Bill Text: HI HB1396 | 2023 | Regular Session | Amended

Hawaii House Bill 1396 (Prior Session Legislation)

Bill Title: Relating To Cesspools.

Spectrum: Partisan Bill (Democrat 11-0)

Status: (Engrossed - Dead) 2023-04-28 - Conference Committee Meeting will reconvene on Friday, 04-28-23 at 4:30pm in Conference Room 309. [HB1396 Detail]

Download: Hawaii-2023-HB1396-Amended.html

HOUSE OF REPRESENTATIVES	H.B. NO.	1396
THIRTY-SECOND LEGISLATURE, 2023		H.D. 2
STATE OF HAWAII		S.D. 2

A BILL FOR AN ACT

RELATING TO CESSPOOLS.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

PART I

SECTION 1. The legislature finds that there are approximately eighty-three thousand cesspools across the State, with 48,596 on Hawaii island, fourteen thousand three hundred on Kauai, eleven thousand thirty-eight on Maui, 7,491 on Oahu, and one thousand four hundred on Molokai. Pursuant to Act 125, Session Laws of Hawaii 2017, every cesspool in the State, excluding cesspools granted exemptions by the director of health, must be upgraded or converted to a director of health‑approved wastewater system or connected to a sewerage system by January 1, 2050.

Additionally, the legislature also finds that because many cesspools will need to be converted each year, planning and coordination must occur between state and county agencies, communities and residents affected, and those involved in the replacement of cesspools to ensure an adequate supply of materials, workers, and equipment as demand for conversions increases.

The legislature further finds that the counties are responsible for wastewater management and are in the best position to identify priority neighborhoods that are conducive to connect to an existing or proposed wastewater treatment system; conduct necessary public outreach to communicate with affected residents; conduct appropriate feasibility studies; plan, design, and construct wastewater connections and improvements; and implement user connection and monthly billing fees.

As such, the legislature finds that creating a pilot program that provides upfront planning funds might encourage the counties to identify the most feasible neighborhoods to connect to an existing or future wastewater treatment plant, engage communities in the discussion, conduct preliminary engineering, and estimate upfront and ongoing costs. A successful pilot program could provide the necessary data and plans to assist the counties to implement wastewater connections and scale future programs to ensure cesspools are converted by 2050.

Therefore, the purpose of this part is to:

(1) Establish a pilot program within the environmental management division of the department of health to work with each county to identify a priority area to expand the county sewage system or other centralized treatment system to connect with individual properties in the priority area and reduce or eliminate cesspools in the identified area; and

(2) Appropriate funds to the department of health to provide planning grants to each county for a pilot cesspool conversion project.

SECTION 2. (a) There is established a county cesspool conversion pilot program within the environmental management division of the department of health to work with the four counties to:

(1) Identify a priority area in each county in which a pilot project could be implemented to expand the county sewage system or other centralized treatment system to connect with individual properties in the priority area and reduce or eliminate cesspools in the identified area;

(2) Meet with appropriate community stakeholders and homeowners to gather input regarding plans for the pilot project;

(3) Conduct planning and design;

(4) Estimate capital and ongoing maintenance costs; and

(5) Equitably allocate the funds available to each county to carry out the pilot project.

(b) Each county shall submit a report on the progress made in priority areas to connect cesspools to a county sewage system to the legislature no later than twenty days prior to the convening of the regular sessions of 2024, 2025, and 2026. The report shall include:

(1) The location, costs of the cesspool conversion project, and number of homes or units assisted;

(2) Outreach efforts conducted with community stakeholders and homeowners on the pilot project;

(3) Status of planning and design;

(4) Estimated capital and maintenance expenses and potential sources of revenues to construct projects; and

(5) Recommendations for future priority areas suitable for municipal sewer connections to further eliminate cesspools in the county.

(d) As used in this section, "cesspool" has the same meaning as in section 342D-72, Hawaii Revised Statutes.

