House Standing Committee on Consumer Protection & Commerce

Good afternoon, everyone. We are convening the committee on consumer protection and commerce. It is Thursday, 04/09/2026, 02:05pm in Room 329. You'll have two minutes to testify today. We've got a lot of fun things on the agenda.

For those of you who don't know, when your two minutes are up, this little device will start flashing rainbow colors. It is not well, ignore too long. I'm gonna I'm gonna stop you, but this is just to encourage you to include your speech when you see that. Alright. Vice chair?

Thank you. First up is SB 3302 SB 1 H p 1 relating to homemade food products. Requires the Department of Health to adopt rules for the regulation of farm kitchens producing homemade food products that are no more stringent than those for home kitchens producing homemade food products. First up is Department of Health offering comments.

Good afternoon, chair, vice chair, member of the committee, Matt Cronin, Department of Health, Department of Health Services. We stand on our written testimony largely in support and really providing just some offered amendments for technical clarity. I'm available for any questions. Trying to avoid delays. Thank you.

Thank you. Grassroot Institute of Hawaii in support. Not present. Hawaii Food Industry Association in support on Zoom.

Oh, thank you, chair. We will stand on our testimony.

Thank you. Anyone else in person or on Zoom who would like to testify on this measure? Seeing none. Members, any questions?

HFIA, were you did you were you here in the inception of this bill by chance? Do you have any insight into the creation of it?

We are submitting in support, but we were not part of the inception of the bill. Sorry. I don't have a lot of details on it.

Shucks. Okay. Thank you. Yeah.

Okay. Moving on to the next measure, SB 2061 SD2 HD1, relating to residential condominiums.

Clarifies the 99 year leasehold program by repealing and prohibition against renting, exempting the design development, and construction contracts from procurement requirements, requiring HCDA to adopt rules to implement an initial sales period during which the residential condo units are offered only to eligible buyers for owner occupied residential use.

Authorizing the sale of a residential condominium unit that is not subject to income restriction, requiring HCDA to adopt rules that require at least 60% of residential condo units to be income restricted and requiring HCDA to establish rules to require buyback pricing similar to other state agencies existing pricing formulas.

First up is Hawaii Community Development Authority in support.

Good afternoon, chair, vice chair, and members of the committee. Craig Nakamoto, Executive Director of Hawaii Community Development Authority. You have our testimony on file in support. There's a lot of background in the testimony. So I'll just summarize the work of the housing committee to clarify some of the unclear provisions of this bill.

I think are very helpful. So I think as drafted right now, we're satisfied with the with this draft, the house draft and we think it's gonna help us move to the next stage of this development, which is presales. So available for any questions. Thank you.

Thank you. Ko Laila, LLC in support.

Henry Chang, Project Manager of Ko Laila and in support of testimony.

Thank you.

William Yuan, individual in support.

My name is William Yuan. I'll stand on my written testimony.

Thank you. Greg Misakian, individual offering comments on Zoom.

Aloha, chair, vice chair, members of the committee. Yeah. I took a look at this, and I did submitted comments. They're very brief, so I'm actually gonna read what I wrote. It's just one short paragraph.

And I do appreciate that there's a need for this bill. I do understand the intent, but I do share some concerns. The concerns are that the build doesn't provide enough specifics for the sale of condominiums to low income buyers. I think that there's always an intent for development projects to to offer some kind of a a low income incentive for locals, Hawaiian natives also, and whatever the program may be. So within this bill, there's a set time period that can happen.

And I'll just point you to the Section, and that that drew concern to me. So it says by amending Subsection a to read, this is Section one. And the specific Section, it's in the middle of the amendment. It says a residential unit that is not subject to an income restriction pursuant to this Subsection and was not, sold within sixty days from the initial offering for sale of the unit may be sold to other buyers as determined by the authority with an owner occupancy requirement.

So there's a section there that's kinda spelling that out.

But the specifics to all of it, it's giving the the authority to another entity as opposed to actually putting some more guidelines within the bill. I just wanna make sure that low income buyers have an opportunity for a set period of time that's substantial enough time. And I'm not sure if that paragraph that I just read is going to be detrimental or it sounded it to me, or there's a nuance to that.

So if you guys could just look at that before you pass it through, I would appreciate it. Mahalo.

Thank you. Anyone else in person around Zoom would like to testify on this measure? Okay. Seeing none, members, any questions?

For each CDA.

So again, thank you. Thanks for your testimony. So right, so the this particular bill will allow for investors to purchase these?

The project is contemplated as a 201H project. As you know, the site is already selected. It's the corner, it's a parcel at the corner of Ward And Kapiolani, the Jack In A Box and the former Gallagher property. So it's because we need 201H to, you know to accept some zoning provisions, actually, our zoning provision to make the project work.

We're gonna the developer is gonna provide 60% of the total number of units to persons with an income or immediate income of 140% or less. So the answer is yes.

So, yes, it's gonna be sold to low income individuals, but also investors so that these investors can rent to potentially, you know, in

Other so non-owner occupants. Yes. For merchant center people.

Yeah. Thank you. So since HCD will continue to be involved, presumably for the lifespan of the 99 year building, What is the value, we the or the taxpayers get by allowing a private investor to purchase and then rent and presumably maybe make a profit instead of HCDA or the state just doing the actual rentals.

So, you know in my testimony, we've kinda took we've put a lot of context into this testimony. The if you look on page six of the testimony, this is the suggested development financing sources of the capital stack.

So HCDA's equity, not a subsidy, equity in the project is $15,000,000. So for that $15,000,000, we're in essence gonna own the parking garage and the commercial spaces in the building.

The rent from those commercial spaces and the parking garage will benefit of the CDA.

It will also be put in a special fund to fund predevelopment work for other 99 year leases that we hope will come out of this. As you know, this is a one time pilot program for just one project. We hope that if this is successful, we can replicate this on for other projects.

Okay. I think some of the test you know, I think some of the testimony that has been stated with some I guess, there's some concern with the idea. That these properties can eventually become unaffordable for some, or is that a concern given that balance?

I think some of the some of the testimony of the gentleman before me pointed to a section in the bill that actually was reworked quite a bit by the Housing Committee. And this was a provision that provided for kind of an initial sales period where during this initial sales period of, let's say, 60 or 70 days that all the units will be only offered to owner occupied persons tending to occupy the units.

It was kind of intended to kind of give the first preference to owner occupants. So after that 60 or 70 or 80 day period is done, whatever remaining units will be sold. Some will be at market.

Some others will be at the 140 AMI or below, but the mix of the building is gonna be 60%, not low income, but 148% AMI or below. 40% will be market units.

Okay. Thank you.

Thank you.

HCDA. Sorry. I was waiting to get all the way back to your seat before I was looking at that section too. I feel a little uncomfortable about it. So when this bill was initially and I haven't been following this bill since its creation, but was the initial intent for this building to at least for the reduced rent units.

What's the intent to have owner occupied units only?

So, thank you for the question, Chair. So this bill was was championed by Senator Chang as we became Act 97 out of the 2023 session. What came out of Act 97 was really the base was resulted from Senator Chang's, you know, vision for this. It was owner occupancy in perpetuity with all any other residential real property or other real estate. As the developers went through their predevelopment work, and you know that this is a leasehold project, not a fee simple project.

Right? So as the developers went through their predevelopment due diligence, they did appraisals to determine what selling price might be of these sold units. We were on the verge of the next step being presale.

And I think we're concerned at that time because of the economy, you know, later last year, the interest rates being a little bit uncertain, the economy being what it was, and just by your appetite.

Also competition from other projects in Kaka‘ako like Stanford cars, the Ko Olina Project, the Castle and Cook project.

But more importantly, we're concerned about the restrictions, the restrictions being or occupant in perpetuity. When we're looking at the difference between a lease 99 year lease for sale unit and a fee unit, you know, those restrictions on the leasehold units could make a difference between being able to sell it or not sell it.

Already, you know, leasehold units, even though they're 99 years, you know, the people perceive a little bit of a difference between the comparable fee unit.

