THE SENATE	S.B. NO.	2951
TWENTY-FIFTH LEGISLATURE, 2010		S.D. 2
STATE OF HAWAII		H.D. 1

A BILL FOR AN ACT

RELATING TO AGRICULTURE.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

PART I

     SECTION 1.  The legislature finds that to widen Saddle Road, in the county of Hawaii, the department of land and natural resources established conservation easements on public land leased for pasture or special livestock use.  Consequently, the lessee ranchers suffered serious financial losses.

     The department of land and natural resources established conservation easements on approximately six thousand acres of leased lands, preventing the lessees from grazing cattle and effectively depriving the lessees of their use of the land.  Although the department of land and natural resources reduced the lease rent in proportion to the taking of the land, the lessees received no other compensation.  The final report on discussions with affected ranchers in connection with the Saddle Road realignment project prepared in response to Act 236, Session Laws of Hawaii 2001, states that the United States Department of Transportation Highways Division will provide compensation to the existing lessees.  However, according to the lessees, the department of land and natural resources has taken the position that because Hawaii law did not provide for any compensation, none was required.

     Despite this lack of compensation, the lessees are required by their leases to maintain insurance on the land and pay taxes for the land.  In addition, several lessees had to reduce their herd and suffered financial losses as a result of the sale of their cattle.  One of the long-term effects of a reduced herd is that lessees cannot mitigate the long-term, fixed costs associated with operating a ranch in the way they anticipated when the lease was negotiated.  Thus, the lessees have experienced financial hardship for an extended period of time that is not sufficiently mitigated by a reduction in their lease rent.

     The purpose of this part is to prevent situations similar to the Saddle Road withdrawal from occurring in the future.  This part is also intended to better provide for the viability and survival of Hawaii's agricultural producers.  This part provides fair compensation for lessees when the department of land and natural resources takes or condemns any portion of the land, preventing a lessee from using the land as originally intended.

     SECTION 2.  Chapter 171, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

     "§171-   Withdrawal of leased land; fair compensation; lease extension. (a)  Upon a withdrawal or taking of leased land pursuant to section 171-37(3) that causes any portion of the land to become unusable for the specific use or uses for which it was leased, the lease rent shall be reduced in proportion to the value of the land withdrawn or made unusable; provided that if any permanent improvement made to or constructed upon the land by the lessee is destroyed or made unusable in the process of the withdrawal or taking, the proportionate value thereof shall be paid to the lessee based upon the unexpired term of the lease.  No land that is under cultivation shall be withdrawn or taken until the crops are harvested, unless the board pays the lessee the value of the crops.  Upon a withdrawal, any person with a long-term lease shall be compensated for the present value of all permanent improvements in place at the time of the withdrawal that were legally made to or constructed upon the land by the lessee of the leased land being withdrawn.  In the case of tree-crops, as defined in section 171-37, the board shall pay to the lessee the residual value of the trees taken and, if there are unharvested crops, the value of the crops.  In the case of breeding livestock that cannot be relocated or marketed for the breeding value, the board shall pay to the lessee the difference between the appraised breeding value and the salvage value, including the cost of transportation to market.

(b)  In addition to compensation received pursuant to subsection (a) or section 171-38, a lessee shall be entitled to compensation for costs attributable to the diminished use of the leased land. 

(c)  On land subject to easements, if the easement that is placed upon the land subsequent to the original lease prevents the lessee from using the land for the original intended use, the lessee shall no longer be required to pay the property tax or cost of any insurance required by the board to be maintained.

(d)  Subsections (a) and (b) shall only apply if the withdrawal or taking that causes any portion of the land to become unusable for the specific use or uses for which it was leased, occurs after at least half of the lease term has elapsed."

     SECTION 3.  Section 171-37, Hawaii Revised Statutes, is amended to read as follows:

     "§171-37  Lease restrictions; intensive agricultural and pasture uses.  In addition to the restrictions provided in section 171-36, the following restrictions shall apply to all leases for intensive agricultural and pasture uses:

     (1)  The lease term shall [be] not be less than fifteen years nor more than thirty-five years, except that if the type of disposition requires the lessee to occupy the premises as the lessee's own personal residence, [it] the lease term may be longer than thirty-five years[, but]; provided that the lease term shall not be in excess of seventy-five years, [and] except in the case of a tree-crop orchard lease the term of which shall not be in excess of forty-five years.

