Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2001

State of Hawaii

Sir:

Your Committee on Transportation, Military Affairs and Government Operations, to which was referred S.B. No. 1054 entitled:

begs leave to report as follows:

The purpose of this measure is to establish a centralized master lease financing program to provide state agencies a tax exempt financing option for purchases of real or personal property, to be spread over the estimated useful life of the property purchased.

Your Committee received testimony in support of this measure from the Department of Budget and Finance, the University of Hawaii, and from Hawaii Health Systems Corporation.

Your Committee finds that this measure will give state agencies the means to finance a wider range of assets at tax exempt rates than is possible under existing law. With these amendments, state agencies can finance equipment purchases over the useful life of the equipment rather than paying cash up front. By allocating the cost of equipment over the life of the equipment, agencies will only have to pay each year for their annual use of the equipment.

In addition, your Committee finds that a lease financing program will allow the State to aggregate several agency purchases into fewer larger ones in order to negotiate more favorable terms than each agency could separately negotiate.

Your Committee amended this measure, based on the testimony of the Department of Budget and Finance and the University of Hawaii, to retain Hawaii Health Systems Corporation's exemption from chapter 37D so that it can continue to enter into its own financing arrangements. Your Committee also made technical, nonsubstantive amendments for clarity.

As affirmed by the record of votes of the members of your Committee on Transportation, Military Affairs and Government Operations that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1054, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1054, S.D. 1, and be referred to the Committee on Ways and Means.