THE SENATE

S.B. NO.

1183

TWENTY-NINTH LEGISLATURE, 2017

S.D. 2

STATE OF HAWAII

H.D. 1

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO TAXATION.

 

 

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

 


SECTION 1. The legislature notes that one county has established the county surcharge on state tax as authorized by section 46-16.8, Hawaii Revised Statutes, to fund a rail transportation project. This Act authorizes that county to extend the county surcharge on state tax for a limited time period; provided that the county adopts an ordinance to extend the county surcharge on state tax. This Act also authorizes counties that have not established a county surcharge on state tax to adopt an ordinance to establish a surcharge.

This Act is contingent upon the repeal of any provision in a county ordinance that prohibits the use of county funds for the capital cost of the project and interest to finance that capital cost. The legislature notes that Ordinance 07-001 of the city and county of Honolulu is an example of such an ordinance. The legislature finds that if the State experiences a revenue loss as a result of this Act, the county also should bear the risk of funding any contingency or cost overrun with county funds.

This Act also requires the mayor of a county that has established the county surcharge on state tax as authorized by section 46-16.8, Hawaii Revised Statutes, to submit a plan and annual updates of the plan to pay for the capital cost of the project and any interest that will finance the capital cost with county funds if necessary. The legislature intends that the plan and updates inform the public as to the status of the project and the variances of its funding needs as construction moves forward.

This Act also requires the mayor to submit a plan to fund the operation and maintenance costs and ongoing systemwide capital cost of the integrated rail and bus transportation system. The importance of the bus component is for feeder service to rail stations and islandwide mobility outside the rail corridor is often overlooked or ignored in the public debate about the rail system. The operating and maintenance and ongoing systemwide capital costs of the integrated system are of major concern. Those costs probably will be greater than the operating and maintenance costs for the current bus transportation system and must be paid for with county funds. Therefore, the legislature finds that the public should be informed about the total future cost of and the funding plan for the integrated rail and bus transportation system.

SECTION 2. Section 46-16.8, Hawaii Revised Statutes, is amended by amending subsections (b) and (c) to read as follows:

"(b) Each county that has established a surcharge on state tax prior to [[]July 1, 2015,[]] under authority of subsection (a) may extend the surcharge from January 1, 2023, until [December 31, 2027,]         , at the [same] rates[.] enumerated in sections 237-8.6 and 238-2.6. A county electing to extend this surcharge shall do so by ordinance; provided that:

(1) No ordinance shall be adopted until the county has conducted a public hearing on the proposed ordinance; and

(2) The ordinance shall be adopted prior to July 1, [2016, but no earlier than July 1, 2015] 2018.

A county electing to exercise the authority granted under this subsection shall notify the director of taxation within ten days after the county has adopted an ordinance extending the surcharge on state tax. Beginning on January 1, 2023, the director of taxation shall levy, assess, collect, and otherwise administer the extended surcharge on state tax.

(c) Each county that has not established a surcharge on state tax prior to [[]July 1, 2015,[]] may establish the surcharge at the rates enumerated in sections 237-8.6 and 238-2.6. A county electing to establish this surcharge shall do so by ordinance; provided that:

(1) No ordinance shall be adopted until the county has conducted a public hearing on the proposed ordinance;

(2) The ordinance shall be adopted prior to July 1, [2016,] 2018, but no earlier than July 1, [2015;] 2017; and

(3) No county surcharge on state tax that may be authorized under this subsection shall be levied prior to January 1, [2018, or after December 31, 2027] 2019.

A county electing to exercise the authority granted under this subsection shall notify the director of taxation within ten days after the county has adopted a surcharge on state tax ordinance. Beginning on January 1, [2018,] 2019, the director of taxation shall levy, assess, collect, and otherwise administer the county surcharge on state tax."

SECTION 3. Section 237-8.6, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Each county surcharge on state tax that may be adopted or extended pursuant to section 46-16.8 shall be levied beginning in the taxable year after the adoption of the relevant county ordinance; provided that no surcharge on state tax may be levied[:

(1) Prior] prior to:

[(A)] (1) January 1, 2007, if the county surcharge on state tax was established by an ordinance adopted prior to December 31, 2005; [or]

[(B)] (2) January 1, 2018, if the county surcharge on state tax was established by the adoption of an ordinance after June 30, 2015, but prior to July 1, 2016; [and] or

[(2) After December 31, 2027.]

(3) January 1, 2019, if the county surcharge on state tax was established by the adoption of an ordinance after June 30, 2017, but prior to July 1, 2018."

