Provides for special purpose revenue bond financing of low and moderate income housing projects. Establishes a new state affordable housing tax credit decoupled from the federal tax credit. Broadens the requirements on developers to provide a reasonable number of lower income housing units. Allows rent supplement funds to be used for operating expenses of state low-income housing. Increases the low-income renters' tax credit and eligibility therefor. Increases the amount of conveyance tax revenues deposited into the rental housing trust fund. Authorizes issuance of revenue bonds to finance maintenance and repair of public housing units, infrastructure development for affordable housing, housing loan programs, and mortgage security and guarantee programs. Authorizes issuance of general obligation bonds to finance downpayment loans for eligible homebuyers and interim construction loans. Appropriates general funds for operating subsidies of state low-income housing units and homeless and transitional housing and services. Establishes a public housing rapid assessment team and appropriates funds therefor. (SD1)

A BILL FOR AN ACT

SECTION 1. The senate and house of representatives of the twenty-third legislature of the State of Hawaii, regular session of 2005, enacted Act 196, Relating to Housing, and section 35 of that act established the joint legislative housing and homeless task force to further identify near-term solutions to Hawaii's affordable housing and homeless problem. The task force issued its report with findings and recommendations in January 2006. The task force recommended in general that the State: (1) leverage more sources of financing for affordable housing; (2) make available more public land for the development of affordable housing; (3) streamline government approvals and permitting of affordable housing projects; (4) build more offsite infrastructure to serve affordable housing; (5) appropriate additional funds for transitional housing, shelters, and services for the homeless population; and (6) preserve and maintain the existing public housing stock.

The specific recommendations of the task force for financing affordable housing include: (1) increasing the amount of conveyance tax revenues deposited into the rental housing trust fund; (2) establishing a new state affordable housing tax credit decoupled from the federal tax credit; (3) allowing state rent supplement funds to be used for operating expenses of state low-income housing; (4) providing a state income tax deduction for contributions of land for affordable housing and for keeping private rental units affordable; (5) increasing the low-income renters' tax credit and eligibility therefor; (6) authorizing issuance of revenue bonds to finance maintenance and repair of public housing units, infrastructure development for affordable housing, housing loan programs, and mortgage security and guarantee programs; (7) authorizing issuance of general obligation bonds to finance downpayment loans for eligible homebuyers and interim construction loans; and (8) appropriating funds for operating subsidies of state low-income housing units and homeless and transitional housing and services.

The purpose of this omnibus Act is to implement certain recommendations of the task force with regard to financing affordable housing.

PART I

SECTION 2. Chapter 39A, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

§39A-A Definitions. Whenever used in this part, unless a different meaning clearly appears from the context:

"Department" means the department of budget and finance.

"Project" means the acquisition, purchase, design, development, construction, reconstruction, rehabilitation, improvement, betterment, extension, financing, or refinancing of low and moderate income housing.

"Project agreement" means any agreement entered into under this part by the department with a project party providing for the issuance of special purpose revenue bonds to finance the development of low and moderate income housing, or to loan the proceeds of such bonds to assist public instrumentalities in partnership with qualified affiliates in the development of low and moderate income housing, including, without limitation, any loan agreement.

"Project party" means a public instrumentality or qualified affiliate engaged in the development of low and moderate income housing.

"Qualified affiliate" means a corporation, partnership, limited liability company, or trust in which each shareholder, partner, member, or beneficiary is a private organization or a public instrumentality.

"Refinancing of outstanding obligations" or "refinancing" means the liquidation, the retirement, or the provision for retirement through the proceeds of bonds issued by the State of any indebtedness of a project party incurred to finance or help finance a lawful purpose of the project party not financed pursuant to this part which constitutes low and moderate income housing, or the consolidation of such indebtedness with indebtedness of the State incurred by the project party related to the purpose for which the indebtedness of the project party was initially incurred.

"Special purpose revenue bonds" or "bonds" means bonds, notes, or other evidence of indebtedness of the State issued pursuant to this part.

§39A-B Department powers as to public instrumentalities and their qualified affiliates in the development of low and moderate income housing. In addition to powers that it may now have, the department shall have all powers necessary or convenient to accomplish the purposes of this part. The powers of the department include but are not limited to the following:

When the department finances or refinances a project by the issuance of special purpose revenue bonds as contemplated by this part, the State shall not exercise the power of eminent domain to acquire a project or any part of the project for lease or transfer to a project party.

§39A-C Compliance with state and local law. The issuance of special purpose revenue bonds with respect to any project under this part shall not relieve any project party or other user of the project from the laws, ordinances, and rules of the State or any of its political subdivisions, or any departments or boards thereof, with respect to the construction, operation, and maintenance of projects; compliance with zoning laws or regulations; obtaining of building permits; and compliance with building codes, health codes, and other laws, ordinances, or rules of a similar nature pertaining to the project. Such laws shall apply to the party or another user to the same extent that it would be if the costs of the project were directly financed by the project party.

§39A-D Conditions precedent to negotiating and entering into a project agreement. Prior to entering into negotiations with any project party, the department shall require that the State be reimbursed for any and all costs and expenses (direct or indirect) incurred by it in implementing and administering this part, as determined by the department, even though a project agreement may not be entered into and may further require the deposit of moneys with the department for such reimbursement. The department shall return any amount of the deposit exceeding the amount required to reimburse the State to the party that made the deposit. The State shall not be required to pay to the project party any interest or earnings on the deposit.

