SB 1333: RELATING TO TAXATION.

A BILL FOR AN ACT

RELATING TO TAXATION.

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

     SECTION 1.  The legislature finds that, with Act 48, Session Laws of Hawaii 2023, the legislature enabled all counties to adopt county surcharges on certain state taxes for the purpose of providing additional funding for transit or other county-provided infrastructure.  The additional revenue source for counties was to correct lagging public investment in major regional infrastructure systems and to address the effect of high infrastructure costs on housing and development.  The county surcharge provides the counties with a much‑needed revenue source that can serve as a relief valve for upward pressure on real property taxes that directly impact Hawaii homeowners and renters.

     The legislature finds that use of the county surcharges for certain counties with populations equal to or less than five hundred thousand people is limited to transit- and transportation-related capital improvements and may not be used for infrastructure to support housing in areas where the State and counties plan public infrastructure investments.

     The legislature further finds that a longer period for the collection of county surcharges is needed to provide more certainty and reliability as to county revenues for long-term capital improvement programs and for debt payment on bonds issued for regional infrastructure.  Housing projects in areas where the counties are able to invest in upfront regional infrastructure are expected to benefit from a reduction in both infrastructure costs and delays associated with the lack of planned infrastructure capacity.

     Accordingly, the purpose of the Act is to:

     (1)  Uniformly extend the period within which a county with a population of five hundred thousand people or less may collect a surcharge on state tax to December 31, 2047;

     (2)  Uniformly authorize each county with a population of five hundred thousand people or less to use county surcharge revenues for both housing and transportation infrastructure; and

     (3)  Authorize cost-sharing with private or other public developers for housing infrastructure projects funded by surcharge revenues.

     SECTION 2.  Section 46-16.8, Hawaii Revised Statutes, is amended as follows:

     1.  By amending subsections (c) and (d) to read:

     "(c)  Each county that has not established a surcharge pursuant to subsection (a) on state tax before July 1, 2015, may establish the surcharge at the rates enumerated in sections 237‑8.6 and 238-2.6.  A county electing to establish this surcharge shall do so by ordinance; provided that:

     (1)  No ordinance shall be adopted until the county has conducted a public hearing on the proposed ordinance;

     (2)  The ordinance shall be adopted before December 31, 2023; and

     (3)  No county surcharge on state tax that may be authorized under this subsection shall be levied before January 1, 2019, or after December 31, [2030.] 2047.

     A county electing to exercise the authority granted under this subsection shall notify the director of taxation within ten days after the county has adopted a surcharge on state tax ordinance.  Beginning on January 1, 2019, January 1, 2020, January 1, 2024, or January 1, 2025, as applicable pursuant to sections 237-8.6 and 238-2.6, the director of taxation shall levy, assess, collect, and otherwise administer the county surcharge on state tax.

     (d)  Each county that has [established] adopted an ordinance to establish a surcharge on state tax [before March 31, 2019,] under subsection [(a) or] (c) may amend the surcharge ordinance to change the authorized uses of surcharge revenues, pursuant to subsection (g); provided that:

     (1)  No ordinance shall be amended pursuant to this section until the county has conducted a public hearing on the proposed amendment; and

     (2)  The ordinance shall be amended before December 31, [2023.] 2026."

     2.   By amending subsections (g) and (h) to read:

     "(g)  Each county having a population equal to or less than five hundred thousand that adopts a county surcharge on state tax ordinance pursuant to this section or amends its surcharge ordinance pursuant to subsection (d) shall use the surcharges received from the State for:

     (1)  Operating or capital costs of public transportation within each county for public transportation systems, including:

          (A)  Public roadways or highways;

          (B)  Public buses;

          (C)  Trains;

          (D)  Ferries;

          (E)  Pedestrian paths or sidewalks; or

          (F)  Bicycle paths;

     (2)  Expenses in complying with the Americans with Disabilities Act of 1990 with respect to paragraph (1); and

     (3)  Housing infrastructure costs; provided that a county that uses surcharge revenues for housing infrastructure [shall not pass on those housing infrastructure costs to the developer of a housing project; provided further that this paragraph shall apply only if a county amended its surcharge ordinance pursuant to subsection (d) or adopts a county surcharge on state tax ordinance after December 31, 2022;

provided that each county having a population equal to or less than five hundred thousand that adopts a county surcharge on state tax ordinance pursuant to this section after December 31, 2022, shall use the surcharge revenues received from the State only for the purposes described in paragraph (3) for county-appropriated housing infrastructure costs.] may establish a

means to cost-share all or a portion of the infrastructure costs through contributions from projects that are served by the infrastructure or other private or public funding sources.

     (h)  As used in this section:

     "Capital costs" means nonrecurring costs required to construct a transit facility or system, including debt service, costs of land acquisition and development, acquiring of rights‑of-way, planning, design, and construction, and including equipping and furnishing the facility or system.  For a county with a population greater than five hundred thousand, capital costs also include non-recurring personal services and other overhead costs that are not intended to continue after completion of construction of the minimum operable segment of the locally preferred alternative for a mass transit project.

     "Housing infrastructure costs" [includes pedestrian] means nonrecurring costs, inclusive of financing costs, including any related debt service and financing agreement costs, required to construct:

     (1)  Pedestrian paths or sidewalks on a county road near or around a public school[, and water,];

     (2)  Water, drainage, sewer, water reuse, waste disposal, and waste treatment systems that connect to the infrastructure of the county [and shall include financing costs, including any related debt service and financing agreement costs.]; and

     (3)  Electrical and communication system improvements required for neighborhood redevelopment."

     SECTION 3.  Section 237-8.6, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  Each county surcharge on state tax that may be adopted, extended, or amended pursuant to section 46-16.8 shall be levied beginning in a taxable year after the adoption of the relevant county ordinance; provided that no surcharge on state tax may be levied:

     (1)  Before:

          (A)  January 1, 2007, if the county surcharge on state tax was established by an ordinance adopted before December 31, 2005;

          (B)  January 1, 2019, if the county surcharge on state tax was established by the adoption of an ordinance after June 30, 2015, but before June 30, 2018;

          (C)  January 1, 2020, if the county surcharge on state tax was established by the adoption of an ordinance on or after June 30, 2018, but before March 31, 2019;

          (D)  January 1, 2024, if the county surcharge on state tax was established by the adoption of an ordinance on or after March 31, 2019, but before August 1, 2023; or

          (E)  January 1, 2025, if the county surcharge on state tax was established by the adoption of an ordinance on or after August 1, 2023, but before December 31, 2023; and

     (2)  After December 31, [2030.] 2047."

     SECTION 4.  Section 238-2.6, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  Each county surcharge on state tax that may be adopted, extended, or amended shall be levied beginning in a taxable year after the adoption of the relevant county ordinance; provided that no surcharge on state tax may be levied:

     (1)  Before:

          (A)  January 1, 2007, if the county surcharge on state tax was established by an ordinance adopted before December 31, 2005;

          (B)  January 1, 2019, if the county surcharge on state tax was established by the adoption of an ordinance after June 30, 2015, but before June 30, 2018;

          (C)  January 1, 2020, if the county surcharge on state tax was established by the adoption of an ordinance on or after June 30, 2018, but before March 31, 2019;

          (D)  January 1, 2024, if the county surcharge on state tax was established by the adoption of an ordinance on or after March 31, 2019, but before August 1, 2023; or

          (E)  January 1, 2025, if the county surcharge on state tax was established by the adoption of an ordinance on or after August 1, 2023, but before December 31, 2023; and

     (2)  After December 31, [2030.] 2047."

     SECTION 5.  Act 247, Session Laws of Hawaii 2005, as amended by section 7 of Act 240, Session Laws of Hawaii 2015, as amended by section 6 of Act 1, First Special Session Laws of Hawaii 2017, is amended by amending section 9 to read as follows:

     "SECTION 9.  This Act shall take effect upon its approval; provided that:

     (1)  If none of the counties of the State adopt an ordinance to levy a county surcharge on state tax by December 31, 2005, this Act shall be repealed and section 437D-8.4, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act;

     (2)  If any county does not adopt an ordinance to levy a county surcharge on state tax by December 31, 2005, it shall be prohibited from adopting such an ordinance pursuant to this Act, unless otherwise authorized by the legislature through a separate legislative act; and

     (3)  If an ordinance to levy a county surcharge on state tax is adopted by December 31, 2005:

          (A)  The ordinance shall be repealed on December 31, 2022; provided that the repeal of the ordinance shall not affect the validity or effect of an ordinance to extend a surcharge on state tax adopted pursuant to an act of the legislature; and

          (B)  This Act shall be repealed on December 31, [2030,] 2047, and section 437D-8.4, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act; provided that the amendments made to section 437D-8.4, Hawaii Revised Statutes, by Act 226, Session Laws of Hawaii 2008, as amended by Act 11, Session Laws of Hawaii 2009, and Act 110, Session Laws of Hawaii 2014, shall not be repealed."