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2023-2024 and the same sum or so much thereof as may be necessary for fiscal year 2024-2025 for the establishment of a county cesspool conversion pilot program within the environmental management division of the department of health to work with each county to identify a priority area to expand the county sewage system or other centralized treatment system to connect individual properties in the priority area and reduce or eliminate cesspools in the identified area; provided that the environmental management division of the department of health may obtain contractor support to provide any services required to establish and implement the pilot program.

The sums appropriated shall be expended by the department of health for the purposes of this section.

PART II

SECTION 4. The legislature further finds that the cesspool conversion working group recently issued recommendations to facilitate the statewide conversion of all cesspools. The implementation of these recommendations will require a significant effort and a commitment of additional personnel resources. This investment will also help to ensure that the State complies with the mandate of Act 125, Session Laws of Hawaii 2017, to upgrade, convert, or connect all cesspools in the State by 2050.

Accordingly, the purpose of this part is to:

(1) Create a new cesspool conversion section within the department of health's wastewater branch that is dedicated to facilitating the conversion of cesspools within the State; and

(2) Establish and appropriate funds for new full-time equivalent permanent positions within the new cesspool conversion section in fiscal year 2023-2024, and additional full-time equivalent positions in fiscal year 2024-2025.

SECTION 5. Chapter 342D, Hawaii Revised Statutes, is amended by adding a new section to part IV to be appropriately designated and to read as follows:

"§342D- Wastewater branch; cesspool conversion section. There is established a cesspool conversion section within the wastewater branch of the department, which shall:

(1) Manage and facilitate various state financing options for the conversion of cesspools in the State;

(2) Develop and manage public outreach and education regarding the conversion of cesspools;

(3) Inform cesspool owners of available options and assistance for compliant conversions of cesspools;

(4) Manage any federal, state, or other available grants to assist with the conversion of cesspools;

(5) Secure available federal funding that may be used to assist in the conversion of cesspools; and

(6) Facilitate partnerships with counties, non‑governmental organizations, and the private sector relating to the department's responsibilities under this section."

SECTION 6. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2023-2024 and the same sum or so much thereof as may be necessary for fiscal year 2024-2025 to establish full-time equivalent ( FTE) permanent positions, a program specialist VI and a planner IV, within the cesspool conversion section.

The sums appropriated shall be expended by the department of health for the purposes of this section.

SECTION 7. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2024-2025 to establish full-time equivalent ( FTE) permanent positions, a program specialist V and contracts specialist, within the cesspool conversion section.

The sum appropriated shall be expended by the department of health for the purposes of this section.

PART III

SECTION 8. The purpose of this part is to require the department of health to retain qualified consultants to identify necessary public outreach and education resources and tools and develop a comprehensive public outreach strategy and website to provide necessary information to educate homeowners regarding the State's cesspool upgrade, conversion, and connection requirements and deadlines.

SECTION 9. Section 342D-59, Hawaii Revised Statutes, is amended to read as follows:

"[[]§342D-59[]] Research, educational, and training programs. The director may:

(1) Conduct and supervise research programs for the purpose of determining the causes, effects, and hazards of water pollution, the quality of the receiving water and the means to monitor the quality of water, or to effect the proper disposal of sewage, drainage, and waste;

(2) With the approval of the governor, cooperate with, and receive money from the federal government, or any political subdivision of the State or from private sources for the study and control of water pollution; [~~and~~]

(3) Conduct and supervise state educational and training programs on water pollution prevention, control, and abatement, including the preparation and distribution of information relating to water pollution[.]; and

(4) In consultation with counties, nonprofit organizations, and wastewater industry professionals:

(A) Identify necessary resources and tools for public outreach and education, including necessary funding and timelines, to meet the requirements of section 342D-72;

(B) Develop a comprehensive public outreach strategy for the State and counties to educate homeowners on cesspool conversion options and resources; and

(C) Develop a website to educate homeowners on why cesspools need to be converted, when conversions are required, options and resources available to help with the conversions, and other relevant information."

