With Gov. Neil Abercrombie and state Office of Hawaiian Affairs Chairwoman Colette Machado looking on, state senators on Friday advanced a potential $200 million settlement between the state and OHA that would transfer valuable waterfront land in Kakaako for Hawaiians to develop.

The settlement is intended to resolve a dispute over OHA’s share of revenue from former crown lands since 1978. Abercrombie and OHA reached a tentative agreement in November to convey state-controlled land in Kakaako to OHA to satisfy the debt, but the deal is subject to approval of the Legislature.

The Senate Ways and Means Committee and the Senate Judiciary and Labor Committee voted Friday to approve the settlement, despite concerns from a few senators about whether the terms provide sufficient redress to Hawaiians. The bill is likely to be approved by the full Senate this week and move to the state House, where lawmakers will review the draft.

The Senate is also expected to approve a separate bill that would give OHA greater ability to use two lots in Kakaako for high-rise apartments, including some that would be reserved for low- or moderate-income residents. Community groups have previously fought the conversion of public land along the waterfront for residential development.

Abercrombie said OHA’s plans for the settlement land fit within his vision of a redeveloped Kakaako that would include high-rise condominiums and commercial and government office space to complement the Honolulu rail stations planned nearby. The governor has set a state policy goal of directing more development into the urban core.

"Even though you may have some concerns, you may have even some trepidation, some wariness of what may be taking place, when everybody puts the mission before their own particular views and recognizes that you have to keep your eye on the prize — and the prize here is to give a foundation for the Hawaiian people in the 21st century — you can succeed," Abercrombie said.

Machado described the Senate action as "a big hurdle."

"We have come through quite a lot," she said.

Approval of the settlement would be a significant achievement for Abercrombie, help resolve constitutional and statutory mandates that have festered since OHA was created in 1978, and give Hawaiians a stake in potentially lucrative redevelopment in Kakaako.

In 2008, the House signed off on a proposed $200 million settlement between then-Gov. Linda Lingle and OHA that involved land transfers and cash, but the agreement was rejected as inadequate by the Senate. This year, House leaders wanted the Senate to act first.

Senators on Friday agreed to advance the settlement bill unamended, which is unusual for any piece of legislation, but particularly for a topic of such consequence. Senate leaders had asked committee chairmen to pass a "clean" version over to the House, where lawmakers will now be under pressure to avoid substantive changes that could complicate passage if the bill moves into a House and Senate conference committee.

State Sen. Clayton Hee (D, Kahuku-Kaneohe), chairman of the Senate Judiciary and Labor Committee, put Abercrombie on notice Friday that he believes the settlement falls short of satisfying what OHA is due. He voted for the bill with reservations, which preserves his ability to serve on a conference committee.

"This is not a fair settlement in my judgment," said Hee, a former OHA chairman.

Other senators, including several Hawaiians, said they were proud to be part of a possible resolution to a longstanding dispute.

"I know this journey has been a long one for the Hawaiian people. But I sincerely believe that it is a step in the right direction for us to take," said state Sen. Gilbert Kahele (D, Hilo-Naalehu).

State Sen. Pohai Ryan (D, Lanikai-Waimanalo) said it is unrealistic to expect Hawaiians or any ethnic group to reach total agreement. "I think what is most important about this bill is that our people are not being ignored. We are being addressed," she said.

State House Majority Leader Pono Chong (D, Maunawili-Kaneohe) said the House would weigh both the settlement — Senate Bill 2783 — and the separate measure to give OHA more authority to develop high-rise apartments in Kakaako — Senate Bill 682.

"I think that’s going to be part of the discussion. We’re going to look at all of it as one issue," he said.