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REPORT TITLE: Native Hawn. Autonomy Act DESCRIPTION: Proposes constitutional amendment to authorize the creator of the native Hawaiian trust corporation, a private nonprofit entity to assume responsibilities for Kaho`olawe, and the responsibilities associated with the office of Hawaiian affairs, and the department of Hawaiian home lands. Repeals OHA and DHHL. HB LRB 98-0270 HOUSE OF REPRESENTATIVES H.B. NO. NINETEENTH LEGISLATURE, 1998 STATE OF HAWAII A BILL FOR AN ACT RELATING TO NATIVE HAWAIIANS. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII: SECTION 1. This Act shall be known as the "Native Hawaiian Autonomy Act". SECTION 2. Findings. The legislature finds as follows: (1) The descendants of the inhabitants of the Hawaiian Islands prior to 1778, by many measures, have not prospered in their native land. (2) While there are many explanations for this condition, the central theme are a loss of control over land and other assets, an inability to provide adequately for native Hawaiian betterment, and an erosion of social and cultural roots. (3) A native Hawaiian renaissance has occurred over the past decades, aided and evidenced by such diverse developments as the voyages of Hokulea, the founding and maturing of the office of Hawaiian affairs and other native Hawaiian entities, the pending return of Kahoolawe, the federal apology and resolution of historic claims, and the success of Hawaiian language immersion education. HB LRB 98-0270 Page 2 H.B. NO. (4) It is fitting that, on the one hundredth anniversary of Hawaii's annexation to the United States of America, all of Hawaii's people of whatever ethnic background acknowledge and reaffirm that Hawaii is the only homeland of the native Hawaiians and pledge themselves to support the continued economic, social, and cultural rebirth of the indigenous peoples of Hawaii. (5) It is equally fitting that all of Hawaii's people pause at this time in Hawaii's history to reflect on what obstacles exist to the continuation of the native Hawaiian renaissance and how best to overcome them and proceed together. (6) It is further appropriate at this point to recognize and acknowledge that any failure to resolve issues of longstanding concern to native Hawaiians and to provide for a permanent and mutually acceptable relationship and understanding between native Hawaiians and the other peoples of Hawaii will have negative economic, social, and cultural consequences to all of Hawaii's people. (7) While many specific obstacles to further progress have been articulated, the common thread is a continued HB LRB 98-0270 Page 3 H.B. NO. dependence by native Hawaiians on others which prevents the development of the full potential of the native Hawaiian people. (8) This continued development can only be fostered by ending a relationship of wardship or dependence by native Hawaiians on others and replacing it with a relationship based wherever appropriate on self- sufficiency and self-determination for native Hawaiians. (9) Although some believe that the relationship of the native Hawaiian peoples to the State should be that of a separate sovereign government, the great majority of Hawaii's people, both native Hawaiian and non-native Hawaiian, desire that the goals of native Hawaiians be pursued and realized within Hawaii's existing government context. (10) It is the overriding purpose of this Act to provide for greater native Hawaiian autonomy through the consolidation of existing native Hawaiian entities into one autonomous entity directed and managed by the native Hawaiian people, the devolution to that entity of rights and responsibilities currently undertaken by HB LRB 98-0270 Page 4 H.B. NO. the State which are or should be specific to native Hawaiians, and the transfer to and creation in that entity of a land and money-based corpus which provides sufficient resources for that entity to carry out whatever missions it determines are appropriate for the advancement of the native Hawaiian peoples. (11) It is the further purpose of this Act to bring closure to certain historic claims by native Hawaiians against the State without precluding the maintenance of comparable claims against other government entities. (12) It is the public policy of this State that, in the interpretation of this Act, these overall goals of decreased dependence and wardship and increased autonomy for the indigenous peoples of Hawaii and the resolution of outstanding or future claims be fully implemented, all for the benefit of all of Hawaii's people. PART I POWERS, DUTIES, AND SCOPE OF THE NATIVE HAWAIIAN TRUST CORPORATION SECTION 3. The Constitution of the State of Hawaii is amended by adding two new sections to be appropriately designated HB LRB 98-0270 Page 5 H.B. NO. and to read as follows: "NATIVE HAWAIIAN TRUST CORPORATION; AUTHORIZATION Section . The State hereby authorizes the transfer by the State of its trust responsibilities and other rights accruing and obligations owed to the Hawaiian population of this State to a non-profit corporation, the Native Hawaiian Trust Corporation, created as provided by law. The Native Hawaiian Trust Corporation shall assume the rights and responsibilities of the former office of Hawaiian affairs and the former department of Hawaiian homelands except as provided by law, as well as other rights and responsibilities transferred to it by the State by law. The Native Hawaiian Trust Corporation shall be a corporate entity and shall not be a sovereign governmental entity. It shall have only the rights and responsibilities as established by law, including any appurtenant authority associated with those rights and responsibilities. The trustees of the Native Hawaiian Trust Corporation shall be Hawaiian by blood and shall be elected by Hawaiian residents of this State as provided by law. There shall be a minimum of thirteen trustees, with representation from the islands of Hawai'i, Kaua'i, Maui, Moloka'i, and O'ahu, as provided by law. HB LRB 98-0270 Page 6 H.B. NO. The beneficiaries of this trust shall be persons of Hawaiian blood. "Hawaiian blood" means a person related by blood to any of the races inhabiting the Hawaiian Island prior to 1778. Unless changed by the Native Hawaiian Trust Corporation board to exclude persons with a blood quantum below a minimum level not to exceed one-eighth Hawaiian, all persons of Hawaiian blood shall be the beneficiaries of the Native Hawaiian Trust Corporation. HAWAIIAN HOME LANDS Section . The responsibilities accepted by the State under the Hawaiian Homes Commission Act, 1920, pursuant to compact with the United States of America, as provided by State law and upon the consent of the United States, are transferred to the Native Hawaiian Trust Corporation. The management of the "available lands," as defined by section 203 of the Hawaiian Homes Commission Act, 1920, shall be the responsibility of the Native Hawaiian Trust Corporation. The State shall retain oversight responsibility over management of the land." SECTION 4. Article XII, section 1, of the Constitution of the State of Hawaii is amended to read as follows: "HAWAIIAN HOMES COMMISSION ACT Section 1. Anything in this constitution to the contrary notwithstanding, the Hawaiian Homes Commission Act, 1920, enacted HB LRB 98-0270 Page 7 H.B. NO. by the Congress, as the same has been or may be amended prior to the admission of the State, is hereby adopted as a law of the State, subject to amendment or repeal by the legislature; provided that if and to the extent that the United States shall so require, such law shall be subject to amendment or repeal only with the consent of the United States and in no other manner; provided further that if the United States shall have been provided or shall provide that particular provisions or types of provisions of such Act may be amended in the manner required for ordinary state legislation, such provisions or types of provisions may be so amended. The proceeds and income from Hawaiian home lands shall be used only in accordance with the terms and spirit of such Act. The State's responsibilities under this Act shall be transferred to the Native Hawaiian Trust Corporation for administration and implementation, as provided by law. The State shall retain oversight responsibility over the fulfillment of the trust responsibilities regarding the land as provided by law. The [legislature] Native Hawaiian Trust Corporation shall [make sufficient sums available for] carry out the following purposes: (1) development of home, agriculture, farm and ranch lots; (2) the making of home, agriculture, aquaculture, farm and ranch loans; and (3) rehabilitation HB LRB 98-0270 Page 8 H.B. NO. projects [to] that shall include, but not be limited to, educational, economic, political, social and cultural processes by which the general welfare and conditions of native Hawaiians are thereby improved[; (4) the administration and operating budget of the department of Hawaiian home lands; in furtherance of (1), (2), (3) and (4) herein, by appropriating the same in the manner provided by law]. Thirty percent of the state receipts derived from the leasing of cultivated sugarcane lands under any provision of law or from water licenses shall be transferred to the [native Hawaiian rehabilitation fund, section 213 of the Hawaiian Homes Commission Act, 1920, for the purposes enumerated in that section.] Native Hawaiian Trust Corporation. Thirty percent of the state receipts derived from the leasing of lands cultivated as sugarcane lands on the effective date of this section shall [continue to] be [so] transferred to the [native Hawaiian rehabilitation fund] Native Hawaiian Trust Corporation whenever such lands are sold, developed, leased, utilized, transferred, set aside or otherwise disposed of for purposes other than the cultivation of sugarcane. There shall be no ceiling established for the aggregate amount transferred [into] to the [native Hawaiian rehabilitation fund.] Native Hawaiian Trust HB LRB 98-0270 Page 9 H.B. NO. Corporation." SECTION 5. Article VII, section 12, of the Constitution of the State of Hawaii is amended to read as follows: "DEFINITIONS; ISSUANCE OF INDEBTEDNESS Section 12. For the purposes of this article: 1. The term "bonds" shall include bonds, notes and other instruments of indebtedness. 2. The term "general obligation bonds" means all bonds for the payment of the principal and interest of which the full faith and credit of the State or a political subdivision are pledged and, unless otherwise indicated, includes reimbursable general obligation bonds. 3. The term "net revenues" or "net user tax receipts" means the revenues or receipts derived from: a. A public undertaking, improvement or system remaining after the costs of operation, maintenance and repair of the public undertaking, improvement or system, and the required payments of the principal of and interest on all revenue bonds issued therefor, have been made; or b. Any payments or return on security under a loan program or a loan thereunder, after the costs of operation and administration of the loan program, and the required HB LRB 98-0270 Page 10 H.B. NO. payments of the principal of and interest on all revenue bonds issued therefor, have been made. 4. The term "person" means an individual, firm, partnership, corporation, association, cooperative or other legal entity, governmental body or agency, board, bureau or other instrumentality thereof, or any combination of the foregoing. 5. The term "rates, rentals and charges" means all revenues and other moneys derived from the operation or lease of a public undertaking, improvement or system, or derived from any payments or return on security under a loan program or a loan thereunder; provided that insurance premium payments, assessments and surcharges, shall constitute rates, rentals and charges of a state property insurance program. 6. The term "reimbursable general obligation bonds" means general obligation bonds issued for a public undertaking, improvement or system from which revenues, or user taxes, or a combination of both, may be derived for the payment of the principal and interest as reimbursement to the general fund and for which reimbursement is required by law, and, in the case of general obligation bonds issued by the State for a political subdivision, general obligation bonds for which the payment of the principal and interest as reimbursement to the general fund HB LRB 98-0270 Page 11 H.B. NO. is required by law to be made from the revenue of the political subdivision. 7. The term "revenue bonds" means all bonds payable from the revenues, or user taxes, or any combination of both, of a public undertaking, improvement, system or loan program and any loan made thereunder and secured as may be provided by law, including a loan program to provide loans to a state property insurance program providing hurricane insurance coverage to the general public. 8. The term "special purpose revenue bonds" means all bonds payable from rental or other payments made to an issuer by a person pursuant to contract and secured as may be provided by law. 9. The term "user tax" means a tax on goods or services or on the consumption thereof, the receipts of which are substantially derived from the consumption, use or sale of goods and services in the utilization of the functions or services furnished by a public undertaking, improvement or system; provided that mortgage recording taxes shall constitute user taxes of a state property insurance program. The legislature, by a majority vote of the members to which each house is entitled, shall authorize the issuance of all HB LRB 98-0270 Page 12 H.B. NO. general obligation bonds, bonds issued under special improvement statutes and revenue bonds issued by or on behalf of the State and shall prescribe by general law the manner and procedure for such issuance. The legislature by general law shall authorize political subdivisions to issue general obligation bonds, bonds issued under special improvement statutes and revenue bonds and shall prescribe the manner and procedure for such issuance. All such bonds issued by or on behalf of a political subdivision shall be authorized by the governing body of such political subdivision. Special purpose revenue bonds shall only be authorized or issued to finance facilities of or for, or to loan the proceeds of such bonds to assist: 1. Manufacturing, processing or industrial enterprises; 2. Utilities serving the general public; 3. Health care facilities provided to the general public by not-for-profit corporations; 4. Early childhood education and care facilities provided to the general public by not-for-profit corporations; [or] 5. Low and moderate income government housing programs[,] or; 6. The Native Hawaiian Trust Corporation, each of which is HB LRB 98-0270 Page 13 H.B. NO. hereinafter referred to in this paragraph as a special purpose entity. The legislature, by a two-thirds vote of the members to which each house is entitled, may enact enabling legislation for the issuance of special purpose revenue bonds separately for each special purpose entity, and, by a two-thirds vote of the members to which each house is entitled and by separate legislative bill, may authorize the State to issue special purpose revenue bonds for each single project or multi-project program of each special purpose entity; provided that the issuance of such special purpose revenue bonds is found to be in the public interest by the legislature. The legislature may enact enabling legislation to authorize political subdivisions to issue special purpose revenue bonds. If so authorized, a political subdivision by a two-thirds vote of the members to which its governing body is entitled and by separate ordinance may authorize the issuance of special purpose revenue bonds for each single project or multi- project program of each special purpose entity; provided that the issuance of such special purpose revenue bonds is found to be in the public interest by the governing body of the political subdivision. No special purpose revenue bonds shall be secured directly or indirectly by the general credit of the issuer or by HB LRB 98-0270 Page 14 H.B. NO. any revenues or taxes of the issuer other than receipts derived from payments by a person under contract or from any security for such contract or special purpose revenue bonds and no moneys other than such receipts shall be applied to the payment thereof. The governor shall provide the legislature in November of each year with a report on the cumulative amount of all special purpose revenue bonds authorized and issued, and such other information as may be necessary." SECTION 6. Article XII, sections 5 and 6, of the Constitution of the State of Hawaii are repealed. ["OFFICE OF HAWAIIAN AFFAIRS; ESTABLISHMENT OF BOARD OF TRUSTEES Section 5. There is hereby established an Office of Hawaiian Affairs. The Office of Hawaiian Affairs shall hold title to all the real and personal property now or hereafter set aside or conveyed to it which shall be held in trust for native Hawaiians and Hawaiians. There shall be a board of trustees for the Office of Hawaiian Affairs elected by qualified voters who are Hawaiians, as provided by law. The board members shall be Hawaiians. There shall be not less than nine members of the board of trustees; provided that each of the following Islands have one representative: Oahu, Kauai, Maui, Molokai and Hawaii. HB LRB 98-0270 Page 15 H.B. NO. The board shall select a chairperson from its members. POWERS OF BOARD OF TRUSTEES Section 6. The board of trustees of the Office of Hawaiian Affairs shall exercise power as provided by law: to manage and administer the proceeds from the sale or other disposition of the lands, natural resources, minerals and income derived from whatever sources for native Hawaiians and Hawaiians, including all income and proceeds from that pro rata portion of the trust referred to in section 4 of this article for native Hawaiians; to formulate policy relating to affairs of native Hawaiians and Hawaiians; and to exercise control over real and personal property set aside by state, federal or private sources and transferred to the board for native Hawaiians and Hawaiians. The board shall have the power to exercise control over the Office of Hawaiian Affairs through its executive officer, the administrator of the Office of Hawaiian Affairs, who shall be appointed by the board."] SECTION 7. Article XVIII, section 8, of the Constitution of the State of Hawaii is repealed. ["EFFECTIVE DATE FOR OFFICE OF HAWAIIAN AFFAIRS Section 8. The legislature shall provide for the implementation of the amendments to Article