HB2261

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

“CHAPTER

HAWAII FARM RENEWABLE SUSTAINABLE ENERGY LOAN PROGRAM

§ -1 Findings and purpose. The legislature finds that:

(1) Long-term sustainability of agriculture and aquaculture is vital for the security and well-being of the state;

(2) Renewable energy is essential for the sustainability of the agricultural and aquacultural industries;

(3) Agriculture and aquaculture production areas may have natural resources available for the production of on-site energy to be used for the production facility;

(4) Conventional financing at reasonable rates and terms may not be available for the establishment of farm renewable sustainable energy projects; and

(6) The State should initiate a loan program to assist commercial agriculture and aquaculture producers in the development of sustainable, renewable energy for use on the production site.

The purpose of this chapter is to establish a loan program to provide financial assistance to farm producers for the production of sustainable energy.

§ -2 Definitions. As used in this chapter:

“Agriculture” means the propagation, cultivation, or farming of plants and animals in controlled or selected environments for commercial purposes, or authorized stock enhancement purposes.

“Aquaculture” means the propagation, cultivation, or farming of aquatic plants and animals in controlled or selected environments for commercial purposes, or authorized stock enhancement purposes.

“Board” means the board of agriculture.

“Chairperson” means the chairperson of the board of agriculture.

“Department” means the department of agriculture.

"Loans" means renewable sustainable energy project loans.

“Qualified aquaculturalist” means a person, or associations of persons, actively engaged in aquaculture farming, aquacultural produce processing, or aquacultural product development activities.

“Qualified farmer” means a person of proven farming ability who operates the person’s own farm on land owned by the person in fee or on land rented or leased from others and who is presently devoting, has recently devoted, or intends to devote most of the person’s time or who derives a major portion of the person’s net cash income from direct participation in farming in its broadest sense. It includes:

(1) Hawaii partnerships controlled by at least seventy-five per cent by persons who would qualify individually and would meet the eligibility requirements of section 155-10;

(2) Small corporations where at least seventy-five per cent of each class of stock issued by the corporation is owned by persons who qualify individually and would meet the eligibility requirements of section 155-10, and where seventy five per cent of the directors are qualified farmers; and

(3) Corporations incorporated in the state primarily for agricultural production purposes; actively engaged in agricultural production for a minimum of two years; and with at least seventy-five percent of each class of stock owned by persons who are residents of this State or entities that are domiciled in this State;

(4) Trusts with situs in Hawaii in which the trustee or other individual in control of the operations of the trust would qualify and meet the eligibility requirements of section 155-10; and

(5) Any other legal entity recognized by the State that conducts business in the State and that is capable of acquiring, holding, encumbering, transferring, or otherwise administering property, whether real or personal, or tangible or intangible, and which entity is owned and controlled by persons or other entities, at least seventy-five per cent of which would qualify and would meet the eligibility requirements of section 155-10.

“Renewable sustainable energy projects” or "projects" means on-farm energy projects that may include but are not limited to photovoltaic energy, hydroelectric, wind power generation, methane generation, bio-diesel production, and ethanol production.

§ -3 Hawaii farm renewable sustainable energy loan program. There is established the Hawaii farm renewable sustainable energy loan program to be administered by the board.

§ -4 Restriction. Loans provided for by this chapter shall be authorized only if these loans cannot be made by the applicant’s bank of account.

§ -5 Powers and duties of the department. (a) The department shall have the necessary powers to carry out the purposes of this chapter, including the following:

(1) Prescribing the qualifications for eligibility of applicants for loans;

(2) Establishing preferences and priorities in determining eligibility for loans and loan repayment requirements;

(3) Establishing conditions consistent with the purpose of this chapter, for the granting or for the continuance of a grant of a loan;

(4) Providing for inspection at reasonable hours of the plant facilities, books, and records of an enterprise that has applied for or has been granted a loan and requiring the submission of progress and final reports;

(5) Making loans to qualified farmers or qualified aquaculturists for renewable sustainable energy projects;

(6) Securing loans through duly recorded first mortgages upon the following property within the state:

(A) Fee simple farm land;

(B) Leaseholds of farm land where the lease has an unexpired term of at least two years longer than the term of the loan;

(D) Other chattels and written agreements, such as assignment of income;

provided that junior mortgages may secure the loans when any prior mortgage does not contain provisions which might jeopardize the security position of the department or the borrower’s ability to repay;

(7) Administering the Hawaii farm renewable sustainable energy loan revolving fund; and

(8) Including in its budget amounts necessary to effectuate the purposes of this chapter.

The department shall adopt rules pursuant to chapter 91 to effectuate this section.

S -6 Renewable sustainable energy project loan limitations and terms. Renewable sustainable energy project loans shall provide for:

(1) The purchase, financing, construction, or improvement of essential farm buildings related to the project, including plant construction, conversion, and expansion;

(2) The acquisition and improvement of land as may be required by the project;

(3) The acquisition of equipment, machinery, supplies, or materials, and payment of project expenses, including materials, labor and services; and

(4) The liquidation of indebtedness for any of the foregoing purposes.

The loans shall be for a term not to exceed years; provided that loans shall not exceed $1,500,000 or eighty-five per cent of the project cost, whichever is the lesser. The interest charged on these loans shall be fixed at per cent per year. The chairperson shall not approve loans where the requested loan amount, plus any principal balance on existing loans to the applicant, exceeds $75,000 of state funds. No loans shall be made for any type of power plant generation projects.

S -7 Hawaii farm renewable sustainable energy loan revolving fund; loan reserve fund; application of payments. (a) There is established a revolving fund to be known as the Hawaii farm renewable sustainable energy loan revolving fund from which moneys shall be loaned by the department pursuant to this chapter.

(b) All interest and fees collected by the department from loans made under this chapter shall be deposited in a separate loan reserve fund to the extent needed to carry on the operation of the program; provided that any moneys surplus to those needs shall be transferred to the Hawaii farm renewable sustainable energy revolving fund at the discretion of the department. All payments received on account of principal shall be credited to the Hawaii farm renewable sustainable energy loan revolving fund.”

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 2008-2009 to be deposited into the Hawaii farm renewable sustainable energy loan revolving fund.

The sum appropriated shall be expended by the department of agriculture for the purposes of this Act.

SECTION 3. There is appropriated out of the Hawaii farm renewable sustainable energy loan revolving fund the sum of

$ or so much thereof as may be necessary for fiscal year 2008-2009 to be used for the Hawaii farm renewable sustainable energy loan program.

The sum appropriated shall be expended by the department of agriculture for the purposes of this Act.

SECTION 4. This Act shall take effect upon its approval; provided that sections 2 and 3 shall take effect on July 1, 2008.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2261
TWENTY-FOURTH LEGISLATURE, 2008
STATE OF HAWAII