REPORT TITLE:
SPRBs; Private Schools


DESCRIPTION:
Proposes amendments to article VII, section 12, and article X,
section 12, of the Hawaii Constitution, to authorize the issuance
of special purpose revenue bonds to finance the construction and
renovation of educational facilities at independent not-for-
profit elementary and secondary schools, universities and
colleges.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2820
HOUSE OF REPRESENTATIVES                H.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO EDUCATION.



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

 1      SECTION 1.  The purpose of this Act is to propose amendments
 
 2 to article VII, section 12, and article X, section 1, of the
 
 3 Constitution of the State of Hawaii, and to chapter 39A, Hawaii
 
 4 Revised Statutes, to authorize the issuance of special purpose
 
 5 revenue bonds to finance the construction and renovation of
 
 6 educational facilities at independent not-for-profit elementary
 
 7 and secondary schools, and universities and colleges.
 
 8      SECTION 2.  Article VII, section 12, of the Constitution of
 
 9 the State of Hawaii is amended to read as follows:
 
10              "DEFINITIONS; ISSUANCE OF INDEBTEDNESS
 
11      Section 12.  For the purposes of this article: 
 
12      1.  The term "bonds" shall include bonds, notes and other
 
13 instruments of indebtedness.
 
14      2.  The term "general obligation bonds" means all bonds for
 
15 the payment of the principal and interest of which the full faith
 
16 and credit of the State or a political subdivision are pledged
 
17 and, unless otherwise indicated, includes reimbursable general
 
18 obligation bonds.
 
19      3.  The term "net revenues" or "net user tax receipts" means
 

 
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                                     H.B. NO.           
                                                        
                                                        


 1 the revenues or receipts derived from:
 
 2      a.   A public undertaking, improvement or system remaining
 
 3           after the costs of operation, maintenance and repair of
 
 4           the public undertaking, improvement or system, and the
 
 5           required payments of the principal of and interest on
 
 6           all revenue bonds issued therefor, have been made; or
 
 7      b.   Any payments or return on security under a loan program
 
 8           or a loan thereunder, after the costs of operation and
 
 9           administration of the loan program, and the required
 
10           payments of the principal of and interest on all
 
11           revenue bonds issued therefor, have been made.
 
12      4.  The term "person" means an individual, firm,
 
13 partnership, corporation, association, cooperative or other legal
 
14 entity, governmental body or agency, board, bureau or other
 
15 instrumentality thereof, or any combination of the foregoing.
 
16      5.  The term "rates, rentals and charges" means all revenues
 
17 and other moneys derived from the operation or lease of a public
 
18 undertaking, improvement or system, or derived from any payments
 
19 or return on security under a loan program or a loan thereunder;
 
20 provided that insurance premium payments, assessments and
 
21 surcharges, shall constitute rates, rentals and charges of a
 
22 state property insurance program.
 
23      6.  The term "reimbursable general obligation bonds" means
 

 
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                                     H.B. NO.           
                                                        
                                                        


 1 general obligation bonds issued for a public undertaking,
 
 2 improvement or system from which revenues, or user taxes, or a
 
 3 combination of both, may be derived for the payment of the
 
 4 principal and interest as reimbursement to the general fund and
 
 5 for which reimbursement is required by law, and, in the case of
 
 6 general obligation bonds issued by the State for a political
 
 7 subdivision, general obligation bonds for which the payment of
 
 8 the principal and interest as reimbursement to the general fund
 
 9 is required by law to be made from the revenue of the political
 
10 subdivision.
 
11      7.  The term "revenue bonds" means all bonds payable from
 
12 the revenues, or user taxes, or any combination of both, of a
 
13 public undertaking, improvement, system or loan program and any
 
14 loan made thereunder and secured as may be provided by law,
 
15 including a loan program to provide loans to a state property
 
16 insurance program providing hurricane insurance coverage to the
 
17 general public.
 
18      8.  The term "special purpose revenue bonds" means all bonds
 
19 payable from rental or other payments made to an issuer by a
 
20 person pursuant to contract and secured as may be provided by
 
21 law.
 
22      9.  The term "user tax" means a tax on goods or services or
 
23 on the consumption thereof, the receipts of which are
 

 
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                                     H.B. NO.           
                                                        
                                                        


 1 substantially derived from the consumption, use or sale of goods
 
 2 and services in the utilization of the functions or services
 
 3 furnished by a public undertaking, improvement or system;
 
 4 provided that mortgage recording taxes shall constitute user
 
 5 taxes of a state property insurance program.
 
 6      The legislature, by a majority vote of the members to which
 
 7 each house is entitled, shall authorize the issuance of all
 
 8 general obligation bonds, bonds issued under special improvement
 
 9 statutes and revenue bonds issued by or on behalf of the State
 
10 and shall prescribe by general law the manner and procedure for
 
11 such issuance.  The legislature by general law shall authorize
 
12 political subdivisions to issue general obligation bonds, bonds
 
13 issued under special improvement statutes and revenue bonds and
 
14 shall prescribe the manner and procedure for such issuance.  All
 
15 such bonds issued by or on behalf of a political subdivision
 
16 shall be authorized by the governing body of such political
 
17 subdivision.
 