The department shall not enter into any project agreement with respect to any project unless the department shall first find and determine either that the project party is a responsible party, whether by reason of economic assets or experience in the type of enterprise to be undertaken through the project or some other reason, or that the obligations of the project party under the project agreement will be unconditionally guaranteed by a person who is a responsible party, whether by reason of economic assets or experience in the type of enterprise to be undertaken through the project or some other reason.

§39A-E Project agreement. No special purpose revenue bonds shall be issued unless, at the time of issuance, the department shall have entered into a project agreement with respect to the project for the financing or refinancing of which such revenue bonds are to be issued. Any project agreement entered into by the department shall contain provisions unconditionally obligating the project party to:

Moneys received by the department pursuant to paragraph (1)(D) shall not be, nor be deemed to be, revenues of the project and shall be paid into the general fund of the State.

§39A-F Issuance of special purpose revenue bonds to finance projects. In addition to the other powers that it may otherwise have, the department may issue special purpose revenue bonds to finance or refinance the costs of developing low and moderate income housing or to loan the proceeds of such bonds to assist project parties in the development of low and moderate income housing. All revenue bonds issued under this part are special purpose revenue bonds and the provisions of part III of chapter 39 shall not apply. All special purpose revenue bonds shall be issued in the name of the department and not in the name of the State.

In determining the cost of any project, the department may also include the following: financing charges, fees, the expenses of trustees, and the cost of paying agents to issue special purpose revenue bonds to fund the project; interest on the bonds and the expenses of the State in connection with the bonds and the project to be financed or refinanced from the proceeds of the bonds accruing or incurred prior to and during the period of construction, not to exceed twelve months thereafter; amounts necessary to establish or increase reserves for the special purpose revenue bonds; the cost of plans, specifications, studies, surveys, and estimates of costs and of revenues; other expenses incidental to determining the feasibility or practicability of the project; administration expenses; the cost of interest incurred by the project party with respect to the project prior to the issuance of the special purpose revenue bonds; fees and expenses incurred in connection with the refinancing of outstanding obligations; other costs, commissions, and expenses incidental to the project; the financing or refinancing of the project and placing the project in operation; and the issuance of the special purpose revenue bonds, whether incurred prior to or after the issuance of such bonds.

The legislature finds and determines that the exercise of the powers vested in the department by this part constitutes assistance to public instrumentalities and their qualified affiliates in the development of low and moderate income housing, and that the issuance of special purpose revenue bonds to finance or refinance projects of or for project parties or to loan the proceeds of the bonds to assist project parties in the development of low and moderate income housing is in the public interest.

§39A-G Authorization of special purpose revenue bonds. (a) The department, with the approval of the governor, may issue special purpose revenue bonds for each single project or multi-project program for public instrumentalities and qualified affiliates engaged in the development of low and moderate income housing that has been authorized by a separate act of the legislature, by an affirmative vote of two-thirds of the members to which each house is entitled; provided that the legislature shall find that the issuance of the special purpose revenue bonds is in the public interest; and provided further that no authorization shall be made for a period exceeding five years of its enactment. Any such special purpose revenue bond authorization, or any portion of such special purpose revenue bond authorization, which has not been issued at the close of the fiscal year for the period for which the authorization is made, shall lapse. Special purpose revenue bonds issued pursuant to this part may be in one or more series for a single project, multiple projects, a single-project party, or multiple-project parties pursuant to the authority of one, or the combined authority of more than one, separate act of the legislature.

The department may combine into a single issue of special purpose revenue bonds two or more proposed issues of special purpose revenue bonds to assist public instrumentalities and their qualified affiliates in the development of low and moderate income housing, separately authorized and approved by the governor as aforesaid, in the total amount not exceeding the aggregate of the proposed separate issues of special purpose revenue bonds. The special purpose revenue bonds of each issue shall be dated, shall bear interest at such rate or rates, shall mature at such time or times (not to exceed forty years from their date or dates), shall have such rank or priority, and may be made redeemable before maturity at the option of the department, at such price or prices and under such terms and conditions, all as may be determined by the department. The department shall determine the form of the special purpose revenue bonds, including any interest coupons to be attached, and the manner of execution of the special purpose revenue bonds. The department shall also fix the denomination or denominations of the special purpose revenue bonds and the place or places of payment of principal and interest, which may be at any bank or trust company approved by the director of finance within or without the State. The special purpose revenue bonds may be issued in coupon or in registered form, or both, as the department may determine. Provisions may be made for the registration of any coupon bonds as to principal alone and also as to both principal and interest and for the reconversion into coupon bonds of any bonds registered as to both principal and interest. The department may sell special purpose revenue bonds in such manner, either at public or private sale, and for such price as it may determine.

(b) Prior to the preparation of definitive special purpose revenue bonds, the department may issue interim receipts or temporary bonds, with or without coupons, exchangeable for definitive bonds when such bonds have been executed and are available for delivery.

(c) Should any bond issued under this part or any coupon pertaining to such a bond become mutilated or be lost, stolen, or destroyed, the department may cause a new bond or coupon of like date, number, and tenor to be executed and delivered in exchange and substitution for and upon the cancellation of the mutilated bond or coupon, or in lieu of and in substitution for the lost, stolen, or destroyed bond or coupon.

The new bond or coupon shall not be executed or delivered until the holder of the mutilated, lost, stolen, or destroyed bond or coupon has: (1) paid the reasonable expense and charges in connection therewith; (2) filed with the department or its fiduciary evidence satisfactory to the department or its fiduciary that such bond or coupon was lost, stolen, or destroyed, if such was the case, and that the holder was the owner; and (3) has furnished indemnity satisfactory to the department.

(d) In its discretion, the department may direct that CUSIP identification numbers shall be printed on the bonds. In the event that the numbers are imprinted on the bonds: (1) no such number shall constitute a part of the contract evidenced by the particular bond upon which it is imprinted; and (2) no liability shall attach to the department or any of its officers or agents, including any fiscal agent, paying agent, or registrar for the bonds, because of the numbers or their use, including any use made by the department or any of its officers or agents, or because of any inaccuracy, error, or omission with respect thereto or in such use. In its discretion, the department may require that all costs of obtaining and imprinting such numbers shall be paid by the purchaser of such bonds. For the purposes of this subsection, "CUSIP identification numbers" means the numbering system adopted by the Committee for Uniform Security Identification Procedures formed by the Securities Industry Association.

§39A-H Special purpose revenue bond anticipation notes. Whenever the department shall have authorized the issuance of special purpose revenue bonds under this part, special purpose revenue bond anticipation notes of the department may be issued in anticipation of the issuance of the bonds and of the receipt of the proceeds of sale thereof, for the purpose for which the bonds have been authorized. All special purpose revenue bond anticipation notes shall be authorized by the department, and the maximum principal amount of the notes shall not exceed the authorized principal amount of the bonds. The notes shall be payable solely from and secured solely by the proceeds of the sale of the special purpose revenue bonds in anticipation of which the notes are issued and the revenues from which would be payable and by which the bonds would be secured; provided that to the extent that the principal of the notes shall be paid from moneys other than the proceeds of sale of the bonds, the maximum amount of bonds in anticipation of which the notes are issued that has been authorized shall be reduced by the amount of notes paid in such manner. The authorization, issuance, and details of the notes shall be governed by the provision of this part with respect to special purpose revenue bonds insofar as the same may apply; provided that each note, together with all renewals and extensions of the note, or refundings of the note by other notes issued under this section, shall mature within five years from the date of the original note.

§39A-I Powers with respect to and security for special purpose revenue bonds. To secure the payment of any of the special purpose revenue bonds issued pursuant to this part, including interest on the bonds, or in connection with the bonds, the department shall have the power to:

The department shall have the power to do all things in the issuance of the bonds and for their security that are consistent with the Constitution of the State of Hawaii.

§39A-J Security for special purpose revenue bonds. Special purpose revenue bonds shall be payable solely from the revenues derived by the department from payments made to the department under the project agreement, project agreements, or other supplemental agreements entered into with respect to the project or projects for the financing of which the special purpose revenue bonds were issued. The special purpose revenue bonds shall be secured solely by such revenues and by the pledges and assignments authorized by this part. Subject to the prior and superior rights of outstanding bonds, claims, obligations, or mechanic's and materialman's liens, all special purpose revenue bonds of the same issue shall have a prior and paramount lien on the revenue derived from the project agreement or agreements with respect to the project or projects for which the bonds were issued. The lien shall be over and ahead of all special purpose revenue bonds of any issue payable from the revenues that may be subsequently issued and over and ahead of any claims or obligations of any nature against the revenues subsequently arising or subsequently incurred; provided that the right and privilege may be reserved by the department in the trust indenture securing an issue of special purpose revenue bonds to subsequently issue additional special purpose revenue bonds, subject to legislative authorization of the issue as provided in section 39A-G. The department may also permit the project party or another party on its behalf to incur debt, from time to time, payable from the revenues derived from the project agreement on a parity with the first issue of the special purpose revenue bonds. Any subsequent issue of special purpose revenue bonds and other debt issued or incurred in accordance with the provisions of the trust indenture shall be secured equally and ratably with the first issue of the special purpose revenue bond by a lien on the revenues in accordance with this part and without priority based on the date of sale, date of execution, or date of delivery.

Notwithstanding any other provisions herein, all or part of the property constituting the project and all interest of the project party in the project and the revenues of the project party therefrom may be subjected to the present and future lien of any mortgage of the project party securing the project party's bonds. The rights of the department and any trustee for the holders of the special purpose revenue bonds and the holders of the special purpose revenue bonds in the project and the revenues therefrom may be made subject to the prior lien of the project party's mortgage.

§39A-K Special purpose revenue bonds not a general obligation of the State. No holder or holders of any special purpose revenue bonds issued under this part shall ever have the right to compel any exercise of the taxing power of the State to pay such bonds or the interest on the bonds, and no moneys other than the revenues pledged to such bonds shall be applied toward their payment. Each special purpose revenue bond issued under this part shall recite in substance that such bond, including interest on the bond, is not a general obligation of the State and is payable solely from the revenues pledged to the payment thereof and that such bond is not secured directly or indirectly by the full faith and credit of the State, by the general credit of the State, or by any revenue or taxes of the State other than the revenues specifically pledged thereto.

