Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred H.B. No. 2848, H.D. 1, S.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to propose amendments to the state constitution that would authorize the State to issue special purpose revenue bonds and use the proceeds from the bonds to assist not-for-profit private nonsectarian and sectarian elementary schools, secondary schools, colleges, and universities.

Because the interest on special purpose revenue bonds is exempt under applicable federal and state income tax laws, your Committee finds that investors are willing to loan money at lower than usual interest rates. Issuers can obtain loans that are up to two percentage points—or twenty-five per cent—below commercial (interest) rates because of these income tax exemptions. A lower interest rate results in lower costs to the private business on whose behalf special purpose revenue bonds have been issued.

Your Committee has amended this measure by proposing amendments to the state constitution that would authorize the State and its political subdivisions to combine into a single issue of special purpose revenue bonds two or more proposed issues of special purpose revenue bonds, separately authorized, in the total amount of not exceeding the aggregate of the proposed separate issues of special purpose revenue bonds. This provision could be used by the State to reduce the costs of issuing special purpose revenue bonds on behalf of not-for-profit private nonsectarian and sectarian elementary schools, secondary schools, colleges, and universities.

Your Committee notes that the addition of a generalized bond pooling concept, as suggested in testimony may violate article III, section 14 of the state constitution as it applies to H.B. No. 2848, H.D. 1, S.D. 2. Because the pooling concept applies to special purpose revenue bonds issued on behalf of:

the breadth of this bill may be deemed to be greater than its title.

It is the intention of your Committee that this matter and other matters (such as the defective effective date), be addressed by your Committee on Conference.

As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 2848, H.D. 1, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 2848, H.D. 1, S.D. 2.