THE SENATE	S.B. NO.	2352
TWENTY-SIXTH LEGISLATURE, 2012
STATE OF HAWAII

A BILL FOR AN ACT

relating to agriculture.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

     SECTION 1.  The legislature finds that for the State of Hawaii to meet its sustainability goals, it must become more self-reliant in food production.  To achieve this goal, Hawaii's farmers need more options to obtain much needed working capital to address critical issues such as improvements, food safety, and crop damage. 

     The purpose of this Act is to:

     (1)  Require the department of agriculture to guarantee up to eighty per cent of the principal balance of a loan by a private lender made to a qualified farmer, qualified food manufacturer, or cooperative;

     (2)  Require the chairperson of the board of agriculture to guarantee loans from commercial lenders and broaden the scope of the guarantee from important agricultural lands to all agricultural lands; and

     (3)  Specify the loan application requirements for loan guarantees by the department of agriculture.

     SECTION 2.  Chapter 155, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§155-   Loan application requirements. (a)  Applicants for loans insured or guaranteed by the department of agriculture pursuant to sections 155-5 and 155-5.5 shall complete an application form as prescribed by the department of agriculture and shall attach the following exhibits to the application:

(1) A business income statement and balance sheet for the two years prior to the application, if applicable;

(2) Cash flow projections for the next three years;

(3) Aging schedules for accounts payable and accounts receivable;

(4) A personal financial statement if the applicant is a sole proprietor, partner, or guarantor;

(5) Copies of income tax returns for the three years prior to the application;

(6) A copy of the deed or lease for the farm, if applicable;

(7) A resume demonstrating the applicant's agricultural experience and a business plan;

(8) A narrative describing the applicant's business, including information on the size and location of the business and the type of crops grown or food manufactured; and

(9) The name of any experts, such as an accountant, attorney, or agricultural expert, that the applicant relied upon in creating the applicant's business plan and cash flow projections.

(b)  The department of agriculture may require additional documentation from the applicant prior to approval of the application for an insured or guaranteed loan."

     SECTION 3.  Section 155-5.5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  The department of agriculture [may] shall guarantee up to [ninety] eighty per cent of the principal balance of a loan, plus interest due thereon, made to a qualified farmer, qualified food manufacturer, or cooperative by a private lender; provided that at no time shall the aggregate amount of the State's liability, contingent or otherwise, on loans guaranteed under this section and sections 155-5, 155-6, and 155-6.5 exceed $10,000,000."

     SECTION 4.  Section 155-5.6, Hawaii Revised Statutes, is amended by amending its title and subsections (a) to (b) to read as follows:

"[[]§155-5.6[]]  Loan guaranty; [important agricultural lands;] agricultural and aquacultural loans.  (a)  [From July 1, 2009, the] The chairperson of the board of agriculture [may] shall guarantee loans made by commercial lenders authorized to do business in this State, to agricultural producers for the purpose of developing and implementing agricultural projects; provided that the chairperson of the board of agriculture shall determine [that:

(1) The agricultural projects are located on lands designated as important agricultural lands pursuant to part III of chapter 205; and

(2) The] that the commercial lender has completed its due diligence in approving the loan, including ensuring adequate collateral.

The chairperson of the board of agriculture may impose other conditions that the chairperson deems reasonable to implement the loan guaranty.

     (b)  In addition to the conditions that the chairperson of the board of agriculture may impose under subsection (a), any loan guaranty made pursuant to this section shall meet the following conditions:

     (1)  For any loan that finances operating costs, the maximum term of the loan shall be ten years;

     (2)  For any loan that finances capital improvement costs, the maximum term of the loan shall be twenty years;

     (3)  The interest rate charged on any loan shall be one per cent below the commercial lender's prime rate for as long as the loan guaranty is in effect;

     (4)  The loan guaranty [may] shall be up to [eighty-five] eighty per cent of the outstanding principal amount of any single loan, but shall not include any fees or accrued interest associated with the loan or its collection; and

     (5)  The total principal amount of the guaranteed portion of all loans outstanding at any time shall not exceed $2,500,000."

     SECTION 5.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 6.  This Act shall take effect upon its approval.

INTRODUCED BY:

_____________________________

Report Title:

Agriculture; Loans

Description:

Requires the department of agriculture to guarantee up to eighty per cent of the principal balance of a loan by a private lender made to a qualified farmer, qualified food manufacturer, or cooperative.  Requires the chairperson of the board of agriculture to guarantee loans from commercial lenders and broadens the scope of the guarantee from important agricultural lands to all agricultural lands.  Specifies the application requirements for loan guarantees by the department of agriculture.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.