REPORT TITLE:
State bonds

DESCRIPTION: 
Authorizes issuance of general obligation bonds.


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2151
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO STATE BONDS.



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

 1      SECTION 1.  Declaration of findings with respect to the
 
 2 general obligation bonds authorized by this Act.  Pursuant to the
 
 3 clause in article VII, section 13 of the state constitution,
 
 4 which states:  "Effective July 1, 1980, the legislature shall
 
 5 include a declaration of findings in every general law
 
 6 authorizing the issuance of general obligation bonds that the
 
 7 total amount of principal and interest, estimated for such bonds
 
 8 and for all bonds authorized and unissued and calculated for all
 
 9 bonds issued and outstanding, will not cause the debt limit to be
 
10 exceeded at the time of issuance," the legislature finds and
 
11 declares as follows:
 
12      (1)  Limitation on general obligation debt.  The debt limit
 
13           of the State is set forth in article VII, section 13 of
 
14           the state constitution, which states in part:  "General
 
15           obligation bonds may be issued by the State; provided
 
16           that such bonds at the time of issuance would not cause
 
17           the total amount of principal and interest payable in
 
18           the current or any future fiscal year, whichever is
 
19           higher, on such bonds and on all outstanding general
 
20           obligation bonds to exceed: a sum equal to twenty
 

 
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 1           percent of the average of the general fund revenues of
 
 2           the State in the three fiscal years immediately
 
 3           preceding such issuance until June 30, 1982; and
 
 4           thereafter, a sum equal to eighteen and one-half
 
 5           percent of the average of the general fund revenues of
 
 6           the State in the three fiscal years immediately
 
 7           preceding such issuance."  Article VII, section 13 also
 
 8           provides that in determining the power of the State to
 
 9           issue general obligation bonds, certain bonds are
 
10           excludable, including "reimbursable general obligation
 
11           bonds issued for a public undertaking, improvement or
 
12           system but only to the extent that reimbursements to
 
13           the general fund are in fact made from the net revenue,
 
14           or net user tax receipts, or combination of both, as
 
15           determined for the immediately preceding fiscal year"
 
16           and bonds constituting instruments of indebtedness
 
17           under which the State incurs a contingent liability as
 
18           a guarantor, but only to the extent the principal
 
19           amount of such bonds does not exceed seven per cent of
 
20           the principal amount of outstanding general obligation
 
21           bonds not otherwise excluded under said article VII,
 
22           section 13.
 

 
 
 
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 1      (2)  Actual and estimated debt limits.  The limits on
 
 2           principal and interest of general obligation bonds
 
 3           issued by the State, actual for fiscal year 1999-2000
 
 4           and estimated for each fiscal year from 2000-2001 to
 
 5           2002-2003, is as follows:
 
 6            Fiscal            Net General
 7             Year            Fund Revenues          Debt Limit
 8 
 9           1996-1997           3,115,264,737                   
10           1997-1998           3,195,967,036                   
11           1998-1999           3,254,256,686                   
12           1999-2000           3,087,808,000        589,871,788
13           2000-2001           3,137,140,000        588,178,623
14           2001-2002           3,153,478,000        584,550,956
15           2002-2003        (not applicable)        578,336,270
16 
17           For fiscal years 1999-2000, 2000-2001, 2001-2002, and
 
18           2002-2003, respectively, the debt limit is derived by
 
19           multiplying the average of the net general fund
 
20           revenues for the three preceding fiscal years by
 
21           eighteen and one-half per cent.  The net general fund
 
22           revenues for fiscal years 1996-1997, 1997-1998, and
 
23           1998-1999 are actual, as certified by the director of
 
24           finance in the Statement of the Debt Limit of the State
 
25           of Hawaii as of July 1, 1999, dated November 24, 1999.
 
