RELATING TO THE PUBLIC LAND TRUST WORKING GROUP.

HB1358

HOUSE OF REPRESENTATIVES

H.B. NO.

1358

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

RELATING
TO THE PUBLIC LAND TRUST WORKING GROUP
.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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SECTION 1.
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In Act 226, Session Laws Hawaii 2022, (Act
226), which in part established the public lands trust working group, the
legislature stated in relevant part:

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It is incumbent upon the legislature to enact legislation that
upholds its trust responsibilities and duty of care to native Hawaiians to:

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(1)

Account for all ceded lands in the public lands
trust inventory;

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(2)

Account for all income and proceeds derived
from the public land trust; and

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(3)

Transfer the full twenty per cent pro rata
share of income and proceeds from the public land trust annually to the office
of Hawaiian affairs (OHA) for the betterment of the conditions of native
Hawaiians.

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The genesis and source of the State's public land trust
responsibility to native Hawaiians are the historical events that led to the
illegal overthrow of the Kingdom of Hawaii; the transfer of approximately
1,800,000 acres of crown, government, and public lands to the United States
under the 1898 Joint Resolution of Annexation without the consent of and
without compensation to the native Hawaiian people or their sovereign
government; the admission of Hawaii as a state of the Union in 1959, with the
explicit trust responsibility and requirement in section 5(f) of the 1959 Admission
Act that one of the five purposes of the public land trust is that the income
and proceeds from the public land trust are to be used "for the betterment
of the conditions of native Hawaiians"; and the 1978 Constitutional
Convention's recognition that native Hawaiians are one of the beneficiaries of
the public land trust and the creation of OHA to manage and administer the
specific allocation of "all income and proceeds from that pro rata portion
of the [public land] trust . . . for native Hawaiians" (Article XII,
section 6, of the Hawaii State Constitution).
�

The United States and the courts have consistently affirmed the trust
nature of the government and crown lands, including large tracts of ceded lands
used for military or other purposes under federal control.

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In 1959, as a condition of its admission into the Union, the
State of Hawaii agreed to hold certain lands granted to the State by the United
States in a public trust for five purposes delineated in section 5(f) of the
Admission Act, which provides in relevant part:

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The lands granted to the State of Hawaii by subsection (b) of
this section and public lands retained by the United States under subsections
(c) and (d) and later conveyed to the State under subsection (e), together with
the proceeds from the sale or other disposition of any such lands and the
income therefrom, shall be held by said State as a public trust [(1)] for the
support of the public schools and other public educational institutions, [(2)]
for
the betterment of the conditions of native Hawaiians, as defined in the
Hawaiian Homes Commission Act, 1920, as amended
, [(3)] for the development
of farm and home ownership on as widespread a basis as possible [(4)] for the
making of public improvements, and [(5)] for the provision of lands for public
use.
�
Such lands, proceeds, and income
shall be managed and disposed of for one or more of the foregoing purposes in
such manner as the constitution and laws of said State may provide, and their
use for any other object shall constitute a breach of trust for which suit may
be brought by the United States.

(
Emphasis added
.)

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In 1978, the people of Hawaii affirmed the State's trust
obligation to native Hawaiians by ratifying constitutional amendments from the
Constitutional Convention, including article XII, sections 4, 5, and 6, of the
Hawaii State Constitution, which established OHA and charged it with managing
income and proceeds from the public land trust for the benefit of native
Hawaiians.
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Article XVI, section 7, of
the Hawaii State Constitution required the State to enact legislation to comply
with its trust obligations.
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Thus, in
1979, legislation, codified as chapter 10, Hawaii Revised Statutes, set forth
the purposes of OHA and described the duties of its trustees.

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In September 1981, an initial land inventory by the department
of land and natural resources listed approximately 1,271,652 acres, falling
woefully short of its duty to provide a complete inventory of the public land
trust lands.
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Additionally, the state
land information management system does not include all lands held by all state
entities.

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Act 273, Session Laws of Hawaii 1980, enacted section 10-13.5,
Hawaii Revised Statutes, to implement OHA's pro rata share and required that
OHA receive "[t]wenty per cent of all funds derived from the public land
trust[.]"
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This legislative
directive addressing the constitutional mandate has led to a series of lawsuits
and legislative enactments concerning OHA's constitutional pro rata share of
the public land trust.
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The State and OHA
have labored to resolve the political question of the statutory pro rata share
of income and proceeds derived from the public land trust, and payment to OHA.

