REPORT TITLE:
Technology


DESCRIPTION:
Allows the high technology development corporation (HTDC) to
issue special purpose revenue bonds and special facility revenue
bonds for the development of high technology projects.  Allows
qualified high technology businesses to sell their unused net
operating loss carryover to any other taxpayer.  Expands the
income tax exclusion for royalties and other income from high
technology businesses.  Allows partnership investors the
flexibility of allocating the high technology business investment
tax credit among partners without regard to their proportionate
interests in their partnership investment vehicle.  Makes the
high technology business investment tax credit and the tax credit
for increasing research activities refundable to the taxpayer or
allowing the credits to be used against the taxpayer's income tax
liability in subsequent years until exhausted.  Conforms the
state tax credit for increasing research activities with the
federal tax credit.  Allows the board of trustees of the
employees' retirement system (ERS) to invest ten percent of ERS
funds in qualified high technology businesses.  Appropriates
funds for education, workforce development, and University of
Hawaii research and training.  Exempts members of the governor's
special advisory council for technology development from the
senate confirmation process and from the need to file a
disclosure of financial interest with the state ethics
commission.  Promotes Hawaii, through a coordinated statewide
effort, as a place to do high technology business.  Giving
increased autonomy and authority to HTDC over its fiscal and
personnel matters.  Establishes the Hawaii venture capital
technology revolving fund.  Requires HTDC to establish programs
for seed capital assistance, venture capital assistance, and
capital access.  Puts the chief executive officer of HTDC, the
executive director of the natural energy laboratory of Hawaii
authority, and the president of the Hawaii strategic development
corporation on each others' boards.  (SB2420 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
                                                        2420
THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 2000                                H.D. 1
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO TECHNOLOGY.


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

 1                              PART I
 
 2      SECTION 1.  The purpose of this part is to allow the high
 
 3 technology development corporation to issue special purpose
 
 4 revenue bonds and special facility revenue bonds for the
 
 5 development of high technology projects.
 
 6      SECTION 2.  Chapter 206M, Hawaii Revised Statutes, is
 
 7 amended by adding a new part to be appropriately designated and
 
 8 to read as follows:
 
 9            "PART  II.  SPECIAL FACILITY REVENUE BONDS
 
10      §206M-  Definitions.  As used in this part, unless the
 
11 context clearly requires otherwise:
 
12      "Special facility" means one or more buildings, structures,
 
13 or facilities and the land thereof located in an industrial park
 
14 for the high technology industry, including, without limitation,
 
15 facilities for technology research, development, support,
 
16 processing, and manufacturing, which are the subject of a special
 
17 facility lease.
 
18      "Special facility lease" includes a contract, lease, or
 
19 other agreement, or any combination thereof, the subject matter
 
20 of which is the same special facility.
 

 
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 1      "Special facility revenue bonds" means all bonds, notes, and
 
 2 other instruments of indebtedness of the State issued pursuant to
 
 3 this part and part III of chapter 39.
 
 4      §206M-  Powers.  In addition to any other powers granted to
 
 5 the development corporation by law, the development corporation
 
 6 may:
 
 7      (1)  With the approval of the governor, and without public
 
 8           bidding, enter into a special facility lease or an
 
 9           amendment or supplement thereto whereby the development
 
10           corporation agrees to acquire, construct, improve,
 
11           install, equip, and develop a special facility solely
 
12           for the use by another party to a special facility
 
13           lease;
 
14      (2)  With the approval of the governor, issue special
 
15           facility revenue bonds in principal amounts that may be
 
16           necessary to yield the amount of the cost of any
 
17           acquisition, construction, improvement, installation,
 
18           equipping, and development of any special facility,
 
19           including, subject to paragraph (6) the costs of
 
20           acquisition of the site thereof; provided that the
 
21           total principal amount of the special facility revenue
 
22           bonds which may be issued pursuant to the authorization
 
23           of this section shall not exceed $100,000,000;
 

 
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 1      (3)  With the approval of the governor, issue refunding
 
 2           special facility revenue bonds with which to provide
 
 3           for the payment of outstanding special facility revenue
 
 4           bonds (including any special facility revenue bonds
 
 5           theretofore issued for this refunding purpose) or any
 
 6           part thereof; provided any issuance of refunding
 
 7           special facility revenue bonds shall not reduce the
 
 8           principal amount of the bonds that may be issued as
 
 9           provided in paragraph (2);
 
10      (4)  Perform and carry out the terms and provisions of any
 
11           special facility lease;
 
12      (5)  Notwithstanding section 103-7 or any other law to the
 
13           contrary, acquire, construct, improve, install, equip
 
14           or develop any special facility, or accept the
 
15           assignment of any contract therefor entered into by the
 
16           other party to the special facility lease;
 
17      (6)  Construct any special facility on land owned by the
 
18           State; provided that no funds derived herein shall be
 
19           expended for land acquisition; and
 
20      (7)  Agree with the other party to the special facility
 
21           lease whereby any acquisition, construction,
 
22           improvement, installation, equipping, or development of
 
23           the special facility and the expenditure of moneys
 

 
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 1           therefor shall be undertaken or supervised by another
 
 2           person.  Neither the undertaking by the other person
 
 3           nor the acceptance by the development corporation of a
 
 4           contract theretofore entered into by the other person
 
 5           therefor, shall be subject to chapter 103D.
 
 6      §206M-  Findings and determinations for special facility
 
 7 leases.  The development corporation shall not enter into any
 
 8 special facility lease unless the development corporation, at or
 
 9 prior to the entering into of the special facility lease, shall
 
10 find and determine:
 
11      (1)  That the building, structure, or facility that is to be
 
12           the subject of the special facility lease shall not be
 
13           used to provide services, commodities, supplies or
 
14           facilities that are then adequately being made
 
15           available otherwise in the State;
 
16      (2)  That the use or occupancy of the building, structure,
 
17           or facility under the special facility lease would not
 
18           result in the reduction of the revenues derived from
 
19           the industrial parks or other properties of the
 
20           development corporation to an amount below the amount
 
21           required to be derived therefrom by section 39-61; and
 
22      (3)  That the entering into of the special facility lease
 
23           would not be in violation of or result in a breach of
 

 
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 1           any covenant contained in any resolution or certificate
 
 2           authorizing any bonds of the State then outstanding.
 
 3      §206M-  Special facility lease.(a) In addition to the
 
 4 conditions and terms set forth in this part, any special facility
 
 5 lease entered into by the development corporation shall at least
 
 6 contain provisions obligating the other party to the special
 
 7 facility lease:
 
 8      (1)  To pay to the development corporation during the
 
 9           initial term of the special facility lease, whether the
 
10           special facility is capable of being used or occupied
 
11           or is being used or occupied by the other party, a
 
12           rental or rentals at the time or times and in the
 
13           amount or amounts that will be sufficient to:
 
14           (A)  Pay the principal and interest on all special
 
15                facility revenue bonds issued for the special
 
16                facility;
 
17           (B)  Establish or maintain any reserves for these
 
18                payments; and
 
19           (C)  Pay all fees and expenses of the trustees, paying
 
20                agents, transfer agents, and other fiscal agents
 
21                for the special facility revenue bonds issued for
 
22                the special facility;
 

 
 
 
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 1      (2)  To pay to the development corporation:
 
 2           (A)  A ground rental, equal to the fair market rental
 
 3                of the land, if the land on which the special
 
 4                facility is located was not acquired from the
 
 5                proceeds of the special facility revenue bonds; or
 
 6           (B)  A properly allocable share of the administrative
 
 7                costs of the development corporation in carrying
 
 8                out the special facility lease and administering
 
 9                the special facility revenue bonds issued for the
 
10                special facility if the land was acquired from the
 
11                proceeds of the special facility revenue bonds;
 
12      (3)  To either operate, maintain, and repair the special
 
13           facility and pay the costs thereof or to pay to the
 
14           development corporation all costs of operation,
 
15           maintenance, and repair of the special facility;
 
16      (4)  To:
 
17           (A)  Insure, or cause to be insured, the special
 
18                facility under builder's risk insurance (or
 
19                similar insurance) in the amount of the cost of
 
20                construction of the special facility to be
 
21                financed from the proceeds of the special facility
 
22                revenue bonds;
 

 
 
 
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 1           (B)  Procure and maintain, or cause to be procured or
 
 2                maintained, to the extent commercially available,
 
 3                a comprehensive insurance policy providing
 
 4                protection and insuring the development
 
 5                corporation and its officers, agents, servants,
 
 6                and employees (and so long as special facility
 
 7                revenue bonds are outstanding, the trustee)
 
 8                against all direct or contingent loss or liability
 
 9                for damages for personal injury or death or damage
 
10                to property, including loss of use thereof,
 
11                occurring on or in any way related to the special
 
12                facility or occasioned by reason of occupancy by
 
13                and the operations of the other person upon, in
 
14                and around the special facility;
 
15           (C)  Provide all risk casualty insurance, including
 
16                insurance against loss or damage by fire,
 
17                lightning, flood, earthquake, typhoon, or
 
18                hurricane, with standard extended coverage and
 
19                standard vandalism and other malicious mischief
 
20                endorsements; and
 
21           (D)  Provide insurance for workers' compensation and
 
22                employers' liability for personal injury or death
 
23                or damage to property (the other party may self-
 

 
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 1                insure for workers' compensation if permitted by
 
 2                law); provided that all policies with respect to
 
 3                loss or damage of property including fire or other
 
 4                casualty and extended coverage and builder's risk
 
 5                shall provide for payments of the losses to the
 
 6                development corporation, the other party or the
 
 7                trustee for the special facility revenue bonds as
 
 8                their respective interests may appear; and
 
 9                provided further that the insurance may be
 
10                procured and maintained as part of or in
 
11                conjunction with other policies carried by the
 
12                other party; and provided further that the
 
13                insurance shall name the development corporation,
 
14                and so long as any special facility revenue bonds
 
15                are outstanding, the trustee, as additional
 
16                insured; and
 
17      (5)  Indemnify, save, and hold the development corporation,
 
18           the trustee, and their respective agents, officers,
 
19           members, and employees harmless from and against all
 
20           claims and actions and all costs and expenses
 
21           incidental to the investigation and defense thereof, by
 
22           or on behalf of any person, firm, or corporation, based
 
23           upon or arising out of the special facility or the
 

 
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 1           other party's use and occupancy thereof, including,
 
 2           without limitation, from and against all claims and
 
 3           actions based upon and arising from any:
 
 4           (A)  Condition of the special facility;
 
 5           (B)  Breach or default on the part of the other party
 
 6                in the performance of any of the party's
 
 7                obligations under the special facility lease;
 
 8           (C)  Fault or act of negligence of the other party or
 
 9                the party's agents, contractors, servants,
 
10                employees, or licensees; or
 
11           (D)  Accident to or injury or death of any person or
 
12                loss of or damage to any property occurring in or
 
13                about the special facility, including any claims
 
14                or actions based upon or arising by reason of the
 
15                negligence or any act of the other party.
 
16      Any moneys received by the development corporation pursuant
 
17 to paragraphs (2) and (3) shall be paid into the high technology
 
18 special fund and shall not be nor be deemed to be revenues of the
 
19 special facility.
 
20      (b)  The term and all renewals and extensions of the term of
 
21 any special facility lease (including any amendments or
 
22 supplements thereto) shall not extend beyond the lesser of the
 
23 reasonable life of the special facility that is the subject of
 

 
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 1 the special facility lease, as estimated by the development
 
 2 corporation at the time of the entering into thereof, or thirty
 
 3 years.
 
 4      (c)  Any special facility lease entered into by the
 
 5 development corporation shall be subject to chapter 171 and shall
 
 6 contain other terms and conditions that the development
 
 7 corporation deems advisable to effectuate the purposes of this
 
 8 part.
 
 9      §206M-  Special facility revenue bonds.  All special
 
10 facility revenue bonds authorized to be issued under this part
 
11 shall be issued pursuant to part III of chapter 39, except as
 
12 follows:
 
13      (1)  No revenue bonds shall be issued unless at the time of
 
14           issuance, the development corporation has entered into
 
15           a special facility lease with respect to the special
 
16           facility for which the revenue bonds are to be issued;
 
17      (2)  The revenue bonds shall be issued in the name of the
 
18           development corporation and not in the name of the
 
19           State;
 
20      (3)  No further authorization of the legislature shall be
 
21           required for the issuance of the special facility
 
22           revenue bonds, but the approval of the governor shall
 
23           be required for the issuance;
 

 
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 1      (4)  The revenue bonds shall be payable solely from and
 
 2           secured solely by the revenues derived by the
 
 3           development corporation from the special facility for
 
 4           which they are issued;
 
 5      (5)  The final maturity date of the revenue bonds shall not
 
 6           be later than either the estimated life of the special
 
 7           facility for which the revenue bonds are issued or the
 
 8           expiration of the initial term of the special facility
 
 9           lease;
 
10      (6)  If deemed necessary or advisable by the development
 
11           corporation, or to permit the obligations of the other
 
12           party to the special facility lease to be registered
 
13           under the U.S. Securities Act of 1933, the development
 
14           corporation, with the approval of the director of
 
15           finance, may appoint a national or state bank within or
 
16           without the State to serve as trustee for the holders
 
17           of the revenue bonds and may enter into a trust
 
18           indenture or trust agreement with the trustee.  The
 
19           trustee may be authorized by the development
 
20           corporation to collect, hold, and administer the
 
21           revenues derived from the special facility for which
 
22           the revenue bonds are issued and to apply the revenues
 
23           to the payment of the principal and interest on the
 

 
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 1           revenue bonds.  In the event that any trustee shall be
 
 2           appointed, any trust indenture or trust agreement
 
 3           entered into by the development corporation with the
 
 4           trustee may contain the covenants and provisions
 
 5           authorized by part III of chapter 39 to be inserted in
 
 6           a resolution adopted or certificate issued, as though
 
 7           the words "resolution" or "certificate" as used in that
 
 8           part read "trust indenture or trust agreement".  
 
 9                The covenants and provisions shall not be required
 
10           to be included in the resolution or certificate
 
11           authorizing the issuance of the revenue bonds if
 
12           included in the trust indenture or trust agreement.
 
13           Any resolution or certificate, trust indenture, or
 
14           trust agreement adopted, issued, or entered into by the
 
15           development corporation pursuant to this part may also
 
16           contain any provisions required for the qualification
 
17           thereof under the U.S. Trust Indenture Act of 1939.
 
18           The development corporation may pledge and assign to
 
19           the trustee the special facility lease and the rights
 
20           of the development corporation including the revenues
 
21           thereunder;
 
22      (7)  If the development corporation, with the approval of
 
23           the director of finance, shall have appointed or shall
 
24           appoint a trustee for the holders of the revenue bonds,
 

 
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 1           then notwithstanding the provisions of section 39-68,
 
 2           the director of finance may elect not to serve as
 
 3           fiscal agent for the payment of the principal and
 
 4           interest, and for the purchase, registration, transfer,
 
 5           exchange, and redemption of the revenue bonds, or may
 
 6           elect to limit the functions the director of finance
 
 7           shall perform as the fiscal agent.  The development
 
 8           corporation, with the approval of the director of
 
 9           finance, may appoint the trustee to serve as the fiscal
 
10           agent, and may authorize and empower the trustee to
 
11           perform the functions with respect to payment,
 
12           purchase, registration, transfer, exchange, and
 
13           redemption, that the development corporation may deem
 
14           necessary, advisable, or expedient, including, without
 
15           limitation, the holding of the revenue bonds and
 
16           coupons, if any, that have been paid and the
 
17           supervising and conducting of the destruction thereof
 
18           in accordance with sections 40-10 and 40-11.  Nothing
 
19           in this paragraph shall be a limitation upon or
 
20           construed as a limitation upon the powers granted in
 
21           paragraph (6) to the development corporation with the
 
22           approval of the director of finance to appoint the
 
23           trustee, or granted in sections 36-3, 39-13, and 39-68
 

 
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 1           to the director of finance to appoint the trustee or
 
 2           others, as fiscal agents, paying agents, and registrars
 
 3           for the revenue bonds or to authorize and empower the
 
 4           fiscal agents, paying agents, and registrars to perform
 
 5           the functions referred to in paragraph (6) and sections
 
 6           36-3, 39-13, and 39-68, it being the intent of this
 
 7           paragraph to confirm that the director of finance may
 
 8           elect not to serve as fiscal agent for the revenue
 
 9           bonds or may elect to limit the functions the director
 
10           of finance shall perform as the fiscal agent, that the
 
11           director of finance may deem necessary, advisable, or
 
12           expedient;
 
13      (8)  The development corporation may sell the revenue bonds
 
14           either at public or private sale;
 
15      (9)  If no trustee is appointed to collect, hold, and
 
16           administer the revenues derived from the special
 
17           facility for which the revenue bonds are issued, the
 
18           revenues shall be held in a separate account in the
 
19           treasury of the State, separate and apart from the high
 
20           technology special fund, to be applied solely to the
 
21           carrying out of the resolution, certificate, trust
 
22           indenture, or trust agreement authorizing or securing
 
23           the revenue bonds;
 

 
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 1     (10)  If the resolution, certificate, trust indenture, or
 
 2           trust agreement provides that no revenue bonds issued
 
 3           thereunder shall be valid or obligatory for any purpose
 
 4           unless certified or authenticated by the trustee for
 
 5           the holders of the revenue bonds, the signatures of the
 
 6           officers of the State upon the bonds required by
 
 7           section 39-56 may be facsimiles of their signatures;
 
 8     (11)  Proceeds of the revenue bonds may be used and applied
 
 9           by the development corporation to reimburse the other
 
10           party to the special facility lease for all preliminary
 
11           costs and expenses, including architectural and legal
 
12           costs; and
 
13     (12)  If the special facility lease requires the other party
 
14           to operate, maintain, and repair the special facility
 
15           that is the subject of the lease, at the other party's
 
16           expense, the requirement shall constitute compliance by
 
17           the development corporation with section 39-61(a)(2),
 
18           and none of the revenues derived by the development
 
19           corporation from the special facility shall be required
 
20           to be applied to the purposes of section 39-62(2).
 
21           Sections 39-62(4), 39-62(5), and 39-62(6) shall not
 
22           apply to the revenues derived from a special facility
 
23           lease."
 

 
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 1      SECTION 3.  Chapter 206M, Hawaii Revised Statutes, is
 
 2 amended by adding a new section to part I to be appropriately
 
 3 designed and to read as follows:
 
 4      "§206M-      Federal tax-exempt status.  Special purpose
 
 5 revenue bonds issued pursuant to this chapter, to the extent
 
 6 practicable, shall be issued to comply with requirements imposed
 
 7 by applicable federal law providing that the interest on the
 
 8 special purpose revenue bonds shall be excluded from gross income
 
 9 for federal income tax purposes (except as certain minimum taxes,
 
10 environmental taxes, or other federal taxes or tax consequences
 
11 may apply).  The development corporation may enter into
 
12 agreements, establish funds or accounts, and take any action
 
13 required to comply with applicable federal law.  Nothing in this
 
14 chapter shall be deemed to prohibit the issuance of special
 
15 purpose revenue bonds, the interest on which may be included in
 
16 gross income for federal income tax purposes."
 
17      SECTION 4.  Chapter 206M, Hawaii Revised Statutes, is
 
18 amending by amending the title in part II to read as follows:
 
19     "[[PART II.]]  PART III.  HAWAII SOFTWARE SERVICE CENTER"
 
20      SECTION 5.   Section 206M-1, Hawaii Revised Statutes, is
 
21 amended as follows:
 
22      1.  By amending the definition of "bonds" to read:
 

 
 
 
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 1      ""Bonds" [means special purpose revenue bonds issued under
 
 2 this chapter and shall include] or "special purpose revenue
 
 3 bonds" mean bonds, notes, and other instruments of indebtedness[,
 
 4 and refunding bonds.] of the State issued pursuant to this part."
 
 5      2.  By amending the definition of "high technology" to read:
 
 6      ""High technology" means [emerging] industries [which] that
 
 7 are technology-intensive, including but not limited to
 
 8 electronics [and], biotechnology[.], software, computers,
 
 9 telecommunications, and other computer-related technologies."
 
10      3.  By amending the definition of "industrial park" to read:
 
11      ""Industrial park" means a tract of real property determined
 
12 by the board as being suitable for use as building sites for
 
13 projects by [a group of enterprises engaged in] one or more
 
14 industrial, processing, or manufacturing enterprises [for]
 
15 engaged in high technology, including research, training,
 
16 technical analyses, software development, and pilot plant or
 
17 prototype product development, and may include the installation
 
18 of improvements to [such] the tract incidental to the use of real
 
19 property as an industrial park, such as water, sewer, sewage and
 
20 waste disposal, and drainage facilities, sufficient to adequately
 
21 service projects in the industrial park, and provision of
 
22 incidental transportation facilities, power distribution
 
23 facilities, and communication facilities.  Industrial parks shall
 

 
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 1 not include any buildings or structures of any kind except for
 
 2 buildings or structures incidental to improvements to the
 
 3 industrial park."
 
