REPORT TITLE: 
State Bonds


DESCRIPTION:
Authorizes issuance of general obligation bonds. (HB2151 CD1)


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        2151
HOUSE OF REPRESENTATIVES                H.B. NO.           H.D. 1
TWENTIETH LEGISLATURE, 2000                                S.D. 1
STATE OF HAWAII                                            C.D. 1
                                                             
________________________________________________________________
________________________________________________________________


                     A BILL FOR AN ACT

RELATING TO STATE BONDS.



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

 1      SECTION 1.  Declaration of findings with respect to the
 
 2 general obligation bonds authorized by this Act.  Pursuant to the
 
 3 clause in article VII, section 13 of the State Constitution,
 
 4 which states:  "Effective July 1, 1980, the legislature shall
 
 5 include a declaration of findings in every general law
 
 6 authorizing the issuance of general obligation bonds that the
 
 7 total amount of principal and interest, estimated for such bonds
 
 8 and for all bonds authorized and unissued and calculated for all
 
 9 bonds issued and outstanding, will not cause the debt limit to be
 
10 exceeded at the time of issuance," the legislature finds and
 
11 declares as follows:
 
12      (1)  Limitation on general obligation debt.  The debt limit
 
13           of the state is set forth in article VII, section 13 of
 
14           the State Constitution, which states in part:  "General
 
15           obligation bonds may be issued by the State; provided
 
16           that such bonds at the time of issuance would not cause
 
17           the total amount of principal and interest payable in
 
18           the current or any future fiscal year, whichever is
 
19           higher, on such bonds and on all outstanding general
 
20           obligation bonds to exceed: a sum equal to twenty
 

 
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 1           percent of the average of the general fund revenues of
 
 2           the State in the three fiscal years immediately
 
 3           preceding such issuance until June 30, 1982; and
 
 4           thereafter, a sum equal to eighteen and one-half
 
 5           percent of the average of the general fund revenues of
 
 6           the State in the three fiscal years immediately
 
 7           preceding such issuance."  Article VII, section 13 also
 
 8           provides that in determining the power of the State to
 
 9           issue general obligation bonds, certain bonds are
 
10           excludable, including "reimbursable general obligation
 
11           bonds issued for a public undertaking, improvement or
 
12           system but only to the extent that reimbursements to
 
13           the general fund are in fact made from the net revenue,
 
14           or net user tax receipts, or combination of both, as
 
15           determined for the immediately preceding fiscal year"
 
16           and bonds constituting instruments of indebtedness
 
17           under which the State incurs a contingent liability as
 
18           a guarantor, but only to the extent the principal
 
19           amount of such bonds does not exceed seven per cent of
 
20           the principal amount of outstanding general obligation
 
21           bonds not otherwise excluded under article VII, section
 
22           13.
 

 
 
 
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 1      (2)  Actual and estimated debt limits.  The limits on
 
 2           principal and interest of general obligation bonds
 
 3           issued by the State, actual for fiscal year 1999-2000
 
 4           and estimated for each fiscal year from 2000-2001 to
 
 5           2002-2003, are as follows:
 
 6                 Fiscal            Net General
 
 7                  Year            Fund Revenues        Debt Limit
 
 8                1996-1997        $ 3,115,264,737
 
 9                1997-1998          3,195,967,036
 
10                1998-1999          3,254,256,686
 
11                1999-2000          3,141,743,000    $ 589,871,788
 
12                2000-2001          3,228,232,000      591,504,615
 
13                2001-2002          3,285,586,000      593,494,287
 
14                2002-2003       (not applicable)      595,426,262
 
15 
 
16           For fiscal years 1999-2000, 2000-2001, 2001-2002, and
 
17           2002-2003 respectively, the debt limits are derived by
 
18           multiplying the average of the net general fund
 
19           revenues for the three preceding fiscal years by
 
20           eighteen and one-half per cent.  The net general fund
 
21           revenues for fiscal years 1996-1997, 1997-1998, and
 
22           1998-1999 are actual, as certified by the director of
 
23           finance in the Statement of the Debt Limit of the State
 

 
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 1           of Hawaii as of July 1, 1999, dated November 24, 1999.
 
