(a) Public auction.
The appraisal of agricultural park 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 of agricultural park 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 an agricultural park lease, the base rental and additional
rental for any ensuing period shall be the rental value at the time of
reopening determined in accordance with generally accepted appraisal methods.
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
658, Hawaii Revised Statutes. 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.
Automatic escalation of the appraised rental at reopening
may be permitted. The increase shall be based on the "Consumer Price Index for
all Urban Consumers, U.S. City Average", published monthly by the Bureau of
Labor Statistics of the U.S. Department of Labor, labeled as "CPI". The
calculation of the escalated value shall be based on a base index and a
reopening period index, both of which are arithmetic averages over a set period
of time. The quotient of these two indexes will set the rate of increase, which
is then multiplied by the existing rental, giving the rental for the ensuing
period.
In the event publication of the CPI is discontinued or not
available, any comparable statistics, equivalent to the CPI, published by an
agency of the United States or by a responsible financial periodical of
recognized authority, shall be used to calculate the indexes as described in
the preceding paragraph.
The CPI computation shall be conclusive and binding, but
shall not preclude any adjustment in the event of a published amendment to the
CPI or an error in the computation; provided the lessee, within thirty days
after receipt of notice, shall notify the lessor of the claimed error or
dispute therein.
(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 4-153, 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 agricultural park system
for parks 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 an agricultural park lot's unproductive acreage, e.g.,
drainageways, wastelands, restricted easements, common usage, and
uncontributory land areas, for those agricultural park 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 plant must reach a certain maturity before
bearing fruit, e.g., macadamia nut trees and 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.
(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.
