Bill Text: HI HB2088 | 2022 | Regular Session | Amended
Bill Title: Relating To Financing.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2022-06-27 - Act 183, on 06/27/2022 (Gov. Msg. No. 1284). [HB2088 Detail]
Download: Hawaii-2022-HB2088-Amended.html
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
2088 |
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THIRTY-FIRST LEGISLATURE, 2022 |
H.D. 1 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO FINANCING.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that the tension between managing the health and safety of Hawaii's residents and visitors from the coronavirus and its highly contagious variants, while managing the economic health of Hawaii's hospitality industry and small businesses over the past two years has heightened the importance of diversifying Hawaii's economic base while simultaneously investing resources toward recovery efforts. Additionally, while the pandemic has demonstrated the importance of ensuring the health of our people and economic health, the legislature also finds that it is equally important to invest resources to ensure Hawaii's environmental health.
As an example, the legislature finds that the State's streams, groundwater, and ocean are being harmed by nonpoint contamination sources that flow directly off the land, rather than through pipes or ditches. Cesspools are a nonpoint contamination source of great concern. These substandard systems are essentially holes in the ground that do not treat wastewater but merely dispose of polluted wastewater.
There are approximately eighty-eight thousand cesspools in the State, with nearly fifty thousand on Hawaii island, approximately fourteen thousand on Kauai, over twelve thousand on Maui, over eleven thousand on Oahu, and approximately one thousand four hundred on Molokai. Collectively, the State's cesspools release more than fifty-three million gallons of untreated sewage into the ground each day. Hawaii relies on groundwater for ninety per cent of its drinking water.
In response to the State's cesspool pollution problem, legislation was enacted in 2017 that requires all cesspools not excluded by the director of health to be upgraded or converted to septic systems or aerobic treatment unit systems, or connected to sewage systems by January 1, 2050; however, cesspool conversions, which are estimated to cost some $1,300,000,000, have been lagging.
The legislature further finds that Hawaii is susceptible to property loss due to hurricanes, tropical storms, and strong winds. The best long-term solution to reducing potential damage is the statewide use of wind resistive devices. While residents should inspect, repair, and reinforce their residences to prepare for the possibility of a hurricane making landfall, said inspection, repair, and reinforcement consume resources from homeowners' budgets. Improved properties that are not using energy conservation or production strategies contribute to the burden and reliance on fossil fuels. Improved properties not protected with wind or flood resistant qualifying improvements contribute to the burden affecting all properties resulting from potential wind or flood damage. Improved properties that do not use septic tanks or are not connected to wastewater sewage systems contribute to water quality problems affecting the State, and properties that are not protected from harmful environmental health hazards contribute to the environmental health burdens affecting the State.
In order to make qualifying improvements more affordable and assist property owners who wish to undertake such improvements, the legislature finds that there is a compelling state interest in enabling property owners to voluntarily finance such improvements with local government assistance. Innovative, non-traditional financing options and repayment mechanisms help bridge financing gaps, attract private capital, and address specific market failures and institutional barriers.
Providing non-traditional financing options to assist low- and moderate-income homeowners and other eligible property owners for the upgrade, conversion, or connection to municipal or private wastewater systems, installation of energy conservation, or renewable energy retrofits, improve a property's resilience and remove health hazards while facilitating other allowable purposes by addressing access to capital obstacles and enabling the financing of qualifying improvements through the execution of property assessment financing contracts. The related imposition of voluntary assessments is reasonable and necessary to serve and achieve a compelling state interest and is necessary for the prosperity and welfare of the State and its property owners.
Additionally, leveraging these non-traditional financing options and repayment mechanisms will accelerate economic recovery and economic diversification efforts statewide.
The purpose of this Act is to establish an at- or below-market interest loan program and authorize property assessed financing for environmental, economic recovery, and economic diversification projects and initiatives.
SECTION 2. Chapter 196, Hawaii Revised Statutes, is amended by adding two new sections to part IV to be appropriately designated and to read as follows:
"§196-A Environmental and economic development revolving loan fund. (a)
There is established in the Hawaii green infrastructure special fund established
pursuant to section 196-65 the environmental and economic development revolving
loan fund, similar to a revolving line of credit, which shall be administered by
the authority. Funds deposited into the environmental
and economic development revolving loan fund shall not be under the jurisdiction
of nor be subject to public utilities commission approval and shall include:
(1) Funds from federal,
state, county, private, or other funding sources;
(2) Investments from
public or private investors;
(3) Moneys received
as repayment of loans and interest payments; provided that the repayment of loans
and interest payments under this paragraph shall not include repayment of loans
and interest collected as a result of funds advanced from proceeds of the green
energy market securitization bonds;
(4) All interest earned
on the loans, deposits, or investments of the moneys in the environmental and economic
development revolving loan fund; and
(5) Any fees collected
by the authority under this section; provided that moneys collected as a result
of the funds advanced from proceeds of the green energy market securitization bonds
shall be kept separate from fees collected as a result of funds advanced from proceeds
of the environmental and economic development revolving loan fund.
(b) Moneys in the environmental
and economic development revolving loan fund shall be used to provide at- or below-market
rate loans or other authorized financial assistance to eligible public, private,
and nonprofit borrowers for environmental and economic diversification investments,
qualifying improvements, or other authorized uses on terms approved by the authority,
including lessees on Hawaiian home lands with cesspools to be upgraded or converted
to septic systems or aerobic treatment unit systems or connected to sewer systems. Moneys from the fund may be used to cover administrative
and legal costs of fund management and management associated with individual loans,
including personnel, services, technical assistance, data collection and reporting,
materials, equipment, and travel for the purposes of this section.
(c) Appropriations or authorizations from the environmental
and economic development revolving loan fund shall be expended by the authority. The authority may contract with other public or
private entities for the provision of all or a portion of the services necessary
for the administration and implementation of the loan fund program. The authority may set fees or charges for fund
management and technical site assistance provided under this section. The authority may adopt rules pursuant to chapter
91 to carry out the purposes of this section.
(d) The authority may
establish subaccounts within the fund as necessary.
§196-B Property assessed financing program. (a) Any county having a charter may authorize the authority, pursuant to this section, to offer a property assessed financing program within its jurisdiction and may contract with the authority for such purpose, and any county having a charter may enact its own property assessed financing program pursuant to this section and sections 46-80(b) and (c), 196-61, and 196-64.
(b) The authority, as administrator of the property
assessed financing program, shall coordinate with each county to bill and collect
a non-ad valorem special tax assessment on a benefitted property as a repayment
mechanism on the real property tax bill.
The non-ad valorem special tax assessment on a benefitted property shall
not be a generally applicable tax upon the real property but shall be collected
in the same manner as real property taxes as a result of the benefit to the property
owners for qualifying improvements.
(c) The authority shall design a property assessed
financing program authorized under section 46-80(b) that addresses market needs
while attracting private capital and that shall, at a minimum, include the following
elements:
(1) A property assessed
financing lender may enter into a property assessed financing assessment contract
to finance or refinance a qualifying improvement only with the record owner of the
affected property and the authority. Each
property assessed financing assessment contract shall
be executed by the authority as administrator of the property assessed financing
program. A property assessed financing assessment
contract shall require the authority to assign, pledge, and transfer revenues to
be derived from property assessed financing assessments to one or more property
assessed financing lenders as security for their direct financing of qualifying
improvements. The obligation of the authority
to transfer such revenues to one or more property assessed financing lenders shall
be evidenced by a revenue bond issued on behalf of the State by the authority in
a form prescribed by the authority, which may be the property assessed financing
assessment contract or other instrument, and no other bonds shall be required to
be issued by the State, the authority, any county, or any other public entity in
order to cause qualifying improvements to be funded through a property assessed
financing assessment contract;
(2) Qualifying improvements shall be affixed to a building or facility or affixed to real property, subject to property assessed financing assessments;
(3) Before entering
into a property assessed financing assessment contract, the property assessed financing
lender shall reasonably determine that:
(A) For
residential properties:
(i) The
property owner has an ability to pay the estimated annual property assessed financing
assessment;
(ii) All
property taxes and any other assessments levied on the same bill as property taxes
are paid and have not been delinquent for the preceding three years or the property
owner's period of ownership, whichever is less;
(iii) There
are no involuntary liens, including but not limited to construction liens, on the
property;
(iv) No
notices of default or other evidence of property-based debt delinquency have been
recorded during the preceding three years or the property owner's period of ownership,
whichever is less; and
(v) The
property owner is current on all mortgage debt on the property; and
(B) For
commercial properties:
(i) The
property owner is able to borrow the amount of the property assessed financing using
reasonable commercial underwriting practices;
(ii) All
property taxes applicable to such property, and any other assessments levied on
the same bill as property taxes, are paid; and
(iii) There
are no involuntary liens applicable to such property, including but not limited
to construction liens, that will not be paid or satisfied upon the closing of the
financing;
(4) The property assessed
financing assessment contract shall include the amount of an annual assessment over
a fixed term that will appear as a non-ad valorem special tax assessment on the
property owner's tax bill annually;
(5) The property assessed financing assessment contract, or summary memorandum of such contract, shall be recorded by the property assessed financing lender in the public records of the State or of the county within which the property is located within five days after execution by the parties to the contract. The recorded contract shall provide constructive notice of the levy of, and obligation of the property owner to pay, the property assessed financing assessment. The property assessed financing assessment to be levied on the property shall be a non-ad valorem special tax assessment and a lien against the property on a parity with the lien of general real property taxes and the lien of any other assessments levied under section 46-80, from the date of recordation entered into pursuant to this section until paid or satisfied in accordance with the property assessed financing assessment contract;