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Act 178, Session Laws of Hawaii 2006, affirmed the State's trust
obligation to native Hawaiians by requiring that the department of land and
natural resources provide an annual accounting of revenue-generating public
trust lands and the amounts derived from those lands to the legislature.
�
The measure also set a fixed amount of
$15,100,000 from the pro rata share of the public land trust income and
proceeds due to OHA for the betterment of the conditions of native Hawaiians
until further action is taken by the legislature for this purpose.

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Act 15, Session Laws of Hawaii 2012, (Act 15) was enacted to
address past-due amounts, which accumulated during the period between November
7, 1978, up to and including June 30, 2012, of income and proceeds from the
public land trust owed to OHA by implementing an agreement between the State
and OHA for the State to convey certain lands in Kakaako, Oahu, to OHA valued
at approximately $200,000,000.
�
Act 15
did not, however, address the State's constitutional obligations relating to
OHA's twenty per cent pro rata share of the income and proceeds from the public
land trust generated after June 30, 2012.
�

Notably, a 2015-2016 financial review initiated by OHA found that the
minimum amount of total gross receipts from sources that OHA has historically
claimed was approximately $394,322,163 in the fiscal year 2015-2016.
�
Twenty per cent of this gross amount is
approximately $78,900,000.

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The legislature finds that to uphold its constitutional trust
obligation and duty to native Hawaiians, it must enact another legislative
measure in light of the information, data, and facts provided to the
legislature by state agencies since the enactment of Act 178, Session Laws of
Hawaii 2006, more than a decade ago.

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SECTION
2.
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Act 54, Session Laws of Hawaii 2011,
(Act 54) mandates the establishment of a comprehensive information system to
inventory and maintain information about the lands of the public land trust as
described in section 5(f) of the Admission Act and article XII, section 4 of
the state constitution.
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The department
of land and natural resources worked with a consultant to develop a public land
trust information system (information system) to satisfy the requirements of
Act 54.
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The information system will be a
geographic information system that is intended for a complete inventory of all
state-owned and county-owned lands, as well as a complete inventory of
encumbrances issued by state and county agencies over these lands.
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To meet these goals, each state or county
agency must submit comprehensive lists of its land and encumbrance inventories.

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SECTION
3.
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The public land trust working group
(working group) was created under Act 226 and was assigned to:

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(1)
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Account for all ceded lands in the public land
trust inventory;

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(2)
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Account for all income and proceeds from the
public land trust; and

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(3)
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Subsequently determine the twenty per cent pro
rata share of income and proceeds from the public land trust due annually to
the office of Hawaiian affairs for the betterment of the conditions of Native
Hawaiians.

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In
December 2023, the working group submitted to all state agencies that hold
title to, maintain management control or otherwise use ceded lands, a written
request to provide information, data, documents, and maps to ensure that those
agencies have completely and accurately identified and reported to the
department of land and natural resources:
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(1) all ceded land parcels for the purpose of an inventory; and (2) all
income and proceeds collected or received from the public land trust.

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The
working group has been informed that the last financial review by an outside
independent accounting firm of the pro rata share was the fiscal year 2015-2016
financial review initiated by the office of Hawaiian affairs.
�
At the time, the financial review identified
total gross receipts from historically claimed public land trust revenue
sources in the minimum amount of approximately $394,322,163 in the fiscal year
2015-2016.
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Twenty per cent of this gross
amount is approximately $78,900,000.
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The
working group found that there has been no new financial review since the
2015-2016.
�
The 2016 financial review
cost $145,404.

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The
legislature notes that Act 178, Session Laws of Hawaii 2006 (Act 178), requires
the department of land and natural resources, with the cooperation of the
department of budget and finance and any other state department or agency that
uses or manages public lands, to provide an accounting of all receipts from
lands described in section 5(f) of the Admission Act for the prior fiscal year.
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The working group has been informed that state
agencies' self-reported information for the purposes of these reports is not
audited or reviewed for accuracy by the department of land and natural
resources.

