Report Title:

Galbraith Estate; Agricultural Lands; Agribusiness

 

Description:

Authorizes issuance of revenue bonds to purchase land in central Oahu from the Galbraith Estate; appropriates funds to purchase the lands; enables the Agribusiness Development Corporation to contract with lending institutions to provide lease management services.  (HB2293 HD1)

 

 


HOUSE OF REPRESENTATIVES

H.B. NO.

2293

TWENTY-FOURTH LEGISLATURE, 2008

H.D. 1

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT


 

 

RELATING TO AGRICULTURE.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


     SECTION 1.  The legislature finds that it is in the public interest to acquire private lands currently owned by the George Galbraith Estate (Estate) for the preservation of agricultural lands in central Oahu, and protection of the health, welfare, and safety of the people of the State of Hawaii.

     The Estate was established pursuant to the will of George Galbraith, which was admitted to probate on March 25, 1905.  Due to considerable ambiguity on the intention and validity of the will, the will was litigated extensively.  In Fitchie v. Brown, 18 Haw. 52 (November 1, 1906), the Hawaii Supreme Court held that the will created a trust to accumulate unapplied income; that the lives in being listed in the will were the named annuitants; and that the trust estate would be distributed 21 years after the death of the last surviving annuitant listed in the will.  The Supreme Court of the United States upheld this interpretation in Fitchie v. Brown 211 U.S. 321 (1908).

     Subsequent litigation established that the heirs of life annuities took their shares of the annuities by right of representation; that annuities could be sold in fee; and that the final holders of the annuities, at the time of distribution, would take a per capita share of the estate.  Hawaiian Trust v. Galbraith, 22 Haw. 78 (1914); Hawaiian Trust Co. v. Galbraith, 24 Haw. 174 (1919).

     The corpus of the Estate currently includes 20 individual and contiguous parcels having a combined area of approximately 2,100 acres situated north of Wahiawa--a significant assemblage of some of the most fertile agricultural land in the state.  These lands were historically leased to pineapple growers on a long-term basis and have not been available for sale for more than 100 years. 

     On April 26, 1986, Arthur Cathcart, the last named annuitant in the George Galbraith will, died.  Pursuant to the terms of the will, the Estate was to terminate on April 26, 2007.  However, because of the numerous interpretations of the will and the passage of time, a large number of minuscule life annuities were created, precipitating considerable difficulty in determining who some of the annuitants are and how the corpus would be distributed among the beneficiaries.  Accordingly, although the termination date of the Estate has passed, the trustees have not yet sold the landholdings while these and other legal issues are addressed.  Furthermore, chapter 517, Hawaii Revised Statutes, authorizes the trustees of an estate or trust, with the approval of the court, to sell the real property of the estate or trust beyond the expiration date of the estate or trust.

     The legislature further finds that the State of Hawaii is committed to preserving its limited natural resources.  Article XI, section 3 of the Hawaii Constitution requires the State to "conserve and protect agricultural lands, promote diversified agriculture, increase agricultural self-sufficiency and assure the availability of agriculturally suitable lands."  As such, the legislature further finds that the acquisition of the Galbraith landholdings in central Oahu furthers this essential public policy.

     The legislature also finds that the body of water in Wahiawa, commonly referred to as Lake Wilson, is on real property owned by the Estate and an affiliate of Castle and Cooke Hawaii (Castle and Cooke).  While the Estate intends to sell that land upon the termination of the Estate, Lake Wilson remains an agricultural irrigation asset of the other half-owner of the land under Lake Wilson--Castle and Cooke.

     According to the American Society of Civil Engineers, the earthen Wahiawa dam on Kaukonahua stream that creates Lake Wilson is classified "high hazard," not because of structural or functional deficiencies, but because of its precarious location.  A failure of the Wahiawa dam could cause massive loss of life, injuries, and property damage to downstream areas throughout the communities of Waialua and Haleiwa.

     While the State has had discussions with the Estate and Castle and Cooke on the possible "gifting" of the landholdings under Lake Wilson, the imminent termination of the Estate and the fiduciary responsibility of the trustees to obtain the maximum return for beneficiaries have greatly compounded the complexity of the negotiations between state officials and the landowners.

