Report Title:

Educational Facilities; Impact Fees

Description:

Creates the education design and construction project assessment fund within the department of education (DOE). Broadens DOE's authority over capital improvement projects. Authorizes the DOE to assess and collect impact fees as fair share contributions of developers for state public school facilities construction. Appropriates funds. (SD2)

HOUSE OF REPRESENTATIVES

H.B. NO.

1132

TWENTY-THIRD LEGISLATURE, 2005

H.D. 1

STATE OF HAWAII

S.D. 2


 

A BILL FOR AN ACT

 

RELATING TO EDUCATION.

 

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

PART I

SECTION 1. The legislature finds that the state educational facilities improvement special fund (special fund) is used to plan, design, acquire lands, construct, and maintain public school facilities. The special fund finances projects that address classroom needs. However, the special fund is overwhelmed with needed projects that include additional classroom buildings to reduce the statewide shortage of three hundred forty nine classrooms. As public school facilities are in dire need of repair, new facilities also need to be constructed to reduce the classroom shortage of three hundred forty-nine classrooms.

Recently, King intermediate and Kailua intermediate schools made news headlines when asbestos was found at King intermediate school and a roof collapsed at Kailua intermediate school. Both schools experienced a break in class schedules to remedy the life-threatening situations.

Presently, the capital improvement projects backlog for the department of education totals $3,000,000,000, while the repair and maintenance backlog is estimated at $500,000,000.

The purpose of this part is to:

(1) Increase the amount of money deposited into the state educational facilities improvement special fund; and

(2) Transfer all school facilities' repair, maintenance, and construction management to the department of education to improve the coordination and facilitation of decreasing the backlog of projects and to establish the education design and construction project assessment fund to allow the superintendent to make assessments on construction projects.

SECTION 2. Chapter 302A, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§302A-   Education design and construction project assessment fund. (a) There shall be established in the department a revolving fund to be known as the education design and construction project assessment fund for the purpose of defraying the costs of:

(1) Carrying out construction projects managed by the department;

(2) Managing funds representing accumulated vacation and sick leave credits and retirement benefits for non-general fund employees in the construction program in accordance with section 78-23;

(3) Equitably collecting and distributing moneys for other current expenses associated with capital improvement, repairs and maintenance, and repairs and alterations projects; and

(4) Managing payments for employee transportation requirements such as car mileage reimbursements in accordance with applicable law and collective bargaining agreements.

(b) The superintendent shall make reasonable assessments on construction projects managed by the department to carry out services for capital improvement, repair and maintenance, and repairs and alterations projects. The assessments shall be based on a logarithmic curve developed by the department for the services. All assessments collected shall be deposited into the education design and construction project assessment fund.

(c) All expenditures from the education design and construction project assessment fund shall be made by the superintendent in accordance with applicable law and rules."

SECTION 3. Section 36-32, Hawaii Revised Statutes, is amended to read as follows:

"§36-32 State educational facilities improvement special fund. (a) There is created in the treasury of the State the state educational facilities improvement special fund, into which shall be deposited a portion of all general excise tax revenues collected by the department of taxation under section 237-31. The special fund shall be used solely to plan, design, acquire lands for and to construct public school facilities and to provide equipment and technology infrastructure to improve public schools and other facilities under the jurisdiction of the department of education, except public libraries. In addition, activities of the department of education intended to eliminate the gap between the facility needs of schools and available resources shall be eligible for funding from the special fund. Expenditures from the special fund shall be limited to projects authorized by the legislature and shall be subject to sections 37-31, and 37-33 through 37-40. Appropriations or authorizations from the special fund shall be expended by the [comptroller.] superintendent of education.

(b) The department of [accounting and general services] education shall submit an annual report to the legislature[, which] that shall include a financial statement of the special fund and the status of projects undertaken pursuant to this section, no later than twenty days prior to the convening of each regular session."