SECTION 10. Notwithstanding section 342D-83, Hawaii Revised Statutes, or any other law to the contrary, there is appropriated out of the water pollution control revolving fund the sum of $ or so much thereof as may be necessary for fiscal year 2023-2024 and the same sum or so much thereof as may be necessary for fiscal year 2024-2025 for the department of health to retain qualified consultants, as necessary, to identify necessary public outreach and education resources and tools, and develop a comprehensive public outreach strategy and website to provide necessary information to educate homeowners regarding the State's cesspool, and connection upgrade, conversion requirements and deadlines.

The sums appropriated shall be expended by the department of health for the purposes of this section.

PART IV

SECTION 11. The legislature finds that one recommendation of the cesspool conversion working group is to ensure that buyers of real property are adequately informed about the existence of a cesspool on a property they are considering purchasing, a requirement that would protect consumers and help to incentivize cesspool conversions. Chapter 508D, Hawaii Revised Statutes, requires a written disclosure statement prepared by the seller, or at the seller's direction, that fully and accurately discloses all material facts relating to residential real property being offered for sale. A "material fact" is defined to mean "any fact, defect, or condition, past or present, that would be expected to measurably affect the value to a reasonable person of the residential real property being offered for sale." The legislature finds that a property with a cesspool that must be converted by a set date is a material fact that should be clearly and explicitly disclosed by the seller in a real property transaction. Further, if the property does have a cesspool, the priority level of that cesspool as determined by the Hawaii cesspool prioritization tool, including the date by which that cesspool must be converted, should also be disclosed.

The legislature further finds that there is a need to reinstate the cesspool upgrade, conversion, or connection tax credit that expired at the end of 2020. There will be a need for a variety of financing options to assist residents with the cost of cesspool conversions, including the grant program established by Act 153, Session Laws of Hawaii 2022. The re‑establishment of the cesspool upgrade, conversion, or connection tax credit will complement the grant program.

The purpose of this part is to:

(1) Re-establish the cesspool upgrade, conversion, or connection income tax credit that sunset on December 31, 2020; and

(2) Require that mandatory seller disclosures in real estate transactions include whether the property has a cesspool, including the date by which state law mandates that the cesspool be upgraded, converted, or connected, and the priority level of the cesspool according to the Hawaii cesspool hazard assessment and prioritization tool.

SECTION 12. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to part I to be appropriately designated and to read as follows:

"§235- Cesspool upgrade, conversion, or connection; income tax credit. (a) For taxable years beginning after December 31, 2023, there shall be allowed to each taxpayer subject to the tax imposed under this chapter a cesspool upgrade, conversion, or connection income tax credit that shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed.

(b) In the case of a partnership, S corporation, estate, or trust, the tax credit allowable is for qualified expenses incurred by the entity for the taxable year. The expenses upon which the tax credit is computed shall be determined at the entity level. Distribution and share of credit shall be determined by rule.

(c) The cesspool upgrade, conversion, or connection income tax credit shall be equal to the qualified expenses of the taxpayer, up to a maximum of $10,000; provided that, in the case of a qualified cesspool that is a residential large capacity cesspool, the amount of the credit shall be equal to the qualified expenses of the taxpayer, up to a maximum of $10,000 per residential dwelling connected to the cesspool, as certified by the department of health pursuant to subsection (e). There shall be allowed a maximum of one cesspool upgrade, conversion, or connection income tax credit per qualified cesspool. The cesspool upgrade, conversion, or connection income tax credit shall be available only for the taxable year in which the taxpayer's qualified expenses are certified by the department of health.

(d) The total amount of tax credits allowed under this section shall not exceed $ for all taxpayers in any taxable year; provided that any taxpayer who is not eligible to claim the credit in a taxable year due to the $ cap being reached for that taxable year shall be eligible to claim the credit in the subsequent taxable year.

