SB1669 HD1

SECTION 1. The legislature finds that the best proven models of successful, affordable, healthy, and vibrant communities in transit-oriented development areas require sufficient water, sewer, and power infrastructure, significant affordable housing, safe, comfortable, and convenient pedestrian and multi-modal transit connectivity, meaningful community amenities such as parks, recreational facilities, and event venues, and community programs that provide for culture, arts, communication, safety, security, and cleanliness.

The legislature further finds that while significant effort has been made to plan for and prioritize affordable housing in transit-oriented development areas, too often the rest of the community infrastructure, multi-modal connectivity, public spaces, and amenities required for successful, livable communities are not the top priority for any one department or agency. As a result, these are often not planned for or constructed, ending up an afterthought once people move in and discover the gaps in their quality of life. This results in communities that are often sufficient for transient investment units and vacation properties, but not best suited for local families and permanent residents. Inevitably, this leads to costly retrofits, inferior community amenities, and diminished quality of life.

The legislature also finds that the two highest costs contributing to the cost of living are housing and transportation. By broadening the State's focus to develop affordable communities with fully built community infrastructure and amenities, rather than just affordable housing, the cost of a single unit can be reduced by as much as $75,000, and the cost of transportation for families living there can be reduced by $15,000 or more per year.

Units in many recent housing projects have become prohibitively expensive. On average, about $50,000 is added to the cost of a unit per parking stall built for it, and as much as $25,000 per unit for building amenities. Numerous cities have begun separating and aggregating parking stalls and building amenities, lowering the cost of each unit produced by as much as $75,000.

The legislature further finds that building separate parking garages allows residents in an area to lease space or use a parking stall as may be needed, rather than having the cost forced upon them through their mortgage. This is important considering Hawaii's next generation is driving considerably less than previous generations. Since 2000, the percentage of eighteen- to twenty-nine-year-olds with a driver's license has plummeted nearly forty per cent. Many desire to live in walkable, bikeable communities where they can get around without the average costly expense of $10,000 per year for each additional car in a family.

Additionally, relieving housing developers of the burden of building excessive amenities and gathering spaces in each building lowers the cost of living. Aggregating public spaces for open plazas, gathering spaces, parks, and green spaces available to everyone creates and fosters a better sense of community, opportunities for better mixed-use commercial, retail, and food options, and at a lower overall cost.

The legislature believes that tasking an agency with a primary mission to prioritize, plan, and build community infrastructure and amenities such as parks, public spaces, markets, and other amenities that make communities livable, desirable, and lower the cost of living should be a priority, not an afterthought. This approach, utilized by countless successful jurisdictions around the country and world, can reduce the cost of living, and, equally importantly, improve the quality of life and mental health and well-being for residents of all ages.

The legislature additionally finds that incorporating mixed-use commercial and retail space into the ground floors of buildings not only puts daily needs within walking distance of residents, but also provides lease rent and revenue generating opportunities that can help pay for maintenance, security, and similar expenses to lower maintenance fees and cost of living for residents in each building by thousands of dollars per year.

The legislature notes that some state agencies, such as the Hawaii housing finance and development corporation and Hawaii public housing authority, have a primary focus on building affordable communities, and other agencies, such as the Hawaii community development authority, have a broad focus on urban planning and development, but must compromise between achieving numerous goals, often leaving critical community amenities and infrastructure unfulfilled. Currently, no agency is tasked with a primary mission to plan for and construct the rest of the community infrastructure and amenities necessary to fill the gaps in recent development projects to ensure communities are being planned and built from the start with the public spaces, safe connectivity, and everything else the public tends to desire and need to reduce the cost of living, improve the quality of life, and ensure that affordable communities end up as more than transient investment or vacation properties, but rather as an ideal home for local residents to live, work, and play within.

Accordingly, the purpose of this Act is to establish the transit-oriented community improvement partnership, with a primary focus on prioritizing and implementing the community improvements and amenities desired by local residents, necessary for affordable, healthy, and vibrant communities, that shall:

(1) Coordinate with transit-oriented community development agencies and other stakeholders to ensure communities are planned and built with full transit infrastructure, communities, amenities, and workforce housing needed for success;

(2) Build community infrastructure, amenities, and address other needs to lower the cost of living and improve the quality of life; and

(3) Establish programs that communities desire, such as community and business improvement districts, to promote community engagement, keep public spaces safe and clean, and provide better opportunities and pathways for local economic development.

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

"Chapter

transit-oriented community improvement partnership

§ -1 Definitions. As used in this chapter:

"Board" means the board of directors of the transit-oriented community improvement partnership.

