Lingle Vetoes Inspection Fee Bill, Lets Ag Bill Become Law over her Concerns

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Governor Linda Lingle vetoed one of the most significant bills relating to invasive species to come out of the 2008 Legislature. House Bill 2843, which expands the list of freight subject to inspection for invasive species to include air shipments, would unduly increase the costs of goods in Hawai`i, Lingle said in her veto message.

The Legislature overrode the veto in its first special session and the bill is now law.

But whether the Department of Agriculture enforces it is an open question. According to some sources within state government, Lingle has instructed the DOA not to promulgate rules to implement the law, reasoning that without rules, the law will not be enforceable.

The law took effect August 1. According to a DOA employee at the Honolulu International Airport, as of late August, “we haven’t started collecting” the fee. “I don’t know when we’ll start,” he added.

The collection of an inspection fee was authorized in a bill passed by the 2007 Legislature. Lingle vetoed that bill, too, but again her veto was overridden in a special session. The 2007 law set the fee at $1 per 20-foot container or equivalent. The 2008 measure changes the fee to one based on weight – 50 cents per 1000 pounds. That translates into a quarter of a penny on a five-pound bag of flour that retails for $3.79.

Still, Lingle objected to the measure.

“The goal to enhance inspections for invasive species is laudable,” she said in her veto message. “However, this bill is objectionable because of its significant impact on the cost of living in Hawai`i…[T]his fee will have a serious impact on families and individuals already stretched with the burdens of rising prices for food, fuel, rent, and other necessities.”

Lingle also objected to another significant measure passed by the Legislature that deals with natural resources – Senate Bill 2646, “relating to important agricultural lands.” That bill, by and large opposed by the environmental community because of last-minute rewrites by agricultural interests, provides incentives to get landowners to designate qualified areas as important agricultural lands.

In her gloss on the bill, contained in Governor’s message No. 921, Lingle identified several concerns. The bill provides for redistricting of land by the Land Use Commission, in connection with designation of important agricultural lands, but fails to “specifically include the evaluation criteria currently required for land reclassification… Further, it is unclear whether the Office of Planning may provide input into the reclassification deliberations.” (Under the state Land Use Law, the OP is a required participant in all redistricting actions.)

Lingle also noted that the bill requires the Department of Agriculture “to review housing plans, a function outside of its scope of responsibility and for which it is not equipped.” Counties, she added, also objected to provisions calling for “priority processing of permits.”

Jeff Mikulina, executive director of the Sierra Club, Hawai`i chapter, has called the legislation a “blatantly pro-development scheme.” As he noted in an op-ed piece, the Legislature “cast aside the democratic process and its own rules.” At the “eleventh hour,” he noted, the Legislature inserted language allowing owners of “important agriculture lands” to reclassify up to 15 percent of their holdings into the urban or rural district. “The Senate had already twice rejected the scheme as a stand-alone measure,” he wrote. “Legislative rules require an open hearing on all proposed legislation, but the new language had never previously appeared in any prior drafts of SB2646. When some senators balked at passing the cannibalized SB2646, House leadership forced it to a floor vote by arbitrarily threatening to hold hostage the popular solar roofs measure, SB 644. Ultimately, a sharply divided (14-10) Senate passed SB2646.”

So what exactly does the new law, which took effect July 1, achieve?

Farm Dwellings: First, it amends Chapter 205, Hawai`i Revised Statutes, which is the state’s fundamental law concerning land use. New language is added to Chapter 205 that specifically allows owners of agricultural lands to “develop, construct, and maintain farm dwellings and employee housing for farmers, employees, and their immediate family members.” The area taken up by such housing is limited to five percent of the total “important agricultural land” controlled by the landowner, or 50 acres, whichever is less. It also requires that the “plans for farm dwellings and employee housing units” be supported by “agricultural plans that are approved by the department of agriculture,” apparently adding a whole new category of work to the state DOA, but giving the agency no guidance at all as to what such plans are to contain.

