HB3021

SECTION 1. The purpose of this Act is to address the issue of tax increment financing by:

(1) Authorizing the counties to use general funds raised from the assessment base in a tax increment district to pay the debt service on tax increment bonds if the tax increment derived from the district is insufficient; and

(2) Providing for the excess revenues from a tax increment district to be deposited into the county general fund instead of the tax increment fund.

SECTION 2. Section 46-102, Hawaii Revised Statutes, is amended as follows:

1. By amending the definition of "project costs" to read:

""Project costs" means expenditures made or estimated to be made or monetary obligations incurred or estimated to be incurred by the agency that are listed in a tax increment financing plan as costs of public works or public improvements in a tax increment district, plus other costs incidental to the expenditures or obligations. Project costs include:

(1) Capital costs, including the actual costs of the construction of public works or public improvements, new buildings, structures, and fixtures; the actual costs of the demolition, alteration, remodeling, repair, or reconstruction of existing buildings, structures, and fixtures; and the actual costs of the acquisition, clearing, and grading of land;

(2) Financing costs, including, but not limited to, all necessary and incidental expenses related to the issuance of tax increment bonds and all interest paid to holders of evidences of indebtedness or other obligations issued to pay for project costs, any capitalized interest, and any premium paid over the principal amount of the obligations because of the redemption of the obligations prior to maturity;

(3) Professional service costs, including architectural, planning, engineering, marketing, appraisal, financial consultant, and special services and legal advice;

(4) Imputed administrative costs, including reasonable charges for the time spent by employees of the agency in connection with the implementation of a tax increment financing plan;

(5) Relocation costs to the extent required by federal or state law;

(6) Organizational costs, including the costs of conducting environmental impact studies or other studies, the costs of publicizing the creation of a tax increment district, and the cost of implementing the tax increment financing plan for the tax increment district;

(7) Payments determined by the county council to be necessary or convenient to the creation of a tax increment district or to the implementation of the tax increment financing plan for the tax increment district[.]; and

(8) Reserves or sinking accounts for any of the foregoing."

2. By repealing the definition of "adjustment rate".

[""Adjustment rate" means a percentage rate or rates of adjustment of the assessment base determined by the director of finance at the time the tax increment district is established, based on the historical and projected increases to the assessed values of taxable real property within the boundary of the tax increment district and the projected cost increases to the county for servicing the new developments within the tax increment district."]

SECTION 3. Section 46-105, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) If a county exercises the power allowed under this part, then commencing with the first payment of real property taxes levied by the county subsequent to the time a tax increment district takes effect, receipts from real property taxes shall be annually allocated and paid over as follows:

(1) The amount of real property tax produced from the assessment base shall be paid to the county general fund; provided that, if the tax increment produced from the assessment increment is insufficient to pay the principal and interest due on the tax increment bonds issued for the district, the county may deposit into the applicable tax increment fund a portion of the real property taxes paid under this section to enable full payment of the principal and interest; and

(2) The tax [~~increments~~] increment produced from the assessment increment in the tax increment district shall be applied from first to last as follows[:] until exhausted:

(A) First, an amount equal to [~~the~~]:

(i) The installment of [~~(i)~~] principal and interest [~~falling~~] due [of] on any tax increment bonds[~~, or~~] issued for the district; and

(ii) [~~any~~] Any other project cost approved by the county[,] to be funded by the tax increment under the applicable tax increment financing plan,

shall be deposited into the tax increment fund established for the tax increment district[.]; and

(B) Second, [~~an amount equal to the adjustment rate times the amount of real property tax produced from the assessment base shall be computed and paid to the county general fund.~~

~~(C)~~ ~~Third,~~] the remaining amount of tax increments, if any, shall be deposited into the [~~tax increment~~] county general fund [~~established for the tax increment district~~]."

SECTION 4. Section 46-106, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read:

"(a) A county may issue tax increment bonds, the proceeds of which may be used to pay project costs for a tax increment district or to satisfy claims of bondholders. The county may issue refunding bonds previously issued by the county for the purpose of paying or retiring or in exchange for tax increment bonds previously issued by the county. Principal and interest on tax increment bonds shall be made payable, as to both principal and interest, solely from the tax increment fund established for the tax increment district[.]; provided that this condition shall be deemed met, whether the payment is made from:

(1) Only the tax increment deposited into the fund for the district pursuant to section 46-105(b)(2)(A); or

(2) Both that tax increment and a portion of the real property taxes deposited into the fund as authorized under section 46-105(b)(1).

A county may provide in its contract with the owners or holders of the tax increment bonds that the county will pay into the tax increment fund all or any part of the revenue or money produced or received as a result of the operation or sale of a facility acquired, improved, or constructed pursuant to a redevelopment plan or community development plan, as the case may be, to be used to pay principal and interest on the tax increment bonds and, if a county so agrees, the owners or holders of the tax increment bonds may have a lien or mortgage on any facility acquired, improved, or constructed with the proceeds of the tax increment bonds."

2. By amending subsections (h) and (i) to read:

"(h) Tax increment bonds shall be payable only out of the tax increment fund. The county council [~~may~~] shall pledge irrevocably all or a part of the fund for payment of the bonds. The part of the fund pledged in payment thereafter shall be used only for the payment of the bonds or interest or redemption premium, if any, on the bonds until the bonds have been fully paid. A holder of the bonds shall have a lien against the fund for payment of the bonds and interest thereon and [~~may~~], either at law or in equity, may protect and enforce [~~such~~] the lien.

(i) No officer of the county including any officer executing tax increment bonds shall be liable for the tax increment bonds by reason of the issuance thereof. Tax increment bonds issued under this part shall not be general obligations of the State or county[~~, nor~~]; provided that, when necessary to fully pay the principal and interest due on the bonds, a county may pledge to deposit a portion of the real property tax produced from the assessment base of the tax increment district into the applicable tax increment fund in accordance with section 46-105(b)(1). Nor in any event shall [~~they~~] the tax increment bonds give rise to a charge against the general credit or taxing powers of the State or county or be payable other than as provided by this part. No holder of bonds issued under this part shall have the right to compel any exercise of the taxing power of the State or county to pay [~~such~~] the bonds or the interest thereon, and no moneys other than the moneys in the tax increment fund pledged to the bonds shall be applied to the payment thereof. Tax increment bonds issued under this part shall state these restrictions on their face."

SECTION 5. Section 46-109, Hawaii Revised Statutes, is amended to read as follows:

"§46-109 Termination of a tax increment district. (a) A tax increment district shall terminate at the time designated in the ordinance creating the district or at an earlier or later time designated by a subsequent ordinance, but in no event shall the district terminate until such time as all project costs and tax increment bonds issued for the district and the interest thereon[,] have been paid in full[,] or sufficient funds have been irrevocably deposited in a special fund or other escrow account held in trust for all outstanding tax increment bonds issued for [~~such~~] the district to provide for the payment of [~~such~~] the bonds at maturity or date of redemption and interest and premium, if any, thereon.

(b) If a county has previously deposited a portion of the real property tax produced from the assessment base of a tax increment district into the applicable tax increment fund to fully pay the principal and interest due on tax increment bonds, as authorized under section 46-105(b)(1), the county may extend the tax increment district until the county general fund has been reimbursed for the amount of real property tax revenues deposited."

SECTION 6. Section 46-110, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

"(c) In any year in which the tax increment exceeds the amount necessary to pay all project costs and all installments of principal and interest of tax increment bonds issued for a tax increment district falling due and the amount paid to the county general fund pursuant to section 46-105(b)(2)(B), and subject to any agreement with bondholders, any excess money in the fund, at the option of the county council, shall be [~~used~~]:

(1) Used to redeem or purchase any outstanding tax increment bonds issued for the district[,] to discharge the pledge of tax increment [~~therefor, be paid~~] for those bonds;

(2) Paid into an escrow account dedicated to the payment of [~~such~~] outstanding tax increment bonds[~~, be paid~~];

(3) Deposited into the county general fund as repayment for any real property tax produced from the assessment base that was used to pay the principal and interest due on tax increment bonds as authorized under section 46-105(b)(1);

(4) Paid over to the county general fund[,] to be used for any purpose; or

(5) Used for any combination [~~thereof.~~] under paragraphs (1) to (4)."

SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 8. This Act shall take effect on July 1, 2008.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	3021
TWENTY-FOURTH LEGISLATURE, 2008
STATE OF HAWAII