Provides a tax credit, rent or lease costs and maintenance, repair or improvement costs of charter school facilities. Allows developers to pay impact fees to charter schools. Allows charter schools to lease state lands and buildings. Provides seed money to establish the charter schools facilities fund partnership.

A BILL FOR AN ACT

PART I

SECTION 1. 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 2. 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. The tax credit may be claimed for only one year.

(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 II

SECTION 3. The legislature finds that lack of facilities funding is a significant financial and operational challenge for new century charter schools. Current funding for new century charter schools is calculated on a per-pupil allocation for each regular education and special education student based upon average enrollment in all cost categories, as published in the department of education's consolidated annual financial report. However, there is no allocation for charter schools to establish and maintain the school facilities. The capacity to provide a long-term physical location, infrastructure maintenance, and building improvements contributes to the successful development and stability of individual charter schools.

The purpose of this part is to provide additional funding for new century charter schools to use for rent or lease costs and repair, maintenance, and improvement costs for charter school facilities.

SECTION 4. Chapter 302A, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§302A-   Facilities funding for new century charter schools. (a) The department of education shall allocate funds to new century charter schools for the purpose of facilities rent or lease costs and repair, maintenance, and improvement costs. The amount provided shall be calculated on a per-pupil basis. The formula for the allocation shall be based on a five-year average of the department of education's debt service level as provided in the department's most recent consolidated annual financial report. The allocation for facilities is in addition to any other per-pupil allocation currently authorized under this chapter and received by the charter schools.

(b) The allocation shall not be subject to any charges or other 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 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.

(c) To enable new century charter schools to access state funding prior to the start of each school year, foster their fiscal planning, and enhance their accountability, the department shall allocate funds on the same schedule as the per pupil general allocation pursuant to section 302A-1185(c). This section does not apply to new century conversion charter schools."

SECTION 5. 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 or lease costs and repair, maintenance, or improvement costs for new century charter school facilities.

SECTION 6. The sum appropriated shall be expended by the department of education for the purposes of this Act.

PART III

SECTION 7. The purpose of this part is to allow charter schools to receive a percentage of the impact fees paid by residential developers to the counties.

SECTION 8. Section 46-144, Hawaii Revised Statutes, is amended to read as follows:

"§46-144 Collection and expenditure of impact fees. (a) Collection and expenditure of impact fees assessed, imposed, levied, and collected for development shall be reasonably related to the benefits accruing to the development. To determine whether the fees are reasonably related, the impact fee ordinance or board rule shall provide that:

(b) Notwithstanding any other law to the contrary, any developer upon whom impact fees are assessed, based upon an approved needs assessment study, under subsection (a) may pay all or a portion of the impact fees directly to pre-existing new century charter schools operating within the same benefit zone as the residential development. This subsection shall not apply to new century conversion charter schools."

PART IV

SECTION 9. 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 10. 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 V

SECTION 11. Section 302A-1185, Hawaii Revised Statutes, is amended to read as follows:

"§302A-1185 New century charter schools; funding. (a) Beginning with the fiscal year 2005-2006 budget request, and each budget request thereafter, the charter school administrative office shall submit a request for general fund appropriations for each new century charter school based upon:

The legislature shall make an appropriation based upon the budget request; provided that the legislature may make additional appropriations for fringe, workers' compensation, and other employee benefits, facility costs, and other requested amounts. The governor, pursuant to chapter 37, may impose restrictions or reductions on charter school appropriations similar to those imposed on other public schools.

(b) All federal financial support for new century charter schools shall be no less than all other public schools; provided that if administrative services related to federal grants and subsidies are provided to the charter school by the department, the charter school shall reimburse the department for the actual costs of the administrative services in an amount that does not exceed six and one-half per cent of the charter school's federal grants and subsidies. The department shall provide the charter school administrative office with all federal grant proposals that include charter schools as potential recipients and timely reports on federal grants received for which charter schools may apply. Federal funds received by the department for charter schools shall be transferred to the charter school administrative office for distribution to charter schools in accordance with the federal requirements.

Any new century charter school shall be eligible to receive any supplementary financial grant or award for which any other public school may submit a proposal, or any supplemental federal grants limited to new century charter schools; provided that if department administrative services, including funds management, budgetary, fiscal accounting, or other related services, are provided with respect to these supplementary grants, the charter school shall reimburse the department for the actual costs of the administrative services in an amount that does not exceed six and one-half per cent of the supplementary grant for which the services are used.

All additional funds that are generated by the local school boards, not from a supplementary grant, shall be separate and apart from allotted funds and may be expended at the discretion of the local school boards.

(c) To enable new century charter schools to access state funding prior to the start of each school year, foster their fiscal planning, and enhance their accountability, the charter school administrative office shall:

(d) The department shall provide appropriate transitional resources to a new century conversion charter school for its first year of operation as a charter school based upon the department's allocation to the school for the year prior to the charter school's conversion.

(e) No new century charter school or new century conversion charter school may assess tuition.

(f) The department shall transfer, no later than November 15, additional funds of not less than eighty per cent of the additional per-pupil allocation to EDN 600 for new century charter schools in which student enrollment, verified on or immediately prior to October 15 as provided for by subsection (c), exceeds the new century charter schools' preliminary projected student enrollment, in an amount corresponding to the number of additional students and the per-pupil allocation. The charter school administrative office shall transfer, no later than November 15, excess funds of not more than eighty per cent of the excess per-pupil allocation to EDN 100 for new century charter schools in which student enrollment, verified on or immediately prior to October 15 as provided for by subsection (c), fails to equal or exceed the new century charter schools' preliminary projected student enrollment, in an amount corresponding to the number of additional students and the per-pupil allocation.

(g) Notwithstanding any law to the contrary, the department of education shall reimburse individual new century charter schools for costs incurred by the charter school for rent or lease and utilities payments. The sum 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 or lease and utilities expenses to the charter school administrative office and provide documentation in such form and timeframe as the executive director may require that actual expenses were incurred and payments made. The amount of reimbursement by the department of education under this subsection shall not be subject to any charges or withholding by any state department or agency, including the charter school administrative office. This subsection shall not apply to new century conversion charter schools."

SECTION 12. 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, to reimburse new century charter schools for the rent or lease and utilities expenses.

SECTION 13. The sum appropriated shall be expended by the department of education for the purposes of this Act.

PART VI

SECTION 14. 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 Los Angeles charter school new market loan 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 15. The charter school administrative office shall prepare and submit a progress report, including any proposed legislation, to the legislature no later than twenty days prior to the convening of the regular session of 2007.

SECTION 16. 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 17. The sum appropriated shall be expended by the department of education for the purposes of this Act.

SECTION 18. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 19. This Act shall take effect upon its approval, provided that: