Report Title:

Business Subsidies; Reporting on Results

 

Description:

Requires recipients of state or county business subsidies (grants, low interest loans, tax reductions, etc.) to file a public annual report specifying the amount of the subsidy, the public purpose to be served, number and quality of jobs to be generated, etc. Failure to meet goals may result in repayment.

 

HOUSE OF REPRESENTATIVES

H.B. NO.

912

TWENTY-FIRST LEGISLATURE, 2001

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to subsidies.

 

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

STATE AND COUNTY BUSINESS SUBSIDIES

§ -1 Definitions. As used in this chapter, unless the context clearly requires otherwise:

"Benefit date" means the date that the recipient receives the business subsidy. If the business subsidy involves the purchase, lease, or donation of physical equipment, then the benefit date begins when the recipient puts the equipment into service. If the business subsidy is for improvements to property, then the benefit date refers to the earliest date of either:

(1) When the improvements are finished for the entire project; or

(2) When a business occupies the property. If a business occupies the property and the subsidy grantor expects that other businesses will also occupy the same property, the grantor may assign a separate benefit date for each business when it first occupies the property.

"Business subsidy" or "subsidy" means a state or county government agency grant, contribution of personal property, real property, infrastructure, the principal amount of a loan at rates below those commercially available to the recipient, any reduction or deferral of any tax or any fee, any guarantee of any payment under any loan, lease, or other obligation, or any preferential use of government facilities given to a business.

The following forms of financial assistance are not a business subsidy:

(1) A business subsidy of less than $25,000;

(2) Assistance that is generally available to all businesses or to a general class of similar businesses, such as a line of business, size, location, or similar general criteria;

(3) Public improvements to buildings or lands owned by the state or county government that serve a public purpose and do not principally benefit a single business or defined group of businesses at the time the improvements are made;

(4) Redevelopment property polluted by contaminants;

(5) Assistance provided for the sole purpose of renovating old or decaying building stock or bringing it up to code, provided that the assistance is equal to or less than fifty per cent of the total cost;

(6) Assistance provided to organizations whose primary mission is to provide job readiness and training services if the sole purpose of the assistance is to provide those services;

(7) Assistance for housing;

(8) Assistance for pollution control or abatement;

(9) Assistance for energy conservation;

(10) Tax reductions resulting from conformity with federal tax law;

(11) Workers' compensation and unemployment compensation;

(12) Benefits derived from regulation;

(13) Indirect benefits derived from assistance to educational institutions;

(14) Funds from bonds allocated under chapter 39 or 39A;

(15) Assistance for a collaboration between a Hawaii higher education institution and a business;

(16) Assistance for a tax increment district as defined under section 46-102;

(17) Redevelopment when the recipient's investment in the purchase of the site and in site preparation is seventy per cent or more of the assessor's current year's estimated market value; and

(18) General changes in tax increment financing law and other general tax law changes of a principally technical nature.

"County government agency" means any county agency that has the authority to award business subsidies.

"Grantor" means any state or county government agency with the authority to grant a business subsidy.

"Recipient" means any for-profit or nonprofit business entity that receives a business subsidy. Only nonprofit entities with at least one hundred full-time equivalent positions and with a ratio of highest to lowest paid employee, that exceeds ten to one, determined on the basis of full-time equivalent positions, are included in this definition.

"State government agency" means any state agency that has the authority to award business subsidies.

§ -2 Public purpose. A business subsidy shall meet a public purpose other than increasing the tax base. Job retention may only be used as a public purpose in cases where job loss is imminent and demonstrable.

§ -3 Developing a set of criteria. A business subsidy may not be granted until the grantor has adopted criteria after a public hearing for awarding business subsidies that comply with this section. The criteria shall include a policy regarding the wages to be paid for the jobs created. The director of business, economic development, and tourism may assist county government agencies in developing criteria.

