Examples raising questions about DLNR’s oversight of state land

Businesses for years have been using state land at a small boat harbor on the Big Island to support their commercial activities without paying rent. The business operators and other boat owners capitalizing on the state’s lax oversight have no written agreements — with one exception — to use the shoreline property.

The state Department of Land and Natural Resources, the landowner, also has a poor track record of leasing idled lands on several islands that it described nearly a decade ago as having the best revenue-generating potential.

And even though staffers as far back as 2012 were recommending that monthly rents for the department’s revocable permits be raised because the rates were substantially below market, the agency didn’t take such action for four to five years.

Those were among the findings of a Honolulu Star-Advertiser investigation of DLNR land management practices that is detailed in a three-day series starting today.

Here are some examples raising questions about DLNR’s oversight:

BARGAIN RENT

Honokohau Small Boat Harbor

Talk about a sweet deal.

For years GKM Inc. had rented 9 acres of state land at Honokohau Small Boat Harbor for a monthly rate equivalent to 1.8 cents per square foot. The company ran a boat storage facility there and rented the land on a month-to-month basis.

A Department of Land and Natural Resources board member in May 2017 questioned why the rent was so low compared with what was being charged other revocable permit holders in the harbor.

Several nonprofit organizations there were paying rents at a per-square-foot rate roughly six times greater than GKM’s rate. DLNR staff told the board member the department’s intention was to convert the revocable permit to a lease, negotiating directly with the company. But a deputy attorney general nixed that idea, saying it would not further competition.

DLNR this year awarded a lease to another company for the 9 acres. GKM had been paying nearly $88,000 annually in rent under the revocable permit. Under the new lease, the new tenant pays a minimum rent of $423,000 per year.

All revocable permit holders at Honokohau are now paying market rents based on an appraisal, the department said. GKM did not respond to a request for comment.

DELAYED ACTION

Waimanalo

When a tenant stops paying rent, a landlord typically will take immediate action to collect the delinquent amount and, if unsuccessful, move to evict.

That wasn’t the case when Landscape Hawaii stopped making payments to the Department of Land and Natural Resources over a lease dispute in early 2007. DLNR didn’t go to its governing board to seek lease cancellation until 2012, five years after the company stopped making payments. The board told staff to try to work out a settlement.

Five years later, staff returned to the panel, still seeking cancellation because a settlement had not been reached and the company had made no payments since 2007.

“Why are we still limping around this?” one board member asked. The board instructed staff to try again, authorizing lease cancellation if a deal wasn’t reached within 60 days. The two sides eventually came to terms, and the company agreed to pay $467,000 in back rent, late fees and interest for the 20-acre parcel.

Explaining why Landscape Hawaii didn’t pay rent for a decade, its chief executive, Kyle Ushijima, told the Star-­Advertiser that DLNR staff had instructed the company early on to forgo paying until the dispute was resolved.

DLNR Director Suzanne Case defended the agency’s handling of the case. “I would say the outcome is what is envisioned by statute,” she said, referring to the public decision-making process.

NO DEDICATION

Sand Island

A business association that developed a 73-acre Sand Island industrial park on leased Department of Land and Natural Resources property has yet to dedicate the project’s streets, streetlights, sewer lines and storm drains to the city even though the infrastructure was completed about two decades ago.

Normally, in such leasehold projects, the infrastructure is dedicated soon after it is completed so the cost of maintenance, repairs and upgrades is transferred to the city, especially before the facilities get too old and in need of major repairs.

The DLNR lease requires dedication, and the agency issued the Sand Island Business Association a default notice in 2013 for failing to comply.

But the association, which historically has had key allies at the Legislature, disputed the default allegation. Now DLNR says it plans to ask its board to defer the dedication requirement until the lease expires in 2047. Any maintenance, repair and upgrade costs would be borne by the lessee, DLNR says.

The association wants to maintain control of the streets so it can restrict access during nonbusiness hours for security reasons — a concern DLNR called legitimate.

Critics say delaying dedication is too risky for the state. The association did not respond to a request for comment.