RELATING TO CESSPOOL CONVERSIONS.

HB1618

HOUSE OF REPRESENTATIVES

H.B. NO.

1618

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

relating
to cesspool conversions
.

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

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SECTION 1.
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The legislature finds that cesspools are a
source of pollution that threatens the health of Hawaii's people and
environment.
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In response to the State's
cesspool pollution problem, legislation was enacted in 2017 that requires all
cesspools not excluded by the director of health to be upgraded or converted to
director of health-approved wastewater systems or connected to sewerage systems
by January 1, 2050.

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The legislature further finds that the
large upfront costs of cesspool conversions prevent many cesspool owners from
addressing systems that contribute to the daily release of untreated sewage.
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It is in the public interest to explore
non-traditional financing mechanisms to accelerate cesspool conversions and
provide Hawaii's homeowners with additional financing options, especially for
those not able to qualify for bank and credit union financing at reasonable
rates and terms.

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The purpose of this Act is to:

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(1)
�
Direct the Hawaii
green infrastructure authority to establish a cesspool conversion financing
program to provide low-interest loans for low- and moderate-income homeowners
to upgrade or convert existing cesspools in all counties to director of
health-approved wastewater systems or connect properties with

existing
cesspools to sewerage systems;

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(2)
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Allow the
department of health, through a memorandum of agreement, to annually transfer
funding available from the water pollution control revolving fund to capitalize
the cesspool conversion financing program; and

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(3)
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Enable the
counties to collaborate with the authority to implement the cesspool conversion
financing program by including the principal and interest loan repayments for
eligible borrowers on the water bill of each respective county and transmit the
collections to the authority.

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SECTION 2.
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Chapter 196, Hawaii Revised Statutes, is
amended by adding a new section to part IV to be appropriately designated and
to read as follows:

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"
�196-
�
Cesspool
conversion loan special fund; cesspool conversion financing program.
�
(a)
�
There is established in the
state treasury the cesspool conversion loan special fund that shall be
administered by the authority.
�
Funds
deposited into the cesspool conversion loan special fund shall include:

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(1)
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Moneys
appropriated by the legislature;

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(2)
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Funds from
federal, state, county, private, or other funding sources, including funds from
the department of health under section 342D-83;

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(3)
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Moneys received
as repayment of loans and interest payments; provided that the repayment of
loans and interest payments under this paragraph shall not include repayment of
loans and interest collected as a result of funds advanced from proceeds of the
green energy market securitization bonds, clean energy and energy efficiency
revolving loan fund, solar photovoltaic and energy storage loan program, or
condominium loan program; and

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(4)
�
Any fees
collected by the authority under this section; provided that moneys collected
as a result of the funds advanced from proceeds of the green energy market
securitization bonds, clean energy and energy efficiency revolving loan fund,
solar photovoltaic and energy storage loan program, and condominium loan
program shall be kept separate from fees collected as a result of funds
advanced from proceeds of the cesspool conversion loan special fund.

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(b)
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Moneys
in the cesspool conversion loan special fund shall be used to administer the cesspool
conversion financing program to provide low-interest loans or other authorized
financial assistance to eligible low and moderate-income households to upgrade
or convert existing cesspools in all counties to director of health-approved
wastewater systems or connect properties with existing cesspools to sewerage
systems on terms approved by the authority.
�

Moneys from the fund may be used to cover administrative and legal costs
of fund management and management associated with individual loans, which
include personnel, services, technical assistance, data collection and
reporting, materials, equipment, and travel for the purposes of this section.

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(c)
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Funds
appropriated or authorized from the cesspool conversion loan special fund shall
be expended by the authority.
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The
authority may contract with other public or private entities for the provision
of all or a portion of the services necessary for the administration and
implementation of the cesspool conversion financing program.
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The authority may set fees or charges for
fund management and technical site assistance provided under this section.

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(d)
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All
interest earned on the loans, deposits, or investments of the moneys in the
fund shall become part of the cesspool conversion loan special fund.

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(e)
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The
authority may establish subaccounts within the cesspool conversion loan special
fund as necessary.

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(f)
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The
authority may adopt rules pursuant to chapter 91 or publish cesspool conversion
financing program guidelines to carry out the purposes of this section.
"

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SECTION
3
.
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Section 196-64,
Hawaii Revised Statutes, is amended to read as follows:

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"
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196-64
�
Functions, powers
,
and duties of the authority.
�
(a)
�
In
the performance of, and with respect to the functions, powers, and duties
vested in the authority by this part, the authority, as directed by the
director and in accordance with a green infrastructure loan program order or
orders under section 269-171 or an annual plan submitted by the authority
pursuant to this section, as approved by the commission for the green
infrastructure loan program, may:

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(1)
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Make loans and expend funds
to finance the
purchase or installation of green infrastructure equipment for clean energy
technology, demand response technology, and energy use reduction and demand
side management infrastructure, programs, and services;

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(2)
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Hold and invest moneys in the green infrastructure special fund in
investments as permitted by law and in accordance with approved investment
guidelines established in one or more orders issued by the commission pursuant
to section 269-171;

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(3)
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Hire employees necessary to perform its
duties, including an executive director.
�

The executive director shall be appointed by the authority, and the
employees' positions, including the executive director's position, shall be
exempt from chapter 76;

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(4)
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Enter into contracts for the service of
consultants for rendering professional and technical assistance and advice, and
any other contracts that are necessary and proper for the implementation of the
loan program;

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(5)
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Enter into contracts for the administration of
the loan program, without the necessity of complying with chapter 103D;

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(6)
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Establish loan program guidelines to be approved in one or more
orders issued by the commission pursuant to section 269-171 to carry out the
purposes of this part;

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(7)
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Be
audited at least annually by a firm of independent certified public accountants
selected by the authority, and provide the results of this audit to the
department and the commission; and

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(8)
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Perform
all functions necessary to effectuate the purposes of this part.

