HB 984: Department of Agriculture; Agricultural Loan Program; Loan Limits; Interest Rates; Credit Denials; Line of Credit; Import Replacement Loans

A BILL FOR AN ACT

RELATING TO AGRICULTURAL LOANS.

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

     SECTION 1.  The legislature finds that Hawaii agricultural producers face critical barriers in accessing capital necessary to cover rising land and water costs, labor shortages, and infrastructure needs.  Modifications to the state agricultural loan program are needed to address these challenges and encourage farmers and ranchers to expand their current operations.  A diverse agricultural sector that includes small and mid-sized farms is essential to Hawaii's food security, economic resilience, and self-sufficiency.  Modifications to the state agricultural loan program should ensure equitable access to capital for farmers of all scales, with a focus on enabling sustainable, community-based, and diversified production.

     The purpose of this Act is to:

     (1)  Lower and fix the state agricultural loan program's interest rates, increase loan limits, and reduce the required number of credit denials;

     (2)  Establish a program for a secured line of credit and create a new loan initiative to encourage larger scale agriculture for import replacement and crops grown for farm to state programs; and

     (3)  Include food hubs as an eligible entity for class E loans.

     SECTION 2.  Section 155-1, Hawaii Revised Statutes, is amended by adding two new definitions to be appropriately inserted and to read as follows:

     ""Import replacement crops" means crops grown on a large‑scale basis in the State with the specific intent to replace crops imported into the State.

     "Line of credit" means a secured revolving loan with a preset credit limit."

     SECTION 3.  Section 155-3, Hawaii Revised Statutes, is amended to read as follows:

     "§155-3  Restriction.  Loans authorized by this chapter shall require [two credit denials, except for class "F" loans for new farmer and farm innovation programs, which shall require] one credit denial.  This requirement shall be waived for new farmer loans for $100,000 or less for farm trainees and recent college graduates with a degree in agriculture.  This requirement may also be waived by the board of agriculture for emergency loans.  Credit denials may be accepted from any of the following:

     (1)  Private lenders;

     (2)  Members of the farm credit system; or

     (3)  The United States Department of Agriculture."

     SECTION 4.  Section 155-8, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  Loans made under this section shall bear simple interest on the unpaid principal balance, charged on the actual amount disbursed to the borrower.  The interest rate on loans of class "A", "B", "C", "E", [and] "G", and "J" shall be at a rate of [one per cent below the prime rate or at a rate of seven and one-half] four per cent a year[, whichever is less.  For purposes of this subsection, the prime rate shall be determined on January 1 and July 1 of each year, and shall be the prime rate charged by the two largest banks in the State identified by the department of commerce and consumer affairs.  If the prime rates of the two largest banks are different, the lower prime rate of the two shall apply.  The interest rate of class "F" loans shall be at a rate of one and one-half per cent below the prime rate or at a rate of six per cent a year, whichever is less].  The interest rate of class "D", "F", "H" [and], "I", and "K" loans shall be three per cent a year.  If the money loaned is borrowed by the department, then the interest on loans of the classes shall be the rate as determined above or one per cent over the cost to the State of borrowing the money, whichever is greater.  Interest on loans made under this chapter shall not be less than three per cent a year."

     SECTION 5.  Section 155-9, Hawaii Revised Statutes, is amended to read as follows:

     "§155-9  Classes of loans; purposes[,]; terms[,]; eligibility.  (a)  Loans made under this chapter shall be for the purposes and in accordance with the terms specified in classes "A" through ["I"] "K" in this section and shall be made only to applicants who meet the eligibility requirements specified therein and except as to class "B" loans to associations and class "E" loans, the eligibility requirements specified in section 155-10.  The maximum amount of a loan for class "A", "C", "D", and "F" loans to an individual applicant shall also apply to any loan application submitted by a partnership, corporation, or other entity, and for the purpose of determining whether the maximum loan amount to any individual will be exceeded, outstanding loans to any partnership, corporation, or other entity that the individual has a legal or equitable interest in excess of twenty per cent shall be taken into account.

     (b)  Class A:  Farm ownership and improvement loans shall provide for:

     (1)  The purchase or improvement of farm land;

     (2)  The purchase, construction, or improvement of adequate farm dwellings, and other essential farm buildings; and

     (3)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed [$800,000] $1,500,000 and for a term not to exceed forty years.  To be eligible, the applicant shall (A) derive, or present an acceptable plan to derive, a major portion of the applicant's income from and devote, or intend to devote, most of the applicant's time to farming operations; and (B) have or be able to obtain the operating capital, including livestock and equipment, needed to successfully operate the applicant's farm.

     (c)  Class B:  Soil and water conservation loans shall provide for:

     (1)  Soil conservation practices;

     (2)  Water development, conservation, and use;

     (3)  Drainage; and

     (4)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed [$35,000] $750,000 to an individual or [$200,000 to] an association and shall be for a term not to exceed twenty years for a loan to an individual and forty years to an association.  To be eligible, an individual applicant shall have sufficient farm and other income to pay for farm operating and living expenses and to meet payments on applicant's existing debts, including the proposed soil and water conservation loan.  An association, to be eligible, shall be a nonprofit organization primarily engaged in extending services directly related to the purposes of the loan to its members, and at least sixty per cent of its membership shall meet the eligibility requirements specified in section 155-10.

     (d)  Class C:  Farm operating loans shall be for the purpose of carrying on and improving a farming operation, including:

     (1)  The purchase of farm equipment and livestock;

     (2)  The payment of production and marketing expenses, including materials, labor, and services;

     (3)  The payment of living expenses;

     (4)  The liquidation of indebtedness incurred for any of the foregoing purposes; and

     (5)  The exportation of crops and livestock.

     The loans shall be for an amount not to exceed [$800,000] $1,500,000 and for a term not to exceed ten years.  To be eligible, an applicant shall derive, or present an acceptable plan to derive, a major portion of the applicant's income from and devote, or intend to devote, most of the applicant's time to farming operations.

     Qualified farmers affected by state eradication programs may also be eligible for loans under this subsection.  Loans made for rehabilitation from eradication programs shall be subject to the terms of class "C" loans; provided that the interest rate shall be three per cent a year and the requirements in section 155-3 shall be waived and paragraph (4) shall not apply.

     (e)  Class D:  Emergency loans shall be for the purpose of providing relief and rehabilitation to qualified farmers without limit as to purpose:

     (1)  In areas stricken by extraordinary rainstorms, windstorms, droughts, tidal waves, earthquakes, volcanic eruptions, and other natural catastrophes;

     (2)  On farms stricken by livestock disease epidemics and crop blights;

     (3)  On farms seriously affected by prolonged shipping and dock strikes;

     (4)  During economic emergencies caused by overproduction, excessive imports, and the like; and

     (5)  During other emergencies as determined by the board of agriculture.

     The maximum amounts and period for the loans shall be determined by the board of agriculture; provided that the board shall require that any settlement or moneys received by qualified farmers as a result of an emergency declared under this section shall first be applied to the repayment of an emergency loan made under this chapter.

     (f)  Class E:  Loans to farmers' cooperatives, corporations, food hubs, and food manufacturers shall provide credit to entities engaged in marketing, purchasing, and processing, and providing farm business services, including:

     (1)  Facility loans to purchase or improve land, building, and equipment for an amount not to exceed [$500,000] $1,500,000 and a term not to exceed twenty years;

     (2)  Operating loans to finance inventories of supplies and materials, warehousing, and shipping commodities[,]; extension of consumer credit to justified farmer‑members[,]; and other normal operating expenses for an amount not to exceed [$300,000] $750,000 and a term not to exceed seven years; and

     (3)  The exportation of crops and livestock.

     To be eligible, a farmers' cooperative or corporation shall have a majority of its board of directors and a majority of its membership as shareholders who meet the eligibility requirements of section 155-10 and who devote most of their time to farming operations, and the facility loans shall be for an amount not to exceed [$500,000] $1,500,000 or [eighty] eighty-five per cent of the cost of the project, whichever is less.

     To be eligible, a food hub shall have a majority of its board of directors and a majority of its membership as shareholders who meet the eligibility requirements of section 155-10 and who devote most of their time to farming operations.  For the purposes of this section, "food hub" means a business or organization that actively manages the aggregation, distribution, and marketing of source-identified food products primarily from local and regional producers to strengthen their ability to satisfy wholesale, retail, and institutional demand.

     To be eligible, a food manufacturer shall be licensed to do business in the State, and the controlling interest of the entity shall possess a minimum of two years of relevant processing or manufacturing experience as acceptable to the department of agriculture.  The entity shall process Hawaii‑grown agricultural products or use Hawaii-grown agricultural products as an ingredient in the manufacturing process.  Facility loans shall be for an amount not to exceed [$500,000] $1,500,000 or [eighty] eighty-five per cent of the cost of the project, whichever is less.  The requirements in section 155‑10 shall be waived for food manufacturing loans; however, the entity shall be a sound credit risk with the ability to repay the money borrowed.

     (g)  Class F:  New farmer and farm innovation loan programs shall provide for:

     (1)  New farmer loans made under this class shall be [for purposes and] in accordance with the terms specified in class "A" and "C" [only, and shall be made only for full-time farming.] loans.  The loans shall be made for an amount not to exceed [$250,000] $750,000 or eighty-five per cent of the cost of the project, whichever is less.  Farm trainees and recent graduates with a degree in agriculture with smaller projects requiring loans of $100,000 or less shall have a minimum five per cent equity contribution towards the cost of the project;

     (2)  Farm innovation loans made under this class shall be for qualified farmers to perform practical research in crop development, innovative production techniques, new technologies, and production of new crops that are not typically grown in the State.  Farm innovation loans shall be limited to a maximum of $75,000;

     (3)  Any subsequent loan shall be made from classes "A" to "D", respectively, depending upon the purpose for which the loan funds are used; and

     (4)  Borrowers shall comply with special term loan agreements as may be required by the department and shall take special training courses as the department deems necessary.

