HB2668

PART I

SECTION 1. The purpose of this Act is to address several housing issues including:

(1) Transferring the responsibility for administering the issuance of special purpose revenue bonds for low- and moderate-income housing projects to the Hawaii housing finance and development corporation from the department of budget and finance;

(2) Transferring the private activity bond volume cap entirely to the State, with an allocation of eighty per cent of the cap to the Hawaii housing finance and development corporation and the remainder to the department of budget and finance;

(3) Requiring only grants to be made from the rental housing trust fund as equity gap financing; and

(4) Repealing the sunset date on the provision transferring a portion of the conveyance tax proceeds to the rental housing trust fund.

PART II

SECTION 2. The purpose of this part is to transfer the responsibility for administering the issuance of special purpose revenue bonds for low- and moderate-income housing projects to the Hawaii housing finance and development corporation from the department of budget and finance.

SECTION 3. Section 39A-281, Hawaii Revised Statutes, is amended as follows:

1. By adding a new definition of "corporation" to be appropriately inserted and to read:

""Corporation" means the Hawaii housing finance and development corporation."

2. By repealing the definition of "department".

["~~"Department" means the department of budget and finance.~~"]

SECTION 4. Section 39A-285, Hawaii Revised Statutes, is amended to read as follows:

"§39A-285 Project agreement. No special purpose revenue bonds shall be issued unless, at the time of issuance, the [~~department~~] corporation shall have entered into a project agreement with respect to the project for the financing or refinancing of which the bonds are to be issued. Any project agreement entered into by the [~~department~~] corporation shall contain provisions unconditionally obligating the project party to:

(1) Pay to the [~~department~~] corporation during the period or term of the project agreement, exclusive of any renewal or extension thereof and whether or not the project is used or occupied by the project party, a sum, at a time, and in an amount that shall be sufficient to:

(A) Pay the principal and interest on all special purpose revenue bonds issued with respect to the project as they become due, including any premium payable upon any required redemption of the bonds;

(B) Establish or maintain a reserve, if any, as may be required by the instrument authorizing or securing the special purpose revenue bonds;

(C) Pay all fees and expenses, including the fees and expenses of the paying agents and trustees, assessed in connection with the special purpose revenue bonds; and

(D) Pay the fees, costs, and expenses (direct or indirect) assessed by the [~~department~~] corporation in administering the bonds or in carrying out the project agreement; and

(2) Operate, maintain, and repair the project as long as it is used to provide low- and moderate-income housing, and to pay all costs of operation, maintenance, and repair.

Moneys received by the [~~department~~] corporation pursuant to paragraph (1)(D) shall not be, nor be deemed to be, revenues of the project and shall be paid to the director of finance for deposit into the general fund of the State."

SECTION 5. Section 39A-286, Hawaii Revised Statutes, is amended to read as follows:

"[[]§39A-286[]] Issuance of special purpose revenue bonds to finance projects. In addition to the other powers that it may otherwise have, the [~~department~~] corporation may issue special purpose revenue bonds to finance or refinance the costs of developing low- and moderate-income housing projects or to loan the proceeds of bonds to assist project parties in the development of low- and moderate-income housing[.] projects. All 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~~] corporation and not in the name of the State[.] or department of budget and finance.

In determining the cost of any project, the [~~department~~] corporation may also include:

(1) Financing charges, fees, the expenses of trustees, and the cost of paying agents to issue special purpose revenue bonds to fund the project;

(2) 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;

(3) Amounts necessary to establish or increase reserves for the special purpose revenue bonds;

(4) The cost of plans, specifications, studies, surveys, and estimates of costs and of revenues;

(5) Other expenses incidental to determining the feasibility or practicability of the project;

(6) Administration expenses;

(7) The cost of interest incurred by the project party with respect to the project prior to the issuance of the special purpose revenue bonds;

(8) Fees and expenses incurred in connection with the refinancing of outstanding obligations;

(9) Other costs, commissions, and expenses incidental to the project;

(10) The financing or refinancing of the project and placing the project in operation; and

(11) The issuance of the special purpose revenue bonds, whether incurred prior to or after the issuance of the bonds.

The legislature finds and determines that the exercise of the powers vested in the [~~department~~] corporation by this part constitutes assistance to not-for-profit private organizations, for-profit private organizations, and 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. The legislature further finds that this governmental assistance to not-for-profit private organizations, for-profit private organizations, and public instrumentalities and their qualified affiliates is necessary to encourage public-private partnerships to develop affordable housing for low- and moderate-income families in the State."