§39A-L Validity of special purpose revenue bonds. The special purpose revenue bonds bearing the signature or facsimile signature of officers on the date of the signing of the bonds shall be valid and sufficient for all purposes, notwithstanding that before the delivery of and payment for the bonds, all the persons whose signatures appear on the bonds shall have ceased to be officers of the department. The special purpose revenue bonds shall contain a recital that they are issued pursuant to this part, and the recital shall be conclusive evidence of their validity and of the regularity of their issuance.

§39A-M Use of revenues derived from project agreement. The department shall have the right to appropriate, apply, or expend the revenues derived with respect to the project agreement for a project for the following purposes:

Unless and until adequate provision has been made for the foregoing purposes, the department shall not transfer the revenues derived from the project agreement to the general fund of the State.

§39A-N Special purpose revenue bonds exempt from taxation. Special purpose revenue bonds and the income derived from the bonds issued pursuant to this part shall be exempt from all state, county, and municipal taxation, except for inheritance, transfer, and estate taxes.

§39A-O Federal tax-exempt status. To the extent practicable, special purpose revenue bonds issued pursuant to this part shall be issued to comply with requirements imposed by applicable federal law providing that the interest on the special purpose revenue bonds shall be excluded from gross income for federal income-tax purposes (except as certain minimum taxes or environmental taxes may apply). The department may enter into agreements, establish funds or accounts, and take any action required to comply with applicable federal law. Nothing in this part shall be deemed to prohibit the issuance of special purpose revenue bonds, the interest on which may be included in gross income for federal income-tax purposes.

§39A-P Exemption from taxation of department property. All revenues derived by the department from any project or under the project agreement pertaining to it shall be exempt from all state, county, and municipal taxation. Any right, title, and interest of the department in any project shall also be exempt from all state, county, and municipal taxation.

Except as otherwise provided by law, the interest of the project party or user of such project under the project agreement or related agreement shall not be exempt from taxation to a greater extent than it would be if the costs of the project were directly financed by the project party or other user.

§39A-Q Refunding special purpose revenue bonds. The legislature, by an act passed by an affirmative vote of two-thirds of the members to which each house is entitled, may authorize the issuance of refunding special purpose revenue bonds for the purpose of refunding any special purpose revenue bonds then outstanding and issued under this part, whether or not such outstanding special purpose revenue bonds have matured or are then subject to redemption.

The legislature is further authorized to provide, by an act passed by an affirmative vote of two-thirds of the members to which each house is entitled, for the issuance of a single issue of special purpose revenue bonds for the combined purposes of: (1) financing or refinancing the cost of a project or improvement or expansion of the project; and (2) refunding special purpose revenue bonds that shall have been issued under this part and shall then be outstanding, whether or not such outstanding special purpose revenue bonds have matured or are then subject to redemption.

Nothing in this section shall require or be deemed to require the legislature to elect to redeem or prepay special purpose revenue bonds being refunded. Moreover, nothing in this section shall require or be deemed to require the legislature to elect to redeem or prepay the special purpose revenue bonds being refunded, which were issued in the form customarily known as term bonds in accordance with any sinking fund installment schedule specified in any law authorizing the issuance thereof, or, in the event the department elects to redeem or prepay any such bonds, to redeem or prepay as of any particular date or dates. The issuance of such special purpose revenue bonds, the maturities and other details regarding the bonds, the rights and remedies of the bondholders, and the rights, powers, privileges, duties, and obligations of the department with respect to the bonds and bondholders, shall be governed by the foregoing provisions of this part insofar as may be applicable.

§39A-R Status of special purpose revenue bonds under Uniform Commercial Code. Notwithstanding any of the provisions of this part or any recitals in any special purpose revenue bonds issued under this part, all special purpose revenue bonds shall be deemed to be investment securities under the Uniform Commercial Code, chapter 490, subject only to the provisions of the special purpose revenue bonds pertaining to registration.

§39A-S Special purpose revenue bonds as legal investments and lawful security. The special purpose revenue bonds issued pursuant to this part shall be and are declared to be legal and authorized investments for banks, savings banks, trust companies, savings and loan associations, insurance companies, credit unions, fiduciaries, trustees, guardians, and for all public funds of the State and its political corporations or subdivisions. The special purpose revenue bonds shall be eligible to secure the deposit of any and all public funds of the State and of the counties or other political corporations or subdivisions of the State. The bonds shall be lawful and sufficient security for such deposits to the extent of their value when accompanied by all unmatured coupons pertaining to the bonds.

§39A-T Access to and public disclosure of financial records of project party. (a) Each project party with a project agreement with the department shall allow the department full access to its financial records. Upon the request of the department for the examination of the financial records, the project party shall allow the department to examine the requested records within a reasonably prompt time from the date of the request. If the department requests copies of the records, the project party shall provide the copies.

(b) To provide the public with full knowledge of the use of the proceeds and benefits derived from special purpose revenue bonds issued under this part, the department shall require each project party with a project agreement with the department to make available to the public all relevant financial records that pertain to the use of or savings resulting from the use of special purpose revenue bonds.

