HOUSE OF REPRESENTATIVES

H.B. NO.

580

TWENTY-SIXTH LEGISLATURE, 2011

 

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO SCHOOLS.

 

 

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

 


     SECTION 1.  The legislature finds that the certificate of participation is a method of financing capital improvement projects in which an investor buys a share of the lease revenues generated from an agreement made between the government and the developer, rather than the bond being issued by the government and secured by those lease revenues.  Specifically, under this method of financing, the department of budget and finance enters into a lease agreement with a developer to front the financing, thereby enabling a capital improvement project to be designed and built prior to the expending state agency's obtaining the necessary capital improvement project appropriation from the legislature.  Certificates of participation have been used to finance the building of the state office building at Kapolei and to finance the purchase of the capitol district office building (Hemmeter Building).

     The primary advantages of certificate of participation financing are speed and lower costs.  Projects will be completed sooner than under the traditional method of financing, through bond appropriation and the ensuing allotment process over an incremental period of years.  Moreover, lower costs will ensue because the design and construction phases of a project can actually be packaged together, rather than be artificially separated by fiscal years.  The primary disadvantage is its complexity, since it requires coordination between the departments of budget and finance, accounting and general services, and the attorney general, the governor, and the legislature.  However, given the current dire state of Hawaii's economy, the advantage of lower costs easily outweighs the disadvantage of administrative complexity.

     The legislature further finds that the department of education is currently pursuing the use of certificates of participation as a method to finance new school construction that will be built on land owned by a developer.  There are three new elementary schools in the board of education's capital improvement project budget designated as top priority.  They are Royal Kunia elementary school on the slope mauka of Waipahu on Oahu; Maui Lani elementary school in Kahului, Maui; and Ocean Pointe elementary school in Ewa Beach, Oahu.  All are in locations where there is large population growth and the enrollments in adjacent schools exceed capacity.  Each of these potential school sites is owned by developers who are interested in building schools, not only because the site meets the need for capacity but also because a new school is an attractive marketing tool.  The developers have expressed an interest in partnering with the State to build schools.

     The purpose of this Act is to:

     (1)  Clarify that the department of education is authorized to enter into financing agreements or issue certificates of participation for the acquisition and development of public school facilities and any lands for these facilities;

     (2)  Direct the department of education to enter into a financing agreement with a private developer for the planning, design, and construction of the Royal Kunia elementary school II, using certificates of participation; and

     (3)  Appropriate state educational facilities improvement special funds for the purposes of this Act.

     SECTION 2.  Section 302A-1506, Hawaii Revised Statutes, is amended to read as follows:

     "§302A-1506  Public school facilities.  The department may enter into [such] contracts, leases, lease-purchase agreements, financing agreements or certificates of participation pursuant to chapter 37D and section 36‑32, or other transactions as may be necessary for the acquisition of public school facilities, including any lands for these facilities, on such terms as it may deem appropriate with the concurrence of the director of finance."

     SECTION 3.  Pursuant to section 36‑32, Hawaii Revised Statutes, the department of education shall enter into a financing agreement with a private developer for the planning, design, and construction of Royal Kunia elementary school II at Kunia, Oahu, Hawaii, using certificates of participation meeting the requirements of chapter 37D, Hawaii Revised Statutes.

     SECTION 4.  There is appropriated out of the state educational facilities improvement special fund of the State of Hawaii the sum of $           or so much thereof as may be necessary for fiscal year 2011-2012 for the planning, design, and construction of Royal Kunia elementary school II at Kunia, Oahu, Hawaii; provided that the remaining costs necessary to complete the project shall also be eligible for funding through a financing agreement or issuance of certificates of participation.

     The sum appropriated shall be expended by the department of education for the purposes of this Act.

     SECTION 5.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 6.  This Act shall take effect on July 1, 2011.

 

INTRODUCED BY:

_____________________________

 

 


 


 

Report Title:

Public School Facilities; Royal Kunia Elementary; Certificate of Participation; Appropriation

 

Description:

Clarifies that DOE may enter into financing agreements or issue certificates of participation (COP) to acquire public school facilities.  Directs DOE to execute a financing agreement for the planning, design, and construction of Royal Kunia Elementary School II using COP.  Appropriates funds.

 

 

 

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