XII in Sections 5 and HB LRB 98-0270 Page 16 H.B. NO. 6 on or before the first general election following ratification of the amendments to Article XII in Sections 5 and 6."] PART II SECTION 8. The Hawaiian Homes Commission Act, 1920, is amended by adding two new sections, to be appropriately designated and to read as follows: "§ . Transfer of lands and administration. After establishment of the Native Hawaiian Trust Corporation by law, and upon consent of the United States, the State shall transfer the responsibility for and the title to all lands categorized as Hawaiian home lands as of the effective date of this Act to the corporation. The Hawaiian Homes Commission Act shall be administered and implemented by the Native Hawaiian Trust Corporation. The State, as signatory to the compact with the federal government, shall have oversight responsibilities to assure that the intent of this Act is carried out. § . Consolidation of lands. The Native Hawaiian Trust Corporation, with the approval of the Secretary of the Interior, in order to consolidate its holdings or to better effectuate the purposes of this Act, may exchange the title to available lands for land, privately or publicly owned, of an equal or greater value. All lands so acquired by the Native Hawaiian Trust HB LRB 98-0270 Page 17 H.B. NO. Corporation shall assume the status of available lands as though the land were originally designated as available lands under section 203 of this Act, and all lands so conveyed by the Native Hawaiian Trust Corporation shall assume the status of the land for which it was exchanged." SECTION 9. Section 201, Hawaiian Homes Commission Act, 1920, is amended as follows: 1. By deleting the definition of "commission": "[(1) The term "commission" means the Hawaiian Homes Commission;"] 2. By adding the definition of "corporation": "(1) The term "corporation" means the Native Hawaiian Trust Corporation;" 3. By deleting the definition of "native Hawaiian": "[(7) The term "native Hawaiian" means any descendant of not less than one-half part of the blood of the races inhabiting the Hawaiian Islands previous to 1778;"] 4. By adding the definition of "Hawaiian": "(7) The term "Hawaiian" means any descendant of the blood of the races inhabiting the Hawaiian Islands prior to 1778;" SECTION 10. Section 204, Hawaiian Homes Commission Act, HB LRB 98-0270 Page 18 H.B. NO. 1920, is amended to read as follows: "§204. Control [by department] of "available [lands," return to board of land and natural resources, when; other lands, use of.] lands". (a) [Upon the passage of this Act, all available lands shall immediately assume the status of Hawaiian home lands and be under the control of the department to be used and disposed of in accordance with the provisions of this Act, except that: (1) In case any available land is under lease by the Territory of Hawaii, by virtue of section 73 of the Hawaiian Organic Act, at the time of the passage of this Act, such land shall not assume the status of Hawaiian home lands until the lease expires or the board of land and natural resources withdraws the lands from the operation of the lease. If the land is covered by a lease containing a withdrawal clause, as provided in section 73(d) of the Hawaiian Organic Act, the board of land and natural resources shall withdraw such lands from the operation of the lease whenever the department gives notice to the board that the department is of the opinion that the lands are required by it for the purposes of this Act; and such HB LRB 98-0270 Page 19 H.B. NO. withdrawal shall be held to be for a public purpose within the meaning of that term as used in section 73(d) of the Hawaiian Organic Act. (2) Any available land, including lands selected by the department out of a larger area, as provided by this Act, not leased as authorized by section 207(a) of this Act, may be returned to the board of land and natural resources as provided under section 212 of this Act, or may be retained for management by the department. Any Hawaiian home lands general lease issued by the department after June 30, 1985, shall contain a withdrawal clause allowing the department to withdraw the land leased at any time during the term of the lease for the purposes of this Act. In the management of any retained available lands not required for leasing under section 207(a), the department may dispose of those lands to the public, including native Hawaiians, on the same terms, conditions, restrictions, and uses applicable to the disposition of public lands in chapter 171, Hawaii Revised Statutes; provided that the department may not sell or dispose of such lands in fee simple except as HB LRB 98-0270 Page 20 H.B. NO. authorized under section 205 of this Act; provided further that the department is expressly authorized to negotiate, prior to negotiations with the general public, the disposition of a lease of Hawaiian home lands to a native Hawaiian, or organization or association owned or controlled by native Hawaiians, for commercial, industrial, or other business purposes, in accordance with the procedure set forth in section 171-59, Hawaii Revised Statutes, subject to the notice requirement of section 171-16(c), Hawaii Revised Statutes, and the lease rental limitation imposed by section 171-17(b), Hawaii Revised Statutes.] The Native Hawaiian Trust Corporation may exercise the withdrawal clause in any Hawaiian home lands general lease having a withdrawal clause. [(3) The department,] (b) The corporation, with the approval of the Secretary of the Interior, in order to consolidate its holdings or to better effectuate the purposes of this Act, may exchange the title to available lands for land, privately or publicly owned, of an equal value. All lands so acquired by the [department] corporation shall assume the status of available lands as though the land were originally designated HB LRB 98-0270 Page 21 H.B. NO. as available lands under section 203 of this Act, and all lands so conveyed by the [department] corporation shall assume the status of the land for which it was exchanged. The limitations imposed by section 73(l) of the Hawaiian Organic Act and the land laws of Hawaii as to the area and value of land that may be conveyed by way of exchange shall not apply to exchanges made pursuant hereto. [No such exchange of land publicly owned by the State shall be made without the approval of two-thirds of the members of the board of land and natural resources.] For the purposes of this paragraph, lands "publicly owned" means land owned by a county or the State or the United States. [(b) Unless expressly provided elsewhere in this Act, lands or an interest therein acquired by the department pursuant to section [213(e)], 221(c), or 225(b), or any other section of this Act authorizing the department to acquire lands or an interest therein, may be managed and disposed of in the same manner and for the same purposes as Hawaiian home lands.]" SECTION 11. Section 204.5, Hawaiian Homes Commission Act, 1920, is amended to read as follows: "[[]§204.5.[]] Additional powers. [In addition and supplemental to the powers granted to the department by law, and notwithstanding any law to the contrary, the department may: HB LRB 98-0270 Page 22 H.B. NO. (1) With the approval of the governor,] The Native Hawaiian Trust Corporation may undertake and carry out the development of any Hawaiian home lands available for lease under and pursuant to section 207 of this Act by assembling these lands in residential developments and providing for the construction, reconstruction, improvement, alteration, or repair of public facilities therein, including, without limitation, streets, storm drainage systems, pedestrian ways, water facilities and systems, sidewalks, street lighting, sanitary sewerage facilities and systems, utility and service corridors, and utility lines, where applicable, sufficient to adequately service developable improvements therein, sites for schools, parks, off-street parking facilities, and other community facilities[; (2) With the approval of the governor, undertake and carry out the development of available lands for homestead, commercial, and multipurpose projects as provided in section 220.5 of this Act, as a developer under this section or in association with a developer agreement entered into pursuant to this section by providing for the construction, reconstruction, improvement, HB LRB 98-0270 Page 23 H.B. NO. alteration, or repair of public facilities for development, including, without limitation, streets, storm drainage systems, pedestrian ways, water facilities and systems, sidewalks, street lighting, sanitary sewerage facilities and systems, utility and service corridors, and utility lines, where applicable, sufficient to adequately service developable improvements therein, sites for schools, parks, off- street parking facilities, and other community facilities; (3) With the approval of the governor, designate by resolution of the commission all or any portion of a development or multiple developments undertaken pursuant to this section an "undertaking" under part III of chapter 39, Hawaii Revised Statutes; and (4) Exercise the powers granted under section 39-53, Hawaii Revised Statutes, including the power to issue revenue bonds from time to time as authorized by the legislature. All provisions of part III of chapter 39, Hawaii Revised Statutes, shall apply to the department and all revenue bonds issued by the department shall be issued pursuant to the HB LRB 98-0270 Page 24 H.B. NO. provisions of that part except these revenue bonds shall be issued in the name of the department, and not in the name of the State. As applied to the department, the term "undertaking" as used in part III of chapter 39, shall include a residential development or a development of homestead, commercial, or multipurpose projects under this Act. The term "revenue" as used in part III of chapter 39, shall include all or any portion of the rentals derived from the leasing of Hawaiian home lands or available lands, whether or not the property is a part of the development being financed]." SECTION 12. Section 205, Hawaiian Homes Commission Act, 1920, is amended to read as follows: "§205. [[]Sale or lease, limitations on.[]] Available lands shall be sold or leased only [(1)] in the manner and for the purposes set out in this title[, or (2) as may be necessary to complete any valid agreement of sale or lease in effect at the time of the passage of this Act; except that such limitations shall not apply to the unselected portions of lands from which the department has made a selection and given notice thereof, or failed so to select and give notice within the time limit, as provided in paragraph (3) of section 204 of this title.] until at HB LRB 98-0270 Page 25 H.B. NO. least twenty-five years have passed since the authorization by the State of the initial transfer of assets by the State to the corporation. Thereafter, upon affirmative vote of no less than seventy-five percent of all board members, the corporation shall be permitted to sell lands in an amount not to exceed in the aggregate fifty percent of the total acreage initially transferred to it, at the rate of no more than ten percent of the total acreage per calendar year. The corporation, after the twenty-five year period has passed, may make additional lease provisions other than as provided in this Act, including leasing land to non-Hawaiians, providing that it provide for the housing needs of Hawaiians." SECTION 13. Section 207, Hawaiian Homes Commission Act, 1920, is amended to read as follows: "§207. Leases to Hawaiians, licenses. (a) [The department] Subject to section 205, the Native Hawaiian Trust Corporation is [authorized to lease] charged with the responsibility of leasing to [native] Hawaiians the right to the use and occupancy of a tract or tracts of Hawaiian home lands [within]. Until the date that is ten years after the initial transfer of assets by the State to the corporation, the following acreage limits [per] shall apply to each lessee: (1) not more HB LRB 98-0270 Page 26 H.B. NO. than forty acres of agriculture lands or lands used for aquaculture purposes; or (2) not more than one hundred acres of irrigated pastoral lands and not more than one thousand acres of other pastoral lands; or (3) not more than one acre of any class of land to be used as a residence lot; provided that in the case of any existing lease of a farm lot in the Kalanianaole Settlement on Molokai, a residence lot may exceed one acre but shall not exceed four acres in area, the location of such area to be selected by the [department;] corporation; provided further that a lease granted to any lessee may include two detached farm lots or aquaculture lots, as the case may be, located on the same island and within a reasonable distance of each other, one of which, to be designated by the [department,] corporation, shall be occupied by the lessee as the lessee's home, the gross acreage of both lots not to exceed the maximum acreage of an agricultural, pastoral, or aquaculture lot, as the case may be, as provided in this section. The [department is authorized to] corporation may develop and construct multifamily units for housing [native] Hawaiians. [The method of disposition, as well as the terms, conditions, covenants, and restrictions as to the use and occupancy of such multifamily units shall be prescribed by rules adopted by the department pursuant to chapter 91.] HB LRB 98-0270 Page 27 H.B. NO. (b) [The] Subject to section 205, the title to lands so leased shall remain in the [State.] corporation. Applications for tracts shall be made to and granted by the [department, under such regulations, not in conflict with any provisions of this title, as the department may prescribe.] corporation. The [department shall] corporation, whenever tracts are available, shall enter into such a lease with any applicant who, in the opinion of the [department,] corporation, is qualified to perform the conditions of [such] the lease. (c) (1) The [department is authorized to] corporation may grant licenses as easements for railroads, telephone lines, electric power and light lines, gas mains, and the like. The [department] corporation is also authorized to grant licenses for lots within a district in which lands are leased under the provisions of this section, for: (A) Churches, hospitals, public schools, post offices, and other improvements for public purposes; and (B) Theaters, garages, service stations, markets, stores, and other mercantile establishments (all of which shall be owned by native Hawaiians or by organizations formed and controlled by native HB LRB 98-0270 Page 28 H.B. NO. Hawaiians). (2) The [department] corporation is also authorized to grant licenses to the United States for reservations, roads, and other rights-of-way, water storage and distribution facilities, and practice target ranges. (3) Any license issued under this subsection shall be subject to such terms, conditions, and restrictions as the [department] corporation shall determine and shall not restrict the areas required by the [department] corporation in carrying on its duties, nor interfere in any way with the [department's] corporation's operation or maintenance activities." SECTION 14. Sections 208, 209, 210, and 211 of the Hawaiian Homes Commission Act, 1920, are amended by substituting the word "corporation" wherever the term "department", or like term appears, as the context requires. SECTION 15. Section 202 of the Hawaiian Homes Commission Act, 1920, is repealed. ["§202. Department officers, staff, commission, members, compensation. (a) There shall be a department of Hawaiian home lands which shall be headed by an executive board to be known as the Hawaiian homes commission. The members of the commission HB LRB 98-0270 Page 29 H.B. NO. shall be nominated and appointed in accordance with section 26-34, Hawaii Revised Statutes. The commission shall be composed of nine members, as follows: three shall be residents of the city and county of Honolulu; two shall be residents of the county of Hawaii one of whom shall be a resident of east Hawaii and the other a resident of west Hawaii; two shall be residents of the county of Maui one of whom shall be a resident from the island of Molokai; one shall be a resident of the county of Kauai; and the ninth member shall be the chairman of the Hawaiian homes commission. All members shall have been residents of the State at least three years prior to their appointment and at least four of the members shall be descendants of not less than one-fourth part of the blood of the races inhabiting the Hawaiian Islands previous to 1778. The members of the commission shall serve without pay, but shall receive actual expenses incurred by them in the discharge of their duties as such members. The governor shall appoint the chairman of the commission from among the members thereof. The commission may delegate to the chairman such duties, powers, and authority or so much thereof, as may be lawful or proper for the performance of the functions vested in the commission. The chairman of the commission shall serve in a HB LRB 98-0270 Page 30 H.B. NO. full-time capacity. He shall, in such capacity, perform such duties, and exercise such powers and authority, or so much thereof, as may be delegated to him by the commission as herein provided above. (b) The provisions of section 76-16, Hawaii Revised Statutes, shall apply to the positions of first deputy and private secretary to the chairman of the commission. The department may hire temporary staff on a contractual basis not subject to chapters 76, 77, and 78, Hawaii Revised Statutes, when the services to be performed will assist in carrying out the purposes of the Act. These positions may be funded through appropriations for capital improvement program projects and by the administration account, operating fund, or native Hawaiian rehabilitation fund. No contract shall be for a period longer than two years, but individuals hired under contract may be employed for a maximum of six years; provided that the six-year limitation shall not apply if the department, with the approval of the governor, determines that such contract individuals are needed to provide critical services for the efficient functioning of the department. All other positions in the department shall be subject to chapters 76 and 77, Hawaii Revised Statutes. All vacancies and new positions which are covered by HB LRB 98-0270 Page 31 H.B. NO. chapters 76 and 77, Hawaii Revised Statutes, shall be filled in accordance with sections 76-23 and 76-31, Hawaii Revised Statutes, provided that the provisions of these sections shall