Exempts affordable housing projects from the GET; streamlines the review and approval of affordable housing projects; increases portion of the conveyance tax dedicated to the rental housing trust fund from 25% to 50%; repeals rental housing trust fund advisory commission.

A BILL FOR AN ACT

SECTION 1. The purpose of this Act is to encourage the development of affordable rental housing units by streamlining the review and approval of affordable housing projects and providing financing incentives.

SECTION 2. Chapter 237, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§237- Affordable housing development exemption. (a) There shall be an exemption from the taxes imposed by this chapter for the development of affordable housing. The housing and community development corporation of Hawaii may certify for exemption any qualified person involved with the planning, design, financing, construction, or marketing of affordable housing units developed by a private developer upon receipt of an application; provided that in the case of projects involving the development of market-price as well as affordable housing units, the exemption under this section shall apply exclusively to the units developed as affordable housing units as defined in subsection (e).

(b) All claims for exemption shall be filed with and certified by the housing and community development corporation of Hawaii and forwarded to the department of taxation. The housing and community development corporation of Hawaii shall not be considered a governmental contracting party when it approves any claim for exemption for the purposes of section 104-2.

(c) The exemption shall apply to all amounts received by any certified person for the planning, design, financing, construction, or marketing in the State of affordable housing units as described in subsection (a), and on which actual construction has started between July 1, 2005, and December 31, 2006, and which is completed by June 30, 2008, as verified by the housing and community development corporation of Hawaii; provided that the exemption shall not be applied until verification by the housing and community development corporation of Hawaii has been completed; provided further that in the event that the developer is delayed or hindered from completing the project by reason of floods, earthquakes (or other acts of nature), strikes, lockouts, inability to procure materials, failure of power, riots, insurrection, war, civil or criminal proceedings, injunctions, writs, appeals, stays, or other reason of a like nature, that is not the fault of or capable of being prevented by the developer, then the June 30, 2008 completion deadline may be extended for a period equivalent to the period of the delay. In the event of a delay, the developer shall be required to submit verification of the date of commencement as well as the date of cessation of any of the delaying events, to the housing and community development corporation of Hawaii for verification.

(d) The exemption shall apply only to projects containing the first two thousand five hundred affordable housing units that are certified and completed by June 30, 2008. The amount of the exemption shall not exceed $4,000 in taxes exempted per affordable housing unit.

(e) For the purposes of this section:

"Actual construction" means the date that the first permit is issued for the development of the project, including permits for off-site improvements that may be required by the county zoning or land use agency.

"Affordable housing units" means housing units that are sold or rented at rates affordable to households earning up to one hundred forty per cent of the area median income as determined by the United States Department of Housing and Urban Development.

"Completion" means the date of the notice of completion for the affordable housing unit or the building or buildings that the affordable housing unit is located within.

(f) The provisions of this section shall apply to property subject to chapter 238, Hawaii Revised Statutes."

SECTION 3. Section 201G-3, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) There is created a board consisting of nine members, of whom six shall be public members appointed by the governor as provided in section 26-34. Public members shall be appointed from each of the counties of Honolulu, Hawaii, Maui, and Kauai. [One public member shall be the chairperson of the rental housing trust fund advisory commission.] One public member shall be a person appointed from a list of nominees submitted by the continuum of care system of each county. Each county continuum of care system shall submit three nominees. For purposes of this section, "continuum of care system" shall have the same meaning that it does in Title 24, Code of Federal Regulations, section 586.5. At least one public member shall be a person who is directly assisted by the corporation under the federal low-rent public housing or federal section 8 tenant-based housing assistance payments program while serving on the board. The public members of the board shall serve four-year staggered terms; provided that the initial appointments shall be as follows: two members to be appointed for four years; two members to be appointed for three years; and one member to be appointed for two years. [The chairperson of the rental housing trust fund advisory commission shall serve a concurrent term on the board.] The director of business, economic development, and tourism and the director of human services, or their designated representatives, and a representative of the governor's office, shall be ex officio voting members. The corporation shall be headed by the board."

SECTION 4. Section 201G-116, Hawaii Revised Statutes, is amended by amending subsections (a) and (b) to read as follows:

"(a) In accordance with section 237-29, the corporation may approve and certify for exemption from general excise taxes any qualified person or firm involved with the planning, design, financing, construction, or marketing of a proposed newly constructed, or moderately or substantially rehabilitated project:

(b) All claims for exemption under this section shall be filed with and certified by the corporation and forwarded to the department of taxation. Any claim for exemption that is filed and approved, shall not be considered a subsidy for the purpose of this subpart. The corporation shall not be considered a contracting party when it approves any claim for exemption for the purposes of section 104-2."