26           The net general fund revenues for fiscal years 1999-
 
27           2000 to 2002-2003 are estimates, based on general fund
 
28           revenue estimates made September 3, 1999, by the
 

 
 
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 1           council on revenues, the body assigned by article VII,
 
 2           section 7 of the state constitution to make such
 
 3           estimates, and based on estimates made by the
 
 4           department of budget and finance of those receipts,
 
 5           which cannot be included as general fund revenues for
 
 6           the purpose of calculating the debt limit, all of which
 
 7           estimates the legislature finds to be reasonable.
 
 8      (3)  Principal and interest on outstanding bonds applicable
 
 9           to the debt limit. 
 
10           (A)  According to the department of budget and finance,
 
11                the total amount of principal and interest on
 
12                outstanding general obligation bonds, after the
 
13                exclusions permitted by article VII, section 13
 
14                of the state constitution, for determining the
 
15                power of the State to issue general obligation
 
16                bonds within the debt limit as of July 1, 1999, is
 
17                as follows for fiscal year 2000-2001 to fiscal
 
18                year 2006-2007:
 
19                 Fiscal                       Principal
20                  Year                      and Interest
21 
22                2000-2001                    352,508,780
23                2001-2002                    367,994,493
24                2002-2003                    411,766,053
25                2003-2004                    396,607,168
26                2004-2005                    408,282,994
27                2005-2006                    399,897,654
28                2006-2007                    412,331,653
29 

 
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 1                The department of budget and finance further
 
 2                reports that the amount of principal and interest
 
 3                on outstanding bonds applicable to the debt limit
 
 4                generally continues to decline each year from
 
 5                fiscal year 2003-2004 to fiscal year 2017-2018
 
 6                when the final installment of $44,962,638 shall be
 
 7                due and payable.
 
 8           (B)  The department of budget and finance further
 
 9                reports that the outstanding principal amount of
 
10                bonds constituting instruments of indebtedness
 
11                under which the State may incur a contingent
 
12                liability as a guarantor is $191,000,000, all or
 
13                part of which is excludable in determining the
 
14                power of the State to issue general obligation
 
15                bonds, pursuant to article VII, section 13 of the
 
16                state constitution.
 
17       (4) Amount of authorized and unissued general obligation
 
18           bonds and guaranties and proposed bonds and guaranties.
 
19           (A)  As calculated from the state comptroller's bond
 
20                fund report as of October 31, 1999, adjusted for:
 
21                (i)  Appropriations to be funded with general
 
22                     obligation bonds and reimbursable general
 
23                     obligation bonds as provided in Act 91,
 

 
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                                     H.B. NO.           
                                                        
                                                        

 
 1                     Session Laws of Hawaii 1999 (the General
 
 2                     Appropriations Act of 1999), to be expended
 
 3                     in fiscal year 2000-2001;
 
 4               (ii)  Appropriations to be funded by reimbursable
 
 5                     general obligation bonds as provided in Act
 
 6                     151, Session Laws of Hawaii 1999 (Relating to
 
 7                     Hawaii Hurricane Relief Fund Bonds) to be
 
 8                     expended in fiscal year 1998-1999;
 
 9              (iii)  Appropriations to be funded by general
 
10                     obligation bonds as provided in Act 156,
 
11                     Session Laws of Hawaii 1999, (the Judiciary
 
12                     Appropriations Act of 1999);
 
13               (iv)  The issuance of $____________ in general
 
14                     obligation bonds of 2000, Series CR; 
 
15                (v)  Appropriations to be funded by reimbursable
 
16                     general obligation bonds as provided in House
 
17                     Bill No. ____ (Relating to Agriculture), in
 
18                     the amount of $____________;
 
19               (vi)  Lapses proposed in House Bill No. ____ (the
 
20                     Supplemental Appropriations Act of 2000) in
 
21                     the amount of $____________; and
 
22              (vii)  Lapses proposed in House Bill No. ____ (the
 
23                     Judiciary Supplemental Appropriations Act of
 

 
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 1                     2000) in the amount of $____________; the
 
 2                     total amount of authorized but unissued
 
 3                     general obligation bonds and reimbursable
 
 4                     general obligation bonds is $____________.
 
