Report Title:

Aquaculture Loans; Revolving Funds

 

Description:

Increases aquaculture loan limits for Class A & B loans to $800,000.  Reduces credit denial requirements of the aquacultural loan program to more closely conform to the agricultural loan program.  Creates a Class E loan program for new aquaculturists.  Repeals the aquaculture loan revolving fund and makes the agricultural loan revolving fund the funding source for aquaculture loans. Combines the existing aquaculture loan revolving fund expenditure ceiling with the agricultural loan revolving fund expenditure ceiling.  (HB1222 HD2)

 


HOUSE OF REPRESENTATIVES

H.B. NO.

1222

TWENTY-FOURTH LEGISLATURE, 2007

H.D. 2

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT


 

 

RELATING TO LOANS FOR AGRICULTURAL AND AQUACULTURE PURPOSES.

 

 

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

 


     SECTION 1.  Section 155-14, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  There is created a special fund to be known as the agricultural loan revolving fund, from which moneys shall be loaned by the department of agriculture under this chapter[.] and chapter 219.  [The department, by its board of agriculture, may transfer moneys from the agricultural loan revolving fund to the aquaculture loan revolving fund, from which moneys shall be disbursed by the department pursuant to chapter 219, and may transfer moneys from that revolving fund to the agricultural loan revolving fund for disbursement pursuant to this chapter; provided that:

     (1)  The amount of moneys transferred shall not exceed $1,000,000 for each revolving fund within the calendar year; and

     (2)  Twenty days prior to the convening of each regular session of the legislature, the department shall report to the legislature all transfers that were made between the agricultural loan revolving fund and the aquaculture loan revolving fund during the preceding calendar year and the balance of each revolving fund as of December 31 of each year.]"

     SECTION 2.  Section 219-2, Hawaii Revised Statutes, is amended as follows:

     1.  By adding two new definitions to be appropriately inserted and to read:

     ""New aquaculturist program" means a new aquaculture loan program for qualified new aquaculturists, including persons or associations of persons who are:

     (1)  Displaced from employment in an aquaculture production enterprise;

     (2)  Persons by reason of experience, training, or education who are likely to successfully operate an aquaculture enterprise; or

     (3)  Persons or associations of persons actively engaged in a new aquaculture operation for less than two years.

     "Private lender" includes banks, savings and loan associations, credit unions, mortgage companies, and other qualified companies whose business includes the making of loans in the state."

     2.  By amending the definition of "qualified aquaculturist" to read:

     "Qualified aquaculturist" means a person, or association of persons, actively engaged in aquaculture farming, aquacultural produce processing, or aquacultural product development activities[.] for a minimum of two years."

     SECTION 3.  Section 219-4, Hawaii Revised Statutes, is amended to read as follows:

     "§219-4  Funds; application of payments.  (a)  [There is established a special fund to be known as the aquaculture loan revolving fund from which moneys shall be loaned by the department of agriculture under this chapter.  The department, by its board of agriculture, may transfer moneys from the aquaculture loan revolving fund to the agricultural loan revolving fund, from which moneys shall be disbursed by the department pursuant to chapter 155, and may transfer moneys from that revolving fund to the aquaculture loan revolving fund for disbursement pursuant to this chapter; provided that:

     (1)  The amount of moneys transferred shall not exceed $1,000,000 for each revolving fund within the calendar year; and

     (2)  Twenty days prior to the convening of each regular session of the legislature, the department shall report to the legislature all transfers that were made between the aquaculture loan revolving fund and the agricultural loan revolving fund during the preceding calendar year and the balance of each revolving fund as of December 31 of each year.Loans approved by

the department under this chapter and chapter 155 shall be funded by the agricultural loan revolving fund established under section 155-14.

     (b)  All interests and fees collected by the department shall be deposited in [a] the agricultural loan reserve fund to the extent needed to carry on the operations of [this program; any moneys surplus to these needs shall be transferred to the aquaculture loan revolving fund at the discretion of the department.] the programs.  All payments received on account of principal shall be [credited to the] paid into the agricultural loan revolving fund."