SECTION 4. Section 36-35, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) There is created in the state general fund under [EDN 100 (school based budgeting)] EDN 400 (school support) the state educational facilities repair and maintenance account, into which shall be deposited legislative appropriations to the account designated for use solely to eliminate the backlog of school repair and maintenance projects, including the repair or replacement of fixtures, furnishings, and equipment, existing on June 30, 2000. Expenditures from the account shall be subject to sections 37-31 and 37-33 to 37-40. Based on the prioritization approved by the department of education as prescribed by section 302A-1505, appropriations or authorizations from the account shall be expended by the superintendent of education."

SECTION 5. Section 237-31, Hawaii Revised Statutes, is amended to read as follows:

"§237-31 Remittances. All remittances of taxes imposed by this chapter shall be made by money, bank draft, check, cashier's check, money order, or certificate of deposit to the office of the department of taxation to which the return was transmitted. The department shall issue its receipts therefor to the taxpayer and shall pay the moneys into the state treasury as a state realization, to be kept and accounted for as provided by law; provided that:

(1) The sum from all general excise tax revenues realized by the State that represents the difference between [$45,000,000] $           and the proceeds from the sale of any general obligation bonds authorized for that fiscal year for the purposes of the state educational facilities improvement special fund shall be deposited in the state treasury in each fiscal year to the credit of the state educational facilities improvement special fund[;] for public school capital improvement program needs;

(2) The sum from all general excise tax revenues realized by the State that represents the difference between $           and the proceeds from the sale of any general obligation bonds authorized for that fiscal year for the purposes of the state educational facilities improvement special fund shall be deposited in the state treasury in each fiscal year to the credit of the state educational facilities improvement special fund for bond-funded repair and maintenance projects at public schools;

(3) The sum from all general excise tax revenues realized by the State in the amount of $           shall be deposited in the state treasury in each fiscal year to the credit of the state educational facilities improvement special fund for cash-funded repair and maintenance projects at public schools; and

[(2)] (4) A sum, not to exceed $5,000,000, from all general excise tax revenues realized by the State shall be deposited in the state treasury in each fiscal year to the credit of the compound interest bond reserve fund[; and

(3) A sum, not to exceed the amount necessary to meet the obligations of the integrated tax information management systems performance-based contract may be retained and deposited in the state treasury to the credit of the integrated tax information management systems special fund. The sum retained by the director of taxation for deposit to the integrated tax information management systems special fund for each fiscal year shall be limited to amounts appropriated by the legislature. This paragraph shall be repealed on July 1, 2005]."

SECTION 6. Section 302A-1128, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The department shall have entire charge and control and be responsible for the conduct of all affairs pertaining to public instruction[.], including operating and maintaining the capital improvement and repair and maintenance programs. The department may establish and maintain schools for secular instruction at such places and for such terms as in its discretion it may deem advisable and the funds at its disposal may permit. The schools may include high schools, kindergarten schools, schools or classes for pregrade education, boarding schools, Hawaiian language medium education schools, and evening and day schools. The department may also maintain classes for technical and other instruction in any school where there may not be pupils sufficient in number to justify the establishment of separate schools for these purposes."

SECTION 7. Section 302A-1312, Hawaii Revised Statutes, is amended to read as follows:

"§302A-1312 Six-year program and financial plan for school repair and maintenance. (a) The department of [accounting and general services, in consultation with the department of] education[,] shall prepare a six-year program and financial plan for school repair and maintenance [which] that shall be:

(1) Based on:

(A) Estimated preventive and scheduled maintenance costs;

(B) Budgeted recurring maintenance;

(C) Health and safety requirements; and

(D) Legal mandates;

(2) Insofar as is practical, prepared in accordance with the principles and procedures contained in section 514A-83.6; and

(3) Submitted initially to the legislature not less than thirty days prior to the convening of the 2002 regular session, with annual funding requirements for the physical plant operations and maintenance account submitted not less than thirty days prior to the convening of the 2002 regular session and each regular session thereafter;

provided that the governor may incorporate the six-year program and financial plan required by this subsection into the six-year program and financial plan required by section 37-69, if the plan required by this subsection is incorporated without reductions or restrictions.