"Coordinating entrepreneur" means a qualified person capable of organizing, operating, and assuming the risk for enterprises, including securing land and seed capital, developing, or managing commercial or recreational facilities or projects, arranging concession agreements, supplying materials, maintaining equipment and infrastructure, and providing for the processing and marketing of services or products.

"Coventure" means an investment by the partnership in qualified securities of an enterprise in which a substantial investment is also being made or has been made by a professional investor to provide seed capital to an enterprise. A guarantee by the partnership of qualified securities provided by a professional investor shall be classified as a coventure. An investment made by the partnership, which is a direct investment, may later be classified as a coventure upon an investment by a professional investor.

"Development rights" means the rights permitted under a law or an ordinance relating to permitted uses of a property, the density or intensity of use, and the maximum height and size of improvements thereon.

"Direct investment" means an investment by the partnership in qualified securities of an enterprise where no investment is being or has been made by a professional investor to provide seed capital to the enterprise.

"Enterprise" means a business that has its principal place of business in Hawaii and that is or proposes to be engaged in recreational or commercial area development, development of new value-added products, enhancement of existing recreational or commercial commodities, or the application of existing recreation or commercial areas and appurtenant facilities to productive uses.

"Fund" means the community improvement special fund.

"Partnership" means the transit-oriented community improvement partnership.

"Professional investor" means any bank, bank holding company, savings institution, farm credit institution, trust company, insurance company, investment company registered under the federal Investment Company Act of 1940, as amended, financial services loan company, pension or profit-sharing trust or other financial institution or institutional buyer, licensee under the federal Small Business Investment Act of 1958, as amended, or any person, partnership, or other entity of whose resources, a substantial amount is dedicated to investing in securities or debt instruments, and whose net worth exceeds $250,000.

"Project" means a specific undertaking, improvement, or system consisting of work or improvement, including personal property or any interest therein acquired, constructed, reconstructed, rehabilitated, improved, altered, or repaired by the partnership.

"Project facility" includes improvements, roads and streets, utility and service corridors, utility lines where applicable, water and irrigation systems, lighting systems, security systems, sanitary sewerage systems, and other community facilities where applicable.

"Qualified person" means any individual, corporation, partnership, or public agency possessing the competence, expertise, experience, and resources, including financial, personnel, and tangible qualifications, as may be deemed desirable by the partnership in administering this chapter.

"Qualified security" means any note, stock, treasury stock bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, pre‑organization certificate of subscription, transferable share, investment contract, certificate of deposit for a security, certificate of interest or participation in a patent or patent application, or in royalty or other payments under a patent or application, or, in general, any interest or instrument commonly known as a "security" or any certificate for, receipt for, or option, warrant, or right to subscribe to or purchase any of the foregoing.

"Revenue bonds" means bonds, notes, or other evidence of indebtedness of the partnership issued to finance any project facility.

"Seed capital" means financing that is provided for the development, refinement, or commercialization of a product or process and other working capital needs.

"Transit-oriented community improvement area" means those lands within one half of a mile of a rail line design.

"Trust indenture" means an agreement by and between the partnership and a trustee that sets forth the duties of the trustee with respect to the revenue bonds, the security thereof, and other provisions as may be deemed necessary or convenient by the partnership to secure the revenue bonds.

"Trustee" means a national or state bank or trust company, within or outside the State, that enters into a trust indenture.

"Value-added" means any activity that increases, by means of development or any other means, the value of public lands.

"Walkable community" means a primarily residential area with mixed uses appurtenant to the residences wherein the services, commodities, and amenities necessary for residents to enjoy a complete and fulfilled life are within walking or bike riding distance along protected or grade-separated paths with minimal conflicts with other modes of transportation, for both bicycles and pedestrians, with convenient access to mass transit.

§ -2 Transit-oriented community improvement partnership; established. (a) There is established the transit-oriented community improvement partnership, which shall be a public body corporate and politic and an instrumentality and agency of the State. The partnership shall be headed by the board. The partnership shall be placed within the department of transportation for administrative purposes only.