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(b)
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The authority shall submit to the commission an annual plan for the
green infrastructure loan program for review and approval no later than ninety
days prior to the start of each fiscal year.
�

The annual plan submitted by the authority shall include the authority's
projected operational budget for the succeeding fiscal year.

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(c)
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In the performance of the functions, powers, and duties vested in the
authority by this part, the authority shall administer the clean energy and
energy efficiency revolving loan fund pursuant to section 196-65.5 and may:

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(1)
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Make loans and
expend funds to finance the purchase or installation of clean energy technology
and services;

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(2)
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Implement and
administer loan programs on behalf of other state departments or agencies
through a memorandum of agreement and expend funds appropriated to the
department or agency for purposes authorized by the legislature;

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(3)
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Utilize all
repayment mechanisms, including the green energy money saver on-bill program,
financing tools, servicing and other arrangements, and sources of capital
available to the authority;

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(4)
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Exercise powers to
organize and establish special purpose entities as limited liability companies
under the laws of the State;

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(5)
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Acquire, hold, and
sell qualified securities;

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(6)
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Pledge unencumbered net assets, loans
receivable, assigned agreements, and security interests over equipment
financed, as collateral for the authority
'
s borrowings from federal,
county, or private lenders or agencies;

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(7)
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Utilize the
employees of the authority, including the executive director;

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(8)
�
Enter into
contracts for the service of consultants for rendering professional and
technical assistance and advice and any other contracts that are necessary and
proper for the implementation of the loan fund program;

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(9)
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Enter into
contracts for the administration of the loan fund program exempt from chapter
103D;

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(10)
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Establish loan
fund program guidelines;

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(11)
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Be audited at
least annually by a firm of independent certified public accountants selected
by the authority and provide the results of the audit to the department and
legislature; and

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(12)
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Perform all
functions necessary to effectuate the purposes of this part.

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(d)
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In the performance of the functions, powers,
and duties vested in the authority by this part, the authority shall administer
the cesspool conversion loan special fund and
cesspool conversion financing program
pursuant to section
196- and may:

����
(1)
�
Make loans and
expend funds to finance the upgrade or conversion of existing cesspools in all
counties to director of health-approved wastewater systems or connection of
properties with existing cesspools to sewerage systems;

����
(2)
�
Implement and
administer the cesspool conversion financing program with funding available
under section 342D-83 provided by the department of health on an annual basis
through a memorandum of agreement and expend funds appropriated to the
department for purposes authorized by the legislature;

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(3)
�
Coordinate with each county water
utility, through memorandums of agreement, to implement the repayment mechanism
for the cesspool conversion financing program to have the principal and
interest loan repayments collected from eligible borrowers, and for each
respective county to transmit those collections to the authority;

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(4)
�
Utilize all
repayment mechanisms, financing tools, servicing and other arrangements, and
sources of capital available to the authority;

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(5)
�
Utilize the
employees of the authority, including the executive director;

����
(6)
�
Enter into
contracts for the service of consultants for rendering professional and
technical assistance and advice and any other contracts that are necessary and
proper for the implementation of the cesspool conversion financing program;

����
(7)
�
Enter into
contracts for the administration of the cesspool conversion financing program that
are exempt from chapter 103D;

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(8)
�
Establish
guidelines for the cesspool conversion financing program;

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(9)
�
Be audited at
least annually by a firm of independent certified public accountants selected
by the authority and provide the results of the audit to the department and
legislature; and

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(10)
�
Perform all
functions necessary to effectuate the purposes of this part.

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[
(d)
]
(e)
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The authority shall submit an annual report
for the clean energy and energy efficiency revolving loan fund
and the
cesspool conversion loan special fund
to the legislature no later than
twenty days prior to the convening of each regular session describing the
projects funded and the projected energy impacts."

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SECTION
4.
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There is appropriated out of the
general revenues of the State of Hawaii the sum of
$ or so much
thereof as may be necessary for fiscal year 2026-2027 to be deposited into the
cesspool conversion loan special fund established under section
196- , Hawaii Revised Statutes.

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SECTION
5.
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There is appropriated out of the
cesspool conversion loan special fund the sum of
$ or so much
thereof as may be necessary for fiscal year 2026-2027 for the hiring of one
full-time equivalent (1.0 FTE) program management position and for the purposes
of the cesspool conversion loan special fund.

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The sum
appropriated shall be expended by the Hawaii green infrastructure authority for
the purposes of this Act.

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

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SECTION 7.
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This Act shall take effect on July 1, 2026.

INTRODUCED BY:

_____________________________

Report Title:

HGIA;
Cesspool Conversion Financing Program; Cesspool Conversion Loan Special Fund;
Appropriation

Description:

Establishes
and appropriates funds for a cesspool conversion loan special fund
,
to be administered by the Hawaii Green Infrastructure Authority,
to provide low-interest loans to eligible homeowners for the upgrade,
conversion, or connection of cesspools.

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