(b) The department of [accounting and general services, in consultation with the department of] education[,] shall develop and maintain a facilities physical analysis report and a facilities financial analysis report for each public school. These reports shall be posted electronically on the Internet.

(c) For the purposes of this section, the [comptroller] superintendent of education shall develop and implement appropriate planning procedures and follow-up accountability reports to ensure sound planning, control, and accountability in the use of moneys allocated by the legislature, as prescribed by section 302A-1309. The department of [accounting and general services] education shall submit an annual report to the legislature[, which] that shall include:

(1) The priority listing established by section 302A-1505;

(2) [List] A list of projects initiated by the department of [accounting and general services;] education; and

(3) [List] A list of projects completed with associated actual cost."

SECTION 8. Section 302A-1505, Hawaii Revised Statutes, is amended to read as follows:

"§302A-1505 Prioritization of repair and maintenance. (a) Each school shall [meet with] inform the [departments] department of education [and accounting and general services] on an annual basis [to advise the department of school] of school repair and maintenance needs. Before any repair and maintenance projects for the upcoming fiscal year are implemented, each individual school administration shall prioritize and approve its repair and maintenance needs, and approve the scope of the implementation plan for the individual projects. After schools have prioritized their repair and maintenance projects, a statewide list shall be prepared [and], reviewed, and approved by the department of [accounting and general services, and reviewed and approved by the department of] education; provided that the department [of education] may make adjustments among schools and [districts. Each school repair and maintenance priority listing shall be submitted by the department of education to the department of accounting and general services for implementation.] complex areas. Each listing shall be posted electronically on the Internet. [The department of accounting and general services shall implement the school repair and maintenance program in accordance with the priorities set forth by the department of education. Where there are differing views as to priorities, the department of education shall make the final decision.]

(b) Prior to [meeting with] informing the department [to advise it of a] about the school's repair and maintenance needs, the school's principal [and the business and fiscal officer] shall consider the recommendations made by the school community council or the local school board, if the school is a new century conversion charter school.

(c) In prioritizing a school's repair and maintenance needs, the department [of accounting and general services,] and the school's principal[, and the business and fiscal officer] shall consider the availability of donated and discounted repair and maintenance services and materials that will be provided by community groups, volunteers, and businesses."

SECTION 9. Act 164, Session Laws of Hawaii 2004, is amended by amending section 9 to read as follows:

"SECTION 9. Section 302A-1312, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) The department of [accounting and general services, in consultation with the department of] education[,] shall prepare a six-year program and financial plan for school repair and maintenance [which] that shall be:

(1) Based on:

(A) Estimated preventive and scheduled maintenance costs;

(B) Budgeted recurring maintenance;

(C) Health and safety requirements; and

(D) Legal mandates;

(2) Insofar as is practical, prepared in accordance with the principles and procedures contained in section    -148; and

(3) Submitted initially to the legislature not less than thirty days prior to the convening of the 2002 regular session, with annual funding requirements for the physical plant operations and maintenance account submitted not less than thirty days prior to the convening of the 2002 regular session and each regular session thereafter;

provided that the governor may incorporate the six-year program and financial plan required by this subsection into the six-year program and financial plan required by section 37-69, if the plan required by this subsection is incorporated without reductions or restrictions.""

SECTION 10. There is appropriated out of the general revenues of the State of Hawaii the sum of $1, or so much thereof as may be necessary for fiscal year 2005-2006, and the sum of $1, or so much thereof as may be necessary for fiscal year 2006-2007, to be credited to the education design and construction project assessment fund for the purpose of section 302A-   .

The sums appropriated shall be expended by the department of education for the purposes of section 302A-    .

PART II

SECTION 11. The purpose of this part is to:

(1) Establish the authority of the department of education to assess and collect impact fees by intergovernmental agreement with a county, as fair share contributions of developers for state public school facilities construction;

(2) Amend the authorization for the counties to assess and collect impact fees and for the land use commission to impose conditions on boundary amendment petitions, by providing reference to chapter 46 and chapter 302A, Hawaii Revised Statutes; and

(3) Appropriate funds for needs assessment studies.