So that's why we went to Senator Chang and asked him if we can work on a bill to relax some of these restrictions. And that section 2, you see there was something that Senator Chang wanted to kind of maintain some of that owner occupant, you know sort of vision by offering it to have a kind of a first offer period to order occupants.

And prior, the Housing Committee had concerns about this chair, and we tried our best to make the language, hopefully a little bit more understandable, but also give HCD date the flexibility to kinda, you know, design that initial offer period.

Okay. I honestly thought this is gonna be all owner occupied too. I'm not sure how I feel about non owner occupied units in this kind of scheme. But you're saying that the old when talking to the developer, the only way it would pencil out would be to do this initial offer period for owner occupants and then

Yeah. That's not what I said. Let me clarify. So when we went to Senator Chang so the conversations with the developer were kind of about these restrictions, like perpetual owner occupancy requirement, other things we've addressed in the bill. When we spoke with Senator Chang, he wanted to kinda have this initial offer period or preference.

Which is to kinda keep some of the sort of the vestiges of this perpetual owner occupancy idea in this section 2.

Are the developers willing to do it with an owner occupant only provision?

For the initial sales period?

No. For for all of it or for in perpetuity? I mean, I'm not sure I if we're allowing these units to be sold to people who are going to either rent them out or not, I mean or hold them for property or some kind of increase in property value without renting it all. I mean, what this is the whole point of this thing is to create housing for people who are gonna live in it.

I, We, I thought the whole point of this was to create a community of of people living in units they own or at least own in essence, in essence 99 leasehold. By allowing them to be sold to investors, it kinda undermines the entire point of this project.

So with respect, Chair, I'm not sure it does. So if we go back to having the 60% units, the best the 201H units have a in perpetuity or occupancy requirement. I think we're back to square one, frankly. And I don't think I don't think this project, you know or those units will be marketable because there's already one thing going against it in, that it's not a fee simple unit. I mean, it's a leasehold.

No matter whether that's 99 years, it's a leasehold. So if we do go back to perpetuity, I don't think we'll have I don't think we can make this project feasible. And I would say, Chair, that having these units on the market is sort of the main purpose. We're gonna put it on the market. There's gonna be some restrictions on the owner occupied units.

It won't be in perpetuity. You know, probably something closer to what HHFDC uses, which is like a ten year owner occupancy requirement, which is proved to be workable in the community in the among life. If we go back to a perpetuity, I think we're back at square one, respectfully, Chair.

Okay. So initial offer period happens. The units that are not sold within that initial offer period, then the units not sold would be offered to people who would not who could buy it and not live there. Is that

They could be there wouldn't be any owner occupancy requirements. There wouldn't be any buyback requirements. But those would be only limited to 48% of the units. The it's gonna be a 60/40 project where 60% are sold to because of the 201H requirement to owner occupants for at least ten years.

Okay. Thank you. You can you can ask something if you can.

You know, if we're trying to balance between passing this bill on moving this bill on to allow this pilot project to to proceed, at least today, and see if it's gonna be successful. If the balance is passing this through, maybe and without that initial sales period in Section 2, in other words, just eliminate it.

I think I would be okay with just eliminating that initial sales period, but keeping the rest of the bill.

Because I think it's far more important to that initial sales period was something that I think Senator wanted, and I see the concerns in it. So if the committee is willing, let's just take that out but let the other parts of the bill go through, which are the important parts.

I think that would be okay. Yeah. Hawaii residents.

If we took out the initial sales period though, then the 40% would just be sold to whoever

Yeah.

With no restriction. Right?

This is, I think it's just a preference, like a first offer period.

But if without that first offer period, then that 40% would be sold to all investors. Right? But then it's worse, I think. Now I don't wanna take that out. I wanna make it a perpetual period rather than take it out.

You need a perpetual owner occupancy requirement?

Yeah. I mean, that I thought that was the point of this thing is to create housing for local residents, not investment properties for.

If you wanna go that route, that's fine, but it's I don't think it's gonna result in a feasible project.

Okay. Thank you.

Yes. Go ahead.

Can we ask a follow-up?

So the way this their initial act got enacted, the bill moved through all those committees several years ago. It was because this was supposed to be like, a magic bullet. We're gonna try this innovative way of providing affordable purchased housing. I feel like we haven't even given a shot.

We haven't even let this theory of housing low income people like, we haven't even given it a chance. And we're already you know, it feels a little bit like, how do I explain this to the, you know, economic justice advocates who are like, this is another bait and switch. Like, it was supposed to be this. And even you know? And so it's really hard for me to take it back to my community.

So what do I tell them when they're like it feels like a beta switch. It just feels like a similar kind of model that we've already been doing that feels that people feel we've been not the best stewards of a taxpayer funding.

So Representative Iwamoto, I'm sorry that it feels like a bait and switch. I don't know all the discussions that happened back in 2023 that led up to this bill, whether there was this expectation that this would be one pilot that it would kind of snowball into another project and another project and another project. I think that, legislatively, you have ideas like this and there's a vision for it. Right?

Then you have what happens in reality in the market when you have to develop a project like this.

And I would say that sometimes what happens in the market and what's workable in the marketplace may not be what legislatively is envisioned in that original bill. So adjustments need to be made.

But if the state, sorry to cut you off. But if the state said this is our vision, we voted this through. The Governor signed it. We're gonna allocate enough funds to build it in the with the kind of, I guess, diligence or that kind of framework that we initially. So is it a concern of we're not getting enough state dollars allocated to this? Is that why then we have to turn to 20H?

201H.

201H allows zoning exemptions to allow the you know certain exemptions from our actually, our zoning rules. And in the case of two this particular 201H, it also allows some exemptions from general excise tax. That's why we have to build 60% or produce 60%. I don't think Representative Iwamoto, I don't know. I don't look at it quite that way.

I think we gave it a chance. We spent maybe a year or a year and a half in due diligence with the developer, you know, testing it all, looking at doing we refining proformas, doing appraisals. So it's not like we just took the bill and we said, what? It's not gonna work. I mean, we tried to make it work.

We're still trying to make it work with this amendment. I think if we have a chance and this amendment does pass. I think we're gonna start to proceed again, but we need this amendment to proceed.

Thank you.

Who are you with?

One item that wasn't mentioned...

Sorry. State your name and the...

Henry Chang, Project Manager at Ko Laila. So one of the things that wasn't mentioned was in order to make vision of one of the purposes of the leasehold was to bring cost of housing down too. So we're anticipating that in order to compete with the competing project that are feasible, that the prices of the leaseholds in addition to having some of these unencumbrances in this bill could be as much as 10% lower than the competing projects.

Because otherwise, they won't sell. They're the same price leasehold versus fee simple, they won't sell. So the intent and one of the reasons that for the subsidies, not subsidy, but for the equity is to lower the cost and money for the project so that less high profit private money is used as in a normal 201H project so that the cost being passed on to the buyers.

The savings is passed on to buyers. So so it's not only intent to or desire to have Hawaiian residents living and owning these units, but the purpose is to bring cost housing down too. So the lease hold is a good way to do it. It's hard, impossible to do it otherwise. It's more subsidies.

Isn't that, like, cost savings supposed to be part of the appeal for the buyer that, like... I mean, I guess I'm... I agree with you. That's the whole purpose of leasehold. So then I'm just wondering why that cost savings as is isn't enough to account for these other restrictions that they're taking on as a leasehold.

There's a baseline that we look at that, number one, if you're if you're competing against 201H projects and you're 201H leasehold, you have to lower price. Otherwise, nobody's gonna buy you. So the reason that the project is benefiting from leasehold condition where the state's only charging, like, a dollar a year lease. So you're taking land cost out so that can help lower the price of buyers. And the equity from the state eliminates that much equity from private sector.

If you're paying 30% per year on $15 million equity to private investor, that jacks up the cost of product quite a bit. So what state equity does help reduce the cost of the product so that those savings will be passed on to the buyers. So it's it's basically high construction costs, high interest rates, high everything. Basically, projects have a hard time even getting to construction right now.

So I mean, it's challenging. Buyer's stories were, you know, some affordable, some projects aren't able to get their affordable sales done because market's too hard. So I think our purpose is to help state HCDA bring cost down by cutting out as much of the private sector profit on the project as possible. Basically, just drive it down so that we can present competitive leasehold product.

