SB1620

SECTION 1. The legislature finds that state tax revenues are up significantly over the last fiscal year, and that excess revenues will likely continue for the foreseeable future. However, the legislature is cognizant, nonetheless, that tax revenues are necessarily erratic and unpredictable, depending on the economic health of the State and the vagaries of the national economy.

The legislature finds that counties are in dire financial straits leaving needed capital improvement projects neglected. A recent example is the Waikiki sewer line that ruptured on March 24, 2006 after flooding rains, which forced the city and county of Honolulu to divert untreated sewage into the Ala Wai Canal and then implement a project for a long-term solution. Another example is the two-year Kapiolani Boulevard underground utility improvement for new water and sewer lines which began on September 5, 2006. Both projects would fix aging underground utilities that were neglected for many years for lack of county funds until a dire emergency situation was created in the case of the Ala Wai, or until a disaster is averted ahead of time in case of Kapiolani Boulevard. Both construction projects are intended to make improvements to last for the next fifty years or more.

The legislature finds orderly and planned infrastructure capacity construction is the foundation for planned population growth and desirable communities. Infrastructure construction should precede development. Adequate infrastructure to accommodate future growth would provide livable communities with a desirable quality of life; make possible strategically situated affordable housing (for example, near areas of job growth); and preserve the environment by targeting growth to specific areas that have the necessary infrastructure to support development. Counties would first determine where development is desirable and then proceed to construct the infrastructure to support a development, rather than vice versa as is the present practice.

Population increase is natural, inevitable, and unavoidable. The issue then becomes how the government can best prepare for future planned growth. Experience indicates that the lack of adequate infrastructure is a tremendous restriction on planned development. For example, the Honolulu Advertiser reported in the September 19, 2006 issue that approximately 60,000 new homes are being planned for Oahu over the next two decades. The estimate was taken from the department of planning and permitting and Advertiser estimates. The expansion is the equivalent of a new Mililani, Hawaii Kai, Wahiawa, Kailua, and Kaneohe combined, a prospect that will bring benefits and drawbacks. Adequate infrastructure (excluding mass transit) would mitigate much of the systemic drawbacks.

The State could assist the counties with supplemental financing of infrastructure capacity construction whenever feasible, although the primary responsibility continues to rest with the counties. Infrastructure projects included under this Act are sewer; water; drainage; and roads, if a project would increase the carrying capacity to accommodate future planning. Increasing capacity is distinguishable from maintenance. While

maintenance would increase the life of the facility, only projects that increase capacity would be eligible for supplemental funding under this Act.

The State cannot afford to abandon the counties and must financially assist the counties when it comes to providing infrastructure. Counties are the first and last stop when it comes to planning and development. Development is linked to several shared responsibilities under the constitution of the State of Hawaii, including the following: article IX, section 6, relating to management of state population growth to protect the public health and welfare; article XI, section 1, relating to conservation and development of resources for the benefit of present and future generations; and article XVI, section 5, relating to intergovernmental relations to provide cooperation in matters affecting the public health, safety, and general welfare.

The purpose of this Act is to create a county infrastructure capacity construction loan revolving fund to provide loans to the counties for infrastructure improvements.

SECTION 2. Chapter 46, Hawaii Revised Statutes, is amended by adding a new section to part V to be appropriately designated and to read as follows:

"§46- County infrastructure capacity construction loan revolving fund. (a) There is established within the state treasury a county infrastructure capacity construction loan revolving fund. The revolving fund shall be administered by and monies expended by the department of budget and finance in accordance with this section. The legislature find that the provisions of this section satisfy the requirements of section 37-52.4.

(b) The county infrastructure capacity construction loan revolving fund shall consist of moneys:

(1) Received by the department from counties for the repayment of loan principal and payment of simple interest; provided that simple interest charged to a county for a loan shall be per cent below the prevailing market rate at the time the loan is made but in no event shall exceed per cent;

(2) Appropriated by the legislature into the fund from surplus revenues derived from prior fiscal years;

(3) Appropriate federal grants and subsidies to the State or counties, if any; and

(4) Voluntary contributions.

(c) The department shall expend monies in this fund to make loans to counties for the costs, in whole or in part, of infrastructure improvements that would increase the carrying capacity of infrastructure facilities, including sewer, water, drainage, and roads. Eligible costs shall be limited to construction and materials, excluding the initial costs of planning, engineering, and feasibility studies. No loan shall be made for maintenance costs, such as increasing the life of the facility, unless the construction would simultaneously increase the carrying capacity of the facility. No loan shall be made for mass transit or for electrical utilities. Loans shall be made only for capital improvement projects approved by the respective county council with a view towards planned growth rather than upkeep and maintenance.

(d) The department shall comply with section 37-47. The department shall adopt rules in accordance with chapter 91 for purposes of this section."

SECTION 3. 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 2007-2008, and the same sum, or so much thereof as may be necessary for fiscal year 2008-2009, for deposit into the county infrastructure capacity construction loan revolving fund.

The sum appropriated shall be expended by the department of budget and finance for the purposes of this Act.

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval;

provided that section 3 shall take effect on July 1, 2007.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	1620
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII