Bill Text: HI SB3302 | 2022 | Regular Session | Amended

---

Bill Title: Relating To Green Infrastructure.

Spectrum: Partisan Bill (Democrat 3-0)

Status: (Introduced - Dead) 2022-02-18 - Report adopted; Passed Second Reading, as amended (SD 1) and referred to WAM. [SB3302 Detail]

Download: Hawaii-2022-SB3302-Amended.html

---

THE SENATE	S.B. NO.	3302
THIRTY-FIRST LEGISLATURE, 2022		S.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

 

 

RELATING TO GREEN INFRASTRUCTURE.

 

 

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

 

     SECTION 1.  The legislature finds that although the coronavirus disease 2019 pandemic demonstrated the importance of ensuring the health of our people and economy, it is equally important to invest resources sufficient to ensure Hawaii's environmental health.  The legislature further finds that there is a compelling interest for state government to provide non-traditional financing options to assist low and moderate-income homeowners and other eligible property owners to voluntarily undertake projects for the upgrade, conversion, or connection to municipal or private wastewater systems, installation of energy conservation, or renewable energy retrofits because properties that are not protected from harmful environmental health hazards contribute to the environmental health burdens affecting the State.  For example, properties that do not use energy conservation or production strategies are contrary to the state renewable energy standard and contribute to the reliance on fossil fuels.  In addition, properties that do not use septic tanks or are not connected to wastewater sewage systems contribute to water quality problems affecting the State.

     The legislature also finds that innovative, non-traditional financing options and repayment mechanisms such as property assessed financing contracts and voluntary assessments are reasonable and necessary, not only to improve a property's resilience and remove health hazards, but to bridge financing gaps, attract private capital, and address specific market failures and institutional barriers; thereby accelerating economic recovery and economic diversification efforts statewide.

     Accordingly, the purpose of this Act is to require the Hawaii green infrastructure authority to:

     (1)  Establish an at or below-market interest loan program to provide financial assistance to certain parties for certain green infrastructure improvements; and

     (2)  Authorize property assessed financing through various mechanisms, including but not limited to non-ad valorem special tax assessments and property assessed financing assessment contracts.

     SECTION 2.  Chapter 196, Hawaii Revised Statutes, is amended by adding five new sections to part IV to be appropriately designated and to read as follows:

     "§196-A  Environmental and economic development revolving loan program.  The authority shall design and administer an environmental and economic development revolving loan program that provides at or below-market rates 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 or septic systems to be upgraded or converted to director of health-approved wastewater systems or connected to sewer systems.

     §196-B  Environmental and economic development revolving loan fund.  (a)  There is established, in the Hawaii green infrastructure special fund established under section 196-65, the environmental and economic development revolving loan fund into which shall be deposited:

     (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; and

     (4)  Any fees collected by the authority pursuant to 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 this fund so that no such separate moneys shall be used to fund or guarantee any environmental and economic development revolving loan purposes.

     (b)  Moneys in the environmental and economic development revolving loan fund shall be used to provide at or below-market rates or other authorized financial assistance pursuant to the environmental and economic development revolving loan program established pursuant to section 196-A.  Moneys from the fund may be used to cover administrative and legal costs of fund management and management associated with individual loans, to include personnel, services, technical assistance, data collection and reporting, materials, equipment, and travel for the purposes of this section.

     (c)  The environmental and economic development revolving loan fund shall be similar to a revolving line of credit, which shall be administered by the authority.  Appropriations or authorizations from the 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 environmental and economic development revolving loan program.  The authority may establish subaccounts within the fund as necessary.  The authority may set fees or charges for fund management and technical site assistance provided under this section.  Funds deposited into the environmental and economic development revolving loan fund shall not be under the jurisdiction of nor be subject to Hawaii public utilities commission approval.

     (d)  All interest earned on the loans, deposits, or investments of the moneys in the environmental and economic development revolving loan fund shall become part of the fund.

     (e)  The authority may adopt rules pursuant to chapter 91 to carry out the purposes of this section.

     §196-C  Property assessed financing program.  (a)  The authority shall design and administer a special improvement program to be known as a property assessed financing program authorized pursuant to section 46-80(b) to finance qualifying improvements on commercial and residential properties that are repaid through a non-ad valorem special tax assessment on the property owner's property tax bill.  The program shall address market needs while attracting private capital.

     (b)  Any county that has 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 this purpose.

     (c)  A property owner may apply to a property assessed financing lender that is approved by the authority for property assessed financing to pay the costs of qualifying improvements and enter into a property assessed financing contract with the approved 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-E, 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 the improvements, and the form of any revenue bond may be a property assessed financing assessment contract or other instrument prescribed by the authority.  Bonds issued to finance qualified improvements, when the only security is the 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 article VII, section 13, of the Hawaii State Constitution.

     §196-D  Property assessed financing assessment contracts.  (a)  A property assessed financing lender may enter into a property assessed financing assessment contract to finance or refinance a qualifying improvement only with the recorded owner of the affected property and the authority.  Each property assessed financing assessment contract shall be executed by the authority as the 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 the 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 include the property assessed financing assessment contract or other instrument.  No bonds shall be required to be issued by the State, the authority, any county or city, or any other public entity in order to cause qualifying improvements to be funded through a property assessed financing assessment contract.  The installation of qualifying improvements shall be affixed to a building or facility or affixed to real property, subject to property assessed financing assessments.