(6) The following provisions regarding lienholders:
(A) For
residential properties:
(i) Without
the consent of the holders or loan servicers of any mortgage encumbering or otherwise
secured by residential property, the total principal amount funded through any property
assessed financing assessment contract secured with a non-ad valorem special tax
assessment for a residential property under this part shall not exceed twenty per
cent of the market value of the property as determined by the county property appraiser. This limitation shall not apply to any property
assessed financing assessment on residential property that is consented to by the
holders or loan servicers of any mortgage encumbering or otherwise secured by the
property; and
(ii) At
least thirty days before entering into a property assessed financing assessment
contract for residential property, the property owner shall provide to the holders
or loan servicers of any existing mortgages encumbering or otherwise secured by
the property a notice of the owner's intent to enter into a property assessed financing
assessment contract together with the maximum principal amount to be financed and
the maximum annual assessment necessary to repay that amount and any incidental
fees. A verified copy or other proof of such
notice shall be provided to the property assessed financing lender. A provision in any agreement between a mortgagee
or other lienholder and a property owner that allows for acceleration of payment
of the mortgage, note, or lien or other unilateral modification solely as a result
of entering into a property assessed financing assessment contract as provided for
in this section shall not be enforceable.
This section shall not limit the authority of the holder or loan servicer
to increase the required monthly escrow by an amount necessary to annually pay the
qualifying improvement assessment; and
(B) For
commercial properties, before entering into a property assessed financing assessment
contract for any commercial property, the property owner shall provide the authority
and the property assessed financing lender with evidence of the written consent
of each holder or loan servicer of any mortgage that encumbers or otherwise secures
such commercial property at the time of the execution of the property assessed financing
assessment contract by the parties; provided that such consents shall be in a form
prescribed by the authority;
(7) Sale of subject property. At or before the time a purchaser executes a contract for the sale and purchase of any property for which a non-ad valorem special tax assessment has been levied under this part and has an unpaid balance due, the seller shall give the prospective purchaser a written disclosure statement notifying the prospective purchaser of the property assessed financing assessment;
(8) The term of the
property assessed financing assessment contract shall not exceed the useful life
of the qualifying improvement being installed or the weighted average useful life
of all qualifying improvements being financed if multiple qualifying improvements
are being financed, as determined by the authority; and
(9) Prior to
the execution by the authority of the first property assessed financing assessment
contract in a county, the authority shall enter into a contract with the county
director of finance or county director of budget and fiscal services to cause such
director to levy and collect any property assessed financing assessment approved
and certified by the authority to the director for collection. The director shall levy and collect any property
assessed financing assessment approved by the authority. Each property assessed financing assessment so
approved for collection shall be a non-ad valorem special tax assessment and shall
be collected in the same manner as general real property taxes are collected and
be subject to the same penalties and same procedure, sale, and lien priority, subject
to this section, in case of delinquency as is provided by general law for default
of the payment of real property taxes, unless another procedure is agreed upon by
the authority and the director. The director
may add to any property assessed financing assessment such reasonable administrative
costs as are agreed upon by the authority and the director. The director shall remit any property assessed
financing assessments collected, less any reasonable administrative costs added
by the director, to or on the direction of the authority, for further application
by the authority to pay each property assessed financing lender and to pay the reasonable
administrative costs of the authority in accordance with each property assessed
financing assessment contract. The director
shall covenant in a contract or instrument, for the benefit of any property assessed
financing lender or bondholder, to commence and diligently pursue to completion
the foreclosure of delinquent property assessed financing assessments and any penalty,
interest, and costs by advertisement and sale and with the same effect as provided
by general law for sales of real property pursuant to default in payment of property
taxes. The covenant shall specify a deadline
for commencement of the foreclosure sale and any other terms and conditions the
director of finance or director of budget and fiscal services determines reasonable
regarding the foreclosure sale. For property
assessed financing assessments levied but not paid when due pursuant to a property
assessed financing assessment contract, the foreclosure of the lien of the property
assessed financing assessment shall not accelerate or extinguish the remaining term
of the property assessed financing assessment as approved in the property assessed
financing assessment contract."