It is the intent of the legislature that the department of education give priority in effectuating this part during the transition period under section 21 of this Act to implement rulemaking, needs assessment studies, and intergovernmental agreements providing for impact fees in the Ewa-Central regions of the island of Oahu as well as in other regions of high demand for public school facilities.

SECTION 12. Chapter 302A, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows:

"PART    . FAIR SHARE CONTRIBUTIONS

§302A-A Definitions. As used in this part, unless the context requires otherwise:

"Capital improvement costs" means costs of land acquisition and required development, planning, design and engineering, construction, administration, needs assessment studies, and legal and financial consulting fees associated with construction, expansion, or improvement of a public school facility. Capital improvement costs do not include expenditures for routine and periodic maintenance, personnel, training, or other operating costs.

"Capital improvements" means the acquisition of real property for public school facilities, improvements to expand capacity and serviceability of existing public school facilities, and the development of new public school facilities.

"Comprehensive plan" means a coordinated land use plan for the development of public school facilities within the jurisdiction of a county based on existing and anticipated needs, showing existing and proposed developments, stating principles to which future development should conform, such as the county's general plans, development plans, or community plans, and the manner in which development should be controlled. In the case of the department, school complex development plans shall be equivalent to the comprehensive plan required in this part.

"County" or "counties" means the city and county of Honolulu, the county of Hawaii, the county of Kauai, and the county of Maui.

"Credits" means the present value of past or future payments or contributions by a developer toward the cost of existing or future capital improvements, including but not limited to the dedication of land and associated costs, construction of public school facilities, and cash payments made for the benefit of a public school; except for contributions or payments made under a development agreement pursuant to section 46-123.

"Developer" means a person, corporation, organization, partnership, association, or other legal entity engaged in any development as defined in this section.

"Development" means any change to real property that requires a building permit for the construction or erection of new residential buildings or structures or the conversion of non-residential buildings or structures to a residential use.

"Discount rate" means the interest rate, expressed in terms of an annual percentage, that is used to adjust past or future financial or monetary payments to present value.

"Impact fees" means the charges imposed upon a developer by a county pursuant to an intergovernmental agreement with the department of education to fund a portion of the capital improvement costs required by the development from which it is collected, or to recoup a portion of the cost of existing capital improvements made in anticipation of the needs of a development, less any offsets as defined in this section.

"Needs assessment study" means a study required for a school complex area, pursuant to this part, to determine the need for new capital improvements, the cost of developing the improvements, the appropriate standards and conditions for the improvements, and the projected future capital improvement needs; provided that the study shall take into consideration and incorporate any relevant comprehensive plan as well as input from affected parties.

"Non-site related improvements" means land dedications or the provision of capital improvements that are not site-related improvements as defined in this section.

"Offset" means a reduction in impact fees designed to fairly reflect the value of capital improvements provided by a developer pursuant to this part or to an agreement previously made between the developer and the department; a public school related condition on a reclassification action under section 205-4 or a rezoning action under section 46-148; or as part of a multi-year master-planned development that provides for land and fees for public school facilities.

"Present value" means the value of past or future payments adjusted to a base period by a discount rate.

"Proportionate share" means the portion of total capital improvement costs that is reasonably attributable to a development, less any credits for past or future payments, adjusted to present value, for capital improvement and other costs made or reasonably anticipated to be contributed by a developer in the form of user fees, debt service payments, taxes, or other payments.

"Reasonable benefit" means a benefit received by a development from a capital improvement that is greater than the benefit afforded the general public in the jurisdiction imposing the impact fees. Incidental benefit to other developments shall not negate a "reasonable" benefit to a development.

"Recoupment" means the proportionate share of the capital improvement costs of excess capacity in existing public school facilities where excess capacity has been provided in anticipation of the needs of a development.

