REPORT TITLE: 
Bonds


DESCRIPTION:
General obligation bond authorization bill.


 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        
THE SENATE                              S.B. NO.           1000
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                     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 section 13 of article VII 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 section 13 of article VII
 
14           of the State Constitution, which states in part:
 
15           "General obligation bonds may be issued by the State;
 
16           provided that such bonds at the time of issuance would
 
17           not cause the total amount of principal and interest
 
18           payable in the current or any future fiscal year,
 
19           whichever is higher, on such bonds and on all
 

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

 
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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 1998-1999
 
 4           and estimated for each fiscal year from 1999-2000 to
 
 5           2001-2002, are as follows:
 
 6            Fiscal            Net General
 7             Year            Fund Revenues          Debt Limit
 8 
 9           1995-1996        $3,136,543,568
10           1996-1997         3,115,264,737
11           1997-1998         3,081,838,000         $566,389,101
12           1998-1999                                           
13           1999-2000                                           
14           2000-2001                                           
15           2001-2002      (Not Applicable)                     
16 
17           For fiscal years 1998-1999, 1999-2000, 2000-2001, and
 
18           2001-2002, respectively, the debt limits are derived by
 
19           multiplying the average of the net general fund
 
20           revenues for the three preceding fiscal years by
 
21           eighteen and one-half per cent.  The net general fund
 
22           revenues for fiscal years 1995-1996, 1996-1997, and
 
23           1997-1998 are actual, as certified by the director of
 
24           finance in the Statement of the Debt Limit of the State
 
25           of Hawaii as of July 1, 1998, dated            , 1998.
 
26           The net general fund revenues for fiscal years 1998-
 
27           1999 to 2000-2001 are estimates, based on general fund
 
28           revenue estimates made            , 1999, by the
 

 
 
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 1           council on revenues, the body assigned by section 7 of
 
 2           article VII of the State Constitution to make such
 
 3           estimates, and based on estimates made by the
 
 4           department of budget and finance of those receipts
 
 5           which cannot be included as general fund revenues for
 
 6           the purpose of calculating the debt limit, all of which
 
 7           estimates the legislature finds to be reasonable.
 
 8      (3)  Principal and interest on outstanding bonds applicable
 
 9           to the debt limit.  (A) According to the department of
 
10           budget and finance, the total amount of principal and
 
11           interest on outstanding general obligation bonds, after
 
12           the exclusions permitted by section 13 of article VII
 
13           of the State Constitution, for determining the power of
 
14           the State to issue general obligation bonds within the
 
15           debt limit as of April 1, 1999 is as follows for fiscal
 
16           year 1999-2000 to fiscal year 2005-2006:
 
17                 Fiscal                       Principal
18                  Year                      and Interest
19 
20                1999-2000                   $           
21                2000-2001                               
22                2001-2002                               
23                2002-2003                               
24                2003-2004                               
25                2004-2005                               
26                2005-2006                               
27 
28           The department of budget and finance further reports
 

 
 
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 1           that the amount of principal and interest on
 
 2           outstanding bonds applicable to the debt limit
 
 3           generally continues to decline each year from fiscal
 
 4           year 2006-2007 to fiscal year 2018-2019 when the final
 
 5           installment of $           shall be due and payable.
 
 6           (B) The department of budget and finance further
 
 7           reports that the outstanding principal amount of bonds
 
 8           constituting instruments of indebtedness under which
 
 9           the State may incur a contingent liability as a
 
10           guarantor is $          , all or part of which is
 
11           excludable in determining the power of the State to
 
12           issue general obligation bonds, pursuant to section 13
 
13           of article VII of the state constitution.
 
14       (4) Amount of authorized and unissued general obligation
 
15           bonds and guaranties and proposed bonds and guaranties.
 
16           (A) As calculated from the state comptroller's bond
 
17           fund report as of            , 1999, adjusted for:
 
18           (i)  Appropriations to be funded with general
 
19                obligation bonds and reimbursable general
 
20                obligation bonds as provided in Act 328, Session
 
21                Laws of Hawaii 1997 (the General Appropriations
 
22                Act of 1997), to be expended in fiscal year 1998-
 
23                1999;
 

 
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 1          (ii)  Appropriations to be funded by reimbursable
 
 2                general obligation bonds as provided in Act 222,
 
 3                Session Laws of Hawaii 1997 (Relating to Hawaii
 
 4                Hurricane Relief Fund Bonds) to be expended in
 
 5                fiscal year 1998-1999;
 
