REPORT TITLE:
Agricultural Loans


DESCRIPTION:
Provides agricultural loans to qualified part-time farmers.
Reduces the state residency requirements for permanent resident
aliens seeking financing under the State's agricultural loan
program.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2996
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO AGRICULTURAL LOANS.



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

 1      SECTION 1.  The legislature finds that a substantial number
 
 2 of individuals and families are undertaking agricultural
 
 3 production on a part-time basis as a means of supplementing
 
 4 earnings obtained from full-time employment by one or more
 
 5 members of the household.  In many instances, the individual and
 
 6 family is dependent upon farm earnings to make ends meet and
 
 7 provide other amenities for the family.  With the uncertainties
 
 8 involved in farming, such as market demand, prices, government
 
 9 regulations, and weather, these people find that they are not
 
10 able to afford terminating their full-time employment, and thus
 
11 leave the security of a steady income and the benefits provided
 
12 by their employer, especially medical coverage.  Many part-time
 
13 farmers want to expand their farm production, as they have found
 
14 their limited operation to be profitable.
 
15      The legislature also finds that current government programs
 
16 are tailored for full-time farming, consequently leaving these
 
17 entrepreneurial and hard-working individuals with limited avenues
 
18 for funding their operation.  A loan program to assist part-time
 
19 farmers would not only enable these individuals to expand their
 

 
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 1 farming enterprise, but would increase the export potential of
 
 2 certain crops, as many part-time farmers are nurturing crops that
 
 3 are exportable.  Exportable crops include fruits (papayas),
 
 4 ornamentals (orchids for cut flower and potted plants, and
 
 5 certified potted foliage), and plants with pharmaceutical
 
 6 qualities (awa root).  Increasing exports would be beneficial to
 
 7 the state economy.
 
 8      In addition, the legislature finds that farming activities
 
 9 are increasingly being undertaken by recent immigrants to the
 
10 State.  Many of these immigrants already skilled in farming
 
11 techniques, have taken up farming as a livelihood.  These
 
12 immigrants are the "new wave" of farmers, as older farming
 
13 generations are ceasing their farming activities, and turning
 
14 their farmland into more profitable urban investments.
 
15      The purpose of this Act is to support interest in the
 
16 agricultural industry by:
 
17      (1)  Providing agricultural loans to qualified part-time
 
18           farmers; and
 
19      (2)  Reducing the state residency requirements for permanent
 
20           resident aliens seeking financing under the State's
 
21           agricultural loan program.
 
22      SECTION 2.  Section 155-1, Hawaii Revised Statutes, is
 
23 amended by adding the definition of "part-time farmer" to be
 
24 appropriately inserted and to read as follows:
 

 
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 1      ""Part-time farmer" means a person of proven farming ability
 
 2 who:
 
 3      (1)  Has been operating the person's farm for at least two
 
 4           years on land owned by the person in fee or on land
 
 5           rented or leased form others;
 
 6      (2)  Is presently devoting a portion of the person's time to
 
 7           farming; and 
 
 8      (3)  Derives between twenty-five to fifty per cent of the
 
 9           person's net cash income from direct participation in
 
10           farming in its broadest sense."
 
11      SECTION 3.  Section 155-8, Hawaii Revised Statutes, is
 
12 amended by amending subsection (c) to read as follows:
 
13      "(c)  Loans made under this section shall bear simple
 
14 interest on the unpaid principal balance, charged on the actual
 
15 amount disbursed to the borrower.  The interest rate on loans of
 
16 classes "A", "B", "C", [and] "E", and "G" shall be at a rate of
 
17 one per cent below the prime rate or at a rate of seven and one-
 
18 half per cent a year, whichever is less.  For purposes of this
 
19 subsection, the prime rate shall be determined on January 1 and
 
20 July 1 of each year, and shall be the prime rate charged by the
 
21 two largest banks in the State identified by the department of
 
22 commerce and consumer affairs.  If the prime rates of the two
 
23 largest banks are different, the lower prime rate of the two
 
24 shall apply.  The interest rate on class "F" loans shall be six
 
25 per cent a year.  If the money loaned is borrowed by the
 
26 department, then the interest on loans of such classes shall be
 
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 1 the rate as determined above or one per cent over the cost to the
 
 2 State of borrowing the money, whichever is greater.  Interest on
 
 3 class "D" loans shall not be less than three per cent a year."
 
 4      SECTION 4.  Section 155-9, Hawaii Revised Statutes, is
 
 5 amended to read as follows:
 
 6      "§155-9 Classes of loans; purposes, terms, eligibility.
 
 7 (a)  Loans made under this chapter shall be for the purposes and
 
 8 in accordance with the terms specified in classes "A" through "F"
 
 9 in this section and shall be made only to applicants who meet the
 
10 eligibility requirements specified therein and except as to class
 
11 "B" loans to associations and class "E" loans, the eligibility
 
12 requirements specified in section 155-10.  The maximum amount of
 
13 a loan for class "A", "C", "D", and "F" loans to an individual
 
14 applicant shall also apply to any loan application submitted by a
 
15 partnership, corporation, or other entity, and for the purpose of
 
16 determining whether the maximum loan amount to any individual
 
17 will be exceeded, outstanding loans to any partnership,
 
18 corporation, or other entity in which such individual has a legal
 
19 or equitable interest in excess of twenty per cent shall be taken
 
20 into account.
 
21      (b)  Class A:  Farm ownership and improvement loans shall
 
22 provide for:
 
23      (1)  The purchase or improvement of farm land;
 

 
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 1      (2)  The purchase, construction, or improvement of adequate
 
 2           farm dwellings, and other essential farm buildings; and
 
 3      (3)  The liquidation of indebtedness incurred for any of the
 
 4           foregoing purposes.
 
 5      The loans shall be for an amount not to exceed $400,000 and
 
 6 for a term not to exceed forty years.  To be eligible, the
 
 7 applicant shall (A) derive, or present an acceptable plan to
 
 8 derive, a major portion of the applicant's income from and
 
 9 devote, or intend to devote, most of the applicant's time to
 
10 farming operations; (B) have or be able to obtain the operating
 
11 capital, including livestock and equipment, needed to
 
12 successfully operate the applicant's farm.
 
13      (c)  Class B:  Soil and water conservation loans shall
 
14 provide for:
 
15      (1)  Soil conservation practices;
 
16      (2)  Water development, conservation, and use;
 
17      (3)  Drainage; and
 
18      (4)  The liquidation of indebtedness incurred for any of the
 
19           foregoing purposes.
 
20      The loans shall be for an amount not to exceed $35,000 to an
 
21 individual or $200,000 to an association and shall be for a term
 
22 not to exceed twenty years for a loan to an individual and forty
 
23 years to an association.  To be eligible, an individual applicant
 

 
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 1 shall have sufficient farm and other income to pay for farm
 
 2 operating and living expenses and to meet payments on the
 
 3 applicant's existing debts, including the proposed soil and water
 
 4 conservation loan.  An association, to be eligible, shall be a
 
 5 nonprofit organization primarily engaged in extending services
 
 6 directly related to the purposes of the loan to its members, and
 
 7 at least sixty per cent of its membership shall meet the
 
 8 eligibility requirements specified in section 155-10.
 
 9      (d)  Class C:  Farm operating loans shall be for the purpose
 
10 of carrying on and improving a farming operation, including:
 
11      (1)  The purchase of farm equipment and livestock;
 
12      (2)  The payment of production and marketing expenses
 
13           including materials, labor, and services;
 
14      (3)  The payment of living expenses;
 
15      (4)  The liquidation of indebtedness incurred for any of the
 
16           foregoing purposes; and
 
17      (5)  The exportation of crops and livestock.
 
18      The loans shall be for an amount not to exceed $400,000 and
 
19 for a term not to exceed ten years.  To be eligible, an applicant
 
20 shall derive, or present an acceptable plan to derive, a major
 
21 portion of the applicant's income from and devote, or intend to
 
22 devote, most of the applicant's time to farming operations.
 

 
 
 
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 1      Qualified farmers affected by state eradication programs may
 
 2 also be eligible for loans under this subsection.  Loans made for
 
 3 rehabilitation from eradication programs shall be subject to the
 
 4 terms of class "C" loans; provided that the interest rate shall
 
 5 be three per cent a year and the requirements in section 155-3
 
 6 shall be waived and paragraph (4) shall not apply.
 
 7      (e)  Class D:  Emergency loans shall be for the purpose of
 
 8 providing relief and rehabilitation to qualified farmers without
 
 9 limit as to purpose:
 
10      (1)  In areas stricken by extraordinary rainstorms,
 
11           windstorms, droughts, tidal waves, earthquakes,
 
12           volcanic eruptions, and other natural catastrophes;
 
13      (2)  On farms stricken by livestock disease epidemics and
 
14           crop blights;
 
15      (3)  On farms seriously affected by prolonged shipping and
 
16           dock strikes;
 
17      (4)  During economic emergencies caused by overproduction,
 
18           excessive imports, and the like; and
 
19      (5)  During other emergencies as determined by the board of
 
20           agriculture.
 