     (b)  Before entering into a property assessed financing assessment contract, the property assessed financing lender shall reasonably determine that:

     (1)  For residential properties:

          (A)  The property owner is able to pay the estimated annual property assessed financing assessment;

          (B)  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;

          (C)  There are no involuntary liens, including but not limited to construction liens, on the property;

          (D)  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

          (E)  The property owner is current on all mortgage debt on the property; and

     (2)  For commercial properties:

          (A)  The property owner is able to borrow the amount of property assessed financing using reasonable commercial underwriting practices;

          (B)  All property taxes, and any other assessments levied on the same bill as property taxes, are paid; and

          (C)  There are no involuntary liens, including but not limited to construction liens, on the property that will not be paid or satisfied upon the closing of the financing.

     (c)  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.

     (d)  The property assessed financing assessment contract, or summary memorandum of the 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 be 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 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.

     (e)  Before entering into a property assessed financing assessment contract, the property owner shall:

     (1)  For residential properties, at least thirty days before:

          (A)  Provide to the holders or loan servicers of any existing mortgages encumbering or otherwise secured by the property:

               (i)  The notice of the owner's intent to enter into a property assessed financing assessment contract;

              (ii)  The maximum principal amount to be financed; and

             (iii)  The maximum annual assessment necessary to repay that amount and any incidental fees; and

          (B)  Provide to the property assessed financing lender a verified copy or other proof of the notice provided under this paragraph;

               A provision in any agreement between a mortgagee or other lienholder and a property owner, which 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 paragraph, shall not be enforceable.  This paragraph 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

     (2)  For commercial properties:  Provide the property assessed financing lender and the authority with evidence of the written consent of each holder or loan servicer of any mortgage that encumbers or otherwise secures the commercial property at the time of the execution of the property assessed financing assessment contract by the parties.  

               Each consent shall be in a form prescribed by the authority.

     (f)  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.

     (g)  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.

     §196-E  Non-ad valorem special tax assessments.  (a)  The authority 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. 

     (b)  Without the consent of the holders or loan servicers of any mortgage encumbering or otherwise secured by the 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 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 the holders or loan servicers of any mortgage encumbering or otherwise secured by the property.

     (c)  Prior to the execution by the authority of the first property assessed financing assessment contact 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 the county director to levy and collect any property assessed financing assessment approved and certified by the authority to the county director for collection.  Each property assessed financing assessment approved for collection shall:

     (1)  Be a non-ad valorem special tax assessment;

     (2)  Not be a generally applicable tax upon the real property;

     (3)  Be collected in the same manner that real property taxes are collected; and

     (4)  Be subject to the same penalties and the same procedures, sale, and lien priority, subject to the provisions of section 196-D, in the 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 county director.  

     (d)  The county director may add to any property assessed financing assessment reasonable administrative costs as agreed upon by the authority and the director.  The county director shall remit any property assessed financing assessments collected, less the reasonable administrative costs added by the county 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.

     (e)  The county 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 county director 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)  Any county with a charter may enact an ordinance, and may amend the same from time to time, to establish and administer its own property assessed financing program pursuant to section 196-C.  The county shall assume all the responsibilities of the authority as 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-E, as a non-ad valorem special tax assessment on the benefitted property.  The county may issue revenue bonds to finance or refinance the improvements, and the form of any revenue bond may be a property assessed financing assessment contract or other instrument prescribed by the county.  Bonds issued to finance qualified improvements, when the only security is the 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 Hawaii State Constitution."

     SECTION 4.  Section 196-61, Hawaii Revised Statutes, is amended by adding nine 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, including any agricultural property and property where there is a leasehold or possessory interest in the non-residential property.

     "County director" means the officer of the county charged with the responsibility of administering the real property taxation function of the county.  "County director" also includes the county director of finance or county director of budget and fiscal services.

     "Non-ad valorem special tax assessment" means a special tax assessment or governmental charge levied by the county as provided in section 196-E 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 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 the 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 property assessed financing administrator to originate property assessed financing assessment contracts, including any successor or assignee of the lender as provided in the property assessed financing contract.

     "Property assessed financing program" means a program to finance qualifying improvements on residential and commercial properties that are 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, including existing or new real property where there is a leasehold or possessory interest in the 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-B 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 or a septic system to a director of health-approved wastewater 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 or counties through a memorandum of agreement and expend funds appropriated to the [department or agency] government entity or county for purposes authorized by the legislature[;], government entity, or county;

     (3)  Utilize all repayment mechanisms, including the on-bill repayment mechanism, as authorized by 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 the 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-B in section 2 of this Act.

     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 purposes 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, 2024.

 

Report Title:

Hawaii Green Infrastructure Authority; Environmental and Economic Development Revolving Loan Program; Environmental and Economic Development Revolving Loan Fund; Property Assessed Financing Program; Counties; Non-Ad Valorem Special Tax Assessment; Property Assessed Financing Assessment Contract; Appropriation

 

Description:

Requires the Hawaii Green Infrastructure Authority to design and administer the Environmental and Economic Development Revolving Loan Program and the Property Assessed Financing Program.  Creates the Environmental and Economic Development Revolving Loan Fund.  Appropriates funds.  Effective 7/1/2024.  (SD1)

 

 

 

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