     (h)  Class G:  Loans to part-time farmers shall be for farm improvement and operating purposes for carrying on and improving farming operations, including loans for:

     (1)  The purchase, construction, and improvement of farm production and growing structures;

     (2)  The purchase of farm equipment or livestock; and

     (3)  The payment of production and marketing expenses, including materials, labor, and services.

     The liquidation of indebtedness incurred for any of the purposes under this subsection and for living expenses shall not be authorized purposes.  Each loan shall be for an amount not to exceed [$25,000] $750,000 and for a term not to exceed ten years.

     (i)  Class H:  Farm sustainable project loans shall provide for:

     (1)  The purchase, construction, or improvement of essential farm buildings, including the improvement of existing farm buildings related to the project;

     (2)  The improvement of land that may be required by the project;

     (3)  The purchase of equipment and payment of any related expenses, including materials, labor, and services;

     (4)  Operating expenses associated with the project; or

     (5)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed $1,500,000 or eighty-five per cent of the project cost, whichever is less, and for a term not to exceed forty years.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  Income from the applicant's farming activities and any supplemental income that may be generated from the project shall be the sole criterion for the department's determination of the applicant's ability to repay the money borrowed.  The department's determination may be based on projections of income and expenses.

     (j)  Class I:  Biosecurity project loans shall provide for:

     (1)  The purchase, construction, or improvement of essential farm buildings, including the improvement of existing farm buildings related to the project;

     (2)  The improvement of land that may be required by the project;

     (3)  The purchase of equipment and payment of any related expenses, including materials, labor, signage, training, and services;

     (4)  Operating expenses associated with the project; or

     (5)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed $1,000,000 or eighty-five per cent of the project cost, whichever is less, and for a term not to exceed twenty-five years.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  Income from the applicant's farming activities and any supplemental income that may be generated from the project shall be the sole criterion for the department's determination of the applicant's ability to repay the money borrowed.  The department's determination may be based on projections of income and expenses.

     (k)  Class J:  Line of credit loans shall provide revolving credit for farm operational expenses and to improve farm operations.  Funds from the line of credit shall not be used for personal expenses or non-farm related purposes.

     A line of credit secured by chattel, crops, or equipment shall not exceed $100,000 or eighty-five per cent of the collateral valuation, whichever is less, and for a term not to exceed five years.  A line of credit secured by real property shall not exceed $250,000 or eighty-five per cent of the collateral valuation, whichever is less, and for a term not to exceed ten years.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  The interest rate for lines of credit shall be the same rate provided in section 155-8.  A borrower may access funds from a line of credit at any time during the term of a loan; provided that the borrower does not exceed the maximum credit limit and the account is in good standing.

     (l)  Class K:  Import replacement loans shall provide credit for farm expansion to grow import replacement crops or to fund crops grown for the farm to state program established under section 27-8.  Loans made under this class shall be for the purposes specified in class "A" and class "C", and terms shall be determined by the primary purpose of the loan funds.  Loans for crops grown for the farm to state program shall have written commitments from the appropriate state agency.  Import replacement crops shall be of sufficient scale to impact regional, island wide, or statewide markets.

     Loans shall be for an amount not to exceed $2,500,000 and for a term not to exceed ten years.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  Interest rates for this class shall be three per cent per year."

     SECTION 6.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 7.  This Act shall take effect on July 1, 2025.

Report Title:

Department of Agriculture; Agricultural Loan Program; Loan Limits; Interest Rates; Credit Denials; Line of Credit; Import Replacement Loans

Description:

Updates the Agricultural Loan Program by lowering and fixing interest rates, increasing and standardizing loan limits, and reducing the number of credit denials.  Includes food hubs as an eligible entity for Class E loans.  Authorizes the Agricultural Loan Program to issue lines of credit.  Creates a new class of loans to encourage large scale agriculture of import replacement crops or crops grown for the farm to state program.  (CD1)

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

A BILL FOR AN ACT

RELATING TO AGRICULTURAL LOANS.

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

     SECTION 1.  The legislature finds that Hawaii agricultural producers face critical barriers in accessing capital necessary to cover rising land and water costs, labor shortages, and infrastructure needs.  Modifications to the state agricultural loan program are needed to address these challenges and encourage farmers and ranchers to expand their current operations.  A diverse agricultural sector that includes small and mid-sized farms is essential to Hawaii's food security, economic resilience, and self-sufficiency.  Modifications to the state agricultural loan program should ensure equitable access to capital for farmers of all scales, with a focus on enabling sustainable, community-based, and diversified production.

     The purpose of this Act is to:

     (1)  Lower and fix the state agricultural loan program's interest rates, increase loan limits, and reduce the required number of credit denials;

     (2)  Establish a program for a secured line of credit and create a new loan initiative to encourage larger scale agriculture for import replacement and crops grown for farm to state programs; and

     (3)  Appropriate funds to meet the anticipated increase in loan demand and to accommodate the increased loan limits.

     SECTION 2.  Section 155-1, Hawaii Revised Statutes, is amended by adding two new definitions to be appropriately inserted and to read as follows:

     ""Import replacement crops" means crops grown on a large‑scale basis in the State with the specific intent to replace crops imported into the State.

     "Line of credit" means a secured revolving loan with a preset credit limit."

     SECTION 3.  Section 155-3, Hawaii Revised Statutes, is amended to read as follows:

     "§155-3  Restriction.  Loans authorized by this chapter shall require [two credit denials, except for class "F" loans for new farmer and farm innovation programs, which shall require] one credit denial.  This requirement shall be waived for new farmer loans for $100,000 or less for farm trainees and recent college graduates with a degree in agriculture.  This requirement may also be waived by the board of agriculture for emergency loans.  Credit denials may be accepted from any of the following:

     (1)  Private lenders;

     (2)  Members of the farm credit system; or

     (3)  The United States Department of Agriculture."

     SECTION 4.  Section 155-8, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  Loans made under this section shall bear simple interest on the unpaid principal balance, charged on the actual amount disbursed to the borrower.  The interest rate on loans of class "A", "B", "C", "E", [and] "G", and "J" shall be at a rate of [one per cent below the prime rate or at a rate of seven and one-half] four per cent a year[, whichever is less.  For purposes of this subsection, the prime rate shall be determined on January 1 and July 1 of each year, and shall be the prime rate charged by the two largest banks in the State identified by the department of commerce and consumer affairs.  If the prime rates of the two largest banks are different, the lower prime rate of the two shall apply.  The interest rate of class "F" loans shall be at a rate of one and one-half per cent below the prime rate or at a rate of six per cent a year, whichever is less].  The interest rate of class "D", "F", "H" [and], "I", and "K" loans shall be three per cent a year.  If the money loaned is borrowed by the department, then the interest on loans of the classes shall be the rate as determined above or one per cent over the cost to the State of borrowing the money, whichever is greater.  Interest on loans made under this chapter shall not be less than three per cent a year."

     SECTION 5.  Section 155-9, Hawaii Revised Statutes, is amended to read as follows:

     "§155-9  Classes of loans; purposes[,]; terms[,]; eligibility.  (a)  Loans made under this chapter shall be for the purposes and in accordance with the terms specified in classes "A" through ["I"] "K" in this section and shall be made only to applicants who meet the eligibility requirements specified therein and except as to class "B" loans to associations and class "E" loans, the eligibility requirements specified in section 155-10.  The maximum amount of a loan for class "A", "C", "D", and "F" loans to an individual applicant shall also apply to any loan application submitted by a partnership, corporation, or other entity, and for the purpose of determining whether the maximum loan amount to any individual will be exceeded, outstanding loans to any partnership, corporation, or other entity that the individual has a legal or equitable interest in excess of twenty per cent shall be taken into account.

     (b)  Class A:  Farm ownership and improvement loans shall provide for:

     (1)  The purchase or improvement of farm land;

     (2)  The purchase, construction, or improvement of adequate farm dwellings, and other essential farm buildings; and

     (3)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed [$800,000] $           and for a term not to exceed forty years.  To be eligible, the applicant shall (A) derive, or present an acceptable plan to derive, a major portion of the applicant's income from and devote, or intend to devote, most of the applicant's time to farming operations; and (B) have or be able to obtain the operating capital, including livestock and equipment, needed to successfully operate the applicant's farm.

     (c)  Class B:  Soil and water conservation loans shall provide for:

     (1)  Soil conservation practices;

     (2)  Water development, conservation, and use;

     (3)  Drainage; and

     (4)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed [$35,000] $           to an individual or [$200,000 to] an association and shall be for a term not to exceed twenty years for a loan to an individual and forty years to an association.  To be eligible, an individual applicant shall have sufficient farm and other income to pay for farm operating and living expenses and to meet payments on applicant's existing debts, including the proposed soil and water conservation loan.  An association, to be eligible, shall be a nonprofit organization primarily engaged in extending services directly related to the purposes of the loan to its members, and at least sixty per cent of its membership shall meet the eligibility requirements specified in section 155-10.

     (d)  Class C:  Farm operating loans shall be for the purpose of carrying on and improving a farming operation, including:

     (1)  The purchase of farm equipment and livestock;

     (2)  The payment of production and marketing expenses, including materials, labor, and services;

     (3)  The payment of living expenses;

     (4)  The liquidation of indebtedness incurred for any of the foregoing purposes; and

     (5)  The exportation of crops and livestock.

     The loans shall be for an amount not to exceed [$800,000] $           and for a term not to exceed ten years.  To be eligible, an applicant shall derive, or present an acceptable plan to derive, a major portion of the applicant's income from and devote, or intend to devote, most of the applicant's time to farming operations.

     Qualified farmers affected by state eradication programs may also be eligible for loans under this subsection.  Loans made for rehabilitation from eradication programs shall be subject to the terms of class "C" loans; provided that the interest rate shall be three per cent a year and the requirements in section 155-3 shall be waived and paragraph (4) shall not apply.