"Site-related improvements" means land dedications or the provision of capital improvements for the use or benefit of a development or for the provision of safe and adequate public school facilities related to a particular development.

§302A-B Authority to impose impact fees; adoption of rules required. (a) Impact fees may be assessed, imposed, levied, and collected by a county for the department from any development, or portion thereof, involving public school facilities; provided that:

(1) The board adopts appropriate rules to effectuate the imposition and collection of the fees within its jurisdiction;

(2) No impact fees shall be levied under this section without an intergovernmental agreement providing for the collection and transfer of the fees to the department; and

(3) Exemptions may be granted for affordable housing units, resort time share vacation units or transient accommodations, and age restricted units, as appropriate.

No impact fee shall be levied and collected under this section for any development, or portion thereof, that is subject to an agreement previously made between the developer and the department; a public school related condition on a reclassification action under section 205-4 or a rezoning action under section 46-148; or as part of a multi-year master-planned development that provides for land and fees for public school facilities. The impact fee rules shall contain a provision setting forth the process by which a developer may contest the amount of the impact fee assessed.

(b) Impact fees may be imposed only for those capital improvements specifically identified in a comprehensive plan or a needs assessment study. The plan or study shall specify the service standards for each public school facility subject to an impact fee; provided that the standards shall apply equally to existing and new public school facilities.

§302A-C Impact fee calculation; needs assessment study. (a) The board, when considering the adoption of impact fees, shall first approve a needs assessment study that shall identify the kinds of public school facilities for which the fees shall be imposed. The study shall be prepared by an engineer, architect, or other qualified professional and shall identify appropriate standards and conditions, project capital improvement needs, and differentiate between existing and future needs.

(b) The data sources and methodology upon which needs assessments and impact fees are based shall be set forth in the needs assessment study.

(c) The pro rata amount of each impact fee shall be based upon the actual capital improvement costs, or a reasonable estimate thereof, to be incurred by the department.

(d) An impact fee shall be substantially related to the needs arising from the development and shall not exceed fifty per cent of the proportionate share of the costs that the department is committed to incur with funds appropriated and encumbered to accommodate the development. The following factors shall be considered in the needs assessment study in determining a proportionate share of capital improvement costs:

(1) The level of capital improvements required to appropriately serve a development, based on a needs assessment study that identifies:

(A) Deficiencies in existing public school facilities;

(B) The means, other than impact fees, by which existing deficiencies will be eliminated within a reasonable period of time; and

(C) Additional demands anticipated to be placed on specified public school facilities by a development;

(2) The availability of other sources of funding for capital improvements, including but not limited to user charges, general fund tax revenues, bonds, intergovernmental transfers, and special taxation or assessments;

(3) The cost of existing capital improvements;

(4) The methods by which existing capital improvements were financed;

(5) The extent to which a developer required to pay impact fees has dedicated land at fair market value or has contributed to the cost of existing capital improvements and received no reasonable benefit therefrom, and any credits that may be due to a development because of the dedications or contributions;

(6) The extent to which a developer required to dedicate land or pay impact fees may reasonably be anticipated to contribute to the cost of existing capital improvements through user fees, debt service payments, or other payments, and any credits that may accrue to a development because of future payments;

(7) The extent to which a developer is required to dedicate land or pay impact fees as a condition precedent to the development of non-site related capital improvements, and any offsets payable to a developer because of this provision; and

(8) The actual fair market value of the land to be dedicated to the department, and the developer’s fair share contribution based on a per unit value by size and type of residential development.

