Report Title:

Agricultural Loans; Animal Feed

Description:

Amends the agricultural loan law to establish a new class of loan for the growing of crops for use as animal feed. Appropriates funds.

HOUSE OF REPRESENTATIVES

H.B. NO.

1369

TWENTY-SECOND LEGISLATURE, 2003

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

relating to agricultural loans.

 

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

SECTION 1. The legislature finds that there is a need to develop fallow sugar land in Hawaii to promote the growth of the animal industry. The State does not produce nearly enough of the food required for local consumption because of an inadequate supply of animal feed stock. Accordingly, the purpose of this Act is to establish a new class of agricultural loan for the growing of crops to use as animal feed.

SECTION 2. Section 155-9, Hawaii Revised Statutes, is amended to read as follows:

"§155-9 Classes of loans; purposes, terms, eligibility. (a) Loans made under this chapter shall be for the purposes and in accordance with the terms specified in classes "A" through "F" in this section and shall be made only to applicants who meet the eligibility requirements specified therein and except as to class "B" loans to associations and class "E" loans, the eligibility requirements specified in section 155-10. The maximum amount of a loan for class "A", "C", "D", and "F" loans to an individual applicant shall also apply to any loan application submitted by a partnership, corporation, or other entity, and for the purpose of determining whether the maximum loan amount to any individual will be exceeded, outstanding loans to any partnership, corporation, or other entity that the individual has a legal or equitable interest in excess of twenty per cent shall be taken into account.

(b) Class A: Farm ownership and improvement loans shall provide for:

(1) The purchase or improvement of farm land;

(2) The purchase, construction, or improvement of adequate farm dwellings, and other essential farm buildings; and

(3) The liquidation of indebtedness incurred for any of the foregoing purposes.

The loans shall be for an amount not to exceed $800,000 and for a term not to exceed forty years. To be eligible, the applicant shall (A) derive, or present an acceptable plan to derive, a major portion of the applicant's income from and devote, or intend to devote, most of the applicant's time to farming operations; and (B) have or be able to obtain the operating capital, including livestock and equipment, needed to successfully operate the applicant's farm.

(c) Class B: Soil and water conservation loans shall provide for:

(1) Soil conservation practices;

(2) Water development, conservation, and use;

(3) Drainage; and

(4) The liquidation of indebtedness incurred for any of the foregoing purposes.

The loans shall be for an amount not to exceed $35,000 to an individual or $200,000 to an association and shall be for a term not to exceed twenty years for a loan to an individual and forty years to an association. To be eligible, an individual applicant shall have sufficient farm and other income to pay for farm operating and living expenses and to meet payments on the applicant's existing debts, including the proposed soil and water conservation loan. An association, to be eligible, shall be a nonprofit organization primarily engaged in extending services directly related to the purposes of the loan to its members, and at least sixty per cent of its membership shall meet the eligibility requirements specified in section 155-10.

(d) Class C: Farm operating loans shall be for the purpose of carrying on and improving a farming operation, including:

(1) The purchase of farm equipment and livestock;

(2) The payment of production and marketing expenses including materials, labor, and services;

(3) The payment of living expenses;

(4) The liquidation of indebtedness incurred for any of the foregoing purposes; and

(5) The exportation of crops and livestock.

The loans shall be for an amount not to exceed $800,000 and for a term not to exceed ten years. To be eligible, an applicant shall derive, or present an acceptable plan to derive, a major portion of the applicant's income from and devote, or intend to devote, most of the applicant's time to farming operations.

Qualified farmers affected by state eradication programs may also be eligible for loans under this subsection. Loans made for rehabilitation from eradication programs shall be subject to the terms of class "C" loans; provided that the interest rate shall be three per cent a year and the requirements in section 155-3 shall be waived and paragraph (4) shall not apply.

(e) Class D: Emergency loans shall be for the purpose of providing relief and rehabilitation to qualified farmers without limit as to purpose:

(1) In areas stricken by extraordinary rainstorms, windstorms, droughts, tidal waves, earthquakes, volcanic eruptions, and other natural catastrophes;

(2) On farms stricken by livestock disease epidemics and crop blights;

(3) On farms seriously affected by prolonged shipping and dock strikes;

(4) During economic emergencies caused by overproduction, excessive imports, and the like; and

(5) During other emergencies as determined by the board of agriculture.

