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    20% of what?

    (back to Essentials)

    These staggering amounts are apparently arrived at by calculating OHA’s 20% share on the gross revenues rather than the net revenues after expenses.

    Revenues from the ceded lands do not just drop like rain from the heavens, nor do they just spring up naturally from the ground. The State has to spend money to generate those revenues.

    For example, at Hilo Hospital, in order to earn revenues from services to patients, the State has to pay salaries to doctors and nurses and staff, buy and maintain and repair and replace x-ray machines, computers and other equipment, pay for electricity, gas, telephone and water, and other operating, overhead and administrative expenses. The State undoubtedly borrowed money, through issuance of bonds, to build and make improvements to Hilo Hospital and has to pay that money back with interest.

    We think it is important to know the actual gross and net revenues which the State, as trustee under the public land trust, receives from the ceded lands before making or agreeing to any “pro rata” distribution to any beneficiaries. Under general trust law, beneficiaries are only entitled to receive shares of net income, not gross.

    The revenues received from the ceded lands back to 1980 and expenses paid by the State to generate those revenues (i.e., the amounts the State spent in operating the ceded lands and and the State’s overhead and expenses of administering the ceded lands and the State’s expenses of depreciation or amortization of the capital cost of improvements to the ceded lands for the same period) are not readily available.

    This information is not provided in the regular financial statements prepared by the State. We have asked for this information. The State’s or OHA’s accountants (both of whom are paid with moneys received from the State) have extracted at least some of this information from the State’s records. But the State has declined to furnish it to us, saying the negotiations with OHA are confidential. (While we can understand the difficulties of negotiating in a fishbowl, we do not consider accountants’ reports about the State’s past income and expenses, mere compilations of data, to be the type of thing which needs to be shielded from public disclosure.)

    We plan to continue to seek this information and if, and when, we obtain it we will update this web page.

    We do know that the State paid OHA $15 million for its 20% share for the fiscal year ending June 30, 1998. If $15 million is 20% then 100 % of the revenues from the ceded lands that year would be $75 million. It seems implausible that the State’s net revenues after expenses of operating, administering, and depreciating or amortizing improvements to the sites of State government buildings, parks, schools, public housing and hospitals for the poor, roads, harbors, airports and other ceded lands in fiscal year ending June 30, 1998 was anywhere near $75 million.

    We also know that the $130 million paid to OHA in June of 1993 for the years 1980 through 1991, after deducting interest, averages roughly $11 million per year which would indicate the State’s total revenues would have averaged in the vicinity of $55 million per year for those years. It likewise seems implausible that the State would have realized net revenues from the ceded lands of those magnitudes.

    We have also seen in court documents a spreadsheet prepared by OHA’s accountant which calculates OHA’s share on the gross revenues rather than the net.

    It seems therefore that the calculation of OHA’s 20% must have been based on gross revenues.