SECTION 5. Section 201G-121, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) In any county, the corporation may develop or may enter into agreements for housing projects with an eligible developer if in the corporation's reasonable judgment a project [is primarily designed for lower income housing.] provides a reasonable number of lower income housing units. The agreement may provide for the housing to be placed under the control of the corporation, or to be sold by the corporation, or to be sold to the corporation [as soon as the units are completed], or be sold to an eligible purchaser, or rented to an eligible renter when the units are available for occupancy and shall contain terms, conditions, and covenants as the corporation, by rules, deems appropriate. Every agreement shall provide for the developer or the general contractor to furnish a performance bond, in favor of the corporation, assuring the timely and complete performance of the housing project[.]; provided that this requirement may be subordinated for purposes of financing. Sureties on the bond must be satisfactory to the corporation."

SECTION 6. Section 201G-123, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) The interim loans shall be secured by a duly recorded [first] primary or secondary mortgage upon the fee simple or leasehold interest in the land upon which the dwelling units are constructed, or the corporation may require other security interests and instruments as it deems necessary to secure the indebtedness and such other conditions consistent with the production and marketing of dwelling units at the lowest possible prices. The corporation may also set the conditions of a loan in a building and loan agreement between the borrower and the corporation in order to secure the loan and the performance of the borrower to complete the project."

SECTION 7. Section 201G-411, Hawaii Revised Statutes, is amended to read as follows:

"§201G-411 Dwelling unit revolving fund. There is created a dwelling unit revolving fund. The funds appropriated for the purpose of the dwelling unit revolving fund and all moneys received or collected by the corporation for the purpose of the revolving fund shall be deposited in the revolving fund. The proceeds in the revolving fund shall be used to reimburse the general fund to pay the interest on general obligation bonds issued for the purposes of the revolving fund, for the necessary expenses in administering subpart F, part II, and for carrying out the purposes of subpart F, part II, including but not limited to the expansion of community facilities constructed in conjunction with housing projects, permanent primary or secondary financing, and supplementing building costs, federal guarantees required for operational losses, and all things required by any federal agency in the construction and receipt of federal funds or low-income housing tax credits for housing projects."

SECTION 8. Section 201G-431, Hawaii Revised Statutes, is amended by deleting the definition of "advisory commission".

[""Advisory commission" means the rental housing trust fund advisory commission established by this subpart."]

SECTION 9. Section 201G-432, Hawaii Revised Statutes, is amended to read as follows:

"§201G-432 Rental housing trust fund. (a) There is hereby established a rental housing trust fund to be placed within the corporation.

(b) An amount from the fund, to be set by the corporation and authorized by the legislature, may be used for administrative expenses incurred by the corporation in administering the fund; however, fund moneys may not be used to finance day-to-day administrative expenses of projects allotted fund moneys.

(c) The following may be deposited into the fund: appropriations made by the legislature, private contributions, repayment of loans, interest, other returns, and moneys from other sources.

(d) The fund shall be used to provide loans or grants for the development, pre-development, construction, acquisition, preservation, and substantial rehabilitation of rental housing units. Permitted uses of the fund may include but are not limited to planning, design, land acquisition, costs of options, agreements of sale, downpayments, equity financing, capacity building of nonprofit housing developers, or other housing development services or activities as provided in rules adopted by the corporation pursuant to chapter 91. The rules may provide for a means of recapturing loans or grants made from the fund if a rental housing project financed under the fund is refinanced or sold at a later date. The rules may also provide that moneys from the fund shall be leveraged with other financial resources to the extent possible.

[(e) Moneys in the fund shall be used for the purpose of providing in whole or in part loans or grants for housing projects wherein:

(f) Commencing with fiscal year 1999-2000, at the close of each biennium, at least one-third of the funds allocated to construction projects for the period shall have been committed to projects that guarantee affordable units to persons or families with incomes at or below thirty per cent of the median income pursuant to [subsection] (e)(2). Commencing with the regular session of 2000, the corporation shall submit an annual report to the legislature documenting existing projects in compliance with this subsection no later than twenty days prior to the convening of each regular session.]

