Report Title:

Fiscal Disclosure and Taxpayer Protection Act

 

Description:

Creates standardized mechanism to assess cost-effectiveness of tax incentive yearly for economic development. Requires extensive disclosures and reporting of actual economic impact on job creation and maintenance, and levels of wages. Caps total incentive per job; sets wage floors at 85% of the market rate.

 

HOUSE OF REPRESENTATIVES

H.B. NO.

54

TWENTY-FIRST LEGISLATURE, 2001

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to the fiscal disclosure and taxpayer protection act.

 

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

SECTION 1. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:

"Chapter

FISCAL DISCLOSURE AND TAXPAYER PROTECTION ACT

   -1 Findings and intent. The legislature finds that, despite an increase in spending for the purpose of economic development, in both on-budget and off-budget expenditures, the real wage levels of the State's average working families have suffered years of decline and stagnation. The legislature also finds that when workers receive low wages, these jobs often impose hidden taxpayer costs on the State's residents in the form of Medicaid, food stamps, earned income tax credits and other forms of assistance provided to the working poor and their families. Therefore, in order to insure that the State's economic development resources are achieving their desired effect of raising living standards for the State's working families, the legislature finds that it is necessary to collect and analyze additional information and to enact certain safeguards in its development assistance.

   -2 Definitions. As used in this chapter, unless the context clearly requires otherwise:

"Corporate parent" means any person or legal entity, organization, business, partnership, group or corporate entity recognized by law, or combination thereof, that possesses, owns or controls an interest greater than fifty per cent of the recipient corporation.

"Date of assistance" means the date upon which a granting body transmits the first dollar value of development assistance to a recipient corporation.

"Development assistance" means any form of public assistance, including both on-budget and off-budget assistance, including tax expenditures, made for the purpose of stimulating economic development of a given corporation, industry, geographic jurisdiction, or other subset of the State's economy, including but not limited to industrial development bonds, training grants, loans, loan guarantees, enterprise zones, empowerment zones, tax increment financing, grants, fee waivers, land price subsidies, infrastructure whose principal beneficiary is a single business or defined group of businesses at the time it is built or improved, matching funds, tax abatements, tax credits and tax discounts of every kind, including corporate income, personal income, general excise, use, raw materials, job creation, industrial investment, public utility, inventory, accelerated depreciation, and research and development tax credits and discounts.

"Full-time job" means a job in which the new employee works for the recipient corporation at a rate of at least forty hours per week.

"Granting body" means any public entity within the State, including the county governments, regional development organizations, state and local public corporations, the state government and any state government department or agency which provides development assistance, including but not limited to the department of business, economic development, and tourism and the department of labor and industrial relations.

"In effect" refers to any calendar year within the duration of the development assistance, including but not limited to the duration of any loan, loan guarantee, tax credit or tax credit carryforward, property tax reduction or abatement, or tax increment financing. For one-time forms of development assistance such as grants and land price subsidies, "in effect" refers to a period of not less than five years from the date of assistance.

"Part-time job" means a job in which the new employee works for the recipient corporation at a rate of less than twenty hours per week.

"Property-taxing entity" means every entity in the State that levies taxes upon real property or personal property, including the counties.

"Small businesses" means those corporations whose corporate parents, and all subsidiaries thereof, employing fewer than an average of twenty full-time equivalent employees or which have gross receipts of less than $1,000,000 in all United States jurisdictions during the calendar year for which disclosure is required.

"Specific project site" means that distinct operational unit to which any development assistance is applied.

"Temporary job" means a job in which the new employee is hired for a specific duration of time or season.

"Value of assistance" means the face value of any and all forms of development assistance.