 4      4.  By amending the definition of "project" to read:
 
 5      ""Project" means [any combination of land and buildings and
 
 6 other improvements thereon for use in industrial, processing, or
 
 7 manufacturing enterprises for high technology which are located
 
 8 in an industrial park and acquired, constructed, reconstructed,
 
 9 rehabilitated, improved, altered, or repaired by or on behalf of
 
10 the development corporation.] the acquisition, construction,
 
11 improvement, installation, equipping, and development of any
 
12 combination of land, buildings, and other improvements thereon,
 
13 including, without limitation, parking facilities for use of, or
 
14 to assist a high technology industrial, manufacturing, or
 
15 processing enterprise located within or without an industrial
 
16 park, including, without limiting the generality of the
 
17 foregoing, machinery, equipment, furnishings, and apparatus that
 
18 shall be deemed necessary, suitable, or useful to the
 
19 enterprise."
 
20      5.  By amending the definition of "project agreement" to
 
21 read:
 
22      ""Project agreement" means [any lease, sublease, loan
 
23 agreement, conditional sale agreement, or other similar financing
 
24 contract or agreement, or any combination thereof entered into
 

 
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 1 under this chapter by the development corporation, including the
 
 2 financing from the proceeds of bonds of a project or an
 
 3 industrial park.] any agreement entered into under this chapter
 
 4 by the development corporation with a qualified person to
 
 5 finance, construct, operate, or maintain a project or an
 
 6 industrial park from the proceeds of special purpose revenue
 
 7 bonds, or to lend the proceeds of special purpose revenue bonds
 
 8 to assist a high technology industrial, manufacturing, or
 
 9 processing enterprise, including, without limitation, any lease,
 
10 sublease, loan agreement, conditional sale agreement, or other
 
11 similar financing contract or agreement, or any combination
 
12 thereof."
 
13      6.  By amending the definition of "qualified person" to
 
14 read:
 
15      ""Qualified person" means any individual, firm, partnership,
 
16 corporation, association, cooperative, or other legal entity,
 
17 governmental body or public agency, or any combination [or
 
18 association] of the foregoing, possessing the competence,
 
19 expertise, experience, and resources, including financial,
 
20 personnel, and tangible resources, required for the purposes of a
 
21 project and [such] other qualifications as may be deemed
 
22 desirable by the development corporation in administering this
 
23 chapter and which enters into a project agreement with the
 
24 development corporation."
 

 
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 1      SECTION 6. Section 206M-2, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a) There is established the high technology development
 
 4 corporation, which shall be a public body corporate and politic
 
 5 and an instrumentality and agency of the State.  The development
 
 6 corporation shall be placed within the department of business,
 
 7 economic development, and tourism for administrative purposes,
 
 8 pursuant to section 26-35.  The purpose of the development
 
 9 corporation shall be to facilitate the growth and development of
 
10 the commercial high technology industry in Hawaii.  Its duties
 
11 shall include, but not be limited to:
 
12      (1)  Developing [developing] industrial parks as high
 
13           technology innovation centers and [the] developing or
 
14           assisting with the development of projects within or
 
15           outside of industrial parks; [providing]
 
16      (2)  Providing financial and other support and services to
 
17           Hawaii-based high technology companies; [collecting]
 
18      (3)  Collecting and analyzing information on the state of
 
19           commercial high technology activity in Hawaii;
 
20           [promoting]
 
21      (4)  Promoting and marketing Hawaii as a site for commercial
 
22           high technology activity; and [providing]
 
23      (5)  Providing advice on policy and planning for technology-
 
24           based economic development."
 

 
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 1      SECTION 7.  Section 206M-2, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (e) to read as follows:
 
 3      "(e)  The board shall appoint a management advisory
 
 4 committee for each industrial park and related project or
 
 5 projects governed by the board.  Each committee shall have five
 
 6 members, who shall serve without compensation but may be
 
 7 reimbursed for expenses incurred in the performance of their
 
 8 duties.  The members shall be drawn from fields of activity
 
 9 related to each [project or park.] industrial park and related
 
10 project or projects."
 
11      SECTION 8.  Section 206M-3, Hawaii Revised Statutes, is
 
12 amended to read as follows:
 
13      "§206M-3  Powers, generally.  The development corporation
 
14 shall have all the powers necessary to carry out its purposes,
 
15 including the following powers:
 
16      (1)  To sue and be sued;
 
17      (2)  To have a seal and alter the same at its pleasure;
 
18      (3)  To make and execute, enter into, amend, supplement, and
 
19           carry out contracts and all other instruments necessary
 
20           or convenient for the exercise of its powers and
 
21           functions under this chapter, including, [subject to]
 
22           with the approval of the governor, a project agreement,
 
23           or an amendment or supplement to an existing project
 

 
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 1           agreement, with a qualified person, and [any other] to
 
 2           enter into and carry out any agreement whereby the
 
 3           obligations of a qualified person under a project
 
 4           agreement shall be unconditionally guaranteed or
 
 5           insured by, or the performance thereof assigned to, or
 
 6           guaranteed or insured by, a person or persons other
 
 7           than the qualified person; and to [grant options or
 
 8           renew any project agreement entered into by it in
 
 9           connection with any project or industrial park, on
 
10           terms and conditions as it deems advisable;] extend or
 
11           renew any project agreement or any other agreement
 
12           related thereto; provided that any such renewal or
 
13           extension shall be subject to the approval of the
 
14           governor unless made in accordance with provisions for
 
15           the extension or renewal contained in a project
 
16           agreement or related agreement theretofore approved by
 
17           the governor;
 
18      (4)  To make and alter bylaws for its organization and
 
19           internal management;
 
20      (5)  To adopt rules under chapter 91 necessary to effectuate
 
21           this chapter in connection with industrial parks,
 
22           projects, multi-project programs, and the operations,
 
23           properties, and facilities of the development
 
24           corporation;
 

 
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                                                        H.D. 1
                                                        

 
 1      (6)  Through its chief executive officer, to appoint
 
 2           officers, agents, and employees, prescribe their duties
 
 3           and qualifications, and fix their salaries, without
 
 4           regard to chapters 76 and 77;
 
 5      (7)  To prepare or cause to be prepared development plans
 
 6           for industrial parks;
 
 7      (8)  To acquire, own, lease, hold, clear, improve, and
 
 8           rehabilitate real, personal, or mixed property and to
 
 9           assign, exchange, transfer, convey, lease, sublease, or
 
10           encumber any project, including by way of easements;
 
11      (9)  To [construct, reconstruct, rehabilitate, improve,
 
12           alter, or repair,] acquire, construct, improve,
 
13           install, equip, or develop or provide for the
 
14           [construction, reconstruction, rehabilitation,
 
15           improvement, alteration, or repair] acquisition,
 
16           construction, improvement, installation, equipping, or
 
17           development of any project and to designate a qualified
 
18           person as its agent for such purpose, and to own, hold,
 
19           assign, transfer, convey, exchange, lease, sublease, or
 
20           encumber any project;
 
21     (10)  To arrange or initiate appropriate action for the
 
22           planning, replanning, opening, grading, or closing of
 
23           streets, roads, roadways, alleys, easements, or other
 

 
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                                                        H.D. 1
                                                        

 
 1           places, the furnishing of improvements, the acquisition
 
 2           of property or property rights, or the furnishing of
 
 3           property or services in connection with an industrial
 
 4           park[;] or project;
 
 5     (11)  To prepare or cause to be prepared plans,
 
 6           specifications, designs, and estimates of cost for the
 
 7           acquisition, construction, reconstruction,
 
 8           [rehabilitation,] improvement, [alteration, or repair]
 
 9           installation, equipping, development, or maintenance of
 
10           any project or industrial park, and from time to time
 
11           to modify [such] the plans, specifications, designs, or
 
12           estimates;
 
13     (12)  To engage the services of consultants on a contractual
 
14           basis for rendering professional and technical
 
15           assistance and advice;
 
16     (13)  To procure insurance against any loss in connection
 
17           with its property and other assets and operations in
 
18           [such] amounts and from [such] insurers as it deems
 
19           desirable;
 
20     (14)  To accept and expend gifts or grants in any form from
 
21           any public agency or from any other source;
 
22     (15)  To issue special purpose revenue bonds and refunding
 
23           special purpose revenue bonds pursuant to and in
 

 
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                                                        H.D. 1
                                                        

 
 1           accordance with this chapter in [such] principal
 
 2           amounts as may be authorized from time to time by law
 
 3           to finance or refinance the cost of a project, singly
 
 4           or as part of a multi-project program, or an industrial
 
 5           park as authorized by law and to provide for the
 
 6           security thereof as permitted by this chapter;
 
 7     (16)  To lend or otherwise apply the proceeds of the bonds
 
 8           issued for a project or an industrial park either
 
 9           directly or through a trustee [or] to a qualified
 
10           person for use and application by the qualified person
 
11           in the acquisition, construction, improvement,
 
12           installation, [or modification] equipping, or
 
13           development of a project or industrial park, or agree
 
14           with the qualified person whereby any of these
 
15           activities shall be undertaken or supervised by that
 
16           qualified person or by a person designated by the
 
17           qualified person;
 
18     (17)  As security for the payment of the principal of,
 
19           premium, if any, and interest of the special purpose
 
20           revenue bonds issued for a project to: 
 
21                (A)  Pledge, assign, hypothecate, or otherwise
 
22                     encumber all or any part of the revenues and
 
23                     receipts derived or to be derived by the
 

 
Page 26                                                    2420
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1                     development corporation under the project
 
 2                     agreement for the project for which the bonds
 
 3                     are issued; 
 
 4                (B)  Pledge and assign the interest and rights of
 
 5                     the development corporation under the project
 
 6                     agreement or other agreement with respect to
 
 7                     the project or the special purpose revenue
 
 8                     bonds;
 
 9                (C)  Pledge and assign any bond, debenture, note,
 
10                     or other evidence of indebtedness received by
 
11                     the development corporation with respect to
 
12                     the project; or 
 
13                (D)  Any combination of the foregoing;
 
14    [(17)] (18)  With or without terminating a project agreement,
 
15           to exercise any and all rights provided by law for
 
16           entry and re-entry upon or take possession of a project
 
17           at any time or from time to time upon breach or default
 
18           by a qualified person under a project agreement,
 
19           including any action at law or in equity for the
 
20           purpose of effecting its rights of entry or re-entry or
 
21           obtaining possession of the project or for the payments
 
22           of rentals, user taxes, or charges, or any other sum
 
23           due and payable by the qualified person to the
 

 
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                                                        H.D. 1
                                                        

 
 1           development corporation pursuant to the project
 
 2           agreement;
 
 3    [(18)] (19)  To enter into arrangements with qualified county
 
 4           development entities whereby the board would provide
 
 5           financial support to qualified projects proposed;
 
 6    [(19)] (20)  To create an environment in which to support high
 
 7           technology economic development, including but not
 
 8           limited to: [supporting] 
 
 9           (A)  Supporting all aspects of technology-based
 
10                economic development; [developing]
 
11           (B)  Developing instructive programs, identifying
 
12                issues and impediments to the growth of high
 
13                technology industry in Hawaii; and [providing]
 
14           (C)  Providing policy analysis and information
 
15                important to the development of high technology
 
16                industries in Hawaii;
 
17    [(20)] (21)  To develop programs that support start-up and
 
18           existing high technology companies in Hawaii and to
 
19           attract new companies to relocate to or establish
 
20           operations in Hawaii by assessing the needs of these
 
21           companies and providing the physical and technical
 
22           infrastructure to support their operations;
 

 
 
 
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                                                        H.D. 1
                                                        

 
 1    [(21)] (22)  To coordinate its efforts with other public and
 
 2           private agencies involved in stimulating technology-
 
 3           based economic development in Hawaii, including but not
 
 4           limited to: [the] 
 
 5                (A)  The department of business, economic
 
 6                     development, and tourism; [the]
 
 7                (B)  The Pacific international center for high
 
 8                     technology research; and [the]
 
 9                (C)  The office of technology transfer and
 
10                     economic development of the University of
 
11                     Hawaii;
 
12    [(22)] (23)  To promote and market Hawaii as a site for
 
13           commercial high technology activity;
 
14    [(23)] (24)  To provide advice on policy and planning for
 
15           technology-based economic development; and
 
16    [(24)] (25)  To do any and all things necessary or [proper]
 
17           convenient to carry out [the] its purposes [of] and
 
18           exercise the powers given and granted in this chapter."
 
19      SECTION 9.  Section 206M-4, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      "[[]§206M-4[]]  Compliance with state and local law.  The
 
22 issuance of special purpose revenue bonds with respect to any
 
23 project or industrial park under this chapter shall not relieve
 

 
Page 29                                                    2420
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                                                        H.D. 1
                                                        

 
 1 any qualified person or other user of [such] the project or
 
 2 industrial park from the laws, ordinances, and rules of the State
 
 3 or any political subdivision thereof, or any department or board
 
 4 thereof with respect to the construction, operation, and
 
 5 maintenance of any project or industrial park, or zoning laws or
 
 6 regulations, obtaining of building permits, compliance with
 
 7 building and health codes and other laws, ordinances, or rules
 
 8 and regulations of similar nature pertaining to the project or
 
 9 industrial park, and [such] the laws shall be applicable to
 
10 [such] the qualified person or [such] the other user to the same
 
11 extent they would be if the costs of the project or industrial
 
12 park were directly financed by the qualified person."
 
13      SECTION 10.  Section 206M-5, Hawaii Revised Statutes, is
 
14 amended to read as follows:
 
15      "§206M-5  Development rules.  Whenever the proceeds of
 
16 special purpose revenue bonds are used to finance the cost of [a
 
17 project,] an industrial park, the board shall adopt rules under
 
18 chapter 91 to be followed during the course of the development of
 
19 any industrial park, which are to be known as development rules
 
20 in connection with health, safety, building, planning, zoning,
 
21 and land use.  The rules, upon final adoption of a development
 
22 plan for an industrial park, shall supersede all other
 
23 inconsistent ordinances and rules relating to the use, zoning,
 

 
Page 30                                                    2420
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                                                        H.D. 1
                                                        

 
 1 planning, and development of land and construction thereon within
 
 2 the industrial park.  Rules adopted under this section shall
 
 3 follow existing law, rules, ordinances, and regulations as
 
 4 closely as is consistent with standards meeting minimum
 
 5 requirements of good design, pleasant amenities, health, safety,
 
 6 and coordinated development.  The corporation shall establish
 
 7 policies and procedures for monitoring and ensuring that the
 
 8 operation of the industrial park complies with these development
 
 9 rules and may establish fines and penalties or take any other
 
10 means available under the law to eliminate any noncomplying
 
11 action."
 
12      SECTION 11.  Section 206M-6, Hawaii Revised Statutes, is
 
13 amended to read as follows:
 
14      "[[]§206M-6[]] Use of public lands.  The governor may set
 
15 aside available public lands to the development corporation for
 
16 the purposes specified in this chapter; provided that [such] the
 
17 setting aside would not impair any covenant between the State or
 
18 any department or board thereof and holders of [revenue] any
 
19 bonds issued by the State or such department or board thereof.
 
20 The development corporation also may lease available state lands
 
21 from the department of land and natural resources."
 
22      SECTION 12.  Section 206M-7, Hawaii Revised Statutes, is
 
23 amended by amending subsection (b) to read as follows:
 

 
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 1      "(b)  The development corporation shall not enter into any
 
 2 project agreement with respect to any project or industrial park
 
 3 unless the legislature shall have first authorized the issuance
 
 4 of special purpose revenue bonds to finance [such project or
 
 5 industrial park] a project or projects, an industrial park or
 
 6 industrial parks, or a multi-project program pursuant to section
 
 7 206M-9, and the development corporation has thereafter found and
 
 8 determined either that:
 
 9      (1)  The qualified person is a responsible party, whether by
 
10           reason of economic assets or experience in the type of
 
11           enterprise to be undertaken through [such] the project,
 
12           or otherwise; or
 
13      (2)  The obligations of the qualified person under the
 
14           project agreement will be unconditionally guaranteed by
 
15           a person who is a responsible party, whether by reason
 
16           of economic assets or experience in the type of
 
17           enterprise to be undertaken through [such] the project
 
18           or otherwise."
 
19      SECTION 13.  Section 206M-8, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      "[[]§206M-8[]] Project agreement. (a)  No special purpose
 
22 revenue bonds shall be issued unless at the time of issuance the
 
23 development corporation shall have entered into a project
 

 
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                                                        H.D. 1
                                                        

 
 1 agreement with respect to the project or industrial park for the
 
 2 financing of which [such] the special purpose revenue bonds are
 
 3 to be issued.  Any project agreement entered into by the
 
 4 development corporation with a qualified person shall contain
 
 5 provisions unconditionally obligating [such] the qualified person
 
 6 [to]:
 
 7      (1)  To pay the development corporation during the period or
 
 8           term of the project agreement, exclusive of any renewal
 
 9           or extension thereof and whether or not the project or
 
10           industrial park to which [such] the project agreement
 
11           relates is used or occupied by the qualified person, at
 
12           [such] the time or times and in [such] the amount or
 
13           amounts that will be at least sufficient:
 
14     [(1)] (A)  To pay the principal of, and premium, if any, and
 
15                interest on all special purpose revenue bonds
 
16                issued to finance the cost of the project, or an
 
17                allocable portion of the special purpose revenue
 
18                bonds issued to finance the industrial park, as
 
19                the case may be, as and when the special purpose
 
20                revenue bonds become due, including upon any
 
21                required redemption thereof;
 
22     [(2)] (B)  To establish or maintain [such] the reserves, if
 
23                any, as may be required by the instrument
 

 
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 1                authorizing or securing the special purpose
 
 2                revenue bonds, or an allocable portion of [such]
 
 3                the reserves, if less than all of the proceeds of
 
 4                the special purpose revenue bonds are utilized for
 
 5                [such] the qualified person;
 
 6     [(3)] (C)  To pay the fees and expenses of the paying agents
 
 7                and trustees for the special purpose revenue
 
 8                bonds, or an allocable portion of [such] the fees
 
 9                and expenses, if less than all of the proceeds of
 
10                the special purpose revenue bonds are utilized for
 
11                [such] the qualified person; and
 
12     [(4)] (D)  To pay the expenses incurred by the development
 
13                corporation in administering the special purpose
 
14                revenue bonds or in carrying out the project
 
15                agreement, or an allocable portion of [such] the
 
16                expenses, if less than all of the proceeds of
 
17                [such] the special purpose revenue bonds are
 
18                utilized for [such] the qualified person[.]; and
 
19     (2)   To operate, maintain, and repair the project as long as
 
20           the project is used as provided in the project
 
21           agreement and to pay all costs of the operation,
 
22           maintenance, and repair.
 

 
 
 
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 1      (b)  The development corporation in determining the cost of
 
 2 any project, may also include the following:
 
 3      (1)  Financing charges, fees, and expenses of any trustee
 
 4           and paying agents or special purpose revenue bonds
 
 5           issued to pay the cost of the project;
 
 6      (2)  Interest on the bonds and the expenses of the State in
 
 7           connection with the bonds and the project to be
 
 8           financed from the proceeds of the bonds accruing or
 
 9           incurred prior to and during the estimated period of
 
10           construction and for not exceeding twelve months
 
11           thereafter;
 
12      (3)  Amounts necessary to establish or increase reserves for
 
13           the special purpose revenue bonds;
 
14      (4)  The cost of plans, specifications, studies, surveys,
 
15           and estimates of costs and of revenues;
 
16      (5)  Other expenses incidental to determining the
 
17           feasibility or practicability of the project;
 
18      (6)  Administration expenses;
 
19      (7)  Legal, accounting, consulting, and other special
 
20           service fees;
 
21      (8)  Interest cost incurred by the project party with
 
22           respect to the project prior to the issuance of the
 
23           special purpose revenue bonds; and
 

 
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                                                        H.D. 1
                                                        

 
 1      (9)  Other costs, commissions, and expenses incidental to
 
 2           the acquisition, construction, improvement,
 
 3           installation, equipping, or development of the project,
 
 4           the financing, placing of same in operation, and the
 
 5           issuance of the special purpose revenue bonds, whether
 
 6           incurred prior to or after the issuance of the bonds.
 
 7      [(b)](c)  Any project agreement entered into by the
 
 8 development corporation may contain [such] provisions as the
 
 9 development corporation deems necessary or desirable to obtain or
 
10 permit the participation of the state and federal government in
 
11 the project or industrial park or in the financing of the cost
 
12 thereof.
 
13      [(c)](d)  A project agreement also shall provide that the
 
14 development corporation shall have all rights and remedies
 
15 generally available at law or in equity to re-enter and take
 
16 possession of a project upon the breach or default by a qualified
 
17 person of any term, condition, or provision of a project
 
18 agreement.
 
19      (e)  Each qualified person with a project agreement with the
 
20 development corporation shall allow the development corporation
 
21 full access to the qualified person's financial records.  Upon
 
22 the request of the development corporation for the examination of
 
23 any financial records, the qualified person shall allow the
 

 
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                                                        H.D. 1
                                                        

 
 1 development corporation to examine the requested records within a
 
 2 reasonably prompt time from the date of the request.  If the
 
 3 development corporation requests copies of the records, the
 
 4 qualified person shall provide the copies.
 