§302A-D Collection and expenditure of impact fees. Collection and expenditure of impact fees assessed, imposed, levied, and collected from a development shall be reasonably related to the benefits accruing to the development. To determine whether the fees are reasonably related, the impact fee rules shall provide that:

(1) Upon collection, the fees shall be deposited in the state educational facilities impact fee trust fund for expenditure in the county and school complex area in which the fee is collected. The portion that constitutes recoupment may be transferred to any appropriate fund;

(2) Collection and expenditure shall be localized to provide a reasonable benefit to the development. The department shall establish geographically limited benefit zones that, for this purpose, shall consist of school complex areas;

(3) Except for recoupment, impact fees shall not be collected from a developer until approval by intergovernmental agreement that sets out planned expenditures bearing a substantial relationship to the needs or anticipated needs created by the development;

(4) Impact fees shall be expended for public school facilities of the type and at the location for which they are collected, and shall be of reasonable benefit to the development; and

(5) Within six years of the date of collection or as extended by agreement with a developer, the impact fees shall be expended or encumbered for the construction of capital improvements that are consistent with the needs assessment study and of reasonable benefit to the development.

§302A-E Refund of impact fees. (a) If impact fees are not expended or encumbered within the period established in section 302A-D, the department shall refund to the developer or the developer's successor in title the amount of fees paid and any accrued interest. Application for a refund shall be submitted to the department within one year of the date on which the right to claim arises. Any unclaimed refund shall be retained in the state educational facilities impact fee trust fund and shall be expended as provided in section 302A-D.

(b) If the department seeks to terminate impact fee requirements, all unexpended or unencumbered funds shall be refunded as provided in subsection (a), and the department shall give public notice and direct notice to all contributing developers of termination and availability of refunds at least two times. All funds available for refund shall be retained for a period of one year at the end of which any remaining funds may be expended for any public purpose as determined by the department.

(c) Recoupment shall be exempt from subsections (a) and (b).

§302A-F Time of assessment and collection of impact fees. Assessment of impact fees pursuant to this part shall be a condition precedent to the issuance of a building permit by a county and shall be collected in full at the time of application for the permit. The collection and transfer of the impact fees to the department shall be by intergovernmental agreement approved by the county pursuant to section 46-144.

§302A-G Effect on existing ordinances. This part shall not invalidate any impact fee ordinance existing as of the effective date of this Act. In the case of conflicts between this part and part VIII of chapter 46, this part shall prevail with respect to the department.

§302A-H Transitions. In order to fund public school facilities, the department shall incorporate its impact fee requirements into the broader system of land use development exactions and regulations of the land use commission pursuant to section 205-4 and the counties pursuant to section 46-148."

SECTION 13. Section 46-141, Hawaii Revised Statutes, is amended as follows:

1. By adding a new definition to be appropriately inserted and to read:

""Department" means the department of education."

2. By amending the definitions of "impact fees", "needs assessment study", "offset", and "proportionate share" to read:

""Impact fees" means the charges imposed upon a developer by a county [or], board, or the department to fund all or a portion of the public facility capital improvement costs required by the development from which it is collected, or to recoup the cost of existing public facility capital improvements made in anticipation of the needs of a development.

"Needs assessment study" means a study required under an impact fee ordinance or rule of the department that determines the need for a public facility, the cost of development, and the level of service standards, and that projects future public facility capital improvement needs; provided that the study shall take into consideration and incorporate any relevant county general plan, development plan, or community plan.

"Offset" means a reduction in impact fees designed to fairly reflect the value of non-site related public facility capital improvements provided by a developer pursuant to county land use provisions[.] or rule of the department.

"Proportionate share" means the portion of total public facility capital improvement costs that is reasonably attributable to a development, less:

(1) Any credits for past or future payments, adjusted to present value, for public facility capital improvement costs made or reasonably anticipated to be contributed by a developer in the form of user fees, debt service payments, taxes, or other payments; or

(2) Offsets for non-site related public facility capital improvements provided by a developer pursuant to county land use provisions[.] or rule of the department."

SECTION 14. Section 46-142, Hawaii Revised Statutes, is amended to read as follows:

"§46-142 Authority to impose impact fees; enactment of ordinances required. (a) Impact fees may be assessed, imposed, levied, and collected by:

(1) Any county for any development, or portion thereof, not involving water supply or service; [or]

(2) Any board for any development, or portion thereof, involving water supply or service; or

(3) The department for any development, or portion thereof, involving state educational facilities;

provided that the county enacts appropriate impact fee ordinances or the board or the department adopts rules to effectuate the imposition and collection of the fees within their respective jurisdictions.

