SECTION 1. Chapter 201H, Hawaii Revised Statutes, is amended by adding a new section to part III, subpart J, to be appropriately designated and to read as follows:

"§201H- Issuance of bonds. (a) In addition to the authorization provided by and without limiting section 201H-71, the corporation, with the approval of the governor and in amounts not exceeding the total amount authorized to be issued by the legislature, may issue revenue bonds for the purpose of financing the rental housing trust fund. The net proceeds of the revenue bonds issued under this section shall be deposited into the rental housing trust fund pursuant to section 201H‑202(c).

(b) In addition to any other power or duty prescribed by law, the corporation shall comply with sections 39-61 and 39-62 and ensure that any revenue bonds issued are excluded from the state constitutional debt ceiling. The rental housing trust fund is a "special fund" within the meaning of article VII, section 13, of the Hawaii State Constitution and chapter 39, part III. The rental housing trust fund is not a "special fund" within the meaning of sections 36-27 and 36-30.

(1) Pledge security under section 201H-71 and pledge funds, loans, and accounts or subaccounts in the rental housing trust fund to the payment or security of revenue bonds issued under this subpart. The pledge shall constitute a lien and security interest on such funds and loans to the extent and with the priority as set forth in the document establishing the pledge without physical delivery, recording, or other further act;

(2) Perform any act considered reasonably necessary, advisable, or expedient for the administration of this subpart or the advancement of the purposes of this subpart; and

(3) Direct the creation of one or more separate accounts or subaccounts within the rental housing trust fund and specify any conditions applicable to the transfer of moneys and securities among the accounts and subaccounts."

SECTION 2. Section 201H-202, Hawaii Revised Statutes, is amended to read as follows:

"§201H-202 Rental housing trust fund. (a) There is established the rental housing trust fund to be administered by the corporation.

(b) An amount from the fund, to be set by the corporation and authorized by the legislature, may be used for administrative expenses incurred by the corporation in administering the fund; provided that fund moneys may not be used to finance day-to-day administrative expenses of projects allotted fund moneys.

(c) The following may be deposited into the fund: appropriations made by the legislature, private contributions, repayment of loans, interest, proceeds of bonds issued by the corporation under section 201H- , all moneys paid into the fund pursuant to section 247-7(2), other returns, and moneys from other sources.

(d) The fund shall be used to provide loans or grants for the development, pre-development, construction, acquisition, preservation, and substantial rehabilitation of rental housing units. Permitted uses of the fund may include but are not limited to planning, design, land acquisition, costs of options, agreements of sale, downpayments, equity financing, capacity building of nonprofit housing developers, or other housing development services or activities as provided in rules adopted by the corporation pursuant to chapter 91[.], and payment of principal, interest, and redemption premium, if any, on revenue bonds issued by the corporation under section 201H- . The rules may provide for a means of recapturing loans or grants made from the fund if a rental housing project financed under the fund is refinanced or sold at a later date. The rules may also provide that moneys from the fund shall be leveraged with other financial resources to the extent possible.

(e) Moneys available in the fund shall be used for the purpose of providing, in whole or in part, loans or grants for rental housing projects in the following order of priority:

(1) Projects or units in projects that are allocated low‑income housing credits pursuant to the state housing credit ceiling under section 42(h) of the Internal Revenue Code of 1986, as amended, or projects or units in projects that are funded by programs of the United States Department of Housing and Urban Development and United States Department of Agriculture Rural Development wherein:

(A) At least [~~fifty~~] 50 per cent of the available units are for persons and families with incomes at or below [~~eighty~~] 80 per cent of the median family income of which at least [~~five~~] 5 per cent of the available units are for persons and families with incomes at or below [~~thirty~~] 30 per cent of the median family income; and

(B) The remaining units are for persons and families with incomes at or below [~~one hundred~~] 100 per cent of the median family income;

provided that the corporation may establish rules to ensure full occupancy of fund projects; and

(2) Mixed-income rental projects or units in a mixed‑income rental project wherein all of the available units are for persons and families with incomes at or below [~~one hundred forty~~] 140 per cent of the median family income.