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

     SECTION 7.  This Act shall take effect upon its approval.

Report Title:

County Surcharge on State Tax; Regional Infrastructure

Description:

Authorizes the use of county surcharge revenues for transportation and housing infrastructure in counties having a population of 500,000 or less.  Authorizes counties that have previously adopted a surcharge on state tax ordinance after July 1, 2015, to amend the uses of the surcharge.  Extends the period within which a county with a population of 500,000 or less may collect a surcharge on state tax, under certain conditions, to 12/31/2047.  Authorizes cost-sharing with private or other public developers for housing infrastructure projects funded by surcharge revenues.  (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 TAXATION.

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

     SECTION 1.  With Act 48, Session Laws of Hawaii 2023, the legislature enabled all counties to adopt county surcharges on certain state taxes for the purpose of providing additional funding for transit or other county-provided infrastructure.  The additional revenue source for counties was to correct lagging public investment in major regional infrastructure systems and to address the effect of high infrastructure costs on housing and development.

     The county surcharge provides the counties with a much‑needed revenue source that can serve as a relief valve for upward pressure on real property taxes that directly impacts Hawaii homeowners and renters.

     The legislature finds that use of the county surcharges for certain counties with populations equal to or less than five hundred thousand people is limited to transit- and transportation-related capital improvements and may not be used for infrastructure to support housing in areas where the State and counties plan public infrastructure investments.

     The legislature further finds that a longer period for the collection of county surcharges is needed to provide more certainty and reliability as to county revenues for long-term capital improvement programs and for debt payment on bonds issued for regional infrastructure.  Housing projects in areas where the counties are able to invest in upfront regional infrastructure are expected to benefit from a reduction in both infrastructure costs and delays associated with the lack of planned infrastructure capacity.

     Accordingly, the purpose of the Act is to:

     (1)  Uniformly extend the period within which a county with a population of five hundred thousand or less people may collect a surcharge on state tax to December 31, 2047;

     (2)  Uniformly authorize each county with a population of five hundred thousand or less people to use county surcharge revenues for both housing and transportation infrastructure; and

     (3)  Authorizes cost-sharing with private or other public developers for housing infrastructure projects funded by surcharge revenues.

     SECTION 2.  Section 46-16.8, Hawaii Revised Statutes, is amended as follows:

     1.  By amending subsections (c) and (d) to read:

     "(c)  Each county that has not established a surcharge pursuant to subsection (a) on state tax before July 1, 2015, may establish the surcharge at the rates enumerated in sections 237‑8.6 and 238-2.6.  A county electing to establish this surcharge shall do so by ordinance; provided that:

     (1)  No ordinance shall be adopted until the county has conducted a public hearing on the proposed ordinance;

     (2)  The ordinance shall be adopted before December 31, 2023; and

     (3)  No county surcharge on state tax that may be authorized under this subsection shall be levied before January 1, 2019, or after December 31, [2030.] 2047.

     A county electing to exercise the authority granted under this subsection shall notify the director of taxation within ten days after the county has adopted a surcharge on state tax ordinance.  Beginning on January 1, 2019, January 1, 2020, January 1, 2024, or January 1, 2025, as applicable pursuant to sections 237-8.6 and 238-2.6, the director of taxation shall levy, assess, collect, and otherwise administer the county surcharge on state tax.

     (d)  Each county that has [established] adopted an ordinance to establish a surcharge on state tax [before March 31, 2019,] under subsection [(a) or] (c) may amend the surcharge ordinance to change the authorized uses of surcharge revenues, pursuant to subsection (g); provided that:

     (1)  No ordinance shall be amended pursuant to this section until the county has conducted a public hearing on the proposed amendment; and

     (2)  The ordinance shall be amended before December 31, [2023.] 2026."

