Report Title:

County Surcharge Tax; General Obligation Bonds

 

Description:

Borrows $150,000,000 out of funds generated by surcharge on state general excise tax revenues transferred to the city and county of Honolulu.  Authorizes issuance of GO bonds to offset loss of tax revenues to the city and county of Honolulu in fiscal year 2009-2010.  Extends surcharge for two years.  (SD1)

 


THE SENATE

S.B. NO.

1626

TWENTY-FIFTH LEGISLATURE, 2009

S.D. 1

STATE OF HAWAII

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO TAXATION.

 

 

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

 


     SECTION 1.  The legislature finds that, due to recent worldwide economic events, the State, like the rest of the nation and the world, is experiencing a severe economic crisis.  While the State of Hawaii, due to steady long term fiscal planning, prudent past decision-making practices, and relatively stable real property values and relatively low unemployment rates, has avoided some of the economic pitfalls and suffering shared by many other states, it still needs to find innovative ways to balance its budget for the ensuing fiscal biennium and beyond.  Recent estimates project executive budget shortfalls of $123,000,000 for fiscal year 2008, $459,000,000 for fiscal year 2009, $655,000,000 for fiscal year 2010, $740,000,000 for fiscal year 2011, for a total of $1,978,000,000.

     To meet the current and future financial needs of the State, the legislature believes that having the city and county of Honolulu return a portion of the moneys transferred to it pursuant to revenues derived from the imposition of a county surcharge on state general excise and use taxes is a reasonable means of achieving a balanced budget for state operations without adversely impacting the city and county of Honolulu's fiscal status or resorting to a drastic reduction in state services or personnel.

     The legislature also finds that the revenues already derived from county surcharge on state general excise and use taxes and transferred to the city and county of Honolulu are largely unencumbered and will not be needed in the immediately foreseeable future.  These moneys would be better utilized if applied to the immediate financial needs of the State, of which the city and county of Honolulu is a part.

     To this end, the legislature believes that borrowing not more than $150,000,000 from the balance of the amount derived from the a county surcharge on state general excise and use taxes already transferred to the city and county of Honolulu and repaying the amount borrowed with revenues derived from the issuance of state general obligation bonds is prudent and will assist the State in maintaining current services and personnel until such time as the state economy recovers.  At the same time, by ensuring that the loan is repaid in a timely manner through revenues derived from state general obligation bonds, any detrimental financial effect to the city and county of Honolulu will be avoided.  In addition, to help ameliorate and detrimental financial impact to the city and county of Honolulu, this Act extends the lifespan of the surcharge on state general excise and use tax for two additional years.

     SECTION 2.  The city and county of Honolulu shall return to the State, $150,000,000 of the revenues transferred to it pursuant to section 248-2.6, Hawaii Revised Statutes; provided that the city and county of Honolulu shall not return any of those revenues until the proceeds from any issuance of the general obligation bonds authorized for issuance under section 4 are placed into escrow for transfer to the city and county of Honolulu.

     SECTION 3.  Act 247, Session Laws of Hawaii 2005, is amended by amending section 9 to read as follows:

     "SECTION 9.  This Act shall take effect upon its approval; provided that:

     (1)  If none of the counties of the State adopt an ordinance to levy a county surcharge on state tax by December 31, 2005, this Act shall be repealed and section 437D-8.4, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act;

     (2)  If any county does not adopt an ordinance to levy a county surcharge on state tax by December 31, 2005, it shall be prohibited from adopting such an ordinance pursuant to this Act, unless otherwise authorized by the legislature through a separate legislative act;

     (3)  If an ordinance to levy a county surcharge on state tax is adopted by December 31, 2005:

         (A)  The ordinance shall be repealed on December 31, [2022;] 2024;

         (B)  This Act shall be repealed on December 31, [2022;] 2024; and

          (C)  Section 437D-8.4, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act."

     SECTION 4.  The director of finance is authorized to issue general obligation bonds in the sum of $250,000,000 or so much thereof as may be necessary and the same sum or so much thereof as may be necessary is appropriated for fiscal year 2009-2010 for the purpose of replacing tax revenues that are returned from the city and county of Honolulu to the state general fund pursuant to section 2; provided that the director of finance shall not issue the general obligation funds until the State receives affirmative advice from the State's bond counsel on the suitability of using the proceeds from the issuance of the general obligation bonds for the purpose of replacing the tax revenues returned from the city and county of Honolulu pursuant to section 2.

     The sum appropriated shall be transferred to the city and county of Honolulu by the department of budget and finance pursuant to this Act and section 248-2.6, Hawaii Revised Statutes.

     SECTION 5.  This Act shall take effect on July 1, 2009.