 5      (f)  To provide the public with full knowledge of the use of
 
 6 the proceeds and benefits derived from special purpose revenue
 
 7 bonds issued under this chapter, the development corporation
 
 8 shall require each qualified person with a project agreement with
 
 9 the development corporation to make available to the public all
 
10 relevant financial records that pertain to the use of or savings
 
11 resulting from the use of special purpose revenue bonds.
 
12      (g)  Each qualified person with a project agreement with the
 
13 development corporation shall estimate the benefits derived from
 
14 the use of the proceeds of special purpose revenue bonds.  The
 
15 benefits estimated shall be based on the creation of new jobs and
 
16 potential effect on tax receipts.  The format of and method for
 
17 determining the estimates shall be established by the development
 
18 corporation and shall be uniform for each qualified person.
 
19      (h)  To promote public understanding of the role played by
 
20 special purpose revenue bonds in providing benefits to the
 
21 general public, the development corporation shall take
 
22 appropriate steps to ensure public access to and scrutiny of the
 
23 estimates determined under subsection (g).
 

 
Page 37                                                    2420
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                                                        H.D. 1
                                                        

 
 1      (i)  The development corporation shall adopt rules under
 
 2 chapter 91 for the purposes of this section.
 
 3      (j) Moneys received by the development corporation pursuant
 
 4 to subsection [(a)(4)] (a)(1)(D) shall not be, nor be deemed to
 
 5 be, revenues or receipts derived under the project agreement
 
 6 which may be pledged as security for special purpose revenue
 
 7 bonds and shall be paid [to the development corporation free and
 
 8 clear of any lien.] into the high technology special fund.
 
 9      A qualified person may comply with the unconditional
 
10 obligation to make payments required by subsection (a), if [such]
 
11 the obligations are unconditionally guaranteed or insured by, or
 
12 the performance thereof assigned to, or guaranteed or insured by,
 
13 a person or persons other than the qualified person [which] who
 
14 is satisfactory to the development corporation."
 
15      SECTION 14.  Section 206M-9, Hawaii Revised Statutes, is
 
16 amended to read as follows:
 
17      "[[]§206M-9[] Bonds;] Issuance of special purpose revenue
 
18 bonds; bond anticipation notes[.]; refunding bonds.  (a) In
 
19 addition to the other powers that it may have, the development
 
20 corporation may issue special purpose revenue bonds to finance,
 
21 in whole or in part, the costs of projects of, for, or to loan
 
22 the proceeds of the bonds to assist qualified persons.  All
 
23 revenue bonds issued under this chapter are special purpose
 
24 revenue bonds and part III of chapter 39 shall not apply thereto.
 

 
Page 38                                                    2420
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1 All special purpose revenue bonds shall be issued in the name of
 
 2 the development corporation and not in the name of the State.
 
 3      The legislature finds and determines that the exercise of
 
 4 the powers vested in the development corporation by this chapter
 
 5 constitutes assistance to a high technology industrial,
 
 6 manufacturing, or processing enterprise and that the issuance of
 
 7 special purpose revenue bonds to finance facilities of, for, or
 
 8 to loan the proceeds of the bonds to assist qualified persons, is
 
 9 in the public interest.
 
10      [(a)](b)  The development corporation, with the approval of
 
11 the governor, may issue special purpose revenue bonds for each
 
12 single project or industrial park or multi-project program
 
13 [which] that has been authorized by the legislature by an
 
14 affirmative vote of two-thirds of the members to which each house
 
15 is entitled; provided that the legislature shall find that the
 
16 issuance of [such] the special purpose revenue bonds is in the
 
17 public interest.  [Bonds] Special purpose revenue bonds shall be
 
18 issued in [such] principal amounts as may be authorized from time
 
19 to time by law and at [such] the time or times as the development
 
20 corporation deems necessary and advisable to finance the cost of
 
21 a project [or], industrial park, or multi-project program as
 
22 authorized by law.  With respect to the financing of a multi-
 
23 project program with the proceeds of special purpose revenue
 

 
Page 39                                                    2420
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                                                        H.D. 1
                                                        

 
 1 bonds, the legislature may authorize the issuance from time to
 
 2 time in one or more series by the development corporation, in
 
 3 each case with the approval of the governor, of special purpose
 
 4 revenue bonds in the aggregate principal amount and during the
 
 5 period as the legislature shall provide.  The principal of,
 
 6 premium, if any, and interest on [such] the special purpose
 
 7 revenue bonds shall be payable:
 
 8      (1)  Exclusively from the revenues and receipts derived or
 
 9           to be derived by the development corporation under
 
10           project agreements or from [such] the revenues and
 
11           receipts together with any grant from the government in
 
12           aid of the project or industrial park financed from the
 
13           proceeds of [such] the bonds;
 
14      (2)  Exclusively from the revenues and receipts derived or
 
15           to be derived by the development corporation from a
 
16           particular project agreement, whether or not the
 
17           project or industrial park to which it relates is
 
18           financed in whole or in part with the proceeds of the
 
19           special purpose revenue bonds; or
 
20      (3)  From revenues and receipts derived or to be derived by
 
21           the development corporation generally.
 
22      Neither the board members nor any person executing the
 
23 special purpose revenue bonds shall be liable personally on the
 
24 bonds by reason of the issuance thereof.
 

 
Page 40                                                    2420
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                                                        H.D. 1
                                                        

 
 1      All special purpose revenue bonds of the same issue (or, in
 
 2 the case of an authorized issue for a multi-project program,
 
 3 series), subject to the prior and superior rights of outstanding
 
 4 bonds, claims, obligations, or mechanic's and materialman's
 
 5 liens, shall have a prior and paramount lien on the revenues
 
 6 derived from the project agreement with respect to the project
 
 7 for which the bonds have been issued, over and ahead of all
 
 8 special purpose revenue bonds of the issue (or series) payable
 
 9 from the revenues which may be subsequently issued and over and
 
10 ahead of any claims or obligations of any nature against the
 
11 revenues subsequently arising or subsequently incurred; provided
 
12 that the development corporation may reserve the right and
 
13 privilege to subsequently issue additional series of special
 
14 purpose revenue bonds, from time to time, payable from the
 
15 revenues derived from the project agreement on a parity with the
 
16 issue or series of special purpose revenue bonds theretofore
 
17 issued, and the subsequently issued series of special purpose
 
18 revenue bonds may be secured, without priority by reason of date
 
19 of sale, date of execution, or date of delivery, by a lien on the
 
20 revenues in accordance with law, including this chapter.
 
21      [(b) Bonds] (c)  Special purpose revenue bonds issued
 
22 pursuant to this chapter may be in one or more issues and in one
 
23 or more series within an issue and shall be further authorized
 

 
Page 41                                                    2420
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1 pursuant to resolution of the board.  The special purpose revenue
 
 2 bonds shall be dated, shall bear interest at [such] the rate or
 
 3 rates, shall mature at [such] the time or times not exceeding
 
 4 forty years from their date or dates, shall have [such] the rank
 
 5 or priority, and may be made redeemable before maturity at the
 
 6 option of the development corporation, at [such] the price or
 
 7 prices and under [such] the terms and conditions, all as may be
 
 8 determined by the development corporation.  
 
 9      The development corporation shall determine the form of the
 
10 special purpose revenue bonds, including interest coupons, if
 
11 any, to be attached thereto, and the manner of execution of the
 
12 special purpose revenue bonds, and shall fix the denomination or
 
13 denominations of the special purpose revenue bonds and, subject
 
14 to the approval of the [state] director of finance, the place or
 
15 places of payment of principal and interest, which may be at any
 
16 bank or trust company approved by the [state] director of finance
 
17 within or without the State.
 
18      The special purpose revenue bonds may be issued in coupon or
 
19 in registered form, or both, as the development corporation may
 
20 determine, and provisions may be made for the registration of
 
21 coupon bonds as to principal alone and also as to both principal
 
22 and interest, and for the reconversion into coupon bonds of
 
23 special purpose revenue bonds registered as to both principal and
 

 
Page 42                                                    2420
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                                                        H.D. 1
                                                        

 
 1 interest.  Subject to the approval of the [state] director of
 
 2 finance, the development corporation may sell special purpose
 
 3 revenue bonds in such manner, either at public or private sale,
 
 4 and for such price as it may determine.
 
 5      [(c)](d)  Prior to the preparation of definitive special
 
 6 purpose revenue bonds, the development corporation may issue
 
 7 interim receipts or temporary bonds, with or without coupons,
 
 8 exchangeable for definitive bonds when [such] the bonds have been
 
 9 executed and are available for delivery.
 
10      [(d)](e)  Should any special purpose revenue bond issued
 
11 under this chapter or any coupon appertaining thereto become
 
12 mutilated, lost, stolen, or destroyed, the development
 
13 corporation may cause a new bond or coupon of like date, number,
 
14 and tenor to be executed and delivered in exchange and
 
15 substitution for, and upon the cancellation of [such] the
 
16 mutilated bond or coupon, or in lieu of and in substitution for
 
17 [such] the lost, stolen, or destroyed bond or coupon.  [Such] The
 
18 new bond or coupon shall not be executed or delivered until the
 
19 holder of the mutilated, lost, stolen, or destroyed bond or
 
20 coupon:
 
21      (1)  [has] Has paid the reasonable expenses and charges in
 
22           connection therewith[,];
 

 
 
 
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                                                        H.D. 1
                                                        

 
 1      (2)  [in] In the case of a lost, stolen, or destroyed bond
 
 2           or coupon, has filed with the development corporation
 
 3           or its fiduciary evidence satisfactory to the
 
 4           development corporation or its fiduciary that [such]
 
 5           the bond or coupon was lost, stolen, or destroyed and
 
 6           that the holder was the owner thereof[,]; and
 
 7      (3)  [has] Has furnished indemnity satisfactory to the
 
 8           development corporation.
 
 9      [(e)](f)  The development corporation in its discretion may
 
10 provide that CUSIP identification numbers shall be printed on
 
11 [such] the special purpose revenue bonds.  If [such] the numbers
 
12 are imprinted on [such] the bonds:
 
13      (1)  [no] No such number shall constitute a part of the
 
14           contract evidenced by the particular bond upon which it
 
15           is imprinted[,]; and
 
16      (2)  [no] No liability shall attach to the development
 
17           corporation or any officer or agent thereof, including
 
18           any fiscal agent, paying agent, or registrar for [such]
 
19           the bonds by reason of [such] the numbers or any use
 
20           made thereof, including any use thereof made by the
 
21           development corporation, any such officer, or any such
 
22           agent, or by reason of any inaccuracy, error, or
 
23           omission with respect thereto or in such use.  The
 

 
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                                                        H.D. 1
                                                        

 
 1           development corporation in its discretion may require
 
 2           that all costs of obtaining and imprinting [such] the
 
 3           numbers shall be paid by the purchaser of [such] the
 
 4           bonds.  For the purposes of this subsection, the term
 
 5           "CUSIP identification numbers" means the numbering
 
 6           system adopted by the Committee for Uniform Security
 
 7           Identification Procedures formed by the Securities
 
 8           Industry Association.
 
 9      [(f)](g)  Whenever the development corporation has
 
10 authorized the issuance of special purpose revenue bonds under
 
11 this chapter, special purpose revenue bond anticipation notes of
 
12 the development corporation may be issued in anticipation of the
 
13 issuance of [such] the bonds and of the receipt of the proceeds
 
14 of sale thereof, for the purposes for which [such] the bonds have
 
15 been authorized.  All special purpose revenue bond anticipation
 
16 notes shall be authorized by the development corporation, and the
 
17 maximum principal amount of [such] the notes shall not exceed the
 
18 authorized principal amount of [such] the bonds.  The notes shall
 
19 be payable solely from and secured solely by the proceeds of sale
 
20 of the special purpose revenue bonds in anticipation of which the
 
21 notes are issued and the moneys, rates, charges, and other
 
22 revenues from which would be payable and by which would be
 
23 secured [such] the bonds; provided that to the extent that the
 

 
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 1 principal of the notes shall be paid from moneys other than the
 
 2 proceeds of sale of [such] the bonds, the maximum amount of bonds
 
 3 that has been authorized in anticipation of which the notes are
 
 4 issued shall be reduced by the amount of notes paid in [such]
 
 5 this manner.  The authorization, issuance, and the details of
 
 6 [such] the notes shall be governed by this chapter with respect
 
 7 to special purpose revenue bonds insofar as the same may be
 
 8 applicable; provided that each note, together with all renewals
 
 9 and extensions thereof, or refundings thereof by other notes
 
10 issued under this subsection, shall mature within five years from
 
11 the date of the original note.
 
12      [(g)  In order to] (h)  To secure the payment of any of the
 
13 special purpose revenue bonds issued pursuant to this chapter,
 
14 and interest thereon, or in connection with [such] the bonds, the
 
15 development corporation shall have the power as to [such] the
 
16 bonds:
 
17      (1)  To pledge all or any part of the revenues and receipts
 
18           derived or to be derived by the development corporation
 
19           as provided in this chapter to the punctual payment of
 
20           special purpose revenue bonds issued with respect to
 
21           the project or industrial park financed from the
 
22           proceeds thereof, and interest thereon, and to covenant
 
23           against thereafter pledging any such revenues and
 

 
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 1           receipts to any other bonds or any other obligations of
 
 2           the development corporation for any other purpose,
 
 3           except as otherwise stated in the proceedings providing
 
 4           for the issuance of special purpose revenue bonds
 
 5           permitting the issuance of additional special purpose
 
 6           revenue bonds to be equally and ratably secured by a
 
 7           lien upon such [moneys, rates, charges, and other]
 
 8           revenues[.] and receipts;
 
 9      (2)  To pledge and assign the interest and right of the
 
10           development corporation under any project agreement and
 
11           other agreements related to a project or industrial
 
12           park, and the rights, duties, and obligations of the
 
13           development corporation thereunder, including the right
 
14           to receive revenues and receipts thereunder[.];
 
15      (3)  To pledge or assign all or any part of the proceeds
 
16           derived by the development corporation from proceeds of
 
17           insurance or condemnation awards[.];
 
18      (4)  To covenant as to the use and disposition of the
 
19           proceeds from the sale of [such] the special purpose
 
20           revenue bonds[.];
 
21      (5)  To covenant to set aside or pay over reserves and
 
22           sinking funds for [such] the special purpose revenue
 
23           bonds and as to the disposition thereof[.];
 

 
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 1      (6)  To covenant and prescribe as to what happenings or
 
 2           occurrences shall constitute "events of default", the
 
 3           terms and conditions upon which any or all of [such]
 
 4           the bonds shall become or may be declared due before
 
 5           maturity, and as to the terms and conditions upon which
 
 6           [such] the declaration and its consequences may be
 
 7           waived[.];
 
 8      (7)  To covenant as to the rights, liabilities, powers, and
 
 9           duties arising upon the breach by [it] the development
 
10           corporation of any covenant, condition, or
 
11           obligation[.];
 
12      (8)  Subject to the approval of the [state] director of
 
13           finance, to designate a national or state bank or trust
 
14           company within or without the State, incorporated in
 
15           the United States, to serve as trustee for the holders
 
16           of the special purpose revenue bonds and to enter into
 
17           a trust indenture, trust agreement, or indenture of
 
18           mortgage with [such] the trustee.  The trustee may be
 
19           authorized by the development corporation to receive
 
20           and receipt for, hold, and administer the proceeds of
 
21           [such] the special purpose revenue bonds and to apply
 
22           the proceeds to the purposes for which [such] the
 
23           special purpose revenue bonds are issued, or to receive
 

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

 
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 1           corporation may appoint the trustee to serve as fiscal
 
 2           agent for the payment of the principal and interest,
 
 3           and for the purchase, registration, transfer, exchange,
 
 4           and redemption of the special purpose revenue bonds,
 
 5           and may authorize and empower the trustee to perform
 
 6           [such] the functions with respect to [such] the
 
 7           payment, purchase, registration, transfer, exchange,
 
 8           and redemption, as the development corporation may deem
 
 9           necessary, advisable, or expedient, including, without
 
10           limitation, the holding of the special purpose revenue
 
11           bonds and coupons [which] that have been paid and the
 
12           supervision of the destruction thereof in accordance
 
13           with law[.];
 
14      (9)  To execute all instruments necessary or convenient in
 
15           the exercise of the powers herein granted or in the
 
16           performance of its covenants and duties[.];
 
17     (10)  To invest or provide for the investment of the proceeds
 
18           of special purpose revenue bonds and revenues and
 
19           receipts derived by the development corporation in
 
20           [such] the securities and in such manner as it deems
 
21           proper[.]; and
 
22     (11)  To make such covenants and do any and all acts and
 
23           things as may be necessary, convenient, or desirable in
 

 
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 1           order to secure [such] the special purpose revenue
 
 2           bonds, notwithstanding that [such] the covenants, acts,
 
 3           or things may not be enumerated in this chapter.
 
 4     No holder or holders of special purpose revenue bonds issued
 
 5 under this chapter shall ever have the right to compel any
 
 6 exercise of the taxing power of the State or any political
 
 7 subdivision of the State to pay [such] the special purpose
 
 8 revenue bonds or the interest thereon and no moneys other than
 
 9 the revenues pledged to [such] the special purpose revenue bonds
 
10 shall be applied to the payment thereof.
 
11     [(h)  Bonds] (i)  Special purpose revenue bonds bearing the
 
12 signature or facsimile signature of officers in office on the
 
13 date of the signing thereof shall be valid and sufficient for all
 
14 purposes, notwithstanding that before the delivery thereof and
 
15 payment therefor any or all of the persons whose signatures
 
16 appear thereon shall have ceased to be officers of the
 
17 development corporation.  The special purpose revenue bonds shall
 
18 contain a recital that they are issued pursuant to this chapter
 
19 which recital shall be conclusive evidence of their validity and
 
20 of the regularity of their issuance.
 
21     [(i)](j)  Subject to authorization by an act enacted by the
 
22 legislature by an affirmative vote of two-thirds of the members
 
23 to which each house is entitled, the development corporation may
 

 
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 1 issue special purpose revenue bonds for the purpose of refunding
 
 2 special purpose revenue bonds then outstanding and issued under
 
 3 this chapter whether or not [such] the outstanding special
 
 4 purpose revenue bonds have matured or are then subject to
 
 5 redemption.  The development corporation may issue special
 
 6 purpose revenue bonds for the combined purposes of:
 
 7      (1)  [financing] Financing or refinancing the cost of a
 
 8           project or industrial park, or the improvement or
 
 9           expansion thereof[,]; and
 
10      (2)  [refunding] Refunding special purpose revenue bonds
 
11           [which] that shall theretofore have been issued under
 
12           this chapter and then shall be outstanding, whether or
 
13           not [such] the outstanding bonds have matured or then
 
14           are subject to redemption.
 
15      Nothing in this subsection shall require or be deemed to
 
16 require the development corporation to elect to redeem or prepay
 
17 special purpose revenue bonds being refunded, or to redeem or
 
18 prepay special purpose revenue bonds being refunded [which] that
 
19 were issued, in the form customarily known as term bonds in
 
20 accordance with any sinking fund installment schedule specified
 
21 in any proceeding authorizing the issuance thereof, or, if the
 
22 development corporation elects to redeem or prepay any such
 
23 bonds, to redeem or prepay as of any particular date or dates.
 

 
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 1 The issuance of [such] the special purpose revenue bonds, the
 
 2 maturities and other details thereof, the rights and remedies of
 
 3 the holders thereof, and the rights, powers, privileges, duties,
 
 4 and obligations of the development corporation with respect to
 
 5 the bonds, shall be governed by the foregoing provisions of this
 
 6 chapter insofar as the same may be applicable.
 
 7      (k)  If special purpose revenue bonds issued pursuant to
 
 8 this chapter are issued bearing interest at a rate or rates which
 
 9 vary from time to time and with a right of holders to tender the
 
10 bonds for purchase, the development corporation may contract for
 
11 such support facility or facilities and remarketing arrangements
 
12 as are required to market the special purpose revenue bonds to
 
13 the greatest advantage of the development corporation upon such
 
14 terms and conditions as the development corporation deems
 
15 necessary and proper.
 
16      The development corporation may enter into contracts or
 
17 agreements with the entity or entities providing a support
 
18 facility; provided that any contract or agreement shall provide,
 
19 in essence, that any amount due and owing by the development
 
20 corporation under the contract or agreement on an annual basis
 
21 shall be payable solely from the revenue and receipts of the
 
22 project agreement and any obligation issued or arising pursuant
 

 
 
 
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 1 to the terms of the contract or agreement in the form of special
 
 2 purpose revenue bonds, notes, or other evidences of indebtedness
 
 3 shall only arise at such time as either:
 
 4      (1)  Moneys or securities have been irrevocably set aside
 
 5           for the full payment of a like principal amount of
 
 6           special purpose revenue bonds issued pursuant to this
 
 7           chapter; or
 
 8      (2)  A like principal amount of the issue or series of
 
 9           special purpose revenue bonds to which the support
 
10           facility relates are held in escrow by the entity or
 
11           entities providing the support facility."
 
