Senate Standing Committee on Ways and Means

Calling to order the 10am agenda. This meeting, including audio and video remote participants is being streamed live on YouTube. You will find links to viewing options for all Senate meetings on the live and on demand video page of our website. In the event we have to end this hearing, the Committee will reconvene, I guess tomorrow.

Tomorrow's Friday at 10am in this room. For those participating remotely, your audio will be muted and video disabled until it is your turn to testify. Please be conscious of the 1 minute time limit. Timer will be visible for all testifiers.

If we have to move on due to technical difficulties, please keep in mind you have we have your written testimony. Okay, this first item is House Bill 1369.

DBEDT

Vice Chair [unintelligible].

Thank you, Energy Office.

Aloha Chair, Vice Chair [unintelligible].

Thank you. Department of Ag.

Chair, Vice Chair, and Members. The Department of Ag stands on its written testimony. We all here to answer any questions.

Thank you. Department of Taxation. Thank you. Matson. Hano. Local Food Coalition. Hawaii Military Affairs Council. PAR Hawaii. HFIA.

Aloha Chair Dela Cruz, Vice Chairman Moriwaki and Members of the Committee. My name is Marc Inouye. On behalf of PAR Hawaii and Eric Wright. PAR Hawaii opposes HB 1369 which would repeal the Section 14 Renewable Fuels Production Tax Credit and other other incentives as well.

The Renewable Production Tax Credit began in 2016 and it was to incentivize biofuel production as another renewable resource to help reach Hawaii's 2045 energy goal. By repealing this credit would set back our state's biofuel production, use and adoption for cleaner fuels.

You know, in alignment with the state's goals, we have invested over $90 million into our current refinery infrastructure so that this year we would be able to create produce over 60 million gallons of renewable fuels for our state that would that would help decarbonize our aviation, transportation and utility sector.

This would complement the solar and other renewable energy resources as from renewable energy for our state. We thank you for hearing this bill and we hope that we could oppose this bill. And thank you for hearing it. If you have any questions, I'll be here for comments. Thank you.

Thank you. Hawaii Food Industry Association.

I'm present on zoom Chair.

Hawaii Renewable Fuels Coalition. Alaska and Hawaiian Airlines. Pono Pacific. Thank you. HCUL.

Not present on zoom.

Thank you. Hawaii Tax Foundation.

Good morning. Chair, Vice Chair, Members of the Committee, Tom Yamachika from Tax Foundation. We submitted written testimony. Is this any better? Hello? Can somebody hear me? Okay, great. Thank you. Members, Tom Yamachika from Tax Foundation. We submitted testimony regarding a couple of the flagged tax benefits that are actually part of the system.

One is the sublease deduction which is there to prevent pyramiding of GET on leases and subleases. And we've provided some historical context for the. 23725 exemption on GET for sales to the Federal Government. I'd be happy to answer any questions. Thank you very much.

Thank you. Anyone else wishing to testify? Yeah. Please come forward and state your name.

[unintelligible] written testimony.

Anyway. Good morning Chair, Vice Chair and Members of the Committee Hawaii Gas appreciate the opportunity to submit testimony in strong opposition to the repeal of Section 18 HRS 237-27. Hawaii Gas is the only gas utility company in Hawaii. We provide over 350 local jobs, 70% of which are union.

We serve approximately 70,000 residential and commercial customers across all six major Hawaiian Islands. Our customers include local residents, food services, restaurants, industrial kitchens, agricultural, military, first responders, hospitality and more. This diverse customer base relies on Hawaii Gas for essential services such as cooking, water heating and backup electricity generation.

The repeal of Section 18 would increase the cost of refining petroleum products which we use to produce gas. This increased cost would be passed through to our customers leading to higher energy costs for Hawaii residents and businesses who already face some of the highest energy costs in the nation.

Repealing Section 18 would take a heavy toll on local residents and businesses who rely on gas for reliability and resilience. Thank you for the opportunity to testify.

We have your written testimony.

Oh, thank you.

My apologies. Chair, Hawaii Renewable Fuels Coalition Nahelani Parsons here to testify in opposition of HB 1369, specifically Section 14. As Parhoy mentioned in its prior testimony, in 2023 as our only local refinery, they made a major investment of over $90 million to convert part of its facility to produce renewable fuels.

That project is going to be operational later this year, delivering to us about 60 million gallons for use by local airlines, utilities, transportation fleets and public agencies. The tax credit is already doing what it is intended to do. Storing in business to support our local economy.

It's helping us build an in energy state energy supply chain, keeping energy dollars circulating here in Hawaii and reducing our reliance on imports. We already import so much, the local investment is already there. We need the state support to continue our efforts to strengthen the local economy and reduce greenhouse gas emissions.