     (2)  If the land being leased is not immediately productive and requires extensive expenditures for clearing, conditioning of the soil, the securing of water, the planting of grasses, or the construction of improvements, as the result of which a longer term is necessary to amortize the lessee's investment, then the lease term may be longer than thirty-five years, but not in excess of fifty-five years.

     (3)  The land leased hereunder, or any portion thereof, shall be subject to withdrawal by the board [of land and natural resources] at any time during the term of the lease with reasonable notice and [without] compensation, [except as provided herein,] as provided in section 171-  , for public uses or purposes, including residential, commercial, industrial, or resort developments, for constructing new roads or extensions, or changes in line or grade of existing roads, for rights-of-way and easements of all kinds, and shall be subject to the right of the board to remove soil, rock, or gravel as may be necessary for the construction of roads and rights-of-way within or without the demised premises[; provided that upon the withdrawal, or upon the taking which causes any portion of the land originally demised to become unusable for the specific use or uses for which it was demised, the rent shall be reduced in proportion to the value of the land withdrawn or made unusable, and if any permanent improvement constructed upon the land by the lessee is destroyed or made unusable in the process of the withdrawal or taking, the proportionate value thereof shall be paid based upon the unexpired term of the lease; provided further that no withdrawal or taking shall be had as to those portions of the land which are then under cultivation with crops until the crops are harvested, unless the board pays to the lessee the value of the crops; and provided further that upon withdrawal any person with a long-term lease shall be compensated for the present value of all permanent improvements in place at the time of withdrawal that were legally constructed upon the land by the lessee to the leased land being withdrawn.  In the case of tree crops, the board shall pay to the lessee the residual value of the trees taken and, if there are unharvested crops, the value of the crops also].

     "Tree-crop", as used in this section, shall be exclusive of papaya and banana."

     SECTION 4.  Section 171-38, Hawaii Revised Statutes, is amended to read as follows:

     "§171-38  Condemnation of leases.  The lease shall provide that whenever a portion of the public land under lease is condemned for public purposes by the State, or any county or city and county, or any other governmental agency or subdivision, the rental shall be reduced in proportion to the value of the portion of the premises condemned, and the lessee shall be entitled to receive from the condemning authority:

     (1)  [the] The value of growing crops, if any, [which] that the lessee is not permitted to harvest; and

     (2)  [the] The proportionate value of the lessee's permanent improvements so taken in the proportion that it bears to the unexpired term of the lease[; provided that the].

The lessee [may], in the alternative, may remove and relocate the lessee's improvements to the remainder of the lands occupied by the lessee.  The foregoing rights of the lessee shall not be exclusive of any other to which the lessee may be entitled by law[.], including those rights established in section 171-  .  Where the portion so taken renders the remainder unsuitable for the uses for which the land was leased, the lessee shall have the option to surrender the lessee's lease and be discharged for any further liability therefor; provided that the lessee may remove the lessee's permanent improvements within [such] a reasonable period allowed by the board [of land and natural resources]."

     SECTION 5.  This part does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

PART II

     SECTION 6.  The purpose of this part is to promote and support agriculture by, among other things:

     (1)  Establishing the agriculture inspection and certification special fund under the department of agriculture;

     (2)  Transmitting certain fees, civil penalties, and moneys collected pursuant to section 141-4, chapter 144, part I of chapter 145, and chapter 147 by the department of agriculture to the agriculture inspection and certification special fund;

     (3)  Allowing the department to enter into agreements with government and private agencies to hire inspectors;

     (4)  Transferring all moneys and unpaid obligations of the certification services revolving fund on June 30, 2010, to the agriculture inspection and certification special fund; and

     (5)  Repealing the certification services revolving fund.

     SECTION 7.  Chapter 147, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and read as follows:

     "§147-   Agriculture inspection and certification special fund. (a)  There is established within the state treasury the agriculture inspection and certification special fund.

