H.B. NO.



H.D. 1
















SECTION 1. The legislature finds that Act 97, Session Laws of Hawaii 2015, requires electric utilities in the State to achieve a one hundred per cent renewable portfolio standard by December 31, 2045, with the intent to transition the State away from imported fossil fuels and toward renewable local resources that provide a secure source of affordable energy. The successful deployment of large-scale renewable energy projects is integral to the achievement of this goal.

The legislature further finds that in late 2021, the city and county of Honolulu real property assessment division changed the classification of some parcels of land from agricultural to industrial for tax purposes as a result of those parcels being developed with renewable energy projects. This change in classification resulted in a drastic increase in property taxes for affected renewable energy projects, resulting in some project operators receiving assessments that were hundreds of times higher than their prior assessments. An increase of this scale was not factored into contract negotiations or other business considerations when the affected projects were financed and under development.

The legislature additionally finds that increases in real property taxes for renewable energy projects may significantly impact the viability of existing and future renewable energy projects and consequently the State's progress toward meeting its one hundred per cent renewable energy mandate. Power purchase contracts that have already been executed may require renegotiations with the electric utility and renewed approvals by the public utilities commission, neither of which is guaranteed. Increased costs of renewable energy projects would likely be borne by ratepayers, with low- and middle-income residents bearing a substantial energy cost burden.

In response to the tax increase, the Honolulu city council adopted Ordinance 21-32 in 2021 to create a partial exemption for renewable energy projects. While this newly enacted ordinance provided some immediate relief, there is still significant uncertainty related to how existing tax policies will be applied, which could have a chilling effect on the future development and financing of renewable energy projects in the State due to the risk of unanticipated tax increases.

The legislature also finds that, under section 239-5, Hawaii Revised Statutes, and section 8-10.24, Revised Ordinances of Honolulu, public service companies, including electric utilities, are assessed public service taxes by the city and county of Honolulu in lieu of real property taxes, and therefore, exempts public utilities from real property taxes on real property that is owned or leased and actually used by a public service company. Allowing the counties to establish an in-lieu real property tax program for independent renewable power producers balances the interests and goals of the State, the counties, and the renewable power industry. A payment in-lieu-of-tax program may similarly provide some stability for renewable energy projects from fluctuations in real property values and taxes.

The purpose of this Act is to provide more certainty for renewable energy developers and ratepayers, while mitigating any potential revenue loss to the counties, by allowing the counties to establish an opt-in program by ordinance that allows an annual payment in lieu of real property taxes on the land or improvements thereon that are actively used to produce or store renewable energy that is sold to an electric utility.

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

"46-    Renewable energy projects; payment in lieu of real property taxes. A county may enact an ordinance, which it may amend from time to time, to establish an opt-in by the property owner or taxpayer program that allows an annual payment in lieu of real property taxes on land or improvements thereon that are actively used to produce or store renewable energy primarily for the purpose of public consumption that is sold under a power purchase contract to an electric utility; provided that:

(1) The ordinance also exempts renewable energy projects from one hundred per cent of real property taxes; and

(2) The payment may be determined by the county on a per megawatt nameplate alternating current (AC) capacity basis."

SECTION 3. If any provision of this Act, or the application thereof to any person or circumstance, is held invalid, the invalidity does not affect other provisions or applications of the Act that can be given effect without the invalid provision or application, and to this end the provisions of this Act are severable.

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect on July 1, 3000.




Report Title:

Renewable Energy Projects; Real Property Taxes; County Ordinance



Allows the counties to establish, by ordinance, an opt-in program that allows an annual payment in lieu of real property taxes on the land or improvements thereon that are actively used to produce or store renewable energy that is sold to an electric utility. Effective 7/1/3000. (HD1)




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