12      SECTION 15.  Section 206M-10, Hawaii Revised Statutes, is
 
13 amended to read as follows:
 
14      "§206M-10  Authorization for loans; loan terms and
 
15 conditions; loan procedure. (a) Notwithstanding any law to the
 
16 contrary, the [state] director of finance is authorized, with the
 
17 approval of the governor, to make loans up to the aggregate sum
 
18 of $1,000,000, or so much thereof as may be necessary, to the
 
19 development corporation.  The loans shall be made from the state
 
20 general fund moneys which are in excess of the amounts necessary
 
21 for immediate state requirements, and shall be used for the
 
22 purpose of paying administrative and other costs associated with
 
23 the development of industrial parks and other projects and
 

 
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 1 activities that encourage the growth of the high technology
 
 2 industry in Hawaii.
 
 3      (b)  The development corporation, to the extent moneys
 
 4 become available from bond proceeds or otherwise, shall repay the
 
 5 general fund the principal amount of any loan made by the [state]
 
 6 director of finance.  No interest shall be required for any such
 
 7 loan.
 
 8      (c)  Loans authorized by this section shall be drawn upon by
 
 9 the development corporation from time to time upon at least five
 
10 days notice to the [state] director of finance and upon the
 
11 filing with the [state] director of finance of a certificate of
 
12 the chairperson of the board setting forth the amount being
 
13 borrowed, the names of the persons, firms, or corporations to
 
14 which moneys will be paid from the proceeds of such borrowing and
 
15 the amount to be paid to each.  In addition, the chairperson of
 
16 the board shall file with the [state] director of finance a copy
 
17 of the resolution or resolutions of the board approving contracts
 
18 for services which will be paid from the proceeds of the
 
19 borrowing." 
 
20      SECTION 16.  Section 206M-11, Hawaii Revised Statutes, is
 
21 amended to read as follows:
 
22      "[[]§206M-11[] Bonds]  Special purpose revenue bonds not a
 
23 general or moral obligation of State.  No holder or holders of
 
24 special purpose revenue bonds issued under this chapter shall
 

 
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 1 ever have the right to compel any exercise of the taxing power of
 
 2 the State to pay [such] the bonds or the interest thereon and no
 
 3 moneys other than the revenues pledged to [such] the bonds shall
 
 4 be applied to the payment thereof.  Each special purpose revenue
 
 5 bond issued under this chapter shall recite in substance that
 
 6 [such] the bond, including interest thereon, is not a general or
 
 7 moral obligation of the State and is payable solely from the
 
 8 revenues pledged to the payment thereof, and that [such] the bond
 
 9 is not secured, directly or indirectly, by the full faith and
 
10 credit or the general credit of the State or by revenues or taxes
 
11 of the State other than the revenues specifically pledged
 
12 thereto."
 
13      SECTION 17. Section 206M-12, Hawaii Revised Statutes, is
 
14 amended to read as follows:
 
15      "[[]§206M-12[] Bonds]  Special purpose revenue bonds exempt
 
16 from taxation. [Bonds] Special purpose revenue bonds and the
 
17 income therefrom issued pursuant to this chapter shall be exempt
 
18 from all state taxation, except inheritance, transfer, and estate
 
19 taxes."
 
20      SECTION 18.  Section 206M-13, Hawaii Revised Statutes, is
 
21 amended to read as follows:
 

 
 
 
 
 
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 1      "[[]§206M-13[] Bonds]  Special purpose revenue bonds as
 
 2 legal investments and lawful security.  [Bonds] The special
 
 3 purpose revenue bonds issued pursuant to this chapter shall be
 
 4 and are declared to be legal and authorized investments for
 
 5 banks, savings banks, trust companies, savings and loan
 
 6 associations, insurance companies, credit unions, fiduciaries,
 
 7 trustees, guardians, and for all public funds of the State or
 
 8 other political corporations or subdivisions of the State.
 
 9 [Such] The special purpose revenue bonds shall be eligible to
 
10 secure the deposit of any and all public funds of the State [or]
 
11 and any and all public funds of counties or other political
 
12 corporations or subdivisions of the State, and [such] the bonds
 
13 shall be lawful and sufficient security for [such] the deposits
 
14 to the extent of their value when accompanied by all unmatured
 
15 coupons, if any, appertaining thereto."
 
16      SECTION 19.  Section 206M-14, Hawaii Revised Statutes, is
 
17 amended to read as follows:
 
18      "[[]§206M-14[]]  Status of special purpose revenue bonds
 
19 under the Uniform Commercial Code.  Notwithstanding any of the
 
20 provisions of this chapter or any recital in any special purpose
 
21 revenue bond issued under this chapter, all such special purpose
 
22 revenue bonds shall be deemed to be investment securities under
 
23 the Uniform Commercial Code, chapter 490, subject only to the
 

 
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 1 provisions of the special purpose revenue bonds pertaining to
 
 2 registration."
 
 3      SECTION 20.  Section 206M-15, Hawaii Revised Statutes, is
 
 4 amended to read as follows:
 
 5      "[[]§206M-15[]]  High technology research and development
 
 6 loans and grants.  (a) All moneys necessary to carry out the
 
 7 purposes of this section shall be allocated by the legislature
 
 8 through appropriations out of the state general fund.  The
 
 9 development corporation shall include in its budgetary request
 
10 for the upcoming fiscal period, the amounts necessary to
 
11 effectuate the purposes of this section.  All moneys, interest
 
12 charges, and other fees collected by the development corporation
 
13 under this section shall be deposited to the credit of the state
 
14 general fund.  In making any expenditure under this section, the
 
15 development corporation shall analyze each funding request to
 
16 determine whether the project to be undertaken will be
 
17 economically viable and beneficial to the State.
 
18      (b)  The development corporation may provide grants [of up
 
19 to fifty] not exceeding the lesser of:
 
20      (1)  Fifty per cent of the federal [grant up to] small
 
21           business innovation research phase I award or contract;
 
22           or
 

 
 
 
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 1      (2)  $25,000 to each business in Hawaii that receives a
 
 2           federal small business innovation research phase I
 
 3           award or contract from any participating federal
 
 4           agency,
 
 5  subject to the availability of funds.
 
 6      (c)  The development corporation shall adopt rules pursuant
 
 7 to chapter 91 that:
 
 8      (1)  Specify the qualifications for eligibility of grant
 
 9           applicants;
 
10      (2)  Establish priorities in determining eligibility in the
 
11           event that insufficient funds are available to fund
 
12           otherwise qualified applicants; and
 
13      (3)  Give preference to all qualified businesses receiving
 
14           their first award in one fiscal year over multiple
 
15           award grantees.
 
16 The development corporation may adopt any other rules pursuant to
 
17 chapter 91 necessary for the purposes of this section.
 
18      (d)  If funds appropriated for the purpose of making grants
 
19 under this section are inadequate to satisfy all qualified
 
20 requests, the development corporation shall apply for funds to be
 
21 transferred from the Hawaii capital loan revolving fund to
 
22 provide the grants in accordance with subsection (b).  The amount
 
23 of any single transfer of funds shall not exceed $100,000, and
 

 
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 1 the development corporation shall transfer the entire amount back
 
 2 to the Hawaii capital loan revolving fund within twelve months of
 
 3 receiving the funds.  No more than one fund transfer shall be
 
 4 outstanding at any one time.  The director of business, economic
 
 5 development, and tourism may transfer funds from the Hawaii
 
 6 capital loan revolving fund to the [high technology research and]
 
 7 development corporation upon request to carry out the purposes of
 
 8 this section.  Transfers of funds shall be made without any
 
 9 charges or fees."
 
10      SECTION 21.  Section 206M-15.5, Hawaii Revised Statutes, is
 
11 amended to read as follows:
 
12      "[[]§206M-15.5[]]  High technology special fund.  There is
 
13 established in the state treasury a fund to be known as the high
 
14 technology special fund, into which shall be deposited, except as
 
15 otherwise provided by section 206M-17, all moneys and fees from
 
16 tenants, qualified persons, or other users of the development
 
17 corporation's industrial parks, projects, other leased
 
18 facilities, and other services and publications.  All moneys in
 
19 the fund are [hereby] appropriated for the purposes of and shall
 
20 be expended by the development corporation for the operation,
 
21 maintenance, and management of its industrial parks, projects,
 
22 facilities, services, and publications[.], and to pay the
 
23 expenses in administering the special purpose revenue bonds of
 

 
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 1 the development corporation or in carrying out its project
 
 2 agreements."
 
 3      SECTION 22.  Section 206M-16, Hawaii Revised Statutes, is
 
 4 amended to read as follows:
 
 5      "§206M-16  Exemption of development corporation from
 
 6 taxation and competitive bidding.(a) All revenues and receipts
 
 7 derived by the development corporation from any project or
 
 8 industrial park or under a project agreement or other agreement
 
 9 pertaining thereto shall be exempt from all state and county
 
10 taxation.  Any right, title, and interest of the development
 
11 corporation in any project or industrial park shall also be
 
12 exempt from all state and county taxation.  Except as otherwise
 
13 provided by law, the interest of a qualified person or other user
 
14 of a project or industrial park under a project agreement or
 
15 other agreements related to a project or industrial park shall
 
16 not be exempt from taxation to a greater extent than it would be
 
17 if the costs of the project or industrial park were directly
 
18 financed by the qualified person or user.
 
19      (b)  The development corporation shall not be subject to any
 
20 requirement of law for competitive bidding for project
 
21 agreements, construction contracts, lease and sublease
 
22 agreements, or other contracts unless a project agreement with
 
23 respect to a project or industrial park [otherwise] shall so
 
24 require."
 

 
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 1      SECTION 23.  Section 206M-17, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "§206M-17  Revenue bond fund accounts.  The development
 
 4 corporation shall establish separate special funds in accordance
 
 5 with section 39-62 for the deposit of the proceeds of special
 
 6 purpose revenue bonds and special facility revenue bonds
 
 7 authorized under this [chapter.] part and part II respectively.
 
 8 The development corporation shall have the right to appropriate,
 
 9 apply, or expend the revenues derived with respect to the project
 
10 agreement for a project for the following purposes:
 
11      (1)  To pay when due all special purpose revenue bonds and
 
12           special facility revenue bonds, premiums, if any, and
 
13           interest thereon, for the payment of which the revenues
 
14           are or have been pledged, charged, or otherwise
 
15           encumbered, including reserves therefor; and
 
16      (2)  To the extent not paid by the qualified person to
 
17           provide for all expenses of administration, operation,
 
18           and maintenance of the project, including reserves
 
19           therefor.
 
20      Unless and until adequate provision has been made for the
 
21 foregoing purposes, the development corporation shall not
 
22 transfer the revenues derived from the project agreement to the
 
23 high technology special fund of the State."
 

 
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 1      SECTION 24.  Section 206M-34, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a)  The development corporation shall have the authority
 
 4 to copyright software applications and programs developed for
 
 5 state use with public funds and to license their subsequent sale
 
 6 and distribution; provided that this authority shall be subject
 
 7 to the terms and conditions of a contract to license between the
 
 8 development corporation and the affected state departments or
 
 9 agencies that developed the software applications or programs
 
10 [.]; and provided further that the authority shall not apply to
 
11 software applications and programs developed by or on behalf of
 
12 private sector qualified persons for which the development
 
13 corporation has issued special purpose revenue bonds under this
 
14 chapter or otherwise provided financing.  Any copyright arising
 
15 from center activities shall belong to the State and any revenues
 
16 generated by licenses and subsequent sale and distribution of
 
17 copyrighted software shall be deposited into the general fund
 
18 unless otherwise stipulated in a licensing agreement."
 
19                              PART II
 
20      SECTION 25.  The purpose of this part:
 
21      (1)  Allows qualified high technology businesses to sell
 
22           their unused net operating loss carryover to any other
 
23           taxpayer;
 

 
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 1      (2)  Amends the high technology-related definitions in the
 
 2           income tax law by:
 
 3           (A)  Consolidating all of the high-technology
 
 4                definitions in chapter 235, Hawaii Revised
 
 5                Statutes, into section 235-1, Hawaii Revised
 
 6                Statutes;
 
 7           (B)  Repealing the corresponding definitions from the
 
 8                high technology tax credit sections;
 
 9           (C)  Adding new definitions of "computer data" and
 
10                computer program"; and
 
11           (D)  Amending the definition of "qualified high
 
12                technology business" to mean a business that
 
13                conducts a majority, rather than one hundred per
 
14                cent, of its activities in performing qualified
 
15                research in Hawaii, or receives a majority, rather
 
16                than one hundred per cent, of its gross income
 
17                derived from qualified research;
 
18      (3)  Amends the income tax exclusion for royalties and other
 
19           income from high technology businesses established by
 
20           section 22 of Act 178, Session Laws of Hawaii 1999, by
 
21           expanding that exclusion to include royalties derived
 
22           from any patent, copyright, or trade secret for any
 
23           individual or other person who owns the patent or
 
24           copyright;
 

 
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 1      (4)  Amends the section relating to operation of certain
 
 2           Internal Revenue Code provisions to allow partnership
 
 3           investors the flexibility of allocating the high
 
 4           technology business investment tax credit in section
 
 5           235-110.9, Hawaii Revised Statutes, among partners
 
 6           without regard to their proportionate interests in
 
 7           their partnership investment vehicle;
 
 8      (5)  Amends the high-technology business investment tax
 
 9           credit under section 235-110.9, Hawaii Revised
 
10           Statutes, and the tax credit for increasing research
 
11           activities under section 235-110.91, Hawaii Revised
 
12           Statutes, by making the credit refundable to the
 
13           taxpayer in addition to allowing the credit to be used
 
14           against the taxpayer's income tax liability in
 
15           subsequent years until exhausted; and
 
16      (6)  Conforms the tax credit for increasing research
 
17           activities under section 235-110.91, Hawaii Revised
 
18           Statutes, to that provided under the Internal Revenue
 
19           Code, thereby increasing the tax credit from 2.5 per
 
20           cent to twenty per cent to match the federal rate.
 
21      SECTION 26.  Chapter 235, Hawaii Revised Statutes, is
 
22 amended by adding a new section to be appropriately designated
 
23 and to read as follows:
 

 
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 1      "§235-    High technology; sale of unused net operating loss
 
 2 carryover.  (a)  A qualified high technology business may apply
 
 3 to the department of taxation to sell its unused net operating
 
 4 loss carryover to another taxpayer.  If approved by the
 
 5 department of taxation, a qualified high technology business may
 
 6 sell its unused net operating loss carryover for private
 
 7 financial assistance to another taxpayer in an amount equal to at
 
 8 least fifty per cent of the amount of the surrendered tax
 
 9 benefit; provided that the qualified high technology business may
 
10 sell no more than $500,000 of its unused net operating loss
 
11 carryover to another taxpayer per year.  The tax benefit
 
12 purchased by the buyer shall be claimed in the year the sale is
 
13 approved by the department.  Any use of the purchased tax benefit
 
14 for tax carryback or carryforward purposes shall comply with
 
15 applicable law.  The financial assistance gained by the seller,
 
16 which is a qualified high technology business, shall be reported
 
17 on its tax return but shall not be considered taxable income.
 
18      (b)  No application for the sale of unused net operating
 
19 losses shall be approved if the seller is a qualified high
 
20 technology business that:
 
21      (1)  Has demonstrated positive net income in any of the two
 
22           previous full years of ongoing operations as determined
 
23           on its financial statements;
 

 
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 1      (2)  Has demonstrated a ratio in excess of one hundred ten
 
 2           per cent or greater of operating revenues divided by
 
 3           operating expenses in any of the two previous full
 
 4           years of operations as determined on its financial
 
 5           statements; or
 
 6      (3)  Is directly or indirectly at least fifty per cent owned
 
 7           or controlled by another corporation that has
 
 8           demonstrated positive net income in any of the two
 
 9           previous full years of ongoing operations as determined
 
10           on its financial statements or is part of a
 
11           consolidated group of affiliate corporations, as filed
 
12           for federal income tax purposes, that in the aggregate
 
13           has demonstrated positive net income in any of the two
 
14           previous full years of ongoing operations as determined
 
15           on its combined financial statements; 
 
16 as certified and documented by a licensed certified public
 
17 accountant.
 
18      (c)  The department of taxation shall adopt rules pursuant
 
19 to chapter 91 to implement this section, which shall include the
 
20 following:
 
21      (1)  Procedure and criteria for the approval or disapproval
 
22           of applications filed by qualified high technology
 
23           businesses selling unused net operating losses; and
 

 
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 1      (2)  Criteria to provide for the equitable apportionment of
 
 2           qualified sales allowed annually under this section to
 
 3           eligible applicants."
 
 4      SECTION 27.  Section 235-1, Hawaii Revised Statutes, is
 
 5 amended by adding six new definitions to be appropriately
 
 6 inserted and to read as follows:
 
 7      ""Computer data" means any representation of information,
 
 8 knowledge, facts, concepts, or instructions that is being
 
 9 prepared or has been prepared and is intended to be processed, is
 
10 being processed, or has been processed in a computer or computer
 
11 network.  "Computer data" includes works in the performing arts
 
12 such as audio files, video files, audiovisual files, computer
 
13 animation, and other entertainment products that are perceived by
 
14 or through the operation of a computer.
 
15      "Computer program" means an ordered set of computer data
 
16 representing coded instructions or statements, that, when
 
17 executed by a computer, causes the computer to perform one or
 
18 more computer operations.
 
19      "Computer software" means computer data, a computer program,
 
20 or a set of computer programs, procedures, or associated
 
21 documentation concerned with the operation and function of a
 
22 computer system, and includes both systems and application
 
23 programs and subdivisions, such as assemblers, compilers,
 
24 routines, generators, and utility programs.
 

 
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 1      "Investment" means a nonrefundable investment, at risk, as
 
 2 that term is used in section 465 (with respect to deductions
 
 3 limited to amount at risk) of the Internal Revenue Code, in a
 
 4 qualified high technology business, of cash that is transferred
 
 5 to the qualified high technology business, the transfer of which
 
 6 is in connection with a transaction in exchange for stock,
 
 7 interests in partnerships, joint ventures, or other entities,
 
 8 licenses (exclusive or nonexclusive), rights to use technology,
 
 9 marketing rights, warrants, options, or any items similar to
 
10 those included in this definition, including but not limited to
 
11 options or rights to acquire any of the items included in this
 
12 definition.  The nonrefundable investment is entirely at risk of
 
13 loss where repayment depends upon the success of the qualified
 
14 high technology business.  If the money invested is to be repaid
 
15 to the taxpayer, no repayment except for dividends or interest
 
16 shall be made for at least three years from the date the
 
17 investment is made.  The annual amount of any dividend and
 
18 interest payment to the taxpayer shall not exceed twelve per cent
 
19 of the amount of the investment.
 
20      "Qualified high technology business" means a business,
 
21 employing or owning capital or property, or maintaining an
 
22 office, in this State that:
 
23      (1)  Conducts a majority of its activities in performing
 
24           qualified research in this State; or
 

 
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 1      (2)  Receives a majority of its gross income derived from
 
 2           qualified research; provided that the income is
 
 3           received from:
 
 4           (A)  Products sold from, manufactured in, or produced
 
 5                in the State; or
 
 6           (B)  Services performed in this State.
 
 7      The term "qualified high technology business" does not
 
 8 include:
 
 9      (1)  Any trade or business involving the performance of
 
10           services in the field of law, architecture, accounting,
 
11           actuarial science, performing arts, consulting,
 
12           athletics, financial services, or brokerage services;
 
13      (2)  Any banking, insurance, financing, leasing, rental,
 
14           investing, or similar business; any farming business,
 
15           including the business of raising or harvesting trees;
 
16           any business involving the production or extraction of
 
17           products of a character with respect to which a
 
18           deduction is allowable under section 611 (with respect
 
19           to allowance of deduction for depletion), 613 (with
 
20           respect to basis for percentage depletion), or 613A
 
21           (with respect to limitation on percentage depleting in
 
22           cases of oil and gas wells) of the Internal Revenue
 
23           Code;
 

 
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 1      (3)  Any business operating a hotel, motel, restaurant, or
 
 2           similar business; and
 
 3      (4)  Any trade or business involving a hospital, a private
 
 4           office of a licensed health care professional, a group
 
 5           practice of licensed health care professionals, or a
 
 6           nursing home.
 
 7      "Qualified research" means:
 
 8      (1)  The same as in section 41(d) of the Internal Revenue
 
 9           Code; or
 
10      (2)  Developing, designing, modifying, programming, and
 
11           licensing computer software;
 
12 except that it shall not include research conducted outside the
 
13 State."
 
14      SECTION 28.  Section 235-2.4, Hawaii Revised Statutes, is
 
15 amended to read as follows:
 
16      "§235-2.4  Operation of certain Internal Revenue Code
 
17 provisions.(a)  Section 63 (with respect to taxable income
 
18 defined) of the Internal Revenue Code shall be operative for the
 
19 purposes of this chapter, except that the standard deduction
 
20 amount in section 63(c) of the Internal Revenue Code shall
 
21 instead mean:
 
22      (1)  $1,900 in the case of:
 
23           (A)  A joint return as provided by section 235-93; or
 

 
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 1           (B)  A surviving spouse (as defined in section 2(a) of
 
 2                the Internal Revenue Code);
 
 3      (2)  $1,650 in the case of a head of household (as defined
 
 4           in section 2(b) of the Internal Revenue Code);
 
 5      (3)  $1,500 in the case of an individual who is not married
 
 6           and who is not a surviving spouse or head of household;
 
 7           or
 
 8      (4)  $950 in the case of a married individual filing a
 
 9           separate return.
 