SECTION 4. Section 238-2.6, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Each county surcharge on state tax that may be adopted or extended shall be levied beginning in the taxable year after the adoption of the relevant county ordinance; provided that no surcharge on state tax may be levied[:

(1) Prior] prior to:

[(A)] (1) January 1, 2007, if the county surcharge on state tax was established by an ordinance adopted prior to December 31, 2005; [or]

[(B)] (2) January 1, 2018, if the county surcharge on state tax was established by the adoption of an ordinance after June 30, 2015, but prior to July 1, 2016; [and] or

[(2) After December 31, 2027.]

(3) January 1, 2019, if the county surcharge on state tax was established by the adoption of an ordinance after June 30, 2017, but prior to July 1, 2018."

SECTION 5. Section 248-2.6, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) If adopted by county ordinance, all county surcharges on state tax collected by the director of taxation shall be paid into the state treasury quarterly, within ten working days after collection, and shall be placed by the director of finance in special accounts. Out of the revenues generated by county surcharges on state tax paid into each respective state treasury special account, the director of finance shall deduct [ten]:

(1)      per cent of the gross proceeds of a respective county's surcharge on state tax to reimburse the State for the costs of assessment, collection, and disposition of the county surcharge on state tax incurred by the State[.]; and

(2)      per cent of the gross proceeds of a respective county's surcharge on state tax to be used by the department of transportation for the purpose of state highway projects.

Amounts retained shall be general fund realizations of the State."

SECTION 6. Act 247, Session Laws of Hawaii 2005, as amended by Act 240, Session Laws of Hawaii 2015, 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; and

(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; provided that the repeal of the ordinance shall not affect the validity or effect of an ordinance to extend a surcharge on state tax adopted pursuant to Act 240, Session Laws of Hawaii 2015[;] and Act    , Session Laws of Hawaii 2017;

(B) This Act shall be repealed on [December 31, 2027;]         ; 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; provided that the amendments made to section 437D-8.4, Hawaii Revised Statutes, by Act 226, Session Laws of Hawaii 2008, as amended by Act 11, Session Laws of Hawaii 2009, and Act 110, Session Laws of Hawaii 2014, shall not be repealed."

SECTION 7. (a) For the purposes of this section:

"Council" means the council of the county.

"Council chair" means the chair of the council of the county.

"County" means a county that has established the county surcharge on state tax as authorized under section 46-16.8(b), Hawaii Revised Statutes.

"County funds" means funds other than general excise and use tax surcharge revenues, interest earned on the revenues, and any federal or state funds appropriated to and received by the county. "County funds" includes transient accommodations tax revenues, franchise tax revenues, and any other revenues transferred or deposited into the general or highway fund of the county without necessity of state legislative appropriation; provided that the term shall not include general excise and use tax surcharge revenues.

"County rapid transportation authority" means the authority of the county that is charged with the responsibility under the county charter for constructing the project.

"Mayor" means the mayor of the county.

"Project" means the minimum operable segment of the locally preferred alternative that the county rapid transportation authority is constructing under a full funding agreement with the Federal Transit Administration.

"Updated project financial plan" means the updated financial plan for the project that is prepared by the county rapid transportation authority, accepted by the Federal Transit Administration, and in effect on July 1, 2017. The "updated project financial plan" includes the plans for funding the capital cost, operations and maintenance costs, and ongoing systemwide capital cost of the project.

(b) No later than August 1, 2017, the mayor shall submit to the council chair a bill proposing to amend an existing ordinance or establish a new ordinance to allow the capital cost of the project and any interest to finance that capital cost to be paid from county funds. The mayor shall request the council chair to introduce the bill on behalf of the mayor.

If the bill is passed by the council and approved by the mayor before December 31, 2017, the mayor shall notify the legislature that the bill has become an ordinance.

If the bill is not passed by the council and approved by the mayor before December 31, 2017, or the mayor does not notify the legislature before December 31, 2017, that the bill has become an ordinance, then the authority for the county to collect the county surcharge on state tax shall be rescinded.

(c) By January 1, 2018, the mayor shall submit to the legislature a plan to pay for the capital cost of the project and any interest to finance that capital cost with county funds under the scenario that:

(1) The general excise and use tax surcharge revenues, interest earned on the revenues, and federal or state revenues are insufficient; and

(2) Any amount budgeted by the county rapid transportation authority under the updated project financial plan as a contingency will be necessary to complete the construction of the project.

At a minimum, the plan shall identify the source of county funds to pay for the capital cost or interest.

