STAND. COM. REP. NO. 1656

Honolulu, Hawaii

RE: H.B. No. 422

H.D. 1

S.D. 2

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

Your Committees on Ways and Means and Education, to which was referred H.B. No. 422, H.D. 1, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO SCHOOL IMPACT FEES,"

beg leave to report as follows:

The purpose and intent of this measure is to address rising housing development costs in school impact zones, which are passed through to renters and homebuyers.

Specifically, this measure:

(1) Eliminates school impact fees; and

(2) Abolishes certain fair share contribution accounts and lapses unencumbered balances to the school facilities special fund.

Your Committees received written comments in support of this measure from the Department of Hawaiian Home Lands, Hawaii Public Housing Authority, Complete Construction Services Corp, Grassroot Institute of Hawaii, Hawaii Appleseed Center for Law and Economic Justice, Hawaii YIMBY, The Libertarian Party of Hawaii, and three individuals.

Your Committees received written comments in opposition to this measure from the Department of Education and seven individuals.

Your Committees received written comments on this measure from the Board of Education, Hawaii School Facilities Authority, LIMBY Hawaii, and Tax Foundation of Hawaii.

Your Committees find that although school impact fees were implemented to support public education needs in areas of the State impacted by new housing developments, school impact fees can add to planning and construction costs and result in even higher housing costs for buyers and renters. Your Committees, however, are concerned that eliminating school impact fees entirely could adversely impact the construction of new schools in areas in need of additional education facilities. Your Committees, therefore, find that further examination of school impact fees is warranted.

Your Committees also find that amendments to this measure are necessary to confirm the efficacy of school impact fees, and to allow the Legislature to consider a repeal of the sunset date of the measure if the report by the School Facilities Authority supports making the contents of this measure permanent.

Accordingly, your Committees have amended this measure by:

(1) Repealing the construction cost component of the school impact fee and making conforming amendments to subpart B of part VI of Chapter 302A, Hawaii Revised Statutes;

(2) Reinserting the provisions regarding the land component impact fee and fee in lieu requirement, and the fair share contribution accounts into which the fees are paid;

(3) Increasing from fifty to one hundred the minimum number of units in a development that triggers land dedication provisions of the land component impact fee;

(4) Exempting additional projects from school impact fees, including certain affordable, government, and Hawaiian home lands developments and single-room dwellings;

(5) Removing the lapse of unencumbered balances in the fair share contribution accounts;

(6) Requiring the School Facilities Authority to adopt rules governing the collection of impact fees;

(7) Requiring the School Facilities Authority to provide a report to the Legislature by December 15, 2026, on the effect of repealing the construction cost component of the school impact fee; and

(8) Inserting a repeal and reenactment date of June 30, 2029.

As affirmed by the records of votes of the members of your Committees on Ways and Means and Education that are attached to this report, your Committees are in accord with the intent and purpose of H.B. No. 422, H.D. 1, S.D. 1, as amended herein, and recommend that it pass Third Reading in the form attached hereto as H.B. No. 422, H.D. 1, S.D. 2.

Respectfully submitted on behalf of the members of the Committees on Ways and Means and Education,

________________________________ MICHELLE N. KIDANI, Chair

________________________________ DONOVAN M. DELA CRUZ, Chair