And it's leasehold because it's it's just that's the way you need to provide cheaper housing. It's like you don't have to pay for land costs. So it's a hard math. But right now, I think I think the way we look at it is projects have a real hard time even getting started because the construction costs are up, interest rates are up. It's like it's a lack of market right now.

So we're trying the very best we can just, like, bring it back down. So and I think HCDA has a great idea in terms of buying leasehold, for the state, getting involved with leasehold, getting rid of land cost, equity to basically help drive financing costs. The project take as much for the private sector financing costs out of the project.

So all this contributes to being able to sell units cheaper for local buyers. And 60 days is a long time to determine. Like, do I want that unit? Well, no. It's like, State of Hawaii is my landlord. It's like, they're not gonna rip me off. Right? So I'm not leasehold is not not that dangerous anymore. So it's like, to me as a local buyer, I'm in a private I'm in a private leasehold product.

I live in a private apartment. I don't like it. Right? But state of Hawaii is my landlord, guess what? You know, I'd love to get in line to buy a unit because it's basically, like, it's gonna be lower cost. It has to be, like... And just the buy in is just lower and just it's a beneficial situation for buyers.

The unfortunate thing is that when you compare leasehold to fee simple for sale, these guys in 201H private sector privately fund their products. After they're done ten years is done, they can sell. Right? So if we try and do a leasehold with perpetual ownership, owner occupant, given the choice, you know, these first time homeowners are gonna benefit from, well, you know, for instance...

Respectfully, though, that's assuming that both units are available. I mean, I thought that the ten year fee simple ones are they were wait list. I mean, you almost have to get lucky to buy one of those apartments. So you're assuming that someone has the choice between a 99 year leasehold and a fee simple.

Whereas, I think people are gonna be lucky to get a choice to buy one of them if if they get lucky. So someone who has an opportunity to buy a 99 year lease isn't gonna say, well, I have this other option. I don't think they have that other option to compare. So I don't...

Actually, what's happening right now is there is most... developers doing housing are doing 201H because it helps bring cost down in in zoning. So when we come to market, if we go to market, we'll be competing against 201H projects where everybody who wants to be affordable has to get in line and get the... So but given the choice between putting your hat in for getting a lottery for a 201H ten year restriction product versus a...

Aren't you allowed to put your hat into more than one ring? Because then you're, I mean, am I gonna look at this lottery ticket and say, I'm not gonna take this lottery ticket because I might win the other lottery. That's probably not a good...

But say, you know, I think to assume that affordable buyers if given the choice between a ten year restriction 201H, 201H ten year restriction affordable unit versus a perpetual unit project...

So I understand that, but I'm saying that I don't think that choice ever... I just don't think that choice ever happens. I mean, that'd be great if everyone had that choice, but we're here because people are lucky to get one choice. Anyway, we're taking too much time on this bill. I do I do wanna move on.

The primary issue is that leasehold versus... Leasehold versus...

I understand. I understand that part. I understand. We've gone over this already. I think we're cutting you off. Let's move on to the next bill, please. I understand. Thank you.

Right. Thanks.

Okay. Moving on to the next bill. SB 2050 SD one HD one relating to chiropractic. Beginning 07/01/2028 allows chiropractic students enrolled in an accredited doctor of chiropractic program to engage in clinical practice as part of the completion of their degree under certain conditions. First up is DCCA Hawaii Hawaii Board of Chiropractic offering comments.

Here, vice chair, and members of the committee. I'm Nancy Nguyen, executive officer for the Hawaii Board of Chiropractic. The board stands on the rooftop, and I'll be available for questions. Thank you.

Hawaii State Chiropractic Association in support.

Hello, board. Thank you for hearing this bill, and,

I just wanted to reiterate from my testimony that

I think, we shouldn't be delayed any longer than possible. I'd like you to implement it as soon as possible. Thank you. I'm here to answer any questions.

Thank you. Anyone else in person or on Zoom who'd like to testify on this measure?

Hi, Jared. Hi, Jared. Hi, Jared. Sure.

Go ahead.

Greg Musakian again. I came to testify just on the previous bill, but this one caught my attention because I have firsthand experience with it. In California, at A Certain point, I can't remember the year, but years ago before I moved to Hawaii, I unfortunately had a a neck injury It just came upon me. And I had a AC 5, C 6 disc compression. And I was fortunate enough to run into someone who was a student in a chiropractic school, and we talked about chiropractic.

I had never done it before. My orthopedic surgeon was actually completely wrong about his diagnosis of what was wrong with me, so that was another issue. I had a eventually had an MRI. But we we figured it out, and I went to a program so that their final year of study in California, they're allowed to so I think it's state regulated. Chiropractic students are allowed to work on individuals, so I participated in that.

Lower cost for me, excellent for the student. The student is under the guidance of, you know, the doctors there at the at the school, at the university. And it's limited to certain things quite a bit, though. So for chiropractic, it's it's quite a bit that you can go for. So I fully enforce this, and I'm surprised that Hawaii doesn't already have it.

So, hopefully, I'll move this bill forward, Mohit.

Thank you. Anyone else who'd like to testify

measure? Pacing none, noting an additional 41 individuals who submitted testimony and support. Members, any questions?

on this

Oh, board, please. You folks asked to delay the implementation of this twenty thirty. That seems like a really long time to make rules. I know the bill is already 2028, which I also considered kind of a while. Why why do you need four years?

So the board feels that they're scheduled to meet four times a year if Quorum is established, but it in some instances, it may be less than that that they need a year. So they feel that they need more time to develop the the rules.

I think 16 meetings over four years to make the rules. That seems like a little long. I mean, do you think you could do it in two?

I'll have to go back to the board.

What what's the last the last time you guys had to adjust the rules, how long did it take?

I I know it's a it's a very time intensive process. It's an 18 step process. So it takes years for it to be made

for the action points report.

It took a long time.

Four years

is a long time?

I think I heard they said it took pretty long. Yeah.

Can you give me a ballpark at least?

I'm not quite sure. Yeah.

Okay. Thank you. You guys know? You know how long it takes to do rules? I think that if I was

making the rules,

I would just use chat GPT to Scan

all the other states and all those rules in and have it done in an hour. But

would you I certainly implement them and then voted on

the next one. They could do it in two sessions.

Would you be willing to volunteer some of your time to help them with the rules maybe to make this thing go a little faster? Okay. Thank you. That's all.

Members, any other questions? Seeing none. Moving on to SB 2102, SD 2, HD 1, relating to industrial hemp. Beginning 7-1-2026 authorizes the use of hemp or hemp derived feed ingredients in commercial feed for pets, specialty pets, and horses. Requires the Department of Agriculture and Biosecurity to adopt rules. First up, Department of Agriculture and Biosecurity with comments.

Aloha, Chair, Vice Chair, Members of the Committee. Jun Tulio testifying on behalf of the Department of Agriculture and Biosecurity. I respectfully submit our comments and some by our written testimony. Thank you for this opportunity.

Thank you. Department of Health with comments.

Afternoon again, Chair, Vice Chair, Members of the Committee. Matt Kurano, Department of Health, Environment Health Services Division. First of all, apologies for the late testimony. Thank you for accepting it. We stand on our testimony with expressing concerns mostly about the expansion of 144 pet food and the ability for us then to regulate it and the potential conflict between regulating it under Department of Agriculture and Biosecurity and Department of Health. Available for any questions. Thank you.

Thank you. Hawaii Sustainable Farms in support on Zoom.

Aloha, Chair, Vice Chair, Members of the Committee. Robert Bence, farmer from Kula, and I was a member of the Hawaii State Hemp Task Force and the Hemp Feed Coalition that got the national approval for the hemp seed meal and laying hens, which is federally legal. I offer a compromise. The departments have a problem with the pet food regulations. We could strike the pet foods and just have it for the federally approved livestock feed.

At this time, that is unfortunately only hemp seed meals. But when you grow hemp for industrial purposes, you have the seed, you can only sell so much seed. You have the oil that everybody can eat, and it's sold at all the stores. And then when you press out that oil, you have the hemp seed, meal cake that's left over. It's a excellent feed for laying hens.