This also ties in with the DOT climate settlement, the [unintelligible] Settlement, requiring the state to reduce its greenhouse gas emissions. This tax credit and the renewable fuel production that it supports, are proactive steps towards meeting that obligation and aligning with the State's broader climate goals. We understand the tough fiscal choices that are before you today.

And if changes must be made, we respectfully suggest considering a reduction to the tax credit cap rather than a full repeal. This would help support industry progress while helping to ease the burden on the state budget. Mahalo for your time to testify. Thank you.

Thank you. Anyone else wishing to testify? Okay. We have about total, even those who testified. 1 support, 34 opposed and 11 comments. Okay, why don't we go into decision making? Yeah, go ahead.

I have the Tax Department.

No tax.

Good morning. Can you tell us what the impact of this bill will do to our economy and to all of the people that are being affected? And your position, the Tax Department position on the bill is what?

So we don't take a position on the bill. We provide comments. We defer. We appreciate the intent to review all of these exemptions and credits periodically. We do defer to the other agencies who have subject matter expertise and the various credits and how they affect their practices. We did provide a revenue impact.

I can pull that up for you. So the total revenue impact for the exemption and credit repeals for fiscal year 26 would be 33.8 million and for fiscal year 27, 121.7 million.

And that is.

That would be a total gain as a result of all of the different repeals in the bill.

Gain. But what is the impact to the industries? What is the impact to the overall economy?

You would have to ask DBEDT economists because they only do the tax credit part.

Okay. When you do the tax credits, I mean, tax credits is actually not income tax. Right. I mean, it depends on what the, what the tax is, what, how much taxes they pay, what the credits might be. So is that all taken into account when you come up with these dollar amounts?

So generally we look at just the tax revenues. For this specific bill, our tax research and planning did use a dynamic model to kind of model what. I guess there's a couple of things. They look at whether taxpayers would be looking at other exemptions that may apply instead of the ones that are being ripp.

And also a basic effect on the economy. But we don't go into depth, as DBEDT may, but we did use a dynamic model to come up with the estimates.

Okay, thank you, DBEDT. You heard my question.

Yes. So we'll have to follow up with our research economic analysis division on the economic impacts for all industries impacted in this bill. And we can, we'll get that to you folks ASAP. We don't have that number in front of us. And I don't think our

But, you we're aware of the bill.

We are aware of the bill. Yes, we, our testimony was based off of two of the industries that would be impacted through a repeal. Our enterprise zone as well as our shipyard manufacturing industry.

Okay. I mean, I just feel that this is so important that we're not prepared at this, at this juncture to give us an idea with so many people affected by this measure.

I follow you on that question. Yes. So we'll ask our economic analysis division to pull together that.

Okay, thank you.

We will do it before the end so that you can get the information. Whatever decisions the Committee makes.

He's probably going to need more time than that.

Well, we'll get what we can, Senator.

Chair question DBEDT, please. Did you receive comments from the cruise line industries with regards to the exemption?

Not. We didn't. Deputy Director. I didn't, but I know that the Department of Transportation Harbors Division has been in contact with the industry.

Well, it's just concerning as well because they're in this measure, so.

Yes.

And they're in opposition. Thank you. Thank you so much.

Okay. Any further questions? If not, Chair is going to recommend password amendments. We're removing the repeal and adding a five year sunset to the following. HRS 237-16.8 on page 56. HRS 237-28.1 on page 65. HRS 237-2414 on page 18. HRS 237-253 on page 29. HRS 237-23 24.31 on page 20. We're removing the repeal of HRS 209e-11 on page 40 Section 12.

And instead amending the HRS 209e to include language to make the exemption eligible to business activity that are qualified as Hawaii made products pursuant to HRS 486-119. Removing the repeal of HRS 235-110.7 on page 41 Section 13, and amending to include language to make the credit eligible for taxpayers who purchase agricultural equipment or manufacturing equipment only.

Removing the repeal of HRS 235-10.32 on page 45 Section 14 and adding and amending to include language to make the credit eligible to taxpayers who use a blank percentage of local feedstocks. Removing the repeal of HRS 237-24.9 on page 60 Section 17, 237-24.311 on page 20 Section 6 and 238-1 on page 30 Section 9.

And amending by including a provision to make the exemption eligible to taxpayers who meet goals for purchasing fresh local agricultural products and local value added processed agricultural or food products as defined in HRS 27-8 with a timeline of 18% by 2028, 26% by 2033, 34% by 2038, 42% by 2043, and 50% by 2048 and reduce its shipping costs for local agricultural products, including live products, which shall be certified by HDOA.