(b) Except for any ordinance governing impact fees enacted before July 1, 1993, impact fees may be imposed only for those types of public facility capital improvements specifically identified in a county comprehensive plan or a facility needs assessment study[.] prepared for a county or the department. The plan or study shall specify the service standards for each type of facility subject to an impact fee; provided that the standards shall apply equally to existing and new public facilities."

SECTION 15. Section 46-143, Hawaii Revised Statutes, is amended as follows:

1. By amending subsection (a) to read:

"(a) A county council [or], board, or the department, when considering the enactment or adoption of impact fees, shall first approve a needs assessment study that shall identify the kinds of public facilities for which the fees shall be imposed. The study shall be prepared by an engineer, architect, or other qualified professional and shall identify service standard levels, project public facility capital improvement needs, and differentiate between existing and future needs."

2. By amending subsection (c) to read:

"(c) The pro rata amount of each impact fee shall be based upon the development and actual capital cost of public facility expansion, or a reasonable estimate thereof, to be incurred[.] by the county, board, or department."

SECTION 16. Section 46-144, Hawaii Revised Statutes, is amended to read as follows:

"§46-144 Collection and expenditure of impact fees. (a) Collection and expenditure of impact fees assessed, imposed, levied, and collected for development shall be reasonably related to the benefits accruing to the development. To determine whether the fees are reasonably related, the impact fee ordinance or [board] rule of the board or the department shall provide that:

(1) Upon collection, the fees shall be deposited in a special trust fund or interest-bearing account[.], or transferred to the department as provided in this section. The portion that constitutes recoupment may be transferred to any appropriate fund;

(2) Collection and expenditure shall be localized to provide a reasonable benefit to the development. A county [or], board, or the department shall establish geographically limited benefit zones for this purpose; provided that zones shall not be required if a reasonable benefit can be otherwise derived. Benefit zones shall be appropriate to the particular public facility and the county [or], board[.], or the department. A county [or], board, or the department shall explain in writing and disclose at a public hearing reasons for establishing or not establishing benefit zones;

(3) Except for recoupment, impact fees shall not be collected from a developer until approval of a needs assessment study that sets out planned expenditures bearing a substantial relationship to the needs or anticipated needs created by the development;

(4) Impact fees shall be expended for public facilities of the type for which they are collected and of reasonable benefit to the development; and

(5) Within six years of the date of collection, the impact fees shall be expended or encumbered for the construction of public facility capital improvements that are consistent with the needs assessment study and of reasonable benefit to the development[.]; provided that the time for expenditure or encumbrance of impact fees transferred to the appropriate department of education trust fund for state educational facility capital improvements may be extended by agreement with the developer.

(b) A county shall transfer impact fees for expenditure by the department pursuant to an intergovernmental agreement approved by the county, upon request of the department pursuant to this part and part       of chapter 302A."

SECTION 17. Section 46-145, Hawaii Revised Statutes, is amended to read as follows:

"§46-145 Refund of impact fees. (a) If impact fees are not expended or encumbered within the period established in section 46-144, the county [or the], board, or the department, as the case may be, shall refund to the developer or the developer's successor in title the amount of fees paid and any accrued interest. Application for a refund shall be submitted to the county [or the], board, or the department, as the case may be, within one year of the date on which the right to claim arises. Any unclaimed refund shall be retained in the special trust fund or interest bearing account and be expended as provided in section 46-144.

(b) If a county [or], board, or the department seeks to terminate impact fee requirements, all unexpended or unencumbered funds shall be refunded as provided in subsection (a) and the county [or], board, or the department, as the case may be, shall give public notice of termination and availability of refunds at least two times. All funds available for refund shall be retained for a period of one year at the end of which any remaining funds may be transferred to:

(1) The county's general fund and expended for any public purpose not involving water supply or service as determined by the county council; [or]

(2) The board's general fund and expended for any public purpose involving water supply or service as determined by the board[.]; or

(3) The state educational facilities impact fee trust fund and expended for any public purpose involving state educational facilities.