 2           The net general fund revenues for fiscal years 1999-
 
 3           2000 to 2001-2002 are estimates, based on general fund
 
 4           revenue estimates made as of March 10, 2000, by the
 
 5           council on revenues, the body assigned by article VII,
 
 6           section 7 of the State Constitution to make such
 
 7           estimates, and based on estimates made by the
 
 8           department of budget and finance of those receipts,
 
 9           which cannot be included as general fund revenues for
 
10           the purpose of calculating the debt limit, all of which
 
11           estimates the legislature finds to be reasonable.
 
12      (3)  Principal and interest on outstanding bonds applicable
 
13           to the debt limit.  
 
14           (A)  According to the department of budget and finance,
 
15                the total amount of principal and interest on
 
16                outstanding general obligation bonds, after the
 
17                exclusions permitted by article VII, section 13 of
 
18                the State Constitution, for determining the power
 
19                of the State to issue general obligation bonds
 
20                within the debt limit as of December 1, 1999 is as
 
21                follows for fiscal year 2000-2001 to fiscal year
 
22                2006-2007:
 

 
 
 
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 1                 Fiscal                       Principal
 
 2                  Year                      and Interest
 
 3                2000-2001                  $ 352,508,780
 
 4                2001-2002                    367,994,493
 
 5                2002-2003                    411,701,970
 
 6                2003-2004                    378,223,219
 
 7                2004-2005                    373,053,164
 
 8                2005-2006                    347,383,328
 
 9                2006-2007                    344,154,560
 
10                The department of budget and finance further
 
11                reports that the amount of principal and interest
 
12                on outstanding bonds applicable to the debt limit
 
13                generally continues to decline each year from
 
14                fiscal year 2007-2008 to fiscal year 2019-2020
 
15                when the final installment of $27,612,984 shall be
 
16                due and payable. 
 
17           (B)  The department of budget and finance further
 
18                reports that the outstanding principal amount of
 
19                bonds constituting instruments of indebtedness
 
20                under which the State may incur a contingent
 
21                liability as a guarantor is $238,500,000
 
22                (including $47,500,000 proposed in Senate Bill No.
 
23                2873, S.D. 1, H.D. 2, C.D. 1 (Relating To Hawaii
 

 
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 1                Health Systems Corporation), all or part of which
 
 2                is excludable in determining the power of the
 
 3                State to issue general obligation bonds, pursuant
 
 4                to article VII, section 13 of the State
 
 5                Constitution.
 
 6      (4)  Amount of authorized and unissued general obligation
 
 7           bonds and guaranties and proposed bonds and guaranties.
 
 8           (A)  As calculated from the state comptroller's bond
 
 9                fund report as of February 29, 2000, adjusted for:
 
10                (i)  Appropriations to be funded with general
 
11                     obligation bonds and reimbursable general
 
12                     obligation bonds as provided in Act 91,
 
13                     Session Laws of Hawaii 1999 (The General
 
14                     Appropriations Act of 1999) to be expended in
 
15                     fiscal year 2000-2001; 
 
16               (ii)  Appropriations to be funded by reimbursable
 
17                     general obligation bonds as provided in Act
 
18                     151, Session Laws of Hawaii 1999 (Relating to
 
19                     Hawaii Hurricane Relief Fund Bonds) to be
 
20                     expended in fiscal year 2000-2001; 
 
21              (iii)  Appropriations to be funded by general
 
22                     obligation bonds as provided in Act 156,
 
23                     Session Laws of Hawaii 1999 (The Judiciary
 

 
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 1                     Appropriations Act of 1999) to be expended in
 
 2                     fiscal year 2000-2001; 
 
 3               (iv)  Lapses and appropriations to be funded by
 
 4                     general obligation bonds proposed in House
 
 5                     Bill No. 2407, H.D.1, S.D.2, C.D.1 (Making An
 
 6                     Emergency Appropriation For The Department Of
 
 7                     Agriculture); 
 
 8                (v)  Lapses totaling $191,918,117 and changes in
 
 9                     means of financing from general obligation
 
10                     bond fund to other federal fund totaling
 
11                     $750,000 proposed in House Bill No. 1900,
 
12                     H.D. 1, S.D. 1, C.D. 1 (The Supplemental
 
13                     Appropriations Act of 2000); and 
 
14               (vi)  Lapses totaling $3,163,000 proposed in House
 
15                     Bill No. 2650, H.D. 1, S.D.2, C.D.1 (The
 
16                     Judiciary Supplemental Appropriations Act of
 
17                     2000), the total amount of authorized but
 
18                     unissued general obligation bonds is
 
19                     $1,198,003,903.  The total amount of general
 
20                     obligation bonds authorized in this Act is
 
21                     $201,541,000.  The total amount of general
 
22                     obligation bonds previously authorized and
 
23                     unissued and the general obligation bonds
 
24                     authorized in this Act is $1,399,544,903.  
 

