Report Title:

Appropriation; Education and Economic Development

 

Description:

Appropriates and creates innovative programs and to help foster innovative education and economic ideas.

 


HOUSE OF REPRESENTATIVES

H.B. NO.

1967

TWENTY-FOURTH LEGISLATURE, 2007

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT


 

 

relating to education and economic development.

 

 

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

 


PART I.

 


SECTION 1.  The legislature finds that Hawaii's desire for economic growth that benefits all residents depends on building our State's human resources.

Realization of Hawaii's longstanding desire for economic diversification and sustainability turns on applying the State's high skilled resources to the creation and adoption of innovation across the economy.

This Act creates an innovation economy by:

(1)  Encouraging the employees' retirement system to invest in Hawaii venture capital by establishing the Hawaii innovation investment fund, a professionally-managed fund of funds in which it may invest, and removing any liability to fiduciaries for investing moderate amounts in Hawaii venture capital, all of which lead to allowing the retirement system to achieve superior investment returns for the pension fund, attracting private investment capital and expertise, and assisting the growth of Hawaii's technology companies and high growth businesses;

(2)  Improving the State's ability to measure the productivity of Hawaii's economy as well measure and assess the effectiveness of benchmarks enacted by the legislature to improve our economic situation;

(3)  Supporting the operations and programs of a State operated technology incubator and innovation center in the Kaka’ako district of downtown Honolulu;

(4)  Establishing a local incubator facility to provide a cohesive and integrated site for developing Hawaii's digital media infrastructure for film and television productions and interactive game development;

(5)  Establishing a support and training system called the music and enterprise learning experience program at the University of Hawaii - Honolulu Community College to develop the technical business skills required by Hawaii's artists and music industry; and

(6) Enhancing the ability of the University of Hawaii's office of technology transfer and economic development to increase the number of licensing agreements and commercialization by providing funds for the office of technology transfer and economic development to enter into a partnership with a qualified and experienced private sector entity.  This partnership will provide the University of Hawaii with resources and expertise to accelerate the number of discoveries disclosed and the number of partnerships and arrangements to commercialize those discoveries.  Both the private sector partner and the University of Hawaii will contribute to this commercialization joint venture and share in the return of their efforts.

PART II.

SECTION 2.  The legislature finds that economic growth and diversification throughout many communities have been enhanced by the availability of venture capital funding for entrepreneurs who are able to attract capital and build innovative new ventures.  Well-known regions such as Silicon Valley, Route 128 in Boston, Austin, Texas, and Research Triangle in North Carolina have benefited greatly from the combination of scientific research, an entrepreneurial culture driving high technology growth, and funding availability for early stage equity investments.  Other areas similar in size and population to Hawaii, including San Diego, Salt Lake City, Seattle, and Boulder have also developed strong technology-based businesses with the assistance of venture capital.

The source of this venture capital is derived largely through employee pension funds.  Of the approximately $25 billion of venture investment taking place in 2006, over half was provided by pension funds.  Many public pension funds target investments in-state to provide enhanced returns to the pensioners and support the development of high-growth businesses within local communities.

The employees' retirement system of the State of Hawaii has committed approximately $300,000,000 to the alternative asset category including venture capital, but none of it is invested in Hawaii.  The legislature finds that this lack of investment in Hawaii venture capital by the employees' retirement system may be due to a lack of large-scale qualified investment opportunities and concerns over the possible breach of fiduciary duty and prudent investor rules related to early stage investing.  Some jurisdictions such as Arkansas and Michigan encourage local investment by pension funds by relieving fiduciaries of liability for investing in local venture capital.  Others, such as the state of Oregon, have legislated investment by the public pension fund in local venture capital where prudent.

The purpose of this Act is to encourage the employees' retirement system to invest in Hawaii venture capital by establishing the Hawaii innovation investment fund, a professionally-managed fund of funds, in which the employees' retirement system may invest.  These actions will allow the retirement system to achieve investment returns for the pension fund, attract private investment capital and expertise, and assist the growth of Hawaii's technology companies and high growth businesses.

SECTION 3. Chapter 211F, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"211F-___.   Definitions.  As used in this part:

"Agency" means each state or county board, commission, department, or officer authorized by law to make rules, except those in the legislative or judicial branches.

"Fiduciaries" means pension funds, corporations, limited liability companies, partnerships, banks, savings institutions, trust companies, and the officers, directors, trustees, partners, managers, advisors, employees, and representatives of the State employees' retirement system.