(b) The partnership shall:

(1) Plan, coordinate, and administer projects and programs to develop meaningful infrastructure, housing, and amenities to create walkable communities along transit-oriented corridors for working families that are affordable, livable, healthy, happy, equitable, and secure;

(2) Identify and designate each transit-oriented community improvement area, and may assist other communities with individual projects as may be appropriate;

(3) Plan and coordinate with any stakeholders necessary, or negotiate with and seek support or concessions from any stakeholders as may be prudent, and develop and execute projects or enter into a public-private partnership to develop and execute projects, to provide for:

(A) Infrastructure for utilities including sewer, water, power, and similar needs;

(B) Transportation infrastructure; provided that the transportation infrastructure shall be designed to have the capacity to enable at least seventy per cent of all daily commutes to, from, and within the area to be safely and comfortably made by walking, biking, micro-mobility, or public transit, between common destinations, as well as for long-distance daily commuting without interruption pursuant to section 264-142 and shall include amenities such as rest stops, secure bicycle and micro-mobility device parking, emergency support stations with tools and other resources as may be appropriate;

(C) Public parking hubs of meaningful capacity, including charging for electric vehicles within a reasonable distance of which the partnership may waive requirements for or limit the number of parking stalls required by the State or counties; provided that of the parking stalls developed pursuant to this subparagraph, twenty per cent shall be electric vehicle-ready.

For purposes of this subparagraph, "electric vehicle-ready" means having a full-circuit installation that includes two hundred eight volt three phase or two hundred forty volt single phase power, forty-ampere panel capacity, raceway, wiring, receptacle, and overprotection devices similar to a dryer circuit;

(D) Affordable housing and related infrastructure; provided that at a minimum, a majority of the ground floor frontage facing each street shall include commercial space;

(E) Public spaces of meaningful scale and access with an overall ratio of residents to public spaces and accessible natural green spaces that shall include:

(i) Public parks and gathering spaces;

(ii) Public spaces for hosting markets and events;

(iii) Natural areas with open green space and water for passive relaxation;

(iv) Public spaces for active recreation; and

(v) Public spaces for pets and animals;

(F) Facilities for public arts and culture that include:

(i) Public libraries;

(ii) Public works of art;

(iii) Galleries, museums, and exhibitions;

(iv) Spaces for performances and events;

(v) Accessible education and narratives on the history, culture, and people of the area; and

(vi) Flexible spaces and infrastructure for seasonal, rotating, and evolving programming and engagement;

(G) Space for local economic development and community empowerment; provided that the primary focus shall be assisting local residents, entrepreneurs, and brands, including:

(i) Community-based economic development hubs and cooperative spaces such as public commercial kitchens, processing facilities, or similar work hubs available to the community and small businesses;

(ii) Cooperative commercial and retail locations capable of supporting and aggregating products and services from numerous small businesses;

(iii) Spaces for hosting micro-businesses such as food trucks, market stalls, and similar temporary business fronts;

(iv) Spaces for hosting growing small businesses in permanent micro or small commercial locations or rotating pop-up locations; and

(v) Spaces for hosting larger maturing businesses in regular food, retail, and commercial locations; and

(H) Opportunities for revenue generation from any facility, lease, program, or other means as may be appropriate to help fund the projects, programs, and operations of the partnership, with a focus on financially sustaining the communities the partnership was created to support; provided that revenue generation shall not be the primary mission of the partnership; and

(4) Address established and adopted goals of the State, including the Aloha+ challenge, sustainable development goals, and other statutory goals.

(1) Adopt rules under chapter 91 to:

(A) Establish and implement a business or community improvement district, to be governed by an approved independent entity with a board represented by stakeholders from the community with the purpose of providing additional services or improvements to the district; and

(B) Establish a fee mechanism to provide long-term funding for a business or community improvement district, subject to approval by either a majority of property owners, contributors, or other stakeholders which it is designed to serve;

(2) Provide grant funding to support the establishment and up to one year of operations of a business or community improvement district;

(3) Establish regular communications to and between residents and businesses within a transit-oriented community improvement area, or within another community as may be appropriate, to provide regular updates, information, or similar communication that builds relations and a sense of community amongst those living and working in the area. The partnership may designate or contract with another entity to carrier out this function; and

(4) Require all or a portion of commercial lease rent to be used to subsidize the cost of property maintenance, security, or similar needs for residents in the building.

§ -3 Board of directors. (a) The board shall consist of the following voting members:

(1) The director of finance, or the director's designee;

(2) The department of transportation multimodal transportation coordinator, or the coordinator's designee;

(3) The director of the office of planning and sustainable development, or the director's designee;

(4) The head of the community-based economic development program of the department of business, economic development, and tourism;

(5) The chairperson of the board of land and natural resources, or the chairperson's designee;

(6) Two individuals with history and expertise in affordable housing, to be appointed by the president of the senate;

(7) Two individuals with history and expertise in public spaces, to be appointed by the president of the senate;

(8) Two individuals with history and expertise in:

(A) Urban planning and building design; or

(B) Architecture as a licensed architect in the State,

to be appointed by the speaker of the house of representatives; and

(9) Two individuals with history and expertise in community‑based economic development, to be appointed by the speaker of the house of representatives.

