SB2467

SECTION 1. The legislature finds that agriculture and aquaculture are essential industries for the State and that their long term sustainability is vital for the security and well being of the State. The development of renewable and sustainable energy is essential to the sustainability of these industries.

Agriculture and aquaculture production areas may have natural resources that are available for the production of on-site energy production for use on the production facility. However, conventional financing at reasonable rates and terms may not be available for these types of projects.

The legislature finds that the State should initiate a loan program to assist the agriculture and aquaculture industries in developing sustainable and renewable energy projects for use on their production sites.

The purpose of this Act is to establish a loan program to financially assist in the development of sustainable energy for the agriculture and aquaculture industries.

SECTION 2. 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 Hawaii farm renewable sustainable energy loan program. The purpose of this chapter is to establish the Hawaii farm renewable sustainable energy loan program to be administered by the board of agriculture.

§ -2 Definitions. As used in this chapter, the following words and terms have the following meanings unless the context indicates otherwise:

"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.

"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 undertakes farming activities on land that the person either owns or leases and who is presently devoting, has recently devoted, or intends to devote a substantial portion of the person’s time or who derives a major portion of the person’s net cash income from direct participation in farming activities. "Qualified farmer" 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 chapter 155-10;

2) 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 chapter 155-10 and where seventy-five per cent of the directors are qualified farmers;

(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 per cent 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 chapter 155; 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 chapter 155-10.

"Renewable sustainable energy projects" mean on-site energy projects that may include but are not limited to photovoltaic energy, hydroelectric, wind power generation, methane generation, biodiesel production, and ethanol production.

§ -3 Restriction. Loans provided for by this chapter shall be authorized only if the loans cannot be obtained from the applicant’s regular bank in which the applicant maintains the applicant's accounts.

§ -4 Powers and duties of the department. The department shall have the necessary powers to carry out the purposes of this chapter including the powers to:

(1) Prescribe the qualifications for eligibility of applicants for loans issued pursuant to this chapter;

(2) Establish preferences and priorities in determining eligibility for loans issued pursuant to this chapter and their repayment requirements;

(3) Establish the conditions for the granting or for the continuance of a grant of a loan issued pursuant to this chapter;

(4) Provide for inspection at reasonable hours of the plant facilities, books, and records of an applicant for a loan under this chapter or a farmer who has been granted a loan which requires the submission of progress and final reports;

(5) Make loans for sustainable renewable energy projects, such as plant construction, conversion, expansion, or the acquisition of land for expansion, the acquisition of equipment, machinery, supplies, or materials, or for working capital;

(6) Secure loans by duly recorded first mortgages or other appropriate instruments 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;

(E) A junior mortgage when any prior mortgage does not contain provisions that might jeopardize the security position of the department or the borrower’s ability to repay; and

(F) Written agreements, such as an assignment of income;

(7) Administer the Hawaii farm renewable sustainable energy loan fund and deposit into the fund all moneys received on account of principal;

(8) Include in its budget for subsequent fiscal periods amounts necessary to effectuate the purposes of this chapter;

(9) Make loans consistent with this chapter to qualified farmers or qualified aquaculturists;

(10) Approve loans, where the requested loan amount, plus any principal balance on existing loans to the applicant, does not exceed $75,000 of state funds; provided that all loans shall be approved by the chairperson; and

(11) Adopt rules pursuant to chapter 91 to effectuate this chapter.

§ -5 Loan limitations and terms. (a) Renewable sustainable energy project loans shall provide for:

(1) The purchase, construction, or improvement of essential farm buildings related to sustainable renewable energy projects;

(2) The improvement of land as may be required by the projects;

(3) The purchase of equipment and payment of project expenses including materials, labor, and services; and

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

(b) Loans issued pursuant to this chapter shall be for a term not to exceed forty years, provided that loans shall not exceed $1,500,000 or eighty-five per cent of the project cost, whichever amount is less. The interest charged on these loans shall be fixed at five per cent per year. No loans shall be made for any type of power plant generation projects.

§ -6 Hawaii farm renewable sustainable energy loan fund, established; application of payments. (a) There is established a special fund to be known as the Hawaii farm renewable sustainable energy loan fund from which moneys shall be loaned by the department under this chapter.

(b) All interest and fees collected by the department shall be deposited in a reserve fund to the extent needed to carry on the operation of this program; any moneys surplus to those needs shall be transferred to the Hawaii farm renewable sustainable energy loan 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 fund."

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 2008-2009 for establishing the Hawaii farm renewable sustainable energy loan fund.

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

SECTION 4. This Act shall take effect on July 1, 2008.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	2467
TWENTY-FOURTH LEGISLATURE, 2008
STATE OF HAWAII