18      Special purpose revenue bonds shall only be authorized or
 
19 issued to finance facilities of or for, or to loan the proceeds
 
20 of such bonds to assist:
 
21      1.   Manufacturing, processing or industrial enterprises;
 
22      2.   Utilities serving the general public;
 
23      3.   Health care facilities provided to the general public
 

 
Page 5                                                     2820
                                     H.B. NO.           
                                                        
                                                        


 1           by not-for-profit corporations;
 
 2      4.   Early childhood education and care facilities provided
 
 3           to the general public by not-for-profit corporations;
 
 4           [or]
 
 5      5.   Low and moderate income government housing programs[,
 
 6           each of which is hereinafter referred to in this
 
 7           paragraph as a special purpose entity.]; or
 
 8      6.   Educational facilities provided to the general public
 
 9           at independent not-for-profit elementary and secondary
 
10           schools, and universities and colleges, each of which
 
11           is hereinafter referred to as a special purpose entity.
 
12      The legislature, by a two-thirds vote of the members to
 
13 which each house is entitled, may enact enabling legislation for
 
14 the issuance of special purpose revenue bonds separately for each
 
15 special purpose entity, and, by a two-thirds vote of the members
 
16 to which each house is entitled and by separate legislative bill,
 
17 may authorize the State to issue special purpose revenue bonds
 
18 for each single project or multi-project program of each special
 
19 purpose entity; provided that the issuance of such special
 
20 purpose revenue bonds is found to be in the public interest by
 
21 the legislature.  The legislature may enact enabling legislation
 
22 to authorize political subdivisions to issue special purpose
 
23 revenue bonds.  If so authorized, a political subdivision by a
 

 
Page 6                                                     2820
                                     H.B. NO.           
                                                        
                                                        


 1 two-thirds vote of the members to which its governing body is
 
 2 entitled and by separate ordinance may authorize the issuance of
 
 3 special purpose revenue bonds for each single project or multi-
 
 4 project program of each special purpose entity; provided that the
 
 5 issuance of such special purpose revenue bonds is found to be in
 
 6 the public interest by the governing body of the political
 
 7 subdivision.  No special purpose revenue bonds shall be secured
 
 8 directly or indirectly by the general credit of the issuer or by
 
 9 any revenues or taxes of the issuer other than receipts derived
 
10 from payments by a person under contract or from any security for
 
11 such contract or special purpose revenue bonds and no moneys
 
12 other than such receipts shall be applied to the payment thereof.
 
13 The governor shall provide the legislature in November of each
 
14 year with a report on the cumulative amount of all special
 
15 purpose revenue bonds authorized and issued, and such other
 
16 information as may be necessary."
 
17      SECTION 3.  Article X, section 1, of the Constitution of the
 
18 State of Hawaii is amended to read as follows:
 
19                         "PUBLIC EDUCATION
 
20      Section 1.  The State shall provide for the establishment,
 
21 support and control of a statewide system of public schools free
 
22 from sectarian control, a state university, public libraries and
 
23 such other educational institutions as may be deemed desirable,
 

 
Page 7                                                     2820
                                     H.B. NO.           
                                                        
                                                        


 1 including physical facilities therefor.  There shall be no
 
 2 discrimination in public educational institutions because of
 
 3 race, religion, sex or ancestry; nor shall public funds be
 
 4 appropriated for the support or benefit of any sectarian or
 
 5 private educational institution, except that proceeds of special
 
 6 purpose revenue bonds authorized or issued under section 12 of
 
 7 article VII may be appropriated to finance or assist [not-for-
 
 8 profit]:
 
 9      1.   Not-for-profit corporations that provide early
 
10           childhood education and care facilities serving the
 
11           general public[.]; and
 
12      2.   Independent not-for-profit elementary and secondary
 
13           schools, and universities and colleges that provide
 
14           educational facilities serving the general public."
 
15                              PART II
 
16      SECTION 4.  Chapter 39A, Hawaii Revised Statutes, is amended
 
17 by adding a new part to be appropriately designated and to read
 
18 as follows:
 
19        "PART .  ASSISTING NOT-FOR-PROFIT ELEMENTARY AND
 
20              SECONDARY SCHOOLS, AND UNIVERSITIES AND
 
21                COLLEGES SERVING THE GENERAL PUBLIC
 
22      39A-A  Definitions.  Whenever used in this part, unless a
 
23 different meaning clearly appears from the context:
 

 
Page 8                                                     2820
                                     H.B. NO.           
                                                        
                                                        


 1      "Department" means the department of budget and finance.
 
 2      "Educational facility", "facility", or "project" means any
 
 3 facility for each single project or multiproject program of a
 
 4 project party, and includes any structure or building suitable
 
 5 for use as a classroom; academic building; auditorium;
 
 6 laboratory; library; research facility; dormitory; dining hall;
 
 7 food service and preparation facility; student union; and
 
 8 parking, maintenance, storage, or utility facility and other
 
 9 structures or facilities related thereto or required or useful
 
10 for the instruction of students or the conducting of research or
 
11 the operation of an institution for higher education, and all
 
12 necessary, useful, and related equipment, furnishings, and
 
13 appurtenances, and including the acquisition, preparation, and
 
14 development of all real and personal property necessary or
 
15 convenient as a site or sites for any such structure or facility,
 
16 and including the refinancing of outstanding obligations of a
 
17 project party relating to any of the foregoing.  "Educational
 
18 facility", "facility", or "project" does not include any property
 
19 used or to be used primarily for sectarian instruction or study
 
20 or as a place for devotional activities or religious worship.
 
21      "Elementary school" means a school which provides elementary
 
22 education.
 