"Hawaii venture capital investments" means any of the following investments in a business:

(1) Direct debt and equity investments in privately-held Hawaii companies; and

(2) Investment in limited partnerships, limited liability companies, or other entities that make private debt and equity investments in privately held Hawaii companies, whether directly or through investments in limited partnerships, limited liability companies, or other entities, including but not limited to investments consisting of shares of capital stock, convertible notes and other debt instruments, securities, warrants, options, or other rights to acquire such securities from privately held Hawaii companies.

"Privately held Hawaii companies" means any privately held corporation, limited liability company, partnership, or other entity that is headquartered, or has substantial operations, in Hawaii.

"System" means the employees' retirement system of the State of Hawaii."

SECTION 4. Chapter 211F, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

 "211F-___Hawaii innovation investment fund.  (a) There is established the Hawaii innovation investment fund into which shall be deposited:

(1)  Moneys from the system;

(2)  Moneys from private investors; and

(3)  Interest payments and proceeds from investments made    by the fund. 

(b)  Moneys in the Hawaii innovation investment fund shall be used to invest in Hawaii and other venture capital investment opportunities.

     (c)  Should the system choose to invest a portion of its assets in the fund, investment of the fund in one or more professionally managed venture capital funds or one or more venture capital fund of funds will be overseen by an advisory board comprised of seven members:  four members from the business community with experience in venture capital investing, fund of funds management, or as an entrepreneur growing companies and achieving liquidity events; a representative of the Board of the Employees’ Retirement System; a representative from the department of budget and finance; and a representative of the department of business, economic development, and tourism or an attached agency thereof.  Members of the advisory board shall be selected based on their knowledge and ability to successfully manage venture capital investments, attract capital from local and external sources, and assist companies to grow.

(d)  Of the four members private sector members of the advisory board, one shall be appointed by the governor, one shall be appointed by the governor from a list of three names nominated by the president of the senate, and one shall be appointed by the governor from a list of three names nominated by the speaker of the house of representatives for staggered terms pursuant to section 26-34.  The representative from the department of business, economic development, and tourism shall serve as chairperson of the board until such time as a chairperson is elected by the board from the membership.  The board shall elect such officers as may be necessary.

The members of the advisory board shall serve without compensation, but may be reimbursed for expenses, including travel expenses, incurred in the performance of their duties.

(e) The advisory board shall be attached to the department of business, economic development, and tourism for administrative purposes. 

(f) The advisory board shall adopt rules for its conduct and management of the fund and shall use its best efforts to maximize return on investments by developing investment strategies for a diverse portfolio focused on investments in Hawaii in order to attract private investment in the fund, develop local investment expertise, stimulate the development of emerging venture capital funds, and encourage opportunities for co-investment with offshore funds. 

The advisory board may hire a fund manager to direct the investment operations.  Any investments made through the Hawaii innovation investment fund will be reported to the legislature on an annual aggregated basis, indicating the number of investments made into venture capital funds investing in Hawaii, the amount of investment made in those venture capital funds, and the number and amount of investments made by those venture capital funds in Hawaii companies.

(g)  A board member shall not participate in any corporation decision to invest in, purchase from, sell to, borrow from, loan to, contract with, or otherwise deal with any person with whom or entity in which the board member has a substantial financial interest.

(h)  Any returns on investment made by tax-paying investors in the fund shall be exempt from Hawaii state income and franchise taxes under chapters 235, 241, and 431.

(i)  Expenditures associated with operations and oversight of the fund, exclusive of actual investments made, will be provided through the Hawaii strategic development corporation revolving fund."

SECTION 5.  Section 88-119, Hawaii Revised Statutes is amended to read as follows:

"§88‑119  Investments.  Investments may be made in:

     (1)  Real estate loans and mortgages.  Obligations (as defined in section 431:6-101) of any of the following classes:

         (A)  Obligations secured by mortgages of nonprofit corporations desiring to build multirental units (ten units or more) subject to control of the government for occupancy by families displaced as a result of government action;

         (B)  Obligations secured by mortgages insured by the Federal Housing Administration;

         (C)  Obligations for the repayment of home loans made under the Servicemen's Readjustment Act of 1944 or under Title II of the National Housing Act;