(b)  The following sources of funds shall be deposited into the fund:

(1) Fees, charges, fines, and penalties designated by law or rule for deposit into the fund;

(2) Federal funds received for inspecting, certifying, weighing, classifying, or grading of agricultural commodities to be exported from or shipped within the state;

(3) Grants and gifts;

(4) Funds received for food safety or food security certification seals;

(5) Funds received for promoting safety-certified food suppliers and services related to food safety;

(6) All interest earned or accrued on moneys deposited in the fund; and

(7) Any other moneys made available to the fund.

(c)  The moneys in the agriculture inspection and certification special fund shall be expended by the department for:

(1) The licensure of commission merchants, dealers, brokers, agents, processors, and retail merchants;

(2) The administration, operation, and enforcement of chapter 144, part I of chapter 145, and this chapter; and

(3) The inspection, certification, weighing, or grading of agricultural commodities that are to be imported into, exported from, or shipped within the state.

No moneys from the general or other special or revolving funds shall be expended by the department for the administration, operation, or enforcement of section 141-4, chapter 144, part I of chapter 145, chapter 150, or this chapter; provided that the expenditure of moneys from the general fund for central services and departmental administrative expenses shall be permitted."

     SECTION 8.  Section 141-4, Hawaii Revised Statutes, is amended to read as follows:

     "§141-4  Weights of coffee; rules.  The department of agriculture may make rules respecting the weighing of coffee prior to its shipment to points outside the [State,] state, and providing for the certification of weights thereof.  Further, a reasonable schedule of fees to defray the expense of administering this section shall be established by the department, which fees shall be collected and [deposited with] transmitted to the state director of finance [to the credit of the general] for deposit into the agriculture inspection and certification special fund; provided that the department shall consult the appropriate industries, organizations, and agencies prior to the promulgation of the rules."

     SECTION 9.  Section 144-5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  There shall be paid to the department for all feeds distributed or imported for use or sale in this [State,] state, inspection fees as established by the rules of the department; provided that the department shall exempt by rule the payment of inspection fees on feed not subject to specific requirements of this chapter or rules adopted under this chapter.  All inspection fees collected shall be [deposited with] transmitted to the state director of finance [to the credit of the general] for deposit into the agriculture inspection and certification special fund."

     SECTION 10.  Section 145-14, Hawaii Revised Statutes, is amended to read as follows:

     "§145-14  Disposition of fees and charges.  All fees, charges, expenses, fines collected from violations of this part, and other moneys collected pursuant to this [chapter] part shall be [deposited with] transmitted to the state director of finance [to the credit of the general] for deposit into the agriculture inspection and certification special fund."

     SECTION 11.  Section 147-10, Hawaii Revised Statutes, is amended to read as follows:

     "§147-10  Income from certification and agriculture control activities.  [Except for fees collected by the department pursuant to part VII, all] All fees, expenses, and penalties collected by the department pursuant to this part shall be [deposited with] transmitted to the director of finance [to the credit of the general] for deposit into the agriculture inspection and certification special fund."

     SECTION 12.  Section 147-34, Hawaii Revised Statutes, is amended to read as follows:

     "§147-34  Inspection; certification fees.  The board of agriculture may designate any appropriately-certified employee or agent of the department as an inspector to classify and inspect fresh and processed flowers and foliage for quality and condition and to determine if containers, packing materials, and methods of packing meet the minimum requirements established.  In addition the inspector may classify and inspect flowers and foliage for quality and condition at the request of persons having a financial interest in the commodities [in order] to ascertain and to certify to those persons the grade, classification, quality, or condition thereof and other pertinent facts.  The department may fix, assess, and collect or cause to be collected fees for those certification services when they are performed by the employees of the department.  The fees shall be on a uniform basis and in an amount reasonably necessary to cover the cost of certification services provided at the request of persons having a financial interest.  [Except for fees collected by the department pursuant to part VII, all] All fees collected by the department pursuant to this part shall be [deposited with] transmitted to the [state] director of finance [to the credit of the general] for deposit into the agriculture inspection and certification special fund."