23      "Project agreement" means any agreement entered into under
 

 
Page 9                                                     2820
                                     H.B. NO.           
                                                        
                                                        


 1 this part by the department with a project party providing for
 
 2 the issuance of special purpose revenue bonds to finance
 
 3 facilities of a project party or for a project party or to loan
 
 4 the proceeds of such bonds to assist independent not-for-profit
 
 5 elementary and secondary schools, and universities and colleges
 
 6 that serve the general public, including without limitation any
 
 7 loan agreement.
 
 8      "Project party" means an independent not-for-profit
 
 9 elementary school, secondary school, university, or college that
 
10 serves the general public.
 
11      "Refinancing of outstanding obligations" or "refinancing"
 
12 means the liquidation, retirement, or provision for retirement
 
13 with the proceeds of bonds issued by the State, of any
 
14 indebtedness of a project party incurred to finance or aid in
 
15 financing a lawful purpose of such project party not financed
 
16 pursuant to this part which constitutes an independent not-for-
 
17 profit elementary school, secondary school, university, or
 
18 college or consolidation of such indebtedness with indebtedness
 
19 of the State incurred for an independent not-for-profit
 
20 elementary and secondary schools, and universities and colleges
 
21 related to the purpose for which the indebtedness of the project
 
22 party was initially incurred.
 
23      "Secondary school" means a school which provides secondary
 

 
Page 10                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1 education, except that it does not include any education provided
 
 2 beyond grade twelve.
 
 3      "Special purpose revenue bonds" or "bonds" means bonds,
 
 4 notes, or other evidences of indebtedness of the State issued
 
 5 pursuant to this part.
 
 6      "University" or "college" means an institution for higher
 
 7 education other than a public college, but does not include
 
 8 private trade, vocational, or technical schools as defined in
 
 9 section 302A-101.
 
10      39A-B Department powers as to independent not-for-profit
 
11 universities, colleges, or other schools.  In addition to powers
 
12 which it may now have, the department shall have all powers
 
13 necessary or convenient to accomplish the purposes of this part.
 
14 The powers of the department include, but are not limited to, the
 
15 following:
 
16      (1)  Notwithstanding and without compliance with section
 
17           103-7, but with the approval of the governor, to enter
 
18           into and carry out a project agreement, or an amendment
 
19           or supplement to an existing project agreement, with a
 
20           project party, and to enter into and carry out any
 
21           agreement whereby the obligation of a project party
 
22           under a project agreement will be unconditionally
 
23           guaranteed by a person other than a project party.
 

 
Page 11                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1      (2)  To issue special purpose revenue bonds pursuant to and
 
 2           in accordance with this part.
 
 3      (3)  To lend the proceeds of the special purpose revenue
 
 4           bonds issued for a project to the project party for use
 
 5           and application by the project party for the
 
 6           acquisition, purchase, construction, reconstruction,
 
 7           improvement, betterment, extension, or refinancing of
 
 8           outstanding obligations related to a project.
 
 9      (4)  As security for the payment of the principal of,
 
10           premium, if any, and interest of the special purpose
 
11           revenue bonds issued for this project, to pledge,
 
12           assign, hypothecate, or otherwise encumber all or any
 
13           part of the revenues and receipts derived or to be
 
14           derived by the department under the project agreement
 
15           for the project for which such bonds are issued; to
 
16           pledge and assign the interest and rights of the
 
17           department under the project agreement or other
 
18           agreement with respect to such project or such special
 
19           purpose revenue bonds; and to pledge and assign any
 
20           bond, debenture, note, or other evidence of
 
21           indebtedness received by the department with respect to
 
22           such project; or any combination of the foregoing.
 
23      (5)  To extend or renew any project agreement or any other
 

 
Page 12                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1           agreement related thereto; provided that any such
 
 2           renewal or extension shall be subject to the approval
 
 3           of the governor unless made in accordance with
 
 4           provisions for such extension or renewal contained in a
 
 5           project agreement or related agreement theretofore
 
 6           approved by the governor.
 
 7      (6)  To do any and all things necessary or convenient to
 
 8           carry out its purposes and exercise the powers given
 
 9           and granted in this part.
 
10 When the department finances or refinances a project by the
 
11 issuance of special purpose revenue bonds as contemplated by this
 
12 part, the State shall not exercise the power of eminent domain to
 
13 acquire a project or any part thereof for lease or transfer to a
 
14 project party, nor shall the State operate a project on behalf of
 
15 a project party.
 
16      39A-C  Compliance with state and local law.  The issuance
 
17 of special purpose revenue bonds with respect to any project
 
18 under this part shall not relieve any project party or other user
 
19 of such project from the laws, ordinances, and rules of the State
 
20 or any political subdivision thereof, or any departments or
 
21 boards thereof with respect to the construction, operation, and
 
22 maintenance of projects, zoning laws or regulations, obtaining of
 
23 building permits, compliance with building and health codes and
 

 
Page 13                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1 other laws, ordinances, or rules of similar nature pertaining to
 
 2 the project, and such laws shall be applicable to such party or
 
 3 such other user to the same extent it would be if the costs of
 
 4 the project were directly financed by the project party.
 
 5      39A-D  Conditions precedent to negotiating and entering
 
 6 into a project agreement.  The department prior to entering into
 
 7 negotiations with any project party shall require that the State
 
 8 shall be reimbursed for any and all costs and expenses (direct or
 
 9 indirect) incurred by it in implementing and administering this
 
10 part, as determined by the department, even though a project
 
11 agreement may not be entered into and may further require the
 
12 deposit of moneys with the department for such reimbursement.
 
13 Any amount of such deposit in excess of the amount required to
 
14 reimburse the State shall be returned by the department to the
 
15 party which has made such deposit.  The State shall not be
 
16 required to pay to the project party any interest or earnings on
 
17 such deposit.
 
18      The department shall not enter into any project agreement
 
19 with respect to any project unless the department shall first
 
20 find and determine either that the project party is a responsible
 
21 party, whether by reason of economic assets or experience in the
 
22 type of enterprise to be undertaken through such project, or
 
23 otherwise, or that the obligations of the project party under the
 

 
Page 14                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1 project agreement will be unconditionally guaranteed by a person
 
 2 who is a responsible party, whether by reason of economic assets
 
 3 or experience in the type of enterprise to be undertaken through
 
 4 such project or otherwise.
 
 5      39A-E Project agreement.  No special purpose revenue bonds
 
 6 shall be issued unless at the time of issuance the department
 
 7 shall have entered into a project agreement with respect to the
 
 8 project for the financing or refinancing of which such revenue
 
 9 bonds are to be issued.  Any project agreement entered into by
 
10 the department shall contain provisions unconditionally
 
11 obligating the project party:
 
12      (1)  To pay to the department during the period or term of
 
13           the project agreement, exclusive of any renewal or
 
14           extension thereof and whether or not the project is
 
15           used or occupied by the project party, such sum or
 
16           sums, at such time or times and in such amounts that
 
17           will be at least sufficient:
 
18           (A)  To pay the principal and interest on all special
 
19                purpose revenue bonds issued with respect to the
 
20                project as and when the same become due, including
 
21                any premium payable upon any required redemption
 
22                of such bonds;
 
23           (B)  To establish or maintain such reserve, if any, as
 

 
Page 15                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1                may be required by the instrument authorizing or
 
 2                securing the special purpose revenue bonds;
 
 3           (C)  To pay all fees and expenses (including the fees
 
 4                and expenses of the paying agents and trustees)
 
 5                incurred in connection with such special purpose
 
 6                revenue bonds; and
 
 7           (D)  To pay the expenses (direct or indirect) incurred
 
 8                by the State, as determined by the department, in
 
 9                administering such bonds or in carrying out the
 
10                project agreement.
 
11      (2)  To operate, maintain, and repair the project as long as
 
12           the same is used as provided in the project agreement
 
13           and to pay all costs of such operation, maintenance,
 
14           and repair.
 
15 Moneys received by the department pursuant to paragraph (1)(D)
 
16 shall not be, nor be deemed to be, revenues of the project and
 
17 shall be paid into the general fund of the State.
 
18      39A-F  Issuance of special purpose revenue bonds to finance
 
19 projects.  In addition to the other powers which it may otherwise
 
20 have, the department may issue special purpose revenue bonds to
 
21 finance or refinance, the costs of facilities of, or for, or to
 
22 loan the proceeds of such bonds to assist project parties.  All
 
23 revenue bonds issued under this part are special purpose revenue
 

 
Page 16                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1 bonds and the provisions of part III of chapter 39 shall not
 
 2 apply thereto.  All special purpose revenue bonds shall be issued
 
 3 in the name of the department and not in the name of the State.
 
 4      The department, in determining the cost of any project, may
 
 5 also include the following:
 
 6      (1)  Financing charges, fees, and expenses of any trustee
 
 7           and paying agents for special purpose revenue bonds
 
 8           issued to pay the cost of such project;
 
 9      (2)  Interest on such bonds and the expenses of the State in
 
10           connection with such bonds and the project to be
 
11           financed from the proceeds of such bonds accruing or
 
12           incurred prior to and during the estimated period of
 
13           construction and not exceeding twelve months
 
14           thereafter;
 
15      (3)  Amounts necessary to establish or increase reserves for
 
16           the special purpose revenue bonds;
 
17      (4)  The cost of plans, specifications, studies, surveys,
 
18           and estimates of costs and revenues;
 
19      (5)  Other expenses incidental to determining the
 
20           feasibility or practicability of the project;
 
21      (6)  Administration expenses;
 
22      (7)  Legal, accounting, consulting, and other special
 
23           service fees;
 

 
Page 17                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1      (8)  Interest cost incurred by the project party with
 
 2           respect to the project prior to the issuance of the
 
 3           special purpose revenue bonds; and
 
 4      (9)  Such other costs, commissions, and expenses incidental
 
 5           to the construction, acquisition, reconstruction,
 
 6           renovation, rehabilitation, improvement, betterment,
 
 7           operation, maintenance, or extension of the project,
 
 8           the financing, placing of same in operation, and the
 
 9           issuance of the special purpose revenue bonds, whether
 
10           incurred prior to or after the issuance of such bonds.
 
11      The legislature finds and determines that the exercise of
 
12 the powers vested in the department by this part constitutes
 
13 assistance to independent not-for-profit elementary and secondary
 
14 schools, and universities and colleges serving the general public
 
15 and that the issuance of special purpose revenue bonds to finance
 
16 or to refinance facilities of, or for, or to loan the proceeds of
 
17 such bonds to assist, project parties, is in the public interest.
 
