RELATING TO TRANSPORTATION.

HB1177

HOUSE OF REPRESENTATIVES

H.B. NO.

1177

THIRTY-THIRD LEGISLATURE, 2025

STATE OF HAWAII

A BILL FOR AN ACT

relating
to transportation
.

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

����
SECTION 1.
�
The legislature finds that the geographic
layout of the Hawaiian islands creates unique logistical challenges for
transporting goods between the islands.
�
Hawaii's residents and businesses face
significant challenges due to the high costs of inter-island shipping, which
stem from logistical complexities, limited competition, and reliance on
maritime transport.
�
These costs
disproportionately impact neighbor island communities, leading to inflated
prices for everyday essentials and hindering economic parity across the State.

����
The legislature further finds that
eliminating interisland transport costs for certain goods will foster economic
benefits, including reducing the cost of living, supporting local businesses,
and enhancing the competitiveness of Hawaii's industries.
�
Affordable transportation of goods will
stimulate trade, improve access to essential resources, and promote equitable
economic growth across all islands.

����
Accordingly, the purpose of the Act
is to:

����
(1)
�
Extend the increase of the rental motor
vehicle surcharge by $0.50 each year from December 31, 2027, to December 31,
2031;

����
(2)
�
Require the department of transportation to
establish a five-year interisland transportation fee reimbursement pilot
program, to be funded by revenues received from the rental motor vehicle
surcharge; and

����
(3)
�
Appropriate funds.

����
SECTION
2
.
�
Section 248-9,
Hawaii Revised Statutes, is amended by amending subsection (a) to read as
follows:

����
"(a)
�
Moneys in the state highway fund may be
expended for the following purposes:

����
(1)
�
To pay the costs
of operation, maintenance, and repair of the state highway system, including
without limitation, the cost of equipment and general administrative overhead;

����
(2)
�
To pay the costs
of acquisition, including real property and interests therein; planning;
designing; construction; and reconstruction of the state highway system and
bikeways, including without limitation, the cost of equipment and general
administrative overhead;

����
(3)
�
To reimburse the
general fund for interest on and principal of general obligation bonds issued
to finance highway projects where the bonds are designated to be reimbursable
out of the state highway fund;

����
(4)
�
To pay the costs
of construction, maintenance, and repair of county roads; provided that none of
the funds expended on a county road or program shall be federal funds when
expenditure would cause a violation of federal law or a federal grant
agreement; [
and
]

����
(5)
�
To pay the costs
of establishing and maintaining a drug and alcohol toxicology testing
laboratory that is intended to support the prosecution of offenses relating to
operation of a motor vehicle while under the influence of an intoxicant[
.
]
;

����
(6)
�
To reimburse
designated carriers under the interisland transportation fee reimbursement
pilot program pursuant to Act , Session Laws of Hawaii 2025,
using revenues deposited from the rental motor vehicle surcharge pursuant to
section 251-5.
"

����
SECTION
3
.
�
Section 251-2, Hawaii Revised Statutes, is
amended by amending subsection (a) to read as follows:

����
"(a)
�
There is levied and shall be assessed and
collected each month a rental motor vehicle surcharge tax of $5 a day, or any
portion of a day that a rental motor vehicle is rented or leased.
�
Beginning January 1, 2022, and each
subsequent year on January 1 until December 31, [
2027,
]
2031,
the
rental motor vehicle surcharge tax shall increase by $0.50.
�
The rental motor vehicle surcharge tax shall
be levied upon the lessor; provided that the tax shall not be levied on the
lessor if:

����
(1)
�
The lessor is
renting the vehicle to replace a vehicle of the lessee that:

���������
(A)
�
Is being repaired;
or

���������
(B)
�
Has been stolen
and is unrecovered or will not be repaired due to a total loss of the vehicle;
and

����
(2)
�
A record of the
repair order, the stolen vehicle record, or total loss vehicle claim for the
vehicle is retained either by the lessor for two years for verification
purposes or by a motor vehicle repair dealer for two years as provided in
section 437B-16.

����
In addition to the requirements
imposed by section 251-4, a lessor shall disclose, to the department, the
portion of the remittance attributed to the county in which the motor vehicle
was operated under rental or lease.
�
A
peer-to-peer car-sharing program, as defined in chapter 279L, shall be subject
to the tax imposed by this subsection and be subject to the other requirements
of this chapter."

����
SECTION 4.
�
(a)
�

For purpose of this section:

����
"Department" means the
department of transportation.

����
"Designated carrier" means
entities engaged in the transport of goods between the Hawaiian islands.

����
"Essential goods" means
goods critical for basic living, including:

����
(1)
�
Food items;

����
(2)
�
Agricultural
products;

����
(3)
�
Medical supplies
and equipment; and

����
(4)
�
Building materials
for affordable housing.

