PART I

SECTION 1. The legislature finds that the agribusiness development corporation was established in 1994 to address the issues of large tracts of land becoming available due to the downsizing of the sugar and pineapple industries. Hawaii now faces different issues in agriculture, mainly sustainable agriculture and local food production. The agribusiness development corporation manages over 20,000 acres of public agricultural lands with significant potential to shape the State's agricultural public policy toward the goal of food self-sufficiency. The lack of affordable agricultural land with long-term leases is cited as a key inhibitor of the growth and expansion of local agriculture.

The purpose of this Act is to ensure that:

(1) The agribusiness development corporation makes food production a priority;

(2) The agribusiness development corporation and department of agriculture provide transparency and accountability on leasing activities through reporting requirements;

(3) The department of agriculture and the agribusiness development corporation lease lands in a variety of farm sizes, provide protocols to enable farming of specialty products, and generally support diversified agriculture; and

(4) The department of agriculture and the agribusiness development corporation lease lands so that at least fifty per cent of their managed lands are leased for local food production.

PART II

SECTION 2. Section 163D-1, Hawaii Revised Statutes, is amended to read as follows:

"[[]§163D-1[]] Findings and purpose. The legislature finds that the downsizing of the sugar and pineapple industries is presenting an unprecedented opportunity for the conversion of agriculture into a [~~dynamic growth~~] local food production industry. Within the next decade, seventy-five thousand acres of agricultural lands and fifty million gallons per day of irrigation water are expected to be released by plantations. The downsizing of the sugar and pineapple industries will idle a valuable inventory of supporting infrastructure including irrigation systems, roads, drainage systems, processing facilities, workshops, and warehouses. The challenge to government and business is to conserve and convert the arable lands and their associated production infrastructure in a timely manner into new productive uses that are based upon strategies developed from detailed marketing analysis and monitoring of local, national, and international opportunities. Constantly evolving economies require an aggressive and dynamic leadership for the promotion and development of agricultural enterprises, and centralized leadership to coordinate industry development, provide industry-wide services, provide marketing assistance, and facilitate investments and coventures in viable enterprises.

The purpose of this chapter is to create a vehicle and process to [~~make optimal use of agricultural assets~~] support and increase local food production for the [~~economic,~~] environmental[,] and social benefit of the people of Hawaii. This chapter establishes a public corporation to administer [~~an aggressive and~~] a dynamic agribusiness development program[.] that shall support and increase local food production in a manner that contributes to the health of Hawaii residents, protects the natural environment, enhances soil and water quality, and preserves and protects existing agricultural lands. The corporation shall coordinate and administer programs to assist agricultural enterprises to facilitate the transition of agricultural infrastructure from plantation operations into other agricultural enterprises, to carry on the marketing analysis to direct agricultural industry evolution, and to provide the leadership for the development, financing, improvement, or enhancement of agricultural enterprises."

SECTION 3. Section 163D-2, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:

""Local food production" means crops, livestock, poultry, and other foods that are grown and raised in Hawaii at least in part for direct consumption by Hawaii residents and visitors."

SECTION 4. Section 163D-5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The corporation shall prepare the Hawaii agribusiness plan which shall define and establish goals, objectives, policies, and priority guidelines for its agribusiness development strategy. The plan shall include but not be limited to:

(1) An inventory of agricultural lands with suitable adequate water resources that are or will become available due to the downsizing of the sugar and pineapple industries that can be used to meet present and future agricultural production needs;

(2) An inventory of agricultural infrastructure that will be abandoned by sugar and pineapple industries such as irrigation systems, drainage systems, processing facilities, and other accessory facilities;

(3) An analysis of imported agricultural products and the potential for increasing local production to replace imported products in a manner that complements existing local producers and increases Hawaii's agricultural self-sufficiency;

(4) Alternatives in the establishment of sound financial programs to promote the development of diversified agriculture;

(5) Feasible strategies for the promotion, marketing, and distribution of Hawaii agricultural products in local, national, and international markets;

(6) Programs to promote and facilitate the absorbing of displaced agricultural workers into alternative agricultural enterprises;

(7) Strategies to insure the provision of adequate air and surface transportation services and supporting facilities to support the agricultural industry in meeting local, national, and international market needs;

(8) Proposals to improve the gathering of data and the timely presentation of information on market demands and trends that can be used to plan future harvests and production; [~~and~~]

(9) Strategies for federal and state legislative actions that will promote the development and enhancement of Hawaii's agricultural industries[.];

(10) Consultation with stakeholders experienced in local food production practices; and

(11) Provisions that encourage partnerships with county governments."

PART III

SECTION 5. Chapter 141, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§141- Reporting requirements; leased lands. The department of agriculture shall submit to the legislature and post on its website, no later than twenty days prior to the convening of each regular session, a complete and detailed report with the following information regarding its leased lands:

(1) The number of lots the department leased by size and by island;

(2) The number of lots by island the department leased that contain protocols and conditions supporting specialty farm products;

(3) The number of vacant parcels and unoccupied parcels in the leasing process by island, including the parcel size, location, and date the parcel was last occupied by a tenant; and

(4) A description of any lease sales or transfers by lessees approved by the board of agriculture, including:

(A) A description of the type of farm products produced by the transferring lessee and the farm products to be produced by the accepting lessee on the leased lands; and

(B) The date and description of the transferring lessee's last lease approved by the board."

