LOANS ON LEASEHOLD INTERESTS IN HAWAII MONDAY, MAY 27, 1968 HOUSE OF REPRESENTATIVES, Washington, D.C. The committee met, pursuant to notice, at 10 a.m., in room 1301, Longworth House Office Building, Hon. E. C. Gathings presiding. Present: Representatives Gathings, Poage (chairman), Montgomery, Teague of California, Hansen, Goodling, Zwach, and Myers. Also present: Christine S. Gallagher, clerk; William C. Black, general counsel; Hyde H. Murray, assistant counsel; and L. T. Easley, staff consultant. Mr. GATHINGS (presiding). The committee will come to order. The chairman will be here most any time, but he asked me to sit in until he arrives. We are delighted to have with us today a former member, Congressman Spark Matsunaga from the State of Hawaii, who will testify in the interest of his bill, H.R. 15,562. (H.R. 15562 and the Department report follow :) [H.R. 15562, 90th Cong., second sess.] A BILL To extend the expiration date of the Act of September 19, 1966 Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That the Act entitled "An Act to amend the Consolidated Farmers Home Administration Act of 1961 to authorize loans by the Secretary of Agriculture on leasehold interests in Hawaii, and for other purposes", approved September 19, 1966 (80 Stat. 809), is amended by striking out "June 30, 1968" and inserting in lieu thereof "June 30, 1970". HON. W. R. POAGE, DEPARTMENT OF AGRICULTURE, Chairman, Committee on Agriculture, House of Representatives, DEAR MR. CHAIRMAN: This will reply to your request of March 11, 1968, for a report on H.R. 15562, a bill "To extend the expiration date of the Act of September 19, 1966," (P.L. 89-586), which amends the Consolidated Farmers Home Administration Act of 1961, to authorize loans by the Sceretary of Agriculture on leasehold interests in Hawaii. Public Law 89-586 amends section 343 of the Consolidated Farmers Home Administration Act of 1961, as amended, to authorize the Secretary of Agriculture to make loans under that Act to lessee-operators of real property in any case in which he determines that the land cannot be acquired in fee simple by the applicant, adequate security is provided for the loan, and there is a reasonable probability of accomplishing the objectives and repayment of the loan. The authority contained in Public Law 89-586 will expire on June 30, 1968. The purpose of H.R. 15562 is to extend the expiration date to June 30, 1970. The Department of Agriculture does not recommend the extension of Public Law 89-586 because the authority contained therein is limited to the State of Hawaii. The Department of Agriculture believes that if this authority is provided for the State of Hawaii, it should be made equally available in all other states, as well as in Puerto Rico and the Virgin Islands. The Bureau of the Budget advises that there is no objection to the presentation of this report from the standpoint of the Administration's program. Sincerely yours, ORVILLE L. FREEMAN. Mr. GATHINGS. You may proceed in your own way, Mr. Matsunaga. STATEMENT OF HON. SPARK M. MATSUNAGA, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF HAWAII Mr. MATSUNAGA. Thank you, Mr. Gathings, and members of the committee. As a former member of this committee, I consider my appearance today as a witness a delightful homecoming on my part. Because of the urgency involved, I am particularly grateful for this opportunity to present my views with respect to H.R. 15562, which would extend for a period of 2 years the expiration date of Public Law 89-586, the authority for Farmers Home Administration loans on farm leasehold interests in Hawaii. By its terms, that statutory authority was restricted to Hawaii and limited in its application to the period between enactment, which was September 19, 1966, and June 30, 1968. The need for the legislation was stated in the committee report which accompanied the reported bill, H.R. 15951, that I had introduced in the 89th Congress. I quote from the committee report: Because of a land-tenure system peculiar to Hawaii, there is virtually no farmland in the State available for purchase in fee simple. For generations, most of the farmland in Hawaii has been held under an entailed status which permits its transfer only on a lease basis. Many of these leases run for 99 or 55 years. The Consolidated Farmers Home Administration Act of 1961 authorizes real estate loans only to owners or prospective owners of farmlands in fee. Therefore, for all practical purposes, Hawaii is barred from participation in the real estate loan provision of this law. The success of the farm loan program under Public Law 89-586 is evidenced by figures which were furnished my office as late as Thursday of last week by the Farmers Home Administration. In fiscal year 1967, actually over a period of a little more than 9 months, five loans were approved and a total amount of $125,000 was disbursed under this statutory authority. In fiscal year 1968, 10 loans totaling $294,790 have already been approved and disbursed. However, seven other loan applications have been received by the Farmers Home Administration and are still in process. These seven applications, involving the sum of $232,380, are from farmers who were displaced in recent years by the rapid urbanization of the area which once constituted the easterly fringe of the city of Honolulu. Their loan applications have been completely developed and reviewed by the Farmers Home Administration, but because the farmer applicants do not yet hold the requisite leases in a new agricultural tract the loans cannot be consummated. The delay in the issuance of individual leases to these farmers, who belong to an association called Kamilonui Farmers Cooperative, named after Kamilonui Valley where the new agricultural tract is located, has been the result of prolonged negotiations involving at least four different parties. The farmland is held in fee by the Bernice P. Bishop Estate. The trustees of the Bishop Estate have been negotiating with the developer, the Kaiser Hawaii-Kai Development Co., which in turn has been negotiating with the farmers cooperative. Some 80 acres have been set aside for this agricultural tract and it is planned to create approximately 27 21⁄2-acre minimum farm lots. City and county regulations require that the agricultural tract must receive the approval of the city and county planning department, and either tract improvements completed or bonds posted guaranteeing such completion before leases can be issued by the Bishop Estate to the individual farmers. On February 20, 1968, I wrote to the trustee of the Bishop Estate and to the development company requesting their