PROPOSING AMENDMENTS TO ARTICLE VII, SECTIONS 12 AND 13, OF THE HAWAII STATE CONSTITUTION.

HB2476

HOUSE OF REPRESENTATIVES

H.B. NO.

2476

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

PROPOSING
AMENDMENTS TO ARTICLE VII, SECTIONS 12 AND 13, OF THE HAWAII state CONSTITUTION
.

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

SECTION 1.
�
The legislature finds that Hawaii faces a
severe and ongoing shortage of housing for local residents and that this crisis
cannot be solved without large, sustained investments in the infrastructure
needed to produce new homes.
�
In
particular, there is a shortage of infrastructure in transit-oriented
development areas and other priority growth areas across all counties.
�
State-funded planning efforts and the
Hawaii
TOD Infrastructure Financing and Delivery Strategy Study
documented that
four transit-oriented-development pilot areas alone will require hundreds of
millions of dollars in new water, wastewater, drainage, road, and
sea-level-rise mitigation projects to support thousands of new homes.
�
Existing funding mechanisms--individual
project-by-project contributions and irregular capital improvement program
appropriations--are fragmented, inequitable, and insufficient to provide the
scale and timing of revenue needed for these infrastructure investments.
�
Without adequate funding for housing infrastructure,
Hawaii will not be able to solve its dire shortage of housing.

The legislature further
finds that counties have limited tools to raise the revenues necessary to
support housing-enabling infrastructure.
�

The TOD Infrastructure Financing and Delivery Strategy Study,

funded by the legislature pursuant to Act 88, Session Laws of Hawaii 2021,
concluded that additional tools, especially value capture mechanisms, are
needed to supplement existing county and state resources and to provide access
to regular, large sources of funds and financing that do not interfere with
counties' normal bonding activities.

The legislature also finds
that housing infrastructure growth bonds are a proven value capture tool used
in many other jurisdictions to help fund housing-enabling infrastructure.
�
Through this form of financing, commonly
implemented through tax increment financing, a county may establish a district
and use a portion of the future growth in real property tax revenues--generated
by new development and appreciation of existing properties within that district--to
pay for present-day infrastructure.
�
Housing
infrastructure growth bonds do not require creating a new tax or increasing
property tax rates.
�
Instead, they
designate a portion of the natural growth in property tax revenues, which is generated
by new development and rising property values within a designated area, and
allow those revenues to be pledged to bonds that provide upfront capital for
infrastructure.

In addition, the
legislature finds that the
TOD Infrastructure Financing and Delivery
Strategy Study
specifically recommended that the State first authorize a
ballot measure for a constitutional amendment to clearly permit counties to
issue housing infrastructure growth bonds and exclude such bonds from county
debt limits and then amend the tax increment financing statutes to allow
additional flexibility, including non-contiguous districts; the use of tax
increment from higher-value areas to support infrastructure in areas of need;
and, where appropriate, the capture of certain state-level tax increments.

Therefore, the purpose of
this Act is to propose amendments to article VII, sections 12 and 13, of the Hawaii
State Constitution to:

����
(1)
�
Expressly authorize the legislature to empower
the counties and other political subdivisions of the State to issue housing
infrastructure growth bonds, a form of financing payable solely from
incremental real property tax revenues generated within designated districts;

����
(2)
�
Clarify that these bonds are payable solely
from those incremental real property tax revenues and need not be supported by
countywide tax increases; and

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(3)
�
Exclude such bonds from county debt limit
calculations to the extent they are in fact repaid from those incremental
revenues.

It is the intent of the
legislature that if the proposed constitutional amendments are approved by the electorate,
subsequent implementing legislation and county ordinances will establish
housing infrastructure growth bond programs consistent with these findings and
the best-practice recommendations of the
TOD Infrastructure Financing and
Delivery Strategy Study
so that new development helps pay for the
housing-enabling infrastructure it requires while safeguarding county fiscal
health and advancing affordable housing goals statewide.

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SECTION
2.
�
Article VII, section 12, of the Constitution
of the State of Hawaii is amended to read as follows:

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"
DEFINITIONS; ISSUANCE OF INDEBTEDNESS

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Section 12.
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For the purposes of this article:

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1.
�

The term "bonds" shall include bonds, notes and other
instruments of indebtedness.

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2.
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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
payments of the principal of and interest on all revenue bonds issued therefor,
have been made.

����
4.
�

The term "dam and reservoir owner" means any person who has a
right to, title to, or an interest in, a dam, a reservoir, or the property upon
which a dam, a reservoir, or appurtenant work is located or proposed to be
located.

����
5.
�

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.

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6.
�

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.

����
7.
�

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 is required by law to be made from the
revenue of the political subdivision.

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8.
�

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.

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9.
�

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.

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10.
�
The term "housing infrastructure growth
bonds" means all bonds, the principal of and interest on which are payable
from and secured solely by all real property taxes levied by a political
subdivision, such as a county, on the assessed valuation of the real property
in a designated district established by the political subdivision that is in
excess of the assessed valuation of the real property for the fiscal year prior
to the effective date specified by resolution of the political subdivision of
the specified public works, public improvements, or other actions necessary for
new housing development by the political subdivision within the designated
district.

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[
10.
]
11.
�
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.

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The legislature, by a majority vote
of the members to which each house is entitled, shall authorize the issuance of
all 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
housing infrastructure growth 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.

