That's the question I raised years ago as a department head at the Chamber of Commerce of Hawaii. In 1980, the state Legislature approved the formula that designated OHA's share of revenues from ceded lands at 20 percent. My immediate query was: 20 percent of what?
When the lands were ceded to the federal government in 1898 they were, for the most part, raw and undeveloped property. Development occurred between 1898 and the creation of OHA, 80 years later.
So what land values are used to determine the revenues to which OHA is entitled? Is it the worth of the raw land in 1898? The appreciated value in 1978, when voters passed a constitutional amendment creating OHA? Or 1980, when the Legislature determined the 20 percent ratio?
No, OHA is receiving income from development that occurred after the lands were ceded and before either the lands were returned or OHA itself was created.
And, apparently it will be rewarded with income for improvements in perpetuity. In other words, OHA is receiving income from the development of airports, harbors and industrial property that occurred through no effort of its own or the Hawaiian people it represents.
No, I said, you're the petitioner: OHA should present its suggested formula and let the Legislature determine, by testing the formula's practical application, whether the state - taxpayers - could afford the cost and still remain economically viable. But no such discussion ever occurred, as far as I know. So the question of land valuation, as a basis for the formula, has never been adequately addressed.
Perhaps the solution is far simpler than it seems. If the ramifications for the people of Hawaii, through our state government, represent a threat to our economy (which I claimed from the outset), the Legislature should simply lower the percentage from 20 percent to something more practical for the survival of everyone, say 3 percent or 5 percent.
The Legislature created this 20 percent formula by law, not by constitutional amendment, and a simple change in the law can undo the damage. Laws are changed every day during the legislative session: Do it tomorrow!
If OHA wants to challenge the change in court, let it happen. It will be cheaper in the long run.
If the law is not changed, the logical alternative is to take a close look at ceded lands, including the airports and harbors operated by the state, and decide that we cannot afford to pay 20 percent of the rising revenues to OHA. Logic says we should then cease any further improvements that would add value and therefore add liability. Ultimately, we should relocate operations from this land to alternative sites that are not encumbered.
Does it make sense to move from our developed harbors and airports? Not yet, but projections for fiscal catastrophe and collapse of our economy are not exaggerated.
In his 1978 re-election campaign, Governor Ariyoshi announced a plan to redevelop the property from Piers 8-11, surrounding Aloha Tower. The plan that emerged called for the state to provide the infrastructure and a private developer to be selected to redevelop the land. The idea was to bring a combination of business and leisure activities to the site by including an office complex and a hotel, together with shops, restaurants, a maritime museum and an aquarium.
The first several attempts to find a developer failed when the candidates worked out the numbers. Oh, they could have made it pay - until they realized that an entity that was unrelated to the project would, by law, take 20 percent of the income off the top, before investors or bondholders would be paid! Suddenly, the project had no chance of succeeding and the risk-takers turned away.
The project at Aloha Tower today is severely pared down from its original concept because it was impossible to build an office building and a hotel and give away 20 percent of the income before operating costs, not to mention the nonprofit museum and aquarium, which simply could not operate under those constraints.
And, even with the more modest development that exists at Aloha Tower, there seems to be insufficient income to be economically viable, mostly because the 20 percent "tribute" to OHA siphons off legitimate return on investment from the investors and operators.
Why would a state government put its economy in such danger of bankruptcy? Paul Brewbaker said it best: It was out of "noble intent" to right a wrong done to the Hawaiian people.
But it's now time to recognize that we must re-evaluate how our efforts to redress wrongs to one segment of our society will adversely affect all our society. The Legislature should admit its 1980 error in judgment and reduce OHA's portion to save all of Hawaii from economic ruin.