     SECTION 13.  Section 147-64, Hawaii Revised Statutes, is amended to read as follows:

     "§147-64  Deposit of moneys.  [Except for fees collected by the department pursuant to part VII, all] All fees, charges, expenses, civil penalties, and other moneys collected by the department under this part or any rules prescribed by the department pursuant to this part shall be [deposited with] transmitted to the [state] director of finance [to the credit of the general] for deposit into the agriculture inspection and certification special fund."

     SECTION 14.  Section 147-74, Hawaii Revised Statutes, is amended to read as follows:

     "§147-74  Grading standards and regulations[.]; fees. (a)  Subject to chapter 91, the department of agriculture may make rules with respect to:

     (1)  Sale and transportation for sale of eggs for human consumption;

     (2)  Specific grades or standards of quality, condition and size or weight classes which shall conform when practical to those established by the United States Department of Agriculture as local conditions will permit;

     (3)  Inspection and classification;

     (4)  Assessment and collection of fees for requested certification as to grade, standard of quality, condition, and size or weight classes;

     (5)  Labeling of containers of imported and locally produced eggs and marking of individual imported eggs as to origin;

     (6)  Seller's invoice for sale of eggs;

     (7)  Records of imported shell eggs of foreign origin;

     (8)  Methods of determining egg quality, which shall not include recandling or any other method applied to eggs in interstate commerce which is discriminatory or impairs that commerce in any way or requires a cost increase of eggs in interstate commerce; and

     (9)  Enforcement of this part and of the rules adopted under this part.

(b)  Any fees collected pursuant to subsection (a)(4) shall be transmitted to the director of finance for deposit into the agriculture inspection and certification special fund."

     SECTION 15.  Section 147-97, Hawaii Revised Statutes, is amended to read as follows:

     "§147-97  Disposition of fees.  All fees collected under this part shall be [paid into a special fund established by the department of agriculture and shall be expended for the purposes of this part.] transmitted to the director of finance for deposit into the agriculture inspection and certification special fund."

     SECTION 16.  Section 147-102, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§147-102[]]  Certification and audit services.  The department of agriculture shall fix, assess, and collect fees for certification or audit services provided by temporary inspectors employed under this [part.] chapter.  The fees shall be in amounts necessary to cover all costs of the administration and provision of the certification or audit services provided under this [part;] chapter; provided that the department of agriculture shall establish charges for traveling expenses and extraordinary services when the performance of the services involves unusual cost.  The fees and charges established by the department of agriculture shall not be subject to chapter 91[.] and, upon collection, shall be transmitted to the director of finance for deposit into the agriculture inspection and certification special fund.  The department of agriculture may employ temporary inspectors to assist in providing certification or audit services under parts I, III, IV, VIII, and IX, and those temporary inspectors shall be exempt from chapter 76."

     SECTION 17.  Section 147-112, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§147-112[]]  Cooperative agreements and contracts to provide auditing and certification services.  The department may enter into cooperative agreements with the United States Department of Agriculture or other agreements and contracts with private parties or other governmental agencies for the purposes of:

     (1)  Auditing and certifying that applicants are following good agricultural, handling, processing, and manufacturing practices; [and]

(2) Hiring and paying travel and other expenses for inspectors to perform the certification and audit services required under this chapter;

    [(2)] (3)  Maintaining food safety, security, and product traceability[.]; and

(4) Establishing and maintaining an Internet food safety promotional and reporting system."

     SECTION 18.  Section 147-114, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§147-114[]]  Fees and deposit of moneys.  (a)  The department shall fix, assess, and collect fees for the audit and certification services provided under this part[.], including fees for hiring inspectors to perform the services.  The fees shall be as established under cooperative agreement with the United States Department of Agriculture or other governmental agencies or, if not applicable, as established by rule under section 147-7.  The department [may] shall also charge an amount necessary to cover all costs of traveling expenses and extraordinary services when the performance of the services involves unusual cost in their performance.

     (b)  [Except for fees collected by the department pursuant to part VII, all] All fees and expenses collected by the department pursuant to this part shall be [deposited with] transmitted to the director of finance [to the credit of the general] for deposit into the agriculture inspection and certification special fund."

     SECTION 19.  Section 147-126, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  [Except for fees collected by the department pursuant to part VII, all] All fees and expenses collected by the department pursuant to this part shall be [deposited with] transmitted to the director of finance [to the credit of the general] for deposit into the agriculture inspection and certification special fund."