The maximum amounts and period for the loans shall be determined by the board of agriculture; provided that the board shall require that any settlement or moneys received by qualified farmers as a result of an emergency declared under this section shall first be applied to the repayment of an emergency loan made under this chapter.

(f) Class E: Loans to farmers' cooperatives, corporations, and food manufacturers shall provide credit to entities engaged in marketing, purchasing, and processing, and providing farm business services, including:

(1) Facility loans to purchase or improve land, building, and equipment for an amount not to exceed $500,000 and a term not to exceed twenty years;

(2) Operating loans to finance inventories of supplies and materials, warehousing, and shipping commodities, extension of consumer credit to justified farmer-members, and other normal operating expenses for an amount not to exceed $300,000 and a term not to exceed seven years; and

(3) The exportation of crops and livestock.

To be eligible, a farmers' cooperative or corporation shall have a majority of its board of directors and a majority of its membership as shareholders who meet the eligibility requirements of section 155-10 and who devote most of their time to farming operations, and the facility loans shall be for an amount not to exceed $500,000 or eighty per cent of the cost of the project, whichever is the lesser.

To be eligible, a food manufacturer shall be licensed to do business in the State, and the controlling interest of the entity shall possess a minimum of two years of relevant processing or manufacturing experience as acceptable to the department of agriculture. The entity shall process Hawaii-grown agricultural products or use Hawaii-grown agricultural products as an ingredient in the manufacturing process. Facility loans shall be for an amount not to exceed $500,000 or eighty per cent of the cost of the project, whichever is the lesser. The requirements in section 155-10 shall be waived for food manufacturing loans; however, the entity shall be a sound credit risk with the ability to repay the money borrowed.

(g) Class F: Loans for new farmer programs shall provide for costs of a new farm enterprise for qualified new farmers:

(1) Initial loans made under this class shall be for purposes and in accordance with the terms specified in class "A" and "C" only, and shall be made only for full-time farming. The loans shall be made for an amount not to exceed $100,000 or eighty-five per cent of the cost of the project, whichever is the lesser;

(2) Any subsequent loan shall be made from classes "A" to "D", respectively, depending upon the purpose for which the loan funds are used; and

(3) Borrowers shall comply with special term loan agreements as may be required by the department and shall take special training courses as the department deems necessary.

(h) Class G: Loans to part-time farmers shall be for farm improvement and operating purposes for carrying on and improving farming operations, including loans for:

(1) The purchase, construction, and improvement of farm production and growing structures;

(2) The purchase of farm equipment or livestock; and

(3) The payment of production and marketing expenses, including materials, labor, and services.

The liquidation of indebtedness incurred for any of the purposes under this subsection and for living expenses shall not be authorized purposes. Each loan shall be for an amount not to exceed $25,000 and for a term not to exceed ten years.

(i) Class H: Animal feed loans shall provide for:

(1) The purchase or improvement of farm land to grow crops for use as animal feed;

(2) The purchase, construction, or improvement of adequate farm dwellings and other essential farm buildings in connection with paragraph (1);

(3) The purchase of farm equipment;

(4) The payment of production and marketing expenses, including materials, labor, and services; and

(5) The liquidation of indebtedness incurred for any of the foregoing purposes.

The loans shall be for an amount not to exceed $1,000,000 and for a term not to exceed five years; provided that the interest on loans made under this subsection shall bear simple interest at the rate of one per cent below the prime rate. All loans shall be collateralized on a basis at least equal to the outstanding balance of the loan guaranteed. The collateral shall be in the form of real property interests or other marketable assets as may be approved by the department. The collateral shall not be subject to a buyback or re-stock agreement such that the value of the collateral or method of securing payment from the collateral shall be guaranteed."

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $2,500,000, or so much thereof as may be necessary for fiscal year 2003-2004, and the same sum, or so much thereof as may be necessary for fiscal year 2004-2005, for the establishment of a new class of agricultural loan for the growing of crops to use as animal feed as provided in this Act.

SECTION 4. The sums appropriated shall be expended by the department of agriculture for the purposes of this Act.

SECTION 5. New statutory material is underscored.

SECTION 6. This Act shall take effect on July 1, 2003.

INTRODUCED BY:

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