be applicable first to qualified persons of Hawaiian extraction."] SECTION 16. Sections 212 and 213 of the Hawaiian Homes Commission Act, 1920, are repealed. ["§212. Lands returned to control of board of land and natural resources. The department may return any Hawaiian home lands not leased as authorized by the provisions of section 207 of this Act to the control of the board of land and natural resources. Any Hawaiian home lands so returned shall, until the department gives notice as hereinafter in this section provided, resume and maintain the status of public lands in accordance with the provisions of the [Hawaii Revised Statutes]; provided that such lands may not be sold, leased, set aside, used, transferred or otherwise disposed of except under a general lease only. Any lease by the board of land and natural resources hereafter entered into shall contain a withdrawal clause, and the lands so leased shall be withdrawn by the board, for the purpose of this Act, upon the department giving at its option, not less than one nor more than five years' notice of such withdrawal; provided, that the minimum withdrawal-notice period shall be specifically HB LRB 98-0270 Page 32 H.B. NO. stated in such lease. Each such lease, whether or not stipulated therein, shall be deemed subject to the right and duty of the board of land and natural resources to terminate the lease and return the lands to the department whenever the department gives notice to the board that the department is of the opinion that the lands are required. Notwithstanding the provisions of section 171-95, Hawaii Revised Statutes, in the leasing of Hawaiian home lands by the board to a public utility or other governmental agency, where such use directly benefits the department of Hawaiian home lands or the homestead lessees, the rental may be nominal; in all other instances, the lease rental shall be no less than the value determined in accordance with section 171-17(b), Hawaii Revised Statutes. Any general lease of Hawaiian home lands hereafter entered into by the board shall be void unless prior to the disposition of such lease by public auction, direct negotiation or otherwise, approval shall be obtained from the department of Hawaiian home lands. §213. Funds and accounts. (a) There are established in the treasury of the State two revolving funds, to be known respectively as the Hawaiian home loan fund and the Hawaiian home HB LRB 98-0270 Page 33 H.B. NO. general loan fund. (b) Hawaiian home loan fund. The moneys in this fund shall be available for the purposes enumerated in section 214 and for payments provided in section 209 and shall not be expended for any other purpose except as provided in subsection (e). Any interest or other earnings arising out of investments from this fund shall be credited to and deposited into the Hawaiian home operating fund. (c) Hawaiian home general loan fund. Moneys appropriated by the legislature for the construction of homes but not otherwise set aside for a particular fund, for construction of replacement homes, for home repairs or additions, or for the development and operation of a farm, ranch, or aquaculture operation; moneys transferred from other funds; and installments of principal paid by the lessees upon loans made to them from this fund, or as payments representing reimbursements on account of advances, but not including interest on such loans or advances, shall be deposited into this fund. The moneys in the fund shall be used for purposes enumerated in section 214 and for payments provided in section 209; provided that, in addition to the conditions enumerated in section 215, farm loans shall be subject to the following conditions: HB LRB 98-0270 Page 34 H.B. NO. (1) To be eligible for a farm loan the applicant shall derive, or present an acceptable plan to derive, a major portion of the applicant's income from farming; (2) Farm loans made for the purpose of soil and water conservation shall not exceed $20,000 and shall be for a term not to exceed ten years; (3) Subsidies and grants or cost-sharing funds entitled and received by the lessee for soil and water conservation purposes shall be assigned to the department for the repayment of the outstanding farm indebtedness; and (4) The lessee shall carry out recommended farm management practices approved by a qualified agricultural agency. The department may create an account within this fund to support the guarantee of repayment of loans made by government agencies or private lending institutions to a holder of a lease under section 207(a) or license issued under section 207(c)(1)(B). The department may create an account within this fund for moneys borrowed from government agencies or private lending institutions to be used for any of the purposes enumerated in section 214. Installments of principal and that part of the interest equal to the interest charged to the department by the HB LRB 98-0270 Page 35 H.B. NO. lender paid by the lessees on the loans made to them from this account shall be deposited into the same account. Any additional interest or other earnings arising out of investments from this account shall be credited to and deposited into the Hawaiian home receipts fund. (d) There are established in the treasury of the State five special funds, to be known respectively as the Hawaiian home operating fund, the Hawaiian home administration account, the Hawaiian home receipts fund, the Hawaiian home trust fund, and the native Hawaiian rehabilitation fund. (e) Hawaiian home operating fund. The interest transferred from the Hawaiian home loan fund, all moneys received by the department from any other source, and moneys transferred from the Hawaiian home receipts fund, shall be deposited into the Hawaiian home operating fund. The moneys in this fund, without the prior written approval of the governor, shall be available: (1) For construction and reconstruction of revenue- producing improvements intended to serve principally occupants of Hawaiian home lands, including acquisition or lease therefor of real property and interests therein, such as water rights or other interests; (2) For payment into the treasury of the State of such HB LRB 98-0270 Page 36 H.B. NO. amounts as are necessary to meet the interest and principal charges for state bonds issued for such revenue-producing improvements; (3) For operation and maintenance of such improvements constructed from such funds or other funds; (4) For the purchase of water or other utilities, goods, commodities, supplies, or equipment needed for services, or to be resold, rented, or furnished on a charge basis to occupants of Hawaiian home lands; and (5) For appraisals, studies, consultants (including architects and engineers), or any other staff services including those in section 202(b) required to plan, implement, develop, or operate these projects. The moneys in this fund may be supplemented by other funds available for or appropriated by the legislature for the same purposes. In addition to such moneys, this fund, with the approval of the governor, may be supplemented by transfers, made on a loan basis from the Hawaiian home loan fund for a period not exceeding ten years; provided that the aggregate amount of such transfers outstanding at any one time shall not exceed $500,000. In addition, moneys of this fund shall be made available with the prior written approval of the governor for offsite HB LRB 98-0270 Page 37 H.B. NO. improvements and development necessary to serve present and future occupants of Hawaiian home lands; for improvements, additions, and repairs to all assets owned or leased by the department excluding structures or improvements that the department is obligated to acquire under section 209; for engineering, architectural, and planning services to maintain and develop properties; for such consultant services as may be contracted for under this Act; for purchase or lease of necessary equipment; for acquisition or lease of real property and interest therein; and for improvements constructed for the benefit of beneficiaries of this Act and not otherwise permitted in the various loan funds or the administration account. (f) Hawaiian home administration account. The entire receipts derived from any leasing or other disposition of the available lands pursuant to section [204(a)(2)] and transfers from the Hawaiian home receipts fund shall be deposited into this account. Any interest or other earnings arising out of investments from this fund shall be credited to and deposited into this fund. The moneys in this account shall be expended by the department for salaries and other administration expenses of the department in conformity with general law applicable to all departments of the State, and no sums shall be expended for HB LRB 98-0270 Page 38 H.B. NO. structures and other permanent improvements. This account shall be subject to the following conditions and requirements: (1) The department, when required by the governor but not later than November 15 preceding each regular session of the legislature, shall submit to the state director of finance its budget estimates of expenditures for the next fiscal period in the manner required by general law; (2) The department's budget as approved by the governor shall be included in the governor's budget report and shall be transmitted to the legislature for its approval; (3) Upon legislative approval of a budget, the amount appropriated shall be made available to the department. If no budget is approved by the legislature prior to its adjournment, sums accruing to this account shall not be expended for any other purpose but shall remain available for future use. Any amount in this account which is in excess of the amount approved by the legislature or made available for the fiscal period may be transferred to the Hawaiian home operating fund. (g) Hawaiian home receipts fund. All interest moneys from HB LRB 98-0270 Page 39 H.B. NO. loans or investments received by the department from any fund except as provided for in each respective fund, shall be deposited into this fund. At the end of each quarter, all moneys in this fund may be transferred to the Hawaiian home operating fund, the Hawaiian home administration account, the Hawaiian home trust fund, and any loan fund in accordance with rules adopted by the department. (h) Hawaiian home trust fund. Except for gifts, bequests, and other moneys given for designated purposes, moneys deposited into this fund shall be available for transfers into any other fund or account authorized by the Act or for any public purpose deemed by the commission to further the purposes of the Act. Public purpose, as used herein, includes the formation of an account within the Hawaiian home trust fund as a reserve for loans insured or guaranteed by the Federal Housing Administration, Department of Veterans Affairs, or any other federal agency and their respective successors and assigns, which are authorized to insure or guarantee loans. Notwithstanding any other law to the contrary, the department is expressly authorized to deposit the reserve for loans in any duly organized bank in the State or elsewhere in the United States with automatic fund transfer capabilities and at such reserve amounts as shall be HB LRB 98-0270 Page 40 H.B. NO. reasonably required by the federal agencies as a condition for participation in their respective insurance or guarantee programs. (i) Native Hawaiian rehabilitation fund. Pursuant to Article XII, Section 1, of the State Constitution, thirty per cent of the state receipts, derived from lands previously cultivated as sugarcane lands under any other provision of law and from water licenses, shall be deposited into this fund. The department shall use this money solely for the rehabilitation of native Hawaiians which shall include, but not be limited to, the educational, economic, political, social, and cultural processes by which the general welfare and conditions of native Hawaiians are thereby improved and perpetuated. Any payment of principal, interest, or other earnings arising out of the loan or investment of money from this fund shall be credited to and deposited into this fund. Sections 214, 215, 216, and 217 shall not apply to administration of this fund. The department is authorized to adopt rules under chapter 91 necessary to administer and carry out the purposes of this fund."] SECTION 17. Section 214, 215, 216, and 217 of the Hawaiian Homes Commission Act, 1920, is repealed. HB LRB 98-0270 Page 41 H.B. NO. ["§214. Purposes of loans; authorized actions. (a) The department may make loans from revolving funds to any lessee or native Hawaiian to whom, or any cooperative association to which, a lease has been issued under section 207(a) of this Act or a license has been issued under section 207(c)(1)(B) of this Act. Such loans may be made for the following purposes: (1) The repair or maintenance or purchase or erection of dwellings on any tract, and the undertaking of other permanent improvements thereon; (2) The purchase of livestock, swine, poultry, fowl, aquaculture stock, and farm and aquaculture equipment; (3) Otherwise assisting in the development of tracts and of farm, ranch, and aquaculture operations, including: (A) The initial and on-going development, improvement, operation, and expansion of homestead farms, ranches, and aquaculture enterprises; (B) The liquidation of indebtedness incurred for any of the foregoing purposes relating to farm loans aged less than five years; (C) The payment of normal and reasonable living expenses of a full-time farmer; (D) The planning, layout, and installation of soil and HB LRB 98-0270 Page 42 H.B. NO. water conservation practices; and (E) Providing relief and rehabilitation to homestead farmers and ranchers due to damage by rain and windstorms, droughts, tidal wave, earthquake, volcanic eruption, and other natural catastrophies, and for livestock disease, epidemics, crop blights, and serious effects of prolonged shipping and dock strikes; (4) The cost of breaking up, planting, and cultivating land and harvesting crops, the cost of excavating or constructing aquaculture ponds and tanks, the purchase of seeds, fertilizers, feeds, insecticides, medicines, and chemicals for disease and pest control for animals, fish, shellfish, and crops, and the related supplies required for farm, ranch, and aquaculture operations, the erection of fences and other permanent improvements for farm, ranch, and aquaculture purposes and the expense of marketing; and (5) To assist licensees in the operation or erection of theaters, garages, service stations, markets, stores, and other mercantile establishments, all of which shall be owned by native Hawaiians or by organizations formed HB LRB 98-0270 Page 43 H.B. NO. and controlled by native Hawaiians. (b) In addition the department may: (1) Use moneys in the Hawaiian home operating fund, with the prior approval of the governor, to match federal, state, or county funds available for the same purposes and to that end, enter into such undertaking, agree to such conditions, transfer funds therein available for such expenditure, and do and perform such other acts and things, as may be necessary or required, as a condition to securing matching funds for such projects or works; (2) Loan or guarantee the repayment of or otherwise underwrite any authorized loan or portion thereof to lessees in accordance with section 215; (3) Loan or guarantee the repayment of or otherwise underwrite any authorized loan or portion thereof to a cooperative association in accordance with section 215; (4) Permit and approve loans made to lessees by government agencies or private lending institutions, where the department assures the payment of such loans; provided that upon receipt of notice of default in the payment of such assured loans, the department may, upon failure HB LRB 98-0270 Page 44 H.B. NO. of the lessee to cure the default within sixty days, cancel the lease and pay the outstanding balance in full or may permit the new lessee to assume the outstanding debt; and provided further that the department shall reserve the following rights: the right of succession to the lessee's interest and assumption of the contract of loan; the right to require that written notice be given to the department immediately upon default or delinquency of the lessee; and any other rights enumerated at the time of assurance necessary to protect the monetary and other interests of the department; (5) Secure, pledge, or otherwise guarantee the repayment of moneys borrowed by the department from government agencies or private lending institutions and pay the interim interest or advances required for loans; provided that the State's liability, contingent or otherwise, either on moneys borrowed by the department or on departmental guarantees of loans made to lessees under this paragraph and paragraphs (2), (3), and (4) of this subsection, shall at no time exceed $50,000,000; the department's guarantee of repayment HB LRB 98-0270 Page 45 H.B. NO. shall be adequate security for a loan under any state law prescribing the nature, amount, or form of security or requiring security upon which loans may be made; (6) Use available loan fund moneys or other funds specifically available for such purposes as cash guarantees when required by lending agencies; (7) Exercise the functions and reserved rights of a lender of money or mortgagee of residential property in all direct loans made by government agencies or by private lending institutions to lessees the repayment of which is assured by the department. The functions and reserved rights shall include but not be limited to, the purchasing, repurchasing, servicing, selling, foreclosing, buying upon foreclosure, guaranteeing the repayment, or otherwise underwriting, of any loan, the protecting of security interest, and after foreclosures, the repairing, renovating, or modernization and sale of property covered by the loan and mortgage; (8) Pledge receivables of loan accounts outstanding as collateral to secure loans made by government agencies or private lending institutions to the department, the HB LRB 98-0270 Page 46 H.B. NO. proceeds of which shall be used by the department to make new loans to lessees or to finance the development of available lands for purposes permitted by this Act; provided that any loan agreement entered into under this paragraph by the department shall include a provision that the money borrowed by the department is not secured directly or indirectly by the full faith and credit or the general credit of the State or by any revenues or taxes of the State other than the receivables specifically pledged to repay the loan; provided further that