         (D)  Other obligations secured by first mortgages on unencumbered improved real estate owned in fee simple; provided that the amount of the obligation at the time investment is made therein shall not exceed eighty per cent of the value of the real estate and improvements mortgaged to secure it, and except that the amount of the obligation at the time investment is made therein may exceed eighty per cent but no more than ninety per cent of the value of the real estate and improvements mortgaged to secure it; provided further that the obligation is insured or guaranteed against default or loss under a mortgage insurance policy issued by a casualty insurance company licensed to do business in the State.  The coverage provided by the insurer shall be sufficient to reduce the system's exposure to not more than eighty per cent of the value of the real estate and improvements mortgaged to secure it.  The insurance coverage shall remain in force until the principal amount of the obligation is reduced to eighty per cent of the market value of the real estate and improvements mortgaged to secure it, at which time the coverage shall be subject to cancellation solely at the option of the board.  Real estate shall not be deemed to be encumbered within the meaning of this subparagraph by reason of the existence of any of the restrictions, charges, or claims described in section 431:6-308;

         (E)  Other obligations secured by first mortgages of leasehold interests in improved real estate; provided that:

              (i)  Each leasehold interest at the time shall have a current term extending at least two years beyond the stated maturity of the obligation it secures; and

             (ii)  The amount of the obligation at the time investment is made therein shall not exceed eighty per cent of the value of the respective leasehold interest and improvements, and except that the amount of the obligation at the time investment is made therein may exceed eighty per cent but no more than ninety per cent of the value of the leasehold interest and improvements mortgaged to secure it;

               provided further that the obligation is insured or guaranteed against default or loss under a mortgage insurance policy issued by a casualty insurance company licensed to do business in the State.  The coverage provided by the insurer shall be sufficient to reduce the system's exposure to not more than eighty per cent of the value of the leasehold interest and improvements mortgaged to secure it.  The insurance coverage shall remain in force until the principal amount of the obligation is reduced to eighty per cent of the market value of the leasehold interest and improvements mortgaged to secure it, at which time the coverage shall be subject to cancellation solely at the option of the board;

         (F)  Obligations for the repayment of home loans guaranteed by the department of Hawaiian home lands pursuant to section 214(b) of the Hawaiian Homes Commission Act, 1920; and

         (G)  Obligations secured by second mortgages on improved real estate for which the mortgagor procures a second mortgage on the improved real estate for the purpose of acquiring the leaseholder's fee simple interest in the improved real estate; provided that any prior mortgage does not contain provisions that might jeopardize the security position of the retirement system or the borrower's ability to repay the mortgage loan.

          The board may retain the real estate, including leasehold interests therein, as it may acquire by foreclosure of mortgages or in enforcement of security, or as may be conveyed to it in satisfaction of debts previously contracted; provided that all the real estate, other than leasehold interests, shall be sold within five years after acquiring the same, subject to extension by the governor for additional periods not exceeding five years each, and that all the leasehold interests shall be sold within one year after acquiring the same, subject to extension by the governor for additional periods not exceeding one year each;

     (2)  Government obligations, etc.  Obligations of any of the following classes:

         (A)  Obligations issued or guaranteed as to principal and interest by the United States or by any state thereof or by any municipal or political subdivision or school district of any of the foregoing; provided that principal of and interest on the obligations are payable in currency of the United States; or sovereign debt instruments issued by agencies of, or guaranteed by foreign governments;

         (B)  Revenue bonds, whether or not permitted by any other provision hereof, of the State or any municipal or political subdivision thereof, including the board of water supply of the city and county of Honolulu, and street or improvement district bonds of any district or project in the State; and

         (C)  Obligations issued or guaranteed by any federal home loan bank including consolidated federal home loan bank obligations, the Home Owner's Loan Corporation, the Federal National Mortgage Association, or the Small Business Administration;

     (3)  Corporate obligations.  Below investment grade or nonrated debt instruments, foreign or domestic, in accordance with investment guidelines adopted by the board;

     (4)  Preferred and common stocks.  Shares of preferred or common stock of any corporation created or existing under the laws of the United States or of any state or district thereof or of any country;

     (5)  Obligations eligible by law for purchase in the open market by federal reserve banks;

     (6)  Obligations issued or guaranteed by the International Bank for Reconstruction and Development, the Inter‑American Development Bank, the Asian Development Bank, or the African Development Bank;

     (7)  Obligations secured by collateral consisting of any of the securities or stock listed above and worth at the time the investment is made at least fifteen per cent more than the amount of the respective obligations;

     (8)  Insurance company obligations.  Contracts and agreements supplemental thereto providing for participation in one or more accounts of a life insurance company authorized to do business in Hawaii, including its separate accounts, and whether the investments allocated thereto are comprised of stocks or other securities or of real or personal property or interests therein;

