HOUSE OF REPRESENTATIVES

H.B. NO.

2740

TWENTY-FIFTH LEGISLATURE, 2010

 

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 of 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 in a shorter period of time than under the traditional method of financing a project through bond appropriation and the ensuing allotment process over an incremental period of years.  Moreover, lower costs will entail because the design and construction phases of a project can actually be packaged together, rather than be separated by fiscal years.  The primary disadvantage is the complexity of the process, since it requires coordination between the department of budget and finance, the department of accounting and general services, the department of the attorney general, the governor, and the legislature.  However, given the current dire state of Hawaii's economy, the advantage of lower costs easily prevails over the disadvantage of mere 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, which 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 as top priority.  They are the Royal Kunia Elementary on the slope mauka of Waipahu on Oahu, the Maui Lani Elementary sited in Kahului, Maui, and the 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 on their developments, not only because it meets the need for capacity but because a new school is an attractive marketing tool.  The developers have expressed an interest in joining with the State to enter into some form of partnership so that they can jointly build schools with the State.

     SECTION 2.  Pursuant to section 36-32, Hawaii Revised Statutes, the department of education is directed to enter into a financing agreement with a private developer for the planning and design of the Royal Kunia Elementary School II at Kunia, Oahu, Hawaii, using certificates of participation, meeting the requirements of chapter 37D, Hawaii Revised Statutes.

     SECTION 3.  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 2010-2011 for the purposes of this Act.

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

     SECTION 4.  This Act shall take effect on July 1, 2010.

 

INTRODUCED BY:

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Report Title:

Public School Facilities; Financing Agreement; Certificate of Participation

 

Description:

Directs the department of education to enter into a financing agreement for the planning and design of the Royal Kunia Elementary School II using certificates of participation.

 

 

 

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.