     SECTION 20.  Section 147-101, Hawaii Revised Statutes, is repealed.

["§147-101  Certification services revolving fund.  There is established a certification services revolving fund for use by the department of agriculture to support certification or audit services established under parts I, III, IV, VIII, and IX.  Moneys in the fund may be expended for materials, salaries, equipment, training, travel, and other costs related to providing certification or audit services.  Notwithstanding sections 147-10, 147-34, 147-64, 147-114 and 147-126, moneys derived from the certification or audit services provided by temporary inspectors employed under this part or from charges for traveling expenses or extraordinary services shall be deposited into the fund."]

     SECTION 21.  (a)  The repeal of section 147-101, Hawaii Revised Statutes, shall not rescind any fees authorized or imposed under that section that would have been deposited into the certification services revolving fund.  From July 1, 2010, the fees under those sections shall be deposited into the agriculture inspection and certification special fund.

     (b)  On the effective date of this Act:

     (1)  All moneys in the certification services revolving fund on June 30, 2010, shall be transferred to the agriculture inspection and certification special fund;

     (2)  All unpaid obligations of the certification services revolving fund on June 30, 2010, shall become payable from the agriculture inspection and certification special fund; and

     (3)  The certification services revolving fund shall cease to exist.

     SECTION 22.  (a)  Between July 1, 2010, and September 30, 2010, the department of agriculture shall adopt new or amend existing rules to impose or increase fees authorized to be charged under section 141-4, chapter 144, part I of chapter 145, and chapter 147, Hawaii Revised Statutes, without regard to the public notice and public hearing requirements of section 91-3, Hawaii Revised Statutes, the small business impact review requirements of chapter 201M, Hawaii Revised Statutes, or the limit on fee increases under section 92-28, Hawaii Revised Statutes.  The department shall set the fees through a two-tiered increase at amounts intended to generate sufficient revenues to pay the operation and maintenance costs of implementing the agriculture inspection and certification programs of chapter 141, chapter 144, part I of chapter 145, and chapter 147, Hawaii Revised Statutes, and central services and departmental administrative expense assessments of section 36-27 and section 36-30, Hawaii Revised Statutes.

     (b)  If, by September 30, 2010, the department of agriculture has not complied with subsection (a), then the fee charged for each inspection or certification conducted under authority of section 141-4, chapter 144, part I of chapter 145, and chapter 147 shall be $65 per hour or as established under cooperative agreement with the United States Department of Agriculture or other governmental agencies commencing October 1, 2010, and the fee charged for licensure of or license renewal for a commission merchant, dealer, broker, agent, processor, or retail merchant shall be:

     (1)  $80 for a commission merchant, dealer, broker, agent, or processor;

     (2)  $20 for a retail merchant; and

     (3)  $10 for each branch store,

commencing October 1, 2010.

     (c)  Any subsequent amendments to the rules adopted or amended pursuant to subsection (a) or the fee established under subsection (b) shall be subject to all applicable provisions of chapter 91, chapter 201M, and section 92-28, Hawaii Revised Statutes.

     SECTION 23.  Notwithstanding section 7 of this Act, there is appropriated out of the general revenues of the State of Hawaii the sum of $         or so much thereof as may be necessary for fiscal year 2010-2011 for the agriculture inspection and certification program of the department of agriculture; provided that funding shall cease when the collection into the agriculture inspection and certification special fund becomes sufficient to carry out the purposes of this part.

     The sum appropriated shall be expended by the department of agriculture for the purposes of this part.

PART III

     SECTION 24.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 25.  This Act shall take effect on July 1, 2010, and part I of this Act shall apply only to leases entered into after the effective date of this Act.

Report Title:

Leased Public Lands; Withdrawal; Compensation; Agricultural Inspection and Certification

Description:

Provides for fair compensation when leased public land for agricultural or pastoral uses is withdrawn, condemned, or taken for public purposes.  Establishes the Agricultural Inspection and Certification Special Fund, to be used for the inspection and certification of agricultural commodities. 

Effective July 1, 2010.  (SB2951 HD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.