     2.   By amending subsections (g) and (h) to read:

     "(g)  Each county having a population equal to or less than five hundred thousand that adopts a county surcharge on state tax ordinance pursuant to this section or amends its surcharge ordinance pursuant to subsection (d) shall use the surcharges received from the State for:

     (1)  Operating or capital costs of public transportation within each county for public transportation systems, including:

          (A)  Public roadways or highways;

          (B)  Public buses;

          (C)  Trains;

          (D)  Ferries;

          (E)  Pedestrian paths or sidewalks; or

          (F)  Bicycle paths;

     (2)  Expenses in complying with the Americans with Disabilities Act of 1990 with respect to paragraph (1); and

     (3)  Housing infrastructure costs; provided that a county that uses surcharge revenues for housing infrastructure [shall not pass on those housing infrastructure costs to the developer of a housing project; provided further that this paragraph shall apply only if a county amended its surcharge ordinance pursuant to subsection (d) or adopts a county surcharge on state tax ordinance after December 31, 2022;

provided that each county having a population equal to or less than five hundred thousand that adopts a county surcharge on state tax ordinance pursuant to this section after December 31, 2022, shall use the surcharge revenues received from the State only for the purposes described in paragraph (3) for county-appropriated housing infrastructure costs.] may establish a

means to cost-share all or a portion of the infrastructure costs through contributions from projects that are served by the infrastructure or other private or public funding sources.

     (h)  As used in this section:

     "Capital costs" means nonrecurring costs required to construct a transit facility or system, including debt service, costs of land acquisition and development, acquiring of rights‑of-way, planning, design, and construction, and including equipping and furnishing the facility or system.  For a county with a population greater than five hundred thousand, capital costs also include non-recurring personal services and other overhead costs that are not intended to continue after completion of construction of the minimum operable segment of the locally preferred alternative for a mass transit project.

     "Housing infrastructure costs" [includes pedestrian] means nonrecurring costs, inclusive of financing costs, including any related debt service and financing agreement costs, required to construct:

     (1)  Pedestrian paths or sidewalks on a county road near or around a public school[, and water,];

     (2)  Water, drainage, sewer, water reuse, waste disposal, and waste treatment systems that connect to the infrastructure of the county [and shall include financing costs, including any related debt service and financing agreement costs.]; and

     (3)  Electrical and communication system improvements required for neighborhood redevelopment."

     SECTION 3.  Section 237-8.6, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  Each county surcharge on state tax that may be adopted, extended, or amended pursuant to section 46-16.8 shall be levied beginning in a taxable year after the adoption of the relevant county ordinance; provided that no surcharge on state tax may be levied:

     (1)  Before:

          (A)  January 1, 2007, if the county surcharge on state tax was established by an ordinance adopted before December 31, 2005;

          (B)  January 1, 2019, if the county surcharge on state tax was established by the adoption of an ordinance after June 30, 2015, but before June 30, 2018;

          (C)  January 1, 2020, if the county surcharge on state tax was established by the adoption of an ordinance on or after June 30, 2018, but before March 31, 2019;

          (D)  January 1, 2024, if the county surcharge on state tax was established by the adoption of an ordinance on or after March 31, 2019, but before August 1, 2023; or

          (E)  January 1, 2025, if the county surcharge on state tax was established by the adoption of an ordinance on or after August 1, 2023, but before December 31, 2023; and

     (2)  After December 31, [2030.] 2047."

     SECTION 4.  Section 238-2.6, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

     "(b)  Each county surcharge on state tax that may be adopted, extended, or amended shall be levied beginning in a taxable year after the adoption of the relevant county ordinance; provided that no surcharge on state tax may be levied:

     (1)  Before:

          (A)  January 1, 2007, if the county surcharge on state tax was established by an ordinance adopted before December 31, 2005;

          (B)  January 1, 2019, if the county surcharge on state tax was established by the adoption of an ordinance after June 30, 2015, but before June 30, 2018;

          (C)  January 1, 2020, if the county surcharge on state tax was established by the adoption of an ordinance on or after June 30, 2018, but before March 31, 2019;

          (D)  January 1, 2024, if the county surcharge on state tax was established by the adoption of an ordinance on or after March 31, 2019, but before August 1, 2023; or

          (E)  January 1, 2025, if the county surcharge on state tax was established by the adoption of an ordinance on or after August 1, 2023, but before December 31, 2023; and

     (2)  After December 31, [2030.] 2047."