And just that alone would be good. It's been able to be approved by the state since August 24. And Jun, it's only his job is for him. He doesn't really do anything because he could have already had them approve this. So, like, the previous questions about how it long it takes, this takes so long. So I offered amendments.

At that time, I was supportive of keeping the the pet food. But if you don't want to move this along with the pet food, please include the amendments to at least have the department allow us to sell the hemp seed meal for the laying hens because that's already been federally legal for a long time, and they don't have to do anything really. They don't have to remake the wheel. They just have to say this is the federal rules and you follow the federal rules.

I have some other amendments that they could do to help us if they wanted. It's kind of optional. As I wrote it, like, they could let the UH College of Pharmacy help us with the testing, which is the cost for us. But this is a major for the hemp farmers. I really appreciate you hearing this measure and mahalo.

Thank you. Hawaii Fibers in support.

Chair, Vice Chair, Members of the Committee, thank you. I'm Julia with Hawaii Fibers. I'm a licensed hemp farmer on Oahu testifying in strong support of SB 2102. This bill allows hemp seed ingredients, hemp seed, hemp seed oil, meal, and cake to be used in commercial animal feed in Hawaii. The HD 1 authorizes them for pets, specialty pets, and horses and directs the Department of Agriculture to adopt rules through chapter 91.

The Hawaii Farm Bureau, Hawaii Union United, and Hawaii Sustainable Farms have all testified in support. And we are proposing one amendment, which is to reintroduce laying hens. Laying hens were removed in the process, but they are the only animal where hemp seed has already been approved at the federal level.

In August 2024, all 48 member states of the Association of American Feed Control Officials, the national body that sets feed ingredient standards, voted unanimously to approve hemp seed meal for laying hens, and it is published in their official publication in 2025.

So our amendment proposes that instead of automatic adoption of the the additional animals, it requires both federal approval and Hawaii's own rulemaking under Chapter 91. In terms of... Okay. Every hemp crop grown in this country is sampled and tested before harvest under 2018 farm bill.

Here in Hawaii, the Department of Agriculture samples the crop, sends it to a USDA approved lab. If it exceeds the .3% THC, the entire crop is destroyed. Peer reviewed studies confirm nothing passes through through to the eggs or to the hen's body tissue.

Hemp protein is already sold in grocery stores for human consumption, and mainland hemp seeds for animals are also being sold in pet stores today. We import over 90% of our animal feed from the mainland. Hemp can be grown and processed here, resulting in lower feed costs, less dependence on mainland supply chains, and a new market for local farmers.

The research also shows hen fed hep seed meal produces eggs with higher omega threes, lower cholesterol, stronger shells, and more vitamin e, better eggs produced locally. We're asking, we're open to any changes and asking you to pass SB 2102 with the proposed amendments. Thank you.

Thank you. Anyone else in person or on Zoom who would like to testify on this measure?

Chair, Vice Chair, Members of the Committee. Thank you for taking the time to hear the bill. My name is Ben Draper. I'm with the Hemp Paper Company testifying in strong support of SB 2102. We're in support of the proposed changes to reintroduce laying hens into the bill.

They're in the original version and were removed incidentally over a constitutional concern, which made sense. The federal approval for laying hens is already done, and we believe they belong back in the bill. Hemp grain is already sold at grocery stores for human consumption, and a handful of states already allow for pets and animal feed.

It's safe for humans, safe for pets, and the bill can help drive down cost for pet food residents. And hemp is, of course, a healthier option than a lot of the ingredients that you might find in your normal pet food. So from a commerce standpoint, the bill enables locally grown feed ingredients to help reduce mainland imports.

We wanna grow and produce here while leading sustainability because hemp improves soil quality. It also sequesters carbon. It has a lot of sustainable benefits. We're open to any changes and suggestions and happy to answer any questions.

Thank you. Anyone else who'd like to testify on this measure? Okay. Seeing none. Members, any questions?

Department of Ag Bio Security. Come on down. So I think I know the answer to this question, but I kinda wanted to hear from you. If we had grown hemp entirely in Hawaii, process it in Hawaii to make animal feed, and fed it to chickens, horses, ducks, whatever. Would that fall under federal guidelines too? Or could we because it's not interstate interstate commerce, would that would we be able to do that regardless of federal guidelines?

Chair, are you asking within the state?

If it goes entirely within the state, no transport,

Yes. That's correct. So we did the states, so that's that's FDA is only not allowing it if you transport it, you know, within from our state to other states.

Okay. So if we we could legalize hemp feed to all animals as long as the hemp is grown and processed here and doesn't leave the state. Is that right?

So as long as you process it here and then you sell it within this state.

Okay. Is that right? I actually thought that answer was gonna be the exact opposite. Is the AG here? I may need to phone a friend. But I okay. So your testimony is that we can kinda do whatever we want as long as we do it here. We're the producers here? Is that is that you guys? Come on up. Thank you. Okay. So when... You guys grow the hemp here?

Yeah. We just started. Yeah. We're on our third third acre.

Okay. And I want you to kind of think not just of yourself, but the other hemp growers that you talked to as well. Are hemp growers producing the animal feed entirely here from hemp entirely grow here?

Not yet. No. So there's basically just, I mean, you know, it became legal in 2018 to grow federally, but there just hasn't been the infrastructure or the interest or the knowledge that hemp is even allowed to, as you just pointed out. So it's just a matter of a lack of knowledge.

I mean, realistically, anybody who has cattle or or any sort of livestock can technically be allowed to feed their animals if they grow it themselves. So it's just a matter of whether or not when it comes to the commercial side of selling it, that's where the kind of we need you guys to step in to to support hemp and allow it to be able to be sold.

So are you thinking about doing this yourself?

Oh, yeah. Yeah. That's right. We've got two acres growing right now. We just got a grant from the SARE, Western SARE USDA program to do another one. We're basically, like, testing the different, like, cycles of the year when we grow it, this time versus that time, and then we're supposed to take the material, turn it into finished goods, and show what the unit economics looks like.

One of the finished goods is going to be animal feed?

Animal feed. It can it can be animal feed. It can be animal bedding. It could be cat litter. There's, like, there's thousands of different applications.

If it is animal feed, would you need to send it to the mainland for processing, or could you process it entirely?

We can process it here. In fact, we're getting a decorticator. We're getting some of the machinery now. We gotta wait until, you know, the determination of animal feed. But but on the other side of it, the fiber side, we're actively working right now to to process and getting into decorticator, getting kind of some of the preliminary machinery.

Does that, would that statement apply to other hemp growers, do you know? Would they be able to process the animal feed here too? So none of this hemp would ever leave the state.

It doesn't have to. I mean, unless we, unless that changes and the the federal side gets involved and they decide that it's it's allowed. But for for laying hens, we technically could because it's already been established. But when it comes to any other livestock, it would just have to be grown and sold here. And it's super sustainable.

It's the fiber of the future. It's all these amazing property. I swear, you can look at, you could Chat GPT it and Google it and look it up. It's not like a hippie thing or it's nothing new with Marijuana or anything like that. It's a real solution to a lot of problems for Hawaii, and it improves the soil. Sequesters carbon. Does all these things.

No one watches these hearings.

Hemppaperco.com.

Yeah. Department of Health, can I talk to you guys? So you guys are good with that? I mean, if if we grow it entirely here, process it here, it never leaves the state. If if there really is no federal conflict, I mean, do you see any safety concerns to for animal feed?

Matt Kurano, Department of Health, Department of Health Services Division. Again, thank you for the question. I hate to be the Debbie Downer, especially since we're the department that have that in, you know, sometimes associated with us. Our concerns is really relegated to the pet food and the safety issue. You know, an additive that might be safe for a human may not necessarily be safe for an animal.

Let's say we strike the pet food and just have the animal feed. Would you be...

If it's animal feed, then I would just completely yield to our our partners and colleagues at Department of Agriculture and Biosecurity. Our concern is narrowed to pet food, especially for domesticated.

Okay. In that case, why don't you guys come up?