   -3 Disclosure of state tax expenditures. (a) Beginning July 1, 2001, and for each succeeding year, the department of budget and finance, with the assistance of the department of taxation, shall provide a detailed tax expenditure budget to the legislature, derived from state income tax filings for the previous calendar year. The disclosure report shall provide, but not be limited to, the following data:

(1) The dollar amount of tax expenditures made by the State, in the form of uncollected revenues, for each individual tax credit provided by the State, including credits for the wages of certain qualified employees, enterprise zones, empowerment zones, tax increment financing, grants, matching funds, tax abatements, and tax credits and tax discounts of every kind, including corporate income, personal income, excise, use, raw materials, job creation, industrial investment, public utility, inventory, accelerated depreciation, and research and development tax credits or discounts;

(2) For each of the tax expenditures in paragraph (1), except as specified in paragraph (3), an itemization of the name of each individual corporate taxpayer that claimed the credit of any value equal to or greater than $5,000, and the specific dollar amount credited to the corporation's tax liability under that credit for that year; and

(3) Credits of less than $5,000 claimed by individual corporations shall not be itemized as required in paragraph (2). Instead, in reporting credits for each tax expenditure, the department of budget and finance shall aggregate all claims of less than $5,000 and report them as a single non-specified group, with the number of claimants stated.

(b) All data produced by the department of budget and finance and received by the legislature in compliance with this section shall be fully subject to chapter 92F.

   -4 Disclosure of property tax reductions and abatements. (a) On or before April 1, 2002, the department of taxation shall adopt a standardized disclosure registry for use by all property-taxing entities. The form shall require, but not be limited to, the following data:

(1) The name of the property owner;

(2) The address and description of the property;

(3) The date upon which any individual property tax reduction or abatement first took effect;

(4) The date upon which any individual property tax reduction or abatement is scheduled to expire;

(5) The rate or schedule of each individual property tax reduction or abatement for the period between the date it took effect and the date it is scheduled to expire;

(6) The entity's aggregate foregone revenue for the calendar year as a result of each property tax reduction or abatement;

(7) A compilation and summary of the entity's total foregone revenue as a result of all property tax reductions or abatements, including a summary of foregone revenue for each kind of reduction or abatement; and

(8) The respective shares of the entity's property tax revenues in the reported year which went to each designated public agency; including but not limited to general funds, public safety, fire department, park districts, and general administration.

(b) Beginning April 1, 2002 and for each year thereafter, every property-taxing entity in the State shall employ this standardized registry to report to the department of taxation all property tax reductions or abatements which were in effect during the previous calendar year.

(c) The department of taxation, by June 1, 2002 and for each year thereafter, compile and publish all data in all of the disclosure registries in both written and electronic form.

(d) If a property-taxing entity fails to comply with subsection (b), the department of taxation, within ten working days of the April 1 filing deadline, shall notify the relevant department, including the department of business, economic development, and tourism, of the failure. Upon receipt of the notice, the relevant department, including department of business, economic development, and tourism, shall suspend within three working days any current development assistance activities under its control in the property-taxing entity's jurisdiction, and shall be prohibited from completing any current development assistance or providing any future development assistance in the non-compliant jurisdiction unless and until it receives proof from the department of taxation that the property-taxing entity has complied with subsection (b).

(e) In the event any state agency fails to enforce subsection (c) or (d), any person who paid personal income taxes or other taxes to the State in the calendar year prior to the year in dispute, shall have standing to sue to compel the State to enforce this section. The court shall award the taxpayer plaintiff who prevails reasonable attorney's fees and costs in any such enforcement action.

(f) All data generated in compliance with subsections (a) and (b) shall be fully subject to chapter 92.

   -5 Standardized applications for on-budget development assistance. (a) On or before April 1, 2002, the department of business, economic development, and tourism shall adopt a standardized application form for on-budget development assistance for use by all granting bodies. The form shall require, but not be limited to, the following data:

(1) An application tracking number which is specific to both the granting agency and to each application;

(2) The name, mailing address, telephone number, and chief officer of the granting body;

(3) The name, mailing address, telephone number, and chief officer of the corporate parent of the applicant corporation;

(4) The name, mailing address, telephone number, and four-digit SIC number, of the chief officer of the applicant corporation at the specific project site for which development assistance is sought;