(c) The department shall adopt rules under chapter 91 for the purpose of this section.

§39A-U Estimate of benefits. (a) Each project party with a project agreement with the department shall estimate the benefits derived from the use of the proceeds of special purpose revenue bonds. The benefits estimated shall be based on a comparison between the use of the proceeds of the special purpose revenue bonds instead of other means of financing and shall be in terms of dollars projected to be or actually saved by consumers of the services of the project party. The format of and method for determining the estimates shall be established by the department and shall be uniform for each project party.

(b) To promote public understanding of the role played by special purpose revenue bonds in providing less costly services by a project party to the general public, the department shall take appropriate steps to ensure public access to and scrutiny of the estimates determined under subsection (a).

(c) The department shall adopt rules under chapter 91 for the purposes of this section.

§39A-V Construction of this part. The powers conferred by this part shall be in addition and supplemental to the powers conferred by any other law. Insofar as the provisions of this part are inconsistent with the provisions of any other law, this part shall control."

PART II

SECTION 3. Chapter 201G, Hawaii Revised Statutes, is amended by adding a new section to subpart F of part II to be appropriately designated and to read as follows:

"§201G-A Credit against income taxes. (a) In accordance with section 235-A, the administration may approve and certify for credit against state income taxes the qualified basis of any newly constructed or moderately or substantially rehabilitated project:

(b) All claims for tax credit under this section shall be certified by the administration and filed with the department of taxation. Any claim for tax credit that is filed and approved shall not be considered a subsidy for the purpose of this subpart.

(c) For the purposes of this section, "moderate rehabilitation" and "substantial rehabilitation" shall have the same meanings as in section 201G-116.

(d) For the purposes of this section, "qualified basis" shall have the same meaning as in section 235-110.8; provided that the administration may by rule establish criteria for the determination of qualified basis for the purposes of this section.

(e) The administration may establish, revise, charge, and collect a reasonable service fee, as necessary, in connection with its approvals and certifications under this section. The fees shall be deposited into the dwelling unit revolving fund."

SECTION 4. Chapter 201G, Hawaii Revised Statutes, is amended by adding a new section to subpart H of part III to be appropriately designated and to read as follows:

"§201G-B Downpayment loan program revolving fund. There is created within the state treasury a revolving fund to be administered by the administration and to be known as the downpayment loan revolving fund. The revolving fund shall be funded from the proceeds of general obligation bonds or other appropriations from the state legislature, and shall be used to carry out the purposes of this subpart."

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

"§235-A Affordable housing tax credit. (a) Each taxpayer subject to the tax imposed by this chapter, who has filed a net income tax return for a taxable year, may claim an affordable housing tax credit against the taxpayer's net income tax liability. The amount of the credit shall be deductible from the taxpayer's net income tax liability, if any, imposed by this chapter for the taxable year in which the credit is properly claimed on a timely basis. A credit under this section shall not be claimed if the taxpayer claims a low-income housing tax credit pursuant to section 235-110.8.

(b) The affordable housing tax credit shall be fifteen per cent of the qualified basis of each project calculated pursuant to section 201G-A.

(c) The credit allowed under this section shall be claimed against net income tax liability for the taxable year. For the purpose of deducting this tax credit, net income tax liability means net income tax liability reduced by all other credits allowed the taxpayer under this chapter. A tax credit under this section which exceeds the taxpayer's income tax liability may be used as a credit against the taxpayer's income tax liability in subsequent years until exhausted.

(d) All claims for a tax credit under this section must be filed on or before the end of the twelfth month following the close of the taxable year for which the credit may be claimed. Failure to properly and timely claim the credit shall constitute a waiver of the right to claim the credit. A taxpayer may claim a credit under this section only if the project is a qualified project approved and certified under section 201G-A.

(e) The director of taxation may adopt any rules under chapter 91 and forms necessary to carry out this section."

SECTION 6. Section 201G-44, Hawaii Revised Statutes, is amended to read as follows:

"§201G-44 Administration of state low-income public housing projects and programs. (a) The administration [may] shall construct, develop, and administer property or housing for the purpose of state low-income public housing projects and programs.

(b) The administration [may] shall offer any decommissioned low-income public housing project, except for federal housing projects, to nonprofit or for-profit organizations or government agencies for rehabilitation into emergency or transitional shelter facilities for the homeless or rehabilitation into rental units that set aside at least fifty per cent of the units to persons or families with incomes at or below fifty per cent of the area median family income; provided that:

The land and improvements may be leased to the nonprofit or for-profit organization or government agency for a period not to exceed ninety-nine years for a sum of $1 per year.

(c) The administration shall adopt necessary rules in accordance with chapter 91, including the establishment and collection of reasonable fees for administering the public housing projects or programs and to carry out any state program under subsection (a)."