(e) The department of health shall:

(1) Certify all qualified cesspools for the purposes of this section;

(2) Collect and maintain a record of all qualified expenses certified by the department of health for the taxable year; and

(3) Certify to each taxpayer the amount of credit the taxpayer may claim; provided that if, in any year, the annual amount of certified credits reaches $ in the aggregate, the department of health shall immediately discontinue certifying credits and notify the department of taxation.

The director of health may adopt rules under chapter 91 as necessary to implement the certification requirements under this section.

(f) The director of taxation:

(1) Shall prepare any forms that may be necessary to claim a tax credit under this section;

(2) May require the taxpayer to furnish reasonable information to ascertain the validity of the claim for the tax credit made under this section; and

(3) May adopt rules under chapter 91 necessary to effectuate the purposes of this section.

(g) If the tax credit under this section exceeds the taxpayer's income tax liability, the excess of the credit over liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted. All claims for the tax credit under this section, including amended claims, shall be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed. Failure to comply with the foregoing provision shall constitute a waiver of the right to claim the credit.

(h) As used in this section:

"Cesspool" has the same meaning as in section 342D‑72.

"Qualified cesspool" means a cesspool that is:

(1) Certified by the department of health to be:

(A) Located within a priority level 1 or 2 area according to the university of Hawaii's 2022 Hawaii cesspool hazard assessment and prioritization tool; or

(B) A residential large capacity cesspool; or

(2) Certified by a county or private sewer company to be appropriate for connection to its existing sewerage system.

"Qualified expenses" means costs that are necessary and directly incurred by the taxpayer for upgrading or converting a qualified cesspool to a director of health-approved wastewater system, or connecting a qualified cesspool to a sewerage system, and that are certified as such by the department of health.

"Residential large capacity cesspool" means a cesspool that is connected to more than one residential dwelling.

"Sewerage system" has the same meaning as in section 342D‑1.

"Wastewater" has the same meaning as in section 342D‑1."

SECTION 13. Section 23-94, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) This section shall apply to the following:

(1) Section 235-4.5(a)--Exclusion of intangible income earned by a trust sited in this State;

(2) Section 235-4.5(b)--Exclusion of intangible income of a foreign corporation owned by a trust sited in this State;

(3) Section 235-4.5(c)--Credit to a resident beneficiary of a trust for income taxes paid by the trust to another state;

(4) Section 235- --Credit for cesspool upgrade, conversion, or connection;

[~~(4)~~] (5) Sections 235-55 and 235-129--Credit for income taxes paid by a resident taxpayer to another jurisdiction;

[~~(5)~~] (6) Section 235-71(c)--Credit for a regulated investment company shareholder for the capital gains tax paid by the company;

[~~(6)~~] (7) Section 235-110.6--Credit for fuel taxes paid by a commercial fisher;

[~~(7)~~] (8) Section 235-110.93--Credit for important agricultural land qualified agricultural cost;

[~~(8)~~] (9) Section 235-110.94--Credit for organically produced agricultural products;

[~~(9)~~] (10) Section 235-129(b)--Credit to a shareholder of an S corporation for the shareholder's pro rata share of the tax credit earned by the S corporation in this State; and

[~~(10)~~] (11) Section 209E-10--Credit for a qualified business in an enterprise zone; provided that the review of this credit pursuant to this part shall be limited in scope to income tax credits."

SECTION 14. Section 23-95, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) This section shall apply to the following:

(1) Section 235-5.5--Deduction for individual housing account deposit;

(2) Section 235-7(f)--Deduction of property loss due to a natural disaster;

[~~(3)~~ ~~Section 235-16.5--Credit for cesspool upgrade, conversion, or connection;~~

~~(4)~~] (3) Section 235-19--Deduction for maintenance of an exceptional tree;

[~~(5)~~] (4) Section 235-55.91--Credit for the employment of a vocational rehabilitation referral;

[~~(6)~~] (5) Section 235-110.2--Credit for in-kind services contribution for public school repair and maintenance; and

[~~(7)~~] (6) Sections 235-110.8 and 241-4.7--Credit for ownership of a qualified low-income housing building."