     (e)  Class D:  Emergency loans shall be for the purpose of providing relief and rehabilitation to qualified farmers without limit as to purpose:

     (1)  In areas stricken by extraordinary rainstorms, windstorms, droughts, tidal waves, earthquakes, volcanic eruptions, and other natural catastrophes;

     (2)  On farms stricken by livestock disease epidemics and crop blights;

     (3)  On farms seriously affected by prolonged shipping and dock strikes;

     (4)  During economic emergencies caused by overproduction, excessive imports, and the like; and

     (5)  During other emergencies as determined by the board of agriculture.

     The maximum amounts and period for the loans shall be determined by the board of agriculture; provided that the board shall require that any settlement or moneys received by qualified farmers as a result of an emergency declared under this section shall first be applied to the repayment of an emergency loan made under this chapter.

     (f)  Class E:  Loans to farmers' cooperatives, corporations, food hubs, and food manufacturers shall provide credit to entities engaged in marketing, purchasing, and processing, and providing farm business services, including:

     (1)  Facility loans to purchase or improve land, building, and equipment for an amount not to exceed [$500,000] $           and a term not to exceed twenty years;

     (2)  Operating loans to finance inventories of supplies and materials, warehousing, and shipping commodities[,]; extension of consumer credit to justified farmer‑members[,]; and other normal operating expenses for an amount not to exceed [$300,000] $           and a term not to exceed seven years; and

     (3)  The exportation of crops and livestock.

     To be eligible, a farmers' cooperative or corporation shall have a majority of its board of directors and a majority of its membership as shareholders who meet the eligibility requirements of section 155-10 and who devote most of their time to farming operations, and the facility loans shall be for an amount not to exceed [$500,000] $           or [eighty]            per cent of the cost of the project, whichever is less.

     To be eligible, a food hub shall have a majority of its board of directors and a majority of its membership as shareholders who meet the eligibility requirements of section 155-10 and who devote most of their time to farming operations.  For the purposes of this section, "food hub" means a business or organization that actively manages the aggregation, distribution, and marketing of source-identified food products primarily from local and regional producers to strengthen their ability to satisfy wholesale, retail, and institutional demand.

     To be eligible, a food manufacturer shall be licensed to do business in the State, and the controlling interest of the entity shall possess a minimum of two years of relevant processing or manufacturing experience as acceptable to the department of agriculture.  The entity shall process Hawaii‑grown agricultural products or use Hawaii-grown agricultural products as an ingredient in the manufacturing process.  Facility loans shall be for an amount not to exceed [$500,000] $           or [eighty]            per cent of the cost of the project, whichever is less.  The requirements in section 155‑10 shall be waived for food manufacturing loans; however, the entity shall be a sound credit risk with the ability to repay the money borrowed.

     (g)  Class F:  New farmer and farm innovation loan programs shall provide for:

     (1)  New farmer loans made under this class shall be [for purposes and] in accordance with the terms specified in class "A" and "C" [only, and shall be made only for full-time farming.] loans.  The loans shall be made for an amount not to exceed [$250,000] $           or eighty-five per cent of the cost of the project, whichever is less.  Farm trainees and recent graduates with a degree in agriculture with smaller projects requiring loans of $100,000 or less shall have a minimum five per cent equity contribution towards the cost of the project;

     (2)  Farm innovation loans made under this class shall be for qualified farmers to perform practical research in crop development, innovative production techniques, new technologies, and production of new crops that are not typically grown in the State.  Farm innovation loans shall be limited to a maximum of $75,000;

     (3)  Any subsequent loan shall be made from classes "A" to "D", respectively, depending upon the purpose for which the loan funds are used; and

     (4)  Borrowers shall comply with special term loan agreements as may be required by the department and shall take special training courses as the department deems necessary.

     (h)  Class G:  Loans to part-time farmers shall be for farm improvement and operating purposes for carrying on and improving farming operations, including loans for:

     (1)  The purchase, construction, and improvement of farm production and growing structures;

     (2)  The purchase of farm equipment or livestock; and

     (3)  The payment of production and marketing expenses, including materials, labor, and services.

     The liquidation of indebtedness incurred for any of the purposes under this subsection and for living expenses shall not be authorized purposes.  Each loan shall be for an amount not to exceed [$25,000] $           and for a term not to exceed ten years.

     (i)  Class H:  Farm sustainable project loans shall provide for:

     (1)  The purchase, construction, or improvement of essential farm buildings, including the improvement of existing farm buildings related to the project;

     (2)  The improvement of land that may be required by the project;

     (3)  The purchase of equipment and payment of any related expenses, including materials, labor, and services;

     (4)  Operating expenses associated with the project; or

     (5)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed $1,500,000 or eighty-five per cent of the project cost, whichever is less, and for a term not to exceed forty years.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  Income from the applicant's farming activities and any supplemental income that may be generated from the project shall be the sole criterion for the department's determination of the applicant's ability to repay the money borrowed.  The department's determination may be based on projections of income and expenses.

     (j)  Class I:  Biosecurity project loans shall provide for:

     (1)  The purchase, construction, or improvement of essential farm buildings, including the improvement of existing farm buildings related to the project;

     (2)  The improvement of land that may be required by the project;

     (3)  The purchase of equipment and payment of any related expenses, including materials, labor, signage, training, and services;

     (4)  Operating expenses associated with the project; or

     (5)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed $1,000,000 or eighty-five per cent of the project cost, whichever is less, and for a term not to exceed twenty-five years.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  Income from the applicant's farming activities and any supplemental income that may be generated from the project shall be the sole criterion for the department's determination of the applicant's ability to repay the money borrowed.  The department's determination may be based on projections of income and expenses.

     (k)  Class J:  Line of credit loans shall provide revolving credit for farm operational expenses and to improve farm operations.  Funds from the line of credit shall not be used for personal expenses or non-farm related purposes.

     A line of credit secured by chattel, crops, or equipment shall not exceed $           or            per cent of the collateral valuation, whichever is less, and for a term not to exceed five years.  A line of credit secured by real property shall not exceed $           or            per cent of the collateral valuation, whichever is less, and for a term not to exceed ten years.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  The interest rate for lines of credit shall be the same rate provided in section 155-8.  A borrower may access funds from a line of credit at any time during the term of a loan; provided that the borrower does not exceed the maximum credit limit and the account is in good standing.

     (l)  Class K:  Import replacement loans shall provide credit for farm expansion to grow import replacement crops or to fund crops grown for the farm to state program established under section 27-8.  Loans made under this class shall be for the purposes specified in class "A" and class "C" and terms shall be determined by the primary purpose of the loan funds.  Loans for crops grown for the farm to state program shall have written commitments from the appropriate state agency.  Import replacement crops shall be of sufficient scale to impact regional, island wide, or statewide markets.

     Loans shall be for an amount not to exceed $           and for a term not to exceed ten years. 

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  Interest rates for this class shall be three per cent a year."

     SECTION 6.  There is appropriated out of the general revenues of the State of Hawaii the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 to be deposited into the agricultural loan revolving fund.

     SECTION 7.  There is appropriated out of the agricultural loan revolving fund the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 for funding agricultural loans.

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

     SECTION 8.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 9.  This Act shall take effect on July 1, 2050.

Report Title:

Department of Agriculture; Agricultural Loan Program; Loan Limits; Interest Rates; Credit Denials; Line of Credit; Import Replacement Crop Loans; Appropriation

Description:

Updates the Agricultural Loan Program by lowering interest rates, increasing and standardizing loan limits, and reducing the number of credit denials.  Includes food hubs as an eligible entity for Class E loans.  Authorizes the Agricultural Loan Program to issue lines of credit.  Creates a new class of loans to encourage large scale agriculture of import replacement crops grown for the farm to state program.  Appropriates funds.  Effective 7/1/2050.  (SD1)

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

A BILL FOR AN ACT

RELATING TO AGRICULTURAL LOANS.

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

     SECTION 1.  The legislature finds that Hawaii agricultural producers face critical barriers in accessing capital necessary to cover rising land and water costs, labor shortages, and infrastructure needs.  Modifications to the state agricultural loan program are needed to address these challenges and encourage farmers and ranchers to expand their current operations.  A diverse agricultural sector that includes small and mid-sized farms is essential to Hawaii's food security, economic resilience, and self-sufficiency.  Modifications to the state agricultural loan program should ensure equitable access to capital for farmers of all scales, with a focus on enabling sustainable, community-based, and diversified production.

     The purpose of this Act is to:

     (1)  Lower and fix the state agricultural loan program's interest rates, increase loan limits, and reduce the required number of credit denials;

     (2)  Establish a program for a secured line of credit and create a new loan initiative to encourage larger scale agriculture for import replacement and crops grown for farm to state programs; and

     (3)  Appropriate funds to meet the anticipated increase in loan demand and to accommodate the increased loan limits.

     SECTION 2.  Section 155-1, Hawaii Revised Statutes, is amended by adding two new definitions to be appropriately inserted and to read as follows:

     ""Import replacement crops" means crops grown on a large-scale basis in Hawaii with the specific intent to replace crops imported into the State.

     "Line of credit" means a secured revolving loan with a preset credit limit."

     SECTION 3.  Section 155-3, Hawaii Revised Statutes, is amended to read as follows:

     "§155-3  Restriction.  Loans authorized by this chapter shall require [two credit denials, except for class "F" loans for new farmer and farm innovation programs, which shall require] one credit denial.  This requirement shall be waived for new farmer loans for $100,000 or less for farm trainees and recent college graduates with a degree in agriculture.  This requirement may also be waived by the board of agriculture for emergency loans.  Credit denials may be accepted from any of the following:

     (1)  Private lenders;

     (2)  Members of the farm credit system; or

     (3   The United States Department of Agriculture."