SECTION 3. Section 46-80, Hawaii Revised Statutes, is amended to read as follows:
"§46-80 Improvement by assessment; financing. (a)
Any county having a charter may enact an ordinance, and may amend the same
from time to time, providing for the making and financing of improvement districts
in the county, and [such] the improvements may be made and financed
under [such] the ordinance.
The county may issue and sell bonds to provide funds for [such] the
improvements. Bonds issued to provide funds
for [such] the improvements may be either bonds when the only security
therefor is the properties benefited or improved or the assessments thereon or bonds
payable from taxes or secured by the taxing power of the county. If the bonds are secured only by the properties
benefited or improved or the assessments thereon, the bonds shall be issued according
and subject to the provisions of the ordinance.
If the bonds are payable from taxes or secured by the taxing power, the bonds
shall be issued according and subject to chapter 47. Except as is otherwise provided in section 46-80.1,
in assessing land for improvements a county shall assess the land within an improvement
district according to the special benefits conferred upon the land by the special
improvement; these methods include assessment on a frontage basis or according to
the area of land within an improvement district, or any other assessment method
[which] that assesses the land according to the special benefit conferred,
or any combination thereof.
(b) There is established a special improvement program
to be known as a property assessed financing program, which shall be administered
by the Hawaii green infrastructure authority. A property owner may apply to a property assessed
financing lender, approved by the authority, for property assessed financing to
pay the cost of qualifying improvements and enter into a property assessed financing
contract with a property assessed financing lender and the authority. Costs incurred for qualifying improvements shall
be levied and collected by each county, as provided in section 196-B, as a non-ad
valorem special tax assessment on the benefitted property. The authority, on behalf of the State, may issue
revenue bonds to finance or refinance such improvements, and the form of any such
revenue bond may be a property assessed financing assessment contract or other instrument
prescribed by the authority. Bonds issued
to finance qualifying improvements, when the only security is the non-ad valorem
special tax assessment levied against benefitted or improved property, shall be
excluded from any determination of the power of the State to issue general obligation
bonds or funded debt for purposes of section 13 of article VII of the state constitution.
(c) Any county having a charter may enact an ordinance,
and may amend the same from time to time, to establish a special improvement program
containing the same elements as the property assessed financing program authorized
under chapter 196, except that any program so established shall be administered
by the county in lieu of administration by the authority. The county shall assume all of the responsibilities
of the authority provided in chapter 196, including determining qualifying improvements
eligible for property assessed financing. A property owner may apply to the county for property
assessed financing to pay the costs of qualifying improvements and enter into a
property assessed financing contract with an approved property assessed financing
lender and the county. Costs incurred for
qualifying improvements shall be levied and collected by each county, as provided
in section 196-B, as a non-ad valorem special tax assessment on the benefitted property.
The county may issue revenue bonds to finance
or refinance such improvements, and the form of any such revenue bond may be a property
assessed financing assessment contract or other instrument prescribed by the county.
Bonds issued to finance qualifying improvements,
when the only security is the non-ad valorem special tax assessment levied against
benefitted or improved property, shall be excluded from any determination of the
power of the county to issue general obligation bonds or funded debt for purposes
of article VII, section 13, of the state constitution."
SECTION 4. Section 196-61, Hawaii Revised Statutes, is amended by adding eight new definitions to be appropriately inserted and to read as follows:
""Commercial property"
means any existing or new real property not defined as a residential property, and
shall include any such property where there is a leasehold or possessory interest
in such property and any agricultural property.
"County director of finance"
or "county director of budget and fiscal services" means the officer or
officers of the county charged with the responsibility of administering the real
property taxation function of the county.
"Non-ad valorem special tax assessment"
means a special tax assessment or governmental charge levied by the county as provided
in section 196-B on a benefitted property that appears on a property tax bill.
"Property assessed financing
assessment" means the non-ad valorem special tax assessment that secures the
repayment of financing obtained by an owner of commercial or residential property
for a qualifying improvement and that appears on a property tax bill.