 6         (iii)  Appropriations to be funded by general obligation
 
 7                bonds as provided in Act 155, Session Laws of
 
 8                Hawaii 1997 (the Judiciary Appropriations Act of
 
 9                1997);
 
10          (iv)  The issuance of $300,000,000 in general obligation
 
11                bonds of 1998, Series CR; 
 
12           (v)  Appropriations to be funded by reimbursable
 
13                general obligation bonds as provided in House Bill
 
14                No. 2990, H.D. 2, S.D. 2 (Relating to
 
15                Agriculture), in the amount of $9,700,000;
 
16          (vi)  Lapses proposed in House Bill No. 2500, H.D. 1,
 
17                S.D. 1, C.D. 1 (the Supplemental Appropriations
 
18                Act of 1998), in the amount of $94,350,482; and
 
19         (vii)  Lapses proposed in House Bill No. 2710, H.D. 1,
 
20                S.D. 1, C.D. 1 (the Judiciary Supplemental
 
21                Appropriations Act of 1998), in the amount of
 
22                $603,000; the total amount of authorized but
 
23                unissued general obligation bonds and reimbursable
 

 
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 1                general obligation bonds is $          .  The
 
 2                total amount of general obligation bonds
 
 3                previously authorized and unissued and the general
 
 4                obligation bonds authorized in this Act is
 
 5                $          .  The total amount of general
 
 6                obligation bonds and reimbursable general
 
 7                obligation bonds previously authorized and
 
 8                unissued and the general obligation bonds
 
 9                authorized in this Act is $          .
 
10           (B) As reported by the department of budget and
 
11           finance, the outstanding principal amount of bonds
 
12           constituting instruments of indebtedness under which
 
13           the State may incur a contingent liability as a
 
14           guarantor is $          , all or part of which is
 
15           excludable in determining the power of the State to
 
16           issue general obligation bonds, pursuant to section 13
 
17           of article VII of the State Constitution.  The
 
18           additional total amount of guaranty authorized by House
 
19           Bill No. 1699, H.D. 2, S.D. 1 (Relating to the Hawaii
 
20           Capital Loan Program), is $10,000,000, and is herein
 
21           validated.  The total amount of guaranties previously
 
22           authorized and the guaranties validated by this Act is
 
23           $          .
 

 
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 1      (5)  Proposed general obligation bond issuance.  As reported
 
 2           in the budget for fiscal years 1998-1999, 1999-2000,
 
 3           2000-2001, and 2001-2002, and 2002-2003, the State
 
 4           proposes to issue $           during the remainder of
 
 5           fiscal year 1998-1999, $           during the first
 
 6           half of fiscal year 1999-2000, $           during the
 
 7           second half of fiscal year 1999-2000, and $          
 
 8           semiannually in each of fiscal years 2000-2001 and
 
 9           2001-2002.  It has been the practice of the State to
 
10           issue twenty-year serial bonds with principal
 
11           repayments beginning the third year, and interest
 
12           payments commencing six months from the date of
 
13           issuance and being paid semiannually thereafter.  As
 
14           reported by the department of budget and finance, the
 
15           bonds will be maturing in substantially equal annual
 
16           installments of principal and interest.  It is assumed
 
17           that this practice will be applied to the bonds which
 
18           are proposed to be issued.
 
19      (6)  Sufficiency of proposed general obligation bond
 
20           issuance to meet the requirements of authorized and
 
21           unissued bonds, as adjusted, and bonds authorized by
 
22           this Act.  From the schedule reported in paragraph (5),
 
23           the total amount of general obligation bonds which the
 

 
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 1           State proposes to issue during fiscal years 1998-1999
 
 2           to 2000-2001 is $          .  An additional $          
 
 3           is proposed to be issued in fiscal year 2001-2002.  The
 
 4           total amount of $           which is proposed to be
 
 5           issued through fiscal year 2000-2001 is sufficient to
 
 6           meet the requirements of the authorized and unissued
 
 7           bonds, as adjusted, and the bonds authorized by this
 
 8           Act, the total amount of which is $          , as
 
 9           reported in paragraph (4), except for $          .  It
 
10           is assumed that the appropriations to which an
 
11           additional $           in bond issuance needs to be
 
12           applied will have been encumbered as of June 30, 2001.
 
