REPORT TITLE:
SPRBs; Private Schools


DESCRIPTION:
Proposes amendments to article VII, section 12, and article X,
section 12, of the Hawaii Constitution, to authorize the issuance
of special purpose revenue bonds to finance the construction and
renovation of educational facilities at independent not-for-
profit elementary schools, secondary schools, universities, and
colleges. (HB2820 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2820
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO EDUCATION.



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

 1      SECTION 1.  The purpose of this Act is to propose amendments
 
 2 to article VII, section 12, and article X, section 1, of the
 
 3 Constitution of the State of Hawaii, and to amend chapter 39A,
 
 4 Hawaii Revised Statutes, to authorize the issuance of special
 
 5 purpose revenue bonds to finance the construction and renovation
 
 6 of educational facilities at independent not-for-profit
 
 7 elementary schools, secondary schools, universities, and
 
 8 colleges.
 
 9                              PART I
 
10      SECTION 2.  Article VII, section 12, of the Constitution of
 
11 the State of Hawaii is amended to read as follows:
 
12              "DEFINITIONS; ISSUANCE OF INDEBTEDNESS
 
13      Section 12.  For the purposes of this article: 
 
14      1.  The term "bonds" shall include bonds, notes and other
 
15 instruments of indebtedness.
 
16      2.  The term "general obligation bonds" means all bonds for
 
17 the payment of the principal and interest of which the full faith
 
18 and credit of the State or a political subdivision are pledged
 
19 and, unless otherwise indicated, includes reimbursable general
 
20 obligation bonds.
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1      3.  The term "net revenues" or "net user tax receipts" means
 
 2 the revenues or receipts derived from:
 
 3      a.   A public undertaking, improvement or system remaining
 
 4           after the costs of operation, maintenance and repair of
 
 5           the public undertaking, improvement or system, and the
 
 6           required payments of the principal of and interest on
 
 7           all revenue bonds issued therefor, have been made; or
 
 8      b.   Any payments or return on security under a loan program
 
 9           or a loan thereunder, after the costs of operation and
 
10           administration of the loan program, and the required
 
11           payments of the principal of and interest on all
 
12           revenue bonds issued therefor, have been made.
 
13      4.  The term "person" means an individual, firm,
 
14 partnership, corporation, association, cooperative or other legal
 
15 entity, governmental body or agency, board, bureau or other
 
16 instrumentality thereof, or any combination of the foregoing.
 
17      5.  The term "rates, rentals and charges" means all revenues
 
18 and other moneys derived from the operation or lease of a public
 
19 undertaking, improvement or system, or derived from any payments
 
20 or return on security under a loan program or a loan thereunder;
 
21 provided that insurance premium payments, assessments and
 
22 surcharges, shall constitute rates, rentals and charges of a
 
23 state property insurance program.
 

 
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 1      6.  The term "reimbursable general obligation bonds" means
 
 2 general obligation bonds issued for a public undertaking,
 
 3 improvement or system from which revenues, or user taxes, or a
 
 4 combination of both, may be derived for the payment of the
 
 5 principal and interest as reimbursement to the general fund and
 
 6 for which reimbursement is required by law, and, in the case of
 
 7 general obligation bonds issued by the State for a political
 
 8 subdivision, general obligation bonds for which the payment of
 
 9 the principal and interest as reimbursement to the general fund
 
10 is required by law to be made from the revenue of the political
 
11 subdivision.
 
12      7.  The term "revenue bonds" means all bonds payable from
 
13 the revenues, or user taxes, or any combination of both, of a
 
14 public undertaking, improvement, system or loan program and any
 
15 loan made thereunder and secured as may be provided by law,
 
16 including a loan program to provide loans to a state property
 
17 insurance program providing hurricane insurance coverage to the
 
18 general public.
 
19      8.  The term "special purpose revenue bonds" means all bonds
 
20 payable from rental or other payments made to an issuer by a
 
21 person pursuant to contract and secured as may be provided by
 
22 law.
 

 
 
 
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 1      9.  The term "user tax" means a tax on goods or services or
 
 2 on the consumption thereof, the receipts of which are
 
 3 substantially derived from the consumption, use or sale of goods
 
 4 and services in the utilization of the functions or services
 
 5 furnished by a public undertaking, improvement or system;
 
 6 provided that mortgage recording taxes shall constitute user
 
 7 taxes of a state property insurance program.
 
 8      The legislature, by a majority vote of the members to which
 
 9 each house is entitled, shall authorize the issuance of all
 
10 general obligation bonds, bonds issued under special improvement
 
11 statutes and revenue bonds issued by or on behalf of the State
 
12 and shall prescribe by general law the manner and procedure for
 
13 such issuance.  The legislature by general law shall authorize
 
14 political subdivisions to issue general obligation bonds, bonds
 
15 issued under special improvement statutes and revenue bonds and
 
16 shall prescribe the manner and procedure for such issuance.  All
 
17 such bonds issued by or on behalf of a political subdivision
 
18 shall be authorized by the governing body of such political
 
19 subdivision.
 