SECTION 15. Section 508D-15, Hawaii Revised Statutes, is amended to read as follows:

"§508D-15 Notification required; ambiguity. (a) When residential real property lies:

(1) Within the boundaries of a special flood hazard area as officially designated on flood maps promulgated by the National Flood Insurance Program of the Federal Emergency Management Agency for the purposes of determining eligibility for emergency flood insurance programs;

(2) Within the boundaries of the noise exposure area shown on maps prepared by the department of transportation in accordance with Federal Aviation Regulation part 150, Airport Noise Compatibility Planning (14 C.F.R. part 150), for any public airport;

(3) Within the boundaries of the Air Installation Compatible Use Zone of any Air Force, Army, Navy, or Marine Corps airport as officially designated by military authorities;

(4) Within the anticipated inundation areas designated on the department of defense's emergency management tsunami inundation maps; or

(5) Within the sea level rise exposure area as designated by the Hawaii climate change mitigation and adaptation commission or its successor,

subject to the availability of maps that designate the five areas by tax map key (zone, section, parcel), the seller shall include the material fact information in the disclosure statement provided to the buyer subject to this chapter. Each county shall provide, where available, maps of its jurisdiction detailing the five designated areas specified in this subsection. The maps shall identify the properties situated within the five designated areas by tax map key number (zone, section, parcel) and shall be of a size sufficient to provide information necessary to serve the purposes of this section. Each county shall provide legible copies of the maps and may charge a reasonable copying fee.

(b) When it is questionable whether residential real property lies within any of the designated areas referred to in subsection (a) due to the inherent ambiguity of boundary lines drawn on maps of large scale, the ambiguity shall be construed in favor of the seller; provided that a good faith effort has been made to determine the applicability of subsection (a) to the subject real property.

(c) When residential real property contains a cesspool and the cesspool is identified by the maps in the university of Hawaii 2022 Hawaii cesspool hazard assessment and prioritization tool, subject to the availability of the maps, the seller shall include the material fact information in the disclosure statement provided to the buyer subject to this chapter. The maps shall identify the cesspool priority level and the date, established by law, by which the cesspool is required to be upgraded or converted to a director of health-approved wastewater system or connected to a sewerage system.

[~~(c)~~] (d) Except as required under subsections (a) and (b), and as required under section 508D-3.5, the seller shall have no duty to examine any public record when preparing a disclosure statement."

PART V

SECTION 16. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 17. This Act shall take effect on June 30, 3000; provided that section 15 shall take effect on November 1, 2023.

Report Title:

Cesspools; Pilot Program; Counties; Priority Area; DOH; Cesspool Conversion Section; Positions; Income Tax Credit; Real Property; Mandatory Disclosures; Appropriation

Description:

Part I: Establishes and appropriates funds for a county cesspool pilot program in the Department of Health to work with each county to identify a priority area to expand the county sewage system or other centralized treatment system to connect individual properties in the priority area and reduce or eliminate cesspools in the identified area. Part II: Creates a cesspool conversion section in the Department of Health to facilitate the conversion of cesspools within the State. Establishes and appropriates funds for positions. Part III: Requires the Department of Health to retain qualified consultants to identify necessary public outreach and education resources and tools, and develop a comprehensive public outreach strategy and educate homeowners regarding the State's cesspool upgrade, conversion, and connection requirements and deadlines. Part IV: Establishes, for all taxable years after December 31, 2023, an income tax credit for the cost of upgrading or converting a qualified cesspool to a Director of Health-approved wastewater system or connecting to a sewerage system. Requires that, effective 11/1/23, certain information regarding cesspools on real property be included in seller mandatory disclosures for real property transactions. Effective 6/30/3000. (SD2)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.