13           The $           which is proposed to be issued in
 
14           fiscal year 2002-2003 will be sufficient to meet the
 
15           requirements of the June 30, 2002 encumbrances in the
 
16           amount of $          .  The amount of assumed
 
17           encumbrances as of June 30, 2001 is reasonable and
 
18           conservative, based upon an inspection of June 30
 
19           encumbrances of the general obligation bond fund as
 
20           reported by the state comptroller.  Thus, taking into
 
21           account the amount of previously authorized and
 
22           unissued bonds and bonds proposed in this Act versus
 
23           the amount of bonds which is proposed to be issued by
 

 
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 1           June 30, 2001, and the amount of June 30, 2001
 
 2           encumbrances versus the amount of bonds which is
 
 3           proposed to be issued in fiscal year 2001-2002, the
 
 4           legislature finds that in the aggregate, the amount of
 
 5           bonds is sufficient to meet these requirements.
 
 6      (7)  Bonds excludable in determining the power of the State
 
 7           to issue bonds.  As noted in paragraph (1), certain
 
 8           bonds are excludable in determining the power of the
 
 9           State to issue general obligation bonds.  (A) General
 
10           obligation reimbursable bonds can be excluded under
 
11           certain conditions.  It is not possible to make a
 
12           conclusive determination as to the amount of
 
13           reimbursable bonds which are excludable from the amount
 
14           of each proposed bond issued because:
 
15           (i)  It is not known exactly when projects for which
 
16                reimbursable bonds have been authorized in prior
 
17                acts and in this Act will be implemented and will
 
18                require the application of proceeds from a
 
19                particular bond issue; and
 
20          (ii)  Not all reimbursable general obligation bonds may
 
21                qualify for exclusion.
 
22           However, the legislature notes that with respect to the
 
23           principal and interest on outstanding general
 

 
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 1           obligation bonds, according to the department of budget
 
 2           and finance, the average proportion of principal and
 
 3           interest which is excludable each year from calculation
 
 4           against the debt limit is       percent for the ten
 
 5           years from fiscal year 1999-2000 to fiscal year 2008-
 
 6           2009.  For the purpose of this declaration, the
 
 7           assumption is made that five percent of each bond issue
 
 8           will be excludable from the debt limit, an assumption
 
 9           which the legislature finds to be reasonable and
 
10           conservative. (B) Bonds constituting instruments of
 
11           indebtedness under which the State incurs a contingent
 
12           liability as a guarantor can be excluded but only to
 
13           the extent the principal amount of such guaranties does
 
14           not exceed seven percent of the principal amount of
 
15           outstanding general obligation bonds not otherwise
 
16           excluded under subparagraph (A) of paragraph (7) and
 
17           provided that the State shall establish and maintain a
 
18           reserve in an amount in reasonable proportion to the
 
19           outstanding loans guaranteed by the State as provided
 
20           by law.  According to the department of budget and
 
21           finance and the assumptions presented herein, the total
 
22           principal amount of outstanding general obligation
 
23           bonds and general obligation bonds proposed to be
 

 
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 1           issued, which are not otherwise excluded under section
 
 2           13 of article VII of the State Constitution for fiscal
 
 3           years 1998-1999, 1999-2000, 2000-2001, 2001-2002, and
 
 4           2003-2004 are as follows:
 
 5 
 6                                      Total Amount of
 7                                 General Obligation Bonds
 8                                 Not Otherwise Excluded by
 9                                 Section 13 of Article VII
10               Fiscal Year       of the State Constitution
11 
12                1998-1999             $3,848,824,276
13                1999-2000              3,850,967,163
14                2000-2001              3,830,302,703
15                2001-2002                           
16 
17           Based on the foregoing and based on the assumption that
 
18           the full amount of a guaranty is immediately due and
 
19           payable when such guaranty changes from a contingent
 
20           liability to an actual liability, the aggregate
 
21           principal amount of the portion of the outstanding
 
22           guaranties and the guaranties proposed to be incurred,
 
23           which does not exceed seven percent of the average
 
24           amount set forth in the last column of the above table
 
25           and for which reserve funds have been or will have been
 
26           established as heretofore provided, can be excluded in
 
27           determining the power of the State to issue general
 
28           obligation bonds.  As it is not possible to predict
 
29           with a reasonable degree of certainty when a guaranty
 

 
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 1           will change from a contingent liability to an actual
 
 2           liability, it is assumed in conformity with fiscal
 
 3           conservatism and prudence, that all guaranties not
 
 4           otherwise excluded pursuant to section 13 of article
 
 5           VII of the State Constitution will become due and
 
 6           payable in the same fiscal year in which the greatest
 
 7           amount of principal and interest on general obligation
 
 8           bonds, after exclusions, occurs.  Thus, based on these
 
 9           assumptions and on the determination in paragraph (8),
 
10           the aggregate amount of the portion of the outstanding
 
11           guaranties, which must be included in determining the
 
12           power of the State to issue general obligation bonds,
 
13           is $0.
 