(5) The applicant corporation's total number of employees at the specific project site on the date of the application, broken down by full-time, part-time, and temporary employees;

(6) The total number of employees in the State of the applicant corporation's corporate parent, and all subsidiaries thereof, as of December 31 of the year preceding the date of application, broken down by full-time, part-time, and temporary employees;

(7) The kind of development assistance and value of assistance being applied for;

(8) The number of new jobs to be created by the development assistance, broken down by full-time, part-time, and temporary employees; and

(9) The average hourly wage to be paid within one year of hiring to the new employees, broken down by number of full-time, part-time, and temporary employees, and broken down by wage bands as follows:

(A) $6.00 or less an hour;

(B) $6.01 to $7.00 an hour;

(C) $7.01 to $8.00 an hour;

(D) $8.01 to $9.00 an hour;

(E) $9.01 to $10.00 an hour;

(F) $10.01 to $11.00 an hour;

(G) $11.01 to $12.00 an hour;

(H) $12.01 to $13.00 an hour;

(I) $13.01 to $14.00 an hour; and

(J) $14.01 or more per hour;

(10) For applicant project sites located in a metropolitan statistical area, as defined by the United States Census Bureau, the average hourly wage paid to non-managerial employees in the applicant's industry in the State, as most recently provided by the United States Bureau of Labor Statistics to the two or three-digit SIC number specification, as available;

(11) For applicant project sites located outside of metropolitan statistical areas, the average weekly wage paid in the county, as most recently reported by the United States Department of Commerce in its County Business Patterns reports; and

(12) The nature of employer-paid health care coverage to be provided within ninety days of hiring to the employees filling the new jobs, including any costs to be borne by the new employees.

(b) Beginning April 1, 2002, every granting body in the State, jointly with applicant corporations, shall fill out the standardized application form as prescribed in subsection (a) each time a corporation applies for development assistance.

   -6 On-budget development assistance disclosure. (a) Beginning on February 1, 2002 and for each year thereafter, every granting body in the State shall submit to the department of business, economic development, and tourism copies of all the standardized applications forms for development assistance, as specified in section    -5 that it has received in the previous calendar year. Upon each form, the granting body shall designate whether the development assistance is pending, was approved, or was not approved, and for those applications that were approved, the date of assistance if the date of assistance occurred in the previous calendar year.

(b) For those applications that were approved but for which the date of assistance did not occur in the same calendar year, each granting body shall report in its next subsequent February 1 annual report to the department of business, economic development, and tourism the relevant dates of assistance.

(c) For each development assistance application that was approved, and for which the date of assistance has occurred in a reporting year, each granting agency shall submit to the department of business, economic development, and tourism a progress report, which shall include but not be limited to the following data:

(1) The application tracking number;

(2) The name, mailing addresses, telephone number, and chief officer of the granting body;

(3) The name, mailing addresses, telephone number, four-digit SIC number, and chief officer of the corporation at the specific project site for which the development assistance was approved;

(4) The kind of development assistance and value of assistance that was approved;

(5) The applicant's total level of employment at the specific project site on the date of the application and the applicant's total level of employment at the specific project site on the date of the report, broken down by full-time, part-time, and temporary employees, and a computation of the gain or loss in each category;

(6) The number of new jobs the applicant corporation stated in its application would be created by the development assistance, broken down by full-time, part-time, and temporary employees;

(7) The total level of employment in the State of the applicant's corporate parent, and all subsidiaries thereof as of December 31 of the year preceding the date of application and the total level of employment in the State of the applicant's corporate parent, and all subsidiaries thereof, as of each December 31 up through the reporting year, broken down by full-time, part-time, and temporary employees, and a statement of the gain or loss in each category from the earliest reported year to the most recent;

(8) The average hourly wage paid as of December 31 of the reporting year to employees filling the new jobs at the specific project site, broken down by full-time, part-time, and temporary employees;

(9) The nature of employer-paid health care coverage being provided within ninety days of hiring to the employees filling the new jobs, including any costs being borne by the new employees;

(10) A narrative, if necessary, describing how the recipient corporation's use of the development assistance during the reporting year has reduced employment at any site in any United States jurisdiction controlled by the applicant or its corporate parent, including but not limited to events such as automation, consolidation, merger, acquisition, product line movement, business activity movement, or restructuring by either the applicant or its corporate parent; and

(11) Signed individual certifications by the chief officers of both the applicant corporation and the granting body as to the accuracy of the progress report, under penalty of perjury.

