REPORT TITLE:
Entertainment; Loan Program


DESCRIPTION:
Creates the Hawaii television and film development loan guarantee
program.  (SD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2959
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 3
TWENTIETH LEGISLATURE, 2000                                S.D. 1
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO THE ENTERTAINMENT INDUSTRY.


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

 1      SECTION 1.  The legislature finds that television and film
 
 2 productions in Hawaii provide an invaluable source of
 
 3 advertisement and promotion for the State.  Over the last four
 
 4 years, Hawaii's television and film industry has experienced
 
 5 double-digit growth.  It is a $100,000,000 per year industry in
 
 6 terms of production expenses, and contributes $15,000,000 per
 
 7 year in state tax revenues.  Within the next five to ten years,
 
 8 there is the potential for television and film in Hawaii to grow
 
 9 to a $300,000,000 per year industry, generating $45,000,000 in
 
10 tax revenues.
 
11      To maximize television and film exposure, it is absolutely
 
12 essential to provide television and film producers with financial
 
13 incentives and assistance to encourage them to produce their
 
14 projects in Hawaii.
 
15      The purpose of this Act is to assist Hawaii's television and
 
16 film industry by:
 
17      (1)  Establishing a loan guarantee program under the
 
18           direction of the department of business, economic
 
19           development, and tourism and its film industry branch,
 
20           to provide needed assistance and facilitate the
 

 
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 1           acquisition of production capital for film and
 
 2           television producers, while ensuring and protecting the
 
 3           State's interests in the process; and
 
 4      (2)  Encouraging the Hawaii tourism authority to provide
 
 5           funding for these entertainment projects that promote
 
 6           Hawaii to the world.
 
 7      SECTION 2.  Chapter 201, Hawaii Revised Statutes, is amended
 
 8 by adding a new part to be appropriately designated and to read
 
 9 as follows:
 
10         "PART   .  HAWAII TELEVISION AND FILM DEVELOPMENT
 
11                      LOAN GUARANTEE PROGRAM
 
12      §201-A  Findings and purpose.  The legislature finds that
 
13 television programs and films produced in Hawaii provide direct
 
14 economic benefits, as well as opportunities to showcase and
 
15 promote Hawaii.  It is the intent of the legislature to encourage
 
16 this dual benefit to the State through a loan guarantee program
 
17 for those entertainment projects that are produced in whole or in
 
18 part in Hawaii, and to encourage funding for those entertainment
 
19 projects that showcase Hawaii by the Hawaii tourism authority.
 
20      The legislature acknowledges that public and private sector
 
21 cooperation is critical to the success of the entertainment
 
22 industry.  To this end, the legislature believes that the film
 
23 industry branch of the department of business, economic
 

 
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 1 development, and tourism should provide opportunities for
 
 2 consultation with county agencies responsible for television and
 
 3 film production, as well as with the entertainment industry in
 
 4 Hawaii and elsewhere.  Through such informal collaboration, the
 
 5 department will be better placed to support viable projects that
 
 6 encourage the television and film industry in Hawaii, and promote
 
 7 Hawaii as a visitor destination.
 
 8      The purpose of this part is to provide television and film
 
 9 producers with financial assistance.
 
10      §201-B  Definitions.  As used in this part:
 
11      "Department" means the department of business, economic
 
12 development, and tourism and its film industry branch.
 
13      "Eligible Hawaii project" means an entertainment project in
 
14 which at least seventy five per cent of the budget for the
 
15 production costs, excluding salaries and costs for the producer,
 
16 director, writer, screenplay, and actors in the project, is
 
17 dedicated for the purchase or lease of goods or services from a
 
18 vendor or supplier who is located and doing business in the
 
19 State.
 
20      "Hawaii lender" means a financial institution that is
 
21 located or has a branch office in Hawaii.
 
22      "Program" means the Hawaii television and film development
 
23 loan guarantee indemnity program administered by the department
 

 
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 1 under this part.
 
 2      §201-C  Hawaii television and film development loan
 
 3 guarantee indemnity program.(a)  The department shall
 
 4 administer a program to guarantee a certain amount of one or more
 
 5 qualified Hawaii project production loans under section 201-D as
 
 6 a means to facilitate access to capital for the production of
 
 7 entertainment in Hawaii.  The department may approve the issuance
 
 8 of a guarantee of a qualified Hawaii project production loan or
 
 9 loans for the production of more than one eligible Hawaii project
 
10 by a single producer.
 
11      (b)  The department shall not approve the issuance of a loan
 
12 guarantee except upon approval of an application submitted with
 
13 the approval of a Hawaii lender who has agreed to make a
 
14 qualified Hawaii project production loan.
 
15      (c)  For each guarantee, the department shall determine:
 
16      (1)  The maximum guarantee amount; and
 
17      (2)  The terms and conditions relating to the guarantee.
 
18      (d)  An action or claim under a loan guarantee shall be
 
19 brought not later than three years after the date on which the
 
20 department approves the issuance of the guarantee.
 
21      (e)  The guarantee amount approved for issuance by the
 
22 department under this part shall not exceed the lesser of:
 
23      (1)  Ninety per cent of the total amount of the qualified
 

 
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 1           Hawaii project production loan; or
 
 2      (2)  $900,000.
 