in making loans or developing available lands out of money borrowed under this paragraph, the department may establish, revise, charge, and collect fees, premiums, and charges as necessary, reasonable, or convenient, to assure repayment of the funds borrowed, and the fees, premiums, and charges shall be deposited into the Hawaiian home trust fund; and provided further that no moneys of the Hawaiian home loan fund may be pledged as security under this paragraph; and (9) Notwithstanding any other provisions of this Act to the contrary, transfer into the Hawaiian home trust fund HB LRB 98-0270 Page 47 H.B. NO. any available and unpledged moneys from any loan funds, the Hawaiian loan guarantee fund, or any fund or account succeeding thereto, except the Hawaiian home loan fund, for use as cash guarantees or reserves when required by a federal agency authorized to insure or guarantee loans to lessees. §215. Conditions of loans. Except as otherwise provided in [section 213(c)], each contract of loan with the lessee or any successor or successors to the lessee's interest in the tract or with any agricultural, mercantile, or aquacultural cooperative association composed entirely of lessees shall be held subject to the following conditions whether or not stipulated in the contract loan: (1) At any one time, the outstanding amount of loans made to any lessee, or successor or successors in interest, for the repair, maintenance, purchase, and erection of a dwelling and related permanent improvements shall not exceed fifty per cent of the maximum single residence loan amount allowed in Hawaii by the United States Department of Housing and Urban Development's Federal Housing Administration (FHA), for the development and operation of a farm, ranch, or aquaculture operation HB LRB 98-0270 Page 48 H.B. NO. shall not exceed $50,000, except that when loans are made to an agricultural or aquacultural cooperative association for the purposes stated in section 214(a)(4), the loan limit shall be determined by the department on the basis of the proposed operations and the available security of the association, and for the development and operation of a mercantile establishment shall not exceed the loan limit determined by the department on the basis of the proposed operations and the available security of the lessee or of the organization formed and controlled by lessees; provided that upon the death of a lessee leaving no relative qualified to be a lessee of Hawaiian home lands, or the cancellation of a lease by the department, or the surrender of a lease by the lessee, the department shall make the payment provided for by section 209(a), the amount of any such payment shall be considered as part or all, as the case may be, of any such loan to the successor or successors, without limitation as to the above maximum amounts; provided further that in case of the death of a lessee, or cancellation of a lease by the department, or the surrender of a lease by HB LRB 98-0270 Page 49 H.B. NO. the lessee, the successor or successors to the tract shall assume any outstanding loan or loans thereon, if any, without limitation as to the above maximum amounts but subject to paragraph (3). (2) The loans shall be repaid in periodic installments, such installments to be monthly, quarterly, semiannual, or annual as may be determined by the department in each case. The term of any loan shall not exceed thirty years. Payments of any sum in addition to the required installments, or payment of the entire amount of the loan, may be made at any time within the term of the loan. All unpaid balances of principal shall bear interest at the rate of two and one-half per cent a year for loans made directly from the Hawaiian home loan fund, or at the rate of two and one-half per cent or higher as established by law for other loans, payable periodically or upon demand by the department, as the department may determine. The payment of any installment due shall be postponed in whole or in part by the department for such reasons as it deems good and sufficient and until such later date as it deems advisable. Such postponed payments shall continue to HB LRB 98-0270 Page 50 H.B. NO. bear interest on the unpaid principal at the rate established for the loan. (3) In the case of the death of a lessee the department shall, in any case, permit the successor or successors to the tract to assume the contract of loan subject to paragraph (1). In case of the cancellation of a lease by the department or the surrender of a lease by the lessee, the department may, at its option declare all installments upon the loan immediately due and payable, or permit the successor or successors to the tract to assume the contract of loan subject to paragraph (1). The department may, in such cases where the successor or successors to the tract assume the contract of loan, waive the payment, wholly or in part, of interest already due and delinquent upon the loan, or postpone the payment of any installment thereon, wholly or in part, until such later dates as it deems advisable. Such postponed payments shall, however, continue to bear interest on the unpaid principal at the rate established for the loan. Further, the department may, if it deems it advisable and for the best interests of the lessees, write off and cancel, wholly or in part, HB LRB 98-0270 Page 51 H.B. NO. the contract of loan of the deceased lessee, or previous lessee, as the case may be, where such loans are delinquent and deemed uncollectible. Such write off and cancellation shall be made only after an appraisal of all improvements and growing crops or improvements and aquaculture stock, as the case may be, on the tract involved, such appraisal to be made in the manner and as provided for by section 209(a). In every case, the amount of such appraisal, or any part thereof, shall be considered as part or all, as the case may be, of any loan to such successor or successors, subject to paragraph (1). (4) No part of the moneys loaned shall be devoted to any purpose other than those for which the loan is made. (5) The borrower or the successor to his interest shall comply with such other conditions, not in conflict with any provision of this Act, as the department may stipulate in the contract of loan. (6) The borrower or the successor to his interest shall comply with the conditions enumerated in section 208, and with section 209 of this Act in respect to the lease of any tract. HB LRB 98-0270 Page 52 H.B. NO. (7) Whenever the department shall determine that a borrower is delinquent in the payment of any indebtedness to the department, it may require such borrower to execute an assignment to it, not to exceed, however, the amount of the total indebtedness of such borrower, including the indebtedness to others the payment of which has been assured by the department of all moneys due or to become due to such borrower by reason of any agreement or contract, collective or otherwise, to which the borrower is a party. Failure to execute such an assignment when requested by the department shall be sufficient ground for cancellation of the borrower's lease or interest therein. §216. Insurance by borrowers; acceleration of loans; lien and enforcement thereof. (a) The department may require the borrower to insure, in such amount as the department may prescribe, any livestock, aquaculture stock, swine, poultry, fowl, machinery, equipment, dwellings, and permanent improvements purchased or constructed out of any moneys loaned or assured by the department; or, in lieu thereof, the department may directly take out such insurance and add the cost thereof to the amount of principal payable under the loan. HB LRB 98-0270 Page 53 H.B. NO. (b) Whenever the department has reason to believe that the borrower has violated any condition enumerated in paragraph (2), (4), (5), or (6) of section 215 of this Act, the department shall give due notice and afford opportunity for a hearing to the borrower or the successor or successors to his interest, as the case demands. If upon such hearing the department finds that the borrower has violated the condition, the department may declare all principal and interest of the loan immediately due and payable notwithstanding any provision in the contract of loan to the contrary. (c) The department shall have a first lien upon the borrower's or lessee's interest in any lease, growing crops, aquacultural stock, either on his tract or share in any collective contract or program, livestock, swine, poultry, fowl, aquaculture stock, machinery, and equipment purchased with moneys loaned by the department, and in any dwellings or other permanent improvements on any leasehold tract, to the amount of all principal and interest due and unpaid and of all taxes and insurance and improvements paid by the department, and any other indebtedness of the borrower, the payment of which has been assured by the department. Such lien shall have priority over any other obligation for which the property subject to the lien HB LRB 98-0270 Page 54 H.B. NO. may be security. (d) The department may, subject to this Act and procedures established by rule, enforce any lien by declaring the borrower's interest in the property subject to the lien to be forfeited, any lease held by the borrower canceled, and shall thereupon order such leasehold premises vacated and the property subject to the lien surrendered within a reasonable time. The right to the use and occupancy of the Hawaiian home lands contained in such lease shall thereupon revest in the department, and the department may take possession of the premises covered therein and the improvements and growing crops or improvements and aquaculture stock thereon; provided that the department shall pay to the borrower any difference which may be due him after the appraisal provided for in section 209 has been made. §217. [Ejectment, when: loan to new lessee for improvements.] In case the lessee or borrower or the successor to his interest in the tract, as the case may be, fails to comply with any order issued by the department under the provisions of section 210 or 216 of this title, the department may (1) bring action of ejectment or other appropriate proceedings, or (2) invoke the aid of the circuit court of the State for the judicial circuit in which the tract designated in the department's order HB LRB 98-0270 Page 55 H.B. NO. is situated. Such court may thereupon order the lessee or his successor to comply with the order of the department. Any failure to obey the order of the court may be punished by it as contempt thereof. Any tract forfeited under the provisions of section 210 or 216 of this title may be again leased by the department as authorized by the provisions of section 207 of this title, except that the value, in the opinion of the department, of all improvements made in respect to such tract by the original lessee or any successor to his interest therein shall constitute a loan by the department to the new lessee. Such loan shall be subject to the provisions of this section and sections 215, except paragraph (1), and 216 to the same extent as loans made by the department from the Hawaiian loan fund."] SECTION 18. Sections 219, 219.1, 220, 220.5, 221, and 222 of the Hawaiian Homes Commission Act, 1920, are repealed. ["§219. Agricultural and aquacultural experts. The department is authorized to employ agricultural and aquacultural experts at such compensation and in such number as it deems necessary. It shall be the duty of such agricultural and aquacultural experts to instruct and advise the lessee of any tract or the successor to the lessee's interest therein as to the best methods of diversified farming and stock raising and HB LRB 98-0270 Page 56 H.B. NO. aquaculture operations and such other matters as will tend successfully to accomplish the purposes of this title. §219.1. General assistance. (a) The department is authorized to carry on any activities it deems necessary to assist the lessees in obtaining maximum utilization of the leased lands, including taking any steps necessary to develop these lands for their highest and best use commensurate with the purposes for which the land is being leased as provided for in section 207, and assisting the lessees in all phases of farming, ranching, and aquaculture operations and the marketing of their agricultural [or] aquacultural produce and livestock. (b) Notwithstanding any law to the contrary, the department either alone or together with any other governmental agency, may: (1) Form an insurance company, association (nonprofit or otherwise), pool, or trust; (2) Acquire an existing insurance company; (3) Enter into arrangements with one or more insurance companies; or (4) Undertake any combination of the foregoing; upon such terms and conditions and for such periods, as the commission shall approve, to provide homeowner protection, including hurricane coverage, for lessees HB LRB 98-0270 Page 57 H.B. NO. participating in such undertaking. Such undertaking shall be subject to the provisions of chapter 431P, including but not limited to section 431P-10(b), and chapter 431. (c) The department, if experiencing any of the power as authorized under subsection (b) may: (1) Issue revenue bonds under and pursuant to part III of chapter 39, Hawaii Revised Statutes, to establish necessary reserves to provide for the payment of claims in excess of reserves and for other related purposes; or to pay any liability incurred that is self-insured or uninsured by the commission including without limitations, liabilities for damage to property, comprehensive liability, environmental, or other losses; and (2) Invest funds held in reserve, which are not required for immediate disbursement, in property or securities in which savings banks may legally invest funds subject to their control or as the commission may authorize by resolution. §220. Development projects; appropriations by legislature; bonds issued by legislature; mandatory reservation of water. (a) HB LRB 98-0270 Page 58 H.B. NO. Subject to subsection (d), the department is authorized directly to undertake and carry on general water and other development projects in respect to Hawaiian home lands and to undertake other activities having to do with the economic and social welfare of the homesteaders, including the authority to derive revenue from the sale, to others than homesteaders, of water and other products of such projects or activities, or from the enjoyment thereof by others than homesteaders, where such sale of products or enjoyment of projects or activities by others does not interfere with the proper performance of the duties of the department; provided that roads through or over Hawaiian home lands, other than federal-aid highways and roads, shall be maintained by the county in which the particular road or roads to be maintained are located. (b) The legislature is authorized to appropriate out of the treasury of the State such sums as it deems necessary to augment the funds of the department and to provide the department with funds sufficient to execute and carry on such projects and activities. The legislature is further authorized to issue bonds to the extent required to yield the amount of any sums so appropriated for the payment of which, if issued for revenue- producing improvements, the department shall provide, as set HB LRB 98-0270 Page 59 H.B. NO. forth in section 213. (c) To enable the construction of irrigation projects which will service Hawaiian home lands, either exclusively or in conjunction with other lands served by such projects, the department is authorized, with the approval of the governor, and subject to subsection (d), to: (1) Grant to the board of land and natural resources, or to any other agency of the government of the State or the United States undertaking the construction and operation of such irrigation projects, licenses for rights-of-way for pipelines, tunnels, ditches, flumes, and other water conveying facilities, reservoirs, and other storage facilities, and for the development and use of water appurtenant to Hawaiian home lands; (2) Exchange available lands for public lands, as provided in section 204 of this Act, for sites for reservoirs and subsurface water development wells and shafts; (3) Request any such irrigation agency to organize irrigation projects for Hawaiian home lands and to transfer irrigation facilities constructed by the department to any such irrigation agency; (4) Agree to pay the tolls and assessments made against HB LRB 98-0270 Page 60 H.B. NO. community pastures for irrigation water supplied to such pastures; and (5) Agree to pay the costs of construction of projects constructed for Hawaiian home lands at the request of the department, in the event the assessments paid by the homesteaders upon lands are not sufficient to pay such costs; provided that licenses for rights-of-way for the purposes and in the manner specified in this section may be granted for a term of years longer than is required for amortization of the costs of the project or projects requiring use of such rights-of-way only if authority for such longer grant is approved by an act of the legislature of the State. Such payments shall be made from, and be a charge against the Hawaiian home operating fund. (d) For projects pursuant to this section, sufficient water shall be reserved for current and foreseeable domestic, stock water, aquaculture, and irrigation activities on tracts leased to native Hawaiians pursuant to section 207(a). §220.5. Development by contract; development by project developer agreement. (a) Notwithstanding any law to the contrary, the department is authorized to enter into and carry out contracts to develop available lands for homestead, HB LRB 98-0270 Page 61 H.B. NO. commercial, and multipurpose projects; provided that the department shall not be subject to the requirements of competitive bidding if no state funds are to be used in the development of the project. (b) Notwithstanding any law to the contrary, the department is authorized to enter into project developer agreements with qualified developers for, or in connection with, any homestead, commercial, or multipurpose project, or portion of any project; provided that prior to entering into a project developer agreement with a developer, the department shall: (1) Set by appraisal the minimum rental of the lands to be disposed of on the basis of the fair market value of the lands; (2) Give notice of the proposed disposition in accordance with applicable procedures and requirements of section 171-60(a)(3), Hawaii Revised Statutes; (3) Establish reasonable criteria for the selection of the private developer; and (4) Determine within