 
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 1           (B)  As reported by the department of budget and
 
 2                finance, the outstanding principal amount of bonds
 
 3                constituting instruments of indebtedness under
 
 4                which the State may incur a contingent liability
 
 5                as a guarantor is $191,000,000, all or part of
 
 6                which is excludable in determining the power of
 
 7                the State to issue general obligation bonds,
 
 8                pursuant to article VII, section 13 of the State
 
 9                Constitution.  The total amount of guaranty
 
10                authorized by Senate Bill No. 2873, S.D. 1, 
 
11                H.D. 2, C.D. 1 (Relating To Hawaii Health Systems
 
12                Corporation) is $47,500,000 and is herein
 
13                validated.  The total amount of guaranties
 
14                previously authorized and validated by this Act is
 
15                $238,500,000.
 
16      (5)  Proposed general obligation bond issuance.  As reported
 
17           herein for fiscal years 1999-2000, 2000-2001, 2001-
 
18           2002, and 2002-2003, the State proposes to issue
 
19           $200,000,000 during the remainder of fiscal year 1999-
 
20           2000, $350,000,000 during the first half of fiscal year
 
21           2000-2001, $150,000,000 during the second half of
 
22           fiscal year 2000-2001, $150,000,000 during the first
 
23           half of fiscal year 2001-2002, $150,000,000 during the
 

 
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 1           second half of fiscal year 2001-2002, $100,000,000
 
 2           during the first half of fiscal year 2002-2003, and
 
 3           $300,000,000 during the second half of fiscal year
 
 4           2002-2003.  It has been the practice of the State to
 
 5           issue twenty-year serial bonds with principal
 
 6           repayments beginning the third year, and interest
 
 7           payments commencing six months from the date of
 
 8           issuance and being paid semiannually thereafter.  As
 
 9           reported by the department of budget and finance, the
 
10           bonds will be maturing in substantially equal annual
 
11           installments of principal and interest.  It is assumed
 
12           that this practice will be applied to the bonds that
 
13           are proposed to be issued, except that principal
 
14           repayments will begin in the fourth year.
 
15      (6)  Sufficiency of proposed general obligation bond
 
16           issuance to meet the requirements of authorized and
 
17           unissued bonds, as adjusted, and bonds authorized by
 
18           this Act.  From the schedule reported in paragraph (5),
 
19           the total amount of general obligation bonds, which the
 
20           State proposes to issue during the fiscal years 1999-
 
21           2000 to 2001-2002 is $1,000,000,000.  An additional
 
22           $400,000,000 is proposed to be issued in fiscal year
 
23           2002-2003.  The total amount of $1,000,000,000, which
 

 
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 1           is proposed to be issued through fiscal year 2001-2002
 
 2           is sufficient to meet the requirements of the
 
 3           authorized and unissued bonds, as adjusted, and the
 
 4           bonds authorized by this Act, the total amount of which
 
 5           is $1,399,544,903, as reported in paragraph (4), except
 
 6           for $399,544,903.  It is assumed that the
 
 7           appropriations to which an additional $399,544,903 in
 
 8           bond issuance needs to be applied will have been
 
 9           encumbered as of June 30, 2002.  The $400,000,000,
 
10           which is proposed to be issued in fiscal year 2002-2003
 
11           will be sufficient to meet the requirements of the June
 
12           30, 2002 encumbrances in the amount of $399,544,903.
 