SECTION 6. Section 39A-292, Hawaii Revised Statutes, is amended to read as follows:

"[[]§39A-292[]] Validity of special purpose revenue bonds. The special purpose revenue bonds bearing the signature or facsimile signature of appropriate officers of the corporation 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.~~] corporation. 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."

SECTION 7. Sections 39A-282, 39A-284, 39A-287, 39A-288, 39A-289, 39A-290, 39A-293, 39A-295, 39A-296, 39A-297, 39A-300, and 39A-301, Hawaii Revised Statutes, are amended by substituting the term "corporation" for the term "department" wherever the latter term occurs.

PART III

SECTION 8. The purpose of this part is to transfer the private activity bond volume cap entirely to the State, with an allocation of eighty per cent to the Hawaii housing finance and development corporation and the remainder to the department of budget and finance.

SECTION 9. Section 39B-1, Hawaii Revised Statutes, is amended as follows:

1. By adding a new definition of "corporation" to read:

""Corporation" means the Hawaii housing finance and development corporation."

2. By amending the definition of "issuer" to read:

""Issuer" means any state department, board, commission, officer, corporation, or authority[,] or private not-for-profit corporation authorized under the laws of the State to issue private activity bonds. The term includes the Hawaii housing finance and development corporation and the department of budget and finance unless the context requires otherwise."

SECTION 10. Section 39B-2, Hawaii Revised Statutes, is amended to read as follows:

"§39B-2 Allocation of annual state ceiling. (a) The annual state ceiling shall be allocated for each calendar year [~~in the following proportions:~~

~~(1)~~ ~~An amount equal to fifty per cent of the annual state ceiling~~] entirely to the State[;

~~(2)~~ ~~An amount equal to 37.55 per cent of the annual state ceiling to the city and county of Honolulu;~~

~~(3)~~ ~~An amount equal to 5.03 per cent of the annual state ceiling to the county of Hawaii;~~

~~(4)~~ ~~An amount equal to 2.41 per cent of the annual state ceiling to the county of Kauai; and~~

~~(5)~~ ~~An amount equal to 5.01 per cent of the annual state ceiling to the county of Maui~~]. Of the total allocation for each calendar year:

(1) Eighty per cent shall be allocated to the corporation; and

(2) Twenty per cent shall be allocated to the department.

(b) [~~The department, with~~] With the approval of the governor, the corporation or department may assign all or any part of [~~the~~] its allocation [~~of the State~~] to [~~any~~] the other, another issuer, or any county for a specific calendar year or years.

At the request of the corporation or department, [~~any issuer or county to which~~] the assignee of any part of [~~the State's~~] an allocation [~~has been assigned~~] shall return all or part of the assignment[~~, in which case~~]. After the return, the corporation or department may provide for [~~its~~] the use or reassignment[.] of the returned allocation.

[(c) The department may request return of all or any part of the allocations of one or more counties made pursuant to subsection (a), and may assign and reassign the allocation to any other county or issuer for a specified calendar year or years.

~~(d)~~] (c) A county, by resolution of its governing body, or any issuer, by written certificate of [~~such~~] the issuer, may request [~~additional allocations~~] an assignment of the corporation's or department's annual state ceiling [~~from, or assign all or any part of its portion of the~~] allocation [~~of the annual state ceiling to, the State~~] for a specified calendar year or years."

SECTION 11. Section 39B-3, Hawaii Revised Statutes, is amended to read as follows:

"[[]§39B-3[]] Application of assigned allocation. The extent to which all or any part of an assigned allocation made to a county or an issuer pursuant to section 39B-2 is applied to a project subject to the annual state ceiling shall be evidenced by a certificate of the issuer or the director of finance of a county, as applicable. This section shall also apply to the corporation and department when applying any part of its respective allocation to a project subject to the annual state ceiling."

SECTION 12. Section 39B-4, Hawaii Revised Statutes, is amended to read as follows:

"[[]§39B 4[]] Report [~~of unused allocation; reversion to State.~~] on use of bonds. The [director of finance of each county shall report to the department in writing by December 15 of each year as to the amount of allocation to such county which has not been applied to private activity bonds in such year or assigned pursuant to this chapter.

In preparing such report, the director of finance of the county shall deduct any allocation which is unused or unassigned as of December 15 but will be applied to private activity bonds on or prior to December 31 of such year.