Aloha again. Keith Otsuka, Manager for Commodities Branch with the Department of Agriculture and Biosecurity. So that information, not really correct. As far as pet food, we don't have jurisdiction because currently, our feed regulations have to do with commercial feed. So as far as commercial feed, it would not be allowed to be distributed in Hawaii. You know, if it's even if it's produced here, except for laying hens, you know, because that has been federally approved.

So federal restrictions would still apply? Okay. Yeah. Thought I was going crazy for a sec.

But as far as pet food, our state regulations don't cover it. It would just be the federal, you know, federal requirements, which is it wouldn't allow interstate transport of these ingredients getting hemp derived. So if it's produced here locally and, you know, distributed here locally, I guess it could be kind of exempt, but we would still caution against it because it hasn't been approved as safe, you know, by FDA for any species other than for laying hens. So that would be our concern.

So for laying hens, you guys are fine with it then. Is that fair? And if the federal government does come out with more guidelines allowing it for horses or whatnot, then then you'd be fine with that too?

Yeah. I don't know if there's other requirements as far as, like, testing because, you know, you know, if it exceeds certain levels, it might might cross other, you know, other lines. But as far as just, you know, there is an approved feed approved by FDA and AAFCO, which is the hemp seed meal. And it's approved for laying hens only at this time. So if they brought in their definition, then we would accept that.

Okay. It looks like in the original version of the bill, there was kind of a federal trigger language allowing food approved by the FDA as the FDA kind of approves them to to be approved here as well. I didn't go back and look at why that was taken out, but someone mentioned AG raised a constitutional concern. Do you recall why that was?

I'm not... I wasn't a part of that. But we would just say it'd probably be better to defer this until the animals are approved in a broader...

I mean, the least we could do is at least approve chickens because you guys are okay with that too. Right?

I don't know. As far as our requirements, this bill is not even needed for that because it's already approved for commercial feed, which is laying hens.

So are you saying that the farmers right now can legally sell, produce and sell hemp feed to chickens?

Yes.

Because I thought they were saying the exact opposite.

That's not true.

Yeah. Right. Hold on one second.

Yeah. You know, there could be other restrictions that I'm not aware of. But as far as our registration requirements, you know, we just, the feed ingredients need to be approved by AAFCO and FDA and, you know, AAFCO. And there is a feed ingredient that is approved for laying hens at this time. So as far as our, you know, our jurisdiction, it's okay. But there could be other requirements that are...

Okay. So the public testimony from Department of Agriculture and Biosecurity is that currently local farmers can't grow hemp feed for chickens and legally sell it. Is that fair?

Yes. Unless there's other agencies there that happen.

But you guys are, nothing would come from you folks for chicken feed derived from hemp.

Yeah. And I don't know if we would, there be requirements for testing.

Testing. Yeah. That that's fair. I think I think everyone agrees that it should be testing.

Because the ingredient that AAFCO, you know, the definition that they're allowing for laying hens, there are limits on the...

Which I think is I think is fair, honestly. Okay. Thank you.

The state has to adopt the rules.

Well, that that they literally said they didn't right now. And you could, if they if they take you to court, you can pull up this committee hearing no one's watching, and you can show the judge, I think. But let let me hear from you guys because I've been hearing the exact opposite.

Yeah. So respectfully, he's wrong. Because because of the fact we already have five states right now that are actively selling hemp seed, hemp grain for pets. So it's already happening in different states. So I'm not sure why he thinks that it's a federal issue.

But that that, the pet thing, I mean, that that's kind of an aside. Right? I'm really focused on chicken feed right now. If chicken feed is federally legal, have you folks been running into any issues with Department of Ag and Biosecurity with selling chicken feed?

No. We haven't had any issues in in that regard, but the reason why we originally approached putting hens in there is because it was it was necessary for Montana as well. So this whole the hens, the laying hens in in the in the bill with the Montana, it required them to get approval in order to do it.

So I'm not, it's new to me to to learn that we can already do it, so that's great if that's the case. But yeah. But in regards to all these other animals as well, it's it's a state by state decision, and there's already five states that are doing it right now. So.

I understand that. I am a little uncomfortable with it federally not being allowed yet, but it sounds like you guys can do it for chickens already. So that's a plus. It sounds like if other things are legalized federally or approved by the FDA federally, we probably don't need this bill to even offer trigger language because Department of Ag and Biosecurity would just be fine with it as long as it's FDA approved. So other than pets, which I'm it's a whole other can of worms, sounds like you guys are okay.

Yeah. I mean, I that's this is all, again, I think you might, we might wanna, like, double check to make sure.

That's why I wanted you to let him talk.

Of course. We had a conversation before before the hearing as well. And I and I thought he would came over and mentioned that he was mistaken about that, but I'm maybe I'm just double confused about it all. But but, yeah, I was under the impression.

And, again, the state by state has to still go through the process to approve even for laying hens in order to make it something. And the reason why they took it out of the original one was because of the there was, like, a constitutional alignment basically saying that the federal side should not dictate what the states can do, so they wanted to remove that technically.

So that way the state has the time to decide for themselves whether or not they wanna implement the same rule. So that's why they originally took it out. It was kind of incidentally taking out the hens.

I mean, they can't dictate, but we can voluntarily follow.

That was the original. Attorney General was the one that...

Thank you. Can you guys figure it out for sure before we break the decision making? You'll have a little bit of time while we're hearing, hearing the other bills. But I'd like a better answer or more definitive answer from you folks on chicken feed and whether, federally, if other things are approved, whether Department of Ag and Biosecurity needs to take any action at all or whether the farmers can automatically just start growing it without interference from DAB.

I would just be hesitant to to give you a definite yes because other agencies, you know, maybe have to...

Oh, yeah. Other agencies aside, I'm just talking about here guys.

As far as us, you know, we're fine with laying hens.

They're the agency that is required to...

Hold on. Hold on. Hold on. You're fine with laying hens and you're fine with other things as the federal government approves them, and you don't need to take any extra action for them to do it. And you don't need us to take any other action for them to do it as long as it's federal FDA...

For laying hens. That's approved.

And subsequent animals too. Right? Okay.

That's incorrect.

Well, I mean, they're the ones that are gonna bust you on it. So I don't know. You're fighting against yourself here.

We will get busted if we don't have this law. We need this law because the...

Standing right there because that's...

No. They don't do any enforcement by anybody who sues because we only do things if it's legal. And to be legal, that's why we grow hemp. It's we go through so much stuff to grow hemp. We're not gonna do anything that's against the law. And to be following the law, either you have to say in this bill right in here that we can do hemp seed laying meal or they have to adopt it, and they are so worthless. We...

I'm gonna, I'm gonna...

I'm sorry. I won't I won't I won't I won't do that. But we funded Jun's position as a hemp coordinator. He's done nothing to help hemp. And this is the only bill that could help hemp. And all they have to do is say that we, as a state, are allowed to follow. Like you said, voluntarily allowed to follow.

The AG's problem was the mandatory follow. So they could follow. That's why I asked for a day a day trigger, like, 120 days to them to adopt the federal law. Because so far, they could have adopted it. They don't even know that they are supposed to adopt it. So this is a major problem. They don't know the law.

I understand. Wait, hold on. I know you guys think you don't have to do anything because it's naturally they can just do it already. Can you come out with some kind of memo stating that or something just to have something on the record that, other than just this committee recording?

I guess at the required levels for laying hens only. Yeah. Yes.

Yeah. And maybe just something that says and for the as approved by the federal government or something like that. I mean, can, I know you don't think you need to, but for the comfort for everyone here, can we just say it?

Yes.

Okay. And then we don't have to go here again next year? Okay. Okay. Thank you. Is that good that good with you guys?

Yeah. Great.

Okay. Alright. Anyone else have questions?

My only question is, I mean, it feels like if we don't keep this moving and then just kill it during conference committee if they don't do it. You know what I mean? Like, having it keep moving. So and then if in conference, which you'll be in, and everything's cool, then they... Huh?

I didn't say I'm killing this bill.

I was just hoping.

I wanna get the process moving of us not having to deal with this anymore.

Yeah. Thank you.