forty-five days of the last day for filing applications the applicant or applicants who meet the criteria for selection, and notify all applicants of its determination within seven days of HB LRB 98-0270 Page 62 H.B. NO. such determination. If only one applicant meets the criteria for selection as the developer, the department then may negotiate the details of the project developer agreement with the developer; provided that the terms of the project developer agreement shall not be less than those proposed by the developer in the application. If two or more applicants meet the criteria for selection, the department shall consider all of the relevant facts of the disposition or contract, the proposals submitted by each applicant, and the experience and financial capability of each applicant and, within forty-five days from the date of selection of the applicants that met the criteria, shall select the applicant who submitted the best proposal. The department then may negotiate the details of the disposition with the developer, including providing benefits to promote native Hawaiian socio-economic advancement; provided that the terms of the project developer agreement shall not be less than those proposed by the developer in the application. (c) Any project developer agreement entered into pursuant to this section shall include the following terms and conditions, HB LRB 98-0270 Page 63 H.B. NO. wherever appropriate: (1) A requirement that the developer file with the department a good and sufficient bond conditioned upon the full and faithful performance of all the terms, covenants, and conditions of the project developer agreement; (2) The use or uses to which the land will be put; (3) The dates on which the developer must submit to the department for approval preliminary plans and final plans and specifications for the total development. No construction shall commence until the department has approved the final plans and specifications; provided that construction on an incremental basis may be permitted by the department; (4) The date of completion of the total development, including the date of completion of any permitted incremental development; (5) The minimum requirements for off-site and on-site improvements that the developer must install, construct, and complete by the date of completion of the total development. The department may permit incremental development and establish the minimum HB LRB 98-0270 Page 64 H.B. NO. requirements for off-site and on-site improvements that must be installed, constructed, and completed prior to the date of completion of the total development; and (6) Any other terms and conditions deemed necessary by the department to protect the interests of the State and the department. (d) Any project developer agreement entered into pursuant to this section may provide for options for renewal of the term of the project developer agreement; provided that: (1) The term of any one project developer agreement shall not exceed sixty-five years; (2) Any lands disposed of under a project developer agreement shall be subject to withdrawal at any time during the term of the agreement, with reasonable notice; and (3) The rental shall be reduced in proportion to the value of the portion withdrawn and the developer shall be entitled to receive from the department the proportionate value of the developer's permanent improvements so taken in the proportion that they bear to the unexpired term of the agreement, with the value of the permanent improvements determined on the basis HB LRB 98-0270 Page 65 H.B. NO. of fair market value or depreciated value, whichever is less; or the developer, in the alternative, may remove and relocate the developer's improvements to the remainder of the lands occupied by the developer. (e) The project developer agreement may permit the developer, after the developer has completed construction of any required off-site improvement, to assign or sublease with the department's approval portions of the leased lands in which the construction of any required off-site improvement has been completed to a purchaser or sublessee who shall assume the obligations of the developer relative to the parcel being assigned or subleased, including the construction of any on-site improvement. The department may permit a developer to share in the lease rent from the assigned lease for a fixed period in order to recover costs and profit. (f) Whenever the department enters into a project developer agreement to develop a homestead project, the department shall provide for the purchase of the completed project or that portion of a completed project developed for disposition to native Hawaiians, and shall dispose of the lands in accordance with this Act; provided that the project developer agreement shall not encumber any existing homestead lease in the project area. HB LRB 98-0270 Page 66 H.B. NO. (g) As used in this section, the following words and terms shall have the following meanings unless the context indicates another or different meaning or intent: "Commercial project" means a project or that portion of a multipurpose project, including single-family or multiple-family residential, agricultural, pastoral, aquacultural, industrial, business, hotel and resort, or other commercial uses designed and intended to generate revenues as authorized by this Act; "Developer" means any person, partnership, cooperative, firm, nonprofit or for-profit corporation, or public agency possessing the competence, expertise, experience, and resources, including financial, personal, and tangible resources, required to carry out a project; "Homestead project" means a project or that portion of a multipurpose project, including residential, agricultural, pastoral, or aquacultural uses designed and intended for disposition to native Hawaiians under this Act; provided that this term shall also include community facilities for homestead areas; "Multipurpose project" means a combination of a commercial project and a homestead project; "Project" means a specific undertaking to develop, HB LRB 98-0270 Page 67 H.B. NO. construct, reconstruct, rehabilitate, renovate, or to otherwise improve or enhance land or real property; "Project developer agreement" means any lease, sublease, conditional leasing agreement, disposition agreement, financing agreement, or other agreement or combination of agreement, entered into under this section by the department, for the purpose of developing one or more projects. (h) The department is authorized to adopt rules in accordance with chapter 91, Hawaii Revised Statutes, to implement and carry out the purposes of this section. §221. Water. (a) When used in this section: (1) The term "water license" means any license issued by the board of land and natural resources granting to any person the right to the use of government-owned water; and (2) The term "surplus water" means so much of any government-owned water covered by a water license or so much of any privately owned water as is in excess of the quantity required for the use of the licensee or owner, respectively. (b) All water licenses issued after the passage of this Act shall be deemed subject to the condition, whether or not HB LRB 98-0270 Page 68 H.B. NO. stipulated in the license, that the licensee shall, upon the demand of the department, grant to it the right to use, free of all charge, any water which the department deems necessary adequately to supply the livestock, aquaculture operations, agriculture operations, or domestic needs of individuals upon any tract. (c) In order adequately to supply livestock, the aquaculture operations, the agriculture operations, or the domestic needs of individuals upon any tract, the department is authorized (1) to use, free of all charge, government-owned water not covered by any water license or covered by a water license issued after the passage of this Act or covered by a water license issued previous to the passage of this Act but containing a reservation of such water for the benefit of the public, and (2) to contract with any person for the right to use or to acquire, under eminent domain proceedings similar, as near as may be, to the proceedings provided in respect to land by sections 101-10 to 101-34, Hawaii Revised Statutes, the right to use any privately owned surplus water or any government-owned surplus water covered by a water license issued previous to the passage of this Act, but not containing a reservation of such water for the benefit of the public. Any such requirement shall be held to HB LRB 98-0270 Page 69 H.B. NO. be for a public use and purpose. The department may institute the eminent domain proceedings in its own name. (d) The department is authorized, for the additional purpose of adequately irrigating any tract, to use, free of all charge, government-owned surplus water tributary to the Waimea river upon the island of Kauai, not covered by a water license or covered by a water license issued after July 9, 1921. Any water license issued after that date and covering any such government- owned water shall be deemed subject to the condition, whether or not stipulated therein, that the licensee shall, upon the demand of the department, grant to it the right to use, free of all charge, any of the surplus water tributary to the Waimea river upon the island of Kauai, which is covered by the license and which the department deems necessary for the additional purpose of adequately irrigating any tract. Any funds which may be appropriated by Congress as a grant- in-aid for the construction of an irrigation and water utilization system on the island of Molokai designed to serve Hawaiian home lands, and which are not required to be reimbursed to the federal government, shall be deemed to be payment in advance by the department and lessees of the department of charges to be made to them for the construction of such system HB LRB 98-0270 Page 70 H.B. NO. and shall be credited against such charges when made. (e) All rights conferred on the department by this section to use, contract for, or acquire the use of water shall be deemed to include the right to use, contract for, or acquire the use of any ditch or pipeline constructed for the distribution and control of such water and necessary to such use by the department. (f) Water systems in the exclusive control of the department shall remain under its exclusive control; provided that the department may negotiate an agreement to provide for the maintenance of the water system and the billing and collection of user fees. If any provision or the application of that provision is inconsistent with provisions contained in this section, this section shall control. Water systems include all real and personal property together with all improvements to such systems acquired or constructed by the department for the distribution and control of water for domestic or agricultural use. §222. Administration. (a) The department shall adopt rules and regulations and policies in accordance with chapter 91, Hawaii Revised Statutes. The department may make such expenditures as are necessary for the efficient execution of the HB LRB 98-0270 Page 71 H.B. NO. functions vested in the department by this Act. All expenditures of the department and all moneys necessary for loans made by the department, in accordance with the provisions of this Act, shall be allowed and paid upon the presentation of itemized vouchers approved by the chairman of the commission or the chairman's designated representative. The department shall make an annual report to the legislature of the State upon the first day of each regular session and such special reports as the legislature may from time to time require. The chairman and members of the commission shall give bond as required by law. The sureties upon the bond and the conditions thereof shall be approved annually by the governor. (b) When land originally leased by the department is, in turn, subleased by the department's lessee or sublessee, the department shall submit, within ten days of the convening of any regular session, a written report to the legislature which shall cover the sublease transactions occurring in the calendar year prior to the regular session and shall contain the names of the persons involved in the transaction, the size of the area under lease, the purpose of the lease, the land classification of the area under lease, the tax map key number, the lease rental, the reason for approval of the sublease by the department, and the HB LRB 98-0270 Page 72 H.B. NO. estimated net economic result accruing to the department, lessee and sublessee."] SECTION 19. Sections 224, 225, 226, and 227 of the Hawaiian Homes Commission Act, 1920, are repealed. ["§224. Sanitation and reclamation expert. The Secretary of the Interior shall designate from his Department someone experienced in sanitation, rehabilitation, and reclamation work to reside in the State and cooperate with the department in carrying out its duties. The salary of such official so designated by the Secretary of the Interior shall be paid by the department while he is carrying on his duties in the State. §225. Investment of funds; disposition. (a) The department shall have the power and authority to invest and reinvest any of the moneys in any of its funds, not otherwise immediately needed for the purposes of the funds, in such bonds and securities as authorized by state law for the investment of state sinking fund moneys. (b) (1) The department may receive, manage, and invest moneys or other property, real, personal or mixed, or any interest therein, which may be given, bequeathed, or devised, or in any manner received from sources other than the legislature or any federal HB LRB 98-0270 Page 73 H.B. NO. appropriation, for the purposes of the Act. (2) All moneys received by or on behalf of the department shall be deposited into the state treasury to be expended according to law and for purposes in accordance with the terms and conditions of the gift. All moneys shall be appropriated for purposes enumerated in such gifts and if no specific purpose is enumerated, shall be appropriated to the Hawaiian home trust fund. (3) The department is authorized to sell, lease, or in any way manage such real, personal, or mixed property or any interest therein, in the manner and for the purposes enumerated in the gift. If no conditions are enumerated, the gift may be sold, leased, managed, or disposed of and the income or proceeds therefrom shall be deposited into the Hawaiian home trust fund. (4) The real property or any interest therein received by the department through contributions or grants shall not attain the status of Hawaiian home lands as defined in section 201(a)(5). (5) The department shall cause to be kept suitable books of account wherein shall be recorded each gift, the HB LRB 98-0270 Page 74 H.B. NO. essential facts of the management thereof, and the expenditure of income. (6) Any action to be taken with respect to gifts shall be made in a public meeting where any pertinent information and reasons for any decisions shall be fully disclosed. §226. Qualification for federal programs. The department shall be qualified to participate in any federal program that renders assistance in program areas that the department is mandated by the Act to implement. [§227.] Enterprise zones. The department is authorized to participate in any federal or state program that permits the establishment of one or more enterprise zones on available lands, provided that participation in the program will result in economic benefits to native Hawaiians. The administration of the program shall be governed by rules adopted by the department in accordance with chapter 91, Hawaii Revised Statutes."] PART III NATIVE HAWAIIAN TRUST CORPORATION: AUTHORIZATION, RIGHTS AND RESPONSIBILITIES, AND GOVERNANCE SECTION 20. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read HB LRB 98-0270 Page 75 H.B. NO. as follows: "CHAPTER NATIVE HAWAIIAN TRUST CORPORATION § -1 Statement of intent. The people of the State of Hawaii reacknowledge and reaffirm the public trust set forth and approved in the Admissions Act, which includes, among other responsibilities, the betterment of conditions of the indigenous people of Hawaii. The State also acknowledges that categorizing persons of Hawaiian blood by the quantum thereof has been divisive, and that ultimately the question whether and to what extent persons of varying quanta of Hawaiian blood should participate in rights, responsibilities, and benefits relating to Hawaiians should be determined by Hawaiians. The State recognizes the desire of Hawaiians for greater control over certain assets which have as their source lands formerly owned by the Kingdom of Hawaii, such as the Hawaiian home lands and certain other ceded lands and the revenues therefrom. The State believes that transferring agreed-upon assets and Hawaiian-related responsibilities to a non-profit corporation run by a Hawaiian board, for the betterment of the Hawaiian people, would provide optimum direction and management and accomplish the benefits of self-determination. In this HB LRB 98-0270 Page 76 H.B. NO. manner, the wishes of the Hawaiian people for greater autonomy will be fulfilled. § -2 Definitions. As used in this chapter: "After authorization by the State" means after the effective date of a concurrent resolution approved on a vote of two-thirds of each house of the legislature acknowledging that the corporation has complied with the requirements established in section -3. "Corporation" means the Native Hawaiian Trust Corporation. Except as otherwise provided under section -9, "Hawaiian" means any descendant of the races inhabiting the Hawaiian Islands prior to 1778. § -3 Native Hawaiian Trust Corporation, authorized. (a) Within three months after the effective date of this Act, the governor, in consultation with the office of Hawaiian affairs and the Hawaiian Homes Commission, shall establish an interim panel whose sole purpose shall be to plan and carry out the election of an initial board of directors of the corporation. The panel shall be placed within the office of planning for administrative purposes. (b) The election of the initial board of directors of the corporation shall be held within eighteen months after the HB LRB 98-0270 Page 77 H.B. NO. establishment of the interim panel. Within three months after the election of the first board of directors, the board shall apply to the State for status as a nonprofit corporation, to be called the Native Hawaiian Trust Corporation. Upon determination by the attorney general that: (1) The board has been validly elected in accordance with this chapter; (2) The corporation