 5                     The total amount of general obligation bonds
 
 6                     previously authorized and unissued and the
 
 7                     general obligation bonds authorized in this
 
 8                     Act is $____________.  The total amount of
 
 9                     general obligation bonds and reimbursable
 
10                     general obligation bonds previously
 
11                     authorized and unissued and the general
 
12                     obligation bonds authorized in this Act is
 
13                     $____________.
 
14           (B)  As reported by the department of budget and
 
15                finance, the outstanding principal amount of bonds
 
16                constituting instruments of indebtedness under
 
17                which the State may incur a contingent liability
 
18                as a guarantor is $____________, all or part of
 
19                which is excludable in determining the power of
 
20                the State to issue general obligation bonds,
 
21                pursuant to article VII, section 13 of the state
 
22                constitution.  The total amount of guaranty
 
23                authorized by House Bill No. ____ (Relating to the
 

 
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 1                Hawaii Capital Loan Program) is $_____________,
 
 2                and is herein validated.  The total amount of
 
 3                guaranties previously authorized and the
 
 4                guaranties validated by this Act is $____________.
 
 5      (5)  Proposed general obligation bond issuance.  As reported
 
 6           in the budget for the fiscal period 1999-2000 to 2002-
 
 7           2003, the State proposes to issue $200,000,000 in
 
 8           general obligation bonds during the remainder of fiscal
 
 9           year 1999-2000, and $350,000,000 during the second half
 
10           of fiscal years 2000 to 2001, $150,000,000 during the
 
11           second half of fiscal year 2000-2001, $150,000,000
 
12           during the first half of fiscal year 2001-2002,
 
13           $150,000,000 during the second half of fiscal year
 
14           2001-2002, $100,000,000 during the first half of fiscal
 
15           year 2002-2003, and $350,000,000 during the second half
 
16           of fiscal year 2002-2003.  It has been the practice of
 
17           the State to issue twenty-year serial bonds with
 
18           principal repayments beginning the third year, and
 
19           interest payments commencing six months from the date
 
20           of issuance and being paid semiannually thereafter.  As
 
21           reported by the department of budget and finance, the
 
22           bonds will be maturing in substantially equal annual
 

 
 
 
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 1           installments of principal and interest.  It is assumed
 
 2           that this practice will be applied to the bonds which
 
 3           are proposed to be issued.
 
 4      (6)  Sufficiency of proposed general obligation bond
 
 5           issuance to meet the requirements of authorized and
 
 6           unissued bonds, as adjusted, and bonds authorized by
 
 7           this Act.  From the schedule reported in paragraph (5),
 
 8           the total amount of general obligation bonds that the
 
 9           State proposes to issue during the fiscal period 1999-
 
10           2000 to 2002-2003 is $1,400,000,000.  The total amount
 
11           of $1,400,000,000 that is proposed to be issued through
 
12           fiscal year 2002-2003 is sufficient to meet the
 
13           requirements of the authorized and unissued bonds, as
 
14           adjusted, and the bonds authorized by this Act, the
 
15           total amount of which is $1,395,874,929, as reported in
 
16           paragraph (4).  Thus, taking into account the amount of
 
17           previously authorized and issued bonds and bonds
 
18           proposed in the budget versus the amount of bonds that
 
19           is proposed to be issued by June 30, 2003, the
 
20           legislature finds that in the aggregate, the amount of
 
21           bonds is sufficient to meet these requirements.
 
22      (7)  Bonds excludable in determining the power of the State
 
23           to issue bonds.  As noted in paragraph (1), certain
 

 
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 1           bonds are excludable in determining the power of the
 
 2           State to issue general obligation bonds.
 
 3           (A)  General obligation reimbursable bonds can be
 
 4                excluded under certain conditions.  It is not
 
 5                possible to make a conclusive determination as to
 
 6                the amount of reimbursable bonds that are
 
 7                excludable from the amount of each proposed bond
 
 8                issued because:
 
 9                (i)  It is not known exactly when projects for
 
10                     which reimbursable bonds have been authorized
 
11                     in prior acts and in this Act will be
 
12                     implemented and will require the application
 
13                     of proceeds from a particular bond issue; and
 
14               (ii)  Not all reimbursable general obligation bonds
 
15                     may qualify for exclusion.
 