SECTION 7. Section 201G-45, Hawaii Revised Statutes, is amended to read as follows:

"§201G-45 State low-income housing revolving fund. The director of finance shall establish a revolving fund to be known as "the state low-income housing revolving fund". Notwithstanding any law to the contrary, moneys received by the administration under or pursuant to this subpart, including appropriations, refunds, reimbursements, rentals, fees, and charges received from tenants, shall be deposited in the state low-income housing revolving fund. Except as otherwise provided in this chapter, the state low-income housing revolving fund may be expended by the administration for any and all of the purposes of this subpart, including, without prejudice to the generality of the foregoing, the expenses of management, operation, and maintenance of state low-income housing, including but not limited to the cost of insurance, a proportionate share of the administrative expenses of the administration, and the cost of repairs, equipment, and improvement; the acquisition, clearance, and improvement of property; the construction and reconstruction of building sites; the construction, reconstruction, repair, remodeling, extension, equipment, and furnishing of any public housing project; the development and administration of any public housing project; the payment of rentals; and administration and other expenses."

SECTION 8. Section 201G-121, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) In any county, the administration may develop or may enter into agreements for housing projects with an eligible developer if in the administration'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 administration, or to be sold by the administration, or to be sold to the administration as soon as the units are completed and shall contain terms, conditions, and covenants as the administration, by rules, deems appropriate. Every agreement shall provide for the developer to furnish a performance bond, in favor of the administration, assuring the timely and complete performance of the housing project. Sureties on the bond must be satisfactory to the administration."

SECTION 9. Section 201G-161, Hawaii Revised Statutes, is amended by amending subsection (f) to read as follows:

"(f) Any pledge made by the administration shall create a perfected security interest in the revenues, moneys, or property so pledged and thereafter received by the administration from and after the time that a financing statement with respect to the revenues, moneys, or property so pledged and thereafter received shall be filed with the bureau of conveyances. Upon the filing, the revenues, moneys, or property so pledged and thereafter received by the administration shall immediately be subject to the lien of such pledge without any physical delivery thereof or further act, and the lien of any such pledge shall be [prior to the lien of all parties having claims by any kind in tort, contract, or otherwise against the administration, irrespective of whether such parties have notice thereof] subject to section 39-63 and part VIII of chapter 39 relating to security interests. This section shall apply to any financing statement heretofore or hereafter filed with the bureau of conveyances with respect to any pledge made to secure revenue bonds issued under this part."

SECTION 10. Section 201G-162, Hawaii Revised Statutes, is amended to read as follows:

"§201G-162 Issuance of bonds for the development of infrastructure. Without limiting section 201G-161, the administration, pursuant to and in accordance with this subpart, is hereby authorized to issue bonds for the purpose of financing the development of infrastructure [on land owned by the administration] for projects under section 201G-118."

SECTION 11. Section 201G-231, Hawaii Revised Statutes, is amended to read as follows:

"[[]§201G-231[]] Rent supplements. (a) The administration is authorized to make, and contract to make, annual payments to a "housing owner" on behalf of a "qualified tenant", as those terms are defined in this subpart, in such amounts and under such circumstances as are prescribed in or pursuant to this subpart. No payment on behalf of a qualified tenant shall exceed a segregated amount of $160 a month.

(b) The administration is authorized to pay, from funds available under this subpart, for expenses of maintenance and repair of state low-income housing under subpart B of part II of this chapter."

SECTION 12. Section 201G-232, Hawaii Revised Statutes, is amended to read as follows:

"§201G-232 Housing owner defined. As used in this subpart, the term "housing owner" means:

SECTION 13. Section 201G-436, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) The administration 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:

in accordance with the priorities set forth in subsection 201G-432(e).

The administration may include other criteria in the above process as it deems necessary to carry out the purposes of this part[.], including but not limited to:

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

SECTION 14. Section 235-55.7, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) Each taxpayer with an adjusted gross income of less than [$30,000] $50,000 who has paid more than $1,000 in rent during the taxable year for which the credit is claimed may claim a tax credit of [$50] $75 multiplied by the number of qualified exemptions to which the taxpayer is entitled; provided that each taxpayer with an adjusted gross income less than $30,000 who has paid more than $1,000 in rent during the taxable year for which the credit is claimed may claim a tax credit of $100 multiplied by the number of qualified exemptions to which the taxpayer is entitled; provided further, that each taxpayer sixty-five years of age or over may claim double the tax credit; and provided that a resident individual who has no income or no income taxable under this chapter may also claim the tax credit as set forth in this section."

SECTION 15. 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:

SECTION 16. Act 291, Session Laws of Hawaii 1980, section 11, as amended by Act 304, Session Laws of Hawaii 1996, section 1, and by Act 185, Session Laws of Hawaii 2004, section 2, is amended to read as follows:

"SECTION 11. Issuance of revenue bond; amount authorized. Revenue bonds may be issued by the [housing and community development corporation of Hawaii] Hawaii housing finance and development administration pursuant to part III, chapter 39 and part III of chapter 201G, Hawaii Revised Statutes, in an aggregate principal amount not to exceed [$300,000,000,]           , at such times and in such amounts as the [housing and community development corporation of Hawaii] Hawaii housing finance and development administration deems advisable for the purpose of undertaking and maintaining any of the housing loan programs under subpart B of part III of chapter 201G, Hawaii Revised Statutes, relating to the funding or purchasing of eligible project loans.

The proceeds of such revenue bonds shall be deposited into the housing project bond special funds or housing loan program revenue bond special funds created pursuant to section 201G-170, Hawaii Revised Statutes."