The chairs of the house of representatives and senate standing committees with jurisdiction over transportation and housing shall serve as ex-officio non-voting members.

(b) No member shall have a financial interest or conflict of interest in any project, parcel, business, or development located in the community improvement district.

(c) The term of office of the voting members appointed by the speaker of the house of representatives and president of the senate shall be four years each.

(d) The board shall appoint an executive director, who shall serve at the pleasure of the board and be exempt from chapter 76. The salary of the executive director shall be set by the board.

(e) The board, through its executive director, may appoint officers, agents, and employees and:

(1) Prescribe their duties and qualifications; and

(2) Fix their salaries, without regard to chapter 76.

§ -4 Powers; generally. (a) Except as otherwise limited by this chapter, the partnership may:

(1) Sue and be sued;

(2) Have a seal and alter the same at its pleasure;

(3) Make and alter bylaws for its organization and internal management;

(4) Adopt rules under chapter 91 necessary to effectuate this chapter in connection with its projects, programs, operations, and properties;

(5) Make and execute contracts and all other instruments necessary or convenient for the exercise of its powers and functions under this chapter;

(6) Carry out surveys, research, investigations, site visits, and similar examinations into technological, business, financial, consumer trends, and other aspects of affordable housing, transportation, walkable communities, public spaces, leisure or recreational land uses;

(7) Acquire or contract to acquire by grant, purchase, or condemnation pursuant to chapter 101:

(A) All privately owned real property or any interest therein and the improvements thereon, if any, that are determined by the partnership to be necessary or appropriate for its purposes under this chapter, including real property together with improvements, if any, in excess of that needed for use in cases where small remnants would otherwise be left or where other justifiable cause necessitates the acquisition to protect and preserve the contemplated improvements, or public policy demands the acquisition in connection with the improvements; and

(B) Encumbrances, in the form of leases, licenses, or otherwise, needed by the partnership or any state department or agency for public purposes; and the disposition of subdivided lots, house lots, apartments or other economic units, or economic development;

(8) Own, hold, improve, and rehabilitate any real, personal, or mixed property acquired; and sell, assign, exchange, transfer, convey, lease, or otherwise dispose of, or encumber the same;

(9) By itself or in partnership with qualified persons or other governmental agencies:

(A) Acquire, construct, reconstruct, rehabilitate, improve, alter, or repair any infrastructure or accessory facilities in connection with any project;

(B) Own, hold, sell, assign, transfer, convey, exchange, lease, or otherwise dispose of, or encumber any project; and

(C) Develop or manage, by itself, or in partnership with qualified persons or other governmental agencies, any project that meets the purposes of this chapter;

(10) In cooperation with any governmental agency, or otherwise through direct investment or coventure with a professional investor or enterprise or any other person, or otherwise, acquire, construct, operate, and maintain public land facilities, including but not limited to leisure, recreational, commercial, residential, hotel, office space, and business facilities, at rates or charges determined by the partnership;

(11) Assist developmental, transit-oriented, recreational, and visitor industry related enterprises, or projects developed or managed by the partnership, by conducting detailed marketing analysis and developing marketing and promotional strategies to strengthen the position of those enterprises and to better exploit local, national, and international markets;

(12) Receive, examine, and determine the acceptability of applications of qualified persons for allowances or grants for the development of new recreation and community-related products, the expansion of established recreation and visitor industry or land development enterprises, and the altering of existing recreational, visitor industry related, or land development enterprises;

(13) Coordinate its activities with any federal or state programs;

(14) Grant options to purchase any project or to renew any lease entered into by the partnership in connection with any of its projects or programs, on the terms and conditions it deems advisable;

(15) Provide advisory, consultative, training, and educational services and technical assistance to any person or partnership, either public or private, to carry out the purposes of this chapter, and engage the services of consultants on a contractual basis for rendering professional and technical assistance and advice;

(16) Procure insurance against any loss in connection with its property and other assets and operations in amounts and from insurers as it deems desirable;

(17) Accept gifts or grants in any form from any public agency or other source;

(18) Issue bonds to finance the cost of a project and provide for the security thereof, in the manner and pursuant to the procedure prescribed in this chapter;

(19) Subject to approval by the board, assume management responsibilities for transit centers, infrastructure, parks and water features;

(20) Recommend to the department of transportation and the board of land and natural resources the purchase of any privately owned properties that may be appropriate for development; and

(21) Do all things necessary or proper to carry out the purposes of this chapter.

(b) Notwithstanding any provisions under subsection (a) to the contrary, the partnership shall not acquire, contract to acquire by grant or purchase, own, hold, sell, assign, exchange, transfer, convey, lease, or otherwise dispose of, or encumber any real, personal, or mixed property that is owned by the department of transportation as of July 1, 2025, except as expressly provided in this chapter.

§ -5 Community improvement projects; development plans and implementation. (a) The partnership may develop and implement plans for community improvement projects and, where appropriate, create projects that meet the mission of the partnership.

(b) The partnership may enter into cooperative agreements with other stakeholders, and capabilities of the persons or agencies are deemed necessary and appropriate to execute the mission of the partnership.

(c) Notwithstanding any provisions of this chapter to the contrary, when leasing partnership-controlled land or facilities, the partnership may contract with a financial institution chartered pursuant to chapter 412 or a federal financial institution, as defined under section 412:1-109, that transacts business in the State to provide lease management services. For the purposes of this subsection, "lease management services" includes the collection of lease rent and any other moneys owed to the partnership related to the lease of land or facilities under the partnership's control.

(d) The partnership may amend the community improvement plans as may be necessary or appropriate.

§ -6 Project facility program. (a) The partnership may develop a project to identify necessary project facilities within a project area.

(b) Unless and except as otherwise provided by law, whenever the partnership undertakes, or causes to be undertaken, any project facility as part of a project, the cost of providing the project facilities may be assessed against the real property in the project area specially benefiting from the project facilities. Subject to the express written consent of the landowners directly affected, the partnership shall determine the properties that will benefit from the project facilities to be undertaken and may establish assessment areas that include the properties specially benefiting from the project facilities. The partnership shall fix the assessments against the real property specially benefited.

(c) Unless and except as otherwise provided by law, the partnership may adopt rules under chapter 91 to establish the method of undertaking and financing project facilities in a project area.

(d) Notwithstanding any other law to the contrary, in assessing real property for project facilities, the partnership shall assess the real property within a project area according to the special benefits conferred upon the real property by the project facilities. These methods may include an assessment on a frontage basis or according to the area of real property within a project area, or any other assessment method that assesses the real property according to the special benefit conferred, or any combination thereof. No assessment levied under this section against real property specially benefited under this chapter shall constitute a tax on real property within the meaning of any law.

(e) Notwithstanding any other law to the contrary, the partnership, at its discretion, may enter into any agreement with the county in which project facilities are located, to implement the purposes of this section.

(f) If all or a part of the project facilities to be financed through bonds by the partnership are dedicated to the county in which the project facilities will be located, the partnership shall ensure that the project facilities or applicable portions thereof are designed and constructed to meet county requirements.

§ -7 Approval of projects, plans, and programs. Every project, plan, and project facility program developed by the partnership shall be approved by the board.

§ -8 Bonds. (a) The partnership, with the approval of the governor, may issue, from time to time, revenue bonds in amounts not exceeding the total amount of bonds authorized by the legislature for the purpose of:

(1) Constructing, acquiring, remodeling, furnishing, and equipping any project facility, including the acquisition of the site of the facility; or

(2) Acquiring non-public lands through purchase to sustain and preserve leisure or recreational enterprises within a contiguous geographic area.

(b) All revenue bonds shall be issued pursuant to part III of chapter 39, except as provided in this chapter.

(c) The revenue bonds shall be issued in the name of the partnership and not in the name of the State. The final maturity date of the revenue bonds may be any date not exceeding thirty years from the date of issuance.

§ -9 Revenue bonds; payment and security. (a) The revenue bonds shall be payable from and secured by the improvements to real properties specially benefited or improved and the assessments thereon, or by the revenues derived from the project facility for which the revenue bonds were issued, including revenue derived from insurance proceeds and reserve accounts, and earnings thereon.

(b) The partnership may pledge revenues derived from the project facility financed from the proceeds of the revenue bonds to the punctual payment of the principal, interest, and redemption premiums, if any, on the revenue bonds.

(c) The revenue bonds may be additionally secured by the pledge or assignment of the loans and other agreements or any note or other undertaking, obligation, or property held by the partnership to secure the loans.

(d) Any pledge made by the partnership shall create a perfected security interest in the revenues, moneys, or property pledged and thereafter received by the partnership, from and after the time that the financing statement with respect to the revenues, moneys, or property pledged and thereafter received are filed with the bureau of conveyances. Upon the filing, the revenues, moneys, or property pledged and thereafter received by the partnership shall immediately be subject to a lien of any pledge without any physical delivery thereof or having claims of any kind in tort, contract, or otherwise against the partnership, irrespective of whether the parties have notice thereof. This section shall apply to any financing statement filed on or after the effective date of this Act with the bureau of conveyances with respect to any pledge made to secure revenue bonds issued under this chapter.

§ -10 Revenue bonds; interest rate, price, and sale. (a) The revenue bonds issued pursuant to this chapter shall bear interest at a rate or rates and shall be payable on a date or dates, as the partnership determines.

(b) The partnership shall include the costs of undertaking the project facility for which the revenue bonds are issued in determining the principal amount of revenue bonds to be issued. In determining the cost of undertaking the project facility, the partnership may include:

(1) The cost of constructing, acquiring, remodeling, furnishing, and equipping the project facility, including the acquisition of the site of the facility;

(2) The cost of purchasing or funding loans or other agreements entered into for the project facility;

(3) The costs of studies and surveys;

(4) Insurance premiums;

(5) Underwriting fees;

(6) Financial consultant, legal, accounting, and marketing services incurred;

(7) Reserve account, trustee, custodian, and rating agency fees; and

(8) Any capitalized interest.

§ -11 Revenue bonds; investment of proceeds and redemption. Subject to any agreement with the holders of its revenue bonds, the partnership may:

(1) Invest moneys not required for immediate use, including proceeds from the sale of revenue bonds, in any investment in accordance with procedures prescribed in a trust indenture; and

(2) Purchase revenue bonds out of any fund or money of the partnership available therefor, and hold, cancel, or resell the revenue bonds.

§ -12 Revenue bonds; subaccounts. A separate subaccount shall be established for each project facility financed from the proceeds of the revenue bonds secured under the same trust indenture. Each subaccount shall be designated a project facility revenue bond subaccount and shall bear additional designation as the partnership deems appropriate to properly identify the fund.

§ -13 Trustee; designation, duties. (a) The partnership shall designate a trustee for each issue of revenue bonds secured under the same trust indenture.

(b) The trustee shall be authorized by the partnership to hold and administer the project facility revenue bond subaccount established pursuant to section -12, to receive and receipt for, hold, and administer the revenues derived by the partnership from the project facility for which the revenue bonds were issued, and to apply these revenues to the payment of the cost of:

(1) Undertaking the project facility;

(2) Administering and operating the proceedings providing for the issuance of the revenue bonds;

(3) The principal or interest on these bonds;

(4) The establishment of reserves; and

(5) Other purposes as may be authorized in the proceedings providing for the issuance of the revenue bonds.

(c) Notwithstanding section 39-68 to the contrary, the director of finance may appoint the trustee to serve as fiscal agent for the:

(1) Payment of the principal of and interest on the revenue bonds; and

(2) Purchase, registration, transfer, exchange, and redemption of the bonds.

(d) The trustee shall perform additional functions with respect to the payment, purchase, registration, transfer, exchange, and redemption of the bonds, as the director of finance may deem necessary, advisable, or expeditious, including the holding of the revenue bonds and coupons that have been paid and the supervision of the destruction thereof in accordance with applicable law.

(e) Nothing in this chapter shall limit or be construed to limit the powers granted to the director of finance in sections 36-3, 39-13, and 39-68(a), to appoint the trustee or others as fiscal agents, paying agents, and registrars for the revenue bonds or to authorize and empower those fiscal agents, paying agents, and registrars to perform the functions referred to in those sections.

§ -14 Trust indenture. (a) A trust indenture may:

(1) Contain covenants and provisions authorized by part III of chapter 39, and as may be deemed necessary or convenient by the partnership for the purposes of this chapter;

(2) Allow the partnership to pledge and assign to the trustee loans and other agreements related to the project facility, and the rights of the partnership thereunder, including the right to receive revenues thereunder and to enforce the provisions thereof; and

(3) Contain provisions deemed necessary or desirable by the partnership to obtain or permit, by grant, interest, subsidy, or otherwise, the participation of the federal government in the financing of the costs of undertaking the project facility.

(b) A trust indenture shall also contain provisions as to:

(1) The investment of the proceeds of the revenue bonds, the investment of any reserve for the bonds, the investment of the revenues of the project facility, and the use and application of the earnings from investments; and

(2) The terms and conditions upon which the holders of the revenue bonds or any portion of the revenue bonds or any trustee thereof may institute proceedings for the foreclosure of any loan or other agreement or any note or other undertaking, obligation, or property securing the payment of the bonds and the use and application of the moneys derived from the foreclosure.