(e) To the extent possible, at least five per cent of the units developed from the fund allocated to construction shall be reserved for persons or households with incomes at or below thirty per cent of the median income.

[(g)] (f) For the purposes of this subpart, the applicable median family income shall be the median family income for the county or standard metropolitan statistical area in which the project is located as determined by the United States Department of Housing and Urban Development, as adjusted from time to time.

[(h)] (g) Providing loans and grants under this section; provided that the corporation [shall] may establish loan-to-value ratios to protect the fund from inordinate risk [and that under no circumstances shall the rules permit the loan-to-value ratio to exceed ninety-five per cent]; and provided further that the underwriting guidelines include a debt-coverage ratio of not less than [1.05 to 1.] 1.0 to 1.0."

SECTION 10. Section 201G-434, Hawaii Revised Statutes, is amended to read as follows:

"[[]§201G-434[]] Duties of the [advisory commission.] corporation. (a) In addition to any other duties granted by this subpart, the [advisory commission shall advise and assist the board of the corporation,] corporation shall evaluate the fund program each year, and report its evaluation with suggested changes to the legislature not fewer than twenty days before the convening of each regular session starting with the regular session of 1998.

(b) In addition to any other powers and duties granted under subsection (a), the [commission] corporation shall:

SECTION 11. Section 201G-435, Hawaii Revised Statutes, is amended to read as follows:

"[[]§201G-435[]] Eligible applicants for funds. Eligible applicants for funds shall include nonprofit and for-profit [developers, including] corporations, limited liability corporations and partnerships, partnerships, and government agencies, who are qualified in accordance with rules adopted by the corporation pursuant to chapter 91."

SECTION 12. Section 201G-436, Hawaii Revised Statutes, is amended to read as follows:

"[[]§201G-436[]] Eligible projects. (a) Activities eligible for assistance from the fund shall include but not be limited to:

(b) [Preference shall be given to projects producing] An eligible project shall produce units in at least one of the following categories:

(c) The corporation shall establish an application process for fund allocation that gives preference to projects meeting the criteria set forth below [that are listed in descending order of priority]:

The corporation may include other criteria in the above process as it deems necessary to carry out the purposes of this part.

If the corporation, after applying the process described in this subsection, finds a nonprofit project equally ranked with a for-profit or government project, the corporation shall give preference to the nonprofit project in allotting fund moneys."

SECTION 13. Section 247-7, Hawaii Revised Statutes, is amended to read as follows:

"§247-7 Disposition of taxes. All taxes collected under this chapter shall be paid into the state treasury to the credit of the general fund of the State, to be used and expended for the purposes for which the general fund was created and exists by law; provided that of the taxes collected each fiscal year, [twenty-five] fifty per cent shall be paid into the rental housing trust fund established by section 201G-432 and twenty-five per cent shall be paid into the natural area reserve fund established by section 195-9; provided that the funds paid into the natural area reserve fund shall be annually disbursed by the department of land and natural resources after joint consultation with the forest stewardship committee and the natural area reserves system commission in the following priority:

SECTION 14. Section 201G-433, Hawaii Revised Statutes, is repealed.

["§201G-433 Rental housing trust fund advisory commission. (a) There is established within the corporation the rental housing trust fund advisory commission consisting of seven members, five of whom shall be public members and appointed pursuant to section 26-34. The public members of the advisory commission shall serve four-year staggered terms; provided that the initial appointments shall be as follows: two members to be appointed for four years; two members to be appointed for three years; and one member to be appointed for two years. As part of this appointment process, an appropriate organization from each of the categories of organizations enumerated below shall submit a list of three public member nominees to the governor. The governor shall select and appoint one public member from each list.

The public members shall be representative of the following categories of organizations:

A county government official who shall be appointed for a two-year term on a rotating basis among counties and the governor's designated representative shall be ex officio voting members of the advisory commission.

(b) The chairperson shall be a public member elected by the members of the advisory commission and shall serve not more than two one-year terms as chair.

(c) The vice-chair shall be a public member elected by the members of the advisory commission.

(d) Four members shall constitute a quorum. Four affirmative votes shall be necessary for all actions by the advisory commission.

(e) The members shall receive no compensation for services, but shall be entitled to necessary expenses, including traveling expenses, incurred in the performance of their duties.

(f) The advisory commission shall advise and serve as the liaison between the board of the corporation and the general public."]

SECTION 15. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 16. This Act shall take effect upon its approval.