The Hawaii Legislature is considering a bill to establish a business mitigation relief pilot program to assist some business impacted by Honolulu's rail project. The bill is H.B. 2518 and while the aim of this bill is to mitigate the negative impacts of the construction of the rail project through Honolulu's urban core, there are some issues to consider.
First, by way of background, no Hawaii court has ever held that landowners are entitled to business interruption damages when their property is condemned, directly or inversely.
Hawaii's Constitution, Art. 1, Section 20 provides:
Private property shall not be taken or damaged for public use without just compensation.
Hawaii does provide a landowner for lost profits as a component of land value but we have not found a case the provides for business interruption damages, lost revenues or lost goodwill in Hawaii jurisprudence. See Honolulu v. Market Place, Inc., 55 Haw. 226 (1973).
As a side note, in the wake of Honolulu's Chinatown fires following outbreaks of the Bubonic Plague, the Territory of Hawaii established a Fire Claims Commission "to provide for the ascertainment and payment of all claims which may be made by persons whose property was destroyed by fire in the years A. D. 1899 and 1900, under orders of the board of health." In Re Brash, 19 Haw. 522 (1909). The Commission was expressly not authorized to pay claims for "no claim for speculative or consequential damage or for loss of rent or use of property, or loss of profits through the interruption of business," or, omitting immaterial portions, "no claim * * * for loss of * * * use of property." Id. at 524.
Most states do not provide for business interruption damages as a component of just compensation, but some do provide for these types of damages, sometimes called going-concern or loss of goodwill damages, by statute. See Coleman v. Escambia County, 405 So. 2d 227, 228 (Fla. Dist Ct. App. 1981)(under Florida law, if a business has been operating for more than five years on the property at issue, a property owner may recover the going-concern value of his or her business); see also Cal. Civ. Proc. Code 1263.510 et seq. (business owner shall be compensated for loss of goodwill).
So far so good, if the Hawaii State government wants to mitigate the impacts of rail construction on landowners, that sounds like a good thing.
But, it notes that the assistance provided by the City government for relocation benefits may not be adequate and creates a pilot program to provide up to $50,000 in benefits for SOME impacted landowners. The bill states, "A business shall be eligible to receive assistance through the business mitigation relief pilot program if the business:
(1) Is a for-profit business or non-religious non-profit organization;
(2) Is located immediately adjacent to the rail corridor or directly affected by the rail construction;
(3) Meets the technical qualifications to participate in the program, including number of employees, time in business, and ability to provide financial records;
(4) Is solvent; provided that a business in bankruptcy, as a documented result of rail construction, shall be considered solvent as long as the business is filing for bankruptcy to reorganize, rather than to liquidate; and
(5) Is in good standing with all local, state, and federal taxing and licensing authorities.
Some landowners are NOT eligible for the program: (1) Businesses engaged in teaching, instructing, counseling, or indoctrinating religion or religious beliefs; (2) Businesses generating over sixty per cent of revenues from the sale of alcoholic beverages; (3) Businesses with any products or services of a sexual nature representing over fifty per cent of their revenue; or (4) National retailers or outlets, unless operated by a single owner under a franchise agreement.
Huh? Saving aside the Equal Protection, Interstate Commerce, and Dormant Commerce Clause issues with some of these distinctions, these landowners are hurt by virtue of their unfortunate luck of owning land and operating a business near a major infrastructure project, so it doesn't seem rational to distinguish between types of businesses operated on that land.
But, perhaps the broader question is why not just provide, like California does, a statutory authorization to provide non-speculative business losses associated with the condemnation/inverse condemnation? Or, if the people of Hawaii do not want these businesses along the rail right of way to disproportionately suffer by virtue of the rail construction, then shouldn't all similarly situated property owners enjoy the same right?
We think a simple change to Haw. Rev. Stat. Ch. 101 would accomplish this result AND put the cost of those losses on the condemning agency and not the Hawaii Department of Business, Economic Development and Tourism.