Report Title:

Relating to security for concession contracts.

Description:

Allows the use of legal tender or financial instruments other than bonds to secure performance under a concession contract.

THE SENATE

S.B. NO.

848

TWENTY-THIRD LEGISLATURE, 2005

 

STATE OF HAWAII

 


 

A BILL FOR AN ACT

 

RELATING TO SECURITY FOR CONCESSION CONTRACTS.

 

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

SECTION 1. Under Section 102-11, Hawaii Revised Statutes, concessionaires are required to post a bond as security for performance under a concession contract with the State. Since September 11, 2001, it has become increasing difficult and costly to obtain performance bonds, especially for concessions at airports. Recently, in order to secure a bond, an airport concessionaire was required to deposit the full amount of the bond in cash into an escrow account for the duration of the bond. The concessionaire was then charged two per cent of the bond amount by the surety company to issue the bond and two per cent by the bank to maintain the escrow account. The requirement to use a bond ended up costing the concessionaire 104 per cent of the amount required by the concession agreement to insure performance.

Section 102-6, Hawaii Revised Statutes, allows the State to accept legal tender and financial instruments other than bonds to secure bid performance. Amending Section 102-11 to more closely follow Section 102-6 will allow the State more flexibility in what it may accept as security for performance under a concession contract, while at the same time reducing the overall cost of the concession contract to the concessionaire.

The purpose of this Act is to allow the State the flexibility to accept legal tender and financial instruments, other than bonds, as security for performance under concession contracts.

SECTION 2. Section 102-11, Hawaii Revised Statutes, is amended to read as follows:

"§102-11 Bond; deposit; conditions. Before any contract is entered into, the party with whom the contract is proposed to be made shall give security for the performance thereof by a good and sufficient bond or deposit of legal tender or by a certificate of deposit, share certificate, cashier′s check, treasurer′s check, teller′s check, or official check drawn by, or a certified check accepted by, a bank, savings institution, or credit union insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration, conditioned for the full and faithful performance of the contract in accordance with the terms and intent thereof, which bond or deposit of legal tender or certificate of deposit, share certificate, cashier′s check, treasurer′s check, teller′s check, or official check drawn by, or a certified check accepted by, a bank, savings institution, or credit union insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration, shall be in an amount not less than two months′ rental and other charges, if any, required under the contract; provided that any contract for the sale and delivery of in bond merchandise at Honolulu International Airport shall require a bond or deposit of legal tender or a certificate of deposit, share certificate, cashier′s check, treasurer′s check, teller′s check, or official check drawn by, or a certified check accepted by, a bank, savings institution, or credit union insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration, in an amount not less than four months of the highest minimum annual rental guaranty required under the contract. The bond shall also by its terms inure to the benefit of the State or of the county, as the case may be.″

Section 3. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

Section 4. This Act shall take effect on its approval.

INTRODUCED BY:

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BY REQUEST