20      Special purpose revenue bonds shall only be authorized or
 
21 issued to finance facilities of or for, or to loan the proceeds
 
22 of such bonds to assist:
 

 
 
 
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 1      1.   Manufacturing, processing or industrial enterprises;
 
 2      2.   Utilities serving the general public;
 
 3      3.   Health care facilities provided to the general public
 
 4           by not-for-profit corporations;
 
 5      4.   Early childhood education and care facilities provided
 
 6           to the general public by not-for-profit corporations;
 
 7           [or]
 
 8      5.   Low and moderate income government housing programs[,
 
 9           each of which is hereinafter referred to in this
 
10           paragraph as a special purpose entity.]; or
 
11      6.   Educational facilities provided to the general public
 
12           at independent not-for-profit elementary schools,
 
13           secondary schools, universities, and colleges, each of
 
14           which is hereinafter referred to as a special purpose
 
15           entity.
 
16      The legislature, by a two-thirds vote of the members to
 
17 which each house is entitled, may enact enabling legislation for
 
18 the issuance of special purpose revenue bonds separately for each
 
19 special purpose entity, and, by a two-thirds vote of the members
 
20 to which each house is entitled and by separate legislative bill,
 
21 may authorize the State to issue special purpose revenue bonds
 
22 for each single project or multi-project program of each special
 
23 purpose entity; provided that the issuance of such special
 
24 purpose revenue bonds is found to be in the public interest by
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1 the legislature.  The legislature may enact enabling legislation
 
 2 to authorize political subdivisions to issue special purpose
 
 3 revenue bonds.  If so authorized, a political subdivision by a
 
 4 two-thirds vote of the members to which its governing body is
 
 5 entitled and by separate ordinance may authorize the issuance of
 
 6 special purpose revenue bonds for each single project or multi-
 
 7 project program of each special purpose entity; provided that the
 
 8 issuance of such special purpose revenue bonds is found to be in
 
 9 the public interest by the governing body of the political
 
10 subdivision.  No special purpose revenue bonds shall be secured
 
11 directly or indirectly by the general credit of the issuer or by
 
12 any revenues or taxes of the issuer other than receipts derived
 
13 from payments by a person under contract or from any security for
 
14 such contract or special purpose revenue bonds and no moneys
 
15 other than such receipts shall be applied to the payment thereof.
 
16 The governor shall provide the legislature in November of each
 
17 year with a report on the cumulative amount of all special
 
18 purpose revenue bonds authorized and issued, and such other
 
19 information as may be necessary."
 
20      SECTION 3.  Article X, section 1, of the Constitution of the
 
21 State of Hawaii is amended to read as follows:
 

 
 
 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1                         "PUBLIC EDUCATION
 
 2      Section 1.  The State shall provide for the establishment,
 
 3 support and control of a statewide system of public schools free
 
 4 from sectarian control, a state university, public libraries and
 
 5 such other educational institutions as may be deemed desirable,
 
 6 including physical facilities therefor.  There shall be no
 
 7 discrimination in public educational institutions because of
 
 8 race, religion, sex or ancestry; nor shall public funds be
 
 9 appropriated for the support or benefit of any sectarian or
 
10 private educational institution, except that proceeds of special
 
11 purpose revenue bonds authorized or issued under section 12 of
 
12 article VII may be appropriated to finance or assist [not-for-
 
13 profit]:
 
14      1.   Not-for-profit corporations that provide early
 
15           childhood education and care facilities serving the
 
16           general public[.]; and
 
17      2.   Independent not-for-profit elementary schools,
 
18           secondary schools, universities, and colleges that
 
19           provide educational facilities serving the general
 
20           public."
 
21                              PART II
 
22      SECTION 4.  Chapter 39A, Hawaii Revised Statutes, is amended
 
23 by adding a new part to be appropriately designated and to read
 
24 as follows:
 

 
Page 8                                                     2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1      "PART .  ASSISTING NOT-FOR-PROFIT ELEMENTARY SCHOOLS,
 
 2            SECONDARY SCHOOLS, UNIVERSITIES, AND
 
 3                COLLEGES SERVING THE GENERAL PUBLIC
 
 4      §39A-A  Definitions.  Whenever used in this part, unless a
 
 5 different meaning clearly appears from the context:
 
 6      "Department" means the department of budget and finance.
 
 7      "Educational facility", "facility", or "project" means any
 
 8 facility for each single project or multiproject program of a
 
 9 project party, and includes any structure or building suitable
 
10 for use as a classroom; academic building; auditorium;
 
11 laboratory; library; research facility; dormitory; dining hall;
 
12 food service and preparation facility; student union; and
 
13 parking, maintenance, storage, or utility facility and other
 
14 structures or facilities related thereto or required or useful
 
15 for the instruction of students or the conducting of research or
 
16 the operation of an institution for higher education, and all
 
17 necessary, useful, and related equipment, furnishings, and
 
18 appurtenances, and including the acquisition, preparation, and
 
19 development of all real and personal property necessary or
 
20 convenient as a site or sites for any structure or facility, and
 
21 including the refinancing of outstanding obligations of a project
 
22 party relating to any of the foregoing.  "Educational facility",
 
23 "facility", or "project" does not include any property used or to
 

 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1 be used primarily for sectarian instruction or study or as a
 
 2 place for devotional activities or religious worship.
 
 3      "Elementary school" means a school that provides elementary
 
 4 education.
 
 5      "Project agreement" means any agreement entered into under
 
 6 this part by the department with a project party providing for
 
 7 the issuance of special purpose revenue bonds to finance
 
 8 facilities of a project party or for a project party or to loan
 
 9 the proceeds of the bonds to assist independent not-for-profit
 
10 elementary schools, secondary schools, universities, and colleges
 
11 that serve the general public, including without limitation any
 
12 loan agreement.
 
