The state has been more than generous in its dealings with F. Newell Bohnett. By allowing him to pay back rent owed from 1980 to 1985 without interest on the accumulated amount ($400,140), the state has enriched Bohnett by roughly $600,000 — and, by the same token, has lost an amount at least equal to that from its general funds.
In effect, then-Land Board Chairman Susumo Ono gave Bohnett an interest-free loan in 1985, when he accepted the proposal of Bohnett’s lawyer, Philip Leas, to pay the balance due on back rent “in equal amounts semi-annually over the remaining lease term of fifteen and one half years.” The annual payment on the back rent comes to $23,000 in round figures.
Compare that against the interest the same $400,000 would accumulate if it were deposited in an interest-bearing account. Assuming the prevailing rate of about 9 percent for a large, long-term certificate of deposit in 1985, the interest would amount to $36,000 a year. One could pay off the principal ($23,000 a year), and have a balance of $13,000 left over.
At the end of fifteen and a half years (the time Bohnett has been given to pay off the bank rent), the $400,000 would be paid off in full — without touching the principal. The debtor would have not only his initial $400,000 intact, but would also have the sum of fifteen and a half years of interest over and above the payments — more than $200,000. If the interest had been plowed back into the interest-bearing account, the accumulated total would be higher still.
Consider, finally, that Bohnett’s running tab with the state did not start in 1985, when the back rent was calculated, but had been accumulating since August 1980. When the state’s losses are calculated from this point, the cost of Ono’s generosity exceeds the $1 million mark.
Bohnett is obviously aware of the losses that come when money is kept in a non-interest bearing account — and thus, presumably, he fully appreciates the break that he has been given by being allowed to pay off his $400,000 debt to the state without interest. In a letter February 19, 1988 to Land Board Chairman William Paty, Bohnett complained about the long time it was taking survey crews to complete the boundary work. (The boundary work was actually completed that same month.)
Until the boundary was completed, Bohnett said, he was paying taxes to the County of Hawai`i on all 106,000 acres. Although the County “has assured us that we will be reimbursed for our overpayment, we do not want to continue to overpay into a non-interest paying fund.” In other words, while Bohnett had no problem with the state not collecting interest on money he owed it, he resented the idea that his far smaller deposit with the County would not be earning interest for the duration of its stay in the County’s treasury.
The Board of Land and Natural Resources instructed Ono to work out with Bohnett the terms of repayment. No one paid any heed to the language of the lease itself, which is unambiguous on this point: “During the pendency of such negotiations (on rent), the Lessee shall continue to pay rent in the same amount which it was paying immediately prior thereto, and shall promptly pay the deficiency, if any, upon conclusion of such negotiations.”
Volume 1, Number 9 March 1991
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