21      The maximum amounts and period for the loans shall be
 
22 determined by the board of agriculture; provided that the board
 
23 shall require that any settlement or moneys received by qualified
 

 
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 1 farmers as a result of an emergency declared under this section
 
 2 shall first be applied to the repayment of an emergency loan made
 
 3 under this chapter.
 
 4      (f)  Class E:  Loans to cooperatives and corporations shall
 
 5 provide credit to farmers' cooperative associations and
 
 6 corporations engaged in marketing, purchasing, and processing,
 
 7 and providing farm business services, including:
 
 8      (1)  Facility loans to purchase or improve land, building,
 
 9           and equipment for an amount not to exceed $500,000 and
 
10           a term not to exceed twenty years;
 
11      (2)  Operating loans to finance inventories of supplies,
 
12           warehousing, and shipping commodities, extension of
 
13           consumer credit to justified farmer-members, and other
 
14           normal operating expenses for an amount not to exceed
 
15           $300,000 and a term not to exceed seven years; and
 
16      (3)  The exportation of crops and livestock.
 
17      To be eligible, a cooperative or corporation shall have a
 
18 majority of its board of directors and a majority of its
 
19 membership as shareholders who meet the eligibility requirements
 
20 of section 155-10 and who devote most of their time to farming
 
21 operations, and the facility loans shall be for an amount not to
 
22 exceed $500,000 or eighty per cent of the cost of the project,
 
23 whichever is the lesser.
 

 
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 1      (g)  Class F:  Loans for new farmer programs shall provide
 
 2 for costs of a new farm enterprise for qualified new farmers:
 
 3      (1)  Initial loans made under this class shall be for
 
 4           purposes and in accordance with the terms specified in
 
 5           classes "A" and "C" only, and shall be made only for
 
 6           full-time farming.  The loans shall be made for an
 
 7           amount not to exceed $100,000 or eighty-five per cent
 
 8           of the cost of the project, whichever is the lesser;
 
 9      (2)  Any subsequent loan shall be made from classes "A" to
 
10           "D", respectively, depending upon the purpose for which
 
11           the loan funds are used; and
 
12      (3)  Borrowers shall comply with such special term loan
 
13           agreements as may be required by the department and
 
14           shall take such special training courses as the
 
15           department deems necessary.
 
16      (h)  Class G:  Loans to part-time farmers for farm
 
17 improvement and operating purposes for carrying on and improving
 
18 farming operations, including loans for:
 
19      (1)  The purchase, construction, and improvement of farm
 
20           production and growing structures;
 
21      (2)  The purchase of farm equipment or livestock; and
 
22      (3)  The payment of production and marketing expenses,
 
23           including materials, labor, and services.
 

 
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 1      The liquidation of indebtedness incurred for any of the
 
 2 purposes under this subsection and for living expenses shall not
 
 3 be authorized purposes.  Each loan shall be for an amount not to
 
 4 exceed $25,000 and for a term not to exceed ten years."
 
 5      SECTION 5.  Section 155-10, Hawaii Revised Statutes, is
 
 6 amended to read as follows:
 
 7      "155-10  General eligibility requirements for loans.  To be
 
 8 eligible for loans under this chapter, an applicant shall be:
 
 9      (1)  A qualified farmer, [or] a person under the new farmer
 
10           program[;], or a part-time farmer;
 
11      (2)  A citizen of the United States who has resided in the
 
12           State for at least three years, or any permanent
 
13           resident alien who has resided in the State for at
 
14           least [five] three years; provided that this
 
15           requirement shall not apply to applicants for class "D"
 
16           loans who otherwise qualify.  In the case of
 
17           partnerships and corporations, the residence
 
18           requirement must be met by seventy-five per cent of the
 
19           members or stockholders;
 
20      (3)  A sound credit risk with the ability to repay the money
 
21           borrowed; and
 
22      (4)  Willing to carry out recommended farm management
 
23           practices."
 

 
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 1      SECTION 6.  Statutory material to be repealed is bracketed.
 
 2 New statutory material is underscored.
 
 3      SECTION 7.  This Act shall take effect upon its approval.
 
 4 
 
 5                       INTRODUCED BY:  ___________________________