     (9)  Interests in real property.  Interests in improved or productive real property in which, in the informed opinion of the board, it is prudent to invest funds of the system.  For purposes of this paragraph, "real property" includes any property treated as real property either by local law or for federal income tax purposes.  Investments in improved or productive real property may be made directly or through pooled funds, including common or collective trust funds of banks and trust companies, group or unit trusts, limited partnerships, limited liability companies, investment trusts, title-holding corporations recognized under section 501(c) of the Internal Revenue Code of 1986, as amended, similar entities that would protect the system's interest, and other pooled funds invested on behalf of the system by investment managers retained by the system;

    (10)  Other securities and futures contracts.  Securities and futures contracts in which in the informed opinion of the board it is prudent to invest funds of the system, including currency, interest rate, bond, and stock index futures contracts and options on the contracts to hedge against anticipated changes in currencies, interest rates, and bond and stock prices that might otherwise have an adverse effect upon the value of the system's securities portfolios; covered put and call options on securities; and stock; whether or not the securities, stock, futures contracts, or options on futures are expressly authorized by or qualify under the foregoing paragraphs, and notwithstanding any limitation of any of the foregoing paragraphs (including paragraph (4)); and

    (11)  Private placements.  Investments in institutional blind pool limited partnerships, limited liability companies, or direct investments that make private debt and equity investments in privately held companies, including but not limited to investments in Hawaii high technology businesses or venture capital investments that, in the informed opinion of the board, are appropriate to invest funds of the system.  In evaluating venture capital investments, the board shall consider [, among other things, the impact an investment may have on job creation in Hawaii and on the state economy.] Hawaii venture capital investment opportunities unless, under the circumstances, it is not prudent to do so.  At any given time, the system shall have $100 million allocated for Hawaii venture capital investments unless, under the circumstances, it is not prudent to do so.  The system may contract with one or more management companies to manage and invest these moneys.  The system may enter into contracts for the provision of investment advice or other services that the board deems reasonable and necessary to fulfill its duties.

Investment of these funds may be made in whole or in part through the Hawaii Innovation Investment Fund.

(A)  Limited investment in privately-held Hawaii companies authorized.

(i) Unless prohibited by federal law or regulations promulgated thereunder, and notwithstanding any law to the contrary, or rules adopted pursuant thereto, fiduciaries may invest in Hawaii venture capital investments up to two and one-half per cent of their funds eligible for investment; provided that their total outlay in Hawaii venture capital investments shall not be more than ten per cent of their capital, which includes common capital stock, certified surplus, capital notes, and undivided profits.  Fiduciaries acting in accordance with this section shall not be in violation of any prudent person or prudent investor rule. If any venture capital investments in privately held Hawaii companies are in violation of this chapter by virtue of a subsequent reduction in the amount of funds eligible for investment, the fiduciary shall not be in violation of any prudent person or prudent investor rule.

(ii) The director of any agency whose duties and powers include regulating the activities of any fiduciaries governed by this chapter may adopt rules for the implementation of this chapter in accordance with chapter 91."

 

 

 

 

PART III.

SECTION 6.  Competing in the global economy will continue to require investment in new technologies and human resources.  The traditional measures of success, including growth of the gross domestic product, will continue to be important but will not help the State determine whether or not Hawaii is prepared to compete in the future.  To determine how well Hawaii is preparing its resources, the legislature recognizes that the State will need to track the effectiveness of training in science, technology, math, engineering and computer skills.  The State will also need to look at levels of investment capital, research, and innovation.  Importantly, assurance is needed that the investments made by the State are productive. 

The Hawaii Institute for Policy Affairs in its 2005 Policy Review, recommends that Hawaii set goals and invest in the collection of data needed to track progress in what it called "new economy" areas.  In particular, Hawaii Institute for Policy Affairs recommended, "collection of new data such as service exports, training, and education outside of the traditional school system, the self-sufficiency wage, job creation, and other impacts of business tax credits, and quality of life indicators."  Currently, there are no data on service exports, except for tourism.  Such data are expensive and difficult to collect through general surveys.  A focused effort is needed to build a database of these and other measures of an innovative economy.

Evaluations of economic impacts and growth are the responsibility of the department of business, economic development, and tourism.  Economists, whose primary responsibility is the measurement of economic impacts, are a primary resource for conducting economic analyses of existing economic incentive programs. 