has been created in accordance with the laws of this State; and (3) The bylaws of the corporation comport with the duties and responsibilities of the corporation as enumerated in this chapter, and further after authorization by the State, the assets, rights, and responsibilities specified in this chapter shall thereafter be transferred to the Native Hawaiian Trust Corporation as provided in this chapter. (c) Within thirty days after the election of the board, the interim panel shall be dissolved. § -4 Rights, responsibilities, and purposes. (a) The purpose of the Native Hawaiian Trust Corporation shall be to benefit Hawaiians and the Hawaiian culture by: (1) Developing home, agriculture, farm and ranch lots, and HB LRB 98-0270 Page 78 H.B. NO. leasing them to Hawaiians; (2) Making home, agriculture, aquaculture, farm and ranch loans to Hawaiians; (3) Devising rehabilitation projects to include, but not be limited to, educational, economic, political, social, and cultural processes by which the general welfare and conditions of Hawaiians are improved; (4) Implementing and administering a K - 12 educational program in the Hawaiian language for Hawaiian children, and other children at the board's discretion; (5) Implementing health initiatives directed at Hawaiians; (6) Devising and implementing business development and assistance programs for Hawaiians; (7) Managing Kaho'olawe; (8) Managing the trust lands transferred to it under this chapter; (9) Acting as trustees for all assets transferred to it by the State and any subsequent assets acquired by the corporation; (10) Bettering the conditions of Hawaiians; (11) Serving as the principal agency in the State responsible for the performance, development, and HB LRB 98-0270 Page 79 H.B. NO. coordination of programs and activities relating to Hawaiians; (12) Conducting advocacy efforts for Hawaiians; (13) Applying for, receiving, and disbursing, grants and donations from all sources for Hawaiian programs and services; (14) Serving as the receptacle for any federal reparations for Hawaiians; (15) Developing, implementing, and continually updating a comprehensive master plan for Hawaiians which shall include, but not be limited to, the following: (A) Compilation of basic demographic data on Hawaiians; (B) Identification of the physical, sociological, psychological, and economic needs of Hawaiians; (C) Establishment of immediate and long-range goals pursuant to programs and services for Hawaiians; (D) Establishment of priorities for program implementation and of alternatives for program implementation; and (E) Organization of administrative and program structure, including the use of facilities and HB LRB 98-0270 Page 80 H.B. NO. personnel; (16) Assisting in the development of state, county, federal, and private plans for Hawaiian programs and services; (17) Maintaining an inventory of federal, state, county, and private programs and services for Hawaiians and acting as a clearinghouse and referral agency for such programs and services; (18) Advising and informing federal, state, and county officials about Hawaiian programs, and coordinating federal, state, and county activities relating to Hawaiians; (19) Conducting, encouraging, and maintaining research relating to Hawaiians; (20) Developing and reviewing models for comprehensive Hawaiian programs; (21) Acting as a clearinghouse for applications for federal or state assistance to carry out Hawaiian programs or projects; (22) Applying for, accepting, and administering any federal funds made available or allotted under any federal law or program to benefit Hawaiians; (23) Applying, when appropriate, for special purpose revenue HB LRB 98-0270 Page 81 H.B. NO. bonds under chapter 39A, part ; (24) Promoting and assisting the establishment of agencies to serve Hawaiians; and (25) Otherwise planning, developing, and carrying out such other programs for the social, economic, educational, cultural, or spiritual development of Hawaiians as the corporation shall determine. (b) The rights and responsibilities of the corporation shall be such rights and responsibilities as are designated under this chapter and such other rights and responsibilities as are subsequently undertaken and assumed by the corporation, but shall include ownership and management of: (1) All assets formerly owned or managed by the office of Hawaiian affairs; (2) All assets formerly owned or managed by the department of Hawaiian home lands; and (3) The island of Kaho'olawe. § -5 Board of directors. (a) The board of directors of the corporation shall consist of a minimum of thirteen members and shall be elected by Hawaiians age eighteen or older, without regard to residence. There shall be at least one representative each who is a resident of O'ahu, Maui, the county of Hawai'i, HB LRB 98-0270 Page 82 H.B. NO. Kaua'i, Moloka'i, and a location other than the State of Hawai'i. (b) The interim panel or board, as appropriate, may require proof of each voter's Hawaiian ancestry through birth certificate or any other reliable indicia of ancestry. The interim panel or board, as appropriate, shall establish criteria and procedures for voting; provided that the "one person one vote" concept shall be adhered to and that the interim panel or board shall make a good faith effort to ensure that: (1) The nomination or filing process is fair; (2) All eligible voters have notice of the nomination or filing process; (3) All eligible voters have notice of the candidates and the election process; and (4) All eligible voters have the opportunity to vote. The interim panel or board, as appropriate, may allow for cumulative voting. (c) The members of the board shall be trustees of the assets of the corporation and shall be held to fiduciary standards. (d) The corporation may provide for compensation of the board of trustees; provided that in no event shall any trustee receive compensation in excess of the statutory compensation set HB LRB 98-0270 Page 83 H.B. NO. for the governor of the State. No board member shall hold another position with the corporation during the period that the board member is a member of the board. § -6 Powers of the corporation. In addition to specific powers granted by this chapter or otherwise by law, the corporation shall have all the usual powers associated with corporations, including the power to enter into contracts and to sue and be sued. § -7 Applicable law. Except as otherwise specified in this chapter or other specific law, general law applicable to non-profit corporations shall apply; provided that, when allegations are made of mismanagement of funds and resources by board members in breach of fiduciary duty, board members shall be subject to suit as established by law for charitable trusts. § -8 Relationship to the State. (a) The corporation shall not be a sovereign entity of the State. The corporation shall have no power to tax or ability to establish a judicial system. (b) The State shall retain the duty to oversee the administration of the "available lands," as defined by section 203 of the Hawaiian Homes Commission Act, 1920, that are transferred to the corporation that were previously transferred HB LRB 98-0270 Page 84 H.B. NO. to the State under the Hawaiian Homes Commission Act, 1920. (c) In order to allow the State to fulfill its oversight responsibility, the corporation shall prepare and make public an annual report within six months after the close of each fiscal year, which shall include a statement of the corporation's activities, income, and expenditures during the year. § -9 Hawaiian ancestry, defined. No sooner than ten years after authorization by the State, the corporation may redefine the term "Hawaiian" as used in this chapter to provide for a minimum quantum of Hawaiian blood, but in no case shall it exclude persons with at least one-eighth Hawaiian blood. § -10 Right to alienate and lease land. None of the lands transferred to the corporation pursuant to this chapter shall be sold by the corporation during the period expiring twenty-five years after authorization by the State; provided that after such period, the corporation may sell such lands in an amount not to exceed fifty percent of the total acreage initially transferred to it at the rate of no more than ten percent of the total initial acreage per calendar year; and provided further that from and after the period expiring ten years after authorization by the State, land that was former Hawaiian home lands may be leased to non-Hawaiians. HB LRB 98-0270 Page 85 H.B. NO. § -11 Condemnation. The corporation shall have no right of condemnation, but may petition the State to condemn and transfer to the corporation, upon reimbursement by the corporation if so required by the State, lands: (1) Of historic or prehistoric value to the Hawaiian people; (2) That would adjoin or lie in close proximity to lands already owned by the corporation; (3) That would expand parcels already owned by the corporation within an ahupua'a; or (4) That would otherwise promote the purposes of the corporation. Should the State determine that any proposed condemnation promotes a legitimate public purpose, then the condemnation shall be initiated and proceed as set forth in chapter 101. Moneys paid in compensation for the condemnation, if required by the State, shall be paid by the corporation. The corporation shall also pay for all of the State's costs and expenses incurred during the condemnation process. § -12 Schedule for transfer. The rights and responsibilities to be transferred by the State to the corporation shall be transferred as follows: HB LRB 98-0270 Page 86 H.B. NO. (1) On the first day of the fiscal year which begins one calendar year after authorization by the State: ceded lands otherwise authorized by the State for transfer to a native Hawaiian entity, and Kaho'olawe; (2) On the first day of the fiscal year which begins at least two calendar years after authorization by the State: Hawaiian immersion education and any other Hawaiian service programs; and (3) On the first day of the fiscal year which begins at least three calendar years after authorization by the State, or, upon approval of changes to the Hawaiian Homes Commission Act by the United States Congress, whichever occurs earlier: Hawaiian home lands. SECTION 21. Chapter 39A, Hawaii Revised Statutes, is amended by adding a new part to be appropriately designated and to read as follows: "PART . ASSISTING THE NATIVE HAWAIIAN TRUST CORPORATION WITH ITS OBLIGATIONS TOWARD HAWAIIANS §39A-A Definitions. Whenever used in this part, unless a different meaning clearly appears from the context: "Corporation" means the Native Hawaiian Trust Corporation. "Project agreement" means any agreement entered into under HB LRB 98-0270 Page 87 H.B. NO. this part by the department with the corporation providing for the issuance of special purpose revenue bonds to finance facilities of the corporation or for the corporation or to loan the proceeds of such bonds to assist the corporation, including without limitation any loan agreement. "Refinancing of outstanding obligations" or "refinancing" means the liquidation, retirement, or provision for retirement with the proceeds of bonds issued by the State, of any indebtedness of a project party incurred to finance or aid in financing a lawful purpose of such project party not financed pursuant to this part which constitutes a health care facility or consolidation of such indebtedness with indebtedness of the State incurred for a health care facility related to the purpose for which the indebtedness of the project party was initially incurred. "Revenue" includes all or any portion of the rentals derived from the leasing of Hawaiian home lands or available lands, whether or not the property is a part of the development being financed. "Special purpose revenue bonds" or "bonds" means bonds, notes, or other evidences of indebtedness of the State issued pursuant to this part. HB LRB 98-0270 Page 88 H.B. NO. "Undertaking" includes a residential development or a development of homestead, commercial, or multipurpose projects. §39A-B Department powers as to this part. In addition to powers which it may now have, the department shall have all powers necessary or convenient to accomplish the purposes of this part. The powers of the department include, but are not limited to, the following: (1) Notwithstanding and without compliance with section 103-7 and chapter 103D, but with the approval of the governor, to enter into and carry out a project agreement, or an amendment or supplement to an existing project agreement, with the corporation, and to enter into and carry out any agreement whereby the obligation of the corporation under a project agreement will be unconditionally guaranteed by a person other than the corporation. (2) To issue special purpose revenue bonds pursuant to and in accordance with this part. (3) To lend the proceeds of the special purpose revenue bonds issued for an undertaking to the corporation for use and application by the corporation for the acquisition, purchase, construction, reconstruction, HB LRB 98-0270 Page 89 H.B. NO. improvement, betterment, extension, or refinancing of outstanding obligations related to an undertaking. (4) As security for the payment of the principal of, premium, if any, and interest of the special purpose revenue bonds issued for this project, to pledge, assign, hypothecate, or otherwise encumber all or any part of the revenues and receipts derived or to be derived by the department under the project agreement for the undertaking for which such bonds are issued; to pledge and assign the interest and rights of the department under the project agreement or other agreement with respect to the undertaking or such special purpose revenue bonds; and to pledge and assign any bond, debenture, note, or other evidence of indebtedness received by the department with respect to the undertaking; or any combination of the foregoing. (5) To extend or renew any project agreement or any other agreement related thereto; provided that any such renewal or extension shall be subject to the approval of the governor unless made in accordance with provisions for such extension or renewal contained in a project agreement or related agreement theretofore HB LRB 98-0270 Page 90 H.B. NO. approved by the governor. (6) To do any and all things necessary or convenient to carry out its purposes and exercise the powers given and granted in this part. When the department finances or refinances an undertaking by the issuance of special purpose revenue bonds as contemplated by this part, the State shall not exercise the power of eminent domain to acquire a project or any part thereof for lease or transfer to the corporation, nor shall the State operate a project on behalf of the corporation. §39A-C Compliance with state and local law. The issuance of special purpose revenue bonds with respect to any undertaking under this part, shall not relieve the corporation or other user of the undertaking from the laws, ordinances, and rules and regulations of the State or any political subdivision thereof, or any departments or boards thereof with respect to the construction, operation, and maintenance of projects, compliance with health care planning laws or regulations, or zoning laws or regulations, obtaining of building permits, compliance with building and health codes and other laws, ordinances, or rules and regulations of similar nature pertaining to the project, and such laws shall be applicable to the corporation or such other HB LRB 98-0270 Page 91 H.B. NO. user to the same extent it would be if the costs of the project were directly financed by the corporation. §39A-D Conditions precedent to negotiating and entering into a project agreement. The department prior to entering into negotiations with the corporation shall require that the State shall be reimbursed for any and all costs and expenses (direct or indirect) incurred by it in implementing and administering this part, as determined by the department, even though a project agreement may not be entered into and may further require the deposit of moneys with the department for reimbursement. Any amount of the deposit in excess of the amount required to reimburse the State shall be returned by the department to the party which has made such deposit. The State shall not be required to pay to the corporation any interest or earnings on the deposit. The department shall not enter into any project agreement with respect to any undertaking unless the department shall first find and determine either that the corporation is a responsible party, whether by reason of economic assets or experience in the type of enterprise to be undertaken through such project, or otherwise. §39A-E Project agreement. No special purpose revenue bonds HB LRB 98-0270 Page 92 H.B. NO. shall be issued unless at the time of issuance the department has entered into a project agreement with respect to the undertaking for the financing or refinancing of which such revenue bonds are to be issued. Any project agreement entered into by the department shall contain provisions unconditionally obligating the corporation: (1) To pay to the department during the period or term of the project agreement, exclusive of any renewal or extension thereof and whether or not the project is used or occupied by the corporation or any of its beneficiaries, such sum or sums, at such time or times and in such amounts that will be at least sufficient: (A) To pay the principal and interest on all special purpose revenue bonds issued with respect to the project as and when the same become due, including any premium payable upon any required redemption of such bonds; (B) To establish or maintain such reserve, if any, as may be required by the instrument authorizing or securing the special purpose revenue bonds; (C) To pay all fees and expenses (including the fees and expenses of the paying agents and trustees) HB LRB 98-0270 Page 93 H.B. NO. incurred in connection with such special purpose revenue bonds; and (D) To pay the expenses (direct or indirect) incurred by the State, as determined by the department, in administering such bonds or in carrying out the project agreement. (2) To operate, maintain, and repair the undertaking as long as the same is used, and to pay all costs of such operation, maintenance, and repair. Moneys received by the department pursuant to paragraph (1)(D) of this section shall not be, nor be deemed to be, revenues of the project and shall be paid into the general fund of the State. §39A-F Issuance of special purpose revenue bonds to finance undertakings. In addition to the other powers which it may otherwise