     SECTION 4.  Section 155-8, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  Loans made under this section shall bear simple interest on the unpaid principal balance, charged on the actual amount disbursed to the borrower.  The interest rate on loans of class "A", "B", "C", "E", [and] "G", and "J" shall be at a rate of [one per cent below the prime rate or at a rate of seven and one-half] four per cent a year[, whichever is less.  For purposes of this subsection, the prime rate shall be determined on January 1 and July 1 of each year, and shall be the prime rate charged by the two largest banks in the State identified by the department of commerce and consumer affairs.  If the prime rates of the two largest banks are different, the lower prime rate of the two shall apply.  The interest rate of class "F" loans shall be at a rate of one and one-half per cent below the prime rate or at a rate of six per cent a year, whichever is less].  The interest rate of class "D", "F", "H" [and], "I", and "K" loans shall be three per cent a year.  If the money loaned is borrowed by the department, then the interest on loans of the classes shall be the rate as determined above or one per cent over the cost to the State of borrowing the money, whichever is greater.  Interest on loans made under this chapter shall not be less than three per cent a year."

     SECTION 5.  Section 155-9, Hawaii Revised Statutes, is amended to read as follows:

     "§155-9  Classes of loans; purposes[,]; terms[,]; eligibility.  (a)  Loans made under this chapter shall be for the purposes and in accordance with the terms specified in classes "A" through ["I"] "K" in this section and shall be made only to applicants who meet the eligibility requirements specified therein and except as to class "B" loans to associations and class "E" loans, the eligibility requirements specified in section 155-10.  The maximum amount of a loan for class "A", "C", "D", and "F" loans to an individual applicant shall also apply to any loan application submitted by a partnership, corporation, or other entity, and for the purpose of determining whether the maximum loan amount to any individual will be exceeded, outstanding loans to any partnership, corporation, or other entity that the individual has a legal or equitable interest in excess of twenty per cent shall be taken into account.

     (b)  Class A:  Farm ownership and improvement loans shall provide for:

     (1)  The purchase or improvement of farm land;

     (2)  The purchase, construction, or improvement of adequate farm dwellings, and other essential farm buildings; and

     (3)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed [$800,000] $           and for a term not to exceed forty years.  To be eligible, the applicant shall (A) derive, or present an acceptable plan to derive, a major portion of the applicant's income from and devote, or intend to devote, most of the applicant's time to farming operations; and (B) have or be able to obtain the operating capital, including livestock and equipment, needed to successfully operate the applicant's farm.

     (c)  Class B:  Soil and water conservation loans shall provide for:

     (1)  Soil conservation practices;

     (2)  Water development, conservation, and use;

     (3)  Drainage; and

     (4)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed [$35,000] $           to an individual or [$200,000 to] an association and shall be for a term not to exceed twenty years for a loan to an individual and forty years to an association.  To be eligible, an individual applicant shall have sufficient farm and other income to pay for farm operating and living expenses and to meet payments on applicant's existing debts, including the proposed soil and water conservation loan.  An association, to be eligible, shall be a nonprofit organization primarily engaged in extending services directly related to the purposes of the loan to its members, and at least sixty per cent of its membership shall meet the eligibility requirements specified in section 155-10.

     (d)  Class C:  Farm operating loans shall be for the purpose of carrying on and improving a farming operation, including:

     (1)  The purchase of farm equipment and livestock;

     (2)  The payment of production and marketing expenses, including materials, labor, and services;

     (3)  The payment of living expenses;

     (4)  The liquidation of indebtedness incurred for any of the foregoing purposes; and

     (5)  The exportation of crops and livestock.

     The loans shall be for an amount not to exceed [$800,000] $           and for a term not to exceed ten years.  To be eligible, an applicant shall derive, or present an acceptable plan to derive, a major portion of the applicant's income from and devote, or intend to devote, most of the applicant's time to farming operations.

     Qualified farmers affected by state eradication programs may also be eligible for loans under this subsection.  Loans made for rehabilitation from eradication programs shall be subject to the terms of class "C" loans; provided that the interest rate shall be three per cent a year and the requirements in section 155-3 shall be waived and paragraph (4) shall not apply.

     (e)  Class D:  Emergency loans shall be for the purpose of providing relief and rehabilitation to qualified farmers without limit as to purpose:

     (1)  In areas stricken by extraordinary rainstorms, windstorms, droughts, tidal waves, earthquakes, volcanic eruptions, and other natural catastrophes;

     (2)  On farms stricken by livestock disease epidemics and crop blights;

     (3)  On farms seriously affected by prolonged shipping and dock strikes;

     (4)  During economic emergencies caused by overproduction, excessive imports, and the like; and

     (5)  During other emergencies as determined by the board of agriculture.

     The maximum amounts and period for the loans shall be determined by the board of agriculture; provided that the board shall require that any settlement or moneys received by qualified farmers as a result of an emergency declared under this section shall first be applied to the repayment of an emergency loan made under this chapter.

     (f)  Class E:  Loans to farmers' cooperatives, corporations, food hubs, and food manufacturers shall provide credit to entities engaged in marketing, purchasing, and processing, and providing farm business services, including:

     (1)  Facility loans to purchase or improve land, building, and equipment for an amount not to exceed [$500,000] $           and a term not to exceed twenty years;

     (2)  Operating loans to finance inventories of supplies and materials, warehousing, and shipping commodities[,]; extension of consumer credit to justified farmer-members[,]; and other normal operating expenses for an amount not to exceed [$300,000] $           and a term not to exceed seven years; and

     (3)  The exportation of crops and livestock.

     To be eligible, a farmers' cooperative or corporation shall have a majority of its board of directors and a majority of its membership as shareholders who meet the eligibility requirements of section 155-10 and who devote most of their time to farming operations, and the facility loans shall be for an amount not to exceed [$500,000] $           or [eighty]            per cent of the cost of the project, whichever is less.

     To be eligible, a food hub shall have a majority of its board of directors and a majority of its membership as shareholders who meet the eligibility requirements of section 155-10 and who devote most of their time to farming operations.  For the purposes of this section, "food hub" means a business or organization that actively manages the aggregation, distribution, and marketing of source-identified food products primarily from local and regional producers to strengthen their ability to satisfy wholesale, retail, and institutional demand.

     To be eligible, a food manufacturer shall be licensed to do business in the State, and the controlling interest of the entity shall possess a minimum of two years of relevant processing or manufacturing experience as acceptable to the department of agriculture.  The entity shall process Hawaii-grown agricultural products or use Hawaii-grown agricultural products as an ingredient in the manufacturing process.  Facility loans shall be for an amount not to exceed [$500,000] $           or [eighty]            per cent of the cost of the project, whichever is less.  The requirements in section 155-10 shall be waived for food manufacturing loans; however, the entity shall be a sound credit risk with the ability to repay the money borrowed.

     (g)  Class F:  New farmer and farm innovation loan programs shall provide for:

     (1)  New farmer loans made under this class shall be [for purposes and] in accordance with the terms specified in class "A" and "C" [only, and shall be made only for full-time farming.] loans.  The loans shall be made for an amount not to exceed [$250,000] $           or eighty-five per cent of the cost of the project, whichever is less.  Farm trainees and recent graduates with a degree in agriculture with smaller projects requiring loans of $100,000 or less shall have a minimum five per cent equity contribution towards the cost of the project;

     (2)  Farm innovation loans made under this class shall be for qualified farmers to perform practical research in crop development, innovative production techniques, new technologies, and production of new crops that are not typically grown in the State.  Farm innovation loans shall be limited to a maximum of $75,000;

     (3)  Any subsequent loan shall be made from classes "A" to "D", respectively, depending upon the purpose for which the loan funds are used; and

     (4)  Borrowers shall comply with special term loan agreements as may be required by the department and shall take special training courses as the department deems necessary.

     (h)  Class G:  Loans to part-time farmers shall be for farm improvement and operating purposes for carrying on and improving farming operations, including loans for:

     (1)  The purchase, construction, and improvement of farm production and growing structures;

     (2)  The purchase of farm equipment or livestock; and

     (3)  The payment of production and marketing expenses, including materials, labor, and services.

     The liquidation of indebtedness incurred for any of the purposes under this subsection and for living expenses shall not be authorized purposes.  Each loan shall be for an amount not to exceed [$25,000] $           and for a term not to exceed ten years.

     (i)  Class H:  Farm sustainable project loans shall provide for:

     (1)  The purchase, construction, or improvement of essential farm buildings, including the improvement of existing farm buildings related to the project;

     (2)  The improvement of land that may be required by the project;

     (3)  The purchase of equipment and payment of any related expenses, including materials, labor, and services;

     (4)  Operating expenses associated with the project; or

     (5)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed $1,500,000 or eighty-five per cent of the project cost, whichever is less, and for a term not to exceed forty years.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  Income from the applicant's farming activities and any supplemental income that may be generated from the project shall be the sole criterion for the department's determination of the applicant's ability to repay the money borrowed.  The department's determination may be based on projections of income and expenses.

     (j)  Class I:  Biosecurity project loans shall provide for:

     (1)  The purchase, construction, or improvement of essential farm buildings, including the improvement of existing farm buildings related to the project;

     (2)  The improvement of land that may be required by the project;

     (3)  The purchase of equipment and payment of any related expenses, including materials, labor, signage, training, and services;

     (4)  Operating expenses associated with the project; or

     (5)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed $1,000,000 or eighty-five per cent of the project cost, whichever is less, and for a term not to exceed twenty-five years.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  Income from the applicant's farming activities and any supplemental income that may be generated from the project shall be the sole criterion for the department's determination of the applicant's ability to repay the money borrowed.  The department's determination may be based on projections of income and expenses.

     (k)  Class J:  Line of credit loans shall provide revolving credit for farm operational expenses and to improve farm operations.  Funds from the line of credit shall not be used for personal expenses or non-farm related purposes.