     SECTION 4.  Section 219-5, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a) The department shall have the necessary powers to carry out the purposes of this chapter, including the following:

     (1)  Prescribe the qualifications for eligibility of applicants for loans;

     (2)  Establish preferences and priorities in determining eligibility for loans and loan repayment requirements;

     (3)  Establish the conditions, consistent with the purpose of this chapter, for the granting or for the continuance of a grant of a loan;

     (4)  Provide for inspection at reasonable hours of the plant facilities, books, and records of an enterprise that has applied for or has been granted a loan and require the submission of progress and final reports;

     (5)  Make loans for aquacultural products development, such as financing of plant construction, conversion, expansion, the acquisition of land for expansion, the acquisition of equipment, machinery, supplies, or materials or for the supplying of working capital, consistent with section 219-6;

     (6)  Secure loans by duly recorded first mortgages upon the following property within the [State:] state:

         (A)  Fee simple farm land;

         (B)  Leaseholds of farm land where the lease has an unexpired term at least two years longer than the term of the loan;

         (C)  Aquaculture products;

         (D)  Other chattels;

         (E)  A second mortgage when any prior mortgage does not contain provisions that might jeopardize the security position of the department or the borrower’s ability to repay; and

         (F)  Written agreements, such as assignments of income;

     (7)  Administer the Hawaii [aquaculture] agricultural loan revolving fund and deposit into the fund all moneys received on account of principal;

     (8)  Include in its budget for subsequent fiscal periods amounts necessary to effectuate the purposes of this chapter;

     (9)  Insure loans made to qualified aquaculturists by private lenders under sections 219-7 and 219-8; provided that at no time shall the aggregate amount of the State's liability, contingent or otherwise, on these loans exceed $1,000,000;

    (10)  Participate in loans made to qualified aquaculturists by private lenders under section 219-8;

    (11)  Make direct loans to qualified aquaculturists as provided under section 219-9;

    (12)  Establish interest rates chargeable by the State for direct loans and by private lenders for insured and participation loans; and

    (13)  Maintain a proper reserve in the [aquaculture] agricultural loan revolving fund to guarantee payment of loans insured under sections 219-7 and 219-8."

SECTION 5.  Section 219-6, Hawaii Revised Statutes, is amended to read as follows:

     "§219-6  Loan; limitation and terms.  Loans made under this chapter shall be for the purposes and in accordance with the terms specified in classes "A", "B", "C", [and] "D", and "E" in [paragraph] paragraphs (1), (2), (3), [and] (4), and (5) following and shall be made only to applicants who meet the eligibility requirements specified therein:

     (1)  Class A:  Aquaculture farm ownership and improvement loans.  To provide for:

         (A)  The purchase or improvement of aquaculture farm land and waters;

         (B)  The purchase, construction, or improvement of adequate aquaculture farm dwellings, and other essential aquaculture farm facilities; and

         (C)  The liquidation of indebtedness incurred for any of the foregoing purposes.

Such loans shall be for an amount not to exceed [$400,000] $800,000 and for a term not to exceed forty years.  To be eligible the applicant shall:

              (i)  Derive, or present an acceptable plan to derive, a major portion of the applicant's income from and devote, or intend to devote, most of the applicant's time to aquaculture farming operations; and

             (ii)  Have or be able to obtain the operating capital, including fishstock and equipment, needed to successfully operate the applicant's aquaculture farm;

     (2)  Class B:  Aquaculture operating loans.  To carry on and improve an aquaculture operation, including:

         (A)  The purchase of aquaculture equipment and fishstock;

         (B)  The payment of production and marketing expenses including materials, labor, and services;

         (C)  The payment of living expenses; and

         (D)  The liquidation of indebtedness incurred for any of the foregoing purposes.