Tax Credits: Second, stating that “it is in the public’s interest to assist agricultural businesses in establishing and sustaining viable agricultural operations on important agricultural lands,” the new law establishes income tax credits for qualified landowners, which is to take effect only after the law giving a $75 million tax credit to the Ko Olina resort is “repealed, exhausted, or expired.” (The Ko Olina tax credit provision expires on June 1, 2009.) In the first year in which credits are allowed, SB2646 allows owners of designated “important agricultural land” to receive credits against income tax of up to 25 percent of qualified agricultural costs incurred by the taxpayer since July 1, 2008, or $625,000, whichever is less. In the second year, the taxpayer can claim 15 percent (or $250,000) of costs incurred – not just over the most recent reporting year, but for all costs incurred since July 1, 2008. In the third (and apparently final) year of tax credits, the credit slips to the lesser of 10 percent or $125,000, but again, the costs can be calculated since July 1, 2008. Altogether, then, over three years, landowners can receive tax credits totaling up to 50 percent of all costs incurred. Furthermore, if, because of other deductions, “the credit … exceeds the taxpayer’s net income tax liability… the excess of the credit over liability shall be refunded.”

Once again, the law imposes a heavy regulatory burden on the state Department of Agriculture, which now is required to “maintain records of the total amount of qualified agricultural costs for each taxpayer claiming a credit; verify the amount of the qualified agricultural costs claimed; total all qualified agricultural costs claimed; and certify the total amount of the tax credit for each taxable year.” In addition, the DOA “shall issue a certificate to the taxpayer verifying the qualifying agricultural costs and the credit amount certified for each taxable year.” To help with the added administrative burden, the DOA will get no more than $50,000 in the current fiscal year.

Perhaps concerned that the tax credits could bankrupt the state, the Legislature capped them at $7.5 million per year, with the credits given out on a first-come, first served basis.

The law does state specifically that any information provided to the DOA in connection with the tax credits “shall be available for public inspection and dissemination.”

In addition to the tax credits, SB2646 provides for guarantees of up to 85 percent of commercial loans for the development of projects on designated important agricultural lands.

Designation: As mentioned, the tax credits and other benefits are available only for owners of or developers of lands that have been designated as “important agricultural lands.” The language setting forth just how such lands are to be designated is what occasioned the great amount of controversy.

Landowners who want to qualify for the benefits spelled out in SB2646 can petition the state Land Use Commission for such designation, so long as the lands qualify for the designation under Section 205-44, Hawai`i Revised Statutes. There are two kinds of petitions. First, there are the straightforward ones, where the land in question is simply designated as important agricultural land. The second kind, the one that generated the heat in discussions over the merits of SB2646, is where the petition for designation is linked to reclassification of other agricultural lands.

Under the second type of petition, the petitioner can seek both to designate lands as important agricultural lands and reclassify other agricultural land into the Urban, Rural, or Conservation District, so long as at least 85 percent of the total land in the petition is to be designated as important agricultural land.

This provision, wrote Mikulina, “allows the urbanization of nearly 300,000 acres (15 percent of existing ag lands) – or almost three times the total urbanized land on O`ahu.”

There is nothing automatic in the LUC approval of such petitions. Under SB2646, the LUC must still find that when land is proposed to be put into the Urban District, it is consistent with applicable county planning documents. (Mikulina faulted the bill for not making rural reclassifications subject to a similar condition.) The bill also requires any LUC approval to be on a two-thirds vote and does allow the LUC to “include reasonable conditions.” Finally, if the commission determines that either the designation or reclassification proposed by the landowner should not be approved, the entire petition is to be denied.

But the bill also positively encourages the redistricting of agricultural land into other state land use districts. Even when a landowner only seeks to have his land classed as “important agricultural land,” he or she still earns credits that can allow other holdings to be reclassified. Such credits, the bill says, “shall equal the difference between … fifteen percent of the total acreage of land subject to the [LUC declaratory] order; less the amount of the petitioner’s land that is reclassified from the agricultural district to the rural, urban, or conservation district by the declaratory order.” Anyone having such credits can petition the LUC for reclassification of other lands he or she may have in the same county into the urban, rural, or conservation district “until the credits are exhausted or expired.” Such credits expire 10 years after the declaratory order designating important agricultural land is granted. They cannot be transferred.

If any landowner whose agricultural lands were designated as important in connection with a redistricting of other lands should in the future seek to lose that designation, the Legislature must first approve such withdrawal by adoption of a concurrent resolution, approved by a two-thirds vote in each chamber.

