Report Title:

Tax Increment Financing; Affordable Housing

 

Description:

Amends the tax increment financing enabling law to encourage counties to use that method of financing of project costs for affordable housing.

 


HOUSE OF REPRESENTATIVES

H.B. NO.

3020

TWENTY-FOURTH LEGISLATURE, 2008

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT


 

 

RELATING TO TAX INCREMENT FINANCING AMENDMENTS.

 

 

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

 


     SECTION 1.  The purpose of this Act is to make various amendments to the tax increment financing enabling law intended to encourage the counties to use that method to finance project costs.  The major amendments are the following:

     (1)  Counties are expressly authorized to up-zone land within a tax increment district and include the increased assessed value in the assessment increment for the district.  The assessment increment is the increase in assessed value after the creation of the district.  The legislature intends that counties may pledge the real property tax revenues generated from the up-zoned land to the payment of the tax increment bond debt service and other district project costs;

     (2)  The excess real property tax revenues from the tax increment of a district are to be realizations of a county's general fund.  The excess revenues are those remaining after the payment of the tax increment bond debt service and other district project costs.  By this amendment, the legislature intends for counties to be able to realize a greater amount of revenues for the county's general fund from the tax increment district;

     (3)  A county and developer are authorized to enter into an agreement that, in effect, uses tax increment bond proceeds to construct infrastructure or to pay an impact fee or other exaction.  Such an agreement is authorized only if:

         (A)  The housing units developed are sold to low- or moderate-income families; and

         (B)  The savings realized from the use of tax increment financing, rather than private conventional financing, are passed on to the purchasers of the housing units.  By this amendment, the legislature intends to provide the counties with another option for financing the construction of infrastructure while encouraging the development of affordable housing units; and

     (4)  Counties are expressly authorized to establish a differential real property tax rate or rates for real property within a tax increment district.  The legislature intends that this amendment enable counties to generate a tax increment from a district sufficient to pay the tax increment bond debt service and other district project costs while maintaining a lesser tax rate or rates on real property outside the district.

     SECTION 2.  Chapter 46, Hawaii Revised Statutes, is amended by adding a new section to part VI to be appropriately designated and to read as follows:

     "§46-     Up-zoning within tax increment district.  A county may up-zone all or a portion of the land within a tax increment district following the creation of the district.  If doing so, the tax increment for the district shall include the increase in assessed value resulting from the up-zoning.  For the purpose of this section, "up-zoning" means an amendment to the county's zoning code or relevant zoning map that, when compared to the previous zoning, permits:

     (1)  More variety of residential, apartment, commercial, industrial, or resort uses;

     (2)  More intensive residential, apartment, commercial, industrial, or resort uses; or

     (3)  Greater building densities or higher structure heights."

     SECTION 3.  Section 46-102, Hawaii Revised Statutes, is amended as follows:

     1.  By amending the definitions of "assessment base" and "assessment increment" to read as follows:

     ""Assessment base" means the total assessed values of all taxable real property in a tax increment district as most recently certified by the director of finance on the date of creation of the tax increment district[.] and as subsequently adjusted pursuant to section 46-111.

     "Assessment increment" means the amount by which the current assessed values of taxable real property located within the boundaries of a tax increment district exceeds its assessment base.  The term includes the increase in assessed values resulting from an up-zoning of real property within the tax increment district."

     2.  By repealing the definition of "adjustment rate".

     [""Adjustment rate" means a percentage rate or rates of adjustment of the assessment base determined by the director of finance at the time the tax increment district is established, based on the historical and projected increases to the assessed values taxable real property within the boundary of the tax increment district and the projected cost increases to the county for servicing the new developments within the tax increment district."]

     SECTION 4.  Section 46-104, Hawaii Revised Statutes, is amended to read as follows:

     "§46-104  County powers.  A county may exercise any power necessary and convenient to establish tax increment districts, including the power to:

     (1)  Create tax increment districts and determine the boundaries of the districts;

     (2)  Issue tax increment bonds;

     (3)  Deposit tax increments into the tax increment fund created for a tax increment district; [and]

     (4)  Enter into agreements, including agreements with the redevelopment agency and owners or developers of project lands and bondholders, determined to be necessary or convenient to implement redevelopment plans or community development plans, as the case may be, and achieve their purposes[.]; and

     (5)  Enter into an agreement with a developer of housing units within a tax increment district under which:

         (A)  The county waives the requirement for the developer to construct infrastructure or pay an impact fee or other exaction for the housing units;

         (B)  The county constructs the infrastructure or pays the impact fee or other exaction using the proceeds of tax increment bonds; and

         (C)  For each housing unit developed to be sold by the developer, the developer agrees to sell the unit to a family earning not more than one hundred forty per cent of the relevant area median income at a price:

              (i)  Affordable to the family; and

             (ii)  Reflective of the savings realized by the developer from the use of the tax increment bonds rather than private conventional financing to construct the infrastructure or pay the impact fee or other exaction.