13      "Project party" means an independent not-for-profit
 
14 elementary school, secondary school, university, or college that
 
15 serves the general public.
 
16      "Refinancing of outstanding obligations" or "refinancing"
 
17 means the liquidation, retirement, or provision for retirement
 
18 with the proceeds of bonds issued by the State, of any
 
19 indebtedness of a project party incurred to finance or aid in
 
20 financing a lawful purpose of the project party not financed
 
21 pursuant to this part that constitutes an independent not-for-
 
22 profit elementary school, secondary school, university, or
 
23 college or consolidation of the indebtedness with indebtedness of
 

 
Page 10                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1 the State incurred for independent not-for-profit elementary
 
 2 schools, secondary schools, universities, and colleges related to
 
 3 the purpose for which the indebtedness of the project party was
 
 4 initially incurred.
 
 5      "Secondary school" means a school that provides secondary
 
 6 education, except that it does not include any education provided
 
 7 beyond grade twelve.
 
 8      "Special purpose revenue bonds" or "bonds" means bonds,
 
 9 notes, or other evidences of indebtedness of the State issued
 
10 pursuant to this part.
 
11      "University" or "college" means an institution for higher
 
12 education other than a public college, but does not include
 
13 private trade, vocational, or technical schools as defined in
 
14 section 302A-101.
 
15      §39A-B Department powers as to independent not-for-profit
 
16 universities, colleges, or other schools.  In addition to powers
 
17 that it may now have, the department shall have all powers
 
18 necessary or convenient to accomplish the purposes of this part.
 
19 The powers of the department include but are not limited to the
 
20 following:
 
21      (1)  Notwithstanding and without compliance with section
 
22           103-7, but with the approval of the governor, to enter
 
23           into and carry out a project agreement, or an amendment
 

 
Page 11                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1           or supplement to an existing project agreement, with a
 
 2           project party, and to enter into and carry out any
 
 3           agreement whereby the obligation of a project party
 
 4           under a project agreement will be unconditionally
 
 5           guaranteed by a person other than a project party.
 
 6      (2)  To issue special purpose revenue bonds pursuant to and
 
 7           in accordance with this part.
 
 8      (3)  To lend the proceeds of the special purpose revenue
 
 9           bonds issued for a project to the project party for use
 
10           and application by the project party for the
 
11           acquisition, purchase, construction, reconstruction,
 
12           improvement, betterment, extension, or refinancing of
 
13           outstanding obligations related to a project.
 
14      (4)  As security for the payment of the principal of,
 
15           premium, if any, and interest of the special purpose
 
16           revenue bonds issued for this project, to pledge,
 
17           assign, hypothecate, or otherwise encumber all or any
 
18           part of the revenues and receipts derived or to be
 
19           derived by the department under the project agreement
 
20           for the project for which the bonds are issued; to
 
21           pledge and assign the interest and rights of the
 
22           department under the project agreement or other
 
23           agreement with respect to the project or the special
 

 
Page 12                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1           purpose revenue bonds; and to pledge and assign any
 
 2           bond, debenture, note, or other evidence of
 
 3           indebtedness received by the department with respect to
 
 4           the project; or any combination of the foregoing.
 
 5      (5)  To extend or renew any project agreement or any other
 
 6           agreement related thereto; provided that any renewal or
 
 7           extension shall be subject to the approval of the
 
 8           governor unless made in accordance with provisions for
 
 9           the extension or renewal contained in a project
 
10           agreement or related agreement theretofore approved by
 
11           the governor.
 
12      (6)  To do any and all things necessary or convenient to
 
13           carry out its purposes and exercise the powers given
 
14           and granted in this part.
 
15 When the department finances or refinances a project by the
 
16 issuance of special purpose revenue bonds as contemplated by this
 
17 part, the State shall not exercise the power of eminent domain to
 
18 acquire a project or any part thereof for lease or transfer to a
 
19 project party, nor shall the State operate a project on behalf of
 
20 a project party.
 
21      §39A-C  Compliance with state and local law.  The issuance
 
22 of special purpose revenue bonds with respect to any project
 
23 under this part shall not relieve any project party or other user
 

 
Page 13                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1 of the project from the laws, ordinances, and rules of the State
 
 2 or any political subdivision thereof, or any departments or
 
 3 boards thereof with respect to the construction, operation, and
 
 4 maintenance of projects, zoning laws or regulations, obtaining of
 
 5 building permits, compliance with building and health codes and
 
 6 other laws, ordinances, or rules of similar nature pertaining to
 
 7 the project, and the laws shall be applicable to the party or the
 
 8 other user to the same extent it would be if the costs of the
 
 9 project were directly financed by the project party.
 
10      §39A-D  Conditions precedent to negotiating and entering
 
11 into a project agreement.  The department prior to entering into
 
12 negotiations with any project party shall require that the State
 
13 shall be reimbursed for any and all costs and expenses (direct or
 
14 indirect) incurred by it in implementing and administering this
 
15 part, as determined by the department, even though a project
 
16 agreement may not be entered into and may further require the
 
17 deposit of moneys with the department for the reimbursement.  Any
 
18 amount of the deposit in excess of the amount required to
 
19 reimburse the State shall be returned by the department to the
 
20 party that has made the deposit.  The State shall not be required
 
21 to pay to the project party any interest or earnings on the
 
22 deposit.
 

