THE SENATE	S.B. NO.	374
THIRTY-THIRD LEGISLATURE, 2025
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO TAX INCREMENT BONDS.

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

SECTION 1. The legislature finds that tax increment financing (TIF) has been a widely utilized economic development tool across the United States. States such as California and Colorado have leveraged TIF to successfully revitalize underserved areas and attract private investment. However, experiences in these states have also demonstrated critical challenges, including overleveraging of tax increment bonds, insufficient impact assessments, and inadequate fiscal transparency.

The legislature further finds that the State can learn from these experiences to enhance its approach to TIF. Specifically, the State seeks to establish safeguards to prevent fiscal over extension, ensure robust economic impact assessments, and mandate regular monitoring and reporting to uphold transparency and accountability. By addressing these issues, the State aims to maximize the benefits of TIF while avoiding the pitfalls that have hindered its implementation in other jurisdictions.

Accordingly, the purpose of this Act is to:

(1) Require counties to commission a comprehensive economic impact analysis before issuing tax increment bonds and make the analysis publicly available;

(2) Require counties issuing tax increment bonds to:

(A) Conduct independent audits biennially to assess the fiscal health and compliance of any tax increment bond projects and submit the reports to the legislature and make the reports publicly available; and

(B) Establish a review board to oversee tax increment bond projects and make recommendations;

(3) Restrict the amount of total outstanding tax increment bonds that may be excluded from the calculation of a county's debt limits from exceeding twenty per cent; and

(4) Conform county debt limit statements law to exclude tax increment bonds from the debt limit of the counties if a constitutional amendment authorizing the use of tax increment bonds and excluding tax increment bonds from determinations of the counties' funded debt is ratified.

SECTION 2. Chapter 47C, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§47C-   Tax increment bonds; comprehensive economic impact analysis; monitoring and reporting; requirements. (a) Before issuing tax increment bonds, each county shall commission a comprehensive economic impact analysis. The comprehensive impact analysis shall include but not be limited to:

(1) Anticipated effects on local job creation;

(2) Housing affordability and availability;

(3) Tax revenue implications; and

(4) Environmental sustainability.

Each county shall make the findings of the comprehensive economic impact analysis available to the public at least thirty days before issuing any tax increment bond.

(b) Each county issuing tax increment bonds shall:

(1) Conduct independent audits biennially to assess the fiscal health and compliance of any tax increment bond projects;

(2) Submit a report of its findings from the independent audits required pursuant to paragraph (1) to the legislature no later than twenty days prior to the convening of each regular session;

(3) Make the findings of the independent audits required pursuant to paragraph (1) available to the public; and

(4) Establish a review board to:

(A) Oversee tax increment bond projects; and

(B) Provide recommendations on improving fiscal accountability."

SECTION 3. Section 47C-1, Hawaii Revised Statutes, is amended to read as follows:

"§47C-1 Definitions. As used in sections 47C-1 through 47C-6, the following words and terms shall have the following meanings or inclusions:

"Chairperson of the finance committee" shall mean the chairperson of the finance committee of the council of the county, or if the council of the county does not have a finance committee, the member of the council appointed by the council to perform the functions required by this chapter to be performed by the chairperson of the finance committee of the council.

"Corporation counsel" shall mean the chief legal advisor or legal representative of the county.

"County" shall include each county of the State, including the city and county of Honolulu.

"Director of finance" shall mean the director of finance of the county, or if the county does not have a director of finance, the officer of the county in whom is vested the functions and powers of maintaining the treasury of the county and issuing and selling, paying interest on, and redeeming bonds of the county.

"Fiscal year" shall mean the fiscal year of the county as defined in section 46-41.

"Special assessment bonds" shall mean bonds issued under special improvement statutes when the only security for [such] the bonds is the assessments or special taxes levied and assessed under those statutes or properties subject to the assessments or special taxes.

As used in sections 47C-1 through 47C-6, the words or terms "bonds", "general obligation bonds", "net revenue", "net user tax receipts", "reimbursable general obligation bonds", "revenue bonds", "special purpose revenue bonds", "tax increment bonds", and "user tax" shall have the respective meanings and inclusions given to [such] those words and terms in section 12 of article VII of the constitution."

SECTION 4. Section 47C-2, Hawaii Revised Statutes, is amended to read as follows:

"§47C-2 Determination of funded debt. (a) Within ninety days after the first day of each fiscal year, the director of finance of each county shall ascertain and set forth in a tabular summary the total indebtedness of the county outstanding and unpaid as of the first day of [such] that fiscal year. The summary shall include the following:

(1) An itemization of the total principal amount of all general obligation bonds, reimbursable general obligation bonds, revenue bonds, special assessment bonds, special purpose revenue bonds, and all other bonds of the county outstanding and unpaid, including bonds [which] that may be excluded under clauses 1, 2, 3, 4, 5, 6, 8, [and] 9, and 10 of section 13 of article VII of the constitution when determining the funded debt of the county for the purposes of that section together with a grand total of such total principal amounts[.];

(2) The total principal amount of all bonds of the State required by clause (7) of section 13 of article VII of the constitution to be included when determining the funded debt of the county for the purposes of that section[.];

(3) A grand total of the total principal amounts set forth in the summary pursuant to paragraphs (1) and (2)[.];

(4) An itemization of the total of the principal amount of all general obligation bonds, reimbursable general obligation bonds, revenue bonds, special assessment bonds, and special purpose revenue bonds of the county outstanding and unpaid [which] that may be excluded under clauses 1, 2, 3, 4, 5, 6, 8, and 9 of section 13 of article VII of the constitution when determining the total funded debt of the county for the purposes of that section, together with a grand total of such total principal amounts[.]; and

(5) The difference between the grand total principal amount set forth in the summary pursuant to paragraph (3) and the grand total principal amount set forth in the summary pursuant to paragraph (4).

The director of finance shall also prepare and attach to the tabular summary such supporting schedules as may be required to set forth in detail the bonds included in the itemizations required by paragraphs (1) and (4). [Such] The supporting schedules shall also set forth or make reference to the relevant statutory, charter, ordinance, or other legal provision, and the relevant figures of the tax increment as defined in section 46‑102, assessment collections, revenues, user tax receipts, cost of operation, maintenance and repair, net revenues, net user tax receipts, reimbursements to the general fund, and other financial information, justifying the inclusion of [such] the bonds in the itemization required by paragraph (4). The director of finance shall indicate in the supporting schedules whether the financial findings and figures are based upon the records of the director's office or upon audited statements and reports, and if based upon the latter, shall identify in the schedules the audited reports and statements.

(b) No more than twenty per cent of the total outstanding tax increment bonds issued by any county may be excluded from the calculation of the county's debt limits."

SECTION 5. Section 47C-3, Hawaii Revised Statutes, is amended to read as follows:

"§47C-3 Supplemental determination. Whenever the county proposes to issue bonds, the director of finance shall prepare a supplemental summary of the indebtedness of the county setting forth therein [such] information and findings as of a date within thirty days of the delivery of [such] the bonds as will bring up to date and make current the most recent summary prepared in accordance with the provisions of section 47C-2. The director of finance shall also prepare and attach to [such] the supplemental summary [such] supporting schedules as may be required to set forth in detail the variations and changes from the summary prepared in accordance with section 47C-2, including [such] legal and financial findings as will justify any changes in the itemizations set forth in [such] the previous summary pursuant to the requirements of paragraph (4) of section 47C-2. If all the bonds proposed to be issued may be excluded when determining the funded debt of the county for the purposes of section 13 of article VII of the constitution by reason of the provisions of clauses 2 [or], 4, or 10 of that section, the supplemental summary and supporting schedules may be limited to [such] those bonds and findings as are necessary to justify [such] the exclusion under [such] those clauses.

In the event proceeds of the bonds proposed to be issued are to be applied to the retirement in the then fiscal year of outstanding bonds, including notes issued in anticipation of the issuance of the bonds proposed to be issued, for the purpose of applying the provisions of clause 1 of section 13 of article VII of the constitution to the bonds to be retired, that amount of [such] proceeds to be so applied may be considered and treated as moneys irrevocably set aside for the payment of [such] those bonds."

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect upon its approval and upon ratification of a constitutional amendment expressly providing that the legislature may authorize the counties to issue tax increment bonds, and further providing that tax increment bonds shall be excluded from determinations of the funded debt of the counties.

INTRODUCED BY:

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Report Title:

Tax Increment Bonds; County Debt Limit Statements; Comprehensive Economic Impact Analysis; Reports

Description:

Requires counties to commission a comprehensive economic impact analysis before issuing tax increment bonds and make the analysis publicly available. Requires counties issuing tax increment bonds to conduct publicly available biennial independent audits and report to the Legislature. Requires counties issuing tax increment bonds to establish a review board to oversee tax increment bond projects. Restricts the amount of total outstanding tax increment bonds that may be excluded from the calculation of a county's debt limits from exceeding twenty per cent. Conforms county debt limit statements law to exclude tax increment bonds from the debt limit of the counties if a constitutional amendment authorizing the use of tax increment bonds and excluding tax increment bonds from determinations of the counties' funded debt is ratified.

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