cooperation in expediting the negotiations in order that individual leases could be issued to the farmers before the June 30, 1968, deadline. With the permission of this committee, I would like to incorporate into my testimony and make a part thereof a reply dated March 4, 1968, from Frank E. Midkiff, president, board of trustees, Bernice P. Bishop Estate, and another reply dated February 29, 1968, from K. Tim Yee, vice president and general manager, Kaiser Hawaii-Kai Development Co. Both replies reflect an appreciation of the exigencies of the situation and a willingness to cooperate to effect the issuance of the leases as soon as possible. However, more recent information from the Kamilonui Farmers Cooperative indicates that it is not likely that the farmers will have their individual leases before June 30, 1968. The displaced farmers who are now members of the Kamilonui Farmers Cooperative formerly supplied much of the fresh vegetable requirements of the military as well as the civilian population on the island of Oahu, which is the principal island on which Honolulu is located. Because of Hawaii's insularity, the production of vegetables at former levels is necessary to avoid the disastrous consequences which could flow during an emergency as the result of total reliance on west coast sources of supply. Mr. Chairman and members of the committee, for the reasons I have stated, I strongly urge that H.R. 15562, which would extend existing law to June 30, 1970, be given your early favorable consideration. Thank you. Mr. GATHINGS. Thank you so much, Mr. Matsunaga, your attachments will be made a part of the record at this point. (The letters dated March 4, 1968, and February 29, 1968, follow :) OFFICE OF THE TRUSTEES OF THE BERNICE P. BISHOP ESTATE, Hon. SPARK M. MATSUNAGA, Washington, D.C. SIR Receipt is acknowledged of your letter of February 20, 1968 addressed to Mr. Frank E. Midkiff, Chairman, Board of Trustees, Bernice P. Bishop Estate, expressing your concern on the delay in utilizing funds made available, under Public Law 89-586, for loans through the Farmers Home Administration to farmers on leasehold property in Hawaii, particularly with respect to the Kamilonui Agricultural Tract in Hawaii, Kai. Under its development contract with Kaiser Hawaii-Kai Development Co., the Trustees of the Bishop Estate have approved an agricultural subdivision in Kamilonui Valley at Maunalua. This project has been under negotiation for nearly two years. Hawaii-Kai, as the Trustees' developer, is promoting the project and has been negotiating with an association known as the Kamilonui Farmers Cooperative. Some 80 acres have been set aside for this agricultural tract and it is planned to create approximately 27 21⁄2 acre minimum farm lots. City and County regulations require that the agricultural tract must receive the approval of the City and County Planning Department, and either tract improvements completed or bonds posted guaranteeing such completion before leases can be issued by the Bishop Estate to the individual farmers. The farmers association have undertaken the obligation of preparing subdivision plans and construction plans for this tract. The preliminary subdivision plan has been approved by the Trustees. No construction plans or final subdivision plans have yet been submitted. The Trustees have, at Hawaii-Kai's request, approved a rental schedule on an acreage basis for lots in the proposed tract. The Trustees have also prepared and submitted to Hawaii-Kai proposed lease forms for individual farm leases and a proposed lease to the association for the tract utilities. The Trustees have also issued letters of intent to HawaiiKai advising them that the Trustees are prepared to issue individual farm leases in accordance with approved rent schedules and lease covenants when permitted to do so under existing subdivision regulations. Please be assured that the Trustees will expedite the issuing of leases on these farm lots immediately upon receipt of the necessary tract approvals from the City and County. Hawaii-Kai in turn has relied upon the farmers association who are undertaking the tract improvements themselves. It is anticipated that leases can be effected on the farm lots within 60 days provided the farmers association produces the necessary plans and Hawaii-Kai obtains the required City approvals. We shall cooperate in these steps and aid in expediting them insofar as we are able to do so. Your concern in advising the Trustees of the urgency in issuing these leases to take advantage of the Federal loan possibilities is greatly appreciated, and you are hereby assured that the Trustees are making every reasonable effort to cooperate in this regard. Very truly yours, Hon. SPARK M. MATSUNAGA, FRANK E. MIDKIFF, President, Board of Trustees. KAISER HAWAII-KAI DEVELOPMENT Co., DEAR SPARKY: In reply to your letter of February 20, 1968, please note that the planning and subdivision of the Kamilonui farm area is the responsibility of the farmers in accordance with their desire and as provided in their agreement with Kaiser Hawaii-Kai. At a series of meetings betweeen Kaiser, the farmers and Bishop Estate about four months ago, it was understood that the farmers would work closely with their engineer so that subdivision approval could be obtained and leases issued no later than April 1, 1968. Also, to satisfy the Farmers Home Administration, Bishop Estate cooperated by writing us letters of intent to lease the farm lots and roadways pursuant to the FHA's requirements. We transmitted these letters to Mr. Scott of the Farmers Home Administration by letter dated October 23, 1967, a copy of which we attach for your information. We have presented to the Trustees for approval proposed forms of the leases mentioned in the first paragraph of both Bishop Estate letters attached to ours of October 23, 1967. It is our understanding that they have been reviewed and found acceptable by Bishop Estate's staff and will be acted on by the Trustees this week. The total annual rent of $15,120 has also been agreed to by all concerned. Accordingly, there would be no difficulty in having the leases ready for execution by the farmers before the anticipated April 1, 1968 target date, but for the obtaining of subdivision approval, which is a legal prerequisite to issuance of leases. We have been told by the farmers' engineers that even if he continued work on the plans immediately, it would ordinarily take a minimum of three months before all necessary approvals can be obtained so that leasing of lots can take place. Since we have no contractual relationship with the engineer, we can do nothing |