����
"Interisland transport"
means the shipment of goods between the islands within the State.

����
(b)
�

The department
�
shall establish an
interisland transportation fee reimbursement pilot program.
�
Under the program, the department shall
reimburse designated carriers for the actual transportation costs, as defined
by the department, of essential goods, subject to documentation requirements
and approval by the department, using revenues deposited into the state highway
fund from the rental motor vehicle surcharge pursuant to section 251-5, Hawaii
Revised Statutes.

����
(c)
�

The department shall establish the following by October 30, 2025:

����
(1)
�
A standardized
application process for designated carriers, including an online portal for
submission of claims.
�
The standardized
application process shall:

���������
(A)
�
Require designated
carriers to submit:

�������������
(i)
�
Itemized invoices
for transportation costs;

������������
(ii)
�
Proof of delivery
of goods transported; and

�����������
(iii)
�
Certification that
goods being transported are essential goods; and

���������
(B)
�
Set a
timeline
�
for reimbursement processing to
ensure payments are issued within thirty days after approving a claim;

����
(2)
�
A certification
process to ensure goods being transported are essential goods;

����
(3)
�
A means of determining reimbursement for
transportation costs in cases where essential goods are being transported along
with, or intertwined with, non-essential goods;

����
(4)
�
Eligibility and
compliance guidelines, including licensing and operational requirements and
protocols for periodic audits of designated carriers to verify compliance and
prevent misuse of funds; and

����
(5)
�
Budget monitoring
procedures, such as maintaining a clear record of all subsidy disbursements and
publishing quarterly financial reports detailing amounts reimbursed and the
volume of essential goods transported.

����
(d)
�

The department shall:

����
(1)
�
Track the volume
of essential goods transported under the pilot program;

����
(2)
�
Measure cost
reductions for essential goods, using baseline data collected before the pilot
program is implemented;

����
(3)
�
Conduct regular
surveys with local businesses and residents to assess the economic impact the
pilot program;

����
(4)
�
Submit a report of
its findings and recommendations, including:

���������
(A)
�
Total funds disbursed
under the pilot program;

���������
(B)
�
Performance
metrics, such as changes in transportation costs, economic growth, and access
to essential goods; and

���������
(C)
�
Any proposed
legislation,

���������
to the legislature no later
than twenty days prior to the convening of each regular session;

����
(5)
�
Convene quarterly
meetings with local businesses, agricultural producers, health care providers,
and other stakeholders to gather feedback and address operational challenges;

����
(6)
�
Partner with the
department of agriculture to prioritize agricultural goods and ensure seamless
integration with existing agricultural programs;

����
(7)
�
Launch an outreach
campaign to inform designated carriers and businesses regarding the pilot
program;

����
(8)
�
Provide a publicly
accessible dashboard displaying key program metrics and updates; and

����
(9)
�
Adopt rules
pursuant to chapter 91, Hawaii Revised Statutes, to effectuate this Act.

����
(e)
�

Any designated carrier found to have engaged in fraudulent practices to
obtain a reimbursement under the pilot program shall:

����
(1)
�
Fully repay funds reimbursed under the pilot
program;

����
(2)
�
Be liable for a penalty not exceeding $50,000
per incident; and

����
(3)
�
Be subject to potential suspension from
participating in the pilot program.

����
(f)
�

The department may seek federal grants and other funding sources for
purposes of this pilot program.

����
SECTION 5.
�
There is appropriated out of the general
revenues of the State of Hawaii the sum of $336,724 or so much thereof as may
be necessary for fiscal year 2025-2026 and the same sum or so much thereof as
may be necessary for fiscal year 2026-2027 for four full-time equivalent (4.00
FTE) positions to develop, plan, execute, and monitor the interisland
transportation fee reimbursement pilot program established pursuant to section
4 of this Act.

����
The sums

appropriated shall be expended by the department of transportation
for the purposes of this Act.

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

����
SECTION 7.
�
This Act shall take effect on July 1, 2025;
provided that sections 2 and 4 of this Act shall be repealed on June 30, 2030,
and section 248-9, Hawaii Revised Statutes, shall be reenacted in the form in
which it read on the day prior to the effective date of this Act.

INTRODUCED BY:

_____________________________

Report Title:

DOT;
Interisland Transportation Fee Reimbursement Pilot Program; State Highway Fund;
Rental Motor Vehicle Surcharge;

Appropriation

Description:

Requires
the Department of Transportation to establish and implement a five-year
Interisland Transportation Fee Reimbursement Pilot Program, to be funded by
revenues received from the rental motor vehicle surcharge.
�
Extends the increase of the rental motor
vehicle surcharge by $0.50 each year from 12/31/2027 to 12/31/2031.
�
Appropriates funds.

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