     The purpose of part III of this Act is to improve the State's ability to measure the productivity of and progress toward achieving innovation in Hawaii's economy as well as to assess the effectiveness of measures enacted by the legislature to improve Hawaii's economic situation.  Specifically, it will:

(1)         Task the department of business, economic development, and tourism (henceforth the department) to accomplish this purpose;

(2)         Provide funding and positions for the department to address these tasks.

Section 7.  Section 201-3, Hawaii Revised Statutes, is amended by adding a new subsection (b) to read as follows:    

 "§201-3  Specific research and promotional functions of the department.  Without prejudice to its general functions and duties the department of business, economic development, and tourism shall have specific functions in the following areas:    

(1)  Industrial development.  The department shall determine through technical and economic surveys the profit potential of new or expanded industrial undertakings; develop through research projects and other means new and improved industrial products and processes; promote studies and surveys to determine consumer preference as to design and quality and to determine the best methods of packaging, transporting, and marketing the State's industrial products; disseminate information to assist the present industries of the State, to attract new industries to the State, and to encourage capital investment in present and new industries in the State; assist associations of producers and distributors of industrial products to introduce such products to consumers; and make such grants or contracts as may be necessary or advisable to accomplish the foregoing;

     (2)  Land development.  The department shall encourage the most productive use of all land in the State in accordance with a general plan developed by the department; encourage the improvement of land tenure practices on leased private lands; promote an informational program directed to landowners, producers of agricultural and industrial commodities, and the general public regarding the most efficient and most productive use of the lands in the State; and make such grants or contracts as may be necessary or advisable to accomplish the foregoing;

     (3)  Credit development.  The department shall conduct a continuing study of agricultural and industrial credit needs; encourage the development of additional private and public credit sources for agricultural and industrial enterprises; promote an informational program to acquaint financial institutions with agricultural and industrial credit needs and the potential for agricultural and industrial expansion, and inform producers of agricultural and industrial products as to the manner in which to qualify for loans; and make such grants or contracts as may be necessary or advisable to accomplish the foregoing;

     (4)  Promotion.  The department shall disseminate information developed for or by the department pertaining to economic development to assist present industry in the State, attract new industry and investments to the State, and assist new and emerging industry with good growth potential or prospects in jobs, exports, and new products.  The industrial and economic promotional activities of the department may include the use of literature, advertising, demonstrations, displays, market testing, lectures, travel, motion picture and slide films, and such other promotional and publicity devices as may be appropriate; [and]

     (5)  Tourism research and statistics.  The department shall maintain a program of research and statistics for the purpose of:

         (A)  Measuring and analyzing tourism trends;

         (B)  Providing information and research to assist in the development and implementation of state tourism policy;

         (C)  Encouraging and arranging for the conduct of tourism research and information development through voluntary means or through contractual services with qualified agencies, firms, or persons; and

         (D)  Providing tourism information to policy makers, the public, and the visitor industry.  This includes:

              (i)  Collecting and publishing visitor-related data including visitor arrivals, visitor characteristics, and expenditures;

             (ii)  Collecting and publishing hotel-related statistics including the number of units available, occupancy rates, and room rates;

            (iii)  Collecting and publishing airline-related data including seat capacity and number of flights;

             (iv)  Collecting information and conducting analyses of the economic, social, and physical impacts of tourism on the State;

              (v)  Conducting periodic studies of the impact of ongoing marketing programs of the Hawaii tourism authority on Hawaii's tourism industry, employment in Hawaii, state taxes, and the State's lesser known and underutilized destinations; and

(vi)       Cooperate with the Hawaii tourism authority and provide it with the above information in a timely manner[.]and;

(6) Assessing the effectiveness of economic development initiatives, specifically related to the innovation economy proposals enumerated in Acts ___, ___, and ___."

SECTION 8.  Section 383-95, Hawaii Revised Statutes, is amended to read as follows:

"§383-95  Disclosure of information.  (a)  Except as otherwise provided in this chapter, information obtained from any employing unit or individual pursuant to the administration of this chapter and determinations as to the benefit rights of any individual shall be held confidential and shall not be disclosed or be open to public inspection in any manner revealing the individual's or employing unit's identity.  Any claimant (or the claimant's legal representative) shall be supplied with information from the records of the department to the extent necessary for the proper presentation of the claimant's claim in any proceeding under this chapter.  Subject to such restrictions as the director may by rule prescribe, and costs incurred in furnishing the information are reimbursed to the department and all safeguards are established as are necessary to ensure that information furnished by the department is used only for authorized purposes, the information and determinations may be made available to:

(1)  Any federal or state agency charged with the administration of an unemployment compensation law or the maintenance of a system of public employment offices;

(2)  The Bureau of Internal Revenue of the United States Department of Treasury;

(3)  Any federal, state, or municipal agency charged with the administration of a fair employment practice or anti-discrimination law;

(4)  Any other federal, state, or municipal agency if the director deems that the disclosure to the agency serves the public interest; and

(5)  Any federal, state, or municipal agency if the disclosure is authorized under section 303 of the Social Security Act and section 3304 of the Internal Revenue Code of 1986, as amended.