(d) The granting body and the department of business, economic development, and tourism shall have full investigative authority to verify the applicant's progress report data, including but not limited to inspection of the specific project site and analysis of tax and payroll records.

(e) By June 1, 2002 and by June 1 of each year thereafter, the department of business, economic development, and tourism shall compile and publish all data in all of the development assistance progress reports in both written and electronic form.

(f)  Every aspect of all development assistance applications, progress reports, and the department of business, economic development, and tourism's compilation of applications and progress reports shall be fully subject to chapter 92.

(g)  If a granting body fails to comply with subsections (a) though (c), or if a recipient corporation fails to comply with subsection (c)(11), the department business, economic development, and tourism, within ten working days of the February 1 filing deadline, shall suspend any current development assistance activities under its control in the granting body's jurisdiction, and shall be prohibited from proceeding with any current or future development assistance activities under its control in the granting body's jurisdiction, unless and until it receives proof that the negligent granting body or recipient corporation has complied with subsections (a) through (c) or subsection (c)(11).

   -7 Job creation and job quality standards. (a) In considering development assistance applications, all granting bodies shall perform two analyses concerning the projected wages and benefits. Specifically:

(1) In considering development assistance applications, all granting bodies shall compare the aggregate projected wage, as specified under section    -5(a)(9), with existing wages, as specified and defined under subsection    -5(a)(10) and (11). To derive the aggregate projected wage, the granting body shall compute the weighted hourly average wage for all new employees, including full-time, part-time, and temporary employees. If the aggregate projected wage is less than eighty-five per cent of existing wages, the application shall be denied. For small businesses, if the aggregate projected wage is less than seventy-five per cent of existing wages, the application shall be denied; and

(2) In considering development assistance applications, all granting bodies shall perform a second wage computation to consider the value of health care coverage provided to full-time employees, as specified in section    -5(a)(12). If the applicant corporation is not providing health care coverage to full-time employees, the granting body shall subtract $1.50 an hour from the projected wage. If the recipient corporation projects some health care costs to be borne by the new full-time employees, the granting body, based on data from the applicant corporation, shall estimate the hourly cost to the new full-time employee of such costs and subtract that amount from the projected wage. If the amount resulting from the subtraction is less than eighty per cent of existing wages as specified and defined under section    -5(a)(10) and (11), the application shall be denied. For small businesses, if the amount resulting from the subtraction is less than seventy per cent of existing wages, the application shall be denied.

(b) Granting bodies shall perform a third eligibility analysis. In considering development assistance applications, all granting bodies shall divide the value of assistance, specified in section    -5(a)(7), by the number of projected full-time jobs. If the resulting sum exceeds $35,000, the application shall be denied.

(c) A granting body's requirement under subsection (a) may be waived in a bona fide collective bargaining agreement that covers employees at the specific project site of the applicant corporation, but only if the waiver is explicitly set forth in the collective bargaining agreement in clear and unambiguous terms. Unilateral implementation of terms and conditions of employment by either party to a collective bargaining agreement shall not constitute, or be permitted, as a waiver of subsections (a) and (b).

   -8 Nonperformance; development assistance; job creation; repayment. Upon determination by the granting body that a recipient corporation that has received development assistance under this chapter has failed to perform, including fulfilling job creation requirements, pursuant to its written application to the granting body, the recipient corporation shall repay to the granting body the entire amount of the development assistance. In addition, the nonperforming recipient corporation shall also pay to the granting body an interest penalty of           per cent."

SECTION 2. This Act shall take effect on July 1, 2001.

INTRODUCED BY:

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