§ -4 Subsidy agreement. (a) A recipient shall enter into a subsidy agreement with the grantor of the subsidy that includes:

(1) A description of the subsidy, including the amount and type of subsidy, and type of district if the subsidy is tax increment financing;

(2) A statement of the public purposes for the subsidy;

(3) Goals for the subsidy;

(4) A description of the financial obligation of the recipient if the goals are not met;

(5) A statement of why the subsidy is needed;

(6) A commitment to continue operations at the site where the subsidy is used for at least five years after the benefit date;

(7) The name and address of the parent corporation of the recipient, if any; and

(8) A list of all financial assistance by all grantors for the project.

(b) Business subsidies in the form of grants shall be structured as forgivable loans. If a business subsidy is not structured as a forgivable loan, the agreement shall state the fair market value of the subsidy to the recipient, including the value of conveying property at less than a fair market price, or other in-kind benefits to the recipient.

(c) If a business subsidy benefits more than one recipient, the grantor shall assign a proportion of the business subsidy to each recipient that signs a subsidy agreement. The proportion assessed to each recipient shall reflect a reasonable estimate of the recipient's share of the total benefits of the project.

(d) The state or county government agency and the recipient shall both sign the subsidy agreement and, if the grantor is a county government agency, the agreement shall be approved by the county council.

§ -5 Wage and job goals. (a) The subsidy agreement, in addition to any other goals, shall include:

(1) Goals for the number of jobs created, which may include separate goals for the number of part-time or full-time jobs, or, in cases where job loss is imminent and demonstrable, goals for the number of jobs retained; and

(2) Wage goals for the jobs created or retained.

(b) In addition to other specific goal time frames, the wage and job goals shall contain specific goals to be attained within two years of the benefit date.

§ -6 Public notice and hearing. (a) Before granting a business subsidy that exceeds $500,000 for a state government grantor and $100,000 for a county government grantor, the grantor shall provide public notice and a hearing on the subsidy. A public hearing and notice under this section is not required if a hearing and notice on the subsidy is otherwise required by law.

(b) Public notice of a proposed business subsidy under this section by a state government grantor shall be published statewide. Public notice of a proposed business subsidy under this section by a county government grantor shall be published in a newspaper of general circulation in the county. The public notice shall identify the location at which information about the business subsidy, including a copy of the subsidy agreement, is available. Published notice should be sufficiently conspicuous in size and placement to distinguish the notice from the surrounding text. The grantor shall make the information available in printed paper copies and, if possible, on the internet. The government agency shall provide at least a ten-day notice for the public hearing.

(c) The public notice shall include the date, time, and place of the hearing.

(d) The public hearing by a state government grantor shall be held in Honolulu.

§ -7 Failure to meet goals. (a) The subsidy agreement shall specify the recipient's obligation if the recipient does not fulfill the agreement. At a minimum, the agreement shall require a recipient failing to meet subsidy agreement goals to pay back the assistance plus interest to the grantor; provided that repayment may be prorated to reflect partial fulfillment of goals. The grantor, after a public hearing, may extend for up to one year the period for meeting the goals provided in a subsidy agreement.

(b) A recipient that fails to meet the terms of a subsidy agreement may not receive a business subsidy from any grantor for a period of five years from the date of failure or until a recipient satisfies its repayment obligation under this section, whichever occurs first.

(c) Before a grantor signs a business subsidy agreement, the grantor shall check with the compilation and summary report required by this section to determine if the recipient is eligible to receive a business subsidy.

§ -8 Reports by recipients to grantors. (a) A business subsidy grantor shall monitor the progress by the recipient in achieving agreement goals.

(b) A recipient shall provide information regarding goals and results for two years after the benefit date or until the goals are met, whichever is later. If the goals are not met, the recipient shall continue to provide information on the subsidy until the subsidy is repaid. The information shall be filed on forms developed by the director of business, economic development, and tourism in cooperation with representatives of county government. Copies of the completed forms shall be sent to the director and the county government agency that provided the business subsidy. The report shall include:

(1) The type, public purpose, and amount of subsidies;

(2) The hourly wage of each job created with separate bands of wages;

(3) The sum of the hourly wages and cost of health insurance provided by the employer with separate bands of wages;

(4) The date the job and wage goals will be reached;

(5) A statement of goals identified in the subsidy agreement and an update on achievement of those goals;

(6) The location of the recipient prior to receiving the business subsidy;

(7) Why the recipient did not complete the project outlined in the subsidy agreement at their previous location, if the recipient was previously located at another site in Hawaii;

(8) The name and address of the parent corporation of the recipient, if any;

(9) A list of all financial assistance by all grantors for the project; and

(10) Other information the director may request.