§ -15 Transfer of public lands. (a) Notwithstanding chapter 171 or any provisions of this chapter to the contrary, any department may transfer development rights for lands under its jurisdiction to the partnership for purposes of this chapter.

(b) If the partnership finds that state lands under the control and management of any department or other public agency are suitable for its purposes under this chapter, the partnership may lease the lands from the agency having the control and management of those lands, upon the terms and conditions as may be agreed to by the parties.

(c) Notwithstanding the provisions of subsection (b) to the contrary, no public lands shall be leased to the partnership if the lease would impair any covenant between the State or any county, or any department or board thereof, and the holders of bonds issued by the State or the county, or any department or board thereof.

§ -16 Community improvement special fund; established; use of partnership funds. (a) There is established the community improvement special fund within the state treasury, to which shall be credited any state appropriations to the fund, any sums collected as a result of bonds issued pursuant to this chapter, any revenues generated from the facilities, or other moneys made available to the fund, to be expended as directed by the partnership.

(b) Notwithstanding any provisions of this chapter to the contrary, revenues, income, and receipts derived from the project facilities shall be set apart in a separate subaccount and applied solely for the following purposes:

(1) The principal and interest on the bonds;

(2) The cost of administering, operating, and maintaining the project not to exceed fifteen per cent of the sums collected, net of principal and interest payments, on account of assessments and interest for any specific project facility;

(3) The establishment of program reserves not to exceed eighty-five per cent of the sums collected, net of principal and interest payments, on account of assessments and interest for any specific project facility; provided that accumulated reserves shall be credited to and become a part of the special land and development fund, established under section 171-19, except in the case of a specific project facility that is situated in part or wholly within a small boat harbor, in which case those accumulated reserves attributable to the portions of the facility situated in the small boat harbor shall be credited to and become a part of the boating special fund, established under section 248-8; and

(4) Other purposes as may be authorized in the proceedings providing for the issuance of the bonds.

If any surplus remains in any subaccount after the payment of the bonds chargeable against that subaccount, the surplus shall be credited to and become a part of the fund, except as provided in paragraph (3). Notwithstanding any other law to the contrary, moneys in the fund may be used to make up any deficiencies in the subaccount.

(c) The partnership shall hold the fund in an account or accounts separate from other funds. Except as otherwise provided in subsection (b), the partnership shall invest and reinvest the fund and the income thereof to:

(1) Purchase qualified securities issued by enterprises for the purpose of raising seed capital; provided that the investment shall comply with the requirements of this chapter;

(2) Make grants, loans, and provide other monetary forms of assistance necessary to carry out the purposes of this chapter; and

(3) Purchase securities as may be lawful investments for fiduciaries in the State.

All appropriations, grants, contractual reimbursements, and other funds not designated for this purpose may be used to pay for the proper general expenses and to carry out the purposes of the partnership.

(d) The partnership shall purchase qualified securities issued by an enterprise only after:

(1) Receiving:

(A) An application from the enterprise containing a business plan that is consistent with the business and public land development plan, including a description of the enterprise and its management, product, and market;

(B) A statement of the amount, timing, and projected use of the capital required;

(C) A statement of the potential economic impact of the enterprise, including the number, location, and types of jobs expected to be created; and

(D) Any other information as the partnership shall require;

(2) Determining, based upon the application submitted, that:

(A) The proceeds of the investment will be used only to cover the seed capital needs of the enterprise, except as authorized in this section;

(B) The enterprise has a reasonable chance of success;

(C) The enterprise has the reasonable potential to create employment within the State and offers employment opportunities to residents;

(D) The coordinating entrepreneur and other founders of the enterprise have already made or are prepared to make a substantial financial and time commitment to the enterprise;

(E) The securities to be purchased are qualified securities;

(F) There is a reasonable possibility that the partnership will recoup at least its initial investment; and

(G) Binding commitments have been made to the partnership by the enterprise for adequate reporting of financial data to the partnership, which shall include a requirement for an annual or other periodic audit of the books of the enterprise, and for control by the partnership that the partnership considers prudent over the management of the enterprise, in order to protect the investment of the partnership, including membership on the board of directors of the enterprise, ownership of voting stock, input in management decisions, and the right of access to the financial and other records of the enterprise; and

(3) Entering into a binding agreement with the enterprise concerning the manner of payback by the enterprise of the funds advanced, granted, loaned, or received from the partnership. The manner of payback may include the payment of dividends, returns from the public sale of corporate securities or products, royalties, and other methods of payback acceptable to the partnership. In determining the manner of payback the partnership shall establish a rate of return or rate of interest to be paid on any investment, loan, or grant of partnership funds under this section.