Unless the director of finance of the county or any issuer, by written certificate, indicates to the department prior to December 15 of each year that it intends to carry forward all or any portion of its allocation which has not been applied to private activity bonds in such year or assigned pursuant to this chapter, such unused or unassigned allocation shall revert to the State on December 31 and the State shall be entitled to carry forward such unused or unassigned allocation as permitted by federal law.] corporation and department shall separately submit to the governor and legislature by January 31 of each year a report setting forth the amount of the allocation used or assigned during the previous calendar year and the projects for which allocations or assignments were made."

PART IV

SECTION 13. The purpose of this part is to:

(1) Require only grants to be made from the rental housing trust fund as equity gap financing; and

(2) Repeal the sunset date on the provision transferring a portion of the conveyance tax proceeds to the rental housing trust fund.

SECTION 14. Section 201H-202, Hawaii Revised Statutes, is amended to read as follows:

"§201H-202 Rental housing trust fund. (a) There is established the rental housing trust fund to be administered by the corporation.

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

(c) The following may be deposited into the fund: appropriations made by the legislature, private contributions, repayment of loans[,] made before the effective date of this Act or in accordance with section 17 of this Act, interest, other returns, and moneys from other sources.

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

(e) [~~Moneys available in~~] Grants from the fund shall be used [~~for the purpose of providing, in whole or in part, loans or grants~~] for rental housing projects in the following order of priority:

(1) Projects or units in projects that are allocated low income housing credits pursuant to the state housing credit ceiling under section 42(h) of the Internal Revenue Code of 1986, as amended, or projects or units in projects that are funded by programs of the United States Department of Housing and Urban Development and United States Department of Agriculture Rural Development wherein:

(A) At least fifty per cent of the available units are for persons and families with incomes at or below eighty per cent of the median family income of which at least five per cent of the available units are for persons and families with incomes at or below thirty per cent of the median family income; and

(B) The remaining units are for persons and families with incomes at or below one hundred per cent of the median family income;

provided that the corporation may establish rules to ensure full occupancy of fund projects; and

(2) Mixed-income rental projects or units in a mixed income rental project wherein all of the available units are for persons and families with incomes at or below one hundred forty per cent of the median family income.

No loan for any rental housing project shall be made from the fund.

(f) The corporation shall submit an annual report to the legislature no later than twenty days prior to the convening of each regular session describing the projects funded and, with respect to rental housing projects targeted for persons and families with incomes at or below thirty per cent of the median family income, its efforts to develop those rental housing projects, a description of proposals submitted for this target group and action taken on the proposals, and any barriers to developing housing units for this target group.

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

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

~~(i)~~] (h) For the period commencing July 1, 2005[,] through June 30, 2009, the fund may be used to provide grants for rental units set aside for persons and families with incomes at or below thirty per cent of the median family income in any project financed in whole or in part by the fund in proportion of those units to the total number of units in the project. At the conclusion of the period described in this subsection, the corporation shall report to the legislature on the number and use of grants provided and whether the grants were an effective use of the funds for purposes of developing rental housing for families at or below thirty per cent of the median family income."

SECTION 15. Section 201H-204, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Activities eligible for [~~assistance~~] grants from the fund shall include but not be limited to:

(1) New construction, rehabilitation, or preservation of low-income rental housing units that meet the criteria for eligibility described in subsection (c);

[~~(2)~~ ~~The leveraging of moneys with the use of fund assets;~~

~~(3)~~] (2) Pre-development activity grants [~~or loans~~] to nonprofit organizations; and

[~~(4)~~] (3) Acquisition of housing units for the purpose of preservation as low-income or very low-income rental housing."

SECTION 16. Act 222, Session Laws of Hawaii 2007, is amended by amending section 4 to read as follows:

"SECTION 4. Act 100, Session Laws of Hawaii 2006, is amended by amending section 30 to read as follows:

"SECTION 30. This Act shall take effect on July 1, 2006[~~; provided that on June 30, 2008, section 21 shall be repealed and section 247-7, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day before the approval of this Act~~]."

SECTION 17. (a) This Act shall not affect the duty and responsibility of the Hawaii housing finance and development corporation to collect any loan made from the rental housing trust fund before the effective date of this Act or pursuant to subsection (b). This Act also shall not affect the duty and liability of a borrower of a loan from the rental housing trust fund to repay the loan to the corporation.

(b) Notwithstanding any amendment made under this part, after the effective date of this Act, the Hawaii housing finance and development may issue a loan to a borrower from the rental housing trust fund if the loan application was pending before the corporation on the day before the effective date of this Act.

PART V

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

SECTION 19. This Act shall take effect on July 1, 2008, except that part III shall take effect on January 1, 2009.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2668
TWENTY-FOURTH LEGISLATURE, 2008
STATE OF HAWAII