14      (8)  Determination whether the debt limit will be exceeded
 
15           at the time of issuance.  From the foregoing and on the
 
16           assumption that all of the bonds identified in
 
17           paragraph (5) will be issued at an interest rate of 6.5
 
18           percent, it can be determined from the following
 
19           schedule that the bonds which are proposed to be
 
20           issued, which include all authorized and unissued bonds
 
21           previously authorized, as adjusted, general obligation
 
22           bonds and instruments of indebtedness under which the
 
23           State incurs a contingent liability as a guarantor
 

 
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                                     S.B. NO.           1000
                                                        
                                                        

 
 1           authorized in this Act, will not cause the debt limit
 
 2           to be exceeded at the time of such issuance:
 
 3                                                Greatest Amount
 4       Time of Issuance                           and Year of
 5       and Amount to be       Debt Limit       Highest Principal
 6        Counted Against       at Time of         and Interest
 7          Debt Limit           Issuance     on Bonds and Guaranties
 8 
 9     2nd half FY 1998-1999
10         $285,000,000        $575,574,855  $476,090,013 (2002-2003)
11     1st half FY 1999-2000
12          $95,000,000         573,160,570   485,093,163 (2002-2003)
13     2nd half FY 1999-2000
14          $95,000,000         573,160,570   494,197,713 (2002-2003)
15     1st half FY 2000-2001
16          $95,000,000         573,672,667   503,207,488 (2002-2003)
17     2nd half FY 2000-2001
18          $95,000,000         573,672,667   512,312,488 (2002-2003)
19     1st half FY 2001-2002
20                     
21     2nd half FY 2001-2002
22 
23      (9)  Overall and concluding finding.  From the facts,
 
24           estimates, and assumptions stated in this declaration
 
25           of findings, the conclusion is reached that the total
 
26           amount of principal and interest estimated for the
 
27           general obligation bonds authorized in this Act, and
 
28           for all bonds authorized and unissued, and calculated
 
29           for all bonds issued and outstanding, and all
 
30           guaranties, will not cause the debt limit to be
 
31           exceeded at the time of issuance.
 
32      SECTION 2.  The legislature finds the bases for the
 
33 declaration of findings set forth in this Act reasonable.  The
 

 
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 1 assumptions set forth in this Act with respect to the principal
 
 2 amount of general obligation bonds which will be issued, the
 
 3 amount of principal and interest on reimbursable general
 
 4 obligation bonds which are assumed to be excludable, and the
 
 5 assumed maturity structure shall not be deemed to be binding, it
 
 6 being the understanding of the legislature that such matters must
 
 7 remain subject to substantial flexibility.
 
 8      SECTION 3.  Authorization for issuance of general obligation
 
 9 bonds.  General obligation bonds may be issued as provided by law
 
10 in an amount that may be necessary to finance projects authorized
 
11 in Bill No.            (the General Appropriations Act of 1999),
 
12 Bill No.            (the Judiciary Appropriations Act of 1999),
 
13 and            passed by this regular session of 1999, and
 
14 designated to be financed from the general obligation bond fund
 
15 and from the general obligation bond fund with debt service cost
 
16 to be paid from special funds; provided that the sum total of the
 
17 general obligation bonds so issued shall not exceed $          .
 
18      Any law to the contrary notwithstanding, general obligation
 
19 bonds may be issued from time to time in accordance with section
 
20 39-16, Hawaii Revised Statutes, in such principal amount as may
 
21 be required to refund any general obligation bonds of the State
 
22 of Hawaii heretofore or hereafter issued pursuant to law.
 
23      SECTION 4.  The provisions of this Act are declared to be
 

 
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                                     S.B. NO.           1000
                                                        
                                                        

 
 1 severable and if any portion thereof is held to be invalid for
 
 2 any reason, the validity of the remainder of this Act shall not
 
 3 be affected.
 
 4      SECTION 5.  In printing this Act, the revisor of statutes
 
 5 shall substitute in section 1 and section 3 the corresponding act
 
 6 numbers for bills identified therein.
 
 7      SECTION 6.  This Act shall take effect upon its approval. 
 
 8 
 
 9                           INTRODUCED BY:  _______________________