A report shall be filed no later than March 1 of each year for the previous year and within thirty days after the deadline for meeting the job and wage goals.

(c) Financial assistance that is excluded from paragraphs (4), (5), (8), and (16) in the definition of "business subsidy" in section -1 is subject to the reporting requirements of this section, except that the report of the recipient shall include:

(1) The type, public purpose, and amount of the financial assistance, and type of district if the subsidy is tax increment financing;

(2) Progress towards meeting goals stated in the subsidy agreement and the public purpose of the assistance;

(3) The hourly wage of each job created with separate bands of wages;

(4) The sum of the hourly wages and cost of health insurance provided by the employer with separate bands of wages;

(5) The location of the recipient prior to receiving the assistance; and

(6) Other information the grantor requests.

(d) If the recipient does not submit its report, the county government agency shall mail the recipient a warning within one week of the required filing date. If, after fourteen days of the postmarked date of the warning, the recipient fails to provide a report, the recipient shall pay to the grantor a penalty of $100 for each subsequent day until the report is filed. The maximum penalty shall not exceed $1,000.

§ -9 Reports by grantors. (a) County and state government agencies, regardless of whether or not they have awarded any business subsidies, shall file a report by April 1 of each year with the director of business, economic development, and tourism. The county government agency shall include a list of recipients that did not complete the report and of recipients that have not met their job and wage goals within two years and the steps being taken to bring them into compliance or to recoup the subsidy.

(b) If the director has not received the report by April 1 from an entity required to report, the director shall issue a warning to the government agency. If the director has still not received the report by June 1 of that same year from an entity required to report, then that government agency may not award any business subsidies until the report has been filed.

(c) The director shall provide information on reporting requirements to state and county government agencies.

§ -10 Compilation and summary report. (a) The department of business, economic development, and tourism shall publish a compilation and summary of the results of the reports for the previous calendar year by July 1 of each year. The reports of the government agencies to the department and the compilation and summary report of the department shall be made available to the public.

(b) The director of business, economic development, and tourism shall coordinate the production of reports so that useful comparisons across time periods and across grantors can be made. The director may add other information to the report as the director deems necessary to evaluate business subsidies. Among the information in the summary and compilation report, the director shall include:

(1) Total amount of subsidies awarded in each development region of the State;

(2) Distribution of business subsidy amounts by size of the business subsidy;

(3) Distribution of business subsidy amounts by time category, such as monthly or quarterly;

(4) Distribution of subsidies by type and by public purpose;

(5) Per cent of all business subsidies that reached their goals;

(6) Per cent of business subsidies that did not reach their goals by two years from the benefit date;

(7) Total dollar amount of business subsidies that did not meet their goals after two years from the benefit date;

(8) Per cent of subsidies that did not meet their goals and that did not receive repayment;

(9) List of recipients that have failed to meet the terms of a subsidy agreement in the past five years and have not satisfied their repayment obligations;

(10) Number of part-time and full-time jobs within separate bands of wages; and

(11) Benefits paid within separate bands of wages.

§ -11 Economic grants. An appropriation rider in an appropriation to the department of business, economic development, and tourism that specifies that the appropriation be granted to a particular business or class of businesses shall contain a statement of the expected benefits associated with the grant. At a minimum, the statement shall include goals for the number of jobs created, wages paid, and the tax revenue increases due to the grant."

SECTION 2. This Act shall apply to business subsidies entered into or appropriations authorized on or after its effective date.

SECTION 3. This Act shall take effect upon its approval.

INTRODUCED BY:

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