The state has reached an agreement subject to state legislative approval that would give the Office of Hawaiian Affairs about 25 acres of Kakaako parcels worth an estimated $200 million to settle long-standing ceded lands claims.

Gov. Neil Abercrombie hailed the agreement as beneficial to both the state and OHA in resolving a contentious issue, dating back to the formation of the state agency in 1978, over the amount owed to OHA from revenues generated from lands that once belonged to the Hawaiian kingdom.

The proposed agreement would resolve the amount the state owes OHA through July 1, 2012.

OHA Chairwoman Colette Machado said the proposal represents a "major milestone" in providing hope for Native Hawaiians.

Abercrombie and OHA acknowledged that the "agreement in principle" is the start of a process that will involve legislators, Native Hawaiians and the larger public providing feedback on the deal.

He said they were pleased to reach the agreement, but "there is still a long way to go."

"We are optimistic we will get there," he said.

Former Gov. Linda Lingle’s administration reached a 2008 settlement with OHA worth about $200 million in land and cash. That proposal, however, died in the state Senate. It included OHA receiving $13 million in cash and commercial and industrial properties on Oahu and Hawaii island totaling 209 acres.

This time, Abercrombie and OHA reached an unsigned deal that can take into consideration concerns and suggestions from lawmakers as well as Native Hawaiians and the public, said Bill Meheula, the OHA attorney who worked out the proposal with Attorney General David Louie.

Meheula said the agreement provides "good potential" to resolve the difficult and complex dispute.

"At this point, I’m cautiously optimistic," Meheula said.

Louie said they first agreed that $200 million was the appropriate settlement amount. It fell "somewhere in the middle" of what OHA wanted and what the state thought it owed.

"It represents a reasonable compromise," he said.

Under the proposal:

» The state will give OHA parcels makai of Ala Moana Boulevard and near Kakaako Waterfront Park for a total of about 25 acres.

» The land will fall under the Hawaii Community Development Authority and is subject to HCDA’s zoning and land use conditions.

» The land will be given to OHA "as is," subject to OHA’s "due diligence" investigation of the properties. OHA has the option of walking away from the settlement before legislative approval.

» The settlement does not cover claims involving the overthrow of the Hawaiian monarchy or OHA claims to revenue from ceded lands in the future. OHA currently receives $15.1 million a year from the state under a 2006 law.

Native Hawaiian legislative leaders voiced support for the proposal, calling it a good first step to settling the claims.

"As a Native Hawaiian, I’m pleased," said Sen. Brickwood Galuteria (D, Downtown-Waikiki), the Senate majority leader. "As the senator that represents the district, I’m pleased. As a community member in the district, I look forward to talking to my neighbors about it.

"I think, generally, we really have to do this in a pono way. I believe that the governor and OHA did this in a pono way and we intend to keep that in mind when we vet it through the legislative process."

Sen. Malama Solomon (D, Hilo-Honokaa) said she expects some amendments will be proposed.

"It still has to go through the public hearing process and I’m sure that the Hawaiians and our constituencies are going to have some input on this," she said. "I just can’t imagine it just going through without any kind of concerns."

She called it a "credible" offer and one that she looked forward to hearing.

"This is something that has been long-standing and an issue that I’ve been involved with for over 30 years," she added. "It’s a beginning."

Sen. Clayton Hee said a big question for him will be whether current legislators understand the history behind the claims and the reasons for the settlement.

"It requires some education on the part of several entities to ensure that legislators are fully briefed with the necessary information," said Hee (D, Kahuku-Kaneohe). "Whether or not the Legislature will pass it remains to be seen.

"It sounds like it’s a step forward to reconciling a settlement. And it appears, on face value, that it does not impact future claims, beyond June 30, 2012 … It preserves OHA’s right to assert itself with the state on future claims."

In the House, Speaker Calvin Say said he had not yet seen the details of the proposed settlement.

"The House of Representatives will review the proposed settlement diligently and take the action determined best for the overall benefit of the people of the state of Hawaii," Say (D, St. Louis Heights-Wilhelmina Rise-Palolo Valley) said in a statement.

Ceded lands once belonged to the Hawaiian government. At statehood, they were transferred from the federal government to the state to be held in trust for Native Hawaiians and the public.