have, the department may issue special purpose revenue bonds to finance or refinance, the costs of facilities of, or for, or to loan the proceeds of such bonds to assist undertakings. All revenue bonds issued under this part, are special purpose revenue bonds and the provisions of part III of chapter 39 shall not apply thereto. All special purpose revenue bonds shall be issued in the name of the department and not in the name of the State. HB LRB 98-0270 Page 94 H.B. NO. The department in determining the cost of any project, may also include the following: financing charges, fees, and expenses of any trustee and paying agents for special purpose revenue bonds issued to pay the cost of the undertaking; interest on the bonds and the expenses of the State in connection with the bonds and the project to be financed or refinanced from the proceeds of such bonds accruing or incurred prior to and during the period of construction and for not exceeding twelve months thereafter; amounts necessary to establish or increase reserves for the special purpose revenue bonds; the cost of plans, specifications, studies, surveys, and estimates of costs and of revenues; other expenses incidental to determining the feasibility or practicability of the project; administration expenses; interest cost incurred by the corporation with respect to the undertaking prior to the issuance of the special purpose revenue bonds; fees and expenses incurred in connection with the refinancing of outstanding obligations; and such other costs, commissions, and expenses incidental to the construction, acquisition, reconstruction, renovation, rehabilitation, improvement, betterment, operation, or extension of the undertaking, the financing or refinancing thereof, placing of same in operation, and the issuance of the special purpose HB LRB 98-0270 Page 95 H.B. NO. revenue bonds, whether incurred prior to or after the issuance of such bonds. The legislature finds and determines that the exercise of the powers vested in the department by this part constitutes assistance to a not-for-profit corporation serving Hawaiians and that the issuance of special purpose revenue bonds to finance or to refinance facilities of, or for, or to loan the proceeds of such bonds to assist, the corporation, is in the public interest. §39A-G Authorization of special purpose revenue bonds. (a) Special purpose revenue bonds for each single or multipart undertaking for the benefit of Hawaiians under this part, shall be authorized by a separate act of the legislature, by an affirmative vote of two-thirds of the members to which each house is entitled; provided that the legislature shall find that the issuance of such bonds is in the public interest. Special purpose revenue bonds issued pursuant to this part may be in one or more series for each undertaking. The special purpose revenue bonds of each issue shall be dated, shall bear interest at such rate or rates, shall mature at such time or times not exceeding forty years from their date or dates, shall have such rank or priority and may be made redeemable before maturity at the option of the department, at such price or prices and under such terms HB LRB 98-0270 Page 96 H.B. NO. and conditions, all as may be determined by the department. The department shall determine the form of the special purpose revenue bonds, including any interest coupons to be attached thereto, and the manner of execution of the special purpose revenue bonds, and shall fix the denomination or denominations of the special purpose revenue bonds and the place or places of payment of principal and interest, which may be at any bank or trust company within or without the State. The special purpose revenue bonds may be issued in coupon or in registered form, or both, as the department may determine, and provisions may be made for the registration of any coupon bonds as to principal alone and also as to both principal and interest, and for the reconversion into coupon bonds of any bonds registered as to both principal and interest. The department may sell special purpose revenue bonds in such manner, either at public or private sale, and for such price as it may determine. (b) Prior to the preparation of definitive special purpose revenue bonds, the department may issue interim receipts or temporary bonds, with or without coupons, exchangeable for definitive bonds when the bonds have been executed and are available for delivery. (c) Should any bond issued under this part or any coupon HB LRB 98-0270 Page 97 H.B. NO. appertaining thereto become mutilated or be lost, stolen, or destroyed, the department may cause a new bond or coupon of like date, number, and tenor to be executed and delivered in exchange and substitution for, and upon the cancellation of the mutilated bond or coupon, or in lieu of and in substitution for the lost, stolen, or destroyed bond or coupon. The new bond or coupon shall not be executed or delivered until the holder of the mutilated, lost, stolen, or destroyed bond or coupon has (1) paid the reasonable expense and charges in connection therewith, (2) in the case of a lost, stolen, or destroyed bond or coupon, has filed with the department or its fiduciary evidence satisfactory to the department or its fiduciary that the bond or coupon was lost, stolen, or destroyed and that the holder was the owner thereof, and (3) has furnished indemnity satisfactory to the department. (d) The department in its discretion may provide that CUSIP identification numbers shall be printed on the bonds. In the event the numbers are imprinted on any bonds (1) no number shall constitute a part of the contract evidenced by the particular bond upon which it is imprinted, and (2) no liability shall attach to the department or any officer or agent thereof, including any fiscal agent, paying agent, or registrar for such HB LRB 98-0270 Page 98 H.B. NO. bonds, by reason of the numbers or any use made thereof, including any use thereof made by the department, any officer, or any agent, or by reason of any inaccuracy, error, or omission with respect thereto or in such use. The department in its discretion may require that all costs of obtaining and imprinting these numbers shall be paid by the purchaser of the bonds. For the purposes of this subsection, the term "CUSIP identification numbers" means the numbering system adopted by the Committee for Uniform Security Identification Procedures formed by the Securities Industry Association. §39A-H Special purpose revenue bond anticipation notes. Whenever the department has authorized the issuance of special purpose revenue bonds under this part, special purpose revenue bond anticipation notes of the department may be issued in anticipation of the issuance of the bonds and of the receipt of the proceeds of sale thereof, for the purposes for which the bonds have been authorized. All special purpose revenue bond anticipation notes shall be authorized by the department, and the maximum principal amount of the notes shall not exceed the authorized principal amount of the bonds. The notes shall be payable solely from and secured solely by the proceeds of sale of the special purpose revenue bonds in anticipation of which the HB LRB 98-0270 Page 99 H.B. NO. notes are issued and the revenues from which would be payable and by which would be secured such bonds; provided that to the extent that the principal of the notes shall be paid from moneys other than the proceeds of sale of the bonds, the maximum amount of bonds in anticipation of which the notes are issued that has been authorized shall be reduced by the amount of notes paid in this manner. The authorization, issuance, and the details of the notes shall be governed by the provisions of this part with respect to special purpose revenue bonds insofar as the same may be applicable; provided that each note, together with all renewals and extensions thereof, or refundings thereof by other notes issued under this section, shall mature within five years from the date of the original note. §39A-I Powers with respect to and security for special purpose revenue bonds. In order to secure the payment of any of the special purpose revenue bonds issued pursuant to this part, and interest thereon, or in connection with the bonds, the department shall have the power as to the bonds: (1) To pledge all or any part of the revenues derived by the department from the project agreement to the punctual payment of special purpose revenue bonds issued with respect to the undertaking financed or HB LRB 98-0270 Page 100 H.B. NO. refinanced from proceeds thereof, and interest thereon, and to covenant against thereafter pledging any of the revenues or receipts to any other bonds or any other obligations of the department for any other purpose, except as otherwise stated in the law providing for the issuance of additional special purpose revenue bonds to be equally and ratably secured by a lien upon the revenues. (2) To pledge and assign the interest of the department under the project agreement and other agreements related thereto and the rights, duties, and obligations of the department thereunder, including the right to receive revenues thereunder. (3) To covenant as to the use and disposition of the proceeds from the sale of the bonds. (4) To covenant to set aside or pay over reserves and sinking funds for the bonds and as to the disposition thereof. (5) To covenant and prescribe as to what happenings or occurrences shall constitute "events of default" and the terms and conditions upon which any or all of the bonds shall become or may be declared due before HB LRB 98-0270 Page 101 H.B. NO. maturity and as to the terms and conditions upon which the declaration and its consequences may be waived. (6) To covenant as to the rights, liabilities, powers, and duties arising upon the breach by it of any covenant, conditions, or obligation. (7) To designate a national or state bank or trust company within or without the State, incorporated in the United States, to serve as trustee for the holders of the special purpose revenue bonds and to enter into a trust indenture or trust agreement or indenture of mortgage with the trustee. The trustee may be authorized by the department to receive and receipt for, hold, and administer the proceeds of the special purpose revenue bonds issued for the undertaking and to apply the same to the purposes for which the bonds are issued, or to receive and receipt for, hold, and administer the revenues derived by the department under the project agreement and to apply the revenues to the payment of the principal and interest on the bonds, or both, and any excess revenues to the payment of expenses incurred by the State in administering the bonds or in carrying out the project agreement. In the event that a trustee HB LRB 98-0270 Page 102 H.B. NO. shall be appointed, any trust indenture or trust agreement or indenture of mortgage entered into by the department with the trustee may contain whatever covenants and provisions as may be necessary or convenient or desirable in order to secure the bonds. The department may pledge and assign to the trustee the interest of the department under the project agreement and other agreements related thereto and the rights, duties, and obligations of the department thereunder, including the right to receive revenues thereunder. The department may appoint the trustee to serve as fiscal agent for the payment of the principal and interest, and for the purchase, registration, transfer, exchange, and redemption of the special purpose revenue bonds, and may authorize and empower the trustee to perform such functions with respect to such payment, purchase, registration, transfer, exchange, and redemption, as the department may deem necessary, advisable, or expedient, including without limitation the holding of the special purpose revenue bonds and coupons which have been paid and the supervision of the destruction thereof in accordance with law. HB LRB 98-0270 Page 103 H.B. NO. (8) To execute all instruments necessary or convenient in the exercise of the powers herein granted or in the performance of its covenants and duties. (9) To make covenants and do any and all acts and things as may be necessary or convenient or desirable in order to secure the bonds, notwithstanding that the covenants, acts, or things may not be enumerated herein; it being the purpose hereof to give the department power to do all things in the issuance of the bonds and for their security that may be consistent with the Constitution of the State of Hawaii. §39A-J Security for special purpose revenue bonds. Special purpose revenue bonds shall be payable solely from the revenues derived by the department from payments made to the department under the project agreement or other supplemental agreements entered into with respect to the undertaking, and shall be secured solely by the revenues and by the pledges and assignments authorized by this part. All special purpose revenue bonds of the same issue, subject to the prior and superior rights of outstanding bonds, claims, obligations, or mechanic's and materialman's liens, shall have a prior and paramount lien on the revenues derived from the project agreement with respect to the HB LRB 98-0270 Page 104 H.B. NO. project, for which the bonds have been issued, over and ahead of all special purpose revenue bonds of any issue payable from the revenues which may be subsequently issued and over and ahead of any claims or obligations of any nature against the revenues subsequently arising or subsequently incurred; provided that the right and privilege may be reserved by the department in the trust indenture securing an issue of special purpose revenue bonds to subsequently issue additional special purpose revenue bonds, subject to legislative authorization of the issue as provided in section 39A-G, or to permit the corporation to incur debt, from time-to-time, payable from the revenues derived from the project agreement on a parity with the first issue of the special purpose revenue bonds and any subsequent issue of special purpose revenue bonds and other debt issued or incurred in accordance with the provisions of the trust indenture shall be secured equally and ratably with the first issue of the special purpose revenue bond without priority by reason of the date of sale, date of execution, or date of delivery, by a lien on the revenues in accordance with this part. Notwithstanding any other provisions herein, all or part of the property constituting the undertaking and all interest of the corporation in the project and the revenues of the corporation HB LRB 98-0270 Page 105 H.B. NO. therefrom may be subjected to the present and future lien of any mortgage of the corporation securing the corporation's bonds, and the rights of the department and any trustee for the holders of the special purpose revenue bonds and the holders of the special purpose revenue bonds in the undertaking and the revenues therefrom may be made subject to the prior lien of the corporation's mortgage. §39A-K Special purpose revenue bonds not a general obligation of State. No holder or holders of any special purpose revenue bonds issued under this part, shall ever have the right to compel any exercise of taxing power of the State to pay the bonds or the interest thereon and no moneys other than the revenues pledged to the bonds shall be applied to the payment thereof. Each special purpose revenue bond issued under this part, shall recite in substance that the bond, including interest thereon, is not a general obligation of the State and is payable solely from the revenues pledged to the payment thereof, and that the bond is not secured directly or indirectly by the full faith and credit or the general credit of the State or by any revenues or taxes of the State other than the revenues specifically pledged thereto. §39A-L Validity of special purpose revenue bonds. The HB LRB 98-0270 Page 106 H.B. NO. special purpose revenue bonds bearing the signature or facsimile signature of officers in office on the date of the signing thereof shall be valid and sufficient for all purposes, notwithstanding that before the delivery thereof and payment therefor any or all the persons whose signatures appear thereon shall have ceased to be officers of the department. The special purpose revenue bonds shall contain a recital that they are issued pursuant to this part, which recital shall be conclusive evidence of their validity and of the regularity of their issuance. §39A-M Use of revenues derived from project agreement. The department shall have the right to appropriate, apply, or expend the revenues derived with respect to the project agreement for an undertaking for the following purposes: (1) To pay when due all special purpose revenue bonds, premium, if any, and interest thereon, for the payment of which the revenues are or have been pledged, charged, or otherwise encumbered, including reserves therefor; and (2) To the extent not paid by the project party to provide for all expenses of administration, operation, and maintenance of the project, including reserves HB LRB 98-0270 Page 107 H.B. NO. therefor. Unless and until adequate provision has been made for the foregoing purposes, the department shall not transfer the revenues derived from the project agreement to the general fund of the State. §39A-N Special purpose revenue bonds exempt from taxation. Special purpose revenue bonds and the income therefrom issued pursuant to this part, shall be exempt from all state, county, and municipal taxation except inheritance, transfer, and estate taxes. §39A-O Federal tax exempt status. Special purpose revenue bonds issued pursuant to this part, to the extent practicable, shall be issued to comply with requirements imposed by applicable federal law providing that the interest on the special purpose revenue bonds shall be excluded from gross income for federal income tax purposes (except as certain minimum taxes or environmental taxes may apply). The director of finance may enter into agreements, establish funds or accounts, and take any action required to comply with applicable federal law. Nothing in this part shall be deemed to prohibit the issuance of special purpose revenue bonds, the interest on which may be included in gross income for federal income tax purposes. HB LRB 98-0270 Page 108 H.B. NO. §39A-P Exemption from taxation of department property. All revenues derived by the department from any undertaking or under the project agreement pertaining thereto shall be exempt from all state and county taxation. Any right, title, and interest of the department in any undertaking shall also be exempt from all state and county municipal