10      Section 63(c)(4) shall not be operative in this State.
 
11 Section 63(c)(5) shall be operative, except that the limitation
 
12 on basic standard deduction in the case of certain dependents
 
13 shall be the greater of $500 or such individual's earned income.
 
14 Section 63(f) shall not be operative in this State.
 
15      The standard deduction amount for nonresidents shall be
 
16 calculated pursuant to section 235-5.
 
17      (b)  Section 72 (with respect to annuities; certain proceeds
 
18 of endowment and life insurance contracts) of the Internal
 
19 Revenue Code shall be operative for purposes of this chapter and
 
20 be interpreted with due regard to section 235-7(a), except that
 
21 the ten per cent additional tax on early distributions from
 
22 retirement plans in section 72(t) shall not be operative for
 
23 purposes of this chapter.
 

 
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 1      (c)  Section 121 (with respect to exclusion of gain from
 
 2 sale of principal residence) of the Internal Revenue Code shall
 
 3 be operative for purposes of this chapter, except that for the
 
 4 election under section 121(f), a reference to section 1034
 
 5 treatment means a reference to section 235-2.4(n) in effect for
 
 6 taxable year 1997.
 
 7      (d)  Section 219 (with respect to retirement savings) of the
 
 8 Internal Revenue Code shall be operative for the purpose of this
 
 9 chapter.  For the purpose of computing the limitation on the
 
10 deduction for active participants in certain pension plans for
 
11 state income tax purposes, adjusted gross income as used in
 
12 section 219 as operative for this chapter means federal adjusted
 
13 gross income.
 
14      (e)  Section 220 (with respect to medical savings accounts)
 
15 of the Internal Revenue Code shall be operative for the purpose
 
16 of this chapter, but only with respect to medical services
 
17 accounts that have been approved by the Secretary of the Treasury
 
18 of the United States.
 
19      (f)  Section 408A (with respect to Roth Individual
 
20 Retirement Accounts) of the Internal Revenue Code shall be
 
21 operative for the purposes of this chapter.  For the purposes of
 
22 determining the aggregate amount of contributions to a Roth
 
23 Individual Retirement Account or qualified rollover contribution
 

 
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 1 to a Roth Individual Retirement Account from an individual
 
 2 retirement plan other than a Roth Individual Retirement Account,
 
 3 adjusted gross income as used in section 408A as operative for
 
 4 this chapter means federal adjusted gross income.
 
 5      (g)  In administering the provisions of sections 410 to 417
 
 6 (with respect to special rules relating to pensions, profit
 
 7 sharing, stock bonus plans, etc.), sections 418 to 418E (with
 
 8 respect to special rules for multiemployer plans), and sections
 
 9 419 and 419A (with respect to treatment of welfare benefit funds)
 
10 of the Internal Revenue Code, the department of taxation shall
 
11 adopt rules under chapter 91 relating to the specific
 
12 requirements under such sections and to such other administrative
 
13 requirements under those sections as may be necessary for the
 
14 efficient administration of sections 410 to 419A.
 
15      In administering sections 401 to 419A (with respect to
 
16 deferred compensation) of the Internal Revenue Code, Public Law
 
17 93-406, section 1017(i), shall be operative for the purposes of
 
18 this chapter.
 
19      In administering section 402 (with respect to the taxability
 
20 of beneficiary of employees' trust) of the Internal Revenue Code,
 
21 the tax imposed on lump sum distributions by section 402(e) of
 
22 the Internal Revenue Code shall be operative for the purposes of
 
23 this chapter and the tax imposed therein is hereby imposed by
 
24 this chapter at the rate determined under this chapter.
 

 
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 1      (h)  Section 468B (with respect to special rules for
 
 2 designated settlement funds) of the Internal Revenue Code shall
 
 3 be operative for the purposes of this chapter and the tax imposed
 
 4 therein is hereby imposed by this chapter at a rate equal to the
 
 5 maximum rate in effect for the taxable year imposed on estates
 
 6 and trusts under section 235-51.
 
 7      (i)  Section 469 (with respect to passive activities and
 
 8 credits limited) of the Internal Revenue Code shall be operative
 
 9 for the purposes of this chapter.  For the purpose of computing
 
10 the offset for rental real estate activities for state income tax
 
11 purposes, adjusted gross income as used in section 469 as
 
12 operative for this chapter means federal adjusted gross income.
 
13      (j)  Sections 512 to 514 (with respect to taxation of
 
14 business income of certain exempt organizations) of the Internal
 
15 Revenue Code shall be operative for the purposes of this chapter
 
16 as provided in this subsection.
 
17      "Unrelated business taxable income" means the same as in the
 
18 Internal Revenue Code, except that in the computation thereof
 
19 sections 235-3 to 235-5, and 235-7 (except subsection (c)), shall
 
20 apply, and in the determination of the net operating loss
 
21 deduction there shall not be taken into account any amount of
 
22 income or deduction which is excluded in computing the unrelated
 
23 business taxable income.  Unrelated business taxable income shall
 
24 not include any income from a prepaid legal service plan.
 

 
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 1      For a person described in section 401 or 501 of the Internal
 
 2 Revenue Code, as modified by section 235-2.3, the tax imposed by
 
 3 section 235-51 or 235-71 shall be imposed upon the person's
 
 4 unrelated business taxable income.
 
 5      (k)  Section 521 (with respect to cooperatives) and
 
 6 subchapter T (sections 1381 to 1388, with respect to cooperatives
 
 7 and their patrons) of the Internal Revenue Code shall be
 
 8 operative for the purposes of this chapter as to any cooperative
 
 9 fully meeting the requirements of section 421-23, except that
 
10 Internal Revenue Code section 521 cooperatives need not be
 
11 organized in Hawaii.
 
12      (l)  Sections 527 (with respect to political organizations)
 
13 and 528 (with respect to certain homeowners associations) of the
 
14 Internal Revenue Code shall be operative for the purposes of this
 
15 chapter and the taxes imposed in each such section are hereby
 
16 imposed by this chapter at the rates determined under section
 
17 235-71.
 
18      (m)  Section 530 (with respect to education individual
 
19 retirement accounts) of the Internal Revenue Code shall be
 
20 operative for the purposes of this chapter.  For the purpose of
 
21 determining the maximum amount that a contributor could make to
 
22 an education individual retirement account for state income tax
 
23 purposes, modified adjusted gross income as used in section 530
 

 
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 1 for this chapter means federal modified adjusted gross income as
 
 2 defined in section 530.
 
 3      (n)  Section 641 (with respect to imposition of tax) of the
 
 4 Internal Revenue Code shall be operative for the purposes of this
 
 5 chapter subject to the following:
 
 6      (1)  The deduction for exemptions shall be allowed as
 
 7           provided in section 235-54(b).
 
 8      (2)  The deduction for contributions and gifts in
 
 9           determining taxable income shall be limited to the
 
10           amount allowed in the case of an individual, unless the
 
11           contributions and gifts are to be used exclusively in
 
12           the State.
 
13      (3)  The tax imposed by section 1(e) of the Internal Revenue
 
14           Code as applied by section 641 of the Internal Revenue
 
15           Code is hereby imposed by this chapter at the rate and
 
16           amount as determined under section 235-51 on estates
 
17           and trusts.
 
18      (o)  Section 667 (with respect to treatment of amounts
 
19 deemed distributed by trusts in preceding years) of the Internal
 
20 Revenue Code shall be operative for the purposes of this chapter
 
21 and the tax imposed therein is hereby imposed by this chapter at
 
22 the rate determined under this chapter; except that the reference
 
23 to tax-exempt interest to which section 103 of the Internal
 

 
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                                                        H.D. 1
                                                        

 
 1 Revenue Code applies in section 667(a) of the Internal Revenue
 
 2 Code shall instead be a reference to tax-exempt interest to which
 
 3 section 235-7(b) applies.
 
 4      (p)  Section 685 (with respect to treatment of qualified
 
 5 funeral trusts) of the Internal Revenue Code shall be operative
 
 6 for purposes of this chapter, except that the tax imposed under
 
 7 this chapter shall be computed at the tax rates provided under
 
 8 section 235-51, and no deduction for the exemption amount
 
 9 provided in section 235-54(b) shall be allowed.  The cost-of-
 
10 living adjustment determined under section 1(f)(3) of the
 
11 Internal Revenue Code shall be operative for the purpose of
 
12 applying section 685(c)(3) under this chapter.
 
13      (q)  Section 704 of the Internal Revenue Code (with respect
 
14 to a partner's distributive share) shall be operative for
 
15 purposes of this chapter; except that subsection (b)(2) shall not
 
16 apply to allocations of the high-technology business investment
 
17 tax credit allowed by section 235-110.9.
 
18      [(q)] (r)  Section 1212 (with respect to capital loss
 
19 carrybacks and carryforwards) of the Internal Revenue Code shall
 
20 be operative for the purposes of this chapter; except that for
 
21 the purposes of this chapter the capital loss carryback
 
22 provisions of section 1212 shall not be operative and the capital
 
23 loss carryforward allowed by section 1212(a) shall be limited to
 

 
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 1 five years[.]; except for qualified high technology businesses
 
 2 under section 235-   , which shall be limited to fifteen years.
 
 3      [(r)] (s)  Subchapter S (sections 1361 to 1379) (with
 
 4 respect to tax treatment of S corporations and their
 
 5 shareholders) of chapter 1 of the Internal Revenue Code shall be
 
 6 operative for the purposes of this chapter as provided in part
 
 7 VII.
 
 8      [(s)] (t)  Section 6015 (with respect to relief from joint
 
 9 and several liability on joint return) of the Internal Revenue
 
10 Code is operative for purposes of this chapter.
 
11      [(t)] (u)  Subchapter C (sections 6221 to 6233) (with
 
12 respect to tax treatment of partnership items) of chapter 63 of
 
13 the Internal Revenue Code shall be operative for the purposes of
 
14 this chapter.
 
15      [(u)] (v)  Subchapter D (sections 6240 to 6255) (with
 
16 respect to simplified audit procedures for electing large
 
17 partnerships) of the Internal Revenue Code shall be operative for
 
18 the purposes of this chapter, with due regard to chapter 232
 
19 relating to tax appeals.
 
20      [(v)] (w)  Section 6511(h) (with respect to running of
 
21 periods of limitation suspended while taxpayer is unable to
 
22 manage financial affairs due to disability) of the Internal
 
23 Revenue Code shall be operative for purposes of this chapter,
 

 
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 1 with due regard to section 235-111 relating to the limitation
 
 2 period for assessment, levy, collection, or credit.
 
 3      [(w)] (x)  Section 7518 (with respect to capital
 
 4 construction fund for commercial fishers) of the Internal Revenue
 
 5 Code shall be operative for the purposes of this chapter.
 
 6 Qualified withdrawals for the acquisition, construction, or
 
 7 reconstruction of any qualified asset which is attributable to
 
 8 deposits made before the effective date of this section shall not
 
 9 reduce the basis of the asset when withdrawn.  Qualified
 
10 withdrawals shall be treated on a first-in-first-out basis."
 
11      SECTION 29.  Section 235-7.3, Hawaii Revised Statutes, is
 
12 amended to read as follows:
 
13      "[[]§235-7.3[]]  Royalties [and other income from high
 
14 technology business] derived from patents, copyrights, or trade
 
15 secrets excluded from gross income.  [(a)] In addition to the
 
16 exclusions in section 235-7, there shall be excluded from gross
 
17 income, adjusted gross income, and taxable income, amounts
 
18 received by an individual or [a qualified high technology
 
19 business] other person as defined in section 1-19 as royalties
 
20 and other income derived from any patents [and], copyrights[:
 
21      (1)  Owned], or trade secrets owned by the individual or
 
22           [qualified high technology business; and
 

 
 
 
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 1      (2)  Developed and arising out of a qualified high
 
 2           technology business.] other person.
 
 3      [(b)  For the purposes of this section:
 
 4      "Computer software" means a set of computer programs,
 
 5 procedures, or associated documentation concerned with the
 
 6 operation and function of a computer system, and includes both
 
 7 systems and application programs and subdivisions, such as
 
 8 assemblers, compilers, routines, generators, and utility
 
 9 programs.
 
10      "Qualified high technology business" means a business
 
11 performing qualified research.  The term "qualified high
 
12 technology business" does not include:
 
13      (1)  Any trade or business involving the performance of
 
14           services in the field of law, architecture, accounting,
 
15           actuarial science, performing arts, consulting,
 
16           athletics, financial services, or brokerage services;
 
17      (2)  Any banking, insurance, financing, leasing, rental,
 
18           investing, or similar business; any farming business,
 
19           including the business of raising or harvesting trees;
 
20           any business involving the production or extraction of
 
21           products of a character with respect to which a
 
22           deduction is allowable under section 611 (with respect
 
23           to allowance of deduction for depletion), 613 (with
 

 
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                                                        H.D. 1
                                                        

 
 1           respect to basis for percentage depletion), or 613A
 
 2           (with respect to limitation on percentage depleting in
 
 3           cases of oil and gas wells) of the Internal Revenue
 
 4           Code;
 
 5      (3)  Any business operating a hotel, motel, restaurant, or
 
 6           similar business; and
 
 7      (4)  Any trade or business involving a hospital, a private
 
 8           office of a licensed health care professional, a group
 
 9           practice of licensed health care professionals, or a
 
10           nursing home.
 
11      "Qualified research" means:
 
12      (1)  The same as in section 41(d) of the Internal Revenue
 
13           Code; or
 
14      (2)  Developing, designing, modifying, programming, and
 
15           licensing computer software.]"
 
16      SECTION 30.  Section 235-9.5, Hawaii Revised Statutes, is
 
17 amended to read as follows:
 
18      "[[]§235-9.5[]]  Stock options from qualified high
 
19 technology businesses exempt from taxation.  [(a)]
 
20 Notwithstanding any law to the contrary, all income received from
 
21 stock options from a qualified high technology business by an
 
22 [employee] that would otherwise be taxed as ordinary income or as
 
23 capital gains to those [employees] is exempt from taxation under
 
24 this chapter.
 

 
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 1      [(b)  For the purposes of this section:
 
 2      "Computer software" means a set of computer programs,
 
 3 procedures, or associated documentation concerned with the
 
 4 operation and function of a computer system, and includes both
 
 5 systems and application programs and subdivisions, such as
 
 6 assemblers, compilers, routines, generators, and utility
 
 7 programs.
 
 8      "Qualified high technology business" means a business
 
 9 performing qualified research.  The term "qualified high
 
10 technology business" does not include:
 
11      (1)  Any trade or business involving the performance of
 
12           services in the field of law, architecture, accounting,
 
13           actuarial science, performing arts, consulting,
 
14           athletics, financial services, or brokerage services;
 
15      (2)  Any banking, insurance, financing, leasing, rental,
 
16           investing, or similar business; any farming business,
 
17           including the business of raising or harvesting trees;
 
18           any business involving the production or extraction of
 
19           products of a character with respect to which a
 
20           deduction is allowable under section 611 (with respect
 
21           to allowance of deduction for depletion), 613 (with
 
22           respect to basis for percentage depletion), or 613A
 

 
 
 
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 1           (with respect to limitation on percentage depleting in
 
 2           cases of oil and gas wells) of the Internal Revenue
 
 3           Code;
 
 4      (3)  Any business operating a hotel, motel, restaurant, or
 
 5           similar business; and
 
 6      (4)  Any trade or business involving a hospital, a private
 
 7           office of a licensed health care professional, a group
 
 8           practice of licensed health care professionals, or a
 
 9           nursing home.
 
10      "Qualified research" means:
 
11      (1)  The same as in section 41(d) of the Internal Revenue
 
12           Code; or
 
13      (2)  Developing, designing, modifying, programming, and
 
14           licensing computer software.]"
 
15      SECTION 31.  Section 235-110.9, Hawaii Revised Statutes, is
 
16 amended to read as follows:
 
17      "[[]§235-110.9[]]  High-technology business investment tax
 
18 credit.(a)  There shall be allowed to each taxpayer, subject to
 
19 the taxes imposed by this chapter, a high technology investment
 
20 tax credit that shall be deductible from the taxpayer's net
 
21 income tax liability, if any, imposed by this chapter for the
 
22 taxable year in which the credit is properly claimed.  The tax
 
23 credit shall be an amount equal to ten per cent of the investment
 

 
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                                                        H.D. 1
                                                        

 
 1 made by the taxpayer in each qualified high technology business,
 
 2 up to a maximum allowed credit of $500,000 for the taxable year
 
 3 for the investment made by the taxpayer in a qualified high
 
 4 technology business.
 
 5      (b)  The credit allowed under this section shall be claimed
 
 6 against the net income tax liability for the taxable year.  For
 
 7 the purpose of this section, "net income tax liability" means net
 
 8 income tax liability reduced by all other credits allowed under
 
 9 this chapter.
 
10      (c)  If the tax credit under this section exceeds the
 
11 taxpayer's income tax liability, the excess of the tax credit
 
12 over liability shall be refunded to the taxpayer or may be used
 
13 as a credit against the taxpayer's income tax liability in
 
14 subsequent years until exhausted[.]; provided that no refund on
 
15 account of the tax credit allowed by this section shall be made
 
16 for amounts less than $1.  All claims, including any amended
 
17 claims, for tax credits under this section shall be filed on or
 
18 before the end of the twelfth month following the close of the
 
19 taxable year for which the credit may be claimed.  Failure to
 
20 comply with the foregoing provision shall constitute a waiver of
 
21 the right to claim the credit.
 

 
 
 
 
 
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 1      [(d)  As used in this section:
 
 2      "Computer software" means a set of computer programs,
 
 3 procedures, or associated documentation concerned with the
 
 4 operation and function of a computer system, and includes both
 
 5 systems and application programs and subdivisions, such as
 
 6 assemblers, compilers, routines, generators, and utility
 
 7 programs.
 
 8      "Investment" means a nonrefundable investment, at risk, as
 
 9 that term is used in section 465 (with respect to deductions
 
10 limited to amount at risk) of the Internal Revenue Code, in a
 
11 qualified high technology business, of cash that is transferred
 
12 to the qualified high technology business, the transfer of which
 
13 is in connection with a transaction in exchange for stock,
 
14 interests in partnerships, joint ventures, or other entities,
 
15 licenses (exclusive or nonexclusive), rights to use technology,
 
16 marketing rights, warrants, options, or any items similar to
 
17 those included herein, including but not limited to options or
 
18 rights to acquire any of the items included herein.  The
 
19 nonrefundable investment is entirely at risk of loss where
 
20 repayment depends upon the success of the qualified high
 
21 technology business.  If the money invested is to be repaid to
 
22 the taxpayer, no repayment except for dividends or interest shall
 
23 be made for at least [three years] one year from the date the
 
24 investment is made.  The annual amount of any dividend and
 

 
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                                                        H.D. 1
                                                        

 
 1 interest payment to the taxpayer shall not exceed twelve per cent
 
 2 of the amount of the investment.
 
 3      (e)  For the purposes of this section:
 
 4      "Qualified high technology business" means:
 
 5      (1)  A business, employing or owning capital or property, or
 
 6           maintaining an office, in this State; and which
 
 7      (2)  (A)  Conducts [one hundred] ninety per cent of its
 
 8                activities in performing qualified research in
 
 9                this State; or
 
10           (B)  Receives [one hundred] ninety per cent of its
 
11                gross income derived from qualified research;
 
12                provided that the income is received from products
 
13                sold from, manufactured, or produced in the State;
 
14                or services performed in this State.
 
15      The term "qualified high technology business" does not
 
16 include:
 
17      (1)  Any trade or business involving the performance of
 
18           services in the field of law, architecture, accounting,
 
19           actuarial science, performing arts, consulting,
 
20           athletics, financial services, or brokerage services;
 
21      (2)  Any banking, insurance, financing, leasing, rental,
 
22           investing, or similar business; any farming business,
 
23           including the business of raising or harvesting trees;
 

 
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 1           any business involving the production or extraction of
 
 2           products of a character with respect to which a
 
 3           deduction is allowable under section 611 (with respect
 
 4           to allowance of deduction for depletion), 613 (with
 
 5           respect to basis for percentage depletion), or 613A
 
 6           (with respect to limitation on percentage depleting in
 
 7           cases of oil and gas wells) of the Internal Revenue
 
 8           Code;
 
 9      (3)  Any business operating a hotel, motel, restaurant, or
 
10           similar business; and
 
11      (4)  Any trade or business involving a hospital, a private
 
12           office of a licensed health care professional, a group
 
13           practice of licensed health care professionals, or a
 
14           nursing home.
 
15      "Qualified research" means:
 
16      (1)  The same as in section 41(d) of the Internal Revenue
 
17           Code; or
 
18      (2)  Developing, designing, modifying, programming, and
 
19           licensing computer software;
 
20 except that it shall not include research conducted outside the
 
21 State.]
 
22      [(f)] (d)  This section shall not apply to taxable years
 
23 beginning after December 31, 2005."
 

