2012-2013 SCR90 SD1 SMA

WHEREAS, commercial and industrial properties in the State remain in the hands of a few large landowners who maintain a system of leasehold tenure and continue to establish long-term leases; and

WHEREAS, in 2003 the Legislature requested the Legislative Reference Bureau to study the major problems facing commercial and other lessees; and

WHEREAS, the Legislative Reference Bureau's report contained feedback from lessees and lessors, and also reviewed information from real estate analysts, real property tax data, an economic report prepared by SMS research, and information from the Department of Business, Economic Development, and Tourism; and

WHEREAS, one of the concluding observations noted in the report was that the feedback for the report indicated there was a lack of available fee simple commercial and industrial property on the market; and

WHEREAS, the report also observed that the primary problem lessees in the State face tended to stem from supply and demand; and

WHEREAS, there has been an increase in the outlying areas on Oahu of fee simple, zoned properties since the 2003 report, thus allowing for a comparative analysis of market behaviors through changing economic conditions; and

WHEREAS, a dichotomy exists between urban industrial development lands, which are primarily held as leaseholds, and vacant land in outlying industrial parks, which are predominately held in fee simple; and

WHEREAS, valuations of land in the urban core are identified by market participants as based on the leasehold tenure, whereby the contractual terms of the leases require appraisers to determine a contract market value rather than determining the value in an arm's length transaction, thus leading to excessive valuations of the underlying land; and

WHEREAS, increased ground rents have been previously identified as a major expense to business and have continued to increase at a greater rate than is economically sustainable, leading to a financial hardship for businesses operating on leasehold land and increasing the costs to all consumers in the State; and

WHEREAS, the State's need for economic revitalization would be furthered by a healthy leasehold system in which the risks assumed by the respective parties of the lease, the benefits created by the development, and activities established on the leasehold property are equitably reflected in the setting of the ground rents under the terms of the lease; and

WHEREAS, almost ten years have passed since the last report on the problems facing commercial and other land lessees, and many of these problems still remain; now, therefore,

BE IT RESOLVED by the Senate of the Twenty-sixth Legislature of the State of Hawaii, Regular Session of 2012, the House of Representatives concurring, that the Legislative Reference Bureau is requested to update their 2003 report analyzing the major problems still facing commercial and other land lessees; and

BE IT FURTHER RESOLVED that the Legislative Reference Bureau is requested to consult with the Economic Research Organization at the University of Hawaii at Manoa and the Department of Business, Economic Development, and Tourism for any reports or information that may be required for a thorough and complete analysis; and

BE IT FURTHER RESOLVED that the Legislative Reference Bureau, in conducting the study, is requested to consult with representatives of various lessees, lessors, and any individual or agency or organization representative with a direct interest in the issues to ensure that all stakeholders are represented; and

BE IT FURTHER RESOLVED that the Legislative Reference Bureau is requested to consult with the Governor's office, given the need for economic revitalization and support for small business, which the Governor's administration has been instrumental in supporting; and

BE IT FURTHER RESOLVED that the Legislative Reference Bureau is also requested to consult with the Attorney General for legal issues, opinions, and advice relating to any constitutional issues related to the study; and

BE IT FURTHER RESOLVED that the Legislative Reference Bureau is requested to submit a report of its findings and recommendations, including proposed legislation, to the Governor's office and the Legislature no later than twenty days prior to the convening of the Regular Session of 2013; and

BE IT FURTHER RESOLVED that certified copies of this Concurrent Resolution be transmitted to the Governor, Director of the Legislative Reference Bureau, Director of Business, Economic Development, and Tourism, Attorney General, and Economic Research Organization at the University of Hawaii at Manoa.

Report Title:

Legislative Reference Bureau; Study; Leasehold Estates

THE SENATE	S.C.R. NO.	90
TWENTY-SIXTH LEGISLATURE, 2012		S.D. 1
STATE OF HAWAII		Proposed