STAND. COM. REP. NO. 229

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  S.B. No. 1282
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Commerce and Consumer Protection, to which
was referred S.B. No. 1282 entitled: 

     "A BILL FOR AN ACT RELATING TO INVESTMENTS OF THE EMPLOYEES'
     RETIREMENT SYSTEM,"

begs leave to report as follows:

     The purpose of this measure is to provide the Employees'
Retirement System (ERS) with greater investment flexibility.

     Specifically, the measure enables the ERS to invest in real
estate via Limited Liability Companies (LLCs) and similar
entities to help limit the ERS's liability from personal injury
or property damage lawsuits.  The measure also amends a section
reference to the Internal Revenue Code to more accurately reflect
the types of real property investments the ERS is authorized to
invest in.

     Your Committee received comments from the ERS on the
measure.

     Your Committee finds that LLCs are a relatively new form of
legal entity that have the advantage of being a pass-through
entity for income tax purposes by eliminating taxation at the
federal and state levels.  LLCs also benefit from the corporate-
type advantages of centralized management and limited liability
for the owners.


 
a                                                     SB1282 SD1
 
                                   STAND. COM. REP. NO. 229
                                   Page 2


     Your Committee has amended the measure by making technical,
nonsubstantive amendments for the purposes of clarity, format,
and style.

     As affirmed by the record of votes of the members of your
Committee on Commerce and Consumer Protection that is attached to
this report, your Committee is in accord with the intent and
purpose of S.B. No. 1282, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as
S.B. No. 1282, S.D. 1, and be referred to the Committee on Ways
and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Commerce and
                                   Consumer Protection,



                                   ______________________________
                                   BRIAN KANNO, Co-Chair



                                   ______________________________
                                   BRIAN T. TANIGUCHI, Co-Chair

 
a                                                     SB1282 SD1