One method for the state Department of Land and Natural Resources (DLNR) to fund a seemingly endless list of programs and initiatives — all aimed toward our mission of protecting and perpetuating Hawaii’s unique natural and cultural resources — is via the Special Land Development Fund (SLDF). This fund receives rents from tenants that utilize state-owned commercial lands.

A recent SLDF “performance audit” outlined several areas for improvement, all focused on opportunities to increase revenues. We agree these are important priorities. (See the audit at http://files.hawaii.gov/auditor/Reports/2019/19-12.pdf; DLNR’s response is on page 62.)

What’s puzzling is the tone of the criticisms leveled at DLNR notwithstanding our recent efforts. Foremost, the audit did not identify any financial mismanagement or violation of any statute or administrative rule. Some of the audit’s findings are conjectural and subjective.

Much attention has been paid of late to the need for DLNR to bring market rents current for revocable permits (RPs). The audit describes, at length, the fact that some rents had not been raised in decades. Yet DLNR reviewed RPs in 2016 with a special task force, appraised many RPs statewide in 2017, and obtained Land Board approval to raise RP rents in 2018. The audit criticizes DLNR’s phase-in of rent increases for existing tenants; the Land Board approved it as an equity measure.

RPs are now analyzed annually by the Land Board separately by county. The RP list is posted online in advance, and is discussed in open, sunshine board meetings. Total and complete transparency.

The audit criticizes DLNR for “lost annual revenue opportunities totaling $1.6 million” for Kanoelehua Industrial Area (KIA) leases in Hilo, because DLNR extended existing ground leases, rather than allowing the leases to expire and auctioning new leases at substantially higher amounts. DLNR believes that the $1.6 million figure is highly speculative, as it is not supported by an appraisal or other market study. Lease rents by law are determined by independent appraisal. Furthermore, the Legislature specifically authorized these extensions, notwithstanding DLNR testimony on potential lost revenue opportunity. DLNR is following the new extension laws.

Overall, through the DLNR Land Division’s planning, implementation and accounting efforts, the annual revenues derived from lease rents in the Land Fund increased significantly in eight years, from $6.3 million in 2010 to over $17 million in 2018. And DLNR’s actual SLDF spending authority ceiling is significantly below $17 million.

DLNR will implement the auditor’s recommendations for an overall strategic plan and other measures outlined in DLNR’s response. We agree with the recommendation to continue to pursue legislative authority to lease out land with the level of flexibility afforded other state agencies.

However, there are clear differences of opinion. Should DLNR expand its lessor role to the more labor-intensive space leasing as opposed to ground leasing? We have considered this recommendation previously, and do not agree that it is cost-effective within our capacity and authority.

Beyond mere differences of opinion, DLNR has concerns about the neutrality of some of the audit’s findings. For example, recommendations made by former staff regarding KIA lease extensions had been carefully considered but were not accepted due to legal concerns and unaddressed potential impacts. Some of those former staff are now employed by the state auditor and the rejected recommendations are directly reflected in the audit, apparently without further independent review or analysis.

DLNR and the Land Board are committed to the stewardship of state lands for all of Hawaii’s citizens. We continue to work diligently and professionally to apply laws fairly and generate market revenues from commercial state lands.

Suzanne Case is state Department of Land and Natural Resources director and its Land Board’s chairwoman.