Month-to-Month State Permits Give Way to Longer-Term Uses

posted in: July 1994, Water | 2

The most common vehicle used by the Division of Land Management to authorize the landscaping of beach reserve land in Kihei is the month-to-month revocable permit. Theoretically, the permit can be cancelled on one month’s notice by either party. Only two such revocable permits have been cancelled, however. In 1980, the Board of Land and Natural Resources took the initiative in canceling the first landscaping permit granted to Hale Pau Hana. In 1993, the owners of Waiohuli Beach Hale asked to have the revocable permit for landscaping of grounds fronting their property cancelled.

In recent months, the Division of Land Management has been sending notices to permit holders, informing them that the month-to-month revocable permits would be converted to longer-term leases providing for non-exclusive easements over the landscaped area.

Most permittees have responded favorably to the offer.

The Permits

State law anticipates the use of revocable permits for short-term occupancy of state-owned land. By law, the Land Board must approve annually the extension of month-to-month permits past the first year of occupancy. To meet the law’s requirements, then, the Division of Land Management annually brings before the Land Board the list of revocable permits then in force with the recommendation that they be extended yet another year. Usually, Land Management also recommends at that time some nominal increase in monthly rental.

Unlike the Kihei permits, most revocable permits issued by the Division of Land Management provide for more-or-less exclusive use of state land by the permit holder. In addition, most permits are issued to further some type of economic activity (for example, pasturing of cattle or cultivation of crops). Because the implied tenure on the land is so uncertain (in theory, at least), permit holders cannot use the permit as security for purposes of obtaining long-term financing. In this important respect, permit holders are at a distinct disadvantage with respect to people who hold long-term leases on state land. Partly in recognition of this, rents for the use of land under month-to-month revocable permits have tended to be substantially below market value.

The holders of the revocable permits to landscape the Kihei beach reserve lots also have enjoyed rents far below any market-based value. The rationale for this was that the beach reserve corridor would become a public park, maintained by adjoining landowners. They would have the benefit of the landscaping and the value that would add to their own property. In return, the public would have the benefit of the park. Many of the older revocable permits, in fact, state that the landscaping shall be done under the supervision of the Maui County parks director. More recent ones say that the area shall be maintained “in accordance with the Division of State Parks’ standards for maintenance of a state park.”

Phase-Out

In 1988, the Legislature passed Act 237, which prodded the Department of Land and Natural Resources into acting more swiftly to convert month-to-month agricultural permits to long-term leases. Many agricultural permit holders wanted leases, since that would allow them greater access to financing, but the Division of Land Management apparently could not process the requests as fast as they were being made.

Not only was the legislature unhappy with the month-to-month R.P.’s; so were the Office of Hawaiian Affairs and the private, non-profit Native Hawaiian Legal Corporation. Rental income from the use of most state land is placed into a trust, in accordance with provisions of the Admissions Act. The Office of Hawaiian Affairs receives 20 percent of that income. Quite understandably, when state lands are rented for below-market rates, trust beneficiaries may be expected to object.

By the end of 1992, the Division of Land Management was trying to respond to these concerns. It had hired an appraiser to review land rents and bring them more in line with market valuations. At the Land Board meeting of December 18, 1992, it presented its recommendations and was immediately rebuffed with outcries from the permittees whose rents were scheduled for a dramatic increase. In addition, the Maui board member at the time, John Arisumi, objected to the proposed rise in rents paid by sugar and pineapple growers that held state land under R.P.’s “until the industry becomes more profitable.”

Echoing Arisumi’s sentiments was Meredith Ching, a vice president of Alexander & Baldwin. The increased rental proposed for the permits held by A&B and East Maui Irrigation would pose a “hardship” for the companies, she said. Mason Young, administrator of the Division of Land Management, was instructed to go back to the drawing board.

By March 23, 1993, the Land Board was ready to approve Young’s revised recommendations. Rentals for sugar and pineapple were capped. The revocable permits issued on Maui for purposes of landscaping also saw a freeze on rentals, with Land Management being instructed to process these permits “for long-term lease via public auction or negotiation,” according to Land Board minutes. Six months later, the certified letters mentioned above went out to the Maui permit holders.

‘Beneficial to All’

Recently, the Division of Land Management has begun to process the award of what it describes as “non-exclusive term easements for the landscaping of the Kihei beach reserves. On two occasions this spring – the Land Board meeting of March 11, 1994, and that of April 8, 1994 – the board approved a total of six such easements, each for a term of fifty-five years.” (Five of those easements were to parties having existing revocable permits. The fifth – to David Jay Flood and Marilee A. Flood – was for new landscaping associated with a new house.)

The staff recommendations approved by the Land Board are vague as to the rent that will be charged for the use of these areas. The rental, according to the submittals, is “to be determined by an independent appraisal establishing the estimated fair market annual rental,” subject to the approval of the chairman of the Land Board.

The rental is to be redetermined at the end of the twenty-fifth year by an independent appraiser. Recent correspondence with the agent for the Association of Apartment Owners of the Mana Kai Maui suggest how difficult the process of establishing a fair rental may be. The Division of Land Management informed the Mana Kai Maui of its offer to convert the revocable permit to an easement, to which the Mana Kai Maui responded with interest. The DLM wrote back on September 22, 1993. “Because you are presently assisting the state in maintaining a portion of the Government Beach Reserve, it would be beneficial to all parties to have something which provides you with more security and stability.” It went on to propose its initial terms for the easement, which call for a minimum annual rental equal to 20 percent of the fair market value, to be determined by independent appraisal.

Limited Value

Chaney, Brooks & Co., the association’s managing agent, hired an appraiser to determine the value of the 13,000-square-foot area under permit to the Mana Kai. The appraisal was conducted in November 1993 by Stephen S. Bronson of Lahaina. Erroneously assuming that the land was zoned “Conservation” (in fact, it is in the Urban district), Bronson stated that the zoning placed “severe restrictions on any type of development.” In addition, “Maui County building codes restrict any construction within 45 feet of the shoreline. These code requirements further restrict the parcel to any use other than the current beach access which the state Department of Land and Natural Resources still insists upon.”

“The Appraiser,” Bronson continued, “does not see any other use for the property other than the present use as a beach access.” Bronson set the land’s worth at between 90 cents and $1.00 per square foot, for a total value of between $11,700 and $13,000. A 20 percent annual rental would translate then into monthly payments somewhere between $195 and $216.67. (That is nearly double the present rental of $101 per month.)

In January 1994, Chaney, Brooks notified the state of Bronson’s determination and inquired whether the state would be willing to sell the property to the Association of Apartment Owners of the Mana Kai Maui. “As the adjacent owner to this property owned by the state,” wrote the Mana Kai Maui agent Brett M. Klyver, “the Association feels that they are the only ones who really benefit from this property and desire therefore to purchase it…. The Association offers $50,000 for the property.”

Volume 5, Number 1 July 1994

2 Responses

  1. We need help to understand the permit that was forced on us please help. It was said it is the path to a long term lease.

Leave a Reply