By TOM CALLIS
Tribune-Herald staff writer
Big Island businesses seeking lease extensions with the state may soon have to do some remodeling.
The state House and Senate unanimously passed a bill Tuesday that would require business owners who lease land from the state Department of Land and Natural Resources to propose making “substantial improvements” to their facilities before being granted a new lease. The bill now awaits Gov. Neil Abercrombie’s signature.
It’s an expansion of a bill adopted last year that only placed the requirement upon hotels and resorts, such as those on Banyan Drive. It does not apply to agricultural uses.
According to the legislation, House Bill 1617, the state is the largest owner of leasehold commercial and industrial property.
In Hilo, the bill would affect the Kanoelehua Industrial Area on the west side of Highway 11. The Kanoelehua Industrial Area Association did not return a request for comment.
The bill cites a 2003 study that found much of the state-owned commercial and industrial lands to be in need of renovation and redevelopment.
With many leases nearing their expiration dates, businesses are left with little incentive to invest in their current locations, said Rep. Jerry Chang, who introduced the legislation.
The bill, he said, is intended to address that problem by offering long-term extensions — up to 55 years — in exchange for a commitment that the businesses will invest in their facilities.
“It’s important that if they want to have an opportunity to get a longer lease, they make substantial improvements,” said Chang, a Democrat whose district includes South Hilo.
The bill would require the businesses to make improvements, which could include renovation or redevelopment, equal to 50 percent of the property’s market value.
Chang acknowledged that some businesses may not be able to meet that requirement.
“It’s the most we could do to support the extensions by asking them to (make) substantial improvements,” he said.
The bill would also provide additional compensation to ranchers and farmers who lose access to public grazing land placed under a conservation easement.
The DLNR has previously only reduced their rent in exchange for making some land off-limits. But they are still left with the bill for insurance and taxes on the land that they could no longer use.
The bill would exempt ranchers and farmers from paying those bills.
Tim Richards, Hawaii Cattlemen’s Association president, said requiring them to cover any expense for inaccessible land creates an unnecessary financial burden.
“When you reduce acreage … you cross a line at some point where it doesn’t make economic sense … ,” he said.
The realignment of Saddle Road was particularly painful for ranchers who still had to pay taxes and insurance fees on 6,000 acres of public grazing land made inaccessible, he said.
“We don’t want this to happen again,” Richards said.
Email Tom Callis at tcallis@hawaiitribune-herald.com.