               The price at which each housing unit is sold by the developer shall be agreed upon by the county and developer.

               The county and developer may agree to any other term or condition that is not inconsistent with this paragraph.  The term or condition may include an owner-occupancy requirement, buy-back restriction, or shared appreciation condition.  For the purpose of this paragraph, "relevant area median income" means the median annual income, adjusted for family size, for households in the county within which an eligible project is situated as most recently established by the United States Department of Housing and Urban Development for the section 8 housing assistance payments program."

     SECTION 5.  Section 46-105, Hawaii Revised Statutes, is amended to read as follows:

     "§46-105  Collection of tax increments.  (a)  The county by ordinance shall provide for the allocation of real property taxes and tax increments in the manner required by this part.

     (b)  If a county exercises the power allowed under this part, then commencing with the first payment of real property taxes levied by the county subsequent to the time a tax increment district takes effect, receipts from real property taxes shall be allocated and paid over as follows:

     (1)  The amount of real property tax produced from the assessment base shall be paid to the county general fund; and

     (2)  The tax increments produced from the assessment increment in the tax increment district shall be applied as follows:

         (A)  First, an amount equal to the installment of:

              (i)  [principal] Principal and interest falling due of any tax increment bonds[,]; or

             (ii)  [any] Any project cost approved by the county,

              shall be deposited into the tax increment fund established for the tax increment district[.];

         (B)  Second, [an amount equal to the adjustment rate times the amount of real property tax produced from the assessment base shall be computed and paid to the county general fund.

         (C)  Third,] the remaining amount of tax increments, if any, shall be deposited into the [tax increment] county general fund [established for the tax increment district].

     (c)  The allocation of real property taxes pursuant to this part [shall] in no way shall limit the power of the county under section 47-12 to levy ad valorem taxes without limitation as to rate or amount on all real property subject to taxation by the county for the payment of the principal and interest of its general obligation bonds.

     (d)  The county may adopt a real property tax rate or rates on real property within a tax increment district that are higher than the rate or rates for identically classified real property outside the district."

     SECTION 6.  Section 46-111, Hawaii Revised Statutes, is amended to read as follows:

     "§46-111  Computation of tax increment.  (a)  Upon or after creation of a tax increment district, the director of finance of the county in which the district is situated shall certify the assessment base of the tax increment district and shall certify in each year thereafter the amount by which the assessment base has increased or decreased as a result of a change in tax exempt status of property within the district, or reduction or enlargement of the district.  The amount to be added to the assessment base of the district as a result of previously tax exempt real property within the district becoming taxable shall be equal to the assessed value of the real property as most recently assessed or, if the assessment was made more than one year prior to the date of transfer rendering the property taxable, the value [which] that shall be assessed by the director of finance at the time of [such] the transfer.  The amount to be added to the assessment base of the district as a result of enlargements thereof shall be equal to the assessed value of the additional real property as most recently certified by the director of finance as of the date of modification of the tax increment financing plan.  The amount to be subtracted from the assessment base of the district as a result of previously taxable real property within the district becoming tax exempt, or a reduction in the geographic area of the district, shall be the amount of assessment base initially attributed to the property becoming tax exempt or being removed from the district.

     In no event shall the assessment base of a tax increment district be increased because of any up-zoning of real property within the district that takes effect after the creation of the district.

     (b)  If the assessed value of property located within the tax increment district is reduced by reason of a court-ordered abatement, stipulated agreement, or voluntary abatement made by the director of finance, the reduction shall be applied to the assessment base of the district when the property upon which the abatement is made has not been improved since the date of creation of the district[,] and to the assessment increment of the district in each year thereafter when the abatement relates to improvements made after the date of creation.

     [(b)] (c)  The director of finance shall certify the amount of the assessment increment to the county and redevelopment agency each year, together with the proportion that the assessment increment bears to the total assessed value of the real property within the tax increment district for that year."

     SECTION 7.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 8.  This Act shall take effect on July 1, 2008.

 

INTRODUCED BY:

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