     Lastly, the valuation of the Estate's landholdings has been a matter of conjecture for many years, especially because of the enormous potential it may hold should the land ever be reclassified from agricultural to a higher use.  As such, there is a strong possibility that the placement of these lands on the open market may create a frenzy of speculative buying that might result in the break up of these large contiguous tracks of land.

     For tax purposes, the city and county of Honolulu has determined that as of October 1, 2006, the total property assessed value of the parcels situated in central Oahu was approximately $100,000,000:

                Parcel                   Assessed Value

            TMK 6-5-002:010                $10,569,100

            TMK 6-5-002:025                 $6,154,700

            TMK 6-5-002:026                 $3,589,000

            TMK 7-1-001:001                 $1,898,900

            TMK 7-1-001:002                $17,492,900

            TMK 7-1-001:003                 $7,879,900

            TMK 7-1-001:005                $12,969,000

            TMK 7-1-001:006                 $3,421,500

            TMK 7-1-001:007                   $813,500

            TMK 7-1-001:008                $17,613,100

            TMK 7-1-001:012                 $1,736,400

            TMK 7-1-001:013                       $900

            TMK 7-1-001:017                       $100

            TMK 7-1-001:020                    $11,300

            TMK 7-1-001:021                     $7,200

            TMK 7-1-001:022                   $156,800

            TMK 7-1-001:023                 $1,041,200

            TMK 7-1-001:024                       $200

            TMK 7-1-001:025                   $998,600

            TMK 7-1-001:026                $11,356,900

            TMK 7-1-001:027                   $464,100

            TMK 7-1-001:028                   $507,400

            TMK 7-1-001:029                   $335,500

            TMK 7-1-001:032                   $878,900

                 TOTAL                     $99,897,100

     The purpose of this Act is to facilitate the acquisition of lands owned by the Galbraith Estate in central Oahu.  In addition, this Act also allows the agribusiness development corporation to:

     (1)  Contract with financial institutions as lease income collection agents; and

     (2)  Purchase, accept, and maintain permanent conservation              easements.

PART I

     SECTION 2.  The purpose of this part is to:

     (1)  Promote fiscal accountability with regard to agricultural land lease agreements between the State and lessees by allowing the agribusiness development corporation to contract with financial institutions as lease income collection agents; and

     (2)  Allow the agribusiness development corporation to purchase, accept, and maintain permanent conservation easements.

     SECTION 3.  Section 163D-7, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§163D-7[]]  Agricultural projects; agricultural development plans.  (a)  The corporation may develop and implement agricultural projects where large tracts of agricultural land have been or will be taken out of productive agriculture or where, through detailed analysis, opportunities exist to exploit potential local, national, and international markets.

     (b)  The corporation may initiate and coordinate the preparation of business and agricultural development plans for its projects.  The plans shall include a proposal for the organization of the enterprise, marketing information and strategy, the impact on existing agricultural operations throughout the [State,] state, and a recommendation for the construction, reconstruction, rehabilitation, improvement, alteration, or repair of any infrastructure or accessory facilities in connection with any project.

     (c)  The corporation may enter into cooperative agreements with coordinating entrepreneurs or public agencies when the powers, services, and capabilities of the persons or agencies are deemed necessary and appropriate for the development and implementation of the business and agricultural development plans.

     (d)  The corporation may purchase, accept, and maintain permanent conservation easements in accordance with the federal Natural Resources Conservation Service Farm and Ranch Lands Protection Program.

     (e)  Notwithstanding any provision of this chapter to the contrary, when leasing corporation-controlled agricultural land, the corporation may contract with a financial institution chartered under chapter 412 or a federal financial institution, as defined under section 412:1-109, that is transacting business in this state to provide lease management services.  For the purposes of this subsection, "lease management services" includes the collection of lease rent and any other moneys owed to the corporation related to the lease of agricultural land under the corporation's control.

     [(d)] (f)  The agricultural planning activities of the corporation shall be coordinated with the county planning departments and the county land use plans, policies, and ordinances.

     [(e)] (g)  The corporation may amend the business and agricultural development plans as may be necessary.

     [(f)] (h)  Any undertaking by the corporation pursuant to this chapter shall be with the express written consent of the landowner or landowners directly affected."

PART II

     SECTION 4.  The purpose of this part is to ensure the long-term availability of lands suitable for agricultural activities by authorizing the agribusiness development corporation to lease lands acquired in this Act for up to fifty-five years.