     A line of credit secured by chattel, crops, or equipment shall not exceed $           or            per cent of the collateral valuation, whichever is less, and for a term not to exceed five years.  A line of credit secured by real property shall not exceed $           or            per cent of the collateral valuation, whichever is less, and for a term not to exceed ten years.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  The interest rate for lines of credit shall be the same rate provided in section 155-8.  A borrower may access funds from a line of credit at any time during the term of a loan; provided that the borrower does not exceed the maximum credit limit and the account is in good standing.

     (l)  Class K:  Import replacement loans shall provide credit for farm expansion to grow import replacement crops or to fund crops grown for the farm to state program established under section 27-8.  Loans made under this class shall be for the purposes specified in class "A" and class "C" and terms shall be determined by the primary purpose of the loan funds.  Loans for crops grown for the farm to state program shall have written commitments from the appropriate state agency.  Import replacement crops shall be of sufficient scale to impact regional, island wide, or statewide markets.

     Loans shall be for an amount not to exceed $           and for a term not to exceed ten years. 

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  Interest rates for this class shall be three per cent per year."

     SECTION 6.  There is appropriated out of the general revenues of the State of Hawaii the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 to be deposited into the agricultural loan revolving fund.

     SECTION 7.  There is appropriated out of the agricultural loan revolving fund the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 for funding agricultural loans.

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

     SECTION 8.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 9.  This Act shall take effect on July 1, 3000.

Report Title:

Department of Agriculture; Agricultural Loan Program; Loan Limits; Interest Rates; Credit Denials; Line of Credit; Import Replacement Crop Loans; Appropriation

Description:

Updates the agricultural loan program by lowering interest rates, increasing and standardizing loan limits, and reducing the number of credit denials.  Includes food hubs as an eligible entity for Class E loans.  Authorizes the agricultural loan program to issue lines of credit.  Creates a new class of loans to encourage large scale agriculture of import replacement crops grown for the farm to state program.  Appropriates funds.  Effective 7/1/3000.  (HD2)

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

A BILL FOR AN ACT

RELATING TO AGRICULTURAL LOANS.

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

     SECTION 1.  The legislature finds that Hawaii agricultural producers face critical barriers in accessing capital necessary to cover rising land and water costs, labor shortages, and infrastructure needs.  Modifications to the state agricultural loan program are needed to address these challenges and encourage farmers and ranchers to expand their current operations.  A diverse agricultural sector that includes small and mid-sized farms is essential to Hawaii's food security, economic resilience, and self-sufficiency.  Modifications to the state agricultural loan program should ensure equitable access to capital for farmers of all scales, with a focus on enabling sustainable, community-based, and diversified production.

     The purpose of this Act is to:

     (1)  Lower and fix the state agricultural loan program's interest rates, increase loan limits, and reduce the required number of credit denials;

     (2)  Establish a program for a secured line of credit and create a new loan initiative to encourage larger scale agriculture for import replacement and crops grown for farm to state programs; and

     (3)  Appropriate funds to meet the anticipated increase in loan demand and to accommodate the increased loan limits.

     SECTION 2.  Section 155-1, Hawaii Revised Statutes, is amended by adding two new definitions to be appropriately inserted and to read as follows:

     ""Import replacement crops" means crops grown on a large-scale basis in Hawaii with the specific intent to replace crops imported into the State.

     "Line of credit" means a secured revolving loan with a preset credit limit."

     SECTION 3.  Section 155-3, Hawaii Revised Statutes, is amended to read as follows:

     "§155-3  Restriction.  Loans authorized by this chapter shall require [two credit denials, except for class "F" loans for new farmer and farm innovation programs, which shall require] one credit denial.  This requirement shall be waived for new farmer loans for $100,000 or less for farm trainees and recent college graduates with a degree in agriculture.  This requirement may also be waived by the board of agriculture for emergency loans.  Credit denials may be accepted from any of the following:

     (1)  Private lenders;

     (2)  Members of the farm credit system; or

     (3   The United States Department of Agriculture."

     SECTION 4.  Section 155-8, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  Loans made under this section shall bear simple interest on the unpaid principal balance, charged on the actual amount disbursed to the borrower.  The interest rate on loans of class "A", "B", "C", "E", [and] "G", and "J" shall be at a rate of [one per cent below the prime rate or at a rate of seven and one-half] four per cent a year[, whichever is less.  For purposes of this subsection, the prime rate shall be determined on January 1 and July 1 of each year, and shall be the prime rate charged by the two largest banks in the State identified by the department of commerce and consumer affairs.  If the prime rates of the two largest banks are different, the lower prime rate of the two shall apply.  The interest rate of class "F" loans shall be at a rate of one and one-half per cent below the prime rate or at a rate of six per cent a year, whichever is less].  The interest rate of class "D", "F", "H" [and], "I", and "K" loans shall be three per cent a year.  If the money loaned is borrowed by the department, then the interest on loans of the classes shall be the rate as determined above or one per cent over the cost to the State of borrowing the money, whichever is greater.  Interest on loans made under this chapter shall not be less than three per cent a year."

     SECTION 5.  Section 155-9, Hawaii Revised Statutes, is amended to read as follows:

     "§155-9  Classes of loans; purposes[,]; terms[,]; eligibility.  (a)  Loans made under this chapter shall be for the purposes and in accordance with the terms specified in classes "A" through ["I"] "K" in this section and shall be made only to applicants who meet the eligibility requirements specified therein and except as to class "B" loans to associations and class "E" loans, the eligibility requirements specified in section 155-10.  The maximum amount of a loan for class "A", "C", "D", and "F" loans to an individual applicant shall also apply to any loan application submitted by a partnership, corporation, or other entity, and for the purpose of determining whether the maximum loan amount to any individual will be exceeded, outstanding loans to any partnership, corporation, or other entity that the individual has a legal or equitable interest in excess of twenty per cent shall be taken into account.

     (b)  Class A:  Farm ownership and improvement loans shall provide for:

     (1)  The purchase or improvement of farm land;

     (2)  The purchase, construction, or improvement of adequate farm dwellings, and other essential farm buildings; and

     (3)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed [$800,000] $1,500,000 and for a term not to exceed forty years.  To be eligible, the applicant shall (A) derive, or present an acceptable plan to derive, a major portion of the applicant's income from and devote, or intend to devote, most of the applicant's time to farming operations; and (B) have or be able to obtain the operating capital, including livestock and equipment, needed to successfully operate the applicant's farm.

     (c)  Class B:  Soil and water conservation loans shall provide for:

     (1)  Soil conservation practices;

     (2)  Water development, conservation, and use;

     (3)  Drainage; and

     (4)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed [$35,000] $750,000 to an individual or [$200,000 to] an association and shall be for a term not to exceed twenty years for a loan to an individual and forty years to an association.  To be eligible, an individual applicant shall have sufficient farm and other income to pay for farm operating and living expenses and to meet payments on applicant's existing debts, including the proposed soil and water conservation loan.  An association, to be eligible, shall be a nonprofit organization primarily engaged in extending services directly related to the purposes of the loan to its members, and at least sixty per cent of its membership shall meet the eligibility requirements specified in section 155-10.

     (d)  Class C:  Farm operating loans shall be for the purpose of carrying on and improving a farming operation, including:

     (1)  The purchase of farm equipment and livestock;

     (2)  The payment of production and marketing expenses, including materials, labor, and services;

     (3)  The payment of living expenses;

     (4)  The liquidation of indebtedness incurred for any of the foregoing purposes; and

     (5)  The exportation of crops and livestock.

     The loans shall be for an amount not to exceed [$800,000] $1,500,000 and for a term not to exceed ten years.  To be eligible, an applicant shall derive, or present an acceptable plan to derive, a major portion of the applicant's income from and devote, or intend to devote, most of the applicant's time to farming operations.

     Qualified farmers affected by state eradication programs may also be eligible for loans under this subsection.  Loans made for rehabilitation from eradication programs shall be subject to the terms of class "C" loans; provided that the interest rate shall be three per cent a year and the requirements in section 155-3 shall be waived and paragraph (4) shall not apply.

     (e)  Class D:  Emergency loans shall be for the purpose of providing relief and rehabilitation to qualified farmers without limit as to purpose:

     (1)  In areas stricken by extraordinary rainstorms, windstorms, droughts, tidal waves, earthquakes, volcanic eruptions, and other natural catastrophes;

     (2)  On farms stricken by livestock disease epidemics and crop blights;

     (3)  On farms seriously affected by prolonged shipping and dock strikes;

     (4)  During economic emergencies caused by overproduction, excessive imports, and the like; and

     (5)  During other emergencies as determined by the board of agriculture.

     The maximum amounts and period for the loans shall be determined by the board of agriculture; provided that the board shall require that any settlement or moneys received by qualified farmers as a result of an emergency declared under this section shall first be applied to the repayment of an emergency loan made under this chapter.

     (f)  Class E:  Loans to farmers' cooperatives, corporations, food hubs, and food manufacturers shall provide credit to entities engaged in marketing, purchasing, and processing, and providing farm business services, including:

     (1)  Facility loans to purchase or improve land, building, and equipment for an amount not to exceed [$500,000] $1,500,000 and a term not to exceed twenty years;

     (2)  Operating loans to finance inventories of supplies and materials, warehousing, and shipping commodities[,]; extension of consumer credit to justified farmer-members[,]; and other normal operating expenses for an amount not to exceed [$300,000] $750,000 and a term not to exceed seven years; and

     (3)  The exportation of crops and livestock.

     To be eligible, a farmers' cooperative or corporation shall have a majority of its board of directors and a majority of its membership as shareholders who meet the eligibility requirements of section 155-10 and who devote most of their time to farming operations, and the facility loans shall be for an amount not to exceed [$500,000] $1,500,000 or [eighty] eighty-five per cent of the cost of the project, whichever is less.