     SECTION 5.  Act 247, Session Laws of Hawaii 2005, as amended by section 7 of Act 240, Session Laws of Hawaii 2015, as amended by section 6 of Act 1, First Special Session Laws of Hawaii 2017, is amended by amending section 9 to read as follows:

     "SECTION 9.  This Act shall take effect upon its approval; provided that:

     (1)  If none of the counties of the State adopt an ordinance to levy a county surcharge on state tax by December 31, 2005, this Act shall be repealed and section 437D-8.4, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act;

     (2)  If any county does not adopt an ordinance to levy a county surcharge on state tax by December 31, 2005, it shall be prohibited from adopting such an ordinance pursuant to this Act, unless otherwise authorized by the legislature through a separate legislative act; and

     (3)  If an ordinance to levy a county surcharge on state tax is adopted by December 31, 2005:

          (A)  The ordinance shall be repealed on December 31, 2022; provided that the repeal of the ordinance shall not affect the validity or effect of an ordinance to extend a surcharge on state tax adopted pursuant to an act of the legislature; and

          (B)  This Act shall be repealed on December 31, [2030,] 2047, and section 437D-8.4, Hawaii Revised Statutes, shall be reenacted in the form in which it read on the day prior to the effective date of this Act; provided that the amendments made to section 437D-8.4, Hawaii Revised Statutes, by Act 226, Session Laws of Hawaii 2008, as amended by Act 11, Session Laws of Hawaii 2009, and Act 110, Session Laws of Hawaii 2014, shall not be repealed."

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

     SECTION 7.  This Act shall take effect upon its approval.

Report Title:

County Surcharge on State Tax; Regional Infrastructure

Description:

Authorizes the use of county surcharge revenues for transportation and housing infrastructure in counties having a population of 500,000 or less.  Authorizes counties that have previously adopted a surcharge on state tax ordinance after July 1, 2015, to amend the uses of the surcharge.  Extends the period within which a county with a population of 500,000 or less may collect a surcharge on state tax, under certain conditions, to 12/31/2047.  Authorizes cost-sharing with private or other public developers for housing infrastructure projects funded by surcharge revenues.

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

STAND. COM. REP. NO. 472

Honolulu, Hawaii

RE:    S.B. No. 1333

       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 Housing, to which was referred S.B. No. 1333 entitled:

"A BILL FOR AN ACT RELATING TO TAXATION,"

begs leave to report as follows:

     The purpose and intent of this measure is to:

     (1)  Authorize the use of county surcharge revenues for transportation and housing infrastructure in counties having a population of five hundred thousand or less; 

     (2)  Authorize counties that have previously adopted a surcharge on state tax ordinance after July 1, 2015, to amend the uses of the surcharge; 

     (3)  Extend the period within which a county with a population of five hundred thousand or less may collect a surcharge on state tax, under certain conditions, to December 31, 2047; and

     (4)  Authorize cost-sharing with private or other public developers for housing infrastructure projects funded by surcharge revenues.

     Your Committee received testimony in support of this measure from the Department of Business, Economic Development, and Tourism; Office of Planning and Sustainable Development; Hawaiʻi Community Development Authority; Office of the Mayor of the County of Hawaiʻi; Office of the Mayor of the County of Kauaʻi; one member of the Maui County Council; and Office of Housing and Community Development of the County of Hawaiʻi.

     Your Committee received testimony in opposition to this measure from the Grassroot Institute of Hawaii.

     Your Committee received comments on this measure from the Department of Taxation and Tax Foundation of Hawaii.

     Your Committee finds that the county surcharge on the State's general excise tax allows each jurisdiction to utilize additional revenue generated for housing and transportation infrastructure projects, enabling cost-sharing of public infrastructure.  As the surcharge on general excise tax serves as a reliable, stable source of revenue, effective usage of surcharge revenue is imperative for the counties to be proactive in the development of housing projects that are affordable for residents.  Therefore, this measure extends an additional source of financing for housing development projects to address the unique housing needs of each county.

     Your Committee expresses concern regarding the utilization of revenue generated from the general excise tax surcharge in Maui County, which has resulted in a disappointing lack of infrastructure development that uses the surcharge.  Revenues were carved out specifically for housing and yet your Committee has not seen evidence of the commencement of more housing development projects in Maui County as a result of the surcharge.  While Maui County may have been a test to determine the feasibility of this method of financing, there have been no results.  Your Committee is therefore uncertain that this measure may catalyze the housing development intended, as the results in other counties may be premature. 

     Your Committee has amended this measure by 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 Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 1333, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 1333, S.D. 1, and be referred to your Committee on Ways and Means.

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