(b)  Information obtained in connection with the administration of the employment service may be made available to persons or agencies for purposes appropriate to the operation of a public employment service.

(c)  Upon requests therefore the department shall furnish to any agency of the United States charged with the administration of public works or assistance through public employment, and may furnish to any state agency similarly charged, the name, address, ordinary occupation and employment status of each recipient of benefits and the recipient's rights to further benefits under this chapter.

(d)  The department may request the comptroller of the currency of the United States to cause an examination of the correctness of any return or report of any national banking association rendered pursuant to this chapter, and may in connection with the request transmit any of the report or return to the comptroller of the currency of the United States as provided in section 3305(c) of the federal Internal Revenue Code.

(e)  The director of the Business, Economic Development and Tourism may identify the types of data necessary from other State departments required to perform the analyses of innovation economy initiatives.  Data shall be provided at an aggregate level such as not to compromise the identity of individual tax payers or businesses."

PART IV.

SECTION 9.  Kajima Urban Development International and Phase 3 Properties competitively bid for, and was selected by Kamehameha Schools, as the developer of the Asia Pacific International Research Center, a 400,000 square foot class 'A' life sciences research complex on 4.98 acres located in Kaka'ako and makai of Ala Moana Boulevard, adjacent to the University of Hawaii John A. Burns School of Medicine. 

Kamehameha Schools and Kajima Urban Development International and Phase 3 Properties are negotiating with the high technology development corporation, an agency of the State of Hawaii, to commit to a ten year lease agreement secured with a state guaranty for approximately 99,000 square feet of laboratory and office space on three floors.  The high technology development corporation will operate a technology incubator and innovation center, which will support the efforts of the University of Hawaii's John A. Burns School of Medicine, and related bioscience research institutions.

There are local fledgling start-up high tech companies trying to attain required financing.  Once they achieve such financing it is critical that they commit their core capital to research, rather than have the core capital tied up in onerous credit enhancement tools, such as security deposits or letters of credit required by the lending community, in order to finance complex and expensive wet laboratory infrastructure developments.  A guaranty of the lease agreement by the state for the high technology development corporation to lease a portion of the Asia Pacific International Research Center will reduce the risk and cost of this unique project for these start-up companies and thereby provide the necessary initial boost to Hawaii's life science industry.

The statutory purpose and mission of the corporation is to grow Hawaii's high technology industry including its fledging life science industry.  In order for the high technology development corporation to grow these tech industries, it must be able to provide y incubator and laboratory facilities to qualified start-up companies.  

The project allows the State to become proactive in growing incubation and innovation space without the burden or cost of constructing the building. 

Kamehameha Schools is committed to redeveloping other buildings in the area to support innovation industries.  Phase 2 of Kamehameha Schools' development more than doubles innovation space in Kaka’ako for future cluster growth, ultimately resulting in a total of 400,000 square feet of laboratory and office space dedicated to the tech industry.  The 99,000 square feet of the Asia Pacific International Research Center represents less than twenty-five percent of the total Kamehameha Schools development in Kaka’ako.

The negotiations between the high technology development corporation and the department of budget and finance with Kamehameha Schools and/or Kajima Urban Development International and Phase 3 Properties shall consider as a means to reducing cost to the state:

(1)  An estimated $80,000,000 in private sector investment;

(2)  The reasonable application of amounts that result from a $28,000,000 federal new market tax credit to reduce the State's rental costs;

(3)  The replacement of incubation and innovation space when the high technology development corporation land lease agreement with the University of Hawaii for Manoa innovation center expires in ten years;

(4)  The speed at which the private sector is able to construct new projects, particularly wet laboratories;

(5)  A monetary contribution in the form of a lease reserve fund by Kamehameha Schools and Kajima Urban Development International/Phase3 to reduce the effective cost of the lease agreement to the State for ten years;

(6)  Commitments by Kamehameha Schools and/or Kajima Urban Development International and Phase 3 Properties to pre-lease two-thirds of the space for the State;

(7)  Enhancements that accrue or result from this development; and

(8)  Any and all other appropriate considerations as determined by the high tech development corporation and department of budget and finance.