     SECTION 5.  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 [in order] to allow for a nonagricultural use of [such] the land[.]; provided that for lands in central Oahu acquired under Act    , 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 [utilizing] using the water from the Waiahole water system.  In the event of any proposed amendment or revocation of any such 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."

PART III

     SECTION 6.  The purpose of this part is to comply with article XI, sections 3 and 10 of the Hawaii Constitution, relating to the protection of agricultural lands and the promotion of farm ownership and diversified agriculture, by establishing a process to ensure that certain lands in central Oahu:

     (1)  Remain available for agricultural use;

     (2)  Are properly managed so as to ensure continued economic viability while used for agriculture; and

     (3)  Are managed in a manner that is sensitive to and consistent with the needs of farmers in the central Oahu area.

     The legislature finds that this Act is in accordance with article XI, sections 3 and 10 of the Hawaii Constitution, is in the public interest, and will preserve agricultural activities in the area and a lifestyle that benefits the central Oahu community and the community at large.

     SECTION 7.  Section 163D-9, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  The corporation, with the approval of the governor, may issue, from time to time, revenue bonds in amounts not exceeding the total amount of bonds authorized to be issued by the legislature for the purpose of constructing, acquiring, remodeling, furnishing, and equipping any project facility, including the acquisition of the site thereof[.], or acquiring agricultural lands through purchase to sustain and preserve viable agricultural enterprises within a contiguous geographic area."

     SECTION 8.  (a)  The agribusiness development corporation is authorized to purchase the agricultural lands located in central Oahu and owned by the George Galbraith trust.

     (b)  The agribusiness development corporation may purchase the lands with a combination of revenues derived through the issuance of revenue bonds pursuant to section 163D-9, Hawaii Revised Statutes, and moneys appropriated under section 9 through 12 of this Act.

     (c)  The agribusiness development corporation shall submit to the legislature a progress report on its actions to obtain the central Oahu agricultural lands no later than twenty days prior to the convening of the 2009 regular session.

     SECTION 9.  There is appropriated out of the general revenues of the State of Hawaii the sum of $           or so much thereof as may be necessary for fiscal year 2008-2009 to acquire the lands currently owned by the Galbraith Estate in central Oahu and designated by tax map keys 6-5-002:010, 6-5-002:025, 6-5-002:026, 7-1-001:001, 7-1-001:002, 7-1-001:003, 7-1-001:005, 7-1-001:006, 7-1-001:007, 7-1-001:008, 7-1-001:012, 7-1-001:013, 7-1-001:017, 7-1-001:020, 7-1-001:021, 7-1-001:022, 7-1-001:023, 7-1-001:024, 7-1-001:025, 7-1-001:026, 7-1-001:027, 7-1-001:028, 7-1-001:029, and 7-1-001:032. 

     The sum appropriated shall be expended by the agribusiness development corporation for the purposes of this part.

     SECTION 10.  Pursuant to part III, chapter 39, Hawaii Revised Statutes, the agribusiness development corporation, with the approval of the governor, is authorized to issue revenue bonds in a total amount not to exceed $          , in one or more series, and the same sum is appropriated for fiscal year 2008-2009 for the purpose of purchasing the lands currently owned by the Galbraith Estate in central Oahu and designated by tax map keys 6-5-002:010, 6-5-002:025, 6-5-002:026, 7-1-001:001, 7-1-001:002, 7-1-001:003, 7-1-001:005, 7-1-001:006, 7-1-001:007, 7-1-001:008, 7-1-001:012, 7-1-001:013, 7-1-001:017, 7-1-001:020, 7-1-001:021, 7-1-001:022, 7-1-001:023, 7-1-001:024, 7-1-001:025, 7-1-001:026, 7-1-001:027, 7-1-001:028, 7-1-001:029, and 7-1-001:032.

     The sum appropriated shall be expended by the agribusiness development corporation for the purposes of this part.

     SECTION 11.  The revenue bonds issued under this Act shall be issued pursuant to part III, chapter 39, Hawaii Revised Statutes, and section 163D-9, Hawaii Revised Statutes, relating to the power of the agribusiness development corporation to issue revenue bonds to acquire agricultural lands to sustain and promote agricultural enterprises.

     SECTION 12.  The authorization to issue revenue bonds under this Act shall lapse on June 30, 2012.

PART IV

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

     SECTION 14.  This Act shall take effect on July 1, 2020.