Hawaii businesses operating on leased public lands, including ceded lands, face the prospect of having to walk away from their businesses when their leases expire.

House Bill 499 is intended to change that.

Passed recently by the state Legislature, HB 499 would allow the state Board of Land and Natural Resources to negotiate lease extensions of up to 40 years with tenants of public lands who have commercial, industrial, resort, mixed-use or government properties.

Opponents of the bill argue that the lease extension is too long, ignores potential benefits from changing real estate market conditions and keeps the land from Native Hawaiians who have ownership claims.

But the lease extensions aren’t automatic. Among other things, they require tenants to make major improvements amounting to at least 30% of the value of their existing facilities and pay an updated minimum annual rent based on the land’s fair market value as determined by an appraiser. A development plan and schedule must be approved before an extension can be negotiated.

As things stand, leases are capped at 65 years. An extension of up to 40 additional years would be a life saver for a business nearing the end of its lease and for the state, which needs the revenue. Our hope is that the governor will sign the bill.

It isn’t just businesses that need a lease extension. Essential public infrastructure including airports, harbors, industrial parks and military installations are also on the 1.4 million acres of public lands transferred to the state of Hawaii with statehood in 1959.

The lease extension requirements in HB 499 mirror a program started on Hawaii island in 2018. It allows lessees of public lands within the Kanoelehua Industrial Area to extend their leases — many of which were established after the 1960 tsunami and will expire soon — as long as they make improvements to their property.

Hilo’s Prince Kuhio Plaza is one of many Hawaii island businesses that would benefit. A gathering spot for the Hilo community, the mall is home to more than 60 stores and provides jobs to about 650 people. The lease extension would make it feasible for the mall to secure the financing to commit to future capital improvements; without it, the mall, and many businesses like it, will be unable to continue investing in the property and faces the prospect of shutting down when its lease expires.

The governor’s decision on HB 499 will also impact future developments.

Stanford Carr Development LLC, led by one of the authors of this commentary, was selected to turn the old Stadium Bowl-O-Drome property on Isenberg Street into a mixed-use development that would include affordable rental housing for the Native Hawaiian community. However, to qualify for financing from the HUD Federal Housing Authority, the project requires a minimum 75-year land lease, which is currently not possible from the state.

HB 499 would enable the state to negotiate such a lease. Meanwhile, the Bowl-O-Drome project is at a stalemate, languishing in its third year as a derelict property.

Unfortunately, this is not unusual. After a half century, Uncle Billy’s Hilo Bay Hotel closed in February 2017 — one month before its lease expired. Today, the interior of the hotel is considered a public health hazard. The state has been looking for a developer for the property but so far there are no takers.

It’s difficult to develop a thriving business in Hawaii and sustain it for decades. Having these businesses invest in their properties in return for an up to 40-year lease extension that allows them to continue contributing to their communities is a way to ensure Hawaii remains an economically and socially stable place for us all.

Stanford Carr is president of Stanford Carr Development; Toby Taniguchi, president/chief operating officer of KTA Super Stores, is president of the Hawaii Island Chamber of Commerce.