SECTION 10.  The State high technology development corporation, with assistance from the department of business, economic development, and tourism, shall negotiate with the developers, a lease agreement, terms acceptable and satisfactory to the corporation’s board of directors and the director of finance including a lease guaranty for a period of ten years for approximately 99,000 square feet of laboratory and office space in the Asia Pacific International Research Center in Kaka’ako.

SECTION 11.  The provisions of this Act are not intended to, nor shall they restrict or constrain the lease negotiations of the high technology development corporation and the department of budget and finance with the developers and owners of the Asia Pacific International Research Center.  The use of the funds shall be for the purposes provided herein, but the expenditure of the funds shall be at the discretion of the director of finance.

Part V.

     SECTION 12.  The legislature finds that the digital media industry is a fast-growing niche between the film and technology industries that has begun to emerge in Hawaii as the result of key natural and invested resources in the State.  Hawaii's environment is especially suited for this low-polluting industry that creates high-skill, high-paying jobs.

     Digital media activities include digital filmmaking and visual effects, television and feature film pre-production and post-production, sound design, interactive video game development, computer animation, creative software design, and dynamic Web design and distribution. 

     This growth industry requires a local incubator facility to provide a cohesive and integrated site for developing Hawaii's digital media infrastructure for film and television productions and interactive game development.  This incubator would be a state-of-the-art mixed use facility that combines industry, government, and academic entities.  In addition to providing a collaborative learning environment for students, faculty, and professionals in the field, the facility will serve as an incubator for digital media businesses and as a research and development lab for the creation of intellectual property.

SECTION 13.  The department of business, economic development, and tourism, in coordination with the University of Hawaii, will oversee the leasing, operating, and maintenance of a digital media incubator facility.  The department may enter into contracts with other government agencies, the county economic development boards, other nonprofit organizations, or for-profit firms for the purpose of the program. 

     The facility will be leased to a mix of anchor tenants, virtual tenants, and project-based tenants.  Anchor tenants are digital media companies with a regular cash flow that need a fixed address and would benefit from sharing a common environment with other digital media companies.  Virtual tenants may be less developed companies with uneven cash flow that are just starting out and may need a place to do business from time to time.  Project-based tenants are television and film production teams that need to lease space for a finite amount of time to complete a particular project.

     The facility should contain a mix of workstations, conference rooms, private offices, a common lounge and kitchen area, a reception area, secure air-conditioned server rooms, and possibly a small soundstage for stop-motion animation, 3D modeling and printing center, and other more spatially dependent projects.

PART VI

SECTION 14.   The purpose of this part is to establish a support and training system called the music and enterprise learning experience program at the University of Hawaii - Honolulu Community College to develop the technical business skills required by Hawaii's artists and music industry. 

Hawaii's music industry is a growing segment of Hawaii's creative industries sector, with a growing popularity reaching far beyond the shores of our island state.  Full recognition of the merits of Hawaiian music came in 2005 when the National Academy of Recording Arts and Sciences announced the creation of a Hawaiian music category in its annual Grammy Awards, the world's most prestigious music awards program. 

It has long been noted that while Hawaii has an unusually high concentration of raw musical talent and industry professionals, it lacks the technical support infrastructure to assist individuals in the progression of their careers and businesses.

The University of Hawaii - Honolulu Community College has been working to build alliances with national and local members of the entertainment industry for the music and enterprise learning experience program.  The music and enterprise learning experience program combines short-term professional training workshops, songwriter seminars, an associate degree program in Music Business and Production, and a transfer program that allows students to matriculate in Belmont University's music and entertainment management programs, one of the premier music and entertainment educational programs in the nation.

SECTION 15.  There is established at the University of Hawaii Honolulu Community College campus the music and enterprise learning experience program to expand the existing industry capacity, and to create new technological, intercultural, and genre-bending forms of music through creativity and professional business expertise. The music and enterprise learning experience program will be developed around three primary components:  artist creativity, entertainment business expertise, and technical production skills.  The program will collaborate with Belmont University on the joint use of their curriculum, technical facilities and equipment specifications, training, dual credit course offerings, and will also offer internships in some of the most varied music environments in the world.

The program will be seeded through a title III Developing Institutions grant which has been awarded to Honolulu Community College Native Hawaiian Center, and will provide for some basic program development of course offerings in coordination with Belmont University. 