 
 
 
Page 14                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1      The department shall not enter into any project agreement
 
 2 with respect to any project unless the department shall first
 
 3 find and determine either that the project party is a responsible
 
 4 party, whether by reason of economic assets or experience in the
 
 5 type of enterprise to be undertaken through the project, or
 
 6 otherwise, or that the obligations of the project party under the
 
 7 project agreement will be unconditionally guaranteed by a person
 
 8 who is a responsible party, whether by reason of economic assets
 
 9 or experience in the type of enterprise to be undertaken through
 
10 the project or otherwise.
 
11      §39A-E Project agreement.  No special purpose revenue bonds
 
12 shall be issued unless at the time of issuance the department
 
13 shall have entered into a project agreement with respect to the
 
14 project for the financing or refinancing of which the revenue
 
15 bonds are to be issued.  Any project agreement entered into by
 
16 the department shall contain provisions unconditionally
 
17 obligating the project party:
 
18      (1)  To pay to the department during the period or term of
 
19           the project agreement, exclusive of any renewal or
 
20           extension thereof and whether or not the project is
 
21           used or occupied by the project party, the sum or sums,
 
22           at the time or times and in the amounts that will be at
 
23           least sufficient:
 

 
Page 15                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1           (A)  To pay the principal and interest on all special
 
 2                purpose revenue bonds issued with respect to the
 
 3                project as and when the same become due, including
 
 4                any premium payable upon any required redemption
 
 5                of the bonds;
 
 6           (B)  To establish or maintain the reserve, if any, as
 
 7                may be required by the instrument authorizing or
 
 8                securing the special purpose revenue bonds;
 
 9           (C)  To pay all fees and expenses (including the fees
 
10                and expenses of the paying agents and trustees)
 
11                incurred in connection with the special purpose
 
12                revenue bonds; and
 
13           (D)  To pay the expenses (direct or indirect) incurred
 
14                by the State, as determined by the department, in
 
15                administering the bonds or in carrying out the
 
16                project agreement.
 
17      (2)  To operate, maintain, and repair the project as long as
 
18           the same is used as provided in the project agreement
 
19           and to pay all costs of the operation, maintenance, and
 
20           repair.
 
21 Moneys received by the department pursuant to paragraph (1)(D)
 
22 shall not be, nor be deemed to be, revenues of the project and
 
23 shall be paid into the general fund of the State.
 

 
Page 16                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1      §39A-F  Issuance of special purpose revenue bonds to finance
 
 2 projects.  In addition to the other powers that it may otherwise
 
 3 have, the department may issue special purpose revenue bonds to
 
 4 finance or refinance, the costs of facilities of, or for, or to
 
 5 loan the proceeds of the bonds to assist project parties.  All
 
 6 revenue bonds issued under this part are special purpose revenue
 
 7 bonds and the provisions of part III of chapter 39 shall not
 
 8 apply thereto.  All special purpose revenue bonds shall be issued
 
 9 in the name of the department and not in the name of the State.
 
10      The department, in determining the cost of any project, may
 
11 also include the following:
 
12      (1)  Financing charges, fees, and expenses of any trustee
 
13           and paying agents for special purpose revenue bonds
 
14           issued to pay the cost of the project;
 
15      (2)  Interest on the bonds and the expenses of the State in
 
16           connection with the bonds and the project to be
 
17           financed from the proceeds of the bonds accruing or
 
18           incurred prior to and during the estimated period of
 
19           construction and not exceeding twelve months
 
20           thereafter;
 
21      (3)  Amounts necessary to establish or increase reserves for
 
22           the special purpose revenue bonds;
 

 
 
 
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                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1      (4)  The cost of plans, specifications, studies, surveys,
 
 2           and estimates of costs and revenues;
 
 3      (5)  Other expenses incidental to determining the
 
 4           feasibility or practicability of the project;
 
 5      (6)  Administration expenses;
 
 6      (7)  Legal, accounting, consulting, and other special
 
 7           service fees;
 
 8      (8)  Interest cost incurred by the project party with
 
 9           respect to the project prior to the issuance of the
 
10           special purpose revenue bonds; and
 
11      (9)  Other costs, commissions, and expenses incidental to
 
12           the construction, acquisition, reconstruction,
 
13           renovation, rehabilitation, improvement, betterment,
 
14           operation, maintenance, or extension of the project,
 
15           the financing, placing of same in operation, and the
 
16           issuance of the special purpose revenue bonds, whether
 
17           incurred prior to or after the issuance of the bonds.
 
18      The legislature finds and determines that the exercise of
 
19 the powers vested in the department by this part constitutes
 
20 assistance to independent not-for-profit elementary schools,
 
21 secondary schools, universities, and colleges serving the general
 
22 public and that the issuance of special purpose revenue bonds to
 
23 finance or to refinance facilities of, or for, or to loan the
 
24 proceeds of the bonds to assist, project parties, is in the
 
25 public interest.
 

