The Special Land and Development Fund

In this week’s spotlight is the Special Land and Development Fund, administered by the state Department of Land and Natural Resources. Into that fund goes all land rents the state receives for land that is either leased or used under revocable permits (such as those used by airport or harbor-based businesses).

The fund is also fed by earmarks on two taxes. HRS section 248-8 gives it 0.3% of the highway fuel tax, up to $250,000, and HRS section 237D-6.5(b)(5) gives it $3 million of the transient accommodations tax, each year.

Recently, the State Auditor came out with Report No. 19-12, concentrating on this fund. The auditor raised some questions about the way the fund and some of the underlying state lands were managed, and the DLNR took umbrage with quite a few of the auditor’s findings.

Just to give you a flavor of the underlying mentality, the first page of DLNR’s response to the audit findings touted “the Land Division’s planning, implementing and accounting efforts [such that] the annual revenues for the SLDF increased exponentially from $6.3 million in 2010, to over $20 million in 2018.”

In response, the auditor thought it interesting to use 2010 as the starting point because it was a tremendous drop from the prior three fiscal years, where revenues averaged $8.4 million. Also, part of the increase was due to the $3 million from the Transient Accommodations Tax earmark, which took effect in 2016 (Act 117 of 2015), so how could DNLR’s Land Division take credit for that?

Also, there seemed to be some problems with basic math. In 2018, DLNR told the auditor that the SLDF consists of a parent account and 24 subaccounts.

That information was used to create Report No. 18-19. This time, the auditor pointed out that 23 subaccounts weren’t reported to the Legislature. DLNR’s response was that the SLDF has only one subaccount, and that the 23 other subaccounts, which together contained over $1 million, were sent to other divisions within DLNR.

Huh? Even if the 23 other subaccounts were being managed by different divisions within DLNR, the subaccounts are still under the SLDF as the parent account and are still within DLNR.

Apparently, DLNR’s Land Division apparently has a “silo mentality” that is so strong that “we don’t manage it” means “it doesn’t exist.”

But the response to the auditor isn’t supposed to be Land Division’s response, it’s DLNR’s response. The response was on DLNR letterhead and signed by its chairperson, so why doesn’t it contain input from the other affected divisions?

Finally, let’s focus on another statistic the auditor pointed out: the delinquency rate on state lands rented out. As of the end of June 2017, DLNR had $7.3 million in accounts receivable. $2.1 million of that, or 29%, was more than 60 days unpaid. Of the $2.1 million, DLNR determined that $1.6 million, or 75%, was uncollectible.

DLNR’s response: “However, the auditor’s report fails to cite to comparable delinquency rates from other state or county landlords … or the private sector. Therefore, the department believes this criticism lacks support and is unwarranted.”

Excuse me? Rent is being charged for state lands (less than market rate in many instances), the rent isn’t being paid on time 70% of the time, and it will never be paid more than 20% of the time.

True, those statistics apply to just one point in time, but if you were the landlord and those statistics came from your property management company, wouldn’t you at least be asking questions? Would you even care about “comparable delinquency rates”? By the way, you’re a taxpayer so you ARE the landlord.

Stop shooting the messenger and concentrate on cleaning house!

•••

Tom Yamachika is president of the Tax Foundation of Hawaii.

2 Comments
  1. Rev Dr. Malama July 21, 2019 12:53 pm Reply

    I am gravely concerned that dlnr continues to ‘act’ dumb…. all the while the true landowner, we the Hawai’ian Subjects are calling fraud, corruption and collusion….
    Retribution and reconciliation are in order so thanks Tom, glad that you are watchdogging the situation as you may be called as an expert witness in the upcoming lawsuits.


  2. harry oyama July 22, 2019 1:52 pm Reply

    The FBI should be looking into that corrupt DLNR of Kauai, where members are getting sweet heart deals on Crown Lands meant to benefit native Hawaiians, but because most are former retired State legislatures, descendants of the Japanese ancestors of the sugar plantation era still paying $1 a year leases, which are subleased to other profit business adventures, making a fortune.

    It is just not honorable or humane to get these dirt cheap leases and make huge profits at the expense of native Hawaiians who often die while awaiting home lots at the Hawaiian Homes Department, another corrupt State agency that carters to the politically connected and corrupt system of back scratching cronies.


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