SUMMARY OF HOW THE STATE OF HAWAII AND OHA ARRIVED AT THE $200 MILLION SETTLEMENT AMOUNT FOR PAST DUE PUBLIC LAND TRUST REVENUES
By Bill Meheula, attorney of OHA
The $200 million amount to settle OHA’s outstanding claims to income and proceeds from the public land trust for the period 1978 to 2008 was arrived at as a compromise after taking into consideration many issues. This memo explains how the parties arrived at that amount.
From 1980 to 1990, OHA was receiving about $1.5 million per year for its 20% share of funds from the public land trust (“trust”) under HRS § 10-13.5. OHA argued that these payments were insufficient and filed suit against the State.
The Hawaii Supreme Court in the 1987 Yamasaki case held that HRS § 10-13.5 did not provide sufficient specificity on the trust funds the legislature intended for OHA and thus the Court cannot enforce OHA’s right to funds from the trust. The Yamasaki decision also encouraged the legislature to more clearly set forth what funds OHA is entitled to from the trust.
In 1990, the legislature enacted Act 304 that set forth that OHA is entitled to trust revenues that are proprietary as opposed to sovereign in nature. Act 304 also provided for the payment of interest on past due amounts.
Between 1990 and 1993, OHA and the State negotiated the implementation of Act 304. In 1993, OHA and the State agreed that OHA is entitled to $130 million for trust revenues OHA would have been entitled to under Act 304 for the period 6/80 to 6/91. This amount also included the payment of interest.
However, the parties were unable to agree on whether OHA was entitled to trust revenues for: (1) revenues paid by Waikiki Duty Free (“WDF”); (2) revenues received by State Hospitals (“Hospitals”); and (3) revenues received by Hawaii Housing Authority and Housing Finance Development Corporation (“HHA/HFDC”). OHA took the position that under Act 304 20% of such revenues should be paid to OHA and the State took the position that OHA was not entitled to these revenues.
In 1994, as a result of the dispute on these three items, OHA filed a lawsuit in State Circuit Court. In 1996, Judge Daniel Heely ruled that, under Act 304, OHA is entitled revenues on these three items plus lost interest. The State appealed Judge Heely’s decision.
In 2001, the Hawaii Supreme Court reversed Judge Heely’s decision on the grounds that Act 304 is invalid because it was in conflict with federal law. The Court again urged the legislature to clearly set forth the trust revenues it intends OHA to receive.
From 12/03 to 12/07, OHA and the Lingle administration negotiated on issues relating to trust revenues that OHA has not yet been paid. In 1/08, the parties agreed that a payment of $200 million would settle OHA’s right to trust revenue that have not yet been paid for the period 1978 to 2008.
The primary trust revenue amounts that led to the $200 million settlement are:
AG’s perceived position w/o interest:
WDF $136 m
Airport $ 21 m
Health $ 5 m
Elliot St. $ 2 m
UH $ 3 m
$ 167 m
Act 178 $ 17.5m
OHA’s position w/o interest:
WDF $136 m
Airport $ 42 m
Health $ 5 m
Elliot St. $ 2 m
UH $ 14 m
$ 199 m
Act 178 $ 17.5m
The Airport difference between $21m and $42m arises from the following differences: This airport figure is comprised of four categories of revenues: airfield, concession, terminal rental and ground rental. OHA took the position it was entitled to all four categories. The AG took the position that OHA was entitled to only concession because the other categories constitute air transportation uses that satisfied the “public use” purpose under section 5(f) of the Admission Act.
The UH difference between $14m and $3m arises from the following differences: The UH figures are comprised of revenues from parking, student housing, and faculty housing. OHA took the position it was entitled to all three categories. The AG took the position that OHA was entitled to only parking because the other categories went toward the “public education” purpose under section 5(f).
The Health category is comprised of Hawaii Health System Corporation figures relating to cafeteria sales and rental revenues that both sides agreed to. This should not be confused with the Hospital claim that was made in the OHA I case. The Hospital claim without interest amounted to $126m based primarily on patient service fees from three of the Hawaii Health Systems Corporation’s hospitals, Hilo, Kula, and Samuel Mahelona Hospitals, that are situated in whole or in part on ceded lands on Hawaii, Maui, and Kauai. The AG rejected this claim on the grounds that patient service fees from providing health and medical services is a “public use” of ceded land which ought to qualify as a rent-free public trust use just as public office building and public school uses qualify as a rent-free public trust use under section 5(f). Given the demise of Act 304 (1990) that eliminated OHA’s proprietary function argument that was the basis of Judge Heely’s 1996 order, OHA could not persuade the AG to change his position.
The above figures also do not include the HHA/HFDC claim that was asserted by OHA in the OHA I case. This claim without interest amounted to $36m based receipts from affordable housing programs. The AG took the position that use of ceded land for its public housing projects is consistent with one of section 5(f)’s five purposes, i.e., “public use.” Again, given the demise of Act 304 that eliminated OHA’s proprietary function argument, OHA could not persuade the AG to change his position regarding the HHA/HFDC claim.
Even if Act 304 had not been invalidated in OHA I, the State has a good argument that the legislature in passing Act 304 never intended that OHA would receive revenues from patient service fees and affordable housing programs, and the Yamasaki and OHA I cases held that legislative intent controls.
The above figures also do not include interest. Act 304 provided that past due public land revenues should include the payment of interest. Again, given the demise of Act 304 that eliminated OHA’s right to interest that was the basis of Judge Heely’s 1996 order, OHA could not persuade the AG to include payment of interest because there is no right to interest against the State until judgment is entered by a Court of law.
Based on this comparative analysis, the mediator got the parties to agree to $200m to settle OHA’s outstanding claims for income and proceeds from the public land trust for the period 1978 to 2008. OHA perceived that the AG agreed to go up to $200m in part because the State would be receiving a complete release for this time period and to give some recognition to the Hospital, HHA/HFDC and interest claims even though Act 304 is no longer law.