Provides seed money to establish the charter schools facilities fund partnership. Provides a tax credit to landlords who rent or lease to charter schools. Encourages the State to enter into leases charter schools at rates comparable to other State agencies. Reimburses new century charter schools for rent, lease, or mortgage payments for charter school facilities.

A BILL FOR AN ACT

PART I

SECTION 1. The legislature finds that, given the State's limited resources, the lack of facilities funding is one the biggest challenges facing Hawaii's charter schools. To help minimize the financial burden on the State for underwriting facilities, the legislature believes it can help to leverage scarce public resources through a partnership similar to the Hawaii 3R's program. Like the Hawaii 3R's program, the partnership would be:

While the Hawaii 3R's program focuses on repair and maintenance, the charter school facilities fund partnership would focus on providing below market loans to charter schools for buildings and capital improvements of their facilities. The purpose of the partnership or financing "hui" would be to create and administer a revolving loan fund.

The Los Angeles charter school new market loan fund could serve as the model for Hawaii's initiative. The fund makes loans possible with funding from the private sector. As an added incentive, businesses, communities, and financial lenders are able to take advantage of federal community development and tax credits under the federal Community Reinvestment Act and the federal new markets tax credit program. The fund has also partnered with Excellence Education Through Charter Schools, a nonprofit research and development corporation, to underwrite and service each loan.

The fund initially focused on fostering investment in low-income areas, defined in the federal census tract as areas with eighty per cent or less of the State's median income. If Hawaii were to use the same criteria, eleven of Hawaii's twenty-seven existing charter schools could qualify for loans under this model. In addition to the low-income requirement, Hawaii could also permit schools with a concentration of native Hawaiians to be considered applicants in a pilot program of this nature.

Potential partners from the public and nonprofit sectors could include the office of the governor, the department of business, economic development, and tourism, the department of land and natural resources, the department of Hawaiian homelands, the office of Hawaiian affairs, the task force on charter school governance, and the Kamehameha Schools. Private partners could include the Bank of Hawaii and American Savings Bank, who have already expressed a preliminary, tentative interest in technical financial assistance to charter schools through the Kamehameha Schools' Hoolako Like program. Potential organizations that could serve as incubators include the Hawaii Charter School Network or the Hawaii Community Loan Fund.

For the purpose of assuring the long-term viability of the charter school facilities fund partnership, the State may also, in the long run, provide ongoing support by:

The purpose of this part is to provide seed money to help establish the charter schools facilities fund partnership, whose initial planning, organization, and development shall be undertaken by the charter school administrative office.

SECTION 2. There is appropriated out of the general revenues of the State of Hawaii the sum of $          , or so much thereof as may be necessary for fiscal year 2006-2007, as seed funds for the charter school administrative office to plan, organize, and develop the charter schools facilities fund partnership.

SECTION 3. The charter school administrative office shall prepare and submit a progress report on its activities pursuant to section 2, including any proposed legislation, to the legislature no later than twenty days prior to the convening of the regular session of 2007.

PART II

SECTION 4. The legislature finds that Hawaii's public charter schools often have difficulty finding suitable facilities to rent or lease for their instructional and administration facilities. New charter schools have even more difficulty in renting or leasing facilities, as landlords are reluctant to enter into a rental or lease agreement with a new charter school or its associated nonprofit organization.

The purpose of this part is to provide an incentive to a landlord to rent or lease property to a new century charter school or its associated nonprofit organization by providing a tax credit to the landlord.

SECTION 5. Chapter 235, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§235-   Tax credit for landlords leasing or renting to a charter school or its associated nonprofit organization. (a) There shall be allowed to each taxpayer that is a qualifying landlord and subject to the taxes imposed by this chapter, a tax credit in the amount of up to fifteen per cent of the income generated by a property or portion of a property that the landlord rents or leases to a new century charter school or its associated nonprofit organization. The landlord shall rent or lease a property at fifteen per cent below the market rate for comparable rentals or leases. The amount of the tax credit shall be equal to the difference between the below market rate the landlord is charging the school or nonprofit organization and the market rate for a comparable rental.

(b) The tax credit shall be deductible from the taxpayer's net income tax liability imposed by this chapter for the taxable year in which the tax credit is properly claimed.

(c) The director of taxation shall prepare forms as may be necessary to claim a credit under this section. The director may also require the taxpayer to furnish information to ascertain the validity of the claim for credit made under this section and may adopt rules as necessary to effectuate the purposes of this section pursuant to chapter 91.

(d) This section does not apply to new century conversion charter schools."

PART III

SECTION 6. Public charter schools have great difficulty with leasing affordable land on which to locate schools due to prohibitive costs and zoning restrictions. The legislature believes that charter schools, with their status as public schools and state agencies, should have access to state-held lands and buildings and enjoy comparable rates and conditions as those afforded other state agencies.

The purpose of this part is to encourage the State to enter into long-term leases of lands and buildings with charter schools for the location of school facilities.

SECTION 7. Chapter 171, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§171-   Lease to public charter schools. Notwithstanding any limitations to the contrary, the board of land and natural resources may lease to new century charter schools, at nominal consideration, by direct negotiation and without recourse to public auction, public lands and buildings under the control of the department of land and natural resources. Except as provided in this section, the terms and conditions of sections 171-33 and 171-36 shall apply. The lands and buildings leased under this section shall be used by the charter schools for educational purposes only. This section shall not apply to new century conversion charter schools."

PART IV

SECTION 8. The legislature finds that lack of facilities funding is a significant financial and operational challenge for new century charter schools, as they often find rent, lease, or mortgage costs prohibitive. The capacity to provide a long-term physical location, infrastructure maintenance, and building improvements will contribute to the successful development and stability of individual charter schools.

The purpose of this part is to assist with stabilizing new century charter schools by providing a reimbursement for their rent, lease, or mortgage payments.

SECTION 9. Chapter 302A, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§302A-   Facilities rent, lease or mortgage payment reimbursement. (a) Notwithstanding any law to the contrary, the department of education shall reimburse individual new century charter schools to offset costs incurred by the charter school for rent, lease, or mortgage payments. The reimbursement shall not apply to repair, maintenance, or improvement costs of charter school facilities.

(b) The sum reimbursed shall be provided not less than two months prior to the end of the fiscal year and shall reflect only the actual expenses incurred. To qualify for the reimbursement, each charter school shall report its actual rent, lease, or mortgage expenses to the charter school administrative office and provide substantiation of these expenses in the form of paid receipts, cancelled checks, and a copy of the current rent, lease, or mortgage agreement. The reimbursement shall be recorded separately from the general per pupil allocation provided for in section 302A-1185, so that it may be easily identified and tracked for matching grants.

(c) The amount of reimbursement shall not be subject to any charges or withholding by any state department or agency, including the charter school administrative office. In the event that a state department or agency, including the charter school administrative office, provides substantive support services to a charter school for facilities acquisition, maintenance, or improvement, there shall be a memorandum of agreement between the individual charter school and the relevant state department or agency to determine the fee to be paid by the individual charter school to the state department or agency.

(d) The reimbursement amount is subject to the same encumbrance for reserve restrictions as any other allocation that the charter school receives from the State."

SECTION 10. There is appropriated out of the general revenues of the State of Hawaii the sum of $          , or so much thereof as may be necessary for fiscal year 2006-2007, for rent, lease, or mortgage expenses for charter school facilities.

SECTION 11. The sums appropriated in sections 2 and 10 shall be expended by the department of education for the purposes of this Act.

SECTION 12. New statutory material is underscored.

SECTION 13. This Act shall take effect upon its approval, provided that: