SB1910

SECTION 1. The legislature finds that, small boat harbors, as centers of economic and recreational activity, constitute significant assets of the State. Their proper maintenance and operation allow Hawaii residents to benefit from the State's natural resources by engaging in recreational boating, commercial and personal fishing, and small business operations. In addition, visitors and residents alike use small boat harbors and launch ramps to participate in local, regional, and international yacht races, fishing tournaments, canoe regattas, surfing, and other watersports contests.

In 1992, the legislature transferred the operation of small boat harbors and boat ramps from the department of transportation to the department of land and natural resources, reasoning that all recreational programs of the State should be administered by one department and that the needs of the boating community would be better served by the department of land and natural resources.

In terms of the number of mooring spaces for boats, the department of land and natural resources in Hawaii has among the fewest of any state in the country to manage. According to the Audit of the Management of Small Boat Harbors and Boat Ramps, conducted by the auditor in 1998, the department's division of boating and ocean recreation administers only twenty-one small boat harbors. According to a fact sheet prepared by the division of boating and ocean recreation using 2005 data, the division administers twenty-one harbors, fifty ramps, 2,122 moorings/berths, and nineteen piers. The division also administers fifty-four launching ramps, thirteen offshore mooring areas, ten designated ocean water areas, one hundred and eight designated ocean recreation management areas, and associated aids to navigation throughout the State.

Among the neighbor islands, the division administers the following small boat facilities:

(1) Big Island: Honokohau boat harbor, Kailua-Kona wharf, Kaulana ramp, Kauhako (Hookena ramp), Kawaihae harbor, Keauhou boat harbor, Milolii landing, Pohoiki ramp, Puako ramp, Reed's bay/Radio bay, and Wailoa sampan basin and boat harbor;

(2) Maui: Hana wharf and ramp, Kaanapali, Kahului ramp, Keanae ramp, Kihei ramp, Lahaina roadstead, Lahaina harbor, Maalaea harbor, Mala wharf and ramp, and Maliko ramp;

(3) Kauai: Anini ramp, Hanalei bay and pier, Kaumualii ramp, Kikiaola harbor, Kukuiula harbor, Nawiliwili harbor, Port Allen harbor, Waikaea canal, and Wailua ramp;

(4) Lanai: Kaumalapau harbor and Manele harbor; and

(5) Molokai: Hale O Lono harbor and Kaunakakai harbor.

Even back in 1987, there has been a documented unfilled demand for mooring facilities on all major islands of the State. Responding to Senate Resolution No. 175 (1987), the department of transportation reported that there was "a long waiting list for boat slips at all of the small boat harbors owned by the State on all islands." There is ample space to expand mooring areas in existing small boat harbors on each of the islands. However, under the current structure and scheme of administration and operation of small boat harbors, there is no incentive or support for this expansion and no realistic way to accomplish the task.

On Oahu, the division administers the Ala Wai harbor, Haleiwa harbor, Heeia Kea harbor, Kahana bay launch ramp facility, Kaneohe bay harbor and anchorage, Keehi harbor/lagoon, Maunalua bay launch ramp facility, Pokai bay, Sand Island launch ramp facility, Waianae harbor, and Waikiki beach waters on Oahu.

Of particular interest and importance on Oahu is Keehi lagoon and harbor. Keehi lagoon and harbor holds the promise of becoming the preeminent marina of the Pacific. Its potential has already been studied and well documented, mainly by a study commissioned by the department of transportation and carried out by Edward K. Noda and Associates and Eugene P. Dashiell, AICP in 1987. That study recommended a plan for Keehi lagoon that benefits both ocean recreation and commercial development and that provides extensive opportunities for:

(1) The greatest variety of ocean recreation facilities in any single location in the State;

(2) Over one hundred acres of land suitable for light industrial and commercial activities;

(3) Large sail craft;

(4) Commercial craft including dinner cruise boats;

(5) Recreational craft;

(6) Commercial fishermen;

(7) Fish transhipping;

(8) Airport and maritime light industry;

(9) Ocean recreation facilities for residents and visitors;

(10) The possibility of a nine-hole golf course integral with a light industrial park.

The report concluded that "if the land is used as projected, economic benefits are conservatively estimated to exceed the costs of development." An impetus behind the selection of Keehi lagoon for development was the possibility of hosting the America's Cup Races in Hawaii in 1991. Although Hawaii was ultimately not chosen as the site, the plan to develop Keehi lagoon into a world-class marina, and the predominant one in the Pacific, remains viable and continues to hold great potential.

The purpose of this Act is to realize the full potential for developing Hawaii's ocean, recreational, and commercial activities in the harbor facilities of the State by establishing maritime industry opportunity zones to accommodate the entry into the State of maritime industry qualified businesses with a minimum of red tape.

The intent of the legislature is to have the groundwork prepared in anticipation of the entry of qualified businesses that are willing and able to invest in the State to develop Hawaii's maritime industry by having certain areas in the respective counties designated as maritime industry opportunity zones, with all the necessary environment impact statements performed and in place, and by expediting the issuance of necessary county permits, in consultation with the respective counties through their active participation in an advisory committee.

SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

MARITIME INDUSTRY opportunity ZONES

§ -1 Purpose. The purpose of this chapter is to realize the full potential for developing Hawaii's ocean, recreational, and commercial activities in the harbor facilities of the State by accommodating the entry into the State of maritime industry qualified businesses by providing for the establishment of maritime industry opportunity zones.

§ -2 Definitions. As used in this chapter, unless the context clearly requires otherwise:

"Department" means the department of business, economic development, and tourism.

"Director" means the director of business, economic development, and tourism.

"Establishment" means a single physical location where a maritime industry business conducts operations. A qualified business may include one or more establishments, any number of which may be in a maritime industry opportunity zone.

"Full-time employee" means any employee for whom the employer is legally required to provide employee fringe benefits.

"Maritime industry business" means any business that conducts operations that are traditionally and customarily conducted in a maritime setting such as in harbors, small boat harbors, ports, lagoons, bays, marinas, piers, anchorages, ramps, roadsteads, and the like, subject to clarifying rules adopted under section -3 by the department of business, economic development, and tourism.

"Maritime industry opportunity zone" means an area:

(1) Designated by the director of business, economic development, and tourism under this chapter in consultation with the maritime industry opportunity zone advisory committee;

(2) That is within the jurisdiction of a county government; and

(3) That is eligible for the benefits under this chapter.

"Qualified business" means any maritime industry business that is:

(1) Authorized to do business in this State;

(2) Qualified under section -8; and

(3) Engaged in operating a business within the definition of "maritime industry business".

"Taxes due the State" means income taxes due under chapter 235.

§ -3 Maritime industry opportunity zone designation; consultation with maritime industry opportunity zone advisory committee; rules. (a) The director, in consultation with the maritime industry opportunity zone advisory committee, shall:

(1) Designate areas within the State as maritime industry opportunity zones;

(2) Establish criteria for determining which areas qualify as maritime industry opportunity zones;

(3) Determine what types of maritime industry businesses shall be approved for each designated maritime industry opportunity zone;

(4) Determine the number of areas in each county that may be designated as maritime industry opportunity zones; and

(5) Set the period of time an area shall remain a designated maritime industry opportunity zone.

A maritime industry opportunity zone shall not be subject to the requirement for prior authorization of the legislature by concurrent resolution under section 171‑53.

(b) The director shall adopt rules in accordance with chapter 91 to carry out the effect of this chapter, including rules to clarify the definition of "maritime industry business."

§ -4 Environmental impact statement; county issuance of permits; reports. (a) The director shall:

(1) Perform the necessary environmental impact statement or statements for the maritime industry business approved by the director in a designated maritime industry opportunity zone; and

(2) Cooperate with the relevant county in which a designated maritime industry opportunity zone is located to expedite the issuance of all necessary county permits by June 30, 2008.

(b) The director shall submit annual reports evaluating the effectiveness of this chapter, including any recommendations for legislation to the legislature and the governor.

§ -5 Government assistance; prohibition. There shall be no duplication of existing state tax incentives to qualified businesses that locate in a maritime industry opportunity zone.

§ -6 Rules; consultation with county. The department, in consultation with each relevant county, shall adopt rules in accordance with chapter 91 to implement this chapter, including rules relating to health, safety, building, planning, zoning, and land use, which shall supersede all other inconsistent ordinances and rules relating to the use, zoning, planning, and development of land and construction in a maritime industry opportunity zone. Rules adopted under this section shall follow existing law, rules, and ordinances as closely as is consistent with standards meeting minimum requirements of energy efficiency, health, and safety. The department may provide by rule that lands within a maritime industry opportunity zone shall not be developed beyond existing uses or that improvements thereon shall not be demolished or substantially reconstructed, or provide other restrictions on the use of the zone.

§ -7 Maritime industry opportunity zone advisory committee. (a) There is established a maritime industry opportunity zone advisory committee, to be placed within the department for administrative purposes. The advisory committee shall consist of six members appointed by the governor pursuant to section 26-34, as follows:

(1) One member representing the department of business, economic development, and tourism to act as an ex-officio nonvoting member;

(2) One member knowledgeable in the maritime industry, who shall serve as chairperson; and

(3) Four members representing each of the mayors of the respective counties.

(b) Members shall not be compensated but shall be reimbursed for necessary expenses, including travel expenses, incurred in the course of carrying out their duties.

§ -8 Eligibility; qualified business; sale of property or services. (a) Any maritime industry business may be eligible to be designated a qualified business for purposes of this chapter if the maritime industry business:

(1) Begins the operation of a maritime industry business within a maritime industry opportunity zone;

(2) During each taxable year has at least per cent of its maritime industry opportunity zone establishment's gross receipts attributable to the active conduct of a maritime industry business within the maritime industry opportunity zone;

(3) Increases its average annual number of full-time employees by at least per cent by the end of its first tax year of participation; and

(4) During each subsequent taxable year at least maintains that higher level of employment.

(b) A maritime industry business also may be eligible to be designated a qualified business for purposes of this chapter if the maritime industry business:

(1) Is actively engaged in conducting a maritime industry business in an area immediately prior to an area being designated a maritime industry opportunity zone;

(2) Meets the requirements of subsection (a)(2); and

(3) Increases its average annual number of full-time employees employed at the maritime industry business's establishment or establishments located within the maritime industry opportunity zone by at least per cent annually.

(c) After designation as a maritime industry opportunity zone, each qualified business in the zone shall submit annually to the department an approved form supplied by the department that provides the information necessary for the department to determine if the maritime industry business qualifies as a qualified business. The approved form shall be submitted by each business to the governing body of the county in which the maritime industry opportunity zone is located, then forwarded to the department by the governing body of the county.

(d) The form referred to in subsection (c) shall be prima facie evidence of the eligibility of a maritime industry business for the purposes of this section.

(e) Any business conducted by a maritime industry business outside of a maritime industry opportunity zone shall not be included in the determination of gross receipts attributable to the active conduct of a maritime industry business under subsection (a)(2).

§ -9 State business tax credit. (a) The director shall certify annually to the department of taxation the applicability of the tax credit provided in this chapter for a qualified business against any taxes due the State. Except for the general excise tax, the credit shall be:

(1) Eighty per cent of the tax due for the first tax year;

(2) Seventy per cent of the tax due for the second tax year;

(3) Sixty per cent of the tax due for the third year;

(4) Fifty per cent of the tax due the fourth year;

(5) Forty per cent of the tax due the fifth year;

(6) Thirty per cent of the tax due the sixth year; and

(7) Twenty per cent of the tax due the seventh year.

Any tax credit not usable shall not be applied to future tax years.

(b) When a partnership is eligible for a tax credit under this section, each partner shall be eligible for the tax credit provided for in this section on the partner's income tax return in proportion to the amount of income received by the partner from the partnership. Any qualified business having taxable income from the active conduct of a maritime industry business, both within and without the maritime industry opportunity zone, shall allocate and apportion its taxable income attributable to that production. Tax credits provided for in this section shall only apply to taxable income of a qualified business attributable to the active conduct of a maritime industry business within the maritime industry opportunity zone.

(c) In addition to any tax credit authorized under this section, any qualified business shall be entitled to a tax credit against any taxes due the State in an amount equal to a percentage of unemployment taxes paid. The amount of the credit shall be equal to:

(1) Eighty per cent of the unemployment taxes paid during the first year;

(2) Seventy per cent of the taxes paid during the second year;

(3) Sixty per cent of the taxes paid during the third year;

(4) Fifty per cent of the taxes paid during the fourth year;

(5) Forty per cent of the taxes paid during the fifth year;

(6) Thirty per cent of the taxes paid during the sixth year; and

(7) Twenty per cent of the taxes paid during the seventh year.

(d) Tax credits provided for in subsection (c) shall only apply to the unemployment tax paid on employees employed at the qualified business' establishment or establishments located within the maritime industry opportunity zone. Any tax credit not usable shall not be applied to future tax years.

§ -10 State general excise and use tax exemptions. The director shall certify annually to the department of taxation that any qualified business is exempt from the payment of general excise taxes on the gross proceeds from the conduct of a maritime industry business within a maritime industry opportunity zone. The director shall also certify annually to the department of taxation that any qualified business is exempt from the use tax for purchases by the qualified business. The gross proceeds received by a contractor licensed under chapter 444 shall be exempt from the general excise tax for construction within a maritime industry opportunity zone performed for a qualified business within a maritime industry opportunity zone. The exemption shall extend for a period not to exceed seven years.

§ -11 Local incentives. A county may propose local incentives to be made available in a maritime industry opportunity zone, including:

(1) Reduction of permit fees;

(2) Reduction of user fees;

(3) Reduction of real property taxes; and

(4) Regulatory flexibility, including, but not limited to:

(A) Special zoning districts;

(B) Permit process reform;

(D) Other public incentives,

which shall be binding upon the locality upon designation of the maritime industry opportunity zone.

§ -12 Termination of maritime industry opportunity zone. Upon designation of an area as a maritime industry opportunity zone, the proposals for regulatory flexibility, tax incentives, and other public incentives specified in this chapter shall be binding upon the county governing body to the extent and for the period of time specified by the director pursuant to section ‑3. If the county governing body is unable or unwilling to provide any of the incentives set forth in section ‑11 or other incentives acceptable to the director, and the director has not adopted rules pursuant to section ‑6 that supersede inconsistent ordinances and rules relating to the use, zoning, planning, and development of land and construction in a maritime industry opportunity zone, then the maritime industry opportunity zone shall terminate. Qualified businesses located in the maritime industry opportunity zone shall be eligible to receive the state tax incentives provided by this chapter even though the zone designation has terminated. No maritime industry business may become a qualified business after the date of zone termination."

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 the department of business, economic development, and tourism, to implement chapter , including the designation of maritime industry opportunity zones and performing required environmental impact statements.

The sums appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this Act.

SECTION 4. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun, before its effective date.

SECTION 5. This Act shall take effect upon approval except that section 3 shall take effect on July 1, 2007.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	1910
TWENTY-FOURTH LEGISLATURE, 2007
STATE OF HAWAII