16                However, the legislature notes that with respect
 
17                to the principal and interest on outstanding
 
18                general obligation bonds, according to the
 
19                department of budget and finance, the average
 
20                proportion of principal and interest that is
 
21                excludable each year from calculation against the
 
22                debt limit is 6.97 per cent for the ten years from
 
23                fiscal year 2000-2001 to fiscal year 2009-2010.
 
24                For the purpose of this declaration, the
 

 
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 1                assumption is made that five per cent of each bond
 
 2                issue will be excludable from the debt limit, an
 
 3                assumption that the legislature finds to be
 
 4                reasonable and conservative.
 
 5           (B)  Bonds constituting instruments of indebtedness
 
 6                under which the State incurs a contingent
 
 7                liability as a guarantor can be excluded but only
 
 8                to the extent the principal amount of such
 
 9                guaranties does not exceed seven per cent of the
 
10                principal amount of outstanding general obligation
 
11                bonds not otherwise excluded under subparagraph
 
12                (A) of paragraph (7); and provided that the State
 
13                shall establish and maintain a reserve in an
 
14                amount in reasonable proportion to the outstanding
 
15                loans guaranteed by the State as provided by law.
 
16                According to the department of budget and finance
 
17                and the assumptions presented herein, the total
 
18                principal amount of outstanding general obligation
 
19                bonds and general obligation bonds proposed to be
 
20                issued, which are not otherwise excluded under
 
21                article VII, section 13 of the state constitution
 
22                for fiscal years 1999-2000, 2000-2001, 2001-2002,
 
23                and 2002-2003 are as follows:
 
24 

 
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 1                                      Total Amount of
 2                                 General Obligation Bonds
 3                                 Not Otherwise Excluded by
 4                                  Article VII, Section 13
 5               Fiscal Year       of the State Constitution
 6 
 7                1999-2000               3,309,433,537
 8                2000-2001               3,600,550,972
 9                2001-2002               3,667,655,955
10                2002-2003               3,843,443,582
11 
12           Based on the foregoing and based on the assumption that
 
13           the full amount of a guaranty is immediately due and
 
14           payable when such guaranty changes from a contingent
 
15           liability to an actual liability, the aggregate
 
16           principal amount of the portion of the outstanding
 
17           guaranties and the guaranties proposed to be incurred,
 
18           which does not exceed seven per cent of the average
 
19           amount set forth in the last column of the above table
 
20           and for which reserve funds have been or will have been
 
21           established as heretofore provided, can be excluded in
 
22           determining the power of the State to issue general
 
23           obligation bonds.  As it is not possible to predict
 
24           with a reasonable degree of certainty when a guaranty
 
25           will change from a contingent liability to an actual
 
26           liability, it is assumed in conformity with fiscal
 
27           conservatism and prudence, that all guaranties not
 
28           otherwise excluded pursuant to article VII, section 13
 
29           of the state constitution will become due and payable
 

 
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 1           in the same fiscal year in which the greatest amount of
 
 2           principal and interest on general obligation bonds,
 
 3           after exclusions, occurs.  Thus, based on these
 
 4           assumptions and on the determination in paragraph (8),
 
 5           the aggregate principal amount of the portion of the
 
 6           outstanding guaranties, which must be included in
 
 7           determining the power of the State to issue general
 
 8           obligation bonds, is $0.
 