taxation. Except as otherwise provided by law, the interest of the corporation or user of the undertaking in an undertaking or under the project agreement or related agreement shall not be exempt from taxation to a greater extent than it would be if the costs of the undertaking were directly financed by the corporation or other user. §39A-Q Refunding special purpose revenue bonds. The legislature, by act enacted by an affirmative vote of two-thirds of the members to which each house is entitled, may authorize the issuance of refunding special purpose revenue bonds for the purpose of refunding any special purpose revenue bonds then outstanding and issued under the provisions of this part, whether or not such outstanding special purpose revenue bonds have matured or are then subject to redemption. The legislature is further authorized to provide, by act finally enacted by an affirmative vote of two-thirds of the members to which each house is entitled, for the issuance of a single issue of special HB LRB 98-0270 Page 109 H.B. NO. purpose revenue bonds for the combined purposes of (1) financing or refinancing the cost of an undertaking or improvement or expansion thereof, and (2) refunding special purpose revenue bonds which shall theretofore have been issued under the provisions of this part and shall then be outstanding, whether or not such outstanding special purpose revenue bonds have matured or are then subject to redemption. Nothing in this section shall require or be deemed to require the legislature to elect to redeem or prepay special purpose revenue bonds being refunded, or to redeem or prepay special purpose revenue bonds being refunded which were issued in the form customarily known as term bonds in accordance with any sinking fund installment schedule specified in any law authorizing the issuance thereof, or, in the event the department elects to redeem or prepay any such bonds, to redeem or prepay as of any particular date or dates. The issuance of such special purpose revenue bonds, the maturities and other details thereof, and the rights and remedies of the holders thereof, and the rights, powers, privileges, duties, and obligations of the department with respect to the same, shall be governed by the foregoing provisions of this part insofar as the same may be applicable. §39A-R Status of special purpose revenue bonds under the HB LRB 98-0270 Page 110 H.B. NO. Uniform Commercial Code. Notwithstanding any of the provisions of this part or any recitals in any special purpose revenue bonds issued under this part, all such special purpose revenue bonds shall be deemed to be investment securities under the Uniform Commercial Code, chapter 490, subject only to the provisions of the special purpose revenue bonds pertaining to registration. §39A-S Special purpose revenue bonds as legal investments and lawful security. The special purpose revenue bonds issued pursuant to this part shall be and are declared to be legal and authorized investments for banks, savings banks, trust companies, savings and loan associations, insurance companies, credit unions, fiduciaries, trustees, guardians, and for all public funds of the State or other political corporations or subdivisions of the State. The special purpose revenue bonds shall be eligible to secure the deposit of any and all public funds of the State and any and all public funds of counties or other political corporations or subdivisions of the State, and the bonds shall be lawful and sufficient security for the deposits to the extent of their value when accompanied by all unmatured coupons appertaining to them. §39A-T Access to and public disclosure of financial records of the corporation. (a) The corporation, when submitting an HB LRB 98-0270 Page 111 H.B. NO. undertaking to the department, shall allow the department full access to its financial records. Upon the request of the department for the examination of any financial records, the corporation shall allow the department to examine the requested records within a reasonably prompt time from the date of the request. If the department requests copies of the records, the corporation shall provide the copies. (b) To provide the public with full knowledge of the use of the proceeds and benefits derived from special purpose revenue bonds issued under this part, the department shall require the corporation, when it has a project agreement with the department, to make available to the public all relevant financial records which pertain to the use of or savings resulting from the use of special purpose revenue bonds. (c) The department shall adopt rules under chapter 91 for the purpose of this section. §39A-U Estimate of benefits. (a) The corporation, when it has a project agreement with the department, shall estimate the benefits derived from the use of the proceeds of special purpose revenue bonds. The benefits estimated shall be based on a comparison between the use of the proceeds of the special purpose revenue bonds instead of other means of financing and shall be in HB LRB 98-0270 Page 112 H.B. NO. terms of dollars projected to be or actually saved by consumers of the services of the corporation. The format of and method for determining the estimates shall be established by the department. (b) To promote public understanding of the role played by special purpose revenue bonds in providing less costly services by the corporation to Hawaiians, the department shall take appropriate steps to ensure public access to and scrutiny of the estimates determined under subsection (a). (c) The department shall adopt rules under chapter 91 for the purposes of this section. S39A-V Construction of this part. The powers conferred by this part shall be in addition and supplemental to the powers conferred by any other law. Insofar as the provisions of this part are inconsistent with the provisions of any other law, this part shall be controlling." PART IV LAND ISSUES SECTION 22. Chapter 6K, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows: "§6K- Duties of the corporation. Upon transfer to it of the island reserve, the corporation shall assume all rights and HB LRB 98-0270 Page 113 H.B. NO. responsibilities of the former Kaho'olawe island reserve commission. The corporation is authorized to serve and execute warrants, arrest offenders, and issue citations in all matters relating to the enforcement of rules and laws applicable to the island reserve. Any person employed to enforce the rules and laws shall be licensed by the State under chapter 463." SECTION 23. Section 6K-2, Hawaii Revised Statutes, is amended as follows: 1. By adding the definition of "corporation" to read as follows: ""Corporation" means the Native Hawaiian Trust Corporation." 2. By deleting the definitions of "commission" and "department". [""Commission" means the Kaho'olawe island reserve commission. "Department" means the department of land and natural resources."] SECTION 24. Section 6K-6, Hawaii Revised Statutes, is amended to read as follows: "§6K-6 Responsibilities and duties of the [commission.] corporation. The [commission] corporation shall: (1) Establish criteria, policies, and controls for HB LRB 98-0270 Page 114 H.B. NO. permissible uses within the island reserve; (2) Approve all contracts for services and rules pertaining to the island reserve; (3) Provide advice to the governor, the department, and other departments and agencies on any matter relating to the island reserve; (4) Provide advice to the office of planning and the department of the attorney general on any matter relating to the federal conveyance of Kaho'olawe; (5) Enter into curator or stewardship agreements with appropriate Hawaiian cultural and spiritual community organizations for the perpetuation of native Hawaiian cultural, religious, and subsistence customs, beliefs, and practices for the purposes stated in section 6K-3; (6) Carry out those powers and duties otherwise conferred upon the board of land and natural resources and the land use commission with regard to dispositions and approvals pertaining to the island reserve. All powers and duties of the board of land and natural resources and the land use commission concerning dispositions and approvals pertaining to the island reserve are transferred to the [commission;] corporation; HB LRB 98-0270 Page 115 H.B. NO. (7) Carry out those powers and duties concerning the island reserve otherwise conferred upon the county of Maui by chapter 205A. The powers and duties of the county of Maui and its agencies concerning coastal zone disposition and approvals pertaining to the island reserve are transferred to the [commission;] corporation; (8) Shall carry out those powers and duties concerning the island reserve otherwise conferred upon the island burial councils and the department with regard to proper treatment of burial sites and human skeletal remains found in the island reserve; (9) Shall adopt rules in accordance with chapter 91 that are necessary for the purposes of this chapter and shall maintain a record of its proceedings and actions; and (10) May delegate to the executive director or employees of the [commission,] corporation, by formal [commission] corporation action, such power and authority vested in the [commission] corporation by this chapter as the [commission] corporation deems reasonable and proper for the effective administration of this chapter. HB LRB 98-0270 Page 116 H.B. NO. SECTION 25. Section 6K-9, Hawaii Revised Statutes, is amended to read as follows: "[[]§6K-9[]] Transfer. Upon its return to the State, the resources and waters of Kaho'olawe shall be held in trust as part of the public land trust; provided that the State shall transfer management and control of the island and its waters to the [sovereign native Hawaiian entity upon its recognition by the United States and the State of Hawaii. All] corporation upon the corporation's express and binding agreement to accept and implement all terms, conditions, agreements, and laws affecting the island, including any ongoing obligations relating to the clean-up of the island and its waters[,]. These shall remain in effect unless expressly terminated [.] by the State." SECTION 26. Section 6K-1, Hawaii Revised Statutes, is repealed. ["[§6K-1] Administration of chapter. The Kaho'olawe island reserve commission and the department of land and natural resources shall administer this chapter."] SECTION 27. Sections 6K-4 and 6K-5, Hawaii Revised Statutes, are repealed. ["§6K-4 Powers and duties. The department and other departments and agencies of the State shall be subject to the HB LRB 98-0270 Page 117 H.B. NO. oversight of the commission with regard to the control and management of the island reserve. Subject to section 6K-6, the department shall: (1) Implement controls and permitted uses for the island reserve; (2) Enforce this chapter; (3) Provide administrative support to the commission; and (4) Authorize those of its employees as it deems reasonable and necessary to serve and execute warrants and arrest offenders or issue citations in all matters relating to enforcement of the laws and rules applicable to the island reserve. §6K-5 Commission. (a) There is established the Kaho'olawe island reserve commission to be placed within the department of land and natural resources for administrative purposes as provided in section 26-35. The commission shall consist of seven members to be appointed in the manner and to serve for the terms provided in section 26-34; provided that: (1) One member shall be a member of the Protect Kaho'olawe Ohana; (2) Two members shall be appointed by the governor from a list provided by the Protect Kaho'olawe Ohana; HB LRB 98-0270 Page 118 H.B. NO. (3) One member shall be a trustee or representative of the office of Hawaiian affairs; (4) One member shall be a county official appointed by the governor from a list provided by the mayor of the county of Maui; (5) One member shall be the chairperson of the board of land and natural resources; and (6) One member shall be appointed by the governor from a list provided by native Hawaiian organizations. (b) The governor shall appoint the chairperson from among the members of the commission. (c) The members of the commission shall serve without pay but shall be reimbursed for their actual and necessary expenses, including travel expenses, incurred in carrying out their duties. (d) Any action taken by the commission shall be approved by a simple majority of its members. Four members shall constitute a quorum to do business. (e) The commission, without regard to the requirements of chapters 76 and 77, may hire employees necessary to perform its duties."] SECTION 28. Transfer of office of Hawaiian affairs lands and assets, and Kaho`olawe. On the first day of the fiscal year HB LRB 98-0270 Page 119 H.B. NO. which begins at least one calendar year after authorization by the State, as defined in section 20 of this Act, the State shall transfer to the Native Hawaiian Trust Corporation: (1) Title to lands then owned by the office of Hawaiian affairs, if any; (2) All assets and debts of the office; and (3) The island of Kaho`olawe. SECTION 29. Transfer of Hawaiian home lands. On the first day of the fiscal year which begins at least three calendar years after authorization by the State, as defined in section 20, the State shall transfer management to the Native Hawaiian Trust Corporation of the Hawaiian home lands, to be used for the purposes of this Act. The State shall transfer possession to the corporation upon approval of the United States. PART V NATIVE HAWAIIAN TRUST CORPORATION: PROGRAMS, SERVICES AND RIGHTS SECTION 30. Transfer of Hawaiian immersion schools. On the first day of the fiscal year which begins two calendar years after authorization by the State, as defined in section 20 of this Act, the State shall transfer all rights and responsibilities for the Hawaiian language immersion program to HB LRB 98-0270 Page 120 H.B. NO. the Native Hawaiian Trust Corporation. The department of education shall annually transmit to the immersion schools a sum on a per student basis that is equal to the statewide per pupil expenditure for average daily attendance, as well as the per pupil expenditure for maintenance and physical plant; provided that the allocation for self-contained special education students and for other special education students shall be adjusted appropriately to reflect the additional expenses incurred for the students in these programs. The schools shall become private and shall be administered by the corporation. Any school site wholly or primarily devoted to the immersion program shall be transferred. For immersion schools that share facilities with regular department of education schools, the department of education and the corporation shall negotiate an arrangement concerning the continued use of facilities until the corporation is able to make alternate arrangements for facilities. No such arrangement shall exceed five years. SECTION 31. Review. For each year of the five fiscal years after transfer of the Hawaiian language immersion program to the corporation, the department of education, with the good faith cooperation of the corporation, shall conduct a review of the HB LRB 98-0270 Page 121 H.B. NO. corporation's operation of the program and provide recommendations. The corporation shall implement each such recommendation. SECTION 32. Transfer of public historical Hawaiian sites and prehistoric and historic burial sites. Within years after authorization by the State, as defined in section 20 of this Act, the State shall transfer title and control to the Native Hawaiian Trust Corporation over public historical Hawaiian sites and prehistoric and historic burial sites, which shall include Iolani Palace and grounds, but exclude Washington Place. The sites so transferred shall be transferred in trust and the Native Hawaiian Trust Corporation shall have no greater right to dispose of the sites than the State would have had under prior law. PART VI MISCELLANEOUS SECTION 33. Transfer of miscellaneous rights. Within years after initial transfer of assets by the State to the corporation, the State shall transfer: (1) Title and control of publicly owned Hawaiian fishponds and subsistence fishing areas; (2) Control over intestate succession of kuleana land; and HB LRB 98-0270 Page 122 H.B. NO. (3) Control over all konohiki-type sea rights. SECTION 34. Chapter 10, Hawaii Revised Statutes, is repealed. SECTION 35. Upon repeal of Chapter 10, Hawaii Revised Statutes, all funds, accounts, debts owed and owing, and financial responsibilities of the office of Hawaiian affairs shall be transferred to the Native Hawaiian Trust Corporation. Upon transfer of the Hawaiian home lands to the Native Hawaiian Trust Corporation, all funds, accounts, debts owed and owing, and financial responsibilities shall be transferred to the corporation. SECTION 36. Chapters 673 and 674, Hawaii Revised Statues, are repealed. SECTION 37. Severability. The provisions of this Act are not severable and if any provision of the Act, or the application thereof, is held to conflict with any federal or state law, rule, or regulation, this Act, in its entirety, shall be invalid, and all sections of the Constitution, Hawaiian Homes Commission Act, and the Hawaii Revised Statutes, shall be reenacted in the form in which they read on the day before the approval of this Act. SECTION 38. Constitutional and statutory material to be repealed is bracketed. New constitutional and statutory material HB LRB 98-0270 Page 123 H.B. NO. is underscored. SECTION 39. In codifying the new sections added by section 21 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in the new sections designated in this Act. SECTION 40. The provisions of this Act shall take effect as follows: (1) Sections 37-40, on approval; (2) Sections 1, 2, 3, 4, 5, 6, and 7; upon compliance with article XVII, section 3, of the Constitution of the State of Hawaii; provided that section 6, even after ratification by the voters, shall not take effect until the transfer of the rights and responsibilities of the office of Hawaiian affairs as provided in section 25; (3) Sections 20, 21, 28, 29, 30, 31, 35, and 36, upon ratification of the constitutional amendments enumerated in paragraph (2); (4) Sections 22, 23, 24, 25, 26, 27, and 34, upon the effective date of the transfer of Kaho`olawe and the assets of the office of Hawaiian affairs as specified in section 28; and (5) Sections 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, HB LRB 98-0270 Page 124 H.B. NO. 29, 32, and 33, upon the effective date for the transfer of Hawaiian home lands as specified in section 29. INTRODUCED BY:______________________