2442
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO ECONOMIC DEVELOPMENT FINANCING.



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

 1      SECTION 1.  Chapter 206M, Hawaii Revised Statutes, is
 
 2 amended by adding a new section to read as follows:
 
 3      "§206M-  Establishment.  The corporation shall establish a
 
 4 revolving fund program for venture capital assistance to be known
 
 5 as The Hawaii Technology Fund."
 
 6      SECTION 2.  Section 88-119, Hawaii Revised Statutes, is
 
 7 amended to read as follows:
 
 8      "§88-119  Investments.  Investments may be made in:
 
 9      (1)  Real estate loans and mortgages.  Obligations (as
 
10           defined in section 431:6-101) of any of the following
 
11           classes:
 
12           (A)  Obligations secured by mortgages of nonprofit
 
13                corporations desiring to build multirental units
 
14                (ten units or more) subject to control of the
 
15                government for occupancy by families displaced as
 
16                a result of government action;
 
17           (B)  Obligations secured by mortgages insured by the
 
18                Federal Housing Administration;
 
19           (C)  Obligations for the repayment of home loans made
 

 
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 1                under the Servicemen's Readjustment Act of 1944 or
 
 2                under Title II of the National Housing Act;
 
 3           (D)  Other obligations secured by first mortgages on
 
 4                unencumbered improved real estate owned in fee
 
 5                simple; provided that the amount of the obligation
 
 6                at the time investment is made therein shall not
 
 7                exceed eighty per cent of the value of the real
 
 8                estate and improvements mortgaged to secure it,
 
 9                and except that the amount of the obligation at
 
10                the time investment is made therein may exceed
 
11                eighty per cent but no more than ninety per cent
 
12                of the value of the real estate and improvements
 
13                mortgaged to secure it; provided further that the
 
14                obligation is insured or guaranteed against
 
15                default or loss under a mortgage insurance policy
 
16                issued by a casualty insurance company licensed to
 
17                do business in the State.  The coverage provided
 
18                by the insurer shall be sufficient to reduce the
 
19                system's exposure to not more than eighty per cent
 
20                of the value of the real estate and improvements
 
21                mortgaged to secure it.  The insurance coverage
 
22                shall remain in force until the principal amount
 

 
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 1                of the obligation is reduced to eighty per cent of
 
 2                the market value of the real estate and
 
 3                improvements mortgaged to secure it, at which time
 
 4                the coverage shall be subject to cancellation
 
 5                solely at the option of the board of trustees.
 
 6                Real estate shall not be deemed to be encumbered
 
 7                within the meaning of this subparagraph by reason
 
 8                of the existence of any of the restrictions,
 
 9                charges, or claims described in section 431:6-308;
 
10           (E)  Other obligations secured by first mortgages of
 
11                leasehold interests in improved real estate;
 
12                provided that:
 
13                (i)  Each such leasehold interest at such time
 
14                     shall have a current term extending at least
 
15                     two years beyond the stated maturity of the
 
16                     obligation it secures; and
 
17               (ii)  The amount of the obligation at the time
 
18                     investment is made therein shall not exceed
 
19                     eighty per cent of the value of the
 
20                     respective leasehold interest and
 
21                     improvements, and except that the amount of
 
22                     the obligation at the time investment is made
 

 
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 1                     therein may exceed eighty per cent but no
 
 2                     more than ninety per cent of the value of the
 
 3                     leasehold interest and improvements mortgaged
 
 4                     to secure it;
 
 5                provided further that the obligation is insured or
 
 6                guaranteed against default or loss under a
 
 7                mortgage insurance policy issued by a casualty
 
 8                insurance company licensed to do business in the
 
 9                State.  The coverage provided by the insurer shall
 
10                be sufficient to reduce the system's exposure to
 
11                not more than eighty per cent of the value of the
 
12                leasehold interest and improvements mortgaged to
 
13                secure it.  The insurance coverage shall remain in
 
14                force until the principal amount of the obligation
 
15                is reduced to eighty per cent of the market value
 
16                of the leasehold interest and improvements
 
17                mortgaged to secure it, at which time the coverage
 
18                shall be subject to cancellation solely at the
 
19                option of the board of trustees;
 
20           (F)  Obligations for the repayment of home loans
 
21                guaranteed by the department of Hawaiian home
 
22                lands pursuant to section 214(b) of the Hawaiian
 

 
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 1                Homes Commission Act, 1920; and
 
 2           (G)  Obligations secured by second mortgages on
 
 3                improved real estate for which the mortgagor
 
 4                procures a second mortgage on the improved real
 
 5                estate for the purpose of acquiring the
 
 6                leaseholder's fee simple interest in the improved
 
 7                real estate; provided that any prior mortgage does
 
 8                not contain provisions that might jeopardize the
 
 9                security position of the retirement system or the
 
10                borrower's ability to repay the mortgage loan.
 
