State rent ruling
could spur lawsuit

An OHA attorney says
the $55,000 rate set for
a resort is too low

KAILUA-KONA » An attorney for the Office of Hawaiian Affairs has advised trustees to file a lawsuit to reverse the state Land Board's decision to set a yearly rent of $55,000 for state land at a Kohala Coast resort.

OHA's Sherry Broder argues that the annual rent approved by the board at its meeting last week is significantly less than the property is worth.

The 1.8-acre parcel of the Hilton Waikoloa Village property was thought to be private land when the resort was first built in 1986, but a federal court determined in 1997 it was state land, specifically ceded land.

OHA is party to the case because the state agency receives 20 percent of all ceded lands, government lands under the Hawaiian monarchy that became public land under statehood in 1959.

"There is a federal lawsuit which has been pending for seven years, and in it (U.S. District Judge David Ezra) orders the Land Board to set a reasonable rate," Broder said. "The amount that was set is quite low for over an acre of oceanfront in the South Kohala area."

State appraiser Craig Leong had appraised the 1.8 acres at $2.7 million, a figure more appropriate for the type of land occupied by a resort, Broder said.

The Land Board's decision accepts an offer from the resort's owners, Lanpar/HTL Associates, who offered to pay the state a yearly rent of $55,000 with annual fixed step-ups of 3 percent on a 65-year lease.

Leong originally determined that the property owners should pay $64,000 a year in rent through 1995 and $192,000 a year beyond that. The property owners balked at that proposal, according to West Hawaii Today.

More than a year later, a three-person panel made up of Leong, an appraiser for the property owner and a third appraiser proposed a yearly rent of $82,876 through 1995 and $55,000 a year after that. However, the panel was unable to come up with an appraised fee-simple value of the land.

Lanpar has said it was unwilling to pay rent before 1996 because the company felt the state was partially culpable for the situation due to a faulty shoreline certification.