 
Page 18                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1      §39A-G  Authorization of special purpose revenue bonds.(a)
 
 2 Special purpose revenue bonds for each single project or multi-
 
 3 project program shall be authorized by a separate act of the
 
 4 legislature, by an affirmative vote of two-thirds of the members
 
 5 to which each house is entitled; provided that the legislature
 
 6 shall find that the issuance of the bonds is in the public
 
 7 interest.  Special purpose revenue bonds issued pursuant to this
 
 8 part may be in one or more series for each project.  The special
 
 9 purpose revenue bonds of each issue shall be dated, shall bear
 
10 interest at the rate or rates, shall mature at the time or times
 
11 not exceeding forty years from their date or dates, shall have
 
12 the rank or priority and may be made redeemable before maturity
 
13 at the option of the department, at the price or prices and under
 
14 the terms and conditions, all as may be determined by the
 
15 department.  The department shall determine the form of the
 
16 special purpose revenue bonds, including any interest coupons to
 
17 be attached thereto, and the manner of execution of the special
 
18 purpose revenue bonds, and shall fix the denomination or
 
19 denominations of the special purpose revenue bonds and the place
 
20 or places of payment of principal and interest, that may be at
 
21 any bank or trust company within or without the State.  The
 
22 special purpose revenue bonds may be issued in coupon or in
 
23 registered form, or both, as the department may determine, and
 

 
Page 19                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1 provisions may be made for the registration of any coupon bonds
 
 2 as to principal alone and also as to both principal and interest,
 
 3 and for the reconversion into coupon bonds of any bonds
 
 4 registered as to both principal and interest.  The department may
 
 5 sell special purpose revenue bonds in the manner, either at
 
 6 public or private sale, and for the price as it may determine.
 
 7      (b)  Prior to the preparation of definitive special purpose
 
 8 revenue bonds, the department may issue interim receipts or
 
 9 temporary bonds, with or without coupons, exchangeable for
 
10 definitive bonds when the bonds have been executed and are
 
11 available for delivery.
 
12      (c)  Should any bond issued under this part or any coupon
 
13 appertaining thereto become mutilated or be lost, stolen, or
 
14 destroyed, the department may cause a new bond or coupon of like
 
15 date, number, and tenor to be executed and delivered in exchange
 
16 and substitution for, and upon the cancellation of the mutilated
 
17 bond or coupon, or in lieu of and in substitution for the lost,
 
18 stolen, or destroyed bond or coupon.  The new bond or coupon
 
19 shall not be executed or delivered until the holder of the
 
20 mutilated, lost, stolen, or destroyed bond or coupon has:
 
21      (1)  Paid the reasonable expense and charges in connection
 
22           therewith;
 

 
 
 
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 1      (2)  In the case of a lost, stolen, or destroyed bond or
 
 2           coupon, has filed with the department or its fiduciary
 
 3           evidence satisfactory to the department or its
 
 4           fiduciary that the bond or coupon was lost, stolen, or
 
 5           destroyed and that the holder was the owner thereof;
 
 6           and
 
 7      (3)  Furnished indemnity satisfactory to the department.
 
 8      (d)  The department in its discretion may provide that CUSIP
 
 9 identification numbers shall be printed on the bonds.  In the
 
10 event the numbers are imprinted on any the bonds:
 
11      (1)  No number shall constitute a part of the contract
 
12           evidenced by the particular bond upon that it is
 
13           imprinted; and
 
14      (2)  No liability shall attach to the department or any
 
15           officer or agent thereof, including any fiscal agent,
 
16           paying agent, or registrar for the bonds, by reason of
 
17           the numbers or any use made thereof, including any use
 
18           thereof made by the department, any officer, or any
 
19           agent, or by reason of any inaccuracy, error, or
 
20           omission with respect thereto or in the use.
 
21      The department in its discretion may require that all costs
 
22 of obtaining and imprinting the numbers shall be paid by the
 
23 purchaser of the bonds.  For the purposes of this subsection, the
 

 
Page 21                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1 term "CUSIP identification numbers" means the numbering system
 
 2 adopted by the Committee for Uniform Security Identification
 
 3 Procedures formed by the Securities Industry Association.
 
 4      §39A-H  Special purpose revenue bond anticipation notes.
 
 5 Whenever the department shall have authorized the issuance of
 
 6 special purpose revenue bonds under this part, special purpose
 
 7 revenue bond anticipation notes of the department may be issued
 
 8 in anticipation of the issuance of the bonds and of the receipt
 
 9 of the proceeds of sale thereof, for the purposes for which the
 
10 bonds have been authorized.  All special purpose revenue bond
 
11 anticipation notes shall be authorized by the department, and the
 
12 maximum principal amount of the notes shall not exceed the
 
13 authorized principal amount of the bonds.  The notes shall be
 
14 payable solely from and secured solely by the proceeds of sale of
 
15 the special purpose revenue bonds in anticipation of which the
 
16 notes are issued and the revenues from which would be payable and
 
17 by which would be secured the bonds; provided that to the extent
 
18 that the principal of the notes shall be paid from moneys other
 
19 than the proceeds of sale of the bonds, the maximum amount of
 
20 bonds in anticipation of which the notes are issued that has been
 
21 authorized shall be reduced by the amount of notes paid in the
 
22 manner.  The authorization, issuance, and the details of the
 
23 notes shall be governed by the provisions of this part with
 

 
Page 22                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1 respect to special purpose revenue bonds insofar as the same may
 
 2 be applicable; provided that each note, together with all
 
 3 renewals and extensions thereof, or refundings thereof by other
 
 4 notes issued under this section, shall mature within five years
 
 5 from the date of the original note.
 
