HILO >> The state Department of Land and Natural Resources owns all the land under the deteriorating and blighted properties that line Banyan Drive, but the county will determine the fate of Hilo’s aging tourism district.

Hawaii County and DLNR officials announced Friday during a public hearing at the Aupuni Center the creation of a Banyan Drive Redevelopment Agency modeled after the redevelopment effort that put Hilo back together after the 1960 tidal wave. Hawaii Mayor Billy Kenoi will appoint the five-member board, which must be confirmed by the County Council. The board will form a new master plan for Banyan Drive, which has seen little investment in recent decades as hotel leases moved closer to their end, an increasingly difficult time for owners to get improvement capital.

“This is a huge step. Essentially, DLNR is putting decisions about the future of Banyan Drive into the hands of the county,” said Duane Kanuha, director of the Hawaii County Planning Department. “DLNR is an owner, so they can’t be on the redevelopment agency board. They will serve as one of many project stakeholders.”

DLNR Chairwoman Suzanne Case said the state wants to work arm in arm with the county to revitalize Banyan Drive. While the sale of state lands is unlikely to be on the table, Case said discussions could center on replacement plans for Uncle Billy’s Hilo Bay Hotel, Reeds Bay Resort Hotel and Country Club Condominium Hotel, which have deteriorated to the point that they will need to be replaced or significantly remodeled over the next five to 15 years. Future planning also must account for rising sea levels, which by 2050 could damage some Banyan Drive parcels.

“It’s a very special place, and we want to do right by it,” said Case, who was born and raised in Hilo.

Kanuha said the county and DLNR will need to move swiftly as some Banyan Drive leases already have expired. Case said she was saddened and motivated by the news last week that Uncle Billy’s Hilo Bay Hotel plans to close Feb. 1.

“They were part of the world of Banyan Drive, and it’s particularly poignant to have that news when we are trying to find the right way to move forward,” she said.

Aaron Whiting, grandson of William J. Kimi Jr., otherwise known as Uncle Billy, said the family made the painful decision to close its circa-1960s hotel because it did not want to operate on a month-to-month lease, which would have allowed the state to order the hotel to vacate the property with only a 30-day notice.

Other hotels that sit on state land, including the Country Club Condominium Hotel, which is on a month-to-month lease, and Reeds Bay Resort Hotel, which has a one-year holdover lease that will expire March 14, were facing similar concerns.

Don Inouye, 85, owner and president of Reeds Bay, said the new partnership buys him time.

“I can keep going until they figure out a master plan,” Inouye said. “If there’s an opportunity for me to continue, I’ll put in another bid.”

Kanuha said DLNR, the county and the public must formulate a new vision for Banyan Drive, which will remain in limbo until a master plan is approved.

“If DLNR wanted to raze Uncle Billy’s, they couldn’t put another back up unless it were part of the master plan,” he said.

While Banyan Drive will soon change, its future is yet undetermined. Additional hotels, improved landscaping and parks, businesses that incorporate hula, and even a Polynesian Cultural Center-type attraction were some of the ideas floated by those attending the public hearing.

Some attendees, including International Longshore and Warehouse Union leaders, said they want an improved tourist district that provides more jobs for Hilo residents. However, it was clear from audience comments that many in the Hilo community hope redevelopment leaves room for the economically priced mom-and-pop hotels that built the tourism district.

Gene Tamashiro, a Hawaiian Kingdom advocate, said he is against more Banyan Drive development because he doesn’t recognize DLNR’s ownership.

“Why has the question and issue of lawful title not come up?” Tamashiro asked. “You cannot take property that you do not own. When it comes time to walk your walk, do it with aloha.”

Although silent, a fair number of hotel investors and developers were on hand to watch the proceedings. From their perspective the new partnership is the biggest news to hit Hilo tourism since last year’s revitalization of the Hilo Hawaiian Hotel and the coming re-branding and expansion of the Naniloa Hilo Hotel into the Grand Naniloa Hotel — a DoubleTree by Hilton, which is increasing in size to 388 rooms from about 150 rooms.

“The creation of development authorities has really worked in Kakaako and Kapolei,” said Honolulu-based developer Peter Savio, who owns Waiakea Villas in Hilo. “It’s more efficient, and the concept provides for more local control, which is definitely what the Hilo community wants.”