     To be eligible, a food hub shall have a majority of its board of directors and a majority of its membership as shareholders who meet the eligibility requirements of section 155-10 and who devote most of their time to farming operations.  For the purposes of this section, "food hub" means a business or organization that actively manages the aggregation, distribution, and marketing of source-identified food products primarily from local and regional producers to strengthen their ability to satisfy wholesale, retail, and institutional demand.

     To be eligible, a food manufacturer shall be licensed to do business in the State, and the controlling interest of the entity shall possess a minimum of two years of relevant processing or manufacturing experience as acceptable to the department of agriculture.  The entity shall process Hawaii-grown agricultural products or use Hawaii-grown agricultural products as an ingredient in the manufacturing process.  Facility loans shall be for an amount not to exceed [$500,000] $1,500,000 or [eighty] eighty-five per cent of the cost of the project, whichever is less.  The requirements in section 155-10 shall be waived for food manufacturing loans; however, the entity shall be a sound credit risk with the ability to repay the money borrowed.

     (g)  Class F:  New farmer and farm innovation loan programs shall provide for:

     (1)  New farmer loans made under this class shall be [for purposes and] in accordance with the terms specified in class "A" and "C" [only, and shall be made only for full-time farming.] loans.  The loans shall be made for an amount not to exceed [$250,000] $750,000 or eighty-five per cent of the cost of the project, whichever is less.  Farm trainees and recent graduates with a degree in agriculture with smaller projects requiring loans of $100,000 or less shall have a minimum five per cent equity contribution towards the cost of the project;

     (2)  Farm innovation loans made under this class shall be for qualified farmers to perform practical research in crop development, innovative production techniques, new technologies, and production of new crops that are not typically grown in the State.  Farm innovation loans shall be limited to a maximum of $75,000;

     (3)  Any subsequent loan shall be made from classes "A" to "D", respectively, depending upon the purpose for which the loan funds are used; and

     (4)  Borrowers shall comply with special term loan agreements as may be required by the department and shall take special training courses as the department deems necessary.

     (h)  Class G:  Loans to part-time farmers shall be for farm improvement and operating purposes for carrying on and improving farming operations, including loans for:

     (1)  The purchase, construction, and improvement of farm production and growing structures;

     (2)  The purchase of farm equipment or livestock; and

     (3)  The payment of production and marketing expenses, including materials, labor, and services.

     The liquidation of indebtedness incurred for any of the purposes under this subsection and for living expenses shall not be authorized purposes.  Each loan shall be for an amount not to exceed [$25,000] $750,000 and for a term not to exceed ten years.

     (i)  Class H:  Farm sustainable project loans shall provide for:

     (1)  The purchase, construction, or improvement of essential farm buildings, including the improvement of existing farm buildings related to the project;

     (2)  The improvement of land that may be required by the project;

     (3)  The purchase of equipment and payment of any related expenses, including materials, labor, and services;

     (4)  Operating expenses associated with the project; or

     (5)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed $1,500,000 or eighty-five per cent of the project cost, whichever is less, and for a term not to exceed forty years.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  Income from the applicant's farming activities and any supplemental income that may be generated from the project shall be the sole criterion for the department's determination of the applicant's ability to repay the money borrowed.  The department's determination may be based on projections of income and expenses.

     (j)  Class I:  Biosecurity project loans shall provide for:

     (1)  The purchase, construction, or improvement of essential farm buildings, including the improvement of existing farm buildings related to the project;

     (2)  The improvement of land that may be required by the project;

     (3)  The purchase of equipment and payment of any related expenses, including materials, labor, signage, training, and services;

     (4)  Operating expenses associated with the project; or

     (5)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed $1,000,000 or eighty-five per cent of the project cost, whichever is less, and for a term not to exceed twenty-five years.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  Income from the applicant's farming activities and any supplemental income that may be generated from the project shall be the sole criterion for the department's determination of the applicant's ability to repay the money borrowed.  The department's determination may be based on projections of income and expenses.

     (k)  Class J:  Line of credit loans shall provide revolving credit for farm operational expenses and to improve farm operations.  Funds from the line of credit shall not be used for personal expenses or non-farm related purposes.

     A line of credit secured by chattel, crops, or equipment shall not exceed $100,000 or eighty-five per cent of the collateral valuation, whichever is less, and for a term not to exceed five years.  A line of credit secured by real property shall not exceed $250,000 or eighty-five per cent of the collateral valuation, whichever is less, and for a term not to exceed ten years.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  The interest rate for lines of credit shall be the same rate provided in section 155-8.  A borrower may access funds from a line of credit at any time during the term of a loan; provided that the borrower does not exceed the maximum credit limit and the account is in good standing.

     (l)  Class K:  Import replacement loans shall provide credit for farm expansion to grow import replacement crops or to fund crops grown for the farm to state program established under section 27-8.  Loans made under this class shall be for the purposes specified in class "A" and class "C" and terms shall be determined by the primary purpose of the loan funds.  Loans for crops grown for the farm to state program shall have written commitments from the appropriate state agency.  Import replacement crops shall be of sufficient scale to impact regional, island wide, or statewide markets.

     Loans shall be for an amount not to exceed $2,500,000 and for a term not to exceed ten years. 

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  Interest rates for this class shall be three per cent per year."

     SECTION 6.  There is appropriated out of the general revenues of the State of Hawaii the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 to be deposited into the agricultural loan revolving fund.

     SECTION 7.  There is appropriated out of the agricultural loan revolving fund the sum of $           or so much thereof as may be necessary for fiscal year 2025-2026 for funding agricultural loans.

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

     SECTION 8.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 9.  This Act shall take effect on July 1, 3000.

Report Title:

Department of Agriculture; Agricultural Loan Program; Loan Limits; Interest Rates; Credit Denials; Line of Credit; Import Replacement Crop Loans; Appropriation

Description:

Updates the agricultural loan program by lowering interest rates, increasing and standardizing loan limits, and reducing the number of credit denials.  Includes food hubs as an eligible entity for Class E loans.  Authorizes the agricultural loan program to issue lines of credit.  Creates a new class of loans to encourage large scale agriculture of import replacement crops grown for the farm to state program.  Appropriates funds.  Effective 7/1/3000.  (HD1)

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

A BILL FOR AN ACT

RELATING TO AGRICULTURAL LOANS.

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

     SECTION 1.  The Legislature finds that Hawaii agricultural producers face critical barriers in accessing capital necessary to cover rising land and water costs, labor shortages, and infrastructure needs.  Modifications to the state agricultural loan program are needed to address these challenges and encourage farmers and ranchers to expand their current operations.  Larger scale agriculture operations are more efficient and better able to compete with imported products and assist the state in becoming more self-sufficient in food production.

     The purposes of this Act are to:

     (1)  Lower and fix the state agricultural loan program's interest rates, increase loan limits, and reduce the required number of credit denials;

     (2)  Establish a program for a secured line of credit and create a new loan initiative to encourage larger scale agriculture for import replacement and crops grown for farm to state programs; and

     (3)  Appropriate funds to meet the anticipated increase in loan demand and to accommodate the increased loan limits.

     SECTION 2.  Section 155-1, Hawaii Revised Statutes, is amended by adding two new definitions to be appropriately inserted and to read as follows:

     ""Import replacement crops" are crops grown on a large-scale basis in Hawaii with the specific intent to replace crops imported into the state.

     "Line of credit" means a secured revolving loan with a preset credit limit.  A borrower can access funds from a line of credit at any time during the term of a loan provided that the borrower does not exceed the maximum credit limit and the account is in good standing."

     SECTION 3.  Section 155-3, Hawaii Revised Statutes, is amended to read as follows:

     "§155-3  Restriction.  Loans authorized by this chapter shall require [two credit denials, except for class "F" loans for new farmer and farm innovation programs, which shall require] one credit denial.  This requirement shall be waived for new farmer loans for $100,000 or less for farm trainees and recent college graduates with a degree in agriculture.  This requirement may also be waived by the board of agriculture for emergency loans.  Credit denials may be accepted from any of the following:

     (1)  Private lenders;

     (2)  Members of the farm credit system; or

     (3   The United States Department of Agriculture."

     SECTION 4.  Section 155-8, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  Loans made under this section shall bear simple interest on the unpaid principal balance, charged on the actual amount disbursed to the borrower.  The interest rate on loans of class "A", "B", "C", "E", [and] "G", and "J" shall be at a rate of [one per cent below the prime rate or at a rate of seven and one-half] four per cent a year[, whichever is less].  [For purposes of this subsection, the prime rate shall be determined on January 1 and July 1 of each year, and shall be the prime rate charged by the two largest banks in the State identified by the department of commerce and consumer affairs.  If the prime rates of the two largest banks are different, the lower prime rate of the two shall apply.  The interest rate of class "F" loans shall be at a rate of one and one-half per cent below the prime rate or at a rate of six per cent a year, whichever is less.]  The interest rate of class "D", "F", "H" [and], "I", and "K" loans shall be three per cent a year.  If the money loaned is borrowed by the department, then the interest on loans of the classes shall be the rate as determined above or one per cent over the cost to the State of borrowing the money, whichever is greater.  Interest on loans made under this chapter shall not be less than three per cent a year."

     SECTION 5.  Section 155-9, Hawaii Revised Statutes, is amended to read as follows:

     "§155-9  Classes of loans; purposes, terms, eligibility.  (a)  Loans made under this chapter shall be for the purposes and in accordance with the terms specified in classes "A" through ["I"] "K" in this section and shall be made only to applicants who meet the eligibility requirements specified therein and except as to class "B" loans to associations and class "E" loans, the eligibility requirements specified in section 155-10.  The maximum amount of a loan for class "A", "C", "D", and "F" loans to an individual applicant shall also apply to any loan application submitted by a partnership, corporation, or other entity, and for the purpose of determining whether the maximum loan amount to any individual will be exceeded, outstanding loans to any partnership, corporation, or other entity that the individual has a legal or equitable interest in excess of twenty per cent shall be taken into account.