SECTION 17. Act 291, Session Laws of Hawaii 2001, sections 1 and 2, are amended to read as follows:

"SECTION 1. The [housing and community development corporation of Hawaii,] Hawaii housing finance and development administration, with the approval of the director of finance and the governor, is authorized pursuant to part III, chapter 39, Hawaii Revised Statutes, and part III, chapter 201G, Hawaii Revised Statutes, to issue revenue bonds in an aggregate principal amount not to exceed [$30,000,000,] $100,000,000, at such times and in such amounts as it deems advisable for the purpose of carrying out the provisions of subpart Q of part III of chapter 201G, Hawaii Revised Statutes[.], relating to the rental housing trust fund.

The proceeds of such revenue bonds shall be deposited into the rental housing trust fund created in section 201G-432, Hawaii Revised Statutes.

SECTION 2. There is appropriated out of the rental housing trust fund the sum of [$30,000,000,] $100,000,000, or so much thereof as may be necessary, for fiscal year [2001-2002,] 2006-2007, to carry out the purposes of the rental housing trust fund.

The sum appropriated shall be expended by the [housing and community development corporation of Hawaii.] Hawaii housing finance and development administration."

SECTION 18. There is appropriated out of the rental housing trust fund the sum of $10,000,000, or so much thereof as may be necessary, for fiscal year 2006-2007, to carry out the purposes of the rental housing trust fund relating to the preservation and substantial rehabilitation of rental housing units; provided that $50,000 of the sum appropriated shall be used for a study of the feasibility of decommissioning public housing units and an action plan for placing them under private ownership and management.

The sum appropriated shall be expended by the Hawaii public housing administration to repair and modernize vacant public housing units; provided that the administration shall report to the legislature its determination of dilapidated units not feasible to repair, and its action plan for decommissioning these units, no later than twenty days prior to the convening of the regular session of 2007.

SECTION 19. The Hawaii housing finance and development administration, with the approval of the director of finance and the governor, is authorized pursuant to part III, chapter 39, Hawaii Revised Statutes, and part III, chapter 201G, Hawaii Revised Statutes, to issue revenue bonds in an aggregate principal amount not to exceed           , at such times and in such amounts as it deems advisable for the purpose of carrying out the provisions of subpart A of part III of chapter 201G, Hawaii Revised Statutes, relating to the development of infrastructure and the purchase of low-income housing projects.

The proceeds of such revenue bonds shall be deposited into the housing finance revolving fund created in section 201G-170, Hawaii Revised Statutes.

SECTION 20. There is appropriated out of the housing finance revolving fund the sum of           , or so much thereof as may be necessary, for fiscal year 2006-2007, to carry out the purposes of section 201G-162, Hawaii Revised Statutes, relating to the development of infrastructure for affordable housing.

The sum appropriated shall be expended by the Hawaii housing finance and development administration.

SECTION 21. There is appropriated out of the housing finance revolving fund the sum of           , or so much thereof as may be necessary, for fiscal year 2006-2007, to carry out the purposes of section 201G-163, Hawaii Revised Statutes, relating to the purchase of low-income housing projects.

The sum appropriated shall be expended by the Hawaii housing finance and development administration.

SECTION 22. The Hawaii housing finance and development administration, with the approval of the director of finance and the governor, is authorized pursuant to part III, chapter 39, Hawaii Revised Statutes, and part III, chapter 201G, Hawaii Revised Statutes, to issue general obligation bonds in an aggregate principal amount not to exceed           , at such times and in such amounts as it deems advisable for the purpose of carrying out the provisions of subpart H of part III of chapter 201G, Hawaii Revised Statutes, relating to the downpayment loan program.

The proceeds of such general obligation bonds shall be deposited into the downpayment loan program revolving fund created in section 201G-B, Hawaii Revised Statutes.

SECTION 23. There is appropriated out of the downpayment loan program revolving fund the sum of           , or so much thereof as may be necessary, for fiscal year 2006-2007, to carry out the purposes of the downpayment loan program revolving fund relating to direct downpayment loans to eligible borrowers.

The sum appropriated shall be expended by the Hawaii housing finance and development administration.

SECTION 24. The Hawaii housing finance and development administration, with the approval of the director of finance and the governor, is authorized pursuant to part III, chapter 39, Hawaii Revised Statutes, and part III, chapter 201G, Hawaii Revised Statutes, to issue general obligation bonds in an aggregate principal amount not to exceed           , at such times and in such amounts as it deems advisable for the purpose of carrying out the provisions of subpart E of part II of chapter 201G, Hawaii Revised Statutes, relating to housing development programs.

The proceeds of such general obligation bonds shall be deposited into the dwelling unit revolving fund created in section 201G-411, Hawaii Revised Statutes.

SECTION 25. There is appropriated out of the dwelling unit revolving fund the sum of $400,000, or so much thereof as may be necessary, for fiscal year 2006-2007, to carry out the purposes of section 201G-411 relating to financing interim construction loans for self-help housing.

The sum appropriated shall be expended by the Hawaii housing finance and development administration.

SECTION 26. There is appropriated out of the general revenues of the State of Hawaii the sum of $20,000,000, or so much thereof as may be necessary for fiscal year 2006-2007, for the purpose of homeless assistance.

The sum appropriated shall be expended by the Hawaii housing finance and development administration for homeless and transitional housing and services.

