Report Title:

UH; Agriculture

Description:

Establishes the diversified agricultural loan program revolving loan fund.

HOUSE OF REPRESENTATIVES

H.B. NO.

2194

TWENTY-FIRST LEGISLATURE, 2002

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO THE UNIVERSITY OF HAWAII AT HILO.

 

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

SECTION 1. The legislature finds that the rural economic transition assistance — Hawaii (RETA-H) program was created in 1993 in order to assist displaced sugar workers following the closure of sugar plantations on the islands of Hawaii, Kauai, Maui, and Oahu. The RETA-H program brought $23,000,000 in federal funds into Hawaii over the next eight years. These funds were distributed as grants to ninety-two projects, all of which will have been completed within calendar year 2002. An initial assessment of the first fifty of these projects determined that two hundred seventy-four independent businesses were created, nine hundred twenty-nine new jobs established, and twenty-eight thousand acres of former sugar lands reclaimed for diversified agriculture.

The legislature further finds that the RETA-H program is administered by the small business development center, a partnership program between the University of Hawaii at Hilo and the United States Small Business Administration. The small business development center is a statewide program with eight offices distributed over the four major islands. It is in its twelfth year of operation.

With the end of the RETA-H program in 2002, many of these newly created agricultural businesses and other similar businesses will have reached a critical point in their growth. They will need additional capital to expand, but will not yet be at a point in their development where they will be able to qualify for commercial loans. A relatively small capital infusion in their growth and that of similar businesses will at this point predictably cause a disproportionately large and positive impact on their rate of growth. To protect the initial investments in these projects and their future success, a revolving loan fund for commercially unviable loans is required. Such loans will promote the growth of these and similar companies in order that their future capital needs can be met by the commercial loan industry.

The success of the RETA-H program has been due to five relatively innovative concepts:

(1) Both public and private sector individuals were used in program management;

(2) Where possible, the program incorporated into its projects coordinating entrepreneurs who served as mentors to others;

(3) Risk was reduced through intensive technical and business consulting;

(4) Each project was required to show that it had commodity group acceptance; and

(5) Each new commodity was supported throughout its entire marketing channel from production through processing to distribution to retailers and end-users, where possible.

The purpose of this Act is to incorporate these same proven concepts into a revolving loan fund for the diversified agricultural loan program ("DALP"). DALP differs from other federal and state loan programs in that the risk is higher and the higher risk is reduced to acceptable levels through intensive consulting. Thus, capital is injected into businesses that would not otherwise qualify for loans. Furthermore, in this time of economic crisis in Hawaii following the recession in the United States and the aftermath of the events of September 11th, the DALP will create an immediate economic stimulus for a growing sector of the economy —- diversified agriculture.

Specifically, the purpose of this Act is to provide funds to the University of Hawaii at Hilo to create the statewide diversified agricultural loan program revolving loan fund for agricultural businesses promoting diversified agriculture for interim financing during that period in their development after startup but prior to being able to borrow funds from the commercial loan industry.

SECTION 2. Chapter 304, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§304- Diversified agricultural loan program revolving loan fund; established. There is established in the University of Hawaii at Hilo the diversified agricultural loan program revolving loan fund to be administered by the small business development center for use in the diversified agricultural loan program. The revolving loan fund shall be managed by a community-based loan agency under contract with the small business development center. Loan decisions for the revolving loan fund shall be made by an oversight committee of public and private community leaders selected by the small business development center."

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $2,000,000, or so much thereof as may be necessary for fiscal year 2002-2003, for the University of Hawaii at Hilo to create a revolving loan fund for agricultural enterprises to be administered by the small business development center.

SECTION 4. The sum appropriated shall be expended by the University of Hawaii at Hilo for the purposes of this Act.

SECTION 5. New statutory material is underscored.

SECTION 6. This Act shall take effect on July 1, 2002.

INTRODUCED BY:

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