Removing the repeal of HRS 237-27 on page 62 Section 18, and including language to require any entity claiming this exemption to have a dollar for dollar match for renewable fuel production for firm renewable energy generation which shall be certified by state energy officer and removing the conformity amendments in sections 1, 8, and 11 for consistency. And we'll let the Committee report reflect that HDOA can certify exemptions assigned to the Department through waybill and manifest records. Any further discussion?

Sure. I appreciate your amendments to this measure. However, I'm going to go with strong reservations at this point. I'm not sure what all the impacts this is. This is a serious measure and it really requires us to be more methodical as to what it is that we're going to be repealing.

And I hope DBEDT is going to take into consideration all of your amendments as well to get back to us to give us a better idea of exactly what is going what is this with all the uncertainty that's going on right now, it's imperative that we have a better understanding before we vote on this measure. Thank you.

Any further discussion?

Sure. Likewise, I have strong reservations due to the economic impacts of where we're headed with the Federal Government and the Federal Government cutbacks on how detrimental this will be to the State of Hawaii and the people that will have to be paying the offset of it. I have strong reservations until we come to some kind of synopsis of where we're going after this. So thank you.

Yeah, that's part of the reason for the five year sunset so that we can analyze all the different tax credits and then they can be re justified and then at that point we can we always either change, extend the sunset or eliminate it.

Chair, because of the the impact that this bill has to, you know, all of our citizens and businesses, I am going to vote no because I I don't understand the all the changes that are going to be made yet. So for that reason my vote would be no.

Okay. Further discussion. If not, Chair votes aye.

Pass with amendments. [Roll call]. Recommendation adopted.

Thank you.

They call to order the 1001 Agenda. First item, HB 159. Recommendation is to pass unamended. Any discussion? If not, Chair votes aye.

HB 159 pass unamended. Anyone voting no with reservation recommendation.

Thank you. Next Item, House Bill 244. Recommendation is to pass unamended. Any discussion? If not, Chair votes aye.

Voting no with reservation. Recommendation adopted.

Thank you. Next Item, House Bill 280. Recommendation is to pass Unamended. Any discussion? Chair votes aye.

Anyone voting no with reservation? Recommendation adopted.

Thank you. Next Item, House Bill 316. Recommendation is to pass Unamended. Any discussion? Chair votes aye.

Anyone voting no with reservation? Recommendation adopted.

Thank you. Next Item, House Bill 455. Recommendation is to pass with amendments.

Removing the language for the Hawaii Startup Business Loan Program and Hawaii Startup Business Loan Program Special Fund amending the appropriation section to provide funds to the Department of Business, Economic Development and Tourism for contracting of services for startup business financing and support provided that businesses eligible for the Community Based Economic Development Loan Program shall not be eligible for this program and making conforming amendments to the preamble for purposes of this bill.

Any discussion? If not, Chair votes aye.

Pass with amendments. Anyone voting no with reservation?Recommendation adopted.

Next Item, House Bill 504. Recommendation is to pass with amendments.

We'll insert a new appropriation section for Hawaii Tourism Authority for each of the next two fiscal years provided that no funds shall be released unless HTA and contractors and vendors contracted by HTA and the visitor industry enter into a formal agreement to commit to purchasing local products in consistency with the timeline in HRS 27-8.

And we also passed out DBEDT's analysis as to why we should fund an increase in tourism. However, these funds are non recurring. Any further discussion?

This is [unintelligible] Senate Bill 1396 for the infrastructure for Hawaii [unintelligible].

No. So this takes the. We left the base in the budget at 63 million. The board, the HTA board voted on additional funds. So this takes the board recommendation of what we're going to fund, and we justified that with the economic analysis report by DBEDT.

Because if you go with the board recommendation, the net gain is, where is it, tax revenues is 345.4 million. So even though we pay, we put in for 80 total. The state would get back 345 million because of the investment, minus the 80.

Question on the $20 tax per passenger for the cruise ships. Is that still in the amendments?

Yeah, I don't think we're touching it.

The money goes where to Special Fund or.

Yeah, so we can pass this out, but the AG. What this is. We can pass this out to Members about how the language that's currently in the bill specifically for that provision, they find defendable.

Understand. But where the money's going to go, what is what the purpose and where the money's going to go from the $20.

Okay, recess.

So the question was, where does it go? It goes to the General Fund. Any further discussion? If not, chair votes aye

Pass with amendments. Anyone voting no? Reservation?

Reservations.

Reservations for Kim. And Recommendation adopted.

Thank you. Next item, House Bill 606.

Recommendation is to pass with amendments removing the current preamble and insert language recognizing DHHL's authority Wine Homes Commission Act of 1920 to grant mercantile projects licenses into the preamble, removing the extension in Section 2 and removing sections 3 and 4 for requirements for a strategic plan and a report to the Legislature.