 
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 1      SECTION 32.  Section 235-110.91, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "[[]§235-110.91[]]  Tax credit for increasing research
 
 4 activities.(a)  Section 41 (with respect to the credit for
 
 5 increasing research activities) and section 280C(c) (with respect
 
 6 to certain expenses for which the credit for increasing research
 
 7 activities are allowable) of the Internal Revenue Code shall be
 
 8 operative for the purposes of this chapter as provided in this
 
 9 section.  If section 41 of the Internal Revenue Code is repealed
 
10 or terminated prior to January 1, 2006, its provisions shall
 
11 remain in effect for purposes of the income tax law of the State
 
12 as provided for in subsection (j).
 
13      (b)  All references to Internal Revenue Code sections within
 
14 sections 41 and 280C(c) of the Internal Revenue Code shall be
 
15 operative for purposes of this section.
 
16      (c)  There shall be allowed to each taxpayer, subject to the
 
17 tax imposed by this chapter, an income tax credit for increased
 
18 research activities [that] equal to the credit for research
 
19 activities provided by section 41 of the Internal Revenue Code.
 
20 The credit shall be deductible from the taxpayer's net income tax
 
21 liability, if any, imposed by this chapter for the taxable year
 
22 in which the credit is properly claimed.
 

 
 
 
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 1      [(d)  The tax credit for increased research activities shall
 
 2 be equal to the sum of:
 
 3      (1)  2.5 per cent of the excess (if any) of:
 
 4           (A)  The qualified research expenses for the taxable
 
 5                year; over
 
 6           (B)  The base amount; and
 
 7      (2)  2.5 per cent of the basic research payments determined
 
 8           under section 41(e)(1)(A) of the Internal Revenue Code.
 
 9      (e)  For purposes of this section:
 
10      (1)  The alternative incremental credit in section 41(c)(4)
 
11           of the Internal Revenue Code shall be equal to the sum
 
12           of 12.5 per cent of:
 
13           (A)  1.65 per cent of so much of the qualified research
 
14                expenses for the taxable year as exceeds one per
 
15                cent of the average described in section
 
16                41(c)(1)(B) but does not exceed 1.5 per cent of
 
17                such average;
 
18           (B)  2.2 per cent of so much of those expenses as
 
19                exceeds 1.5 per cent of the average but does not
 
20                exceed two per cent of the average; and
 
21           (C)  2.75 per cent of so much of those expenses as
 
22                exceeds two per cent of the average;
 

 
 
 
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 1      (2)  The term "qualified research" under section 41(d)(1) of
 
 2           the Internal Revenue Code shall not include research
 
 3           conducted outside of the State; and
 
 4      (3)  The term "basic research" under section 41(e) of the
 
 5           Internal Revenue Code shall not include research
 
 6           conducted outside of the State.
 
 7      (f)  The amount of reduced credit in section 280C(c)(3)(B)
 
 8 of the Internal Revenue Code shall be equal to the excess of:
 
 9      (1)  The amount of credit determined under section 41(a) (as
 
10           provided for in this section) (without regard to this
 
11           paragraph); over
 
12      (2)  The product of:
 
13           (A)  The amount described in subsection (f)(1); and
 
14           (B)  12.5 per cent of the maximum rate of tax under
 
15                section 11(b)(1) of the Internal Revenue Code.
 
16      (g)] (d)  If the tax credit for increased research
 
17 activities claimed by a taxpayer exceeds the amount of income tax
 
18 payment due from the taxpayer, the excess of the tax credit over
 
19 payments due shall be refunded to the taxpayer or may be used as
 
20 a credit against the taxpayer's income tax liability in
 
21 subsequent years until exhausted[.]; provided that no refund on
 
22 account of the tax credit allowed by this section shall be made
 
23 for amounts less than $1.
 

 
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 1      [(h)] (e)  All claims for a tax credit under this section
 
 2 [must] shall be filed on or before the end of the twelfth month
 
 3 following the close of the taxable year for which the credit may
 
 4 be claimed.  Failure to properly claim the credit shall
 
 5 constitute a waiver of the right to claim the credit.
 
 6      [(i)] (f)  The director of taxation may adopt any rules
 
 7 under chapter 91 and forms necessary to carry out this section.
 
 8      [(j)] (g)  This section shall not apply to taxable years
 
 9 beginning after December 31, 2005."
 
10                             PART III
 
11      SECTION 33.  The legislature finds that the shortage of
 
12 venture capital in Hawaii makes it difficult for local high
 
13 technology businesses to obtain the necessary financing to
 
14 develop products, enter new markets, and expand on their early
 
15 success.  The purpose of this part is to allow the board of
 
16 trustees of the employees' retirement system to invest ten per
 
17 cent of employees' retirement system funds in qualified high
 
18 technology businesses as a means of providing venture capital for
 
19 those businesses.
 
20      SECTION 34.  Section 88-119, Hawaii Revised Statutes, is
 
21 amended to read as follows:
 

 
 
 
 
 
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 1      "§88-119  Investments.  (a)  Investments may be made in:
 
 2      (1)  Real estate loans and mortgages.  Obligations (as
 
 3           defined in section 431:6-101) of any of the following
 
 4           classes:
 
 5           (A)  Obligations secured by mortgages of nonprofit
 
 6                corporations desiring to build multirental units
 
 7                (ten units or more) subject to control of the
 
 8                government for occupancy by families displaced as
 
 9                a result of government action;
 
10           (B)  Obligations secured by mortgages insured by the
 
11                Federal Housing Administration;
 
12           (C)  Obligations for the repayment of home loans made
 
13                under the Servicemen's Readjustment Act of 1944 or
 
14                under Title II of the National Housing Act;
 
15           (D)  Other obligations secured by first mortgages on
 
16                unencumbered improved real estate owned in fee
 
17                simple; provided that the amount of the obligation
 
18                at the time investment is made therein shall not
 
19                exceed eighty per cent of the value of the real
 
20                estate and improvements mortgaged to secure it,
 
21                and except that the amount of the obligation at
 
22                the time investment is made therein may exceed
 
23                eighty per cent but no more than ninety per cent
 

 
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 1                of the value of the real estate and improvements
 
 2                mortgaged to secure it; provided further that the
 
 3                obligation is insured or guaranteed against
 
 4                default or loss under a mortgage insurance policy
 
 5                issued by a casualty insurance company licensed to
 
 6                do business in the State.  The coverage provided
 
 7                by the insurer shall be sufficient to reduce the
 
 8                system's exposure to not more than eighty per cent
 
 9                of the value of the real estate and improvements
 
10                mortgaged to secure it.  The insurance coverage
 
11                shall remain in force until the principal amount
 
12                of the obligation is reduced to eighty per cent of
 
13                the market value of the real estate and
 
14                improvements mortgaged to secure it, at which time
 
15                the coverage shall be subject to cancellation
 
16                solely at the option of the board of trustees.
 
17                Real estate shall not be deemed to be encumbered
 
18                within the meaning of this subparagraph by reason
 
19                of the existence of any of the restrictions,
 
20                charges, or claims described in section 431:6-308;
 
21           (E)  Other obligations secured by first mortgages of
 
22                leasehold interests in improved real estate;
 
23                provided that:
 

 
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 1                (i)  Each such leasehold interest at such time
 
 2                     shall have a current term extending at least
 
 3                     two years beyond the stated maturity of the
 
 4                     obligation it secures; and
 
 5               (ii)  The amount of the obligation at the time
 
 6                     investment is made therein shall not exceed
 
 7                     eighty per cent of the value of the
 
 8                     respective leasehold interest and
 
 9                     improvements, and except that the amount of
 
10                     the obligation at the time investment is made
 
11                     therein may exceed eighty per cent but no
 
12                     more than ninety per cent of the value of the
 
13                     leasehold interest and improvements mortgaged
 
14                     to secure it;
 
15                provided further that the obligation is insured or
 
16                guaranteed against default or loss under a
 
17                mortgage insurance policy issued by a casualty
 
18                insurance company licensed to do business in the
 
19                State.  The coverage provided by the insurer shall
 
20                be sufficient to reduce the system's exposure to
 
21                not more than eighty per cent of the value of the
 
22                leasehold interest and improvements mortgaged to
 
23                secure it.  The insurance coverage shall remain in
 

 
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 1                force until the principal amount of the obligation
 
 2                is reduced to eighty per cent of the market value
 
 3                of the leasehold interest and improvements
 
 4                mortgaged to secure it, at which time the coverage
 
 5                shall be subject to cancellation solely at the
 
 6                option of the board of trustees;
 
 7           (F)  Obligations for the repayment of home loans
 
 8                guaranteed by the department of Hawaiian home
 
 9                lands pursuant to section 214(b) of the Hawaiian
 
10                Homes Commission Act, 1920; and
 
11           (G)  Obligations secured by second mortgages on
 
12                improved real estate for which the mortgagor
 
13                procures a second mortgage on the improved real
 
14                estate for the purpose of acquiring the
 
15                leaseholder's fee simple interest in the improved
 
16                real estate; provided that any prior mortgage does
 
17                not contain provisions that might jeopardize the
 
18                security position of the retirement system or the
 
19                borrower's ability to repay the mortgage loan.
 
20           The board of trustees may retain such real estate,
 
21           including leasehold interests therein, as it may
 
22           acquire by foreclosure of mortgages or in enforcement
 
23           of security, or as may be conveyed to it in
 

 
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 1           satisfaction of debts previously contracted; provided
 
 2           that all such real estate, other than leasehold
 
 3           interests, shall be sold within five years after
 
 4           acquiring the same, subject to extension by the
 
 5           governor for additional periods not exceeding five
 
 6           years each, and that all such leasehold interests shall
 
 7           be sold within one year after acquiring the same,
 
 8           subject to extension by the governor for additional
 
 9           periods not exceeding one year each;
 
10      (2)  Government obligations, etc.  Obligations of any of the
 
11           following classes:
 
12           (A)  Obligations issued or guaranteed as to principal
 
13                and interest by the United States or by any state
 
14                thereof or by any municipal or political
 
15                subdivision or school district of any of the
 
16                foregoing; provided that principal of and interest
 
17                on such obligations are payable in currency of the
 
18                United States; or sovereign debt instruments
 
19                issued by agencies of, or guaranteed by foreign
 
20                governments;
 
21           (B)  Revenue bonds, whether or not permitted by any
 
22                other provision hereof, of the State or any
 
23                municipal or political subdivision thereof,
 

 
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 1                including the board of water supply of the city
 
 2                and county of Honolulu, and street or improvement
 
 3                district bonds of any district or project in the
 
 4                State; and
 
 5           (C)  Obligations issued or guaranteed by any federal
 
 6                home loan bank including consolidated federal home
 
 7                loan bank obligations, the Home Owner's Loan
 
 8                Corporation, the Federal National Mortgage
 
 9                Association, or the Small Business Administration;
 
10      (3)  Corporate obligations.  Below investment grade or
 
11           nonrated debt instruments, foreign or domestic, in
 
12           accordance with investment guidelines adopted by the
 
13           board of trustees;
 
14      (4)  Preferred and common stocks.  Shares of preferred or
 
15           common stock of any corporation created or existing
 
16           under the laws of the United States or of any state or
 
17           district thereof or of any country;
 
18      (5)  Obligations eligible by law for purchase in the open
 
19           market by federal reserve banks;
 
20      (6)  Obligations issued or guaranteed by the International
 
21           Bank for Reconstruction and Development, the Inter-
 
22           American Development Bank, the Asian Development Bank,
 
23           or the African Development Bank;
 

 
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 1      (7)  Obligations secured by collateral consisting of any of
 
 2           the securities or stock listed above and worth at the
 
 3           time the investment is made at least fifteen per cent
 
 4           more than the amount of the respective obligations;
 
 5      (8)  Insurance company obligations.  Contracts and
 
 6           agreements supplemental thereto providing for
 
 7           participation in one or more accounts of a life
 
 8           insurance company authorized to do business in Hawaii,
 
 9           including its separate accounts, and whether the
 
10           investments allocated thereto are comprised of stocks
 
11           or other securities or of real or personal property or
 
12           interests therein;
 
13      (9)  Interests in real property.  Interests in improved or
 
14           productive real property in which, in the informed
 
15           opinion of the board of trustees, it is prudent to
 
16           invest funds of the system.  For purposes of this
 
17           paragraph, "real property" includes any property
 
18           treated as real property either by local law or for
 
19           federal income tax purposes.  Investments in improved
 
20           or productive real property may be made directly or
 
21           through pooled funds, including common or collective
 
22           trust funds of banks and trust companies, group or unit
 
23           trusts, limited partnerships, limited liability
 

 
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 1           companies, investment trusts, title-holding
 
 2           corporations recognized under section 501(c) of the
 
 3           Internal Revenue Code of 1986, as amended, similar
 
 4           entities that would protect the system's interest, and
 
 5           other pooled funds invested on behalf of the system by
 
 6           investment managers retained by the system;
 
 7     (10)  Other securities and futures contracts.  Securities and
 
 8           futures contracts in which in the informed opinion of
 
 9           the board of trustees it is prudent to invest funds of
 
10           the system, including currency, interest rate, bond,
 
11           and stock index futures contracts and options on such
 
12           contracts to hedge against anticipated changes in
 
13           currencies, interest rates, and bond and stock prices
 
14           that might otherwise have an adverse effect upon the
 
15           value of the system's securities portfolios; covered
 
16           put and call options on securities; and stock; whether
 
17           or not the securities, stock, futures contracts, or
 
18           options on futures are expressly authorized by or
 
19           qualify under the foregoing paragraphs, and
 
20           notwithstanding any limitation of any of the foregoing
 
21           paragraphs (including paragraph (4)); and
 

 
 
 
 
 
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 1     (11)  Private placements.  Investments in institutional blind
 
 2           pool limited partnerships or direct investments that
 
 3           make private debt and equity investments in privately
 
 4           held companies.
 
 5      (b)  Ten per cent of alternative investments may be
 
 6 dedicated as venture capital investments by the board of trustees
 
 7 in qualified high technology businesses.  Investment under this
 
 8 subsection shall be made under the condition that there shall be
 
 9 three or more unrelated investors other than the system involved
 
10 in the investment.  The board, in making investments under this
 
11 subsection, may consult with knowledgeable state agencies,
 
12 corporations, and financial institutions before investing assets
 
13 in qualified high technology businesses.
 
14      For the purposes of this subsection:
 
15      "Computer software" means computer data, a computer program,
 
16 or a set of computer programs, procedures, or associated
 
17 documentation concerned with the operation and function of a
 
18 computer system, and includes both systems and application
 
19 programs and subdivisions, such as assemblers, compilers,
 
20 routines, generators, and utility programs.
 
21      "Qualified high technology business":
 
22      (1)  Means a business, employing or owning capital or
 
23           property, or maintaining an office, in this State that:
 

 
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 1           (A)  Conducts a majority of its activities in
 
 2                performing qualified research in this State; or
 
 3           (B)  Receives a majority of its gross income derived
 
 4                from qualified research; provided that the income
 
 5                is received from:
 
 6                (i)  products sold from, manufactured in, or
 
 7                     produced in the State; or
 
 8               (ii)  Services performed in this State.
 
 9      (2)  Does not include:
 
10           (A)  Any trade or business involving the performance of
 
11                services in the field of law, architecture,
 
12                accounting, actuarial science, performing arts,
 
13                consulting, athletics, financial services, or
 
14                brokerage services;
 
15           (B)  Any banking, insurance, financing, leasing,
 
16                rental, investing, or similar business; any
 
17                farming business, including the business of
 
18                raising or harvesting trees; any business
 
19                involving the production or extraction of products
 
20                of a character with respect to which a deduction
 
21                is allowable under section 611 (with respect to
 
22                allowance of deduction for depletion), 613 (with
 
23                respect to basis for percentage depletion), or
 

 
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 1                613A (with respect to limitation on percentage
 
 2                depleting in cases of oil and gas wells) of the
 
 3                Internal Revenue Code;
 
 4           (C)  Any business operating a hotel, motel, restaurant,
 
 5                or similar business; and
 
 6           (D)  Any trade or business involving a hospital, a
 
 7                private office of a licensed health care
 
 8                professional, a group practice of licensed health
 
 9                care professionals, or a nursing home.
 
10      "Qualified research" means:
 
11      (1)  The same as in section 41(d) of the Internal Revenue
 
12           Code; or
 
13      (2)  Developing, designing, modifying, programming, and
 
14           licensing computer software;
 
15 except that it shall not include research conducted outside the
 
16 State.
 
17      "Venture capital investment" means any of the following
 
18 investments in a qualified high technology business:
 
19      (1)  Common or preferred stock and equity securities without
 
20           a repurchase requirement for at least five years;
 
21      (2)  A right to purchase stock or equity securities;
 
22      (3)  Any debenture or loan, whether or not convertible or
 
23           having stock purchase rights, which are subordinated,
 

 
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 1           together with security interests against the assets of
 
 2           the borrower, by their terms to all borrowings of the
 
 3           borrower from other institutional lenders, and that is
 
 4           for a term of not less than three years, and that has
 
 5           no part amortized during the first three years; and
 
 6      (4)  General or limited partnership interests."
 
 7                              PART IV
 
 8      SECTION 35.  The legislature finds that there is a need to
 
 9 expand educational programs in science and math at Hawaii's "E
 
10 Academies", which were established by section 17 of Act 178,
 
11 Session Laws of Hawaii 1999, to afford students greater
 
12 opportunities in new educational technologies, and provide
 
13 relevant, challenging, and meaningful course offerings for
 
14 students interested in pursuing a career in advanced technology
 
15 fields.  The legislature finds that the use of "E Academies",
 
16 which are virtual, site-based schools that provide students with
 
17 industry and academic standards-based instruction and assessments
 
18 in technology, science, math, and engineering, offer enhanced
 
19 opportunities to students who are interested in furthering their
 
20 preparation for technology positions or who are interested in
 
21 advanced studies in post secondary information technology,
 
22 science, engineering, and math.
 

 
 
 
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 1      SECTION 36.  There is appropriated out of the general
 
 2 revenues of the State of Hawaii the sum of $1,000,000 or so much
 
 3 thereof as may be necessary for fiscal year 2000-2001 for the
 
 4 expansion of the department of education's E Academies to provide
 
 5 students at virtual onsite locations based at selected high
 
 6 schools with industry and academic standards-based instruction
 
 7 and assessments in technology, science, math, and engineering.  
 
 8      The sum appropriated shall be expended by the department of
 
 9 education for the purposes of this part.
 
10                              PART V
 
11      SECTION 37.  The legislature finds that there is a need to
 
12 expand the millennium workforce development training program,
 
13 which was created by section 12 of Act 178, Session Laws of
 
14 Hawaii 1999, and placed within the department of labor and
 
15 industrial relations for administrative purposes.  In particular,
 
16 the legislature finds that there is a need for Hawaii's public
 
17 community colleges to develop training programs to improve the
 
18 skills of students in those colleges for jobs in the new economy,
 
19 in such industries as biotechnology, health care, information
 
20 technology, environmental science and technology, and
 
21 telecommunications.  The development of new or enhanced programs
 
22 in these and related areas at the State's community colleges will
 

 
 
 
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                                                        H.D. 1
                                                        

 
 1 help to lessen the need to import workers and increase job
 
 2 opportunities for Hawaii's residents by improving their skills in
 
 3 these areas.
 
 4      SECTION 38.  There is appropriated out of the general
 
 5 revenues of the State of Hawaii the sum of $1,000,000 or so much
 
 6 thereof as may be necessary for fiscal year 2000-2001 to be
 
 7 expended by the University of Hawaii's community colleges for the
 
 8 purposes of establishing the Pacific center for advanced
 
 9 technology training where a coordinated statewide approach to
 
10 designing and delivering customized training to the high
 
11 technology industry in Hawaii will be implemented.  
 
12      The sum appropriated shall be expended by the University of
 
13 Hawaii for the purposes of this part.
 
14      SECTION 39.  There is appropriated out of the general
 
15 revenues of the State of Hawaii the sum of $          or so much
 
16 thereof as may be necessary for fiscal year 2000-2001 to be
 
17 expended by Hawaii's public community colleges for the purposes
 
18 of the millennium workforce development program established in
 
19 section 371-17, Hawaii Revised Statutes, to prepare students for
 
20 the workforce of the new economy.  
 
21      The sum appropriated shall be expended by the department of
 
22 labor and industrial relations for the purposes of this part.
 

 
 
 
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 1                              PART VI
 
 2      SECTION 40.  The purpose of this part is to appropriate
 
 3 funds to the University of Hawaii's college of engineering,
 
 4 college of business administration, and school of medicine, and
 
 5 the University of Hawaii at Hilo to develop new programs and
 
 6 enhance existing programs to enable Hawaii's students to more
 
 7 effectively compete for jobs in the new economy, in such
 
 8 industries as biotechnology, health care, information technology,
 
 9 environmental science and technology, and telecommunications.
 
10 The legislature finds that funding these programs for these
 
11 colleges at the University of Hawaii will assist in lessening the
 
12 need to import workers and increase job opportunities for
 
13 Hawaii's residents by improving their skills in these areas.
 
14      SECTION 41.  There is appropriated out of the general
 
15 revenues of the State of Hawaii the sum of $1,000,000 or so much
 
16 thereof as may be necessary for fiscal year 2000-2001 to conduct
 
17 advanced communications research at the University of Hawaii's
 
18 college of engineering.  
 