So well, I guess I haven't made a decision yet on killing it or not. But with your commitment from DAB to create that memo that I think that they need, I think we're gonna be okay. So I might keep this moving just to make sure. But...

Again, my only reservation would be that if there's any other agency, like...

Yeah. Totally understand. If other agencies need to weigh in, I mean, I don't think, they still need to get tested. No one's denying that. I think they're just worried about you guys. Okay. Anyone else? Alright. Let's move on.

Aloha. My name is David Beltre, and I'm associate general counsel at Young Brothers. We're in strong support of the proposed draft, including the WICI mechanism, which stands for the Water Carrier Inflationary Cost Index mechanism, and it was the Hawaii Water Carrier Working Group's top recommendation to stabilize water carrier finances and ensure continued service throughout the state. Simply put, the state's regulatory framework for water carriers is broken. For decades, Young Brothers has been regulated like a traditional public utility under a framework based on the regulatory compact.

The regulatory compact, at a very high level, says the utility provides service and that the utility can charge rates to recover the reasonable costs necessary to provide those services plus a fair return. Currently, under traditional public utility rate making, rates can only be adjusted via something called a rate case. These are extremely slow, expensive, and often very contentious processes. And the practical effect of these this traditional framework is that there's extended periods of stagnant rates while actual operating costs arise due to things like inflation.

And this feeds this ongoing cycle where rates and costs drift too far apart, under recovery accumulates, financial pressure builds, and then these large disruptive rate increases are necessary to catch up after years of delay.

This has real consequences. Capital for reinvestment becomes more expensive and less available. Short term cash management must be prioritized over long term savings. For example, deferred maintenance, can lead to bigger problems that cost more later to repair. Third, large catch up rate increase requests mean more contentious rate cases.

More contentious rate cases means more expensive rate cases. More expensive rate cases means more costs are passed on to customers. WICI is a common sense regulatory tool designed to address these challenges. It doesn't replace or reduce existing regulation or oversight and includes key guardrails that were designed by the working group. To go over a few of those, first, it's tied to an existing state inflationary mechanism for maritime fee changes.

Second, these are annual adjustments that are capped at 5% and that they'd be known months in advance. For example, today, you can go on the Department of Transportation's website and see what wharfage increases will be in July of this year. And third, they are paired with mandatory full rate reviews and resets every third year to avoid runaway rate increases. In short, annual WICI adjustments help keep rates aligned with real changes to costs, support sustainable operations, and keep our local supply chain strong.

Model for the opportunity to testify, and I'd be happy to answer any questions.

Thank you. Anyone else in person or on Zoom would like to testify on this measure?

Hello, chair on Zoom.

Hello, Greg.

Hey. Just making sure. Greg Misakian. Again, I do wanna comment on this bill. I I fully understand the need to have rate increases when necessary due to inflation.

And and obviously, we live in a dynamic world right now where on a day to day basis, we never know what the cost of anything is gonna be due to the world, you know, political environment and and the wars that are going on. Unfortunately, that's not a a fun thing that we're dealing with right now. But that said, I don't endorse any automatic rate such as this. So I believe an annual evaluation for every, industry, including insurance.

And I believe if I'm correct, we our insurance industry is on an annual basis is important.

But I will stress also that there needs to be a stopgap. My HO-6 insurance policy this year went up just under 20%. I we might as well call it a

Let's keep it on let's keep it on the bill, Greg.

I will. But but it's just a concern because that's the highest increase I've ever had. And I hope that whatever you do with this bill, if there's any adjustment to it, I don't feel there should be any kind of automatic increase on a, you know, three year basis where they can move you three years later. It should be annual.

If you can if there's a need for them to have an additional evaluation, then let them have the additional evaluation on the merits of inflation and what have you.

You make the bill to to, you know, to add those elements into the existing annual regulatory. That's all I'm suggesting to you. And I didn't mean to go to the insurance, but I had to give an analogy. So thank you very much, and I appreciate a moment to add some comments. Aloha.

Thank you. Any questions?

Yes. I have a question for the the retail representative retailer representative.

HFIA? HFIA. Lauren, are you there?

Sorry. Hi, Lauren. My question was you it sounded like you stated that there's a lot of shalls. Like, it shall commence on on July 1, which and your point, I think, that you raised was that the the PC just had a bump that was supposed to not be revisited for x amount of years. So are you saying that if this bill does move forward, that we should change it until May?

That would definitely be an improvement. Yeah. We we do, and I believe that was the PUC's amendment, and we do support the PUC's amendment.

And, also, you know, like most businesses, you want predictability. Alright? I would imagine your your clients want predictability. To have a job go up 25 percent one year kind of out of the blue, that feels harsher for small businesses than something more predictable like this bill. This bill seems to be offering predictability for businesses who have to plan on increasing prices of units.

How does

Yeah. So I see why, you know, you would say that, but the thing is is that every third year, there's a rate hearing. So it could actually go up much more than the 5%. So that kind of to us, that's not really predictable. And the way it works currently is they they can apply for an emergency rate increase.

So, like, they were approved for that 18%, like, while they were going through the process where they ultimately got the much higher increase that started in January. So there there is definitely a lever for them to do that. And I think our members are kind of saying, like, hey. You know, if they're the only, you know, game in town for Inter Island shipping, like, it really shouldn't be an inflationary rate adjustment every year.

It should be based on the actual cost, and that's really only something that the PUC and the special overseer can determine because they're the only ones that have access to all of the financial data to do that.

And that's sort of why they were put in charge of regulating them. So from our perspective, it's like, yes. It would be you know, yes. We would know it would go up with inflation, but at the same time, we just got hit with this 25.75% increase, and then we're looking at potentially another increase. In the same year, six months later, that could be up to 5%, each year, and then every three years, who knows how much.

So for us, we don't really think that's predictable. You know?

What if the water carrier said that it actually costs more money to consumers every time they have to go before the PUC, that it actually will save the the the customers more money? We'll save the customers money if they have to go in so often.

Yeah. We we have heard that. I think that, you know, there's definitely a lot of room for improvement in the regulatory process, and I think that the special overseer is a great individual to maybe make it easier to assess what the rate increase should be on an annual basis if that's how we're gonna do it. And then it should be based on actual data, actual financial expenses, and income. Right?

And that's how it should be determined, not based on some sort of arbitrary index that has nothing to do with their cost structure. That's actually a pass through. We're just a pass through. It's not this is has nothing to do with their cost structure

Thank you.

PUC? I promise I'm gonna give YB some craps after this too. But I don't understand your argument because inflation is gonna happen no matter what. I mean, unless we're talking about a zero inflation environment, inflation seems to be something that will happen anyway. So to say that Young Brothers might pay for over some of their mismanagement by this inflationary cost increase is trying to say that inflation wouldn't happen if they didn't make mistakes.

But if they made mistakes or not, inflation is still gonna happen, so the prices are still gonna rise. I'm not saying that we give them everything. I'm not saying that we add fuel and all kinds of other fuel increases and everything like that in there too.

But if it's just an inflationary cost index, and we can all agree that that whatever that inflation overall is gonna happen anyway, I don't see how that has anything to do with young brothers doing well or make bad or good decisions. So how does how does that factor in?

You know, I'm gonna try parse your question because I think you're referring to the termination made in order 42100. We you know, at that time, we did, you know, say what he did say, which was we were concerned with, granted in that in that specific context. You know, a lot has changed since then. They've gone through management changes. You know, it's a little bit reassuring.

They have a better, more depth operational

But their management has nothing to do with inflation.

Right? I understand. I'm just trying to paint a picture. I apologize. I'm trying to get to it. So it's not that inflation, inflation is not real. Inflation is real. We understand that. We see that every day. We acknowledge that within other utilities.

We understand that completely and appreciate that. But it's not just that. It's if they start having lack of cost control, if they start doing operations that don't make sense, inefficient operations, it could basically be subsidized by getting this increase, and the increase is supposed to cover for inflation. You know, they get a they have a contract or a copier.

You know, it escalates a 2% rate because Xerox wants their months, you know, wants their cut, And then that's the things that, yeah, it could make sense for.