(e) If the partnership makes a direct investment, the partnership shall also find that a reasonable effort has been made to find a professional investor to make an investment in the enterprise as a coventure, and that the effort was unsuccessful. The findings, when made by the partnership, shall be conclusive.

(f) The partnership shall make investments in qualified securities issued by an enterprise in accordance with the following limits:

(1) No more than $500,000 shall be invested in the securities of any one enterprise, except that more than a total of $500,000 may be invested in the securities of any one enterprise if the partnership finds, after its initial investment, that additional investments in that enterprise are required to protect the initial investment of the partnership, and the other findings set forth in subsection (d) and this subsection are made as to the additional investment;

(2) The partnership shall not own securities representing more than forty-nine per cent of the voting stock of any one enterprise at the time of purchase by the partnership after giving effect to the conversion of all outstanding convertible securities of the enterprise, except that if a severe financial difficulty of the enterprise occurs, threatening the investment of the partnership in the enterprise, a greater percentage of those securities may be owned by the partnership; and

(3) No more than fifty per cent of the assets of the partnership shall be invested in direct investments at any time.

(g) No investment, loan, grant, or use of corporate funds for the purposes of this chapter shall be subject to chapter 42F.

§ -17 Standards for the award of grants. Applications for grants shall be made to the department of transportation and contain the information as shall be required by rules adopted thereunder. At a minimum, the applicant shall:

(1) Be licensed or accredited, in accordance with federal, state, or county laws, rules, or ordinances, to conduct the activities or provide the services for which a grant is awarded;

(2) Provide a detailed plan outlining the scope, objectives, and projected impact of the project and a clear breakdown of how grant funds will be utilized;

(3) Agree to use state funds exclusively for the purposes of this chapter;

(4) Indicate capability to properly use the grant for the purpose of the grant program;

(5) Comply with all applicable federal and state laws prohibiting discrimination against any person on the basis of race, color, national origin, religion, creed, sex, age, sexual orientation, disability, or any other characteristic protected under applicable federal or state law;

(6) Agree not to use state funds for purposes of entertainment or perquisites;

(7) Comply with other requirements as the department of transportation may prescribe;

(8) Comply with all applicable federal, state, and county laws, rules, and ordinances;

(9) Agree to indemnify and save harmless the State and its officers, agents, and employees from and against any and all claims arising out of or resulting from activities carried out or projects undertaken with funds provided under this chapter and procure sufficient insurance to provide this indemnification if requested to do so by the department of transportation; and

(10) Agree to make available to the department of transportation all records the applicant may have relating to the grant to allow state agencies to monitor the applicant's compliance with this section.

§ -18 Exemption from taxation. The partnership shall not be required to pay state taxes of any kind.

§ -19 Exemption from requirements. Notwithstanding section 171-42 and except as otherwise provided in this chapter, projects pursuant to this chapter shall be exempt from all statutes, ordinances, charter provisions, and rules of any government agency relating to special improvement district assessments or requirements; land use, zoning, and construction standards for development, and improvement of land; provided that the community improvement planning activities of the partnership shall be coordinated with:

(1) All relevant state permitting and regulatory agencies and programs; and

(2) The county planning departments and county land use plans, policies, and ordinances.

§ -20 Annual report. The partnership shall submit to the governor and legislature a complete and detailed report of its plans and activities no later than twenty days prior to the convening of each regular session."

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 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 to be deposited into the community improvement special fund established under section -16.

SECTION 4. There is appropriated out of the community improvement special fund the sum of $ or so much thereof as may be necessary for fiscal year 2025-2026 and the same sum or so much thereof as may be necessary for fiscal year 2026-2027 for:

(1) The establishment and operation of the transit-oriented community improvement partnership; and

(2) The establishment of four positions as follows:

(A) One permanent full-time equivalent (1.0 FTE) executive director position;

(B) One permanent full-time equivalent (1.0 FTE) planner or licensed architect position;

(D) One permanent full-time equivalent (1.0 FTE) administrative assistant position.

The sums appropriated shall be expended by the transit-oriented community improvement partnership for the purposes of this Act.

SECTION 5. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 6. This Act shall take effect on July 1, 2050.

THE SENATE	S.B. NO.	1669
THIRTY-THIRD LEGISLATURE, 2025		S.D. 2
STATE OF HAWAII		H.D. 1