STAND. COM. REP. NO. 2965

                                   Honolulu, Hawaii
                                                     , 2000

                                   RE:  H.B. No. 839
                                        H.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 2000
State of Hawaii

Sir:

     Your Committees on Labor and Environment and Transportation
and Intergovernmental Affairs, to which was referred H.B.
No. 839, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO THE GENERAL EXCISE TAXATION
     OF WASTEWATER LEASING,"

beg leave to report as follows:

     The purpose of this measure is to exempt from the general
excise tax the value or gross proceeds received from any county
by an operator of a wastewater treatment plant.

     Testimony in support of this measure was received from the
City and County of Honolulu, Department of Environmental Services
and U.S. Filter Operating Services, Inc. (USFOS).  Testimony in
opposition to this measure was submitted by the Department of
Taxation.  The Tax Foundation submitted comments on this measure.

     Your Committees find that this measure will exempt USFOS
from the general excise tax on the value or gross proceeds
received from the City and County of Honolulu for the purchase of
recycled water from its wastewater treatment plant in Honouliuli,
Oahu.  According to the testimony of USFOS, the excise tax
exemption will amount to approximately $100,000.  USFOS estimates
that the general excise tax the company will pay on water sold to
private entities will be in excess of $100,000.

     Your Committees find that it is in the public interest to
support the efforts of the City and County to meet its federally

 
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                                   STAND. COM. REP. NO. 2965
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mandated requirements for reuse of wastewater effluent.  In
addition, the City and County will be subject to fines and
penalties if it does not meet these requirements.  The project is
scheduled to begin producing water in August, 2000.  The
public/private partnership between the City and County and USFOS
will ultimately result in the beneficial use of approximately ten
million gallons per day of recycled water.

     As affirmed by the records of votes of the members of your
Committees on Labor and Environment and Transportation and
Intergovernmental Affairs that are attached to this report, your
Committees are in accord with the intent and purpose of H.B.
No. 839, H.D. 1 and recommend that it pass Second Reading and be
referred to the Committee on Ways and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committees on Labor and
                                   Environment and Transportation
                                   and Intergovernmental Affairs,



____________________________       ______________________________
CAL KAWAMOTO, Chair                BOB NAKATA, Chair

 
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