SECTION 6. Section 163D-19, Hawaii Revised Statutes, is amended to read as follows:

"[[]§163D-19[]] Annual report. (a) The corporation shall submit to the governor and the legislature, no later than twenty days prior to the convening of each regular session, a complete and detailed report of its plans and activities.

(b) The following information shall be included in the annual report and shall be posted on the corporation's website:

(1) The number of lots the corporation leased or used by size and by island;

(2) The number of lots by island the corporation leased or used that contain protocols and conditions supporting specialty farm products;

(3) The number of vacant parcels and unoccupied parcels in the leasing process by island, including the parcel size, location, and date the parcel was last occupied by a tenant; and

(4) A description of any lease sales or transfers approved by the corporation, including:

(A) A description of the type of farm products produced by the transferring lessee and the farm products to be produced by the accepting lessee on the leased lands; and

(B) The date and description of the transferring lessee's last lease approved by the corporation."

PART IV

SECTION 7. Section 163D-16, Hawaii Revised Statutes, is amended to read as follows:

"[[]§163D-16[]] Use of public lands; acquisition of state lands. (a) Notwithstanding chapter 171 to the contrary, the governor may transfer lands located within a project area to the corporation for its use.

(b) If state lands under the control and management of other public agencies are required by the corporation for its purposes, the agency having the control and management of those required lands, upon request by the corporation and with the approval of the governor, may lease the lands to the corporation upon such terms and conditions as may be agreed to by the parties.

(c) Notwithstanding subsection (b) to the contrary, no public lands shall be leased to the corporation if the lease would impair any covenant between the State or any county, or any department or board thereof, and the holders of bonds issued by the State or the county, department, or board.

(d) The corporation shall ensure that all public lands transferred to it are diversified by:

(1) Ensuring the lands are used or disposed of in each of the following ranges:

(A) At least one but less than ten acres;

(B) At least ten but less than twenty-five acres;

(D) At least fifty but less than two hundred acres; and

(E) At least two hundred acres;

(2) Adopting land-use protocols and conditions that support specialty farm products in specified locations, including areas for organic production where protocols and conditions will protect organic farms from pesticide drift by adjacent tenants; and

(3) Ensuring diversified agricultural opportunities are available on each island where there is available land to be used or disposed of by the corporation.

The corporation shall consider the diversity of its lands when approving lease sales or transfers by lessees to new tenants."

SECTION 8. Section 166-6, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Any provision of this chapter to the contrary notwithstanding, the board may by negotiation, drawing of lot, or public auction, directly dispose of public lands and related facilities set aside and designated for use as agricultural parks, and any other lands and facilities under the jurisdiction of the department pursuant to section 166-3 and notwithstanding chapter 171. Except as provided by subsection (c), dispositions may be by lease and shall be subject to the requirements set forth in rules adopted by the board in conformity with section 166-9, and subject also to the following limitations:

(1) The property shall be disposed of for agricultural or aquacultural purposes only;

(2) The lessee shall derive the major portion of the lessee's total annual income from the lessee's activities on the premises; provided that this restriction shall not apply if failure to meet the restriction results from mental or physical disability or the loss of a spouse, or if the premises are fully utilized in the production of crops or products for which the disposition was granted;

(3) The lessee shall comply with all federal and state laws regarding environmental quality control;

(4) The board shall determine the specific uses for which the disposition is intended; parcel the land into minimum size economic units sufficient for the intended uses; make, or require the lessee to make improvements as are required to achieve the intended uses; set the upset price or lease rent based upon an appraised evaluation of the property value adjustable as provided in rules adopted in accordance with chapter 91 to the specified use of the lot; set the term of the lease, which shall be not less than fifteen years nor more than fifty-five years, including any extension granted for mortgage lending or guarantee purposes; and establish other terms and conditions as it may deem necessary, including but not limited to restrictions against alienation and provisions for withdrawal by the board;

(5) No lease shall be made to any person who is in arrears in the payment of taxes, rents, or other obligations owing the State or any county; [~~and~~]

(6) Any transferee, assignee, or sublessee of an agricultural park lease shall first qualify as an applicant under this chapter. For the purpose of this paragraph, any transfer, assignment, sale, or other disposition of any interest, excluding a security interest, of any legal entity which holds an agricultural park lease shall be treated as a transfer of the agricultural park lease and shall be subject to the approval of the board of agriculture upon reasonable terms and conditions, not inconsistent with this chapter or rules of the board, which the board may deem necessary. No transfer shall be approved by the board if the disposition of the stock, or assets or other interest of the legal entity would result in the failure of the entity to qualify for an agricultural park lease[.]; and

(7) The board shall ensure that leased lands are diversified by:

(A) Ensuring the lands are leased in each of the following ranges:

(i) At least one but less than ten acres;

(ii) At least ten but less than twenty-five acres;

(iii) At least twenty-five but less than fifty acres;

(iv) At least fifty but less than two hundred acres; and

(v) At least two hundred acres;

(B) Adopting protocols and lease conditions that support specialty farm products in specified locations, including areas for organic production where protocols and conditions will protect organic farms from pesticide drift by adjacent tenants; and

The board shall consider the diversity of its leased lands when approving lease sales or transfers by lessees to new tenants."