13           The amount of assumed encumbrances as of June 30, 2002
 
14           is reasonable and conservative, based upon an
 
15           inspection of June 30 encumbrances of the general
 
16           obligation bond fund as reported by the state
 
17           comptroller.  Thus, taking into account the amount of
 
18           previously authorized and unissued bonds and bonds
 
19           proposed in this Act versus the amount of bonds that is
 
20           proposed to be issued by June 30, 2002, and the amount
 
21           of June 30, 2002 encumbrances versus the amount of
 
22           bonds that is proposed to be issued in fiscal year
 
23           2002-2003, the legislature finds that in the aggregate,
 

 
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 1           the amount of bonds, which is proposed to be issued is
 
 2           sufficient to meet the requirements of all authorized
 
 3           and unissued bonds and the bonds authorized by this
 
 4           Act.
 
 5      (7)  Bonds excludable in determining the power of the State
 
 6           to issue bonds.  As noted in paragraph (1), certain
 
 7           bonds are excludable in determining the power of the
 
 8           State to issue general obligation bonds.  
 
 9           (A)  General obligation reimbursable bonds can be
 
10                excluded under certain conditions.  It is not
 
11                possible to make a conclusive determination as to
 
12                the amount of reimbursable bonds, which are
 
13                excludable from the amount of each proposed bond
 
14                issued because:
 
15                (i)  It is not known exactly when projects for
 
16                     which reimbursable bonds have been authorized
 
17                     in prior acts and in this Act will be
 
18                     implemented and will require the application
 
19                     of proceeds from a particular bond issue; and
 
20               (ii)  Not all reimbursable general obligation bonds
 
21                     may qualify for exclusion. 
 
22                However, the legislature notes that with respect
 
23                to the principal and interest on outstanding
 
24                general obligation bonds, according to the
 

 
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 1                department of budget and finance, the average
 
 2                proportion of principal and interest, which is
 
 3                excludable each year from the calculation against
 
 4                the debt limit is 6.97 per cent for the ten years
 
 5                from fiscal year 2000-2001 to fiscal year 2009-
 
 6                2010.  For the purpose of this declaration, the
 
 7                assumption is made that five per cent of each bond
 
 8                issue will be excludable from the debt limit, an
 
 9                assumption that the legislature finds to be
 
10                reasonable and conservative.  
 
11           (B)  Bonds constituting instruments of indebtedness
 
12                under which the State incurs a contingent
 
13                liability as a guarantor can be excluded, but only
 
14                to the extent the principal amount of such
 
15                guaranties does not exceed seven per cent of the
 
16                principal amount of outstanding general obligation
 
17                bonds not otherwise excluded under subparagraph
 
18                (A) of paragraph (7) and provided that the State
 
19                shall establish and maintain a reserve in an
 
20                amount in reasonable proportion to the outstanding
 
21                loans guaranteed by the State as provided by law.
 

 
 
 
 
 
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 1                According to the department of budget and finance
 
 2                and the assumptions presented herein, the total
 
 3                principal amount of outstanding general obligation
 
 4                bonds and general obligation bonds proposed to be
 
 5                issued, which are not otherwise excluded under
 
 6                article VII, section 13 of the State Constitution
 
 7                for fiscal years 1999-2000, 2000-2001, 2001-2002,
 
 8                and 2002-2003 are as follows:
 
 9                                           Total Amount of
 
10                                      General Obligation Bonds
 
11                                      Not Otherwise Excluded by
 
12                                       Article VII, Section 13
 
13               Fiscal Year            of the State Constitution
 
14                1999-2000                  $ 3,309,433,537
 
15                2000-2001                    3,600,550,972
 
16                2001-2002                    3,677,655,955
 
17                2002-2003                    3,843,443,582
 
18                Based on the foregoing and based on the assumption
 
19                that the full amount of a guaranty is immediately
 
20                due and payable when such guaranty changes from a
 
21                contingent liability to an actual liability, the
 
22                aggregate principal amount of the portion of the
 
23                outstanding guaranties and the guaranties proposed
 

 
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 1                to be incurred, which does not exceed seven per
 
 2                cent of the average amount set forth in the last
 
 3                column of the above table and for which reserve
 
 4                funds have been or will have been established as
 
 5                heretofore provided, can be excluded in
 
 6                determining the power of the State to issue
 
 7                general obligation bonds.  As it is not possible
 
 8                to predict with a reasonable degree of certainty
 
 9                when a guaranty will change from a contingent
 
10                liability to an actual liability, it is assumed in
 
11                conformity with fiscal conservatism and prudence,
 
12                that all guaranties not otherwise excluded
 
13                pursuant to article VII, section 13 of the State
 
14                Constitution will become due and payable in the
 
15                same fiscal year in which the greatest amount of
 
16                principal and interest on general obligation
 
17                bonds, after exclusions, occurs.  Thus, based on
 
18                such assumptions and on the determination in
 
19                paragraph (8), all of the outstanding guaranties
 
20                can be excluded.
 