 9      (8)  Determination whether the debt limit will be exceeded
 
10           at the time of issuance.  From the foregoing and on the
 
11           assumption that all of the bonds identified in
 
12           paragraph (5) will be issued at an interest rate of 6.0
 
13           per cent as reported in the Budget, it can be
 
14           determined from the following schedule that the bonds
 
15           that are proposed to be issued, which include all
 
16           authorized and unissued bonds previously authorized, as
 
17           adjusted, general obligation bonds and instruments of
 
18           indebtedness under which the State incurs a contingent
 
19           liability as a guarantor authorized in this Act, will
 
20           not cause the debt limit to be exceeded at the time of
 
21           such issuance:
 

 
 
 
 
 
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 1                                                Greatest Amount
 2       Time of Issuance                           and Year of
 3       and Amount to Be       Debt Limit       Highest Principal
 4        Counted Against       at Time of         and Interest
 5          Debt Limit           Issuance     on Bonds and Guaranties
 6    Remainder FY 1999-2000
 7         $190,000,000        $589,871,788  $423,101,970 (2002-2003)
 8     1st half FY 2000-2001
 9         $332,500,000        $588,178,623  $443,051,970 (2002-2003)
10     2nd half FY 2000-2001
11         $142,500,000        $588,178,623  $451,601,970 (2002-2003)
12     1st half FY 2001-2002
13         $142,500,000        $584,550,956  $455,876,970 (2002-2003)
14     2nd half FY 2001-2002
15         $142,500,000        $584,550,956  $464,426,970 (2002-2003)
16     1st half FY 2002-2003
17          $95,000,000        $578,336,270  $459,374,614 (2004-2005)
18     2nd half FY 2002-2003
19         $285,000,000        $578,336,270  $479,324,614 (2004-2005)
20 
21      (9)  Overall and concluding finding.  From the facts,
 
22           estimates, and assumptions stated in this declaration
 
23           of findings, the conclusion is reached that the total
 
24           amount of principal and interest estimated for the
 
25           general obligation bonds authorized in this Act, and
 
26           for all bonds authorized and unissued, and calculated
 
27           for all bonds issued and outstanding, and all
 
28           guaranties, will not cause the debt limit to be
 
29           exceeded at the time of issuance.
 
30      SECTION 2.  The legislature finds the bases for the
 
31 declaration of findings set forth in this Act reasonable.  The
 
32 assumptions set forth in this Act with respect to the principal
 
33 amount of general obligation bonds that will be issued, the
 

 
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 1 amount of principal and interest on reimbursable general
 
 2 obligation bonds that are assumed to be excludable, and the
 
 3 assumed maturity structure shall not be deemed to be binding, it
 
 4 being the understanding of the legislature that such matters must
 
 5 remain subject to substantial flexibility.
 
 6      SECTION 3.  Authorization for issuance of general obligation
 
 7 bonds.  General obligation bonds may be issued as provided by law
 
 8 in an amount that may be necessary to finance projects authorized
 
 9 in House Bill No. ____ (the Suplemental Appropriations Act of
 
10 2000), and House Bill No. ____ (the Judiciary Supplemental
 
11 Appropriations Act of 2000), passed by this regular session of
 
12 2000, and designated to be financed from the general obligation
 
13 bond fund and from the general obligation bond fund with debt
 
14 service cost to be paid from special funds; provided that the sum
 
15 total of the general obligation bonds so issued shall not exceed
 
16 $____________.
 
17      Any law to the contrary notwithstanding, general obligation
 
18 bonds may be issued from time to time in accordance with section
 
19 39-16, Hawaii Revised Statutes, in such principal amount as may
 
20 be required to refund any general obligation bonds of the State
 
21 of Hawaii heretofore or hereafter issued pursuant to law.
 

 
 
 
 
 
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 1      SECTION 4.  The provisions of this Act are declared to be
 
 2 severable and if any portion thereof is held to be invalid for
 
 3 any reason, the validity of the remainder of this Act shall not
 
 4 be affected.
 
 5      SECTION 5.  In printing this Act, the revisor of statutes
 
 6 shall substitute in section 1 and section 3 the corresponding act
 
 7 numbers for bills identified therein.
 
 8      SECTION 6.  This Act shall take effect upon its approval. 
 
 9 
 
10                           INTRODUCED BY:  _______________________