A bill that would create a sprawling redevelopment district for Hilo under a 10-year pilot program is headed for a vote in the state House and Senate.
Dozens of state parcels in the town are leased for commercial, hotel and industrial uses, and the measure would allow tenants within the district to extend their leases for up to 40 years if they make substantial improvements. A House-Senate conference committee agreed Thursday to the legislation.
Under the pilot program, the “Hilo community economic district” would encompass the Kanoelehua Industrial Area as far inland as Makaala Street, the Waiakea Peninsula, Wailoa River state park, the bayfront ball fields and along Kalanianaole Avenue to Hilo Harbor. It applies only to state land.
Sen. Kai Kahele, sponsor of Senate Bill 3058, called it a “home run for Hilo.”
“It’s going to incentivize current lessees and future lessees and start to revitalize and rehabilitate what you see today,” he said. “You drive around the industrial area you see dilapidated facades, you see facades falling down.”
Many leases were established after the 1960 tsunami and are facing expiration. Members of the business community say that gives lessees little incentive to invest in the property, leading to dilapidation in areas such as the KIA, where the state leases nearly 80 parcels.
The leases were issued for 55 years, and some received a 10-year extension under a law passed a few years ago.
State law caps public land leases at 65 years, but this bill would allow existing leases within the district to last up to 95 years in total, if tenants’ plans are approved by the state Land Board.
The bill says the Land Board can modify or eliminate restrictions in HRS section 171-36(a), which sets lease limits, upon issuance or during the term of a lease to allow the lessee to qualify for project financing or amortize the cost of improvements within the district. It states leases can’t be extended for more than 40 years beyond the original term.
The measure must pass the Legislature and be signed by Gov. David Ige to become law.
Kahele, D-Hilo, said businesses will have to invest equal to 30 percent of the property’s market value in order to qualify for the extension. Otherwise, the property and improvements revert back to the state for public auction.
The bill also allows for a tenant, who has less than 10 years left in a lease, to start a “request for interest” process to see if other parties are interested in the land before a new lease is issued.
David De Luz Jr., president of the Kanoelehua Industrial Area Association, said he wasn’t familiar with the current version of the legislation, but noted the pending expiration of the leases creates too much uncertainty for businesses and makes it hard for them to get financing.
“We’ve been working at this for the last 20 years or longer,” he said.
But if the bill is a home run, it’s short of the grand slam East Hawaii lawmakers had wanted.
Kahele, along with Reps. Chris Todd and Mark Nakashima, introduced several bills to aid KIA tenants and help finance redevelopment of the Waiakea Peninsula, home to Hilo’s large hotels on Banyan Drive.
SB 3058 appears to be the only one to survive, meaning there will be no financial aid from the state to help Hawaii County, which created a redevelopment district for the hotel area, fund its studies or plans. Kahele said they will try again next year.
His bill originally started as a way to finance redevelopment of the hotel area, though it was later amended. Banyan Drive is included in the district but no funding mechanisms are part of the bill.
Kahele said the district is so large because lawmakers want to take a more “holistic approach.”
While the bill doesn’t propose developing state park lands around Waiakea pond and bayfront, he said they are included in the district to allow them to be “part of the conversation” as to what Hilo will look like in the future.
He said he and Todd, who were both part of the conference committee, are looking at hosting a two-day “economic development summit” for Hilo in the fall.
“Hilo has such untapped potential,” Kahele said. “This is a step in the right direction.”
Todd, D-Hilo, couldn’t be reached for comment by deadline Friday.
Email Tom Callis at tcallis@hawaiitribune-herald.com.