21      (8)  Determination whether the debt limit will be exceeded
 
22           at the time of issuance.  From the foregoing and on the
 
23           assumption that all of the bonds identified in
 

 
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 1           paragraph (5) will be issued at an interest rate of 6.0
 
 2           per cent, it can be determined from the following
 
 3           schedule that the bonds, which are proposed to be
 
 4           issued, which include all authorized and unissued bonds
 
 5           previously authorized, as adjusted, general obligation
 
 6           bonds and instruments of indebtedness under which the
 
 7           State incurs a contingent liability as a guarantor
 
 8           authorized in this Act, will not cause the debt limit
 
 9           to be exceeded at the time of such issuance:
 
10                                                Greatest Amount
 
11            Time of Issuance                      and Year of
 
12            and Amount to be   Debt Limit      Highest Principal
 
13             Counted Against   at Time of        and Interest
 
14               Debt Limit       Issuance    on Bonds and Guaranties
 
15         Remainder FY 1999-2000
 
16              $190,000,000     589,871,788  423,101,970 (2002-2003)
 
17          1st half FY 2000-2001
 
18              $332,500,000     591,504,615  443,051,970 (2002-2003)
 
19          2nd half FY 2000-2001
 
20              $142,500,000     591,504,615  451,601,970 (2002-2003)
 
21          1st half FY 2001-2002
 
22              $142,500,000     593,494,287  455,876,970(2002-2003)
 

 
 
 
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 1          2nd half FY 2001-2002
 
 2              $142,500,000     593,494,287  464,426,970 (2002-2003)
 
 3          1st half FY 2002-2003
 
 4               $95,000,000     595,426,262  549,374,614 (2004-2005)
 
 5          2nd half FY 2002-2003
 
 6              $285,000,000     595,426,262  479,324,614 (2004-2005)
 
 7      (9)  Overall and concluding finding.  From the facts,
 
 8           estimates, and assumptions stated in this declaration
 
 9           of findings, the conclusion is reached that the total
 
10           amount of principal and interest estimated for the
 
11           general obligation bonds authorized in this Act, and
 
12           for all bonds authorized and unissued, and calculated
 
13           for all bonds issued and outstanding, and all
 
14           guaranties, will not cause the debt limit to be
 
15           exceeded at the time of issuance.  
 
16      SECTION 2.  The legislature finds the bases for the
 
17 declaration of findings set forth in this Act reasonable.  The
 
18 assumptions set forth in this Act with respect to the principal
 
19 amount of general obligation bonds, which will be issued, the
 
20 amount of principal and interest on reimbursable general
 
21 obligation bonds that are assumed to be excludable, and the
 
22 assumed maturity structure shall not be deemed to be binding, it
 
23 being the understanding of the legislature that such matters must
 
24 remain subject to substantial flexibility.  
 

 
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 1      SECTION 3.  Authorization for issuance of general obligation
 
 2 bonds.  General obligation bonds may be issued as provided by law
 
 3 in an amount that may be necessary to finance projects authorized
 
 4 in House Bill No. 1900, H.D. 1, S.D. 1, C.D. 1 (The Supplemental
 
 5 Appropriations Act of 2000) and House Bill No. 2650, H.D. 1,
 
 6 S.D.2, C.D.1 (The Judiciary Supplemental Appropriations Act of
 
 7 2000), passed by this regular session of 2000, and designated to
 
 8 be financed from the general obligation bond fund and from the
 
 9 general obligation bond fund with debt service cost to be paid
 
10 from special funds; provided that the sum total of general
 
11 obligation bonds so issued shall not exceed $201,541,000.
 
12      Any law to the contrary notwithstanding, general obligation
 
13 bonds may be issued from time to time in accordance with section
 
14 39-16, Hawaii Revised Statutes, in such principal amount as may
 
15 be required to refund any general obligation bonds of the State
 
16 of Hawaii heretofore or hereafter issued pursuant to law.
 
17      SECTION 4.  The provisions of this Act are declared to be
 
18 severable and if any portion thereof is held to be invalid for
 
19 any reason, the validity of the remainder of this Act shall not
 
20 be affected. 
 
21      SECTION 5.  In printing this Act, the revisor of statutes
 
22 shall substitute in section 1 and section 3 the corresponding act
 
23 numbers for bills identified therein.
 
24      SECTION 6.  This Act shall take effect upon its approval.