     (b)  Class A:  Farm ownership and improvement loans shall provide for:

     (1)  The purchase or improvement of farm land;

     (2)  The purchase, construction, or improvement of adequate farm dwellings, and other essential farm buildings; and

     (3)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed [$800,000] $1,500,000 and for a term not to exceed forty years.  To be eligible, the applicant shall (A) derive, or present an acceptable plan to derive, a major portion of the applicant's income from and devote, or intend to devote, most of the applicant's time to farming operations; and (B) have or be able to obtain the operating capital, including livestock and equipment, needed to successfully operate the applicant's farm.

     (c)  Class B:  Soil and water conservation loans shall provide for:

     (1)  Soil conservation practices;

     (2)  Water development, conservation, and use;

     (3)  Drainage; and

     (4)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed [$35,000] $750,000 to an individual or [$200,000 to] an association and shall be for a term not to exceed twenty years for a loan to an individual and forty years to an association.  To be eligible, an individual applicant shall have sufficient farm and other income to pay for farm operating and living expenses and to meet payments on applicant's existing debts, including the proposed soil and water conservation loan.  An association, to be eligible, shall be a nonprofit organization primarily engaged in extending services directly related to the purposes of the loan to its members, and at least sixty per cent of its membership shall meet the eligibility requirements specified in section 155-10.

     (d)  Class C:  Farm operating loans shall be for the purpose of carrying on and improving a farming operation, including:

     (1)  The purchase of farm equipment and livestock;

     (2)  The payment of production and marketing expenses, including materials, labor, and services;

     (3)  The payment of living expenses;

     (4)  The liquidation of indebtedness incurred for any of the foregoing purposes; and

     (5)  The exportation of crops and livestock.

     The loans shall be for an amount not to exceed [$800,000] $1,500,000 and for a term not to exceed ten years.  To be eligible, an applicant shall derive, or present an acceptable plan to derive, a major portion of the applicant's income from and devote, or intend to devote, most of the applicant's time to farming operations.

     Qualified farmers affected by state eradication programs may also be eligible for loans under this subsection.  Loans made for rehabilitation from eradication programs shall be subject to the terms of class "C" loans; provided that the interest rate shall be three per cent a year and the requirements in section 155-3 shall be waived and paragraph (4) shall not apply.

     (e)  Class D:  Emergency loans shall be for the purpose of providing relief and rehabilitation to qualified farmers without limit as to purpose:

     (1)  In areas stricken by extraordinary rainstorms, windstorms, droughts, tidal waves, earthquakes, volcanic eruptions, and other natural catastrophes;

     (2)  On farms stricken by livestock disease epidemics and crop blights;

     (3)  On farms seriously affected by prolonged shipping and dock strikes;

     (4)  During economic emergencies caused by overproduction, excessive imports, and the like; and

     (5)  During other emergencies as determined by the board of agriculture.

     The maximum amounts and period for the loans shall be determined by the board of agriculture; provided that the board shall require that any settlement or moneys received by qualified farmers as a result of an emergency declared under this section shall first be applied to the repayment of an emergency loan made under this chapter.

     (f)  Class E:  Loans to farmers' cooperatives, corporations, and food manufacturers shall provide credit to entities engaged in marketing, purchasing, and processing, and providing farm business services, including:

     (1)  Facility loans to purchase or improve land, building, and equipment for an amount not to exceed [$500,000] $1,500,000 and a term not to exceed twenty years;

     (2)  Operating loans to finance inventories of supplies and materials, warehousing, and shipping commodities, extension of consumer credit to justified farmer-members, and other normal operating expenses for an amount not to exceed [$300,000] $750,000 and a term not to exceed seven years; and

     (3)  The exportation of crops and livestock.

     To be eligible, a farmers' cooperative or corporation shall have a majority of its board of directors and a majority of its membership as shareholders who meet the eligibility requirements of section 155-10 and who devote most of their time to farming operations, and the facility loans shall be for an amount not to exceed [$500,000] $1,500,000 or [eighty] eighty-five per cent of the cost of the project, whichever is less.

     To be eligible, a food manufacturer shall be licensed to do business in the State, and the controlling interest of the entity shall possess a minimum of two years of relevant processing or manufacturing experience as acceptable to the department of agriculture.  The entity shall process Hawaii-grown agricultural products or use Hawaii-grown agricultural products as an ingredient in the manufacturing process.  Facility loans shall be for an amount not to exceed [$500,000] $1,500,000 or [eighty] eighty-five per cent of the cost of the project, whichever is less.  The requirements in section 155-10 shall be waived for food manufacturing loans; however, the entity shall be a sound credit risk with the ability to repay the money borrowed.

     (g)  Class F:  New farmer and farm innovation loan programs shall provide for:

     (1)  New farmer loans made under this class shall be [for purposes and] in accordance with the terms specified in class "A" and "C" [only, and shall be made only for full-time farming.] loans.  The loans shall be made for an amount not to exceed [$250,000] $750,000 or eighty-five per cent of the cost of the project, whichever is less.  Farm trainees and recent graduates with a degree in agriculture with smaller projects requiring loans of $100,000 or less shall have a minimum five per cent equity contribution towards the cost of the project;

     (2)  Farm innovation loans made under this class shall be for qualified farmers to perform practical research in crop development, innovative production techniques, new technologies, and production of new crops that are not typically grown in the State.  Farm innovation loans shall be limited to a maximum of $75,000;

     (3)  Any subsequent loan shall be made from classes "A" to "D", respectively, depending upon the purpose for which the loan funds are used; and

     (4)  Borrowers shall comply with special term loan agreements as may be required by the department and shall take special training courses as the department deems necessary.

     (h)  Class G:  Loans to part-time farmers shall be for farm improvement and operating purposes for carrying on and improving farming operations, including loans for:

     (1)  The purchase, construction, and improvement of farm production and growing structures;

     (2)  The purchase of farm equipment or livestock; and

     (3)  The payment of production and marketing expenses, including materials, labor, and services.

     The liquidation of indebtedness incurred for any of the purposes under this subsection and for living expenses shall not be authorized purposes.  Each loan shall be for an amount not to exceed [$25,000] $750,000 and for a term not to exceed ten years.

     (i)  Class H:  Farm sustainable project loans shall provide for:

     (1)  The purchase, construction, or improvement of essential farm buildings, including the improvement of existing farm buildings related to the project;

     (2)  The improvement of land that may be required by the project;

     (3)  The purchase of equipment and payment of any related expenses, including materials, labor, and services;

     (4)  Operating expenses associated with the project; or

     (5)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed $1,500,000 or eighty-five per cent of the project cost, whichever is less, and for a term not to exceed forty years.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  Income from the applicant's farming activities and any supplemental income that may be generated from the project shall be the sole criterion for the department's determination of the applicant's ability to repay the money borrowed.  The department's determination may be based on projections of income and expenses.

     (j)  Class I:  Biosecurity project loans shall provide for:

     (1)  The purchase, construction, or improvement of essential farm buildings, including the improvement of existing farm buildings related to the project;

     (2)  The improvement of land that may be required by the project;

     (3)  The purchase of equipment and payment of any related expenses, including materials, labor, signage, training, and services;

     (4)  Operating expenses associated with the project; or

     (5)  The liquidation of indebtedness incurred for any of the foregoing purposes.

     The loans shall be for an amount not to exceed $1,000,000 or eighty-five per cent of the project cost, whichever is less, and for a term not to exceed twenty-five years.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  Income from the applicant's farming activities and any supplemental income that may be generated from the project shall be the sole criterion for the department's determination of the applicant's ability to repay the money borrowed.  The department's determination may be based on projections of income and expenses.

     (k)  Class J:  Line of credit loans shall provide revolving credit for farm operational expenses and to improve farm operations.  Funds from the line of credit shall not be used for personal expenses or non-farm related purposes, and.

     (1)  A line of credit secured by chattel, crops, or equipment shall not exceed $100,000 or eighty-five per cent of the collateral valuation, whichever is less and for a term not to exceed five years; and

     (2)  A line of credit secured by real property shall not exceed $250,000 or eighty-five per cent of the collateral valuation, whichever is less and for a term not to exceed ten years.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  The interest rate for lines of credit shall be the same rate provided in section 155-8.

     (l)  Class K:  Import replacement loans shall provide credit for farm expansion to grow import replacement crops or to fund crops grown for the farm to state program established under section 27-8.  Loans made under this class shall be for the purposes specified in class "A" and class "C" and terms shall be determined by the primary purpose of the loan funds.  Loans shall be for an amount not to exceed $2,500,000 and for a term not to exceed 10 years.

     (1)  Loans for crops grown for the farm to state shall have written commitments from the appropriate state agency;

     (2)  Import replacement crops shall be of sufficient scale to impact regional, island wide, or statewide markets.

     To be eligible, the applicant shall be a qualified farmer of sound credit rating with the ability to repay the money borrowed, as determined by the department.  Interest rates for this class shall be three per cent per year."

     SECTION 6.  There is appropriated out of the general revenues of the State of Hawaii the sum of $__________ or so much thereof as may be necessary for fiscal year 2025-2026 to be deposited into the agricultural loan revolving special fund.

     SECTION 7.  There is appropriated out of the agricultural loan revolving special fund the sum of $____________ or so much thereof as may be necessary for fiscal year 2025-2026 for funding agricultural loans.

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

     SECTION 8.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 9. This Act shall take effect upon its approval.

Report Title:

Department of Agriculture; Agricultural Loan Program; Loan Limits; Interest Rates; Credit Denials; Line of Credit; Import Replacement Crop Loans

Description:

Updates the agricultural loan program by lowering interest rates, increasing and standardizing loan limits, and reducing the number of credit denials.  Authorizes the agricultural loan program to issue lines of credit.  Creates a new class of loans to encourage large scale agriculture of import replacement crops grown for the farm to state program.  Appropriates funds.

