Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committees on Intergovernmental Affairs and Judiciary and Hawaiian Affairs, to which was referred H.B. No. 393, H.D. 1, entitled:

beg leave to report as follows:

The purpose of this measure is to clarify that unpaid civil fines and unpaid administratively imposed fines of a county do not become part of any taxes, fees, or charges of the county, and do not constitute a lien in favor of the county upon any property and rights to property belonging to debtors.

Your Committees received testimony in support of this measure from the Mortgage Bankers Association of Hawaii, Hawaii Bankers Association, and Hawaii Financial Services Association. Testimony in opposition was received from the Honolulu Department of Planning and Permitting.

Act 168, Session Laws of Hawaii 1993, enacted an amendment to section 46-1.5, Hawaii Revised Statutes, to empower the counties to enact an ordinance for the addition of any unpaid civil fines and any unpaid administratively imposed fines to any taxes, fees, or charges owing to the county. This measure is an outgrowth of concerns raised by the commercial lending institutions that a county can attach unpaid fines to real property taxes, which would have a lien priority over mortgage liens. The effect is that a mortgage lender may become liable for paying the county lien in a mortgage foreclosure. In addition, a potential mortgage lender has no way of knowing of any unpaid civil fines owing to the county by the potential mortgagee because such fines are not recorded anywhere.

While only one county has of late exercised the right under Act 168 and while the amount actually added to real property taxes has been small, on the order of $1,500 according to testimony, your Committees believe that the counties should nonetheless retain their rights under Act 168 which would be effectively extinguished by this measure. According to testimony, real property tax attachments are the last resort for the counties to attach anything of value of the delinquent debtor. All other avenues of collection are exhausted first, often two years or longer after the debt is incurred.

Testimony further indicated that the parties are collaborating on reaching a consensus on this issue, perhaps negating the necessity for this measure. Testimony indicated that possible amendments to this measure are to limit the amount of the lien, require a notice be filed with the land court or the bureau of conveyances, or making the county's lien subordinate to the mortgage lien. With this in mind, your Committees pass this measure to the Committee on Ways and Means.

As affirmed by the records of votes of the members of your Committees on Intergovernmental Affairs and Judiciary and Hawaiian Affairs that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 393, H.D. 1, and recommend that it pass Second Reading and be referred to the Committee on Ways and Means.