PART VII

SECTION 16.  Universities that generate new knowledge and discoveries can be important contributors in developing a state’s technology-based economy.  But for a university to make that contribution there must be effective mechanisms to move innovation into the marketplace.  At the University of Hawaii, commercialization assistance is provided by the office of technology transfer and economic development.  Activities include securing patents, seeking licensing opportunities, and assisting university researchers to transform ideas and innovations into products ready for commercialization.  The office of technology transfer and economic development’s ability to fulfill its mandate would be enhanced by collaboration with commercialization experts and funding from the private sector.

The purpose of this part is to enhance the ability of the office of technology transfer and economic development to increase commercialization of the University of Hawaii discoveries by providing funds to the department of business, economic development and tourism to fund a partnership with a qualified and experienced private sector entity to work with the office of technology transfer and economic development.  This partnership will provide the University of Hawaii with resources and expertise to ramp up the number of discoveries disclosed and the number of partnerships and arrangements to commercialize those discoveries.  The department of business, economic development, and tourism; the private sector partner; and the University of Hawaii will contribute to this commercialization joint venture; and the private sector partner and the University of Hawaii will share in the return of their efforts.

PART VIII

SECTION 17.  There is appropriated out of the general revenues of the State of Hawaii the sum of $220,000 or so much thereof as may be necessary for fiscal year 2007-2008, and the sum of $315,000 or so much thereof as may be necessary for the fiscal year 2008-2009, for the purposes of improving the State's ability to measure the productivity of and progress toward achieving innovation in Hawaii's economy as well as to assess the effectiveness of measures enacted by the legislature to improve Hawaii's economic situation under part III of this Act. Of the sum appropriated, $140,000 in fiscal year 2007-2008 and $140,000 in fiscal years 2008-2009 shall be for the purpose of hiring two permanent full-time equivalent economist positions in the department of business, economic development, and tourism.  The sum appropriated shall be expended by the department of business, economic development, and tourism.

SECTION 18.  There is appropriated out of the general revenues of the State of Hawaii the sum of $240,000 or so much thereof as may be necessary for the fiscal year 2007-2008 and the sum of $240,000 or so much thereof as may be necessary for the fiscal year 2008-2009 for the lease agreement and guaranty between the high technology development corporation and the developers or owners of the Asia Pacific International Research Center to carry out the purposes of this Act.  The sums appropriated shall be expended by the high technology development corporation, an agency administratively attached to the department of business, economic development, and tourism.

     SECTION 19.  There is appropriated out of the general revenues of the State of Hawaii the sum of $756,000, or so much thereof as may be necessary, for fiscal year 2007-2008 and the sum of $356,300, or so much thereof as may be necessary, for fiscal year 2008-2009 for the purpose of facility improvements, equipment purchase, leasing, operating, and maintaining a digital media incubator facility.  Of the sum appropriated, $450,000 in fiscal year 2007-2008, and $300,300 in fiscal year 2008-2009 shall be expended by the department of business, economic development, and tourism for the purposes of this Act.  Of the sum appropriated, $325,000 in fiscal year 2007-2008, and $55,000 in fiscal year 2008-2009 shall be expended by the University of Hawaii Honolulu Community College for the purposes of this Act.

SECTION 20.  There is appropriated out of the general revenues of the State of Hawaii the sum of $2,405,500, or so much thereof as may be necessary, for fiscal year 2007-2008 and the sum of $220,000, or so much thereof as may be necessary, for fiscal year 2008-2009 to carry out the purpose of leasing, operating, and maintaining a music & entertainment business training center.  The sum appropriated shall be expended by the University of Hawaii Honolulu Community College for the purposes of this Act.

     SECTION 21.  There is appropriated out of the general revenues of the State of Hawaii the sum of $240,000, or so much thereof as may be necessary for fiscal year 2007-2008, and $240,000, or so much thereof as may be necessary for fiscal year 2008-2009 for the public-private University research commercialization partnership.  The sum appropriated shall be expended by the department of business, economic development, and tourism for the purposes of this Act.

     SECTION 22.  Any sum invested in the Hawaii innovation investment fund by the employees' retirement system, private investors, or other sources up to $100,000,000 may be expended by the Hawaii strategic development corporation in fiscal years 2007-2008 and 2008-2009 for the purposes of this Act.

SECTION 23.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

SECTION 24.  This Act shall take effect on July 1, 2007.

 

 

INTRODUCED BY:

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