SECTION 9. Section 166E-8, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) In all dispositions, the department shall be subject to the requirements set forth in rules adopted by the board consistent with section 166E-6 and subject to the following:

(1) All land and facilities shall be disposed of for purposes of agricultural or aquacultural activities only;

(2) Each lessee shall derive a major portion of the lessee's total annual income earned from the lessee's activities on the premises; provided that this restriction shall not apply if:

(A) Failure to meet the restriction results from mental or physical disability or the loss of a spouse; or

(B) The premises are fully used in the production of crops or products for which the disposition was granted;

(3) The lessee shall comply with all federal and state laws regarding environmental quality control;

(4) The board shall:

(A) Determine the specific uses for which the disposition is intended;

(B) Parcel the land into minimum size economic units sufficient for the intended uses;

(D) Set the upset price or lease rent based upon an appraised evaluation of the property value, adjustable to the specified use of the lot;

(E) Set the term of the lease that shall be not less than fifteen years nor more than sixty-five years, including any extension granted for mortgage lending or guarantee purposes; and

(F) Establish other terms and conditions it deems necessary, including but not limited to restrictions against alienation and provisions for withdrawal by the board; [~~and~~]

(5) Any transferee, assignee, or sublessee of a non-agricultural park lease shall first qualify as an applicant under this chapter. For the purpose of this paragraph, any transfer, assignment, sale, or other disposition of any interest, excluding a security interest, by any legal entity that holds a non-agricultural park lease shall be treated as a transfer of the non-agricultural park lease and shall be subject to the approval of the board and to reasonable terms and conditions, consistent with this chapter or rules of the board that the board may deem necessary. No transfer shall be approved by the board if the disposition of the stock or assets or other interest of the legal entity would result in the failure of the entity to qualify for a non-agricultural park land lease[.]; and

(6) The board shall ensure that leased lands are diversified by:

(A) Ensuring the lands are leased in each of the following ranges:

(i) At least one but less than ten acres;

(ii) At least ten but less than twenty-five acres;

(iii) At least twenty-five but less than fifty acres;

(iv) At least fifty but less than two hundred acres; and

(v) At least two hundred acres;

The board shall consider the diversity of its leased lands when approving lease sales or transfers by lessees to new tenants."

PART V

SECTION 10. Section 163D-15.6, Hawaii Revised Statutes, is amended to read as follows:

"§163D-15.6 Commitment and preservation of agricultural leases. (a) The [~~agribusiness development~~] corporation shall work toward obtaining commitments from landowners in the leeward and central districts of Oahu that their agricultural leases shall be for a duration of twenty or more years and shall not be amended or revoked to allow for a nonagricultural use of the land; provided that for lands in central Oahu acquired under Act 234, Session Laws of Hawaii 2008, the agricultural leases shall be for no more than fifty-five years.

(b) To further ensure the preservation of agriculture in the leeward and central districts of Oahu, the [~~agribusiness development~~] corporation shall monitor the agricultural leases of lands using the water from the Waiahole water system. In the event of any proposed amendment or revocation of any lease, the corporation shall do all things within its powers under this chapter to protect and defend the interests of the agricultural leaseholders to ensure the continuation of agricultural use for those lands.

(c) Beginning on January 1, 2016, the corporation shall lease each year a minimum of fifty per cent of lands managed by the corporation to operations that support local food production and whose primary business is local food production. This subsection shall apply to all licenses and lease renewals."

SECTION 11. Section 166-11, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The land eligible for lease negotiations under this section are limited to those lands:

(1) Zoned and used for agricultural purposes;

(2) Set aside by governor's executive order to the department of agriculture for agricultural uses only; [~~and~~]

(3) Not needed by any state or county agency for any other public purpose[.]; and

(4) Beginning January 1, 2016, leased so that, each year, at least fifty per cent of the land is used by operations whose primary business is the production of food for local consumption in Hawaii. This paragraph shall apply to all licenses and lease renewals."

SECTION 12. Section 166E-11, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Lands eligible for lease negotiations under this section are limited to lands that are:

(1) Zoned and used for agricultural purposes;

(2) Set aside for agricultural uses only, by the governor through an executive order to the department; [~~and~~]

(3) Not needed by any state or county agency for any other public purpose[.]; and

PART VI

SECTION 13. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 14. This Act shall take effect upon its approval.

THE SENATE	S.B. NO.	593
TWENTY-EIGHTH LEGISLATURE, 2015		S.D. 1
STATE OF HAWAII