18      39A-G  Authorization of special purpose revenue bonds.(a)
 
19 Special purpose revenue bonds for each single project or multi-
 
20 project program shall be authorized by a separate act of the
 
21 legislature, by an affirmative vote of two-thirds of the members
 
22 to which each house is entitled; provided that the legislature
 
23 shall find that the issuance of such bonds is in the public
 

 
Page 18                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1 interest.  Special purpose revenue bonds issued pursuant to this
 
 2 part may be in one or more series for each project.  The special
 
 3 purpose revenue bonds of each issue shall be dated, shall bear
 
 4 interest at such rate or rates, shall mature at such time or
 
 5 times not exceeding forty years from their date or dates, shall
 
 6 have such rank or priority and may be made redeemable before
 
 7 maturity at the option of the department, at such price or prices
 
 8 and under such terms and conditions, all as may be determined by
 
 9 the department.  The department shall determine the form of the
 
10 special purpose revenue bonds, including any interest coupons to
 
11 be attached thereto, and the manner of execution of the special
 
12 purpose revenue bonds, and shall fix the denomination or
 
13 denominations of the special purpose revenue bonds and the place
 
14 or places of payment of principal and interest, which may be at
 
15 any bank or trust company within or without the State.  The
 
16 special purpose revenue bonds may be issued in coupon or in
 
17 registered form, or both, as the department may determine, and
 
18 provisions may be made for the registration of any coupon bonds
 
19 as to principal alone and also as to both principal and interest,
 
20 and for the reconversion into coupon bonds of any bonds
 
21 registered as to both principal and interest.  The department may
 
22 sell special purpose revenue bonds in such manner, either at
 
23 public or private sale, and for such price as it may determine.
 

 
Page 19                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1      (b)  Prior to the preparation of definitive special purpose
 
 2 revenue bonds, the department may issue interim receipts or
 
 3 temporary bonds, with or without coupons, exchangeable for
 
 4 definitive bonds when such bonds have been executed and are
 
 5 available for delivery.
 
 6      (c)  Should any bond issued under this part or any coupon
 
 7 appertaining thereto become mutilated or be lost, stolen, or
 
 8 destroyed, the department may cause a new bond or coupon of like
 
 9 date, number, and tenor to be executed and delivered in exchange
 
10 and substitution for, and upon the cancellation of such mutilated
 
11 bond or coupon, or in lieu of and in substitution for such lost,
 
12 stolen, or destroyed bond or coupon.  Such new bond or coupon
 
13 shall not be executed or delivered until the holder of the
 
14 mutilated, lost, stolen, or destroyed bond or coupon has:
 
15      (1)  Paid the reasonable expense and charges in connection
 
16           therewith;
 
17      (2)  In the case of a lost, stolen, or destroyed bond or
 
18           coupon, has filed with the department or its fiduciary
 
19           evidence satisfactory to such department or its
 
20           fiduciary that such bond or coupon was lost, stolen, or
 
21           destroyed and that the holder was the owner thereof;
 
22           and
 
23      (3)  Furnished indemnity satisfactory to the department.
 

 
Page 20                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1      (d)  The department in its discretion may provide that CUSIP
 
 2 identification numbers shall be printed on such bonds.  In the
 
 3 event such numbers are imprinted on any such bonds (1) no such
 
 4 number shall constitute a part of the contract evidenced by the
 
 5 particular bond upon which it is imprinted, and (2) no liability
 
 6 shall attach to the department or any officer or agent thereof,
 
 7 including any fiscal agent, paying agent, or registrar for such
 
 8 bonds, by reason of such numbers or any use made thereof,
 
 9 including any use thereof made by the department, any such
 
10 officer, or any such agent, or by reason of any inaccuracy,
 
11 error, or omission with respect thereto or in such use.  The
 
12 department in its discretion may require that all costs of
 
13 obtaining and imprinting such numbers shall be paid by the
 
14 purchaser of such bonds.  For the purposes of this subsection,
 
15 the term "CUSIP identification numbers" means the numbering
 
16 system adopted by the Committee for Uniform Security
 
17 Identification Procedures formed by the Securities Industry
 
18 Association.
 
19      39A-H  Special purpose revenue bond anticipation notes.
 
20 Whenever the department shall have authorized the issuance of
 
21 special purpose revenue bonds under this part, special purpose
 
22 revenue bond anticipation notes of the department may be issued
 
23 in anticipation of the issuance of such bonds and of the receipt
 

 
Page 21                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1 of the proceeds of sale thereof, for the purposes for which such
 
 2 bonds have been authorized.  All special purpose revenue bond
 
 3 anticipation notes shall be authorized by the department, and the
 
 4 maximum principal amount of such notes shall not exceed the
 
 5 authorized principal amount of such bonds.  The notes shall be
 
 6 payable solely from and secured solely by the proceeds of sale of
 
 7 the special purpose revenue bonds in anticipation of which the
 
 8 notes are issued and the revenues from which would be payable and
 
 9 by which would be secured such bonds; provided that to the extent
 
10 that the principal of the notes shall be paid from moneys other
 
11 than the proceeds of sale of such bonds, the maximum amount of
 
12 bonds in anticipation of which the notes are issued that has been
 
13 authorized shall be reduced by the amount of notes paid in such
 
14 manner.  The authorization, issuance, and the details of such
 
15 notes shall be governed by the provisions of this part with
 
16 respect to special purpose revenue bonds insofar as the same may
 
17 be applicable; provided that each note, together with all
 
18 renewals and extensions thereof, or refundings thereof by other
 
19 notes issued under this section, shall mature within five years
 
20 from the date of the original note.
 
21      39A-I  Powers with respect to and security for special
 
22 purpose revenue bonds.  In order to secure the payment of any of
 
23 the special purpose revenue bonds issued pursuant to this part,
 

 
Page 22                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1 and interest thereon, or in connection with such bonds, the
 
 2 department shall have the power as to such bonds:
 
 3      (1)  To pledge all or any part of the revenues derived by
 
 4           the department from the project agreement to the
 
 5           punctual payment of special purpose revenue bonds
 
 6           issued with respect to the project financed or
 
 7           refinanced from proceeds thereof, and interest thereon,
 
 8           and to covenant against thereafter pledging any such
 
 9           revenues or receipts to any other bonds or any other
 
10           obligations of the department for any other purpose,
 
11           except as otherwise stated in the law providing for the
 
12           issuance of additional special purpose revenue bonds to
 
13           be equally and ratably secured by a lien upon such
 
14           revenues;
 
15      (2)  To pledge and assign the interest of the department
 
16           under the project agreement and other agreements
 
17           related thereto and the rights, duties, and obligations
 
18           of the department thereunder, including the right to
 
19           receive revenues thereunder;
 
20      (3)  To covenant as to the use and disposition of the
 
21           proceeds from the sale of such bonds;
 
22      (4)  To covenant to set aside or pay over reserves and
 
23           sinking funds for such bonds and as to the disposition
 

 
Page 23                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1           thereof;
 
 2      (5)  To covenant and prescribe as to what happenings or
 
 3           occurrences shall constitute "events of default" and
 
 4           the terms and conditions upon which any or all of such
 
 5           bonds shall become or may be declared due before
 
 6           maturity and as to the terms and conditions upon which
 
 7           such declaration and its consequences may be waived;
 
 8      (6)  To covenant as to the rights, liabilities, powers, and
 
 9           duties arising upon the breach by it of any covenant,
 
10           conditions, or obligation;
 
11      (7)  To designate a national or state bank or trust company
 
12           within or without the State, incorporated in the United
 
13           States, to serve as trustee for the holders of the
 
14           special purpose revenue bonds and to enter into a trust
 
15           indenture or trust agreement or indenture of mortgage
 
16           with such trustee.  The trustee may be authorized by
 
17           the department to receive and receipt for, hold, and
 
18           administer the proceeds of the special purpose revenue
 
19           bonds issued for the project and to apply the same to
 
20           the purposes for which such bonds are issued, or to
 
21           receive and receipt for, hold, and administer the
 
22           revenues derived by the department under the project
 
23           agreement and to apply such revenues to the payment of
 

 
Page 24                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1           the principal and interest on such bonds, or both, and
 
 2           any excess revenues to the payment of expenses incurred
 
 3           by the State in administering such bonds or in carrying
 
 4           out the project agreement.  In the event that such
 
 5           trustee shall be appointed, any trust indenture or
 
 6           trust agreement or indenture of mortgage entered into
 
 7           by the department with the trustee may contain whatever
 
 8           covenants and provisions as may be necessary or
 
 9           convenient or desirable in order to secure such bonds.
 
10           The department may pledge and assign to the trustee the
 
11           interest of the department under the project agreement
 
12           and other agreements related thereto and the rights,
 
13           duties, and obligations of the department thereunder,
 
14           including the right to receive revenues thereunder.
 
15           The department may appoint the trustee to serve as
 
16           fiscal agent for the payment of the principal and
 
17           interest, and for the purchase, registration, transfer,
 
18           exchange, and redemption of the special purpose revenue
 
19           bonds, and may authorize and empower the trustee to
 
20           perform such functions with respect to such payment,
 
21           purchase, registration, transfer, exchange, and
 
22           redemption, as the department may deem necessary,
 
23           advisable, or expedient, including without limitation
 

 
Page 25                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1           the holding of the special purpose revenue bonds and
 
 2           coupons which have been paid and the supervision of the
 
 3           destruction thereof in accordance with law;
 
 4      (8)  To execute all instruments necessary or convenient in
 
 5           the exercise of the powers herein granted or in the
 
 6           performance of its covenants and duties; and
 
 7      (9)  To make such covenants and do any and all acts and
 
 8           things as may be necessary or convenient or desirable
 
 9           in order to secure such bonds, notwithstanding that
 
10           such covenants, acts, or things may not be enumerated
 
11           herein; it being the purpose hereof to give the
 
12           department power to do all things in the issuance of
 
13           such bonds and for their security that may be
 
14           consistent with the Constitution of the State of
 
15           Hawaii.
 
16      39A-J  Security for special purpose revenue bonds.  Special
 
17 purpose revenue bonds shall be payable solely from the revenues
 
18 derived by the department from payments made to the department
 
19 under the project agreement or other supplemental agreements
 
20 entered into with respect to the project, and shall be secured
 
21 solely by such revenues and by the pledges and assignments
 
22 authorized by this part.  All special purpose revenue bonds of
 
23 the same issue, subject to the prior and superior rights of
 

 
Page 26                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1 outstanding bonds, claims, obligations, or mechanic's and
 
 2 materialman's liens, shall have a prior and paramount lien on the
 
 3 revenues derived from the project agreement with respect to the
 
 4 project, for which the bonds have been issued, over and ahead of
 
 5 all special purpose revenue bonds of any issue payable from the
 
 6 revenues which may be subsequently issued and over and ahead of
 
 7 any claims or obligations of any nature against the revenues
 
 8 subsequently arising or subsequently incurred; provided that the
 
 9 right and privilege may be reserved by the department in the
 
10 trust indenture securing an issue of special purpose revenue
 
11 bonds to subsequently issue additional special purpose revenue
 
12 bonds, subject to legislative authorization of the issue as
 
13 provided in section 39A-G, or to permit the project party or
 
14 another party on its behalf to incur debt, from time to time,
 
15 payable from the revenues derived from such project agreement on
 
16 a parity with the first issue of the special purpose revenue
 
17 bonds and any subsequent issue of special purpose revenue bonds
 
18 and other debt issued or incurred in accordance with the
 
19 provisions of the trust indenture shall be secured equally and
 
20 ratably with the first issue of the special purpose revenue bond
 
21 without priority by reason of the date of sale, date of
 
22 execution, or date of delivery, by a lien on the revenues in
 
23 accordance with this part.
 