(f) The corporation shall submit an annual report to the legislature no later than twenty days prior to the convening of each regular session describing the projects funded and, with respect to rental housing projects targeted for persons and families with incomes at or below [~~thirty~~] 30 per cent of the median family income, its efforts to develop those rental housing projects, a description of proposals submitted for this target group and action taken on the proposals, and any barriers to developing housing units for this target group.

(g) For the purposes of this subpart, the applicable median family income shall be the median family income for the county or standard metropolitan statistical area in which the project is located as determined by the United States Department of Housing and Urban Development, as adjusted from time to time.

(h) The corporation may provide loans and grants under this section; provided that the corporation shall establish loan-to-value ratios to protect the fund from inordinate risk and that under no circumstances shall the rules permit the loan‑to-value ratio to exceed [~~one hundred~~] 100 per cent; and provided further that the underwriting guidelines include a debt-coverage ratio of not less than 1.0 to 1.

(i) For the period commencing July 1, 2005, through June 30, 2009, the fund may be used to provide grants for rental units set aside for persons and families with incomes at or below [~~thirty~~] 30 per cent of the median family income in any project financed in whole or in part by the fund in proportion of those units to the total number of units in the project. At the conclusion of the period described in this subsection, the corporation shall report to the legislature on the number and use of grants provided and whether the grants were an effective use of the funds for purposes of developing rental housing for families at or below [~~thirty~~] 30 per cent of the median family income.

(j) The entire fund, not only those accounts or subaccounts funded by revenue bond proceeds, shall be subject to section 39-61 for the purposes of accomplishing leveraging and exclusion of the revenue bonds from the state constitutional debt ceiling."

SECTION 3. Section 247-7, Hawaii Revised Statutes, is amended to read as follows:

"§247-7 Disposition of taxes. All taxes collected under this chapter shall be paid into the state treasury to the credit of the general fund of the State, to be used and expended for the purposes for which the general fund was created and exists by law; provided that of the taxes collected each fiscal year:

(1) [~~Ten~~] 10 per cent shall be paid into the land conservation fund established pursuant to section 173A-5;

(2) [~~Twenty-five~~] 25 per cent from July 1, 2009, until June 30, 2012; [~~thirty~~] 30 per cent from July 1, 2012, until June 30, 2014; and [~~fifty~~] 50 per cent in each fiscal year thereafter shall be paid into the rental housing trust fund established by section 201H-202; provided that per cent of the funds paid into the rental housing trust fund, up to a maximum of §5,000,000 per fiscal year, may be used for the repayment of revenue bonds and revenue refunding bonds; and

(3) [~~Twenty~~] 20 per cent from July 1, 2009, until June 30, 2012, and [~~twenty-five~~] 25 per cent in each fiscal year thereafter shall be paid into the natural area reserve fund established by section 195-9; provided that the funds paid into the natural area reserve fund shall be annually disbursed by the department of land and natural resources in the following priority:

(A) To natural area partnership and forest stewardship programs after joint consultation with the forest stewardship committee and the natural area reserves system commission;

(B) Projects undertaken in accordance with watershed management plans pursuant to section 171-58 or watershed management plans negotiated with private landowners, and management of the natural area reserves system pursuant to section 195-3; and

SECTION 4. Revenue bonds and revenue refunding bonds are hereby authorized to be issued by the Hawaii housing finance and development corporation pursuant to chapters 39, part III, and 201H, part III, subpart A, Hawaii Revised Statutes, except in each case as provided in chapter 201H, part III, subpart J, Hawaii Revised Statutes, in an aggregate principal amount, exclusive of the aggregate principal amount of revenue refunding bonds, not to exceed $125,000,000, at such times and in such amounts as it deems advisable for the purpose of financing the rental housing trust fund as provided under section 201H- , Hawaii Revised Statutes.

Proceeds from bonds issued pursuant to section 201H- , Hawaii Revised Statutes, shall be deposited into the rental housing trust fund and expended by the Hawaii housing finance and development corporation.

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect on July 1, 2015.

INTRODUCED BY:	_____________________________

THE SENATE	S.B. NO.	970
TWENTY-EIGHTH LEGISLATURE, 2015
STATE OF HAWAII