REPORT TITLE:
Entertainment; Loan Program


DESCRIPTION:
Creates the Hawaii television and film development board, the
Hawaii television and film development special fund, and the
Hawaii television and film development grant program and venture
capital program.  (HB37 CD1)

 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        37
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 1999                                S.D. 2
STATE OF HAWAII                                            C.D. 1
                                                        
                                                             
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                   A  BILL  FOR  AN  ACT

RELATING TO FILM PRODUCTION FUNDING.



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

 1      SECTION 1.  The legislature finds that film and television
 
 2 productions in Hawaii provide an invaluable source of
 
 3 advertisement and promotion for the State.  Over the last four
 
 4 years, Hawaii's film and television industry has experienced
 
 5 double-digit growth with annual production expenses reaching
 
 6 $100,000,000, which translates into tax contributions of
 
 7 approximately $15,000,000.  Within the next five to ten years,
 
 8 film and television in Hawaii have the potential to grow to a
 
 9 $300,000,000 per year industry, generating up to $45,000,000 in
 
10 tax revenues.
 
11      The legislature further finds that there is a need to
 
12 encourage and lend support to Hawaii's local film and television
 
13 industry.  While film and television production from the United
 
14 States mainland provides a needed and invaluable source of
 
15 support for Hawaii's economy, the legislature finds that Hawaii's
 
16 local film and television industry performs a vital role, both in
 
17 terms of furthering cultural and artistic expression in the State
 
18 as well as providing a strong foundation for the future of
 
19 Hawaii's economy.  Accordingly, to maximize film and television
 

 

Page 2                                                     37
                                     H.B. NO.           H.D. 1
                                                        S.D. 2
                                                        C.D. 1
                                                        

 1 exposure, and to assist the local film and video industries, it
 
 2 is essential to provide film and television producers with
 
 3 incentives and assistance to encourage them to produce their
 
 4 projects in Hawaii.
 
 5      The purpose of this Act is to assist Hawaii's television and
 
 6 film industries by providing incentives to both in-state and out-
 
 7 of-state television and film production by:
 
 8      (1)  Creating the Hawaii television and film development
 
 9           special fund and the Hawaii television and film
 
10           development board to administer the fund; and
 
11      (2)  Establishing the following programs, under the
 
12           direction of the board, to provide needed assistance to
 
13           facilitate the acquisition of production capital for
 
14           film and television producers in the form of:
 
15           (A)  A grant program; and
 
16           (B)  A venture capital program.
 
17      SECTION 2.  Chapter 201, Hawaii Revised Statutes, is amended
 
18 by adding a new part to be appropriately designated and to read
 
19 as follows:
 
20         "PART  .  HAWAII TELEVISION AND FILM DEVELOPMENT
 
21      201-A  Definitions.  As used in this part:
 
22      "Applicant" means a person applying for a grant or venture
 
23 capital investment from the board under this part.
 

 

Page 3                                                     37
                                     H.B. NO.           H.D. 1
                                                        S.D. 2
                                                        C.D. 1
                                                        

 1      "Board" means the Hawaii television and film development
 
 2 board.
 
 3      "Eligible Hawaii project" or "project" means an
 
 4 entertainment project in which at least seventy-five per cent of
 
 5 the budget for the production costs, excluding salaries and costs
 
 6 for the producer, director, writer, screenplay, and actors in the
 
 7 project, is dedicated for the purchase or lease of goods or
 
 8 services from a vendor or supplier who is located and doing
 
 9 business in the State.
 
10      "Fund" means the Hawaii television and film development
 
11 special fund.
 
12      "Venture capital investment" means any of the following
 
13 investments in a project:
 
14      (1)  Common or preferred stock and equity securities without
 
15           a repurchase requirement for at least five years;
 
16      (2)  A right to purchase stock or equity securities;
 
17      (3)  Any debenture, whether or not convertible or having
 
18           stock purchase rights, which is subordinated, together
 
19           with security interests against the assets of the
 
20           borrower, by their terms to all borrowings of the
 
21           borrower from other institutional lenders, and that is
 
22           for a term of not less than three years, and that has
 
23           no part amortized during the first three years; and
 

 

Page 4                                                     37
                                     H.B. NO.           H.D. 1
                                                        S.D. 2
                                                        C.D. 1
                                                        

 1      (4)  General or limited partnership interests.
 
 2      201-B  Hawaii television and film development board.(a)
 
 3 There is established the Hawaii television and film development
 
 4 board.  The board shall be attached to the department of
 
 5 business, economic development, and tourism for administrative
 
 6 purposes only.  The board shall administer the grant and venture
 
 7 capital investment programs and the Hawaii television and film
 
 8 development special fund established under this part.  The board
 
 9 shall also assess and consider the overall viability and
 
10 development of the television and film industries and make
 
11 recommendations to appropriate state or county agencies.
 
12      (b)  The board shall be composed of nine members, four of
 
13 whom shall be appointed by the governor pursuant to section
 
14 26-34, and all of whom shall serve four-year staggered terms.
 
15 One of the governor's appointments shall be made from a list of
 
16 nominees submitted by the president of the senate and another
 
17 appointment shall be made from a list of nominees submitted by
 
18 the speaker of the house of representatives.  The four appointed
 
19 members shall possess a current working knowledge of the film,
 
20 television, or entertainment industry.  The director of business,
 
21 economic development, and tourism, and the chairs of the four
 
22 county film commissions or its equivalent, shall serve as ex
 

 

 
Page 5                                                     37
                                     H.B. NO.           H.D. 1
                                                        S.D. 2
                                                        C.D. 1
                                                        

 1 officio voting members, who may be represented on the board by
 
 2 designees.
 