 
Page 27                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1      Notwithstanding any other provisions herein, all or part of
 
 2 the property constituting the project and all interest of the
 
 3 project party in the project and the revenues of the project
 
 4 party therefrom may be subjected to the present and future lien
 
 5 of any mortgage of the project party securing the project party's
 
 6 bonds, and the rights of the department and any trustee for the
 
 7 holders of the special purpose revenue bonds and the holders of
 
 8 the special purpose revenue bonds in the project and the revenues
 
 9 therefrom may be made subject to the prior lien of the project
 
10 party's mortgage.
 
11      39A-K Special purpose revenue bonds not a general
 
12 obligation of the State.  No holder or holders of any special
 
13 purpose revenue bonds issued under this part shall ever have the
 
14 right to compel any exercise of taxing power of the State to pay
 
15 such bonds or the interest thereon and no moneys other than the
 
16 revenues pledged to such bonds shall be applied to the payment
 
17 thereof.  Each special purpose revenue bond issued under this
 
18 part shall recite in substance that such bond, including interest
 
19 thereon, is not a general obligation of the State and is payable
 
20 solely from the revenues pledged to the payment thereof, and that
 
21 such bond is not secured directly or indirectly by the full faith
 
22 and credit or the general credit of the State or by any revenues
 
23 or taxes of the State other than the revenues specifically
 

 
Page 28                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1 pledged thereto.
 
 2      39A-L Validity of special purpose revenue bonds.  The
 
 3 special purpose revenue bonds bearing the signature or facsimile
 
 4 signature of officers on the date of the signing thereof shall be
 
 5 valid and sufficient for all purposes, notwithstanding that
 
 6 before the delivery thereof and payment therefor all the persons
 
 7 whose signatures appear thereon shall have ceased to be officers
 
 8 of the department.  The special purpose revenue bonds shall
 
 9 contain a recital that they are issued pursuant to this part,
 
10 which recital shall be conclusive evidence of their validity and
 
11 of the regularity of their issuance.
 
12      39A-M  Use of revenues derived from project agreement.  The
 
13 department shall have the right to appropriate, apply, or expend
 
14 the revenues derived with respect to the project agreement for a
 
15 project for the following purposes:
 
16      (1)  To pay when due all special purpose revenue bonds,
 
17           premium, if any, and interest thereon, for the payment
 
18           of which the revenues are or have been pledged,
 
19           charged, or otherwise encumbered, including reserves
 
20           therefor; and
 
21      (2)  To the extent not paid by the project party to provide
 
22           for all expenses of administration, operation, and
 
23           maintenance of the project, including reserves
 

 
Page 29                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1           therefor.
 
 2 Unless and until adequate provision has been made for the
 
 3 foregoing purposes, the department shall not transfer the
 
 4 revenues derived from the project agreement to the general fund
 
 5 of the State.
 
 6      39A-N  Special purpose revenue bonds exempt from taxation.
 
 7 Special purpose revenue bonds and the income therefrom issued
 
 8 pursuant to this part shall be exempt from all state, county, and
 
 9 municipal taxation except inheritance, transfer, and estate
 
10 taxes.
 
11      39A-O  Exemption from taxation of department property.  All
 
12 revenues derived by the department from any project or under the
 
13 project agreement pertaining thereto shall be exempt from all
 
14 state, county, and municipal taxation.  Any right, title, and
 
15 interest of the department in any project shall also be exempt
 
16 from all state, county, and municipal taxation.  Except as
 
17 otherwise provided by law, the interest of the project party or
 
18 user of such project in a project or under the project agreement
 
19 or related agreement shall not be exempt from taxation to a
 
20 greater extent than it would be if the costs of the project were
 
21 directly financed by the project party or other user.
 
22      39A-P  Refunding special purpose revenue bonds.  The
 
23 legislature, by act enacted by an affirmative vote of two-thirds
 

 
Page 30                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1 of the members to which each house is entitled, may authorize the
 
 2 issuance of refunding special purpose revenue bonds for the
 
 3 purpose of refunding any special purpose revenue bonds then
 
 4 outstanding and issued under this part, whether or not such
 
 5 outstanding special purpose revenue bonds have matured or are
 
 6 then subject to redemption.  The legislature is further
 
 7 authorized to provide, by act finally enacted by an affirmative
 
 8 vote of two-thirds of the members to which each house is
 
 9 entitled, for the issuance of a single issue of special purpose
 
10 revenue bonds for the combined purposes of (1) financing or
 
11 refinancing the cost of a project or improvement or expansion
 
12 thereof, and (2) refunding special purpose revenue bonds which
 
13 shall theretofore have been issued under this part and shall then
 
14 be outstanding, whether or not such outstanding special purpose
 
15 revenue bonds have matured or are then subject to redemption.
 
