Judiciary; Financing Agreement
Except under certain conditions, exempts the judiciary from financing agreement approval by the director of finance and the attorney general.
HOUSE OF REPRESENTATIVES
TWENTY-FIRST LEGISLATURE, 2001
STATE OF HAWAII
A BILL FOR AN ACT
RELATING TO FINANCING AGREEMENTS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Section 37D-2, Hawaii Revised Statutes, is amended to read as follows:
"§37D-2 Financing agreements. Only with the approval of the director, and the approval by the attorney general as to form and legality, may the agency enter into a financing agreement in accordance with this chapter, except that the judiciary and the board of regents of the University of Hawaii may enter into a financing agreement in accordance with this chapter without the approval of the director and of the attorney general as to form and legality if the principal amount of the financing agreement does not exceed $3,000,000. A financing agreement may be entered into at the time (before or after commencement or completion of any improvement to be financed) and shall be upon terms the agency finds to be advantageous. Any financing agreement entered into by the agency without the approvals required by this section shall be void and of no effect. Financing agreements shall be subject to the following limitations:
(1) Amounts payable by the agency under a financing agreement shall be limited to available funds. In no circumstance shall the agency be obligated to pay amounts due under a financing agreement from any source other than available funds. If, by reason of insufficient available funds or other reason, amounts due under a financing agreement are not paid when due, the lender may exercise any property right that the agency has granted to it in the financing agreement, against the property that was purchased with the proceeds of the financing agreement, and apply the amounts so received toward payments scheduled to be made by the agency under the financing agreement;
(2) No property rights may be granted in property unless the property is being acquired, is to be substantially improved, is to be refinanced with the proceeds of a financing agreement, or is land on which the property is located;
(3) Except as otherwise provided in this section with respect to the judiciary and the University of Hawaii, the agency shall not enter into financing agreements under any provision of law other than this chapter if the principal amount of the financing agreement, together with the principal amount of any financing agreement previously issued by the agency for the same project, exceeds $100,000; and
(4) Except as otherwise provided in this section with respect to the judiciary and the University of Hawaii, the sale, assignment, or other disposition of any financing agreements, including certificates of participation, shall require the approval of the director."
SECTION 2. Section 37D-3, Hawaii Revised Statutes, is amended to read as follows:
"§37D-3 Related agreements. With the approval of the director and the approval by the attorney general of form and legality, an agency may:
(1) Enter into agreements with trustees, within or without the State, to hold financing agreement proceeds, payments, and reserves as security for lenders to accept assignments of rights in the financing agreement from, and to enforce such rights of, the lessor or other party thereto, and to issue certificates of participation for the right to receive payments due from the agency under a financing agreement. Amounts held by a trustee shall be invested by the trustee at the direction of the agency in such investments as shall be specified in the agreement with the trustee. Interest earned on any investment held by a trustee as security for a financing agreement may, at the option of the agency, be credited to the accounts held by the trustee and applied in payment of sums due under a financing agreement;
(2) Enter into credit enhancement agreements for financing agreements or certificates of participation; provided that the credit enhancement agreements shall be payable solely from available funds and amounts received from the exercise of property rights granted under such financing agreements;
(3) Use financing agreements to finance the costs of acquiring or refinancing property, plus the costs of reserves and credit enhancements and costs associated with obtaining the financing;
(4) Use a single financing agreement to finance property to be used by multiple agencies;
(5) Grant leases of real property subject to section 37D-2(2). The leases may be for a term that ends on the date on which all amounts due under a financing agreement have been paid or provision for payment has been made or ten years after the last scheduled payment under a financing agreement, whichever is later. The leases may grant the lessor the right to evict the agency and exclude it from possession of the real property for the term of the lease, if the agency fails to appropriate or pay when due the amounts scheduled to be paid under a financing agreement or otherwise defaults under a financing agreement. Upon failure to pay or default, the lessor may sublease the land to third parties and apply any rentals toward payments scheduled to be made under a financing agreement;
(6) Grant security interests in personal property subject to section 37D-2(2). The security interests shall attach and be perfected on the date the agency takes possession of the personal property, or the date the lender advances money under a financing agreement, whichever is later. A security interest authorized by this section shall have, except as otherwise provided by law, priority over all other liens and claims. Upon failure to pay or default, the secured party shall have the rights and remedies available to a secured party under chapter 490 or a first, perfected security interest in goods and fixtures. No later than ten days after a security interest authorized by this section attaches, the agency shall cause a financing statement for the security interest to be filed with the bureau of conveyances in the same manner as financing statements are filed for goods;
(7) Pledge any amounts that are deposited with a trustee in accordance with a financing agreement. The pledge shall be valid and binding from the time it is made, the amounts so pledged shall immediately be subject to the lien of the pledge without filing, physical delivery, or other act, and the lien of the pledge shall be superior to all other claims and liens of any kind whatsoever;
(8) Bill any other agency that benefits from property acquired with the proceeds of a financing agreement for an appropriate share of the financing costs, including debt service, on a monthly or other periodic basis, and deposit payments received in connection with the billings with a trustee as security for a financing agreement. Any agency receiving such a bill shall be authorized and shall pay the amounts billed from the first amounts legally available to it;
(9) Purchase fire and extended coverage or other casualty insurance, or liability, title, rental interruption or other insurance for property that is acquired or refinanced with proceeds of a financing agreement, assign the proceeds thereof to a lender or trustee to the extent of their interest, and covenant to maintain such insurance while the financing agreement is unpaid, so long as available funds are sufficient to purchase such insurance; and
(10) In connection with any financing agreement by which any agency leases or purchases property from another party, notwithstanding and without regard to chapter 171 or any other law, the agency may lease or sell, on such terms as the agency shall determine, to that party the site or property to be improved or otherwise to be leased or sold back to the agency[
provided that the judiciary and the board of regents of the University of Hawaii shall not be required to obtain the approval of the director to enter, nor the approval of the attorney general as to the form and legality of, any of the foregoing types of agreements or transactions, as long as such agreements or transactions are related to a financing agreement entered by the judiciary pursuant to section 37D-2, the principal amount of which does not exceed $2,000,000."
SECTION 3. Section 37D-9, Hawaii Revised Statutes, is amended to read as follows:
§37D-9[ ]] Litigation; jurisdiction. The director of finance or the administrative director of the courts may petition the supreme court for an opinion as to the validity of any financing or related agreement entered into pursuant to the provisions of this chapter. The petition shall constitute a case for purposes of section 602-5, and the supreme court shall have exclusive and original jurisdiction to receive and determine the question presented in the petition, irrespective of an actual controversy or dispute regarding the agreement or its validity."
SECTION 4. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 5. This Act shall take effect upon its approval.