 3      The chairperson and vice chairperson of the board shall be
 
 4 selected by the board by majority vote.  Five members shall
 
 5 constitute a quorum, whose affirmative vote shall be necessary
 
 6 for all actions by the board.  The members shall serve without
 
 7 compensation but shall be reimbursed for expenses, including
 
 8 travel expenses, necessary for the performance of their duties.
 
 9      (c)  The film industry branch development manager shall
 
10 serve as the executive secretary of the board.
 
11      (d)  The board may adopt rules pursuant to chapter 91 to
 
12 effectuate the purposes of this part.
 
13      201-C  Hawaii television and film development special fund.
 
14 (a)  There is established in the state treasury the Hawaii
 
15 television and film development special fund into which shall be
 
16 deposited:
 
17      (1)  Appropriations by the legislature;
 
18      (2)  Donations and contributions made by private individuals
 
19           or organizations for deposit into the fund;
 
20      (3)  Grants provided by governmental agencies or any other
 
21           source; and
 
22      (4)  Any profits or other amounts received from venture
 
23           capital investments.
 

 

Page 6                                                     37
                                     H.B. NO.           H.D. 1
                                                        S.D. 2
                                                        C.D. 1
                                                        

 1      (b)  The fund shall be used by the board to assist in, and
 
 2 provide incentives for, the production of eligible Hawaii
 
 3 projects that are in compliance with criteria and standards
 
 4 established by the board in accordance with rules adopted by the
 
 5 board pursuant to chapter 91.  In particular, the board shall
 
 6 adopt rules to provide for the implementation of the following
 
 7 programs:
 
 8      (1)  A grant program.  The board shall adopt rules pursuant
 
 9           to chapter 91 to provide conditions and qualifications
 
10           for grants.  Applications for grants shall be made to
 
11           the board and shall contain such information as the
 
12           board shall require by rules adopted pursuant to
 
13           chapter 91.  At a minimum, the applicant shall agree to
 
14           the following conditions:
 
15           (A)  The grant shall be used exclusively for eligible
 
16                Hawaii projects;
 
17           (B)  The applicant shall have applied for or received
 
18                all applicable licenses and permits;
 
19           (C)  The applicant shall comply with applicable federal
 
20                and state laws prohibiting discrimination against
 
21                any person on the basis of race, color, national
 
22                origin, religion, creed, sex, age, or physical
 
23                handicap;
 

 

Page 7                                                     37
                                     H.B. NO.           H.D. 1
                                                        S.D. 2
                                                        C.D. 1
                                                        

 1           (D)  The applicant shall comply with other requirements
 
 2                as the board may prescribe;
 
 3           (E)  All activities undertaken with funds received
 
 4                shall comply with all applicable federal, state,
 
 5                and county statutes and ordinances;
 
 6           (F)  The applicant shall indemnify and save harmless
 
 7                the State of Hawaii and its officers, agents, and
 
 8                employees from and against any and all claims
 
 9                arising out of or resulting from activities
 
10                carried out or projects undertaken with funds
 
11                provided hereunder, and procure sufficient
 
12                insurance to provide this indemnification if
 
13                requested to do so by the department;
 
14           (G)  The applicant shall make available to the board
 
15                all records the applicant may have relating to the
 
16                project, to allow the board to monitor the
 
17                applicant's compliance with the purpose of this
 
18                chapter; and
 
19           (H)  The applicant, to the satisfaction of the board,
 
20                shall establish that sufficient funds are
 
21                available for the completion of the project for
 
22                the purpose for which the grant is awarded;
 
23           and
 

 

Page 8                                                     37
                                     H.B. NO.           H.D. 1
                                                        S.D. 2
                                                        C.D. 1
                                                        

 1      (2)  A venture capital program.  The board shall adopt rules
 
 2           pursuant to chapter 91 to provide conditions and
 
 3           qualifications for venture capital investments in
 
 4           eligible Hawaii projects.  The program may include a
 
 5           written agreement between the borrower and the board,
 
 6           as the representative of the State, that as
 
 7           consideration for the venture capital investment made
 
 8           under this part, the borrower shall share any
 
 9           royalties, licenses, titles, rights, or any other
 
10           monetary benefits that may accrue to the borrower
 
11           pursuant to terms and conditions established by the
 
12           board by rule pursuant to chapter 91.  Venture capital
 
13           investments may be made on such terms and conditions as
 
14           the board shall determine to be reasonable,
 
15           appropriate, and consistent with the purposes and
 
16           objectives of this part.
 
17      201-D  Inspection of premises and records.  The board shall
 
18 have the right to inspect, at reasonable hours, the plant,
 
19 physical facilities, equipment, premises, books, and records of
 
20 any applicant in connection with the processing of a grant to the
 
21 applicant."
 
22      SECTION 3.  In codifying the new part added by section 2 of
 
23 this Act, the revisor of statutes shall substitute appropriate
 

 

Page 9                                                     37
                                     H.B. NO.           H.D. 1
                                                        S.D. 2
                                                        C.D. 1
                                                        

 1 section numbers for the letters used in designating the new
 
 2 sections in this Act.
 
 3      SECTION 4.  This Act shall take effect upon its approval.