Honorable Robert Bunda

President of the Senate

Twenty-Second State Legislature

Regular Session of 2003

State of Hawaii

Sir:

Your Committee on Ways and Means, to which was referred S.B. No. 1477, S.D. 1, entitled:

begs leave to report as follows:

The purpose of this measure is to enable the counties to enter into lease/leaseback transactions of certain of their assets in such a manner that they retain complete operating control of the assets while also enjoying significant cash benefits.

Your Committee finds that this measure would allow the counties to enter into agreements with private third parties whereby they grant a long-term leasehold interest in their water supply, waste water, or other waste disposal systems to the third party and then lease the same system back for a lesser lease term, thereby maintaining title and physical control over the system. Upon execution of the long-term lease, the county will receive a one time front end lease payment of the full one hundred per cent value of the leased system. The major portion of the payment is deposited into a defeasance deposit which is guaranteed by a highly rated financial institution and is set up to make all the leaseback payments to the private third party for the term of the leaseback. The remainder portion of the front end lease payment, which could represent in some cases approximately three to four per cent of the fair market value of the leased system, would be an immediate cash benefit to the county.

Your Committee further finds that these transactions have been entered into successfully and safely by other municipalities in other states for years.

Your Committee has made technical nonsubstantive changes for purposes of clarity and style.

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 S.B. No. 1477, S.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as S.B. No. 1477, S.D. 2.