STAND. COM. REP. NO. 1140

                                   Honolulu, Hawaii
                                                     , 1999

                                   RE:  H.B. No. 367
                                        H.D. 1
                                        S.D. 1




Honorable Norman Mizuguchi
President of the Senate
Twentieth State Legislature
Regular Session of 1999
State of Hawaii

Sir:

     Your Committee on Economic Development, to which was
referred H.B. No. 367, H.D. 1, entitled: 

     "A BILL FOR AN ACT RELATING TO WATER CONSERVATION,"

begs leave to report as follows:

     The purpose of this measure is to establish a tax credit for
farmers and ranchers who install agricultural water storage
facilities for drought mitigation purposes.

     Testimony in support of this measure was received from the
City and County of Honolulu Board of Water Supply, County of Maui
Board of Water Supply, County Council for the County of Maui,
Central Maui Soil and Water Conservation District, Hawaii Farm
Bureau, Kohala County Hawaii Farm Bureau Federation, Maui County
Farm Bureau, Maui Farmers' Cooperative Exchange, Kula Grown
Vegetable Farm, Maui Pineapple Company, Ltd., Ulupalakua Ranch,
Inc., and one concerned farmer.

     Testimony in support of this measure with amendments was
received from the Big Island Farm Bureau.  Testimony in
opposition to this measure was received from the Department of
Taxation.  Comments were presented by the Hawaii Tax Foundation.

     Your Committee finds that several drought-like conditions in
recent years have required the counties to mandate restrictions
on watering activities.  Contractors and farmers have all

 
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                                   STAND. COM. REP. NO. 1140
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sustained economic losses through forced reductions in water
usage.  

     Your Committee finds that this measure will promote water
storage and conservation which is vital to this State which has
been under the threat of drought in recent years.  This in turn,
will increase agricultural potential and help to resolve the
water use problems in the State.

     Your Committee has amended this measure by:

     (1)  Specifying the amount of allowable credit to be ten
          percent of the investment paid by the taxpayer;

     (2)  Requiring the facility constructed with the qualified
          water storage investment have a minimum capacity of
          10,000 rather than 1,000,000 gallons;

     (3)  Amending the definition of "qualified water storage
          investment" by replacing the county Department of Water
          Supply with the Department of Agriculture as the entity
          responsible to certify whether the construction of a
          new agricultural water storage facility or the
          expansion of an existing agricultural water storage
          facility is necessary for drought mitigation purposes;
          and 

     (4)  Making technical, nonsubstantive changes for clarity
          and style.

     As affirmed by the record of votes of the members of your
Committee on Economic Development that is attached to this
report, your Committee is in accord with the intent and purpose
of H.B. No. 367, H.D. 1, as amended herein, and recommends that
it pass Second Reading in the form attached hereto as H.B.
No. 367, H.D. 1, S.D. 1, and be referred to the Committee on Ways
and Means.

                                   Respectfully submitted on
                                   behalf of the members of the
                                   Committee on Economic
                                   Development,



                                   ______________________________
                                   LORRAINE R. INOUYE, Chair

 
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