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

CONFERENCE COMMITTEE REP. NO. 21

Honolulu, Hawaii

                 , 2025

RE:    H.B. No. 984

       H.D. 2

       S.D. 1

       C.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madam and Sir:

     Your Committee on Conference on the disagreeing vote of the House of Representatives to the amendments proposed by the Senate in H.B. No. 984, H.D. 2, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO AGRICULTURAL LOANS,"

having met, and after full and free discussion, has agreed to recommend and does recommend to the respective Houses the final passage of this bill in an amended form.

     The purpose of this measure is to:

     (1)  Update the Agricultural Loan Program by lowering and fixing interest rates, increasing and standardizing loan limits, and reducing the required number of credit denials;

     (2)  Establish a program for a secured line of credit and create a new loan initiative to encourage larger scale agriculture for import replacement and crops grown for farm-to-state programs;

     (3)  Include food hubs as an eligible entity for Class E loans; and

     (4)  Appropriate funds into and out of the Agricultural Loan Revolving Fund to meet the anticipated increase in loan demand and to accommodate the increased loan limits.

     Your Committee on Conference has amended this measure by:

     (1)  Inserting loan limits for Class A, B, C, E, F, G, and K loans;

     (2)  Inserting a line of credit limit for Class J loans;

     (3)  Deleting language that would have appropriated funds into and out of the Agricultural Loan Revolving Fund to meet the anticipated increase in loan demand and to accommodate the increased loan limits;

     (4)  Changing the effective date to July 1, 2025; and

     (5)  Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

     As affirmed by the record of votes of the managers of your Committee on Conference that is attached to this report, your Committee on Conference is in accord with the intent and purpose of H.B. No. 984, H.D. 2, S.D. 1, as amended herein, and recommends that it pass Final Reading in the form attached hereto as H.B. No. 984, H.D. 2, S.D. 1, C.D. 1.

Respectfully submitted on behalf of the managers:

STAND. COM. REP. NO. 1685

Honolulu, Hawaii

RE:    H.B. No. 984

       H.D. 2

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committee on Ways and Means, to which was referred H.B. No. 984, H.D. 2, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO AGRICULTURAL LOANS,"

begs leave to report as follows:

     The purpose and intent of this measure is to update the Agricultural Loan Program.

     Specifically, this measure:

     (1)  Lowers and fixes the interest rates, increases loan limits, and reduces the required number of credit denials pertaining to the program;

     (2)  Establishes a program for a secured line of credit and creates a new loan initiative to encourage larger scale agriculture for import replacement and crops grown for farm to state programs;

     (3)  Adds food hubs as qualified borrowers; and

     (4)  Appropriates moneys to meet the anticipated increase in loan demand and to accommodate the increased loan limits.

     Your Committee received written comments in support of this measure from the Department of Agriculture, Hawaii County Department of Research and Development, Hawaii Ag Finance Network, Hawaii Cattlemen's Council, Hawaii Farm Bureau, Hawaii Farmers Union, Purple Maia Foundation, Ulupono Initiative, and one individual.

     Your Committee recognizes that the Agricultural Loan Program requires an update to meet the current needs of the agricultural industry and to support state self-sufficiency in food production.  Your Committee finds that updates to the program, including interest rate adjustments, new lines of credit, expansion of qualified borrowers, and increasing loan limits will expand access to affordable capital for ranchers and farmers in the State.

     As affirmed by the record of votes of the members of your Committee on Ways and Means that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 984, H.D. 2, S.D. 1, and recommends that it pass Third Reading.

Respectfully submitted on behalf of the members of the Committee on Ways and Means,

STAND. COM. REP. NO. 1075

Honolulu, Hawaii

RE:    H.B. No. 984

       H.D. 2

       S.D. 1

Honorable Ronald D. Kouchi

President of the Senate

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Sir:

     Your Committee on Agriculture and Environment, to which was referred H.B. No. 984, H.D. 2, entitled:

"A BILL FOR AN ACT RELATING TO AGRICULTURAL LOANS,"

begs leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Update the Agricultural Loan Program by lowering interest rates, increasing and standardizing loan limits, and reducing the number of credit denials;

     (2)  Include food hubs as an eligible entity for Class E loans;

     (3)  Authorize the issuance of line of credit loans;

     (4)  Create a new class of loans to encourage large scale agriculture of import replacement crops grown for the farm to state program; and

     (5)  Appropriate funds.

     Your Committee received testimony in support of this measure from the Department of Agriculture; Department of Research and Development of the County of Hawaiʻi; Ulupono Initiative; Hawaiʻi Farm Bureau; Hawaii Cattlemen's Council, Inc.; Hawaiʻi Food+ Policy; Chamber of Commerce Hawaii; Hawaii Farmers Union, Hana Chapter; and one individual. 

     Your Committee finds that the Agricultural Loan Program needs to be updated to meet the current needs and requirements of the agricultural industry.  Your Committee recognizes that, as the State moves toward becoming increasingly self-sufficient in food production, it is more critical than ever for local farmers and ranchers to receive access to affordable credit to cover significantly increasing production and inflation costs.  Your Committee notes that setting a fixed interest rate for loans under the Agricultural Loan Program would eliminate confusion and inequity for borrowers based on when they received loan approval and increase the cash flow for capital‑intensive farming and ranching operations.  Your Committee further notes that allowing food hubs to access Class E loans will not only support smaller scale farmers, but also strengthen the local food infrastructure for value-added producers.  According to testimony received by your Committee, larger loan limits and faster access to funds are necessary to encourage large scale agriculture to increase production and keep costs down to compete with imported crops and meet the needs of farm to state programs.  This measure seeks to efficiently meet the anticipated demand for agricultural loans, thereby enhancing the State's efforts to meet its food security and sustainability goals. 

     Your Committee has amended this measure by:

     (1)  Inserting an effective date of July 1, 2050, to encourage further discussion; and

     (2)  Making technical, nonsubstantive amendments for the purposes of clarity and consistency.

     As affirmed by the record of votes of the members of your Committee on Agriculture and Environment that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 984, H.D. 2, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 984, H.D. 2, S.D. 1, and be referred to your Committee on Ways and Means.

Respectfully submitted on behalf of the members of the Committee on Agriculture and Environment,

STAND. COM. REP. NO.  1108

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 984

      H.D. 2

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Finance, to which was referred H.B. No. 984, H.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO AGRICULTURAL LOANS,"

begs leave to report as follows:

     The purpose of this measure is to:

     (1)  Lower and fix the State's Agricultural Loan Program's interest rates, increase loan limits, and reduce the required number of credit denials;

     (2)  Establish a program for a secured line of credit and create a new loan initiative for farm expansion to grow import replacement crops or crops for farm-to-state programs; and

     (3)  Appropriate funds.

     Your Committee received testimony in support of this measure from the Department of Agriculture; Department of Research and Development of the County of Hawaiʻi; Hawaiʻi Farm Bureau; Ulupono Initiative; Hawaii Cattlemen's Council, Inc.; Hawaiʻi Food+ Policy; and three individuals.

     Your Committee has amended this measure by changing the cap amounts for various loans to unspecified amounts and percentages.

     As affirmed by the record of votes of the members of your Committee on Finance that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 984, H.D. 1, as amended herein, and recommends that it pass Third Reading in the form attached hereto as H.B. No. 984, H.D. 2.

Respectfully submitted on behalf of the members of the Committee on Finance,

STAND. COM. REP. NO.  639

Honolulu, Hawaii

                , 2025

RE:   H.B. No. 984

      H.D. 1

Honorable Nadine K. Nakamura

Speaker, House of Representatives

Thirty-Third State Legislature

Regular Session of 2025

State of Hawaii

Madame:

     Your Committee on Agriculture & Food Systems, to which was referred H.B. No. 984 entitled:

"A BILL FOR AN ACT RELATING TO AGRICULTURAL LOANS,"

begs leave to report as follows:

     The purpose of this measure is to:

     (1)  Lower and fix the state agricultural loan program's interest rates, increase loan limits, and reduce the required number of credit denials;

     (2)  Establish a program for a secured line of credit and create a new loan initiative to encourage larger scale agriculture for import replacement and crops grown for farm to state programs; and

     (3)  Appropriate funds into and out of the Agricultural Loan Revolving Fund to meet the anticipated increase in loan demand and to accommodate the increased loan limits.

     Your Committee received testimony in support of this measure from the Department of Agriculture; Department of Research and Development of the County of Hawai‘i; Ulupono Initiative; Hawai‘i Farm Bureau; Hawai‘i Farmers Union; Hawaii Cattlemen's Council; and Hawaiʻi Food+ Policy.  Your Committee received comments on this measure from one individual.

     Your Committee finds that Hawaii's farmers and ranchers face significant challenges in securing affordable capital to cover rising costs related to land, water, labor, and infrastructure.  Access to financing is often a major barrier to expanding agricultural operations and increasing local food production.  By providing farmers with the necessary financial tools, this measure promotes agricultural expansion, strengthens local food security, and ensures the long-term viability of Hawaii's farming industry.

     Your Committee has amended this measure by:

     (1)  Clarifying language in the preamble related to small and mid-sized farms being essential to Hawaii's food security, economic resilience, and self-sufficiency;

     (2)  Including food hubs as an eligible entity for Class E loans;

     (3)  Changing the effective date to July 1, 3000, to encourage further discussion; and

     (4)  Making technical, nonsubstantive amendments for the purposes of clarity, consistency, and style.

     As affirmed by the record of votes of the members of your Committee on Agriculture & Food Systems that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 984, as amended herein, and recommends that it pass Second Reading in the form attached hereto as H.B. No. 984, H.D. 1, and be referred to your Committee on Finance.

Respectfully submitted on behalf of the members of the Committee on Agriculture & Food Systems,