11           The board of trustees may retain such real estate,
 
12           including leasehold interests therein, as it may
 
13           acquire by foreclosure of mortgages or in enforcement
 
14           of security, or as may be conveyed to it in
 
15           satisfaction of debts previously contracted; provided
 
16           that all such real estate, other than leasehold
 
17           interests, shall be sold within five years after
 
18           acquiring the same, subject to extension by the
 
19           governor for additional periods not exceeding five
 
20           years each, and that all such leasehold interests shall
 
21           be sold within one year after acquiring the same,
 
22           subject to extension by the governor for additional
 

 
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 1           periods not exceeding one year each;
 
 2      (2)  Government obligations, etc.  Obligations of any of the
 
 3           following classes:
 
 4           (A)  Obligations issued or guaranteed as to principal
 
 5                and interest by the United States or by any state
 
 6                thereof or by any municipal or political
 
 7                subdivision or school district of any of the
 
 8                foregoing; provided that principal of and interest
 
 9                on such obligations are payable in currency of the
 
10                United States; or sovereign debt instruments
 
11                issued by agencies of, or guaranteed by foreign
 
12                governments;
 
13           (B)  Revenue bonds, whether or not permitted by any
 
14                other provision hereof, of the State or any
 
15                municipal or political subdivision thereof,
 
16                including the board of water supply of the city
 
17                and county of Honolulu, and street or improvement
 
18                district bonds of any district or project in the
 
19                State; and
 
20           (C)  Obligations issued or guaranteed by any federal
 
21                home loan bank including consolidated federal home
 
22                loan bank obligations, the Home Owner's Loan
 

 
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 1                Corporation, the Federal National Mortgage
 
 2                Association, or the Small Business Administration;
 
 3      (3)  Corporate obligations.  Below investment grade or
 
 4           nonrated debt instruments, foreign or domestic, in
 
 5           accordance with investment guidelines adopted by the
 
 6           board of trustees;
 
 7      (4)  Preferred and common stocks.  Shares of preferred or
 
 8           common stock of any corporation created or existing
 
 9           under the laws of the United States or of any state or
 
10           district thereof or of any country;
 
11      (5)  Obligations eligible by law for purchase in the open
 
12           market by federal reserve banks;
 
13      (6)  Obligations issued or guaranteed by the International
 
14           Bank for Reconstruction and Development, the Inter-
 
15           American Development Bank, the Asian Development Bank,
 
16           or the African Development Bank;
 
17      (7)  Obligations secured by collateral consisting of any of
 
18           the securities or stock listed above and worth at the
 
19           time the investment is made at least fifteen per cent
 
20           more than the amount of the respective obligations;
 
21      (8)  Insurance company obligations.  Contracts and
 
22           agreements supplemental thereto providing for
 

 
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 1           participation in one or more accounts of a life
 
 2           insurance company authorized to do business in Hawaii,
 
 3           including its separate accounts, and whether the
 
 4           investments allocated thereto are comprised of stocks
 
 5           or other securities or of real or personal property or
 
 6           interests therein;
 
 7      (9)  Interests in real property.  Interests in improved or
 
 8           productive real property in which, in the informed
 
 9           opinion of the board of trustees, it is prudent to
 
10           invest funds of the system.  For purposes of this
 
11           paragraph, "real property" includes any property
 
12           treated as real property either by local law or for
 
13           federal income tax purposes.  Investments in improved
 
14           or productive real property may be made directly or
 
15           through pooled funds, including common or collective
 
16           trust funds of banks and trust companies, group or unit
 
17           trusts, limited partnerships, limited liability
 
18           companies, investment trusts, title-holding
 
19           corporations recognized under section 501(c) of the
 
20           Internal Revenue Code of 1986, as amended, similar
 
21           entities that would protect the system's interest, and
 
22           other pooled funds invested on behalf of the system by
 

 
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                                     H.B. NO.           
                                                        
                                                        


 1           investment managers retained by the system;
 
 2     (10)  Other securities and futures contracts.  Securities and
 
 3           futures contracts in which in the informed opinion of
 
 4           the board of trustees it is prudent to invest funds of
 
 5           the system, including currency, interest rate, bond,
 
 6           and stock index futures contracts and options on such
 
 7           contracts to hedge against anticipated changes in
 
 8           currencies, interest rates, and bond and stock prices
 
 9           that might otherwise have an adverse effect upon the
 
10           value of the system's securities portfolios; covered
 
11           put and call options on securities; and stock; whether
 
12           or not the securities, stock, futures contracts, or
 
13           options on futures are expressly authorized by or
 
14           qualify under the foregoing paragraphs, and
 
15           notwithstanding any limitation of any of the foregoing
 
16           paragraphs (including paragraph (4)); and
 
17     (11)  Private placements.  Investments in institutional blind
 
18           pool limited partnerships or direct investments that
 
19           make private debt and equity investments in privately
 
20           held companies.  Additionally, investments of up to ten
 
21           per cent of alternative asset allocations may be made
 
22           in venture capital funds in conjunction with or through
 

 
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                                     H.B. NO.           
                                                        
                                                        


 1           the Hawaii strategic development corporation or the
 
 2           high technology development corporation."
 
 3      SECTION 3.  There is appropriated out of the high technology
 
 4 special fund the sum of $___________________, or so much thereof
 
 5 as may be necessary for fiscal year 2000-2001, to carry out the
 
 6 purposes of this Act.  The sum appropriated shall be expended by
 
 7 the high technology development corporation.
 
 8      SECTION 4.  Statutory material to be repealed is bracketed.
 
 9 New statutory material is underscored.
 
10      SECTION 5.  This Act shall take effect on July 1, 2000.
 
11 
 
12                           INTRODUCED BY:  _______________________
 

 
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