 3      §201-D  Qualified Hawaii project production loan.  To
 
 4 qualify as a Hawaii project production loan, the loan:
 
 5      (1)  Shall be made by a Hawaii lender under a written loan
 
 6           agreement that:
 
 7           (A)  Is entered into with a borrower to finance the
 
 8                production of an eligible Hawaii project;
 
 9           (B)  May be conditioned on the approval for the
 
10                issuance of a loan guarantee under this part;
 
11           (C)  Requires that the loan be secured by:
 
12                (i)  A security interest on the eligible Hawaii
 
13                     project to be financed by the loan and
 
14                     proceeds and receivables due from the
 
15                     project; and
 
16               (ii)  A security or other interest in a
 
17                     distribution agreement covering the eligible
 
18                     Hawaii project, an irrevocable letter of
 
19                     credit, a presale agreement covering the
 
20                     project, a certificate of deposit, a
 
21                     marketable security, or other instrument that
 
22                     meets all requirements and is secured in the
 
23                     manner and to the extent provided by rule
 

 
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 1                     adopted by the department pursuant to
 
 2                     chapter 91; and
 
 3           (D)  Meets any other requirement prescribed by the
 
 4                department; and
 
 5      (2)  May include a written agreement between the borrower
 
 6           and the department, as the representative of the State,
 
 7           that as consideration for the loan made under this
 
 8           part, the borrower shall share any royalties, licenses,
 
 9           titles, rights, or any other monetary benefits that may
 
10           accrue to the borrower as a result of the loan with the
 
11           State, pursuant to terms and conditions established by
 
12           the department by rule pursuant to chapter 91.
 
13      §201-E  Application for loan guarantee.(a)  An application
 
14 for a loan guarantee under the program shall:
 
15      (1)  Contain the names and addresses of the Hawaii lender
 
16           and the borrower who is the subject of the loan;
 
17      (2)  Contain a certification by the borrower that the
 
18           project is an eligible Hawaii project;
 
19      (3)  Be accompanied by:
 
20           (A)  A certification by the Hawaii lender that:
 
21                (i)  The Hawaii lender has reviewed the
 
22                     application;
 
23               (ii)  The budget for the total cost to produce the
 

 
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 1                     eligible Hawaii project as disclosed in the
 
 2                     application is the same as the budget for the
 
 3                     total cost to produce the project that was
 
 4                     disclosed to the Hawaii lender for the
 
 5                     purpose of determining whether to make the
 
 6                     loan; and
 
 7              (iii)  The information contained in the application
 
 8                     is not contrary to the information submitted
 
 9                     to the Hawaii lender in connection with the
 
10                     loan;
 
11           (B)  A copy of the loan agreement described by
 
12                section 201-D(2); and
 
13           (C)  A copy of a distribution agreement or other
 
14                instrument described in section 201-D(1)(C)(ii) as
 
15                appropriate; and
 
16      (4)  Contain any other information required by the
 
17           department.
 
18      (b)  The department shall charge an application fee in a
 
19 reasonable amount not to exceed $100 to cover the cost of
 
20 processing the application.
 
21      (c)  On receipt of an application, the department shall
 
22 verify the information contained in the application and may
 
23 conduct investigations as necessary to make a determination
 

 
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 1 regarding information provided in the application.
 
 2      (d)  The department may contract with a private company to
 
 3 perform any of the department's duties under subsection (c) and
 
 4 to submit a written report of the company's findings to the
 
 5 department.
 
 6      (e)  The department shall not approve an application
 
 7 submitted under this section unless it is complete and meets the
 
 8 requirements of this section.
 
 9      §201-F  Surety bond for completion of project.  The
 
10 department may require a surety bond indemnifying the State and
 
11 the lender against loss that results from the eligible Hawaii
 
12 project not being completed by the date and for the budget
 
13 certified to the department in the application required by
 
14 section 201-E.
 
15      §201-G  Issuance of loan guarantee.  The department shall
 
16 not approve the issuance of a loan guarantee under the program
 
17 unless:
 
18      (1)  The loan for which the guarantee is sought meets the
 
19           qualifications of a Hawaii project production loan
 
20           under section 201-D;
 
21      (2)  The department approves the application for the loan
 
22           guarantee;
 
23      (3)  The department has received the application fee
 

 
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 1           required by section 201-E(b); and
 
 2      (4)  The surety bond requirements of section 201-F, and any
 
 3           other bond or insurance requirements prescribed under
 
 4           this part or by department rule have been satisfied.
 
 5      §201-H  Rulemaking authority.  The department shall adopt
 
 6 rules pursuant to chapter 91, that shall include:
 
 7      (1)  Terms and conditions for a security interest or other
 
 8           pledge of collateral to be provided to a Hawaii lender
 
 9           as security for any default of a loan guaranteed under
 
10           the program;
 
11      (2)  Procedures for the enforcement of obligations owed to
 
12           the department under the program; and
 
13      (3)  Rules necessary to effectuate this part.
 
14      §201-I  Annual report.  The department shall submit a report
 
15 to the governor and the legislature at least twenty days prior to
 
16 the convening of each regular session of the legislature.  The
 
17 report shall include:
 
18      (1)  The name and addresses of all borrowers that have
 
19           applied to the department for a loan guarantee under
 
20           the program and their respective Hawaii lenders;
 
21      (2)  The names and addresses of all borrowers and their
 
22           respective Hawaii lenders that have been approved to
 
23           receive a loan guarantee under the program;
 

 
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 1      (3)  The amount of the loan guarantee approved by the
 
 2           department to each applicant described by paragraph
 
 3           (2); and
 
 4      (4)  Any other information relating to the program that may
 
 5           be requested to be included in the report.
 
 6      §201-J  Gifts and grants.  The department may solicit and
 
 7 accept gifts, grants, and donations from any source for the
 
 8 purposes of this part."
 
 9      SECTION 3.  In codifying the new part added by section 2 of
 
10 this Act, the revisor of statutes shall substitute appropriate
 
11 section numbers for the letters used in designating the new
 
12 sections in this Act.
 
13      SECTION 4.  Statutory material to be repealed is bracketed.
 
14 New statutory material is underscored.
 
15      SECTION 5.  This Act shall take effect upon its approval.