Such loans shall be for an amount not to exceed [$400,000] $800,000 and for a term not to exceed ten years.  To be eligible, an applicant shall derive or present an acceptable plan to derive a major portion of the applicant's income from and devote, or intend to devote, most of the applicant's time to aquaculture operations;

     (3)  Class C:  Aquaculture cooperative and corporation loans.  To provide credit to aquaculturists' cooperative associations and corporations engaged in marketing, purchasing, and processing, and providing farm business services, including:

         (A)  Facility loans to purchase or improve land, building, and equipment for an amount not to exceed $500,000 and a term not to exceed twenty years; and

         (B)  Operating loans to finance inventories of supplies, warehousing, and shipping commodities, extension of consumer credit to justified farmer-members, and other normal operating expenses for an amount not to exceed $300,000 and a term not to exceed seven years.

To be eligible, a cooperative or corporation shall have at least seventy-five per cent of its board of directors and seventy-five per cent of its membership as shareholders who meet the eligibility requirements prescribed by the board and who devote most of their time to aquaculture operations; [and]

     (4)  Class D:  Emergency loans.  To provide relief and rehabilitation to qualified aquaculturists without limit as to purpose:

         (A)  In areas stricken by extraordinary rainstorms, windstorms, droughts, tidal waves, earthquakes, volcanic eruptions, and other natural catastrophes;


         (B)  On farms stricken by aquatic diseases;

         (C)  On farms seriously affected by prolonged shipping and dock strikes;

         (D)  During economic emergencies such as those caused by overproduction and excessive imports; and

         (E)  During other emergencies as determined by the board.

The maximum amounts and period for the loans shall be determined by the board; provided that the board shall require that any settlement or moneys received by qualified aquaculturists as a result of an emergency declared under this section shall be first applied to the repayment of an emergency loan made under this chapter[.]; and

     (5)  Class E:  New aquaculturist loans.  To provide for the costs of a new aquaculture enterprise for qualified new aquaculturists:

         (A)  Initial loans made under this class shall be for purposes and in accordance with the terms specified in class "A" or "B" only; provided that loans under this subparagraph shall be made for an amount not to exceed $100,000 or eighty-five per cent of the cost of the project, whichever is less;

         (B)  Any subsequent loan shall be made from class "A", "B", or "D", respectively, depending upon the purpose for which the loan funds are used; and

         (C)  Borrowers shall comply with special term loan agreements as may be required by the department and shall take special training courses as the department deems necessary."

     SECTION 6.  Section 219-9, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

     "(a)  The department of agriculture may make loans directly to qualified aquaculturists who are unable to obtain sufficient funds at reasonable rates from private lenders either independently or under section 219-7 or 219-8.  Loans made under this section shall be authorized only if loans cannot be obtained from [the relevant farm credit lender and] two [other] private lenders[.], which may include any of the following:

     (1)  Private lenders;

     (2)  Members of the farm credit system; or

     (3)  The United States Department of Agriculture;

provided that the board of agriculture may waive this requirement for emergency loans."

     SECTION 7.  On July 1, 2007, the director of finance shall transfer all unexpended and unencumbered balances remaining in the aquaculture loan revolving fund as of June 30, 2007, to the credit of the agricultural loan revolving fund established by section 155-14, Hawaii Revised Statutes.

     SECTION 8.  On July 1, 2007, the director of finance shall transfer all unexpended and unencumbered balances remaining in the aquaculture loan reserve fund as of June 30, 2007, to the credit of the agricultural loan revolving fund established by section 155-14, Hawaii Revised Statutes.

     SECTION 9.  The director of finance shall increase the budget expenditure ceiling of the agricultural loan revolving fund by the amount of the budget expenditure ceiling of the aquaculture loan revolving fund; however, in no event shall the increase be more than the current combined budget expenditure ceiling for both funds.

     SECTION 10.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 11.  This Act shall take effect on July 1, 2050.