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The
working group has been informed that work began on the process to procure a
consultant for the information system after the enactment of Act 54 and that
the development of the information system began in 2012 and the information
system was launched in October 2018.
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Act
54 appropriated up to $360,000 from a land conservation fund for the work by an
outside independent consultant.
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The
final amount for the creation of the information system and training was
$340,382.

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The
implementation of the information system informed all state and county agencies
that hold title to land that they must submit their entire land inventory,
regardless of the public land trust status, regardless of whether there are any
encumbrances on the land, and regardless of whether revenue is being generated
on the land.
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The goal here was to have
all state-owned and county-owned land represented in the information system.
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All state and county agencies must submit
encumbrances that they have issued over state-owned and county-owned land,
regardless if they hold title to that land or not.
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This includes all encumbrances, including leases,
permits, right‑of‑entries, and easements.
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All encumbrances must be submitted, regardless
of whether they generate revenue or not.
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The goal was to have all encumbrances issued
over state-owned and county-owned land represented in the information system.

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As with
the reporting to the department of land and natural resources on public land
trust revenues, the information system is also based on self-reporting by state
agencies and the counties.
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There are
some disclaimers about the information.
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The
department of land and natural resources has encouraged all state and county departments
to regularly update data in the system.
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Updates,
however, are also based on self-reported information.
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The legislature believes that independent
third‑party professionals need to evaluate this practice.

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The
working group has been informed that State agencies use a "rule of thumb"
to determine whether a parcel is ceded or not when it is both.
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When more than fifty per cent of a parcel is
ceded land, it is categorized as ceded.
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The working group is not able to determine
whether this is detrimental to the calculation of the office of Hawaiian
affairs' pro rata share.
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The legislature
believes that independent third-party professionals need to evaluate this
practice.

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The
working group has been informed that there are many parcels without tax map key
numbers in the information system and therefore may not be included in the
system.
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This is particularly the case
for the submerged lands which are generally considered public land trust lands.

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The legislature believes that
independent third-party professionals need to evaluate how to include these parcels
so that the information system contains the complete and accurate inventory.

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The
working group has been informed that the lands under federal jurisdiction are
not included in the information system and that the counties do not report any
of the revenue from the public land trust to the department of land and natural
resources for the purposes of the annual accounting required pursuant to Act
178 (Act 178 report).

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To the
knowledge of the working group, there has been no third-party independent
audit, review, or evaluation of the thoroughness and accuracy of the information
system or the current reporting by agencies for the purpose of the preparing
the annual Act 178 report, nor has there been any analysis or comparison of the
data in the information system with the data in the Act 178 reports.

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The
working group has conducted research and has determined that the services of one
or more third-party independent consultants with the necessary financial,
accounting, land inventory expertise will be appropriate to address the
concerns that have been raised regarding the thoroughness and accuracy of the information
system, to ensure that the working group completes its objectives under Act
226.

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Based on
the amounts expended for the office of Hawaiian affairs' 2016 financial review
and the creation and launch of the information system, which cost $495,786, the
working group has estimated that approximately $1,000,000 is needed for the
retention of third party independent professionals.

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Accordingly,
the purpose of this Act is to appropriate moneys to the office of Hawaiian
affairs to facilitate the hiring of necessary staff and the purchase of
equipment and professional services on behalf of the public land trust working
group.

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SECTION
4.
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There is appropriated out of the
general revenues of the State of Hawaii the sum of $1,000,000 or so much
thereof as may be necessary for fiscal year 2025-2026 and the same sum or so
much thereof as may be necessary for fiscal year 2026-2027 to carry out the
purposes of this Act, including the hiring of necessary staff and the purchase
of equipment and professional services; provided that in obtaining services by
uniquely qualified persons, the office of Hawaiian affairs shall be exempt from
chapter 103D, Hawaii Revised Statutes.

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The sums

appropriated shall be expended by the office
of Hawaiian affairs for the purposes of this Act.

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SECTION 5.
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This Act shall take effect on July 1, 2025.

INTRODUCED BY:

_____________________________

Report Title:

Public
Land Trust Working Group; OHA; Public Land Trust; Appropriations

Description:

Appropriates
moneys to the Office of Hawaiian Affairs to facilitate the hiring of necessary
staff and the purchase of equipment and professional services on behalf of the
public land trust working group.

The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.