The Food Basket’s move to a warehouse on Holomua Street just more than two years ago might have a short shelf life.
The Big Island’s food bank acquired the remaining five years of the lease for the state-owned land in Hilo’s Kanoelehua Industrial Area in June 2011 after outgrowing its previous location. Its plan was to negotiate a contract for a longer term with the state Department of Land and Natural Resources, ideally at a nominal rate available to nonprofit organizations.
But so far, that has gained little traction with DLNR, which relies on rent from the industrial area to help fund its operations.
Additionally, the department wants to create a master plan for future development in the area, and in the meantime is mainly recommending 10-year extensions for leases, some of which were initially granted to businesses relocating after the 1960 tsunami. The state provided 55-year leases following the natural disaster, and many are set to expire during the next three years, said Gordon Heit, DLNR’s Hawaii Island district land agent.
On Dec. 13, the Board of Land and Natural Resources denied the Food Basket’s request for a new 65-year lease at a rate of $480 per year. The current rent is $17,100 per year.
DLNR staff gave the request a negative recommendation.
Russell Tsuji, DLNR land administrator, said the price and length of the requested lease were both reasons for the denial.
“It’s not against the Food Basket …,” he said. “We think it’s a really great organization.”
Tsuji said the organization’s request for a lengthy lease doesn’t fit with DLNR’s intent to redevelop the industrial area. He also noted the department can’t afford to offer nominal rates to tenants in the KIA, which is one of its main revenue sources.
“We fund our programs, we fund our salaries, we fund our retirement” with those leases, Tsuji said.
“We don’t get enough general fund support.”
En Young, Food Basket executive director, said he disagrees with the assessment from DLNR’s staff, adding he thinks the food bank is a good long-term fit for the neighborhood.
“I believe we are an industrial-type operation,” he said. “We don’t really belong in a residential area.”
The Food Basket initially made the request for the new contract in 2011, shortly after taking on the lease, according to DLNR.
Since then, it invested more than $260,000 in equipment and renovations.
In a letter to the organization following the first request, Tsuji said he could not give a favorable recommendation partly because of DLNR’s intent to create a KIA master plan.
“The issuance of a long-term direct lease may impact any future development plans for the area (such as consolidation of the relatively small parcels and creation of fewer but larger parcels, for which leases would be sold at public auction),” he wrote.
Tsuji also said the Food Basket was warned when it acquired the lease that it could not be guaranteed a new contract.
The request came before the board for the first time last week, Heit said.
Young questions DLNR’s reasoning, saying it made few steps toward creating such a plan and noting some tenants were granted 10-year extensions.
“They basically see the dollar signs in their eyes and want to make sure it’s a revenue-generating property for the department,” he said.
Young said the denial “calls into question” how the food bank will operate during the next few years, adding it’s looking at its options.
That could involve moving to a vacant state-owned Waiakea parcel, as DLNR recommended, or seeking an extension at market rate, he said.
“I am definitely looking for any of the solutions they may be able to provide on the other side,” Young said.
The Food Basket isn’t the only KIA tenant affected by the department’s preference for extensions rather than new, long-term leases.
There are between 40 and 50 DLNR tenants in the industrial area, Heit said. Many are expiring in the next few years, though some extend as far as 2044, he said.
Craig Takamine, Kanoelehua Industrial Area Association government affairs chair, said tenants can apply for a 10-year extension only if they invested substantially into the property.
“I think the tough part is coming off the recession, a lot of lessees that operate a business on the property may not have funds or capacity to do that,” he said.
Takamine said he was only aware of one extension granted to the Hilo Fish Co. That pushes its lease up to 2026, he said.
“That creates further problems for the master plan because all these leases don’t come up at once,” Takamine said.
Tsuji said he is drafting a “scope of services” for a master plan. He does not yet have a planner for the project.
Takamine said the association might host an informational meeting for its members on the issue next month.
Email Tom Callis at email@example.com.