HB1094

SECTION 1. The legislature finds that this Act is necessary due to the significant hardship that Hawaii is experiencing, especially during the ongoing coronavirus disease 2019 (COVID-19) pandemic. The legislature further finds that the department of transportation does not have the same powers to grant relief to Hawaii airport concessions that most other airports across the United States have whenever significant hardships occur. Hawaii’s airport concessions are currently suffering more significant hardships than many other airport concessions across the United States that are heavily dependent on tourism. Hawaii’s chief economist has stated that 2019 tourism levels may not return for six years following the beginning of the COVID-19 pandemic in Hawaii, which occurred around March 15, 2020.

The legislature recognizes that airport concessions play a major role in supporting Hawaii’s public airports. Historically, airport concessions have, on average, provided fifty per cent, and occasionally up to seventy per cent, of the necessary operating revenues for Hawaii's public airports. Hawaii's airports are supported by special funds rather than by taxpayer dollars. Federal Aviation Administration officials have recognized this importance and encouraged airport operators, like the department of transportation, to be creative and think outside the box to provide varied relief measures, other than just temporary rent relief, to airport concessions. The legislature likewise so encourages the department of transportation. The purpose of these relief measures in part is to encourage concessionaires to remain in their current locations in spite of any financial hardships and be ready and able to serve those passengers that are beginning to return to the airports.

This Act provides the department with the discretion and powers to address significant hardships as they occur or continue, including those hardships caused by COVID-19, and to not delay until the department of transportation has the discretion and power to take corrective action. The legislature expects that, when exercising this discretionary power, the department of transportation will timely respond to significant hardships in a fashion that is generally fair to all and does not favor one airport tenant or group of tenants, regardless of size, over others unless warranted.

Accordingly, the purpose of this Act is not to require any type of relief or action, but rather to provide the department of transportation broad flexibility and broad discretion to timely address significant hardships and to grant relief to airport concessions.

SECTION 2. Section 102-10, Hawaii Revised Statutes, is amended to read as follows:

"§102-10 Modification of contract terms. [If] (a) Notwithstanding any other law to the contrary, if during the term of the contract [(], including [~~contracts which have~~] any type of contract that has been executed [~~and are~~] or is presently in force[~~) there~~], or both:

(1) There has been a reduction of fifteen per cent or more in the volume of business of the concessionaire for a period of sixty days or more, computed on the average monthly gross income for the eighteen months [~~just prior to~~] immediately preceding the period or [~~as long as~~] the length of time that the concessionaire has been in the business, whichever [~~period~~] is shorter, and [~~such~~] the reduction, as determined by the officer letting the contract, is caused by construction work conducted during the period of time on, or within or contiguous to, the public property upon which the concession is located by either the state or county governments, or both, the officer, with the approval of the governor in the case of a state officer and the chief executive of the respective county in the case of a county officer, may modify any of the terms of the contract, including the agreed upon rent, for a period which will allow the concessionaire to recoup the amount lost by [~~such~~] the reduction; [~~provided that if~~] and

(2) A significant hardship is anticipated or has occurred to one or more airport concession, as determined by the officer letting the contract, the officer, with the approval of the governor, shall have the discretion to grant recoupment for the amount lost as may be applicable for the period that the concessionaire has been in business; provided that the recoupment may periodically include one or more of the following:

(A) Entering into a new contract; and

(B) Modifying the terms of any type of existing contract, including without limitation holdover agreements or revocable permits; the adjustment of rent; the granting of an extension of the contract's term with or without any further required investments or obligations; permitting the assumption or transfer, or both, of a contract; permitting the withdrawal of the contract without a concessionaire being in default or barred from doing business with the State, or both; and any other form of relief to a concession suffering significant hardship.

(b) Subsection (a) shall not apply:

(1) If the contract includes provisions allowing modification for all of the [~~above~~] contingencies[~~, this section shall not be applicable thereto; provided further that this provision shall not apply to~~] and types of relief described in this section; and

(2) To any particular concession if the application [~~thereto~~] may impair any contractual obligations with bondholders of the State or counties or with any other parties.

(c) For airport concessions, the term of the contract shall not be more than twenty years, which shall include both the remaining term of the contract and any extension thereof.

(d) To the extent that the provisions of chapter 171 conflict with the purpose and intent of this section, chapter 171 shall not apply to airport concessions.

(e) For purposes of this section, "significant hardship" includes one or more of the following that may occur or continue, or both, from time to time:

(1) A reduction of:

(A) Fifteen per cent or more in the volume of business of the concessionaire for a period of sixty days or more, computed on the average monthly gross income for the eighteen months immediately preceding the period or the length of time that the concessionaire has been in business, whichever is shorter; and

(B) Ten per cent or more in the volume of business of the concessionaire for a period of one hundred eighty days or more, computed on the average monthly gross income for the period one hundred eighty days immediately preceding the period or the length of time that the concessionaire has been in business, whichever is shorter;

(2) A delay of more than ninety days in the anticipated substantial completion of premises being constructed by the State resulting in less time for the concessionaire to construct, occupy, and amortize the concessionaire's tenant improvements over the remaining term of the concessionaire's contract with the State;

(3) Unexpected circumstances, including but not limited to rising international tariffs, construction site or design problems, or other circumstances resulting in the infeasibility or other significant hardship for the concessionaire to proceed with the improvements described in the concessionaire's contract with the State;

(4) Situations in which one or more concession contracts have more favorable relief terms to address financial or operating hardships when compared to the relief terms of other concession contracts;

(5) Situations in which one or more of a concessionaire’s locations are in default, withdrawn, or in the process of being transferred and a sublessee, a joint venture partner, or licensee generating less than twenty-five per cent or less of the total gross receipts of the concessionaire will not be allowed to continue operations and amortize the cost of the sublessee, joint venture partner, or licensee's concession improvements over the remaining term of the sublessee, joint venture partner, or licensee's contract with the concessionaire; or

(6) Situations in which an extension of time on the contract would assist the concessionaire in the recoupment of the concessionaire's loss or the loss of time for the concessionaire to amortize the cost of the concession improvements, or both, due to the loss of volume of business as described paragraphs (1)(A) and (1)(B)."

SECTION 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 4. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1094
THIRTY-FIRST LEGISLATURE, 2021
STATE OF HAWAII