"Property assessed financing
assessment contract" means the financing contract, under the property assessed
financing program, by and among one or more property assessed financing lenders,
one or more property owners, and the authority as administrator of the property
assessed financing program for the acquisition or installation of qualifying improvements.
"Property assessed financing
lender" means a private or public lender approved by the authority, as property
assessed financing program administrator, to originate property assessed financing
assessment contracts, and which may include any successor or assignee of such lender
as provided in a property assessed financing assessment contract.
"Property assessed financing
program" means a program to finance qualifying improvements on commercial and
residential properties that is repaid through a non-ad valorem special tax assessment
on the property owner's property tax bill.
"Qualifying improvement"
means septic systems or aerobic treatment unit systems or connections to sewer systems,
clean energy technologies, efficiency technologies, resiliency measures, and other
improvements approved by the authority.
"Residential property" means
any existing or new real property consisting of any single-family dwelling or townhouse
or any multi-family dwelling or townhouse consisting of four or fewer units, and
shall include any such property where there is a leasehold or possessory interest
in such property."
SECTION 5. Section 196-64, Hawaii Revised Statutes, is amended by amending subsections (c) and (d) to read as follows:
"(c) In the performance of the functions, powers, and
duties vested in the authority by this part, the authority shall administer the
clean energy and energy efficiency revolving loan fund pursuant to section 196-65.5
and the environmental and economic development revolving loan fund pursuant to
section 196-A and may:
(1) Make loans and expend funds to finance the purchase or installation of clean energy technology and services; upgrade or convert a cesspool to a septic system or an aerobic treatment unit system; connect a cesspool to a sewer system; and finance eligible environmental, economic recovery, and economic diversification projects and initiatives and other qualifying improvements;
(2) Implement and administer
loan programs on behalf of other [state departments or agencies] government
entities and municipalities through a memorandum of agreement and expend funds
appropriated to the [department or agency] government entity and municipality
for purposes authorized by the legislature[;], government entity, and
municipality;
(3) Utilize all repayment mechanisms, including the green energy money saver on-bill program, property assessed financing assessment program, financing tools, servicing and other arrangements, and sources of capital available to the authority;
(4) Exercise powers to organize and establish special purpose entities as limited liability companies under the laws of the State;
(5) Acquire, hold, and sell qualified securities;
(6) Pledge unencumbered net assets, loans receivable, assigned agreements, and security interests over equipment financed, as collateral for the authority's borrowings from federal, county, or private lenders or agencies;
(7) Utilize the employees of the authority, including the executive director;
(8) Enter into contracts for the service of consultants for rendering professional and technical assistance and advice and any other contracts that are necessary and proper for the implementation of the loan fund program;
(9) Enter into contracts for the administration of the loan fund program exempt from chapter 103D;
(10) Establish loan fund program guidelines;
(11) Be audited at least annually by a firm of independent certified public accountants selected by the authority and provide the results of the audit to the department and legislature; and
(12) Perform all functions necessary to effectuate the purposes of this part.
(d) The authority shall submit an annual report for the clean energy and energy efficiency revolving loan fund and environmental and economic development revolving loan fund to the legislature no later than twenty days prior to the convening of each regular session describing the projects funded and the projected energy, environmental, and economic development impacts."
SECTION 6. There is appropriated out of the general revenues of the State of Hawaii the sum of $25,000,000 or so much thereof as may be necessary for fiscal year 2022-2023 to be deposited in the environmental and economic development revolving loan fund established pursuant to section 196-A, Hawaii Revised Statutes.
SECTION 7. There is appropriated out of the environmental and economic development revolving loan fund the sum of $25,000,000 or so much thereof as may be necessary for fiscal year 2022-2023 to provide loans or other financial assistance to eligible property owners and for other allowable purposes, including implementation costs.
The sum appropriated shall be expended by the Hawaii green infrastructure authority for the purpose of this Act.
SECTION 8. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.
SECTION 9. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 10. This Act shall take effect on July 1, 2100.
Report Title:
Hawaii Green Infrastructure Authority; Counties; Property Assessed Financing; Cesspool Upgrade and Conversion; Property Resilience; Environmental and Economic Development Financing
Description:
Creates the environmental and economic development revolving loan fund under the administration of the Hawaii Green Infrastructure Authority. Allows property owners to finance qualifying improvements through a non-ad valorem property assessment. Appropriates funds. Effective 7/1/2100. (HD1)
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