19      The sum appropriated shall be expended by the University of
 
20 Hawaii for the purposes of this part.
 
21      SECTION 42.  There is appropriated out of the general
 
22 revenues of the State of Hawaii the sum of $1,000,000 or so much
 
23 thereof as may be necessary for fiscal year 2000-2001 for the
 

 
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 1 expansion of research, scholarship, and instruction in electronic
 
 2 commerce at the University of Hawaii's college of business
 
 3 administration.  
 
 4      The sum appropriated shall be expended by the University of
 
 5 Hawaii for the purposes of this part.
 
 6      SECTION 43.  There is appropriated out of the general
 
 7 revenues of the State of Hawaii the sum of $1,000,000 or so much
 
 8 thereof as may be necessary for fiscal year 2000-2001 to conduct
 
 9 research in molecular genetics at the University of Hawaii's
 
10 school of medicine.  
 
11      The sum appropriated shall be expended by the University of
 
12 Hawaii for the purposes of this part.
 
13      SECTION 44.  There is appropriated out of the general
 
14 revenues of the State of Hawaii the sum of $500,000 or so much
 
15 thereof as may be necessary for fiscal year 2000-2001 to develop
 
16 new programs and enhance existing programs at the University of
 
17 Hawaii at Hilo to prepare students for the workforce of the new
 
18 economy.  
 
19      The sum appropriated shall be expended by the University of
 
20 Hawaii for the purposes of this part.
 
21                             PART VII
 
22      SECTION 45.  The legislature finds that the governor's
 
23 special advisory council for technology development, which was
 
24 established under section 3 of Act 178, Session Laws of Hawaii
 

 
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 1 1999, has the potential to make significant contributions to the
 
 2 development of the State's high technology industry.  The intent
 
 3 of the advisory council was to attract leaders in high technology
 
 4 development from around the world to Hawaii.  However, the
 
 5 legislature finds it highly unlikely that these individuals will
 
 6 come to Hawaii for this purpose if they are faced with a possibly
 
 7 lengthy senate confirmation process and must file financial
 
 8 disclosure forms with the state ethics commission.
 
 9      The legislature finds that there is no reason to subject
 
10 these individuals to confirmation hearings and the filing of
 
11 ethics disclosure forms, in view of the fact that the advisory
 
12 council is strictly advisory in nature and the members of that
 
13 council have no influence over spending or budgetary matters.
 
14 The legislature also recognizes the need to bring in persons who
 
15 have international prestige and expertise in high technology.  It
 
16 would be extremely difficult to find such highly qualified people
 
17 to serve on the council before its expiration on December 31,
 
18 2005.  Accordingly, the purpose of this part is to exempt the
 
19 members of the governor's special advisory council for technology
 
20 development from the senate confirmation process and from the
 
21 need to file a disclosure of financial interests with the state
 
22 ethics commission.
 

 
 
 
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 1      SECTION 46.  Section 27-42, Hawaii Revised Statutes, is
 
 2 amended by amending subsection (a) to read as follows:
 
 3      "(a)  There is established within the office of the
 
 4 governor, for administrative purposes, an advisory council to be
 
 5 known as the governor's special advisory council for technology
 
 6 development, that shall review and make recommendations on
 
 7 matters relating to the marketing and promotion of Hawaii as a
 
 8 location for high technology companies.  The council shall be
 
 9 composed of at least eleven but no more than twenty-five members
 
10 [appointed in accordance with section 26-34], and shall include
 
11 representatives of the high technology industry, business
 
12 leaders, educators, government leaders, and legislators."
 
13      SECTION 47.  Section 84-17, Hawaii Revised Statutes, is
 
14 amended by amending subsection (c) to read as follows:
 
15      "(c)  The following persons shall file annually with the
 
16 state ethics commission a disclosure of financial interests:
 
17      (1)  The governor, the lieutenant governor, the members of
 
18           the legislature, and delegates to the constitutional
 
19           convention; provided that delegates to the
 
20           constitutional convention shall only be required to
 
21           file initial disclosures;
 
22      (2)  The directors and their deputies, the division chiefs,
 
23           the executive directors and the executive secretaries
 

 
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 1           and their deputies, the purchasing agents and the
 
 2           fiscal officers, regardless of the titles by which the
 
 3           foregoing persons are designated, of every state agency
 
 4           and department;
 
 5      (3)  The permanent employees of the legislature and its
 
 6           service agencies, other than persons employed in
 
 7           clerical, secretarial, or similar positions;
 
 8      (4)  The administrative director of the State, and the
 
 9           assistants in the office of the governor and the
 
10           lieutenant governor, other than persons employed in
 
11           clerical, secretarial, or similar positions;
 
12      (5)  The hearings officers of every state agency and
 
13           department;
 
14      (6)  The president, the vice presidents, assistant vice
 
15           presidents, the chancellors, and the provosts of the
 
16           University of Hawaii and its community colleges;
 
17      (7)  The superintendent, the deputy superintendent, the
 
18           assistant superintendents, the district
 
19           superintendents, the state librarian, and the deputy
 
20           state librarian of the department of education;
 
21      (8)  The administrative director and the deputy director of
 
22           the courts;
 

 
 
 
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 1      (9)  The members of every state board or commission whose
 
 2           original terms of office are for periods exceeding one
 
 3           year and whose functions are not solely advisory;
 
 4           provided that the governor's special advisory council
 
 5           for technology development established pursuant to
 
 6           section 27-42 shall be exempt from this subsection;
 
 7     (10)  Candidates for state elective offices, including
 
 8           candidates for election to the constitutional
 
 9           convention, provided that candidates shall only be
 
10           required to file initial disclosures; and
 
11     (11)  The administrator and assistant administrator of the
 
12           office of Hawaiian affairs."
 
13                             PART VIII
 
14      SECTION 48.  The legislature finds that the internet is a
 
15 critical component of the new economy because of its enormous
 
16 potential to increase efficiency and raise productivity.
 
17 Internet commerce, which is probably the most significant
 
18 component of electronic commerce, or "e-commerce", includes such
 
19 areas as online financial services, consumer retain and business-
 
20 to-business transactions, media, infrastructure, and consumer and
 
21 business internet access services.
 
22      The legislature further finds that the total United States
 
23 internet economy more than doubled between 1996 and 1997, from
 
24 $15,500,000,000 to $38,800,000,000.  By 2001, it has been
 

 
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 1 projected that the total United States internet economy will be
 
 2 over $350,000,000,000.  Of this amount, business-to-business e-
 
 3 commerce is expected to account for the largest share, while
 
 4 consumer retail activity is expected to emerge more slowly,
 
 5 totaling over $18,000,000,000 in the year 2001.
 
 6      The purpose of this part is to increase the State's share of
 
 7 this significant economic activity and the facilitation of e-
 
 8 commerce in Hawaii through the development of partnerships
 
 9 between the Hawaii tourism authority and Hawaii's business
 
10 community to promote the State, through a coordinated statewide
 
11 effort, as an internet and server-friendly place to conduct
 
12 electronic commerce.
 
13      SECTION 49.  Section 201B-7, Hawaii Revised Statutes, is
 
14 amended by amending subsection (a) to read as follows:
 
15      "(a)  The authority may enter into contracts and agreements
 
16 that include the following:
 
17      (1)  Tourism promotion, marketing, and development;
 
18      (2)  Market development-related research;
 
19      (3)  Product development and diversification issues;
 
20      (4)  Promotion, development, and coordination of sports-
 
21           related activities and events;
 
22      (5)  Promotion of Hawaii, through a coordinated statewide
 
23           effort, as a place to do high technology business;
 

 
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 1     [(5)] (6)  Reduction of barriers to travel;
 
 2     [(6)] (7)  Tourism public information and educational
 
 3           programs;
 
 4     [(7)] (8)  Programs to monitor and investigate complaints
 
 5           about the problems resulting from the tourism industry
 
 6           in the State; and
 
 7     [(8)] (9)  Any and all other activities necessary to carry
 
 8           out the intent of this chapter;
 
 9 provided that for the purposes of continuity, the Hawaii Visitors
 
10 and Convention Bureau shall be the designated agency to conduct
 
11 the marketing and promotion of the State until the end of fiscal
 
12 year 1998-1999 or until a date specified by the board."
 
13                              PART IX
 
14      SECTION 50.  The purpose of this part is to improve the
 
15 effectiveness of the high technology development corporation by
 
16 providing increased autonomy and authority over its personnel and
 
17 fiscal matters.
 
18      SECTION 51.  Chapter 206M, Hawaii Revised Statutes, is
 
19 amended:
 
20      1.  By adding four new definitions to be appropriately
 
21 inserted and to read as follows:
 
22      ""Direct investment" means an investment by the corporation
 
23 in qualified securities of an enterprise to provide capital to an
 
24 enterprise.
 

 
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 1      "Qualified security" means any note, stock, treasury stock
 
 2 bond, debenture, evidence of indebtedness, certificate of
 
 3 interest or participation in any profit-sharing agreement,
 
 4 preorganization certificate of subscription, transferable share,
 
 5 investment contract, certificate of deposit for a security,
 
 6 certificate of interest or participation in a patent or patent
 
 7 application, or in royalty or other payments under such a patent
 
 8 or application, or, in general, any interest or instrument
 
 9 commonly known as a "security" or any certificate for, receipt
 
10 for, or option, warrant, or right to subscribe to or purchase any
 
11 of the foregoing.
 
12      "Seed capital" means financing provided for the earliest
 
13 stage of business development, including but not limited to
 
14 developing a working prototype, preparing a business plan,
 
15 performing an initial market analysis, or organizing a management
 
16 team.
 
17      "Venture capital investment" means any of the following
 
18 investments in a business:
 
19      (1)  Common or preferred stock and equity securities without
 
20           a repurchase requirement for at least five years;
 
21      (2)  A right to purchase stock or equity securities;
 
22      (3)  Any debenture or loan, whether or not convertible or
 
23           having stock purchase rights, which are subordinated,
 

 
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 1           together with security interests against the assets of
 
 2           the borrower, by their terms to all borrowings of the
 
 3           borrower from other institutional lenders, and that is
 
 4           for a term of not less than three years, and that has
 
 5           no part amortized during the first three years; and
 
 6      (4)  General or limited partnership interests."
 
 7      2.  By adding six new sections to be appropriately
 
 8 designated and to read:
 
 9      "§206M-    Hawaii venture capital technology revolving fund.
 
10 There is established the Hawaii venture capital technology
 
11 revolving fund for the purpose of seed capital and venture
 
12 capital investment in technology development in Hawaii.  The
 
13 following shall be deposited into the Hawaii venture capital
 
14 technology revolving fund:
 
15      (1)  Appropriations from the legislature;
 
16      (2)  Moneys received as repayments of loans;
 
17      (3)  Investment earnings;
 
18      (4)  Moneys received pursuant to a venture agreement;
 
19      (5)  Royalties; and
 
20      (6)  Premiums or fees charged by the corporation, or
 
21           otherwise received by the corporation.
 
22      §206M-    Contracts for services necessary for management
 
23 and operation of corporation.  The corporation may contract with
 
24 others, public or private, for the provision of all or a portion
 

 
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 1 of the services necessary for the management and operation of the
 
 2 corporation.  The corporation shall have the power to use all
 
 3 appropriations, grants, contractual reimbursements, and all other
 
 4 funds not appropriated for a designated purpose to pay for the
 
 5 proper general expenses and to carry out the purposes of the
 
 6 corporation.
 
 7      §206M-    Confidentiality of trade secrets or the like;
 
 8 disclosure of financial information.  Notwithstanding chapters
 
 9 92, 92F, or any other law to the contrary, any documents or data
 
10 made or received by any member or employee of the corporation, to
 
11 the extent that the material or data consist of trade secrets,
 
12 commercial or financial information regarding the operation of
 
13 any business conducted by an applicant for, or recipient of, any
 
14 form of assistance that the corporation is empowered to render,
 
15 or regarding the competitive position of that applicant in a
 
16 particular field of endeavor, shall not be a public record;
 
17 provided that if the corporation purchases a qualified security
 
18 from an applicant, the commercial and financial information,
 
19 excluding confidential business information, shall be deemed to
 
20 become a public record of the corporation.  If the information is
 
21 made or received by any member or employee of the corporation
 
22 after the purchase of the qualified security, it shall become a
 
23 public record three years from the date the information was made
 

 
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 1 or received.  Any discussion or consideration of trade secrets or
 
 2 commercial or financial information, shall be held by the board,
 
 3 or the subcommittee of the board, in executive sessions closed to
 
 4 the public; provided that the purpose of any such executive
 
 5 session shall be set forth in the official minutes of the
 
 6 corporation and business that is not related to that purpose
 
 7 shall not be transacted, nor shall any vote be taken during the
 
 8 executive sessions.
 
 9      §206M-    Private sector financial support.  Significant
 
10 private sector financial support shall be associated with any
 
11 technology development project for which the corporation provides
 
12 assistance.
 
13      §206M-    Limitations on debt owed to corporation.  Not more
 
14 than $           in financial assistance, excluding rights and
 
15 royalties under a venture capital agreement, shall be provided to
 
16 any one enterprise at any time.  The direct investments of the
 
17 corporation shall not exceed       per cent of the assets of the
 
18 corporation, excluding rights and royalties under a venture
 
19 capital agreement; provided that by a two-thirds vote of the
 
20 board, this amount may be increased to a limit of       per cent
 
21 of the total assets of the corporation.
 
22      §206M-    Limitation on liability.  Chapters 661 and 662 or
 
23 any other law to the contrary notwithstanding, nothing in this
 

 
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 1 chapter shall create an obligation, debt, claim, cause of action,
 
 2 claim for relief, charge, or any other liability of any kind
 
 3 whatsoever in favor of any person or entity, without regard to
 
 4 whether that person or entity receives any benefits under this
 
 5 chapter, against the State or its officers and employees.  The
 
 6 State and its officers and employees shall not be liable for the
 
 7 results of any investment, purchase of securities, loan, or other
 
 8 assistance provided pursuant to this chapter.  Nothing in this
 
 9 chapter shall be construed as authorizing any claim against the
 
10 corporation in excess of any note, loan, or other specific
 
11 indebtedness incurred by the corporation or in excess of any
 
12 insurance policy acquired for the corporation or its employees."
 
13      3.  By adding three new parts to be appropriately designated
 
14 and to read:
 
15           "PART  .  PROGRAM FOR SEED CAPITAL ASSISTANCE
 
16      §206M-    Establishment.  The corporation shall establish a
 
17 program for seed capital assistance.
 
18      §206M-    Seed capital investments.  Subject to this
 
19 chapter, the corporation may invest in:
 
20      (1)  A certified development company under sections 501 to
 
21           503 of the Small Business Investment Act of 1958, 15
 
22           U.S.C. sections 695 to 697, and the regulations adopted
 
23           under those sections;
 

 
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 1      (2)  A small business investment company under the Small
 
 2           Business Investment Act, 15 U.S.C. sections 631 to 634,
 
 3           636 to 649, and the regulations adopted under those
 
 4           sections;
 
 5      (3)  A minority enterprise small business investment
 
 6           corporation or equivalent venture capital corporation;
 
 7      (4)  A similar entity that may leverage its capital under a
 
 8           federal program; or
 
 9      (5)  A seed capital fund or partnership.
 
10      §206M-    Purposes and terms of investments.  (a)
 
11 Investments may be used for any purpose consistent with the
 
12 purposes and objectives of this chapter, including but not
 
13 limited to:
 
14      (1)  Developing a working prototype;
 
15      (2)  Preparing a development plan;
 
16      (3)  Performing an initial market analysis;
 
17      (4)  Organizing a management team; and
 
18      (5)  Any other purpose reasonably related to an economic
 
19           development project.
 
20      (b)  Investments may be made on such terms and conditions as
 
21 the corporation shall determine to be reasonable, appropriate,
 
22 and consistent with the purposes and objectives of this chapter.
 

 
 
 
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 1         PART   .  PROGRAM FOR VENTURE CAPITAL ASSISTANCE
 
 2      §206M-  Establishment.  The corporation shall establish a
 
 3 program for venture capital.
 
 4      §206M-    Venture capital investments.  Subject to this
 
 5 chapter, the corporation may invest in:
 
 6      (1)  A certified development company under sections 501 to
 
 7           503 of the Small Business Investment Act of 1958, 15
 
 8           U.S.C. sections 695 to 697, and the regulations adopted
 
 9           under those sections;
 
10      (2)  A small business investment company under the Small
 
11           Business Investment Act, 15 U.S.C. sections 631 to 634,
 
12           636 to 649, and the regulations adopted under those
 
13           sections;
 
14      (3)  A minority enterprise small business investment
 
15           corporation or equivalent venture capital corporation;
 
16      (4)  A similar entity that may leverage its capital under a
 
17           federal program; or
 
18      (5)  A venture capital fund or partnership.
 
19      §206M-  Purposes and terms of investments.  (a)
 
20 Investments may be used for any purpose consistent with the
 
21 purposes and objectives of this chapter.
 
22      (b)  Investments may be made on such terms and conditions as
 
23 the corporation shall determine to be reasonable, appropriate,
 
24 and consistent with the purposes and objectives of this chapter.
 

 
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 1               PART   .  PROGRAM FOR CAPITAL ACCESS
 
 2      §206M-  Establishment.  The corporation shall establish a
 
 3 program for capital access.
 
 4      §206M-    Financial assistance.  The corporation, through
 
 5 the program for capital access, may:
 
 6      (1)  Procure insurance, a guarantee, or a letter of credit
 
 7           from any source for all or a part of a loan, debenture,
 
 8           or lease of others, public or private, or a revenue
 
 9           bond issue of the State or other entity or authority
 
10           authorized by law to issue revenue bonds; and
 
11      (2)  Procure insurance, a guarantee, or a letter of credit
 
12           for either a single loan, debenture, or lease or for
 
13           any combination of loans, debentures, or leases, or a
 
14           single revenue bond issue or for all or a part of any
 
15           combination of revenue bond issues.
 
16      §206M-  Purposes and priorities required in the procuring
 
17 of insurance, loan guarantees, or letters of credit.(a)
 
18 Insurance, guarantees, or letters of credit procured pursuant to
 
19 section 211F-42 shall be procured only for economic development
 
20 projects within the State that are consistent with the purposes
 
21 and objectives of this chapter.
 
22      (b)  The corporation shall give paramount priority in
 
23 procuring insurance, guarantees, and letters of credit to
 

 
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 1 economic development projects that have the greatest potential
 
 2 for creating new jobs or retaining current jobs within the State.
 
 3      §206M-    Conditions for procuring of insurance, loan
 
 4 guarantees, or letters of credit.  (a)  Insurance, guarantees, or
 
 5 letters of credit shall not be procured pursuant to section
 
 6 211F-42 unless the corporation is assured that the loans,
 
 7 debentures, or leases insured, or guaranteed, or for which
 
 8 letters of credit are issued, shall be used to assist economic
 
 9 development projects that also have significant private sector
 
10 financial support.
 
11      (b)  Insurance, guarantees, or letters of credit may be
 
12 procured on such terms and conditions as the corporation, in its
 
13 sole discretion, shall determine to be reasonable, appropriate,
 
14 and consistent with the purposes and objectives of this chapter.
 
15      (c)  The corporation shall charge the lender or the
 
16 borrower, or both, a fee or premium for procuring loan,
 
17 debenture, or lease insurance, guarantee, or a letter of credit.
 
18 Rules for premiums or fees shall be established by the
 
19 corporation.
 
20      §206M-  Program for capital access participation
 
21 agreements.  The corporation shall enter into agreements with
 
22 lenders for participation in the program for capital access that
 
23 shall include but not be limited to:
 

 
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 1      (1)  Authorization for the lender to determine, collect, and
 
 2           transmit to the corporation a fee or premium charge
 
 3           within a specified range established consistent with
 
 4           the purposes and objectives of the corporation;
 
 5      (2)  Specification of whether the premium charge shall be
 
 6           paid by the lender, the borrower, the corporation, or
 
 7           by a combination thereof in specified proportions;
 
 8      (3)  The procedure by which a lender may make a claim upon
 
 9           the corporation upon default by the borrower, and the
 
10           conditions under which a claim may be made; and
 
11      (4)  The maximum amount of claims a lender may make upon the
 
12           corporation, which amount may be equal to or less than
 
13           the proportion of the total premiums contributed by the
 
14           corporation.
 
15      §206M-    Establishment of special funds to secure loan
 
16 insurance obligations; source of funds.  The corporation may
 
17 establish a special fund or funds for capital access into which
 
18 fees or premiums collected by the corporation are deposited."
 