PART III

SECTION 27. The joint legislative housing and homeless task force, established pursuant to Act 196, Session of Hawaii 2005, has reported that seven hundred fifty federal public housing units and seventy-five state public housing units in Hawaii are vacant, in many instances for substantial periods of time up to six months. The vacant units represent thirteen per cent of the inventory of public housing units in Hawaii. Meanwhile, there are approximately six thousand homeless individuals in Hawaii, and the pent-up demand for affordable rental housing for the low-income and workforce population exceeds twenty thousand units.

A physical needs assessment of all sixty-five federal public housing properties in Hawaii, conducted for the housing and community development corporation of Hawaii in 2003, reported in detail on a number of problems and deficiencies resulting from poor design and deferred maintenance in Hawaii's public housing stock. The cost just to remedy the maintenance deficiencies in these properties was estimated at almost $11,000,000. In part as a result of this assessment, the corporation was designated as a "troubled" public housing agency by the United States Department of Housing and Urban Development in 2004, and was required to enter into a memorandum of agreement for the purpose of improving its score in a number of areas.

Although some progress has been made and the corporation has since been discharged from its obligations under the memorandum of agreement, much more remains to be done. Targets still outstanding include developing a strategy for reducing unit preparation time; generating work orders immediately after completion of unit inspections; correcting or abating emergency work orders within twenty-four hours; and increasing unit occupancy to ninety-five per cent in all projects.

A recent internal assessment by corporation staff indicates that nearly five hundred vacant federal units and substantially all of the vacant state units still require modernization or major to minor repairs. The total cost for this work is estimated at $9,600,000.

While government continues to assess the State's long-term needs and available resources, immediate short-term solutions are needed to remedy the high vacancy rates and poor physical condition of the public housing stock. Solutions for immediate relief will require unprecedented levels of cooperation between the State and private entities, and bold yet productive proposals for action.

The purpose of this Act is to establish a public housing rapid assessment team within the Hawaii public housing administration, and to appropriate funds for the expedited maintenance and repair of vacant public housing units within one year of the effective date of this Act.

SECTION 28. Section 46-14.5, Hawaii Revised Statutes, is amended to read as follows:

"[[]§46-14.5[]] Land use density; low-income rental units. (a) Notwithstanding any other law to the contrary, the counties are authorized to provide flexibility in land use density provisions to encourage the development of any rental housing project where at least a portion of the rental units are set aside for persons and families with incomes at or below one hundred forty per cent of the area median family income, of which twenty per cent are set aside for persons and families with incomes at or below eighty per cent of the area median family income.

(b) Notwithstanding any other law to the contrary, any maintenance and repair work performed in public housing projects pursuant to this Act shall be exempt from any county permit requirements. The rapid assessment team shall perform all repair and maintenance work in conformity with all county building code regulations."

SECTION 29. Section 103D-102, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Notwithstanding subsection (a), this chapter shall not apply to contracts by governmental bodies:

SECTION 30. Section 104-2, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) This chapter shall apply to every contract in excess of $2,000 for construction of a public work project to which a governmental contracting agency is a party; provided that this chapter shall not apply to experimental and demonstration housing developed pursuant to section 46-15, or housing developed pursuant to chapter 201G, including maintenance and repair work on public housing projects if the cost of the project or the work is less than $500,000 and the eligible bidder or eligible developer is a private nonprofit corporation.

For the purposes of this subsection:

"Contract" includes but is not limited to any agreement, purchase order, or voucher in excess of $2,000 for construction of a public work project.

"Governmental contracting agency" includes any person or entity that causes either directly or indirectly the building or development of a public work.

"Party" includes eligible bidders for and eligible developers of any public work and any housing under chapter 201G; provided that this subsection shall not apply to any housing developed under section 46-15 or chapter 201G if the entire cost of the project is less than $500,000 and the eligible bidder or eligible developer is a private nonprofit corporation.

"Public work" means any project, including development of any housing pursuant to section 46-15 or chapter 201G, and development, construction, renovation, and maintenance related to refurbishment of any real or personal property, where the funds or resources required to undertake the project are to any extent derived either directly or indirectly from public revenues of the State or any county, or from the sale of securities or bonds whose interest or dividends are exempt from state or federal taxes."

SECTION 31. Section 201G-133, Hawaii Revised Statutes, is amended to read as follows:

"§201G-133 Rate of wages for laborers and mechanics. The administration shall require an eligible bidder or eligible developer of a housing project developed under this subpart to comply with the requirements of section 104-2 for those laborers and mechanics hired to work on that housing project; provided that this section shall not apply to:

SECTION 32. There is established a public housing rapid assessment team to be attached to the Hawaii public housing administration for administrative purposes. The rapid assessment team shall:

SECTION 33. The Hawaii public housing administration shall:

SECTION 34. There is appropriated out of the general revenues of the State of Hawaii the sum of $10,000,000 or so much thereof as may be necessary for fiscal year 2006-2007 for the establishment of a public housing rapid assessment team to be administered by Hawaii public housing administration.

The sum appropriated shall be expended by Hawaii public housing administration for the purposes of this Act.

PART IV

SECTION 35. In codifying the new sections added by sections 2 through 5 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 36. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 37. This Act shall take effect on July 1, 2006.