Removing the existing appropriation in Section 5 and 6 and inserting a blank appropriation to the Department of Hawaiian Homelands for fiscal year 26 to be allocated as follows. 25 million for mercantile projects pursuant to sections 207c1b of DHHL Hawaiian Homes Commission Act, and 25 million for lump sum repair and maintenance.

So this was not in the budget to keep to the same funding level set by subject matter Committee. Okay. Any further discussion? If not, Chair votes aye.

Members present? Anyone voting no, with reservation. Recommendation adopted.

Thank you. Next item, House Bill 716. Recommendation is to pass, unamended. Any discussion? Chair votes aye

All Members present. Anyone voting no with reservation? Recommendation adopted

Thank you. Next Item, House Bill 1295. Recommendation is to pass with amendments effecting the date to 2050. Any discussion? Chair votes aye

Voting no with reservation? Recommendations adopted.

Thank you. Next item. House Bill 1298. Recommendation is to pass, unamended. Any discussion? If not, Chair votes aye.

Anyone voting no with reservation? Recommendations adopted.

Thank you. Next item. House Bill 1378. Recommendation is to pass with amendments on page four, provide the foundation with the ability to enter into public private partnerships on the on lands acquired through this section. Amend Section 6, page 9, lines 19 and 20 to say up to a total amount until the balance equals the amount listed in HRS 103-8.51c.

Amend Section 6 to specify that capital improvement appropriations made into the works of art special Fund shall only be determined from the construction cost element of the state building and remove language referencing renovation. Remove the word proportionate on page 11, lines 9, 16, and 19.

And we'll let the Committee report reflect a proposed limit of 15 million to be inserted in page 1197 and that the proposed amendments to this bill are necessary to address the concerns outlined in testimony from BNF and the Attorney General. Any discussion? If not, Chair votes aye.

We'll be voting no. Reservations?

Reservation.

Reservation for Senator Fevella.

Reservations 1378.

for Senator Inouye. Anyone else? Recommendation adopted.

Thank you. Calling to order the 1002 agenda. First item, House Bill 974, being that the House has already passed SB 1501, will be deferring this measure indefinitely. Next item, House Bill 1007. Recommendation is to pass with amendments.

Okay, so to address the Attorney General's concerns on Germanness, the chair recommends to rename the Transit Oriented Development Infrastructure District Program to Transit Oriented Community Improvement Program. Require the program to enable affordable and livable communities to provide a better quality of life.

Amend HRS 206e-243 to rename Transit Oriented Development Infrastructure Improvement Program Areas to Transit Oriented Community Improvement Program Areas. Replace the four Transit Oriented Development Infrastructure Improvement District boards with one Transit Oriented Community Improvement Board. Add the following board Members to the Transit Oriented Community Improvement Board.

One multimodal coordinator within the DOT two head of the community based Economic Development program at DBEDT the Director of State Foundation of Culture and Arts and one individual with history and expertise in public spaces and one individual with history and expertise in urban planning to be appointed by the President of the Senate.

One individual with history and expertise in public spaces and one individual with history and expertise in urban planning to be appointed by the speaker Chairs of the Senate and House standing committees on with jurisdiction over transportation and housing as ex official non voting Members. Provide additional powers to the board for the implementation of the program.

Expand the duties and responsibilities of the board for guiding and planning and implementation for each city in certain areas. Make conforming amendments for the appointments and terms of the board Members. Add a provision preventing conflicts of interest while serving on the board.

Authorize the Legislature to designate Transit Oriented Community improvement Areas in addition to existing designation processes is remove part two of the measure and make conforming amendments and amend the preamble accordingly. Any discussion?

So, just a clarification. So what I getting up for this that ACDA is going to be doing certain things with the to we're talking about again district with a stadium you know for making the is the basics of the agreement HCDA I mean for me for. For now.

I mean, I don't have any trust in HCDA when it comes to Stanford car and not having the able to drop the hammer when they need to drop down and getting things done the stadium district.

So by having this, I guess a little bit more leeway for them to make decisions, I just thinking is that, you know, why now? Why, why only wait for certain projects, especially when coming around the stadium.

Yeah. Well, right now the stadium authority oversees that project, not HCDA.

Are they working with the stadium authority?

You got to ask stadium authority?

Interim city manager. We are the stadium authority.

Okay, so that's what I'm saying.

No, you're asking if. If they're working with HCDA.

Not at this time. They are a consulting agency that we work with on the planning.

So they're going to end up overlooking this. Not if this goes through HCDA. It's gonna be over, you guys, right?

Not necessarily. HCDA is a regulatory body. Aloha Stadium is the land owner.

Thanks.

Any further discussion? If not, Chair votes aye.

Members present, anyone voting no? With reservations?

Reservations.

Reservation for Senator Fevella. Anyone else? Measure adopted.

Thank you.