SB2702 SD2

SECTION 1. The legislature finds that the department of agriculture's non-agricultural park lands program supports, among others, new and bona fide farmers, who are generally farmers engaged in diversified agriculture on smaller parcels, in gaining a foothold in the agricultural industry. The legislature further finds that technological advances have created opportunities for innovation in agriculture to improve efficiency, increase yields, and encourage sustainable farming practices. However, these technologies often require high investments of capital that farmers are often unable to access alone. By partnering with investors or establishing partnerships with others who have access to capital, farmers may be able to invest in these technologies to establish and grow their businesses.

The legislature finds that the department of agriculture's administrative rules on the non-agricultural park lands program require bona fide farmers to be: individuals who meet certain qualifications; agricultural cooperatives or other agricultural associations or partnerships, at least seventy-five per cent of the members of which would qualify individually as bona fide farmers; or corporations incorporated primarily for agricultural production purposes where at least seventy-five per cent of trustees, officers, stockholders, and members qualify individually, excluding a holder of record having a security interest.

The legislature further finds that there may be confusion regarding qualifications for bona fide farmers. Specifically, a durational Hawaii residency requirement may apply to bona fide farmers, despite the fact that chapter 166E, Hawaii Revised Statutes, relating to non-agricultural park lands, does not include such a requirement. The legislature believes that the law should more clearly specify the application of the definition of "bona fide farmer" and broaden the types of entities that may qualify for non-agricultural park leases.

The purpose of this Act is to expand opportunities for certain entities, including farmers, to obtain investment capital for their operations and be eligible for non-agricultural park leases.

SECTION 2. Section 166E-8, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) In all dispositions, the department shall be subject to the requirements set forth in rules adopted by the board consistent with section 166E-6 and subject to the following:

(1) All land and facilities shall be disposed of for purposes of agricultural or aquacultural activities only;

(2) Each lessee shall derive a major portion of the lessee's total annual income earned from the lessee's activities on the premises; provided that this restriction shall not apply if:

(A) Failure to meet the restriction results from mental or physical disability or the loss of a spouse; or

(B) The premises are fully used in the production of crops or products for which the disposition was granted;

(3) The lessee shall comply with all federal and state laws regarding environmental quality control;

(4) The board shall:

(A) Determine the specific uses for which the disposition is intended;

(B) Parcel the land into minimum size economic units sufficient for the intended uses;

(D) Set the upset price or lease rent based upon an appraised evaluation of the property value, adjustable to the specified use of the lot;

(E) Set the term of the lease that shall be not less than fifteen years nor more than sixty-five years, including any extension granted for mortgage lending or guarantee purposes; and

(F) Establish other terms and conditions it deems necessary, including but not limited to restrictions against alienation and provisions for withdrawal by the board; [~~and~~]

(5) Any transferee, assignee, or sublessee of a non-agricultural park lease shall first qualify as an applicant under this chapter. For the purpose of this paragraph, any transfer, assignment, sale, or other disposition of any interest, excluding a security interest, by any legal entity that holds a non-agricultural park lease shall be treated as a transfer of the non-agricultural park lease and shall be subject to the approval of the board and to reasonable terms and conditions, consistent with this chapter or rules of the board that the board may deem necessary. No transfer shall be approved by the board if the disposition of the stock or assets or other interest of the legal entity would result in the failure of the entity to qualify for a non-agricultural park land lease[.];

(6) Any provision in this chapter to the contrary notwithstanding, when a person, whether an individual, agricultural cooperative, agricultural association, partnership, joint venture, or corporation incorporated primarily for agricultural production purposes, seeks an agricultural lease to construct or expand a facility and operate the facility for agriculture or aquaculture that requires more than $500,000 in construction and equipment acquisition costs, the board may determine that person is eligible for the lease; provided that:

(A) The agricultural or aquacultural use is based on operations or methodology that require high, advanced, or innovative technology and substantial initial capital funding;

(B) No less than fifty-one per cent of the operational decision-making authority regarding crop or product selection and pricing is held by persons who are either citizens of the United States who have resided in the State for at least three years or permanent status aliens who have resided in the State for at least five years, and a bona fide farmer, or a nonindividual concern, who:

(i) Has not less than two years' experience as a full-time farmer;

(ii) Is an owner-operator of an established farm conducting a substantial farming operation;

(iii) Resided on a farm or depended on farm income for the person's livelihood for a substantial period of the person's life;

(iv) Has been a farm tenant, farm laborer, or other individual who has for the two years last preceding the person's application obtained the major portion of the person's income from farming operations;

(v) Has a college degree in agriculture;

(vi) By reason of ability, experience, and training as a vocational trainee is likely to successfully operate a farm;

(vii) Has qualified for and received a commitment for a loan under the Bankhead-Jones Farm Tenant Act as amended, or as may hereafter be amended, for the acquisition of a farm;

(viii) Is displaced from employment in an agricultural production enterprise;

(ix) Is a Future Farmer of America graduate or Go Farm Hawaii participant with two years of training with farming projects;

(x) Meets the definition of "new farmer" pursuant to section 155-1; or

(xi) Possesses other qualifications as the board of agriculture may prescribe;

(C) The agricultural or aquacultural operations are primarily to produce food crops, products that contribute to the replacement of similar food crops, or products that are imported into the State; or

(D) The board finds that making the determination of eligibility is in the best interests for agriculture in the State and is consistent with the department's mission and priorities; and

(7) For purposes of this subsection:

"Farm" includes ranch and "farmer" includes rancher.

"Individual" means a natural person who is not part of a partnership, corporation, or joint venture.

"Nonindividual concern" means a partnership, corporation, or joint venture properly formed under law."

SECTION 3. The board of agriculture shall submit a report of its findings and recommendations, including any proposed legislation, to the legislature no later than twenty days prior to the convening of each regular session. The report shall include an accounting of non-agricultural park lessees by parcel that includes:

(1) The range of gross proceeds from agricultural sales;

(2) The type of agricultural products sold;

(3) The range of the volume of sales and product prices; and

(4) Whether accessory uses are being conducted on property, and if so, what type, by industry.

SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 2050.

THE SENATE	S.B. NO.	2702
THIRTIETH LEGISLATURE, 2020		S.D. 2
STATE OF HAWAII