(d) By January 1, 2019 through January 1, 2028, the mayor shall submit to the legislature an annual update of the plan required under subsection (c); except that the update shall not be required after completion of construction of the project. Each updated plan shall identify the following:

(1) Source of county funds to pay for the capital cost or interest;

(2) Status of construction of the project;

(3) Estimates of the:

(A) Capital cost and interest to finance the capital cost of the project;

(B) General excise and use tax surcharge revenues; and

(C) Other federal or state revenues for the project; and

(4) The difference between the information provided under paragraphs (1) to (3) from the information provided in the update of the previous year and an explanation for the difference.

(e) By January 1, 2018, the mayor shall submit to the legislature a plan to fund the operation and maintenance cost and ongoing systemwide capital cost of the integrated rail and bus transportation system of the county. At a minimum, the plan shall identify the estimated operation and maintenance cost and ongoing systemwide capital cost of the system and sources of funding for those costs. The plan shall cover the period through fiscal year 20422043. The mayor shall estimate the operation and maintenance cost and ongoing systemwide capital cost of the integrated rail and bus transportation system based on the updated project financial plan.

(f) The mayor shall submit to the legislature in accordance with section 93-16, Hawaii Revised Statutes, the notification required under subsection (b) and plans required under subsections (c) through (e).

SECTION 8. (a) For the purposes of this section:

"Council" means the council of the county.

"Council chair" means the chair of the council of the county.

"County" means a county that has established a county surcharge on state tax as authorized under section 46-16.8(c), Hawaii Revised Statutes.

"County funds" means funds other than general excise and use tax surcharge revenues, interest earned on the revenues, and any federal or state funds appropriated to and received by the county. "County funds" includes transient accommodations tax revenues, franchise tax revenues, and any other revenues transferred or deposited into the general or highway fund of the county without necessity of state legislative appropriation; provided that the term shall not include general excise and use tax surcharge revenues.

"County rapid transportation authority" means the authority of the county that is charged with the responsibility under the county charter for constructing the project.

"Mayor" means the mayor of the county.

"Project" means the minimum operable segment of the locally preferred alternative that the county rapid transportation authority is constructing under a full funding agreement with the Federal Transit Administration.

"Updated project financial plan" means the updated financial plan for the project that is prepared by the county rapid transportation authority and accepted by the Federal Transit Administration. The "updated project financial plan" includes the plans for funding the capital cost, operations and maintenance costs, and ongoing systemwide capital cost of the project.

(b) By January 1, 2019, the mayor shall submit to the legislature a plan to pay for the capital cost of the project and any interest to finance that capital cost with county funds under the scenario that:

(1) The general excise and use tax surcharge revenues, interest earned on the revenues, and federal or state revenues are insufficient; and

(2) Any amount budgeted by the county rapid transportation authority under the updated project financial plan as a contingency will be necessary to complete the construction of the project.

At a minimum, the plan shall identify the source of county funds to pay for the capital cost or interest.

(c) By January 1, 2020 through January 1, 2028, the mayor shall submit to the legislature an annual update of the plan required under subsection (c); except that the update shall not be required after completion of construction of the project. Each updated plan shall identify the following:

(1) Source of county funds to pay for the capital cost or interest;

(2) Status of construction of the project;

(3) Estimates of the:

(A) Capital cost and interest to finance the capital cost of the project;

(B) General excise and use tax surcharge revenues; and

(C) Other federal or state revenues for the project; and

(4) The difference between the information provided under paragraphs (1) to (3) from the information provided in the update of the previous year and an explanation for the difference.

(d) By January 1, 2019, the mayor shall submit to the legislature a plan to fund the operation and maintenance cost and ongoing systemwide capital cost of the completed project of the county. At a minimum, the plan shall identify the estimated operation and maintenance cost and ongoing systemwide capital cost of the system and sources of funding for those costs. The plan shall cover the period through fiscal year 20422043. The mayor shall estimate the operation and maintenance cost and ongoing systemwide capital cost of the completed project based on the updated project financial plan.

(e) The mayor shall submit to the legislature in accordance with section 93-16, Hawaii Revised Statutes, the notification required under subsection (b) and plans required under subsections (c) through (e).

SECTION 9. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 10. This Act shall take effect on July 1, 2050.



 

Report Title:

County Surcharge on State Tax

 

Description:

Authorizes a county that has established a county surcharge on state tax to extend the surcharge for a limited time period. Authorizes counties that have not established a surcharge to adopt an ordinance to establish a surcharge prior to 7/1/2018. Provides that the State shall retain an unspecified portion of surcharge. Requires the mayor of the county to submit certain plans with respect to the alternative transportation system. (SB1183 HD1)

 

 

 

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