 6      §39A-I  Powers with respect to and security for special
 
 7 purpose revenue bonds.  To secure the payment of any of the
 
 8 special purpose revenue bonds issued pursuant to this part, and
 
 9 interest thereon, or in connection with the bonds, the department
 
10 shall have the power as to the bonds:
 
11      (1)  To pledge all or any part of the revenues derived by
 
12           the department from the project agreement to the
 
13           punctual payment of special purpose revenue bonds
 
14           issued with respect to the project financed or
 
15           refinanced from proceeds thereof, and interest thereon,
 
16           and to covenant against thereafter pledging any
 
17           revenues or receipts to any other bonds or any other
 
18           obligations of the department for any other purpose,
 
19           except as otherwise stated in the law providing for the
 
20           issuance of additional special purpose revenue bonds to
 
21           be equally and ratably secured by a lien upon the
 
22           revenues;
 

 
 
 
Page 23                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1      (2)  To pledge and assign the interest of the department
 
 2           under the project agreement and other agreements
 
 3           related thereto and the rights, duties, and obligations
 
 4           of the department thereunder, including the right to
 
 5           receive revenues thereunder;
 
 6      (3)  To covenant as to the use and disposition of the
 
 7           proceeds from the sale of the bonds;
 
 8      (4)  To covenant to set aside or pay over reserves and
 
 9           sinking funds for the bonds and as to the disposition
 
10           thereof;
 
11      (5)  To covenant and prescribe as to what happenings or
 
12           occurrences shall constitute "events of default" and
 
13           the terms and conditions upon which any or all of the
 
14           bonds shall become or may be declared due before
 
15           maturity and as to the terms and conditions upon which
 
16           the declaration and its consequences may be waived;
 
17      (6)  To covenant as to the rights, liabilities, powers, and
 
18           duties arising upon the breach by it of any covenant,
 
19           conditions, or obligation;
 
20      (7)  To designate a national or state bank or trust company
 
21           within or without the State, incorporated in the United
 
22           States, to serve as trustee for the holders of the
 
23           special purpose revenue bonds and to enter into a trust
 

 
Page 24                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1           indenture or trust agreement or indenture of mortgage
 
 2           with the trustee.  The trustee may be authorized by the
 
 3           department to receive and receipt for, hold, and
 
 4           administer the proceeds of the special purpose revenue
 
 5           bonds issued for the project and to apply the same to
 
 6           the purposes for which the bonds are issued, or to
 
 7           receive and receipt for, hold, and administer the
 
 8           revenues derived by the department under the project
 
 9           agreement and to apply the revenues to the payment of
 
10           the principal and interest on the bonds, or both, and
 
11           any excess revenues to the payment of expenses incurred
 
12           by the State in administering the bonds or in carrying
 
13           out the project agreement.  In the event that the
 
14           trustee shall be appointed, any trust indenture or
 
15           trust agreement or indenture of mortgage entered into
 
16           by the department with the trustee may contain whatever
 
17           covenants and provisions as may be necessary or
 
18           convenient or desirable in order to secure the bonds.
 
19           The department may pledge and assign to the trustee the
 
20           interest of the department under the project agreement
 
21           and other agreements related thereto and the rights,
 
22           duties, and obligations of the department thereunder,
 
23           including the right to receive revenues thereunder.
 

 
Page 25                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1           The department may appoint the trustee to serve as
 
 2           fiscal agent for the payment of the principal and
 
 3           interest, and for the purchase, registration, transfer,
 
 4           exchange, and redemption of the special purpose revenue
 
 5           bonds, and may authorize and empower the trustee to
 
 6           perform the functions with respect to the payment,
 
 7           purchase, registration, transfer, exchange, and
 
 8           redemption, as the department may deem necessary,
 
 9           advisable, or expedient, including without limitation
 
10           the holding of the special purpose revenue bonds and
 
11           coupons that have been paid and the supervision of the
 
12           destruction thereof in accordance with law;
 
13      (8)  To execute all instruments necessary or convenient in
 
14           the exercise of the powers herein granted or in the
 
15           performance of its covenants and duties; and
 
16      (9)  To make the covenants and do any and all acts and
 
17           things as may be necessary or convenient or desirable
 
18           in order to secure the bonds, notwithstanding that the
 
19           covenants, acts, or things may not be enumerated
 
20           herein; it being the purpose hereof to give the
 
21           department power to do all things in the issuance of
 
22           the bonds and for their security that may be consistent
 
23           with the Constitution of the State of Hawaii.
 

 
Page 26                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1      §39A-J  Security for special purpose revenue bonds.  Special
 
 2 purpose revenue bonds shall be payable solely from the revenues
 
 3 derived by the department from payments made to the department
 
 4 under the project agreement or other supplemental agreements
 
 5 entered into with respect to the project, and shall be secured
 
 6 solely by the revenues and by the pledges and assignments
 
 7 authorized by this part.  All special purpose revenue bonds of
 
 8 the same issue, subject to the prior and superior rights of
 
 9 outstanding bonds, claims, obligations, or mechanic's and
 
10 materialman's liens, shall have a prior and paramount lien on the
 
11 revenues derived from the project agreement with respect to the
 
12 project, for which the bonds have been issued, over and ahead of
 
13 all special purpose revenue bonds of any issue payable from the
 
14 revenues that may be subsequently issued and over and ahead of
 
15 any claims or obligations of any nature against the revenues
 
16 subsequently arising or subsequently incurred; provided that the
 
17 right and privilege may be reserved by the department in the
 
18 trust indenture securing an issue of special purpose revenue
 
19 bonds to subsequently issue additional special purpose revenue
 
20 bonds, subject to legislative authorization of the issue as
 
21 provided in section 39A-G, or to permit the project party or
 
22 another party on its behalf to incur debt, from time to time,
 
23 payable from the revenues derived from the project agreement on a
 

 
Page 27                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1 parity with the first issue of the special purpose revenue bonds
 
 2 and any subsequent issue of special purpose revenue bonds and
 
 3 other debt issued or incurred in accordance with the provisions
 
 4 of the trust indenture shall be secured equally and ratably with
 
 5 the first issue of the special purpose revenue bond without
 
 6 priority by reason of the date of sale, date of execution, or
 
 7 date of delivery, by a lien on the revenues in accordance with
 
 8 this part.
 