But we're really at in the order, and I wanna emphasize, in the order, we're really concerned that they would stop having this type of discipline that they could just increase the rates and cover up anything that they lacked discipline for in the order. I just wanna make that clear. If you're talking about our testimony, you know, we didn't say we're against it. We did make some suggestions to the measure. You know?

But, I mean, even if they did create a enter into a a dump contract with Xerox or something like that, then they're gonna eat that contract anyway. That that has nothing to do with inflation on the rest of their expenses. Right? So, I mean, it it seems like trying to punish them for inflation is misguided.

And, again, the order did what it did, and I'm just speaking on to help you understand what the order set. Again, we're not saying that we shouldn't do this measure to help curb inflate the inflationary pressures on the business. We understand that. Again, it's real. We acknowledge that it's real.

We just make just do want some changes to the measure so that we have some leeway in applying this.

If we if we make your changes, it's it's gotta basically cut the bill, I think. But do you have something to add to that?

Yeah. So it's on time with the commission too as well. So just to give you an idea. So typically, a rate case is, like, like, every three years, right, typically. So when they do a rate case, they come to us. They come to us and the information is saying, this is what we're gonna we need looking for. So it's a forward looking rate case.

So this is what we're gonna need between the next rate case, you know. So that that's that's kind of the idea when they come to us, you know. So it's not like I mean, they that should be considered. Right? If you think of it, you know, maybe inflation or whatever it is baked into.

It's like, this is what we need moving forward into the next ratings. You know? I mean

Sure. Yeah. That's a good point

Right. Yeah. So this that's the thing. So and the things that we just they just recently had one increase.

Right? I mean, this is like, it was effective, like, in January of this . And we all we want to do is to make sure because of the past history and issues, you know, with the operation efficiencies financially, we just want to know with the with the SON, their special overseer, to make sure their business plan is implemented properly and that they get to a point where they're financially stable. They they actually exhibit or show or demonstrate, you know, financial stability over time.

And then we can go into look into that.

We I mean, we're not again we're not precluding it. We're not against it. You know? We just wanna make sure they get to that level because it's been, like historically, it's been ongoing like that with a continuous rate case, emergency emergency. We just wanna get them on a strong footing and then go forward from there. Yeah.

And I do like the special overseer. Right. When you gave them the 25% Yeah.

Increase last year, did that bake in inflation over the next two or three years? Was that a consideration?

Well, I mean, they said this is what we need moving forward. You know, that's what is in there. I mean, they should bake that data too. I mean, that's their observation.

Right? Yeah. Let's hear from them. Thank you.

Okay. The way rate cases it's true. Rate cases are forward looking, but they're forward looking. They're developed for the next, what's called the test year. So the 2025 test year rate case was developed in 2024 leading up to 2025 based on 2024's forecast of what 2025 is going to look like.

So now in 2026, we're using rates that are based on what we thought 2025 was going to look like in 2024. It does not have Well, yeah. Inflation baked in for years beyond this.

It should, though. Right? Unless inflation raises unless inflation is raising by five additional percent every year, you should have baked in. Even though you have a test year, it's also looking forward. And so the the inflation that you experienced between 2024 and 2025, I'm assuming that you took that into account going forward, assuming that the inflation would be the same.

So adding this 5% on top of that would seem to be either an admission that you folks underestimated inflation by 5% in the subsequent years or or this kind of bonus.

Sorry. Can I call my our director of finance up? She can explain this much better than I can. There's there's a there's a specific formula and process, and it works based on what's called the test.

So Test year. So like David mentioned, we submitted our rate case for I'm sorry. I'm Ashley Kishimoto. Thanks for allowing you to be here. I'm director of finance at YB.

We submitted our 2025 test share, which was based on what our best estimate of 2025 would look like. We did include increases such as wage increases. We have labor contracts that go obviously beyond 2025, so we baked in increases for those. We did not take a stand on what inflation would be. We did known increases and that we expect it to be.

So you don't take inflation into account? That that seems like a pretty well, not only does that seem like something that I think would everyone acknowledges is gonna happen anyway, but by doing this bill, you guys are kind of acknowledging that it's gonna happen anyway. So why, why not bake in inflation if that that doesn't doesn't really make any sense?

We're doing it as a test year as per one year at a period of time. Right? I'd say and we're trying to come with something that's reasonable, I'd say. We're trying to best guess what 2025 is gonna be.

But even they think inflation's reasonable, so why don't you put it in there?

Because it's unclear for how long into the future thats going to last

I would just say

That inflation is gonna last.

Or how many years that will be between rate cases as well too. Yes.

Okay.

Because like I said, we're taking it a step in time. Like, we could submit a rate case annually if we wanted to. Right? So then we could then say, k. 2025 looks like this.

We'll come back again next year for 2026. But we all know that these rate cases take a long time. We submitted our rate case in October 2024. We did not receive an order until November 2025.

Isn't that more of a reason to bake any inflation, though? Because you know it's gonna take so long, and and you guys control when it's not like they order you to do rankings.

It is not.

But it is timely and costly for both parties.

It Is. It is. I acknowledge that, but that's why it doesn't happen every year, which which I'm not saying you should. But because you know it's not gonna happen every year and you know how long they take or no offense, guys. Yeah.

But, you know

But we are

But is that a reason to

period as well too. Right?

And but but if they have a sale period, then then then even more, they can't afford the sale period. I mean, the

We didn't know that.

The so also, we're not sorry. The way the rules work are we're not allowed to bake in inflation for future years beyond the 2021.

Test years, aren't they?

So we can bake in inflation for what we expect it to be in that test year.

For the one year period.

Going on, we can't say. And then also, as part of our rate structure, we would request, you know, escalations for inflation in year 2027 and year 2028 because we forecast inflation to be this. The PUC would just disallow that. That's not allowed.

PUC, can you guys come into that?

Okay. So at least for this this application, twenty hundred twenty five four zero two five five, they did bake it in in terms of asking for WICI. But I wanna be very clear. If they did it within the regular rates and they did it within WICI, you know, I don't wanna don't wanna double guess here, but if they did that, it could be, like, double counting.

So you gotta understand, the position they were in, they decide to package WICI all the all the additional years into WICI.

If they didn't propose Wiki and they just tried to bake it in any way, would would that have been okay with you guys?

Only only for the future test year.

Okay. So they're they're right, sir. They they can only bake in one year of information. Right. So they're always gonna be lagging behind unless the WICI mechanism is put in, which is why they proposed it, but you guys rejected it.

In the again, yes. That that was their their decision to put all of their, all of the inflationary items within the WICI program within the rate case. And we did deny it for

Just to add to what Andrew was saying too. In the last three cases, we gave him the full amount they requested too, but we didn't have to give the full amount too. Right? So we gave him the the 46% across the board last time and then another 25% of the month. That that was a full that was a full month they requested.

We couldn't we could've just, you know, divvy it up and then add weekly if you want it or, you know, percentage to that. But we gave the full amount. Giving letting them to get up because they had a business plan, updated business plan, and we wanted them to implement that plan. And we want to make sure they're it's implemented, and we wanna make sure it they're fast stable before we consider the WICI.

Because we just think it's reasonable to make sure they're fast stable before.

And and still also, I just wanna back up a little bit. They would they all say what the the the SR 125 working group we did, right, the recommendation. But if you look at the recommendations too, there's also some concerns too that was addressed too. And one was that because if there could be some inefficiencies, you know, that would just offset it, you know, by the the WICI.

So Okay. I mean, so that that's fair. I don't I wanna kind of take the inflation thing out of their good or bad management decisions, though. If they come back, when they come back for another rate case, they're gonna come back and they're gonna be behind in amount plus whatever they're behind in inflation too. So they're gonna ask for that anyway.

Right? And and aren't you guys gonna give it to them? Be I mean, at least the inflationary part because everyone here agrees that inflation is reasonable.

Right that would, we would definitely consider that.

Okay. So if inflation is gonna be considered in their future rate case, and everyone agrees that good decisions or bad decisions by them, the inflationary portion Yep. Is reasonable, then why aren't we just giving it to them now? Why are we forcing them to eat it and then come back for a cost that we all agree is is gonna happen anyway and is reasonable?