19      SECTION 52.  Section 36-27, Hawaii Revised Statutes, is
 
20 amended to read as follows:
 
21      "§36-27  Transfers from special funds for central service
 
22 expenses.  Except as provided in this section, and
 
23 notwithstanding any other law to the contrary, from time to time,
 

 
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 1 the director of finance, for the purpose of defraying the
 
 2 prorated estimate of central service expenses of government in
 
 3 relation to all special funds, except the:
 
 4      (1)  Special summer school and intersession fund under
 
 5           section 302A-1310;
 
 6      (2)  School cafeteria special funds of the department of
 
 7           education;
 
 8      (3)  Special funds of the University of Hawaii;
 
 9      (4)  State educational facilities improvement special fund;
 
10      (5)  Convention center capital and operations special fund
 
11           under section 206X-10.5;
 
12      (6)  Special funds established by section 206E-6;
 
13      (7)  Housing loan program revenue bond special fund;
 
14      (8)  Housing project bond special fund;
 
15      (9)  Aloha Tower fund created by section 206J-17;
 
16     (10)  Domestic violence prevention special fund under section
 
17           321-1.3;
 
18     (11)  Spouse and child abuse special account under section
 
19           346-7.5;
 
20     (12)  Spouse and child abuse special account under section
 
21           601-3.6;
 
22     (13)  Funds of the employees' retirement system created by
 
23           section 88-109;
 

 
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 1     (14)  Unemployment compensation fund established under
 
 2           section 383-121;
 
 3     (15)  Hawaii hurricane relief fund established under chapter
 
 4           431P;
 
 5     (16)  Hawaii health systems corporation special funds;
 
 6     (17)  Boiler and elevator safety revolving fund established
 
 7           under section 397-5.5;
 
 8     (18)  Tourism special fund established under section 201B-11;
 
 9     (19)  Department of commerce and consumer affairs' special
 
10           funds;
 
11     (20)  Compliance resolution fund established under section
 
12           26-9;
 
13     (21)  Universal service fund established under chapter 269;
 
14     (22)  Integrated tax information management systems special
 
15           fund under section 231-3.2;
 
16     (23)  Insurance regulation fund under section 431:2-215;
 
17     (24)  Hawaii tobacco settlement special fund under section
 
18           328L-2; [and]
 
19     (25)  Emergency budget and reserve fund under section 328L-3;
 
20           and
 
21     (26)  High technology special fund under section 206M-15.5;
 
22 shall deduct five per cent of all receipts of all other special
 
23 funds, which deduction shall be transferred to the general fund
 

 
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 1 of the State and become general realizations of the State.  All
 
 2 officers of the State and other persons having power to allocate
 
 3 or disburse any special funds shall cooperate with the director
 
 4 in effecting these transfers.  To determine the proper revenue
 
 5 base upon which the central service assessment is to be
 
 6 calculated, the director shall adopt rules pursuant to chapter 91
 
 7 for the purpose of suspending or limiting the application of the
 
 8 central service assessment of any fund.  No later than twenty
 
 9 days prior to the convening of each regular session of the
 
10 legislature, the director shall report all central service
 
11 assessments made during the preceding fiscal year."
 
12     SECTION 53.  Section 36-30, Hawaii Revised Statutes, is
 
13 amended by amending subsection (a) to read as follows:
 
14     "(a)  Each special fund, except the:
 
15     (1)   Transportation use special fund established by section
 
16           261D-1;
 
17     (2)   Special summer school and intersession fund under
 
18           section 302A-1310;
 
19     (3)   School cafeteria special funds of the department of
 
20           education;
 
21     (4)   Special funds of the University of Hawaii;
 
22     (5)   State educational facilities improvement special fund;
 
23     (6)   Special funds established by section 206E-6;
 

 
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 1     (7)   Aloha Tower fund created by section 206J-17;
 
 2     (8)   Domestic violence prevention special fund under section
 
 3           321-1.3;
 
 4     (9)   Spouse and child abuse special account under section
 
 5           346-7.5;
 
 6     (10)  Spouse and child abuse special account under section
 
 7           601-3.6;
 
 8     (11)  Funds of the employees' retirement system created by
 
 9           section 88-109;
 
10     (12)  Unemployment compensation fund established under
 
11           section 383-121;
 
12     (13)  Hawaii hurricane relief fund established under chapter
 
13           431P;
 
14     (14)  Convention center capital and operations special fund
 
15           established under section 206X-10.5;
 
16     (15)  Hawaii health systems corporation special funds;
 
17     (16)  Tourism special fund established under section 201B-11;
 
18     (17)  Compliance resolution fund established under section
 
19           26-9;
 
20     (18)  Universal service fund established under chapter 269;
 
21     (19)  Integrated tax information management systems special
 
22           fund;
 
23     (20)  Insurance regulation fund under section 431:2-215;
 

 
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 1     (21)  Hawaii tobacco settlement special fund under section
 
 2           328L-2; [and]
 
 3     (22)  Emergency and budget reserve fund under section 328L-3;
 
 4           and
 
 5     (23)  High technology special fund under section 206M-15.5;
 
 6 shall be responsible for its pro rata share of the administrative
 
 7 expenses incurred by the department responsible for the
 
 8 operations supported by the special fund concerned."
 
 9      SECTION 54.  Section 206M-2, Hawaii Revised Statutes, is
 
10 amended by amending subsections (a) and (b) to read as follows:
 
11      "(a)  There is established the high technology development
 
12 corporation, which shall be a public body corporate and politic
 
13 and an instrumentality and agency of the State.  The development
 
14 corporation shall be placed within the department of business,
 
15 economic development, and tourism for administrative purposes,
 
16 pursuant to section 26-35.  The purpose of the development
 
17 corporation shall be to facilitate the growth and development of
 
18 the commercial high technology industry in Hawaii.  Its duties
 
19 shall include[, but not be limited to: developing]:
 
20      (1)  Developing industrial parks as high technology
 
21           innovation centers and the developing of projects
 
22           within or outside of industrial parks; [providing]
 
23      (2)  Providing support and services to Hawaii-based high
 
24           technology companies; [collecting]
 

 
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 1      (3)  Collecting and analyzing information on the state of
 
 2           commercial high technology activity in Hawaii;
 
 3           [promoting]
 
 4      (4)  Promoting and marketing Hawaii as a site for commercial
 
 5           high technology activity; [and providing]
 
 6      (5)  Providing advice on policy and planning for technology-
 
 7           based economic development[.];
 
 8      (6)  Making equity investments either directly or indirectly
 
 9           in technology companies, venture capital funds, or
 
10           other type of investment for technology development in
 
11           the state;
 
12      (7)  Establishing programs to stimulate private capital
 
13           investment in Hawaii toward investments that support
 
14           technology development;
 
15      (8)  Providing incentives to private investment activity by
 
16           co-investing public funds in private financial
 
17           organizations to increase the impact of the public
 
18           investment while using the investment acumen of the
 
19           private sector; and
 
20      (9)  Using public fund to reduce the risks of private
 
21           investments.
 
22 The corporation shall have the flexibility to provide various
 
23 types of financial assistance.  When providing financial
 

 
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 1 assistance, the corporation shall make provision for the recovery
 
 2 of its expenditures, as far as possible.
 
 3      (b)  The governing body of the development corporation shall
 
 4 consist of a board of directors having [nine] eleven voting
 
 5 members.  Seven of the members shall be appointed by the governor
 
 6 for staggered terms pursuant to section 26-34.  Six of the
 
 7 appointed members shall be from the general public and selected
 
 8 on the basis of their knowledge, interest, and proven expertise
 
 9 in, but not limited to, one or more of the following fields:
 
10 finance, commerce and trade, corporate management, marketing,
 
11 economics, engineering, and telecommunications, and other high
 
12 technology fields.  The other appointed member shall be selected
 
13 from the faculty of the University of Hawaii.  All appointed
 
14 members of the board shall continue in office until their
 
15 respective successors have been appointed.  The director of
 
16 business, economic development, and tourism [and], the director
 
17 of finance, the president of the Hawaii strategic development
 
18 corporation, and the executive director of the natural energy
 
19 laboratory of Hawaii authority, or their designated
 
20 representatives, shall serve as ex officio voting members of the
 
21 board.  The director of business, economic development, and
 
22 tourism shall serve as the chairperson until such time as a
 
23 chairperson is elected by the board from the membership.  The
 
24 board shall elect such other officers as it deems necessary."
 

 
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 1      SECTION 55.  Section 206M-2.5, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "[[]§206M-2.5[]]  Meetings of the board.  (a)  The meetings
 
 4 of the board shall be open to the public as provided in section
 
 5 92-3, except that when it is necessary for the board to receive
 
 6 information that is proprietary to a particular enterprise that
 
 7 seeks entry into or use of one of its facilities or the
 
 8 disclosure of which might be harmful to the business interests of
 
 9 the enterprise, the board may enter into an executive meeting
 
10 that is closed to the public.
 
11      (b)  The board shall be subject to the procedural
 
12 requirements of section 92-4, and this authorization shall be an
 
13 addition to the exceptions listed in section 92-5, to enable the
 
14 development corporation to respect the proprietary requirements
 
15 of enterprises with which it has business dealings.
 
16      (c)  The board shall be exempt from section 26-35(4) and
 
17 (5)."
 
18      SECTION 56.  Section 206M-3, Hawaii Revised Statutes, is
 
19 amended to read as follows:
 
20      "§206M-3 Powers, generally.  (a)  The development
 
21 corporation shall have all the powers necessary to carry out its
 
22 purposes, including the [following powers:] power to:
 
23      (1)  [To sue] Sue and be sued; 
 

 
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 1      (2)  [To have] Have a seal and alter the same at its
 
 2           pleasure; 
 
 3      (3)  [To make] Make and execute, enter into, amend,
 
 4           supplement, and carry out contracts and all other
 
 5           instruments necessary or convenient for the exercise of
 
 6           its powers and functions under this chapter including,
 
 7           subject to approval of the governor, a project
 
 8           agreement with a qualified person, and any other
 
 9           agreement whereby the obligations of a qualified person
 
10           under a project agreement shall be unconditionally
 
11           guaranteed or insured by, or the performance thereof
 
12           assigned to, or guaranteed or insured by, a person or
 
13           persons other than the qualified person; and to grant
 
14           options or renew any project agreement entered into by
 
15           it in connection with any project or industrial park,
 
16           on terms and conditions as it deems advisable;  
 
17      (4)  [To make] Make and alter bylaws for its organization
 
18           and internal management; 
 
19      (5)  [To adopt] Adopt rules under chapter 91 necessary to
 
20           effectuate this chapter in connection with industrial
 
21           parks, projects, and the operations, properties, and
 
22           facilities of the development corporation;
 

 
 
 
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 1      (6)  Through its chief executive officer, [to] appoint
 
 2           officers, agents, and employees, prescribe their duties
 
 3           and qualifications, and fix their salaries, without
 
 4           regard to chapters 76 and 77;  
 
 5      (7)  [To prepare] Prepare or cause to be prepared
 
 6           development plans for industrial parks;
 
 7      (8)  [To acquire,] Acquire, own, lease, hold, clear,
 
 8           improve, and rehabilitate real, personal, or mixed
 
 9           property and to assign, exchange, transfer, convey,
 
10           lease, sublease, or encumber any project including by
 
11           way of easements; 
 
12       (9) [To construct,] Construct, reconstruct, rehabilitate,
 
13           improve, alter, or repair, or provide for the
 
14           construction, reconstruction, rehabilitation,
 
15           improvement, alteration, or repair of any project [and
 
16           to]; designate a qualified person as its agent for such
 
17           purpose[, and to]; and own, hold, assign, transfer,
 
18           convey, exchange, lease, sublease, or encumber any
 
19           project;
 
20     (10)  [To arrange] Arrange or initiate appropriate action for
 
21           the planning, replanning, opening, grading, or closing
 
22           of streets, roads, roadways, alleys, easements, or
 
23           other places, the furnishing of improvements, the
 

 
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 1           acquisition of property or property rights, or the
 
 2           furnishing of property or services in connection with
 
 3           an industrial park; 
 
 4     (11)  [To prepare] Prepare or cause to be prepared plans,
 
 5           specifications, designs, and estimates of cost for the
 
 6           construction, reconstruction, rehabilitation,
 
 7           improvement, alteration, or repair of any project or
 
 8           industrial park, and from time to time to modify such
 
 9           plans, specifications, designs, or estimates;
 
10     (12)  [To engage] Engage the services of consultants on a
 
11           contractual basis for rendering professional and
 
12           technical assistance and advice;
 
13     (13)  [To procure] Procure insurance against any loss in
 
14           connection with its property and other assets and
 
15           operations in such amounts and from such insurers as it
 
16           deems desirable; 
 
17     (14)  [To accept] Accept and expend gifts or grants in any
 
18           form from any public agency or from any other source; 
 
19     (15)  [To issue] Issue bonds pursuant to this chapter in such
 
20           principal amounts as may be authorized from time to
 
21           time by law to finance the cost of a project or an
 
22           industrial park as authorized by law and to provide for
 
23           the security thereof as permitted by this chapter;
 

 
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 1     (16)  [To lend] Lend or otherwise apply the proceeds of the
 
 2           bonds issued for a project or an industrial park either
 
 3           directly or through a trustee or a qualified person for
 
 4           use and application in the acquisition, construction,
 
 5           installation, or modification of a project or
 
 6           industrial park, or agree with the qualified person
 
 7           whereby any of these activities shall be undertaken or
 
 8           supervised by that qualified person or by a person
 
 9           designated by the qualified person;
 
10     (17)  With or without terminating a project agreement, [to]
 
11           exercise any and all rights provided by law for entry
 
12           and re-entry upon or to take possession of a project at
 
13           any time or from time to time upon breach or default by
 
14           a qualified person under a project agreement, including
 
15           any action at law or in equity for the purpose of
 
16           effecting its rights of entry or re-entry or obtaining
 
17           possession of the project or for the payments of
 
18           rentals, user taxes, or charges, or any other sum due
 
19           and payable by the qualified person to the development
 
20           corporation pursuant to the project agreement;
 
21     (18)  [To enter] Enter into arrangements with qualified
 
22           county development entities whereby the board would
 
23           provide financial support to qualified projects
 
24           proposed; 
 

 
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 1     (19)  [To create] Create an environment in which to support
 
 2           high technology economic development, including but not
 
 3           limited to:  supporting all aspects of technology-based
 
 4           economic development; developing instructive programs,
 
 5           identifying issues and impediments to the growth of
 
 6           high technology industry in Hawaii; and providing
 
 7           policy analysis and information important to the
 
 8           development of high technology industries in Hawaii; 
 
 9     (20)  [To develop] Develop programs that support start-up and
 
10           existing high technology companies in Hawaii and to
 
11           attract new companies to relocate to or establish
 
12           operations in Hawaii by assessing the needs of these
 
13           companies and providing the physical and technical
 
14           infrastructure to support their operations;
 
15     (21)  [To coordinate] Coordinate its efforts with other
 
16           public and private agencies involved in stimulating
 
17           technology-based economic development in Hawaii,
 
18           including but not limited to:  the department of
 
19           business, economic development, and tourism; the
 
20           Pacific international center for high technology
 
21           research; and the office of technology transfer and
 
22           economic development of the University of Hawaii;
 

 
 
 
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 1     (22)  [To promote] Promote and market Hawaii as a site for
 
 2           commercial high technology activity;  
 
 3     (23)  [To provide] Provide advice on policy and planning for
 
 4           technology-based economic development; [and]
 
 5     (24)  Finance, conduct, or cooperate in financing or
 
 6           conducting technological, business, financial, or other
 
 7           investigations that are related to or likely to lead to
 
 8           business, technology, and economic development by
 
 9           making and entering into contracts and other
 
10           appropriate arrangements, including the provision of
 
11           loans, start-up and expansion capital, and other forms
 
12           of assistance;
 
13     (25)  Solicit, study, and assist in the preparation of
 
14           business plans and proposals of new or established
 
15           businesses;
 
16     (26)  Provide advice, technical and marketing assistance,
 
17           support, and promotion to enterprises in which
 
18           investments have been made;
 
19     (27) Acquire, hold, and sell qualified securities;
 
20     (28)  Consent, subject to the provisions of any contract with
 
21           noteholders or bondholders, whenever the corporation
 
22           deems it necessary or desirable in the fulfillment of
 
23           the purposes of this chapter, to the modification, with
 

 
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 1           respect to rate of interest, time of payment of any
 
 2           installment of principal or interest, or any other
 
 3           terms, of any contract or agreement of any kind to
 
 4           which the corporation is a party;
 
 5     (29)  Accept donations, grants, bequests, and devises of
 
 6           money, property, service, or other things of value that
 
 7           may be received from the United States or any agency
 
 8           thereof, any governmental agency, or any public or
 
 9           private institution, person, firm, or corporation, to
 
10           be held, used, or applied for any or all of the
 
11           purposes specified in this chapter.  Receipt of each
 
12           donation or grant shall be detailed in the annual
 
13           report of the corporation.  The report shall include
 
14           the identity of the donor or lender, the nature of the
 
15           transaction, and any conditions attaching thereto;
 
16     (30)  Invest any funds held in reserves or sinking funds, or
 
17           any funds not required for immediate disbursement, in
 
18           such investment as may be lawful for fiduciaries in the
 
19           State;
 
20     (31)  Acquire real property, or an interest therein, by
 
21           purchase or foreclosure, where that acquisition is
 
22           necessary or appropriate to protect or secure any
 
23           investment or loan in which the corporation has an
 

 
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 1           interest; sell, transfer, and convey the property to a
 
 2           buyer and if the sale, transfer, or conveyance cannot
 
 3           be effected with reasonable promptness or at a
 
 4           reasonable price, to lease the property to a tenant;
 
 5     (32)  Procure insurance against any losses in connection with
 
 6           its property in such amounts, and from such insurers,
 
 7           as may be necessary or desirable; and
 
 8     [(24) To do] (33)  Do all things necessary or proper to carry
 
 9           out the purposes of this chapter.
 
10      (b)  The corporation shall be exempt from chapters 102 and
 
11 103D."
 
12      SECTION 57.  Section 211F-3, Hawaii Revised Statutes, is
 
13 amended by amending subsection (a) to read as follows:
 
14      "(a)  The governing body of the corporation shall be a board
 
15 of directors consisting of [nine] eleven members.  Eight of the
 
16 members shall be from the general public and appointed by the
 
17 governor for staggered terms pursuant to section 26-34, and shall
 
18 be selected on the basis of their knowledge, skill, and
 
19 experience in the scientific, business, or financial fields.  The
 
20 director of business, economic development, and tourism, the
 
21 chief executive officer of the high technology development
 
22 corporation, and the executive director of the natural energy
 
23 laboratory of Hawaii authority, or [a] their designated
 

 
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 1 [subordinate,] representatives, shall serve as [an] ex officio
 
 2 voting [member.] members.  Not more than two of the eight
 
 3 appointed members of the board, during their term of office on
 
 4 the board, shall be employees of the State.  Of the members
 
 5 appointed by the governor, one member shall be appointed from a
 
 6 list of nominees provided by the speaker of the house of
 
 7 representatives and one member shall be appointed from a list of
 
 8 nominees provided by the president of the senate.  All appointed
 
 9 members of the board shall continue in office until their
 
10 respective successors have been appointed."
 
11      SECTION 58.  Section 227D-2, Hawaii Revised Statutes, is
 
12 amended by amending subsection (b) to read as follows:
 
13      "(b)  The governing body of the authority shall consist of a
 
14 board of directors having [nine] eleven voting members.  Three
 
15 members from the general public shall be appointed by the
 
16 governor for staggered terms pursuant to section 26-34, except
 
17 that one of these members shall be a resident of the county of
 
18 Hawaii.  For the first term, one of these members shall be
 
19 appointed from the board of the high technology development
 
20 corporation.  The members shall be selected on the basis of their
 
21 knowledge, interest, and proven expertise in, but not limited to,
 
22 one or more of the following fields: finance, commerce and trade,
 
23 corporate management, marketing, economics, engineering, energy
 

 
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 1 management, real estate development, property management,
 
 2 aquaculture, and ocean science.  The chairperson and secretary of
 
 3 the research advisory committee shall serve on the board.  The
 
 4 director of business, economic development, and tourism, the
 
 5 chairperson of the board of land and natural resources, the
 
 6 president of the University of Hawaii, [and] the mayor of the
 
 7 county of Hawaii, the chief executive officer of the high
 
 8 technology development corporation, and the president of the
 
 9 Hawaii strategic development corporation, or their designated
 
10 representatives, shall serve as ex officio, voting members of the
 
11 board.  The director of business, economic development, and
 
12 tourism shall serve as the chairperson until such time as a
 
13 chairperson is elected by the board from the membership.  The
 
14 board shall elect other officers as it deems necessary."
 
15      SECTION  59.  The department of business, economic
 
16 development, and tourism and the high technology development
 
17 corporation shall:
 
18      (1)  Evaluate the effectiveness of the Hawaii capital loan
 
19           program;
 
20      (2)  Examine how the Hawaii capital loan program can
 
21           increase its support of capital loan financing needs of
 
22           high technology businesses in the state; and
 

 
 
 
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 1      (3)  Submit a report of the findings and recommendations,
 
 2           including an implementation plan to increase the
 
 3           capital loan financing needs of high technology
 
 4           businesses in the state, to the legislature no later
 
 5           than twenty days before the convening of the regular
 
 6           session of 2001.
 
 7      SECTION 60.  Statutory material to be repealed is bracketed.
 
 8 New statutory material is underscored.
 
 9      SECTION 61.  This Act shall take effect upon its approval;
 
10 provided that:
 
11      (1)  Parts IV, V, and VI shall take effect on July 1, 2000;
 
12           and
 
13      (2)  Part II, upon its approval, shall apply to taxable
 
14           years beginning after December 31, 1999.