 9      Notwithstanding any other provisions herein, all or part of
 
10 the property constituting the project and all interest of the
 
11 project party in the project and the revenues of the project
 
12 party therefrom may be subjected to the present and future lien
 
13 of any mortgage of the project party securing the project party's
 
14 bonds, and the rights of the department and any trustee for the
 
15 holders of the special purpose revenue bonds and the holders of
 
16 the special purpose revenue bonds in the project and the revenues
 
17 therefrom may be made subject to the prior lien of the project
 
18 party's mortgage.
 
19      §39A-K Special purpose revenue bonds not a general
 
20 obligation of the State.  No holder or holders of any special
 
21 purpose revenue bonds issued under this part shall ever have the
 
22 right to compel any exercise of taxing power of the State to pay
 
23 the bonds or the interest thereon and no moneys other than the
 

 
Page 28                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1 revenues pledged to the bonds shall be applied to the payment
 
 2 thereof.  Each special purpose revenue bond issued under this
 
 3 part shall recite in substance that the bond, including interest
 
 4 thereon, is not a general obligation of the State and is payable
 
 5 solely from the revenues pledged to the payment thereof, and that
 
 6 the bond is not secured directly or indirectly by the full faith
 
 7 and credit or the general credit of the State or by any revenues
 
 8 or taxes of the State other than the revenues specifically
 
 9 pledged thereto.
 
10      §39A-L Validity of special purpose revenue bonds.  The
 
11 special purpose revenue bonds bearing the signature or facsimile
 
12 signature of officers on the date of the signing thereof shall be
 
13 valid and sufficient for all purposes, notwithstanding that
 
14 before the delivery thereof and payment therefor all the persons
 
15 whose signatures appear thereon shall have ceased to be officers
 
16 of the department.  The special purpose revenue bonds shall
 
17 contain a recital that they are issued pursuant to this part,
 
18 which recital shall be conclusive evidence of their validity and
 
19 of the regularity of their issuance.
 
20      §39A-M  Use of revenues derived from project agreement.  The
 
21 department shall have the right to appropriate, apply, or expend
 
22 the revenues derived with respect to the project agreement for a
 
23 project for the following purposes:
 

 
Page 29                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1      (1)  To pay when due all special purpose revenue bonds,
 
 2           premium, if any, and interest thereon, for the payment
 
 3           of which the revenues are or have been pledged,
 
 4           charged, or otherwise encumbered, including reserves
 
 5           therefor; and
 
 6      (2)  To the extent not paid by the project party to provide
 
 7           for all expenses of administration, operation, and
 
 8           maintenance of the project, including reserves
 
 9           therefor.
 
10 Unless and until adequate provision has been made for the
 
11 foregoing purposes, the department shall not transfer the
 
12 revenues derived from the project agreement to the general fund
 
13 of the State.
 
14      §39A-N  Special purpose revenue bonds exempt from taxation.
 
15 Special purpose revenue bonds and the income therefrom issued
 
16 pursuant to this part shall be exempt from all state, county, and
 
17 municipal taxation except inheritance, transfer, and estate
 
18 taxes.
 
19      §39A-O  Exemption from taxation of department property.  All
 
20 revenues derived by the department from any project or under the
 
21 project agreement pertaining thereto shall be exempt from all
 
22 state, county, and municipal taxation.  Any right, title, and
 
23 interest of the department in any project shall also be exempt
 

 
Page 30                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1 from all state, county, and municipal taxation.  Except as
 
 2 otherwise provided by law, the interest of the project party or
 
 3 user of the project in a project or under the project agreement
 
 4 or related agreement shall not be exempt from taxation to a
 
 5 greater extent than it would be if the costs of the project were
 
 6 directly financed by the project party or other user.
 
 7      §39A-P  Refunding special purpose revenue bonds.  The
 
 8 legislature, by act enacted by an affirmative vote of two-thirds
 
 9 of the members to which each house is entitled, may authorize the
 
10 issuance of refunding special purpose revenue bonds for the
 
11 purpose of refunding any special purpose revenue bonds then
 
12 outstanding and issued under this part, whether or not the
 
13 outstanding special purpose revenue bonds have matured or are
 
14 then subject to redemption.  The legislature is further
 
15 authorized to provide, by act finally enacted by an affirmative
 
16 vote of two-thirds of the members to which each house is
 
17 entitled, for the issuance of a single issue of special purpose
 
18 revenue bonds for the combined purposes of:
 
19      (1)  Financing or refinancing the cost of a project or
 
20           improvement or expansion thereof; and
 
21      (2)  Refunding special purpose revenue bonds that shall
 
22           theretofore have been issued under this part and shall
 
23           then be outstanding, whether or not the outstanding
 

 
Page 31                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1           special purpose revenue bonds have matured or are then
 
 2           subject to redemption.
 
