A bill aimed at facilitating the sale of public lands in Oahu’s Sand Island Industrial Park passed the Senate Ways and Means Committee last week despite strong objections from the Office of Hawaiian Affairs and the Department of Land and Natural Resources, which relies on lease revenue from Sand Island.

The measure was introduced in the Legislature at the request of the Sand Island Business Association, which has tried in the past to get the state to sell the land. Milton Holt, SIBA’s executive director, said selling the 70-acre industrial park could bring in $200 million in revenue for the state.

“That would help the state address its budget deficit,” Holt told the Honolulu Star-Advertiser.

SIBA has a master lease with the the Department of Land and Natural Resources that was initiated in 1992. The business association sublets the leased land to tenants operating about 85 businesses, including Mitsunaga Construction, S&M Sakamoto (general contractors), Economy Plumbing &Air Conditioning, Striker Construction, and CTK Development. Clyde Kaneshiro, president of Honolulu Disposal Serv­ice Inc., is an SIBA director, according to an October filing with the IRS.

DLNR Chairwoman Suzanne Case testified that the sale of the land could jeopardize important programs funded by the lease revenue. SIBA currently pays close to $9.3 million annually, which is deposited into a special fund that supports the department’s Land Division, Office of Conservation and Coastal Lands, and Dam Safety and Mineral Resources programs.

She also warned that the measure would allow parcels within the industrial park to be sold before the department can recoup the fair market rents it is entitled to under the master lease. SIBA was allowed to pay below-market rents for the first 25 years of its lease to assist in covering infrastructure costs. Subsequent rent increases were designed to recoup the fair market value of the lots over the course of the lease.

“It hands a windfall to SIBA and its tenants,” Case wrote in testimony on the bill.

Case said the bill also undermines the Legislature’s oversight of public land sales. She said the Land Board already has the power to sell public lands, despite its strong stance against it. She said Senate Bill 176 would allow SIBA and other such lessees to circumvent the requirement that two-thirds of both the House and Senate approve the transfers.

She also questioned why the state would want to limit the sale of public land to a current lessee.

“If the true intent of this measure is to assist the state in generating revenues during these dire financial times, then limiting the field to only a select parcel of land and a few chosen purchasers would only hamper that objective,” wrote Case.

The history of the industrial park land is also a subject of dispute. The Office of Hawaiian Affairs claims that it’s ceded land, which Holt disputes. Ceded lands comprise about 1.8 million acres that were transferred to the United States when Hawaii was annexed in 1898. OHA says the state must retain the land until Native Hawaiians’ claims to it have been resolved.

“Any further diminishment of the ‘ceded’ lands corpus will negatively impact reconciliation efforts between Native Hawaiians and the state, and will severely inhibit their ability to achieve a comprehensive, just, and lasting resolution of the historic injustices experienced by the Native Hawaiian people,” the Office of Hawaiian Affairs wrote in testimony against the measure.

Senate Ways and Means Chairman Donovan Dela Cruz amended the bill Thursday to give SIBA a major break on its rent in the absence of a sale. The changes, which were requested by SIBA, would decrease its lease payments by 30% from June 2022 through June 2057, provided the lease is extended. Instead of paying the state a total of $137.2 million, SIBA would pay $95.7 million.

SIBA says the association and its individual lessees have invested more than $96 million in infrastructure and improvements to the properties and that there was never any mention of compensating the state for the lower rent it was given during the first 25 years of the lease. SIBA says the periodic rent increases in the lease are therefore “arbitrary in nature, unfair to SIBA, and should be addressed” as part of negotiations to amend and extend its lease.

Nine out of 11 members of the Senate Ways and Means Committee voted in favor of the bill, with four senators expressing reservations. Sen. Sharon Moriwaki (D, Kakaako-McCully-Waikiki) and Sen. Kurt Fevella (R, Ewa Beach-Iroquois Point) voted against the bill.

The measure was supposed to be first heard in the Senate Water and Land Committee but never got a hearing. It was saved at the final hour when Dela Cruz (D, Wahiawa-Whitmore-Mililani Mauka) pushed it through his committee. It’s likely to face opposition in the House of Representatives, where a similar bill was shelved.