THE SENATE

S.B. NO.

1426

TWENTY-SIXTH LEGISLATURE, 2011

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO PUBLIC FUNDS.

 

 

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

 


PART I

     SECTION 1.  The legislature finds that due to recent worldwide economic events, the State, like the rest of the nation and the world, is experiencing a severe economic crisis.  Although in the past, the State of Hawaii has displayed steady long-term fiscal planning, prudent past decision-making practices, relatively stable real property values, and relatively low unemployment rates, it has still been unable to avoid the negative effects of the struggling economy, and it needs to find innovative ways to balance its budget for the current fiscal biennium and beyond.  Sizeable budget shortfalls for the current and upcoming fiscal years require immediate and decisive action.

     To meet the current and future financial needs of the State, the legislature believes that having the city and county of Honolulu return a portion of the moneys transferred to it pursuant to revenues derived from the imposition of a county surcharge on state general excise and use taxes is a reasonable means of achieving a balanced budget for state operations without adversely impacting the city and county of Honolulu's fiscal status or resorting to a drastic reduction in state services or personnel.

     The legislature further finds that the revenues already derived from the county surcharge on state general excise and use taxes and transferred to the city and county of Honolulu are largely unencumbered and will not be needed in the immediately foreseeable future.  These moneys would be better utilized if applied to the immediate financial needs of the State, of which the city and county of Honolulu is a part.

     To this end, the legislature finds that borrowing not more than $200,000,000 from the balance of the amount derived from the county surcharge on state general excise and use taxes already transferred to the city and county of Honolulu and repaying the amount borrowed with revenues derived from the issuance of state general obligation bonds is prudent and will assist the State in maintaining current services and personnel until such time as the state economy recovers.  At the same time, by ensuring that the loan is repaid in a timely manner through revenues derived from state general obligation bonds, any detrimental financial effect to the city and county of Honolulu will be avoided.  In addition, to help ameliorate any detrimental financial impact to the city and county of Honolulu, this Act extends the lifespan of the surcharge on state general excise and use taxes for two additional years.

     The purpose of this Act is to:

     (1)  Require the city and county of Honolulu to return to the State moneys derived from the county surcharge on state tax;

     (2)  Authorize the issuance of general obligation bonds to reimburse the city and county of Honolulu; and

     (3)  Extend the sunset of Act 247, Session Laws of Hawaii 2005, to extend, for an additional two years, the county surcharge on general excise and use taxes and the ordinance levying that surcharge.

     SECTION 2.  The city and county of Honolulu shall return to the State, $200,000,000 of the revenues transferred to the city and county of Honolulu pursuant to section 248-2.6, Hawaii Revised Statutes; provided that the city and county of Honolulu shall not return any of those revenues to the State until the State deposits in escrow the same amount of moneys, from the proceeds of general obligation bonds issued pursuant to section 4 of this Act, for transfer to the city and county of Honolulu as repayment.  The State and the city and county of Honolulu shall enter into a memorandum of understanding to coordinate and effectuate the transfer of revenues from the city and county of Honolulu to the State and the transfer of the general obligation bond proceeds in escrow to the city and county of Honolulu, in accordance with this Act.

     SECTION 3.  Act 247, Session Laws of Hawaii 2005, is amended by amending section 9 to read as follows:

     "SECTION 9.  This Act shall take effect upon its approval; provided that:

     (1)  If none of the counties of the State adopt an ordinance to levy a county surcharge on state tax by December 31, 2005, this Act shall be repealed and section 437D‑8.4, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act;

     (2)  If any county does not adopt an ordinance to levy a county surcharge on state tax by December 31, 2005, it shall be prohibited from adopting such an ordinance pursuant to this Act, unless otherwise authorized by the legislature through a separate legislative act;

     (3)  If an ordinance to levy a county surcharge on state tax is adopted by December 31, 2005:

         (A)  The ordinance shall be repealed on December 31, [2022;] 2024;

         (B)  This Act shall be repealed on December 31, [2022;] 2024; and

         (C)  Section 437D‑8.4, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act."

     SECTION 4.  The director of finance is authorized to issue general obligation bonds in the sum of $300,000,000 or so much thereof as may be necessary and the same sum or so much thereof as may be necessary is appropriated for fiscal year 2010-2011 for the purpose of replacing surcharge revenues that are returned from the city and county of Honolulu to the state general fund pursuant to section 2 of this Act; provided that the director of finance shall not issue the general obligation funds until the State receives affirmative advice from the State's bond counsel on the suitability of using the proceeds from the issuance of the general obligation bonds for the purpose of replacing the tax revenues returned from the city and county of Honolulu pursuant to section 2 of this Act.

     The sum appropriated shall be transferred to the city and county of Honolulu by the department of budget and finance pursuant to this Act and section 248-2.6, Hawaii Revised Statutes.

PART II

     SECTION 5.  Act 226, Session Laws of Hawaii 2008, as amended by Act 11, Session Laws of Hawaii 2009, is amended by amending section 16 to read as follows:

     "SECTION 16. This Act shall take effect on July 1, 2008; provided that the amendments made to section 437D-8.4(a), Hawaii Revised Statutes, by this Act, shall not be repealed when section 437D-8.4, Hawaii Revised Statutes, is reenacted on December 31, [2022,] 2024, pursuant to Act 247, Session Laws of Hawaii 2005[.], as amended by Act      , Session Laws of Hawaii 2011."

PART III

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


     SECTION 7.  This Act shall take effect on July 1, 2011.

 

INTRODUCED BY:

_____________________________

 

 


 


 

Report Title:

County Surcharge Tax; General Obligation Bonds

 

Description:

Returns $200,000,000 from the funds generated by surcharge on state general excise tax revenues transferred to the city and county of Honolulu to the State general fund.  Authorizes issuance of $300,000,000 GO bonds to offset loss of tax revenues to the city and county of Honolulu in fiscal year 2010-2011.  Extends surcharge for two years.  Requires a memorandum of understanding between the State and city and county of Honolulu to return the $200,000,000.

 

 

 

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