(c) Recoupment shall be exempt from subsections (a) and (b)."

SECTION 18. Section 46-148, Hawaii Revised Statutes, is amended to read as follows:

"[[]§46-148[]] Transitions. Any county, or the land use commission pursuant to section 205-4, requiring impact fees or imposing development exactions[,] in order to fund public facilities, shall incorporate fee requirements into their broader system of development and land use regulations in such a manner that developments, either collectively or individually, are not required to pay or otherwise contribute more than a proportionate share of public facility capital improvements. Development contributions or payments made under a development agreement, pursuant to section 46-123, are exempted from this requirement."

SECTION 19. Section 205-4, Hawaii Revised Statutes, is amended by amending subsection (g) to read as follows:

"(g) Within a period of not more than three hundred sixty-five days after the proper filing of a petition, unless otherwise ordered by a court, or unless a time extension[, which] that shall not exceed ninety days[,] is established by a two-thirds vote of the members of the commission, the commission, by filing findings of fact and conclusions of law, shall act to approve the petition, deny the petition, or to modify the petition by imposing conditions pursuant to section 46-148 or section 302A-H or otherwise necessary to uphold the intent and spirit of this chapter or the policies and criteria established pursuant to section 205-17 or to assure substantial compliance with representations made by the petitioner in seeking a boundary change. The commission may provide by condition that absent substantial commencement of use of the land in accordance with [such] these representations, the commission shall issue and serve upon the party bound by the condition an order to show cause why the property should not revert to its former land use classification or be changed to a more appropriate classification. [Such] These conditions, if any, shall run with the land and be recorded in the bureau of conveyances."

SECTION 20. Section 302A-1127, Hawaii Revised Statutes, is amended to read as follows:

"[[]§302A-1127[]] Rules. The board may adopt rules under chapter 91 to implement sections 302A-202, 302A-1124 to 302A-1126, 302A-A to 302A-H, and 302A-1507."

SECTION 21. Fair share contributions transitional period. (a) The department of education and the development community shall be allowed a reasonable time period for transition into the implementation of impact fees for fair share contributions to the department of education pursuant to chapter 302A, part      , Hawaii Revised Statutes. The Ewa-Central regions of Oahu are projected to absorb approximately seventy per cent of the new students over the next ten years. This level of growth is anticipated to place continuing heavy demand on the existing public school facilities in this region.

(b) The department of education, in effectuating this Act shall:

(1) Give priority to implementing rulemaking, needs assessment studies, and intergovernmental agreements providing for impact fees under chapter 302A, part      , in the Ewa-Central regions of the island of Oahu as well as in other regions of high demand for public school facilities, until the adoption of rules and approval of an intergovernmental agreement or agreements pursuant to section 302A-B; and

(2) Until rulemaking, needs assessment studies, and intergovernmental agreements providing for impact fees as required in paragraph (1) have been completed for a specific school complex area, an interim impact fee shall be assessed for all regions on a per unit basis as set forth in section 302A-H(b).

SECTION 22. There is appropriated out of the general revenues of the State of Hawaii the sum of $1, or so much thereof as may be necessary for fiscal year 2005-2006, for the preparation of public schools needs assessment studies.

The sum appropriated shall be expended by the department of education for the purposes of this Act.

SECTION 23. In codifying the new sections added by section 12 of this Act and referenced throughout this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 24. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 25. This Act shall take effect on July 1, 2050; provided that section 8 shall take effect on July 2, 2050; provided further that sections 2, 3, 4, 6, 7, 8, and 9 shall be repealed on July 1, 2052; provided further that sections 36-32, 36-35(a), 302A-1128, 302A-1312, and 302A-1505 shall be reenacted in the form in which they read on the day before the approval of this Act.