Earl Yamamoto, a planner with the Department of Agriculture, said his agency would probably have to go through the rule-making process before it could process requests made by landowners seeking to take advantage of some of the benefits contained in the new law. “Where we’re required to certify if the land meets designation criteria,” under Part X of the law, he said, “we presume that this requires rules.” Other parts of the law, including the loan guarantee provision, may be accomplished with existing resources, however, he said.

* * *
Environmental Bills’
Final Fate

In June, we reported on several bills that had passed the Legislature but whose fate on the governor’s desk was still uncertain. Here, for the record, is what happened to those bills:


• HB2863, which seems to have been tailor-made to suit Lana`i owner Castle & Cooke, was signed by the governor and became Act 207 of the 2008 Legislature. The new law sets up a new, streamlined system for approving sites where renewable energy facilities could be built.

• HB2502, adding “solar energy facilities” to the list of uses permitted on land in the state Agriculture District, was signed into law, becoming Act 31.

• HB3179, now Act 90, allows “renewable energy producers” to be eligible to acquire leases on state land without going through the public auction process.

• HB2505 gives the Department of Business, Economic Development and Tourism $112,000 to hire temporary staff to help with the permitting of renewable energy facilities. The governor let HB2507, which gives DBEDT $140,000 to hire two temporary employees to help with the work of the Greenhouse Gas Emissions Reduction Task Force, pass into law without her signature. “Rather than appropriating funds to research an issue,” her message said, “I believe this money could be put to better use by directing it to existing programs.”

• Under SB644, new single-family houses built after December 31, 2009, are required to be equipped with solar water heaters, on-demand gas water heaters, or “comparable renewable energy systems.” The governor signed the bill, which became Act 204.

• SB2933, which would invalidate private covenants against outdoor clotheslines, sailed through to approval in the Legislature, but the governor sent it back without her signature. “This bill is objectionable,” she said in her message, “because the proper way to promote this practice is through advertising and public relations campaigns, not through regulation… This bill unnecessarily invalidates homeowners’ contracts and inserts government regulation into a local, community matter.” When the Legislature got a second chance to vote on the measure during the special session in July, it easily overrode her veto.

• SB988, which opens the door to letting people who install photovoltaic systems receive a rebate, was signed by the governor and became Act 151.

Invasive Species

• HB2977, which requires agencies to coordinate efforts to control coqui frogs, was approved by the governor.

• HB2850, which establishes a biosecurity program, became law without the governor’s signature. She expressed concerns “over the funding methods provided.” The program is authorized to spend up to $250,000 in general revenues and up to $6 million from the state’s pest inspection, quarantine, and eradication special fund.

DLNR Bills

• HB3177, HB3178, and SB1891 increase fines and penalties for violating rules relating to use of lands regulated by the Department of Land and Natural Resources. Governor Lingle signed all three.

• HB3174 and HB3175 impose new authority on the DLNR relating to regulation of commercial and recreational fishing. They, too, were signed by the governor.

• HB2872, requiring the Board of Land and Natural Resources to negotiate with holders of leases at Koke`e, Kaua`i, became law without the governor’s signature. “I have received many petitions arguing that it is unfair for the previous lessees to monopolize the opportunity to lease these unique properties,” she wrote in her message to the Legislature. “I understand these concerns and have weighed them heavily in my deliberations on this measure.” Still, she said, the bill attempts to “balance the interests of the taxpayers, the current lessees, and other interested parties.”


• SB1793 would have increased the board of directors of the Natural Energy Laboratory of Hawai`i Authority by adding two tenants’ representatives (something long sought by the tenants) and would have eliminated any role for parent agency DBEDT in NELHA’s procurement process. At a June meeting, the NELHA board voted to recommend that the governor approve the measure, even though DBEDT director Ted Liu had earlier warned against it. The vote was moot: the governor vetoed the bill, saying it was objectionable because it eliminated the partnership between NELHA and DBEDT in key areas: “I strongly believe all attached agencies must have Executive Branch oversight … to ensure the proper use and expenditure of public funds.”

— Patricia Tummons

Volume 19, Number 3 September 2008

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