Hawaii Administrative Rules › Title 4 - DEPARTMENT OF AGRICULTURE › Subtitle 8 - DIVISION OF AGRICULTURAL RESOURCE MANAGEMENT › Chapter 158 - NON-AGRICULTURAL PARK LANDS PROGRAM RULES › Subchapter 4 - DISPOSITION OF NON-AGRICULTURAL PARK LANDS › Section 4-158-21 - Appraisals and setting of lease rents

Current through June, 2024
(a) Public auction.
				  The appraisal of lands for the determination of the upset lease rental at
				  public auction may be made by an employee of the department qualified to
				  appraise lands, or by one but not more than three disinterested appraisers
				  contracted for by the administrator; provided that the upset lease rental shall
				  be determined by disinterested appraisal when prudent management so dictates.
				  Except as otherwise provided in this subchapter, no such lands shall be leased
				  for a sum less than the rental value fixed by appraisal; provided that for any
				  lease at public auction, the board may establish the upset lease rental at less
				  than the appraisal value set by an employee of the department and the land may
				  be leased at that price. The department shall be reimbursed by the lessee for
				  the cost of any appraisal made by a disinterested appraiser or appraisers
				  contracted for by the department.
(b) Drawing or negotiation. The base rental
				  and additional rental lands to be disposed of by drawing or by negotiation
				  shall, except as otherwise provided in this subchapter, be no less than the
				  rental value determined by a disinterested appraiser or appraisers contracted
				  by the administrator, and such appraisal, and any further appraisal which is
				  made at the request of the lessee and with the approval of the department,
				  shall be reimbursed to the department by the lessee.
(c) Reopening. In the case of reopenings of
				  the rental for a lease, the base rental and additional rental for any ensuing
				  period shall be the rental value at the time of reopening determined in
				  conformance with the uniform standards of professional appraisal practice as
				  adopted by national professional appraisal organizations. At least six months
				  prior to the time of reopening, the rental value of the land in the specific
				  use or uses for which the disposition was made shall be determined by an
				  appraiser whose services shall be contracted for by the administrator, and the
				  lessee shall be promptly notified of the determination; provided that should
				  the lessee disagree with the appraised rental, the lessee may appoint the
				  lessee's own appraiser who together with the department's appraiser shall
				  appoint a third appraiser, and the appraised rental shall be determined by
				  arbitration as provided in chapter
				  658A, HRS. In that case the lessee
				  shall pay for the lessee's own appraiser, the department shall pay for its
				  appraiser, and the cost of the third appraiser shall be borne equally by the
				  lessee and the department.
(d)
				  Assignment of lease. In the event of an assignment of lease, the base rental
				  and additional rental for any ensuing period may be redetermined by the board
				  pursuant to appraisal conducted by a disinterested appraiser or appraisers
				  contracted by the administrator; provided that the base rental and additional
				  rental shall be the rental value at the time of assignment determined by
				  generally accepted appraisal methods. The cost of redetermining the base rental
				  and additional rental shall be borne by the lessee.
(e) When more than one appraiser is
				  appointed, each shall prepare and submit an independent appraisal. All
				  appraisal reports shall be available for review by the public.
(f) Notwithstanding anything to the contrary
				  contained in this chapter, the administrator may recommend to the board for
				  approval an adjustment of an appraised value. The administrator may recommend
				  using any of the following adjustments:
(1) An
				  adjustment of the fee simple value determined through appraisal as necessary to
				  maintain equitable fee simple values between, among, or throughout the
				  department's land lease system for lands having the same designated use and
				  which are put out to lease within twelve months of each other;
(2) An adjustment of the rental value
				  determined through appraisal by:
(A) Applying
				  a percentage of the rate of return used in the appraisal instead of the
				  appraisal's rate of return. An adjusted rate of return may be applied in the
				  following cases:
(i) For those uses which
				  require extensive or large capital expenditures to meet lease terms and
				  conditions;
(ii) For those uses
				  involving a crop of low yield value; and
(iii) For those uses involving a crop or
				  product which does not generate revenues for a substantial period of time after
				  award of the lease, provided that the adjusted rate of return shall apply only
				  for the period of time in which revenues are not generated;
(B) Factoring in a lot's
				  unproductive acreage, e.g., drainageways, restricted easements, common usage,
				  and uncontributory land areas, for those lots for which the specified use is
				  for crops to be "grown in the soil or ground";
(C) Factoring in extraordinary start-up costs
				  for those crops or uses which require heavy initial capital investments before
				  any returns are realized, e.g., shadehouse crops, wetland crops, etc., or those
				  crops or uses which have unusually little or no return during the initial years
				  of the lease;
(D) Delaying
				  collection of the rental for those crops or specific uses where no income is
				  realized during the first five to seven years. Generally, this adjustment would
				  apply to orchard type crops where a tree must reach a certain maturity before
				  bearing fruit, e.g., macadamia nut, guava, and other tropical fruit plants. The
				  proposed rental structure may factor in the no revenue years with low rent and
				  the revenue years with a "catch-up" rent, making a multi-tier rental structure
				  during the initial rental period; or
(3) An adjustment of the rental determined
				  through appraisal at the time of reopening or conversion, as the case may be,
				  by:
(A) Factoring in the income for a
				  particular lessee using a percentage increase that reflects the increase in the
				  agricultural use value of the leasehold since commencement of the
				  lease;
(B) Using an appropriate
				  index (e.g., consumer price index, producers' price index, etc.) to calculate
				  an escalation of the rental over a specified period of time.