HOUSE OF REPRESENTATIVES	H.C.R. NO.	246
TWENTY-FOURTH LEGISLATURE, 2008
STATE OF HAWAII

HOUSE CONCURRENT

RESOLUTION

ENCOURAGING THE DEVELOPMENT OF GOOD FAITH VALUATION STANDARDS AND NEGOTIATING PRACTICES FOR LONG-TERM INDUSTRIAL AND COMMERCIAL REAL ESTATE LEASES IN HAWAII.

WHEREAS, industrial and commercial businesses in Hawaii are vital to Hawaii's economy, provide thousands of jobs, and provide millions of dollars in state and local tax revenue; and

WHEREAS, many small industrial and commercial lessees in Hawaii operate under long-term real estate leases for properties being used as warehousing, office, and distribution facilities that sell and service industrial and construction equipment, materials, and supplies, automobiles, trucks, and other vehicles as well as the general manufacture, warehousing, distribution and sale of goods of every kind; and

WHEREAS, under most long-term industrial and commercial real estate leases, lease rates are customarily renegotiated at periodic intervals, typically ten to fifteen years; and

     WHEREAS, Hawaii’s industrial and commercial real estate lessees already pay among the highest lease rates in the country leaving lessees no choice but to pass the increased cost of high lease rates on to consumers, thereby adding significantly to Hawaii’s high cost of living; and

WHEREAS, continuing increases in lease rates places economic pressure on Hawaii’s industrial and commercial lessees and makes it more and more difficult for them to compete with out-of-state businesses causing a growing number of businesses to downsize, leave the State, or go out of business; and

     WHEREAS, current valuation and renegotiation practices may lead to more lease rate increases that may further increase the economic pressure on Hawaii’s industrial and commercial lessees and, ultimately, on Hawaii’s consumers, workers, and the state economy; and

WHEREAS, the long-term economic effects of increases in industrial and commercial real estate lease rates are likely to include:

(1)  A significant increase in unemployment that may lead to an increase in homelessness and an increase in the number of families that require public assistance; and

(2)  A significant decrease in the tax base and in county and state tax revenues; and

WHEREAS, in order to ensure a business environment where long-term commercial and industrial real estate lessees and lessors are able to negotiate lease terms and rate increases that allow a fair return on investment for both parties, it is important to develop good faith valuation standards and negotiating practices that will allow lessors and lessees to achieve fair and reasonable lease rates; now, therefore,

     BE IT RESOLVED by the House of Representatives of the Twenty-fourth Legislature of the State of Hawaii, Regular Session of 2008, the Senate concurring, that the Legislature encourages the establishment of good faith valuation standards and negotiating practices for long-term industrial and commercial real estate leases that allow lessors and lessees to establish fair and reasonable lease rates that take into account:

(1)  Existing uses of the land or property;

(2)  Sound economic principles;

(3)  Providing a fair return on both parties' investments; and

(4)  The best interests of the consumers, workers, and economy of Hawaii; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the Governor, the Director of Business, Economic Development, and Tourism, the Director of Labor and Industrial Relations, the Director of Commerce and Consumer Affairs, and the Director of Taxation.

OFFERED BY:

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Report Title: 

Industrial and Commercial Leases