(For Release 4/5/15)
Last year we wrote about a deal reached in the waning days of last year’s legislature where the owner of the Turtle Bay Hotel would sell to the government a “conservation easement” requiring that neither the current nor any future owners would be allowed to develop most of the land. The State’s share of the price would be $40 million, which would be paid for by having the Hawaii Tourism Authority float bonds that would be paid back by a revenue stream created by putting yet another earmark on our Transient Accommodations Tax.
This year, with a new governor and a new legislature in place, the Department of Budget and Finance (B&F) is working diligently to get the bond issue up and running. They were under the impression that the bond sale process needed to begin by June 30 of this year. “No,” said the Department of Attorney General, “the law says that the bond sale needs to be DONE by June 30.”
Oops! Bond sales typically take a few months to pull off, and at that point it was already February. So the parties, anxious to save the deal, ran to the Legislature and were successful at getting the Senate Committee on Ways and Means to pull back an otherwise technical TAT bill, Senate Bill 284, to insert language cleaning up the bond issue. Over to the House the bill went, and its first stop was the House Committee on Tourism.
In House Tourism, the bill hit a snag. After the bill was heard on March 18, Chair Tom Brower told the Star-Advertiser that the committee discussed the bill for about 90 minutes, an eternity by legislative standards, and couldn’t pass the bill out.
To keep the entire deal from cratering, proponents then had to scramble. The House Speaker wound up re-referring the bill to skip House Tourism, and the fate of the bill was placed in the hands of the Committee on Water and Land. The latter committee held a hearing on the bill on March 25th, and reported the bill out the next day.
The present version of the bill does have some improvements over the old version. In particular, the old version used “revenue bonds,” where the bond debt is supposed to be repaid from a dedicated stream of revenue. The current version has B&F issue reimbursable general obligation bonds, where the full faith and credit of the State is pledged to repay the obligations rather than one single revenue stream. General obligation bonds of the State are a known commodity for investors and are likely to be perceived as less risky. Therefore, they will be cheaper in terms of interest cost that is likely to be demanded by those investors. The earmark on the TAT is still there, probably because the bill’s title is “Relating to the Transient Accommodations Tax,” but the fund that this earmark feeds is designated solely to service the debt on the bonds.
In addition, the new version extends the financing deadline to the end of December, which should give B&F enough time to get the bonds out to market and get some money in the door.
So, it seems that the legislative process, despite some mad scrambles, is working and bad things are being fixed.
And, in case you’re wondering about the technical amendments that were in Senate Bill 284 before this whirlwind started, they were necessary because one of the earmarks on the TAT last year gave $3 million to be allocated by agreement between the Department of Land and Natural Resources and the Hawaii Tourism Authority, but did not authorize spending it. As a result, the $3 million allocated last year couldn’t be touched. These amendments have landed in House Bill 444, which is also working through the process.