So I wanna make a really important distinction here. Like, in the rate case process, we're looking at actual projected costs rather than in inflated cost from, like, three years back. So whatever it costs for them to do for their for their Xerox contract, I'm sure they have a Xerox contract. We have a Xerox contract. It has may have inflation index in there from when they last negotiated.

The real costs are what we look at in the rate cases. So so if you're doing WICI through a surcharge, when you do the third year, and I don't wanna presuppose, you know, their thoughts around this.

When you do that with the the real case of third year, you're basically doing a reset on the actual cost plus whatever they think would be reasonable for the for the inflation of that cost, and they have proof that the that the cost will increase by that amount in that test year.

But the bill has a true up.

I understand.

So that's kind of the same. I mean, that's not exactly the same. I understand. But at least there's that. I mean, is does that comfort you guys at all?

It's it's not that. It's again, you know, we do want the the flexibility to do it rather than the mandate. If you know, like, we can't stop you from telling us we have to do it.

And I don't think we mandate, you know, for fuel or other things like that, but for for inflation, I mean, it seems seems like a modest proposal.

And so

And and, again, when we mentioned earlier in the order that, you know, we want to make sure that financial statement. I know we're tying that to it. I understand that limitation is gonna be considered separate subject, but we wanted to use that to make sure that they get up to speed. There's things that we're concerned, and we wish to make sure that operationally stable. It's like, what if they're not

I understand.

Holding them accountable. I totally understand. But that's why we have a special overseer coming in. Right? I mean, we don't need this to do that.

And then we what I'm saying is that we it could it could happen even before the next rate case. Right? You know, in terms of doing that, we can we can, you know, review that. And that so that's we wanna establish some history. You know?

Like, okay. You implemented the plan. It could be end of end of this year or whatever it is. I'm not sure when we would do it, but we wanna establish history first of that fashionability and have the overseer there create performance metrics, you know, so we can actually measure quantified the, you know, how how they're doing, and it's okay. Yeah.

We agree with you guys. You can go ahead and and do the WICI. You know? And whether we use that method in terms of workbench, we're not sure yet, but we would have some type of inflationary index. Okay.

Thank you. Members, any other questions?

I just wanted to clarify the the focus on between inflation and expenses, like, when wage contracts go up, inflation is embedded already in that wage contract going up. That that's where the inflation is, I would imagine.

Yeah. Because the the CBA is actually built into that, you know, in, like, bargaining agreements in there.

Okay. Let's recess.

Thank you, members. Moving on to SB 2061 SD two HD one relating to residential condominiums. I want to put back in the provision where if someone owns another piece of property, they are not eligible.

So on page four, recommendation is to reinsert on page four, subsection the subsection three that's currently crossed out from lines three to nine, but also to insert a provision that if the condo lessee or spouse or any other person attempting to live with the condo lessee purchases or requires real property, the condo lessee has six months to sell the condo lease to an eligible buyer. Members, any comments?

I I guess, chair. Thank you. I'm gonna be voting no because I was under the impression that this whole model was supposed to be owner occupied for the duration of the ninety nine years. And I also thought the cost was was to come down because it didn't include ownership of land. So I'm really disappointed by this.

I appreciate your amendments. I think it's a step in the right direction. I'm still a no.

Anybody's there any comments?

Vice chair for the vote.

Voting on SB 2061 SD 2 HD one, chair's recommendation is to pass with amendments. Are there any reservations reservation oh, any reservations. Sorry. Nope. No for Rep Iwamoto.

Any other notes?

For Kong.

No.

Okay. Chair, your recommendation is adopted.

SB 2050 SD 1 HD one relating to chiropractic. I think 2030 is too long. I hope that you guys can work with them to develop admin rules quicker than that, but I'm gonna keep the 2028 date that's already in the bill. Chair's recommendation is to adopt proposed amendments from the Hawaii State Chiropractic Association regarding clarifying language for chiropractic interns, namely making sure that they have all of their studies didactic studies done.

This is really just for the last six months of their training.

And to redefect the date, members, any comments? Vice chair for the vote.

Voting on SB 2050, SD one HD one. Chair's recommendation is to pass with amendments. Any reservations? Any no's? Chair, your recommendation is adopted.

K. Moving on to SB 2102 SD two HD one relating to industrial hemp. In the committee report, we will note Department of Ag and Biosecurity's requested position and the amount of money they requested for that position. We will be deleting pets, specialty pets, and forces from this definition and adding back in a federal trigger to that was taken back, I think was in the original.

We'll have something like that to make sure that anything federally legal through the FDA will be legal in the state as requiring the Department of Ag and Biosecurity to affirm that however they need to.

Members, any comments? Any vice chair for the vote?

On SB 2102 SD two HD one. Chair's recommendation is to pass with amendments. Are there any reservations? Any no's? Chair, your recommendation is adopted.

Moving on to SB 2694 SD two HD one relating to water carriers. Everybody's favorite bill. We will be adopting the proposed HD two language that was posted earlier. Members, any comments?

Sure. Yep. Excuse me. I'll be voting no. I I I I wish we went toward we accepted the PC's amendment proposed amendments, which would have made it shall.

What's interesting is that it feels despite

Which would have made it may.

Oh, sorry. What?

Which would have made it may.

Yes. May. Sorry. Yes. I would have preferred going with the PC's recommendation that it would have said may.

But, yeah, given that it's interesting because from as a new person to watching this dynamic, it looks adversarial in some ways. But in many ways, the Young Brothers seems to be getting all of its ask for rate increases anyway. So it's very interesting. But I'm I'm I I do support giving deference to the PC in this case. Thank you.

Any any other comments? Okay vice chair for the vote?

Voting on SD 2694, SD two HD one. Chair's recommendation is to pass with amendments. Noting no from rep. Are there any reservations from representative Khan and any other noes from representative? Representative Perrick. Chair your recommendation is adopted.

Thank you, members. Moving on to the DM only agenda. First up, we have SB 2089 SD one, HD one relating to mental health. Chair's recommendation is to adopt the amendments in the prior committee's committee report. Thank you to the prior chair for doing a great job tracking all that down.

Sorry. I I was gonna maybe put an automatic review language, but with a trigger, but we're not sure. In the committee in the committee report, we'll note that in conference, they may wanna actually, we'll just let it we'll just let another legislature deal with that. All we'll do is then we'll adopt the members in the party for this to the report recommended. Members any comments.

Vice chair for the vote?

Voting on SB 2089 SD one HD one, chair's recommendation is to pass with amendments. Any reservations? Any no's? Chair, your recommendation is adopted.

Alright. Last up, SB 847 SD two HD one, relating to psychologists. Alright. First up, amending the definition of prescriptive authority beginning on page three lines 19 through page four line five. We'll be taking out the words psych psychiatric, mental, cognitive, nervous, emotional, or behavioral disorders and replacing it with major depressive or generalized anxiety disorder.

And then the also gonna be amending the definition of psychotropic medical on page four lines nine through 16 to, gosh, I guess I can just read this whole thing out. I think it is. Psychotropic medication means only selective serotonin reuptake inhibitors, SSRI, and serotonin non for free reuptake inhibitors, SNRI, related to the diagnosis and treatment of mental and emotional disorders. And the rest of that section will remain the same.

Remember oh, I'm sorry. Gosh. Alright. H252. After County Of Kauai, we're gonna be adding provided that psychotropic medication prescribed in this pilot shall be eligible for Medicaid reimbursement to to the extent such prescriptions would otherwise be eligible if prescribed by psychiatrists.

We'll be adding a requirement that psychologists and employers report to Shipta adverse events, patient outcomes, and escalation protocols. And Shipta will report any of these results annually to the Board of Psychology, expanding the pilot program to include Wilcox and Sam Mahelona hospitals on Kauai, inserting language to reenact the definition of practitioner after the sunset date and defecting date. Members, any comments? K. Vice chair for the vote.

Voting on SB 847 SD two HD one. Chair's recommendation is to pass with amendments. Are there any reservations?

Reservations.

Two.

Iwamoto and Kong. Any no's? Chair, your recommendation is adopted.

Thank you, members. We're adjourned.