Report Title:

Agriculture; Aquaculture; Loan Program

Description:

Integrates the state agriculture and aquaculture loan programs and removes all restrictions on the amount that may be borrowed and requires the board of agriculture to determine loan amount limits.

HOUSE OF REPRESENTATIVES

H.B. NO.

2916

TWENTY-SECOND LEGISLATURE, 2004

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO LOAN PROGRAMS.

 

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

SECTION 1. Section 155-1, Hawaii Revised Statutes, is amended as follows:

1. By amending the definition of "farm land" to read:

""Farm land" means land used for agricultural purposes, including general farming, cane growing, fruit growing, flower growing, grazing, dairying, the production of any form of livestock or poultry, and any other form of agricultural activity. It includes land required for an adequate farm dwelling and other essential farm buildings, roads, and wasteland. It also includes the propagation, cultivation, or farming of aquatic plants and animals in controlled or selected environments for commercial purposes or authorized stock enhancement purposes."

2. By amending the definition of "qualified farmer" to read:

""Qualified farmer" means a person of proven farming ability who operates the person's own farm on land owned by the person in fee or on land rented or leased from others and includes a person actively engaged in aquaculture farming, aquacultural produce processing, or aquacultural product development activities. It also means a person who is presently devoting, has recently devoted, or intends to devote most of the person's time or who derives a major portion of the person's net cash income from direct participation in farming in its broadest sense. It includes:

(1) Hawaii partnerships controlled by at least seventy-five per cent by persons who would qualify individually and would meet the eligibility requirements of section 155-10;

(2) Small corporations where at least seventy-five per cent of each class of stock issued by the corporation is owned by persons who qualify individually and would meet the eligibility requirements of section 155-10 and where seventy-five per cent of the directors are qualified farmers;

(3) Corporations incorporated in the State primarily for agricultural production purposes; actively engaged in agricultural production for a minimum of two years; and with at least seventy-five per cent of each class of stock owned by persons who are residents of this State or entities that are domiciled in this State;

(4) Trusts with situs in Hawaii in which the trustee or other individual or entity in control of the operations of the trust would qualify and meet the eligibility requirements of section 155-10; and

(5) Any other legal entity recognized by the State that conducts business in the State and that is capable of acquiring, holding, encumbering, transferring, or otherwise administering property, whether real or personal, or tangible or intangible, and which entity is owned and controlled by persons or other entities, at least seventy-five per cent of which would qualify and would meet the eligibility requirements of section 155-10."

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

1. By amending subsections (b), (c), and (d) to read:

"(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] to be determined by the board of agriculture 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] to be determined by the board of agriculture 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] to be determined by the board of agriculture 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."

2. By amending subsections (f), (g), and (h), to read:

"(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] to be determined by the board of agriculture 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 determined by the board of agriculture.

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.] to be determined by the board of agriculture. 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;] to be determined by the board of agriculture;

(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] to be determined by the board of agriculture and for a term not to exceed ten years."

SECTION 3. Chapter 219, Hawaii Revised Statutes, is repealed.

SECTION 4. On June 30, 2004, all funds in the aquaculture loan revolving fund under section 219-4, Hawaii Revised Statutes, or any funds scheduled to be deposited or transferred into the revolving fund, shall be transferred to or deposited into the agricultural loan revolving fund under section 155-14, Hawaii Revised Statutes.

SECTION 5. This Act shall not be applied so as to impair any executed contract or loan existing with the aquaculture loan program under chapter 219, Hawaii Revised Statutes, as of the effective date of this Act in a manner violative of either the Hawaii Constitution or Article I, section 10 of the United States Constitution.

SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 7. This Act shall take effect upon its approval.

INTRODUCED BY:

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