 3      Nothing in this section shall require or be deemed to
 
 4 require the legislature to elect to redeem or prepay special
 
 5 purpose revenue bonds being refunded, or to redeem or prepay
 
 6 special purpose revenue bonds being refunded that were issued in
 
 7 the form customarily known as term bonds in accordance with any
 
 8 sinking fund installment schedule specified in any law
 
 9 authorizing the issuance thereof, or, in the event the department
 
10 elects to redeem or prepay any bonds, to redeem or prepay as of
 
11 any particular date or dates.  The issuance of the special
 
12 purpose revenue bonds, the maturities and other details thereof,
 
13 and the rights and remedies of the holders thereof, and the
 
14 rights, powers, privileges, duties, and obligations of the
 
15 department with respect to the same, shall be governed by the
 
16 foregoing provisions of this part insofar as the same may be
 
17 applicable.
 
18      §39A-Q  Status of special purpose revenue bonds under
 
19 Uniform Commercial Code.  Notwithstanding any of the provisions
 
20 of this part or any recitals in any special purpose revenue bonds
 
21 issued under this part, all special purpose revenue bonds shall
 
22 be deemed to be investment securities under the Uniform
 
23 Commercial Code, chapter 490, subject only to the provisions of
 
24 the special purpose revenue bonds pertaining to registration.
 

 
Page 32                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1      §39A-R  Special purpose revenue bonds as legal investments
 
 2 and lawful security.  The special purpose revenue bonds issued
 
 3 pursuant to this part shall be and are declared to be legal and
 
 4 authorized investments for banks, savings banks, trust companies,
 
 5 savings and loan associations, insurance companies, credit
 
 6 unions, fiduciaries, trustees, guardians, and for all public
 
 7 funds of the State or other political corporations or
 
 8 subdivisions of the State.  The special purpose revenue bonds
 
 9 shall be eligible to secure the deposit of any and all public
 
10 funds of the State and any and all public funds of counties or
 
11 other political corporations or subdivisions of the State, and
 
12 the bonds shall be lawful and sufficient security for the
 
13 deposits to the extent of their value when accompanied by all
 
14 unmatured coupons appertaining thereto.
 
15      §39A-S  Access to and public disclosure of financial records
 
16 of project party.(a)  Each project party with a project
 
17 agreement with the department shall allow the department full
 
18 access to its financial records.  Upon the request of the
 
19 department for the examination of any financial records, the
 
20 project party shall allow the department to examine the requested
 
21 records within a reasonably prompt time from the date of the
 
22 request.  If the department requests copies of the records, the
 
23 project party shall provide the copies.
 

 
Page 33                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1      (b)  To provide the public with full knowledge of the use of
 
 2 the proceeds and benefits derived from special purpose revenue
 
 3 bonds issued under this part, the department shall require each
 
 4 project party with a project agreement with the department to
 
 5 make available to the public all relevant financial records that
 
 6 pertain to the use of or savings resulting from the use of
 
 7 special purpose revenue bonds.
 
 8      (c)  The department shall adopt rules under chapter 91 for
 
 9 the purpose of this section.
 
10      §39A-T  Estimate of benefits.(a)  Each project party with
 
11 a project agreement with the department shall estimate the
 
12 benefits derived from the use of the proceeds of special purpose
 
13 revenue bonds.  The benefits estimated shall be based on a
 
14 comparison between the use of the proceeds of the special purpose
 
15 revenue bonds instead of other means of financing and shall be in
 
16 terms of dollars projected to be or actually saved by consumers
 
17 of the services of the project party.  The format of and method
 
18 for determining the estimates shall be established by the
 
19 department and shall be uniform for each project party.
 
20      (b)  To promote public understanding of the role played by
 
21 special purpose revenue bonds in providing less costly services
 
22 by a project party to the general public, the department shall
 
23 take appropriate steps to ensure public access to and scrutiny of
 
24 the estimates determined under subsection (a).
 

 
Page 34                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1      (c)  The department shall adopt rules under chapter 91 for
 
 2 the purposes of this section.
 
 3      §39A-U  Construction of this part.  The powers conferred by
 
 4 this part shall be in addition and supplemental to the powers
 
 5 conferred by any other law.  Insofar as the provisions of this
 
 6 part are inconsistent with the provisions of any other law, this
 
 7 part shall be controlling.
 
 8      §39A-V  Sunset provision.  After June 30,     , no new
 
 9 special purpose revenue bonds shall be issued under this part."
 
10      SECTION 5.  In codifying the new part added to chapter 39A,
 
11 Hawaii Revised Statutes, by section 4 of this Act, the revisor of
 
12 statutes shall substitute appropriate section numbers for the
 
13 letters used in the designation of new sections in that part.
 
14      SECTION 6.  The question to be printed on the ballot shall
 
15 be as follows:
 
16      "Shall the State be authorized to issue special purpose
 
17      revenue bonds, and use the proceeds from those bonds, to
 
18      assist independent not-for-profit elementary schools,
 
19      secondary schools, universities, and colleges that provide
 
20      educational facilities serving the general public?"
 
21      SECTION 7.  Constitutional material to be repealed is
 
22 bracketed.  New constitutional material is underscored.
 

 
 
 
Page 35                                                    2820
                                     H.B. NO.           H.D. 1
                                                        
                                                        


 1      SECTION 8.  Sections 2 and 3 of this Act shall take effect
 
 2 upon compliance with article XVII, section 3, of the Constitution
 
 3 of the State of Hawaii, and section 4 of this Act shall take
 
 4 effect upon ratification of the constitutional amendments
 
 5 proposed by sections 2 and 3 of this Act.