16 Nothing in this section shall require or be deemed to require the
 
17 legislature to elect to redeem or prepay special purpose revenue
 
18 bonds being refunded, or to redeem or prepay special purpose
 
19 revenue bonds being refunded which were issued in the form
 
20 customarily known as term bonds in accordance with any sinking
 
21 fund installment schedule specified in any law authorizing the
 
22 issuance thereof, or, in the event the department elects to
 
23 redeem or prepay any such bonds, to redeem or prepay as of any
 

 
Page 31                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1 particular date or dates.  The issuance of such special purpose
 
 2 revenue bonds, the maturities and other details thereof, and the
 
 3 rights and remedies of the holders thereof, and the rights,
 
 4 powers, privileges, duties, and obligations of the department
 
 5 with respect to the same, shall be governed by the foregoing
 
 6 provisions of this part insofar as the same may be applicable.
 
 7      39A-Q  Status of special purpose revenue bonds under
 
 8 Uniform Commercial Code.  Notwithstanding any of the provisions
 
 9 of this part or any recitals in any special purpose revenue bonds
 
10 issued under this part, all such special purpose revenue bonds
 
11 shall be deemed to be investment securities under the Uniform
 
12 Commercial Code, chapter 490, subject only to the provisions of
 
13 the special purpose revenue bonds pertaining to registration.
 
14      39A-R  Special purpose revenue bonds as legal investments
 
15 and lawful security.  The special purpose revenue bonds issued
 
16 pursuant to this part shall be and are declared to be legal and
 
17 authorized investments for banks, savings banks, trust companies,
 
18 savings and loan associations, insurance companies, credit
 
19 unions, fiduciaries, trustees, guardians, and for all public
 
20 funds of the State or other political corporations or
 
21 subdivisions of the State.  Such special purpose revenue bonds
 
22 shall be eligible to secure the deposit of any and all public
 
23 funds of the State and any and all public funds of counties or
 

 
Page 32                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1 other political corporations or subdivisions of the State, and
 
 2 such bonds shall be lawful and sufficient security for such
 
 3 deposits to the extent of their value when accompanied by all
 
 4 unmatured coupons appertaining thereto.
 
 5      39A-S  Access to and public disclosure of financial records
 
 6 of project party.(a)  Each project party with a project
 
 7 agreement with the department shall allow the department full
 
 8 access to its financial records.  Upon the request of the
 
 9 department for the examination of any such financial records, the
 
10 project party shall allow the department to examine the requested
 
11 records within a reasonably prompt time from the date of the
 
12 request.  If the department requests copies of the records, the
 
13 project party shall provide the copies.
 
14      (b)  To provide the public with full knowledge of the use of
 
15 the proceeds and benefits derived from special purpose revenue
 
16 bonds issued under this part, the department shall require each
 
17 project party with a project agreement with the department to
 
18 make available to the public all relevant financial records which
 
19 pertain to the use of or savings resulting from the use of
 
20 special purpose revenue bonds.
 
21      (c)  The department shall adopt rules under chapter 91 for
 
22 the purpose of this section.
 
23      39A-T  Estimate of benefits.(a)  Each project party with
 

 
Page 33                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1 a project agreement with the department shall estimate the
 
 2 benefits derived from the use of the proceeds of special purpose
 
 3 revenue bonds.  The benefits estimated shall be based on a
 
 4 comparison between the use of the proceeds of the special purpose
 
 5 revenue bonds instead of other means of financing and shall be in
 
 6 terms of dollars projected to be or actually saved by consumers
 
 7 of the services of the project party.  The format of and method
 
 8 for determining the estimates shall be established by the
 
 9 department and shall be uniform for each project party.
 
10      (b)  To promote public understanding of the role played by
 
11 special purpose revenue bonds in providing less costly services
 
12 by a project party to the general public, the department shall
 
13 take appropriate steps to ensure public access to and scrutiny of
 
14 the estimates determined under subsection (a).
 
15      (c)  The department shall adopt rules under chapter 91 for
 
16 the purposes of this section.
 
17      39A-U  Construction of this part.  The powers conferred by
 
18 this part shall be in addition and supplemental to the powers
 
19 conferred by any other law.  Insofar as the provisions of this
 
20 part are inconsistent with the provisions of any other law, this
 
21 part shall be controlling.
 
22      39A-V  Sunset provision.  After June 30,     , no new
 
23 special purpose revenue bonds shall be issued under this part."
 

 
Page 34                                                    2820
                                     H.B. NO.           
                                                        
                                                        


 1      SECTION 5.  In codifying the new part added to chapter 39A,
 
 2 Hawaii Revised Statutes, by section 4 of this Act, the revisor of
 
 3 statutes shall substitute appropriate section numbers for the
 
 4 letters used in the designation of new sections in that part.
 
 5      SECTION 6.  The question to be printed on the ballot shall
 
 6 be as follows:
 
 7      "Shall the State be authorized to issue special purpose
 
 8      revenue bonds, and use the proceeds from those bonds, to
 
 9      assist independent not-for-profit elementary and secondary
 
10      schools, and universities and colleges that provide
 
11      educational facilities serving the general public?"
 
12      SECTION 7.  Constitutional material to be repealed is
 
13 bracketed.  New constitutional material is underscored.
 
14      SECTION 8.  Sections 2 and 3 of this Act shall take effect
 
15 upon compliance with article XVII, section 3, of the Constitution
 
16 of the State of Hawaii, and section 4 of this Act shall take
 
17 effect upon ratification of the constitutional amendments
 
18 proposed by sections 2 and 3 of this Act.
 
19 
 
20                           INTRODUCED BY:  _______________________