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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.
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Manufacturing,
processing or industrial enterprises;

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2.
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Utilities
serving the general public;

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3.
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Health
care facilities provided to the general public by not-for-profit corporations;

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4.
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Early
childhood education and care facilities provided to the general public by
not-for-profit corporations;

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5.
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Low
and moderate income government housing programs;

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6.
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Not-for-profit
private nonsectarian and sectarian elementary schools, secondary schools,
colleges and universities;

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7.
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Agricultural
enterprises; or

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8.
�
Dam
and reservoir owners; provided that the bonds are issued for and the proceeds
are used to offer loans to assist dam and reservoir owners to improve their
facilities to protect public safety and provide significant benefits to the
general public as important water sources,

each of which is hereinafter referred to in this
paragraph as a special purpose entity.

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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; and provided further that the State may combine
into a single issue of special purpose revenue bonds two or more proposed
issues of special purpose revenue bonds to assist:

����
(1)
�
Not-for-profit
private nonsectarian and sectarian elementary schools, secondary schools,
colleges, and universities;

����
(2)
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Dam and reservoir
owners; or

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(3)
�
Agricultural enterprises,

separately authorized as aforesaid, in the total
amount not exceeding the aggregate of the proposed separate issues of special
purpose revenue bonds.
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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 any revenues or taxes of the issuer
other than receipts derived from payments by a person or persons under contract
or from any security for such contract or contracts or special purpose revenue
bonds and no moneys other than such receipts shall be applied to the payment
thereof.
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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."

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SECTION
3
.
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Article VII, section 13, of the Constitution
of the State of Hawaii is amended to read as follows:

����
"
DEBT
LIMIT; EXCLUSIONS

����
Section 13.
�
General obligation bonds may be issued by the
State; provided that such bonds at the time of issuance would not cause the
total amount of principal and interest payable in the current or any future
fiscal year, whichever is higher, on such bonds and on all outstanding general
obligation bonds to exceed:
�
a sum equal
to twenty percent of the average of the general fund revenues of the State in
the three fiscal years immediately preceding such issuance until June 30,
1982; and thereafter, a sum equal to eighteen and one-half percent of the
average of the general fund revenues of the State in the three fiscal years
immediately preceding such issuance.
�

Effective July 1, 1980, the legislature shall include a declaration
of findings in every general law authorizing the issuance of general obligation
bonds that the total amount of principal and interest, estimated for such bonds
and for all bonds authorized and unissued and calculated for all bonds issued and
outstanding, will not cause the debt limit to be exceeded at the time of
issuance.
�
Any bond issue by or on behalf
of the State may exceed the debt limit if an emergency condition is declared to
exist by the governor and concurred to by a two-thirds vote of the members to
which each house of the legislature is entitled.
�
For the purpose of this paragraph, general
fund revenues of the State shall not include moneys received as grants from the
federal government and receipts in reimbursement of any reimbursable general
obligation bonds which are excluded as permitted by this section.

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A sum
equal to fifteen percent of the total of the assessed values for tax rate
purposes of real property in each political subdivision, as determined by the
last tax assessment rolls pursuant to law, is established as the limit of the
funded debt of such political subdivision that is outstanding and unpaid at any
time.

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All
general obligation bonds for a term exceeding two years shall be in serial form
maturing in substantially equal installments of principal, or maturing in
substantially equal installments of both principal and interest.
�
The first installment of principal of general
obligation bonds and of reimbursable general obligation bonds shall mature not
later than five years from the date of issue of such series.
�
The last installment on general obligation
bonds shall mature not later than twenty-five years from the date of such issue
and the last installment on general obligation bonds sold to the federal
government, on reimbursable general obligation bonds and on bonds constituting
instruments of indebtedness under which the State or a political subdivision incurs
a contingent liability as a guarantor shall mature not later than thirty-five
years from the date of such issue.
�
The
interest and principal payments of general obligation bonds shall be a first
charge on the general fund of the State or political subdivision, as the case
may be.

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In
determining the power of the State to issue general obligation bonds or the
funded debt of any political subdivision under section 12, the following shall
be excluded:

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1.
�
Bonds that have matured, or that mature in
the then current fiscal year, or that have been irrevocably called for
redemption and the redemption date has occurred or will occur in the then
fiscal year, or for the full payment of which moneys or securities have been
irrevocably set aside.

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2.
�
Revenue bonds, if the issuer thereof is
obligated by law to impose rates, rentals and charges for the use and services
of the public undertaking, improvement or system or the benefits of a loan
program or a loan thereunder or to impose a user tax, or to impose a
combination of rates, rentals and charges and user tax, as the case may be,
sufficient to pay the cost of operation, maintenance and repair, if any, of the
public undertaking, improvement or system or the cost of maintaining a loan
program or a loan thereunder and the required payments of the principal of and
interest on all revenue bonds issued for the public undertaking, improvement or
system or loan program, and if the issuer is obligated to deposit such revenues
or tax or a combination of both into a special fund and to apply the same to
such payments in the amount necessary therefor.

����
3.
�
Special purpose revenue bonds, if the issuer
thereof is required by law to contract with a person obligating such person to
make rental or other payments to the issuer in an amount at least sufficient to
make the required payment of the principal of and interest on such special
purpose revenue bonds.

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4.
�
Bonds issued under special improvement
statutes when the only security for such bonds is the properties benefited or
improved or the assessments thereon.

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5.
�
General obligation bonds issued for
assessable improvements, but only to the extent that reimbursements to the
general fund for the principal and interest on such bonds are in fact made from
assessment collections available therefor.

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6.
�
Reimbursable general obligation bonds issued
for a public undertaking, improvement or system but only to the extent that
reimbursements to the general fund are in fact made from the net revenue, or
net user tax receipts, or combination of both, as determined for the
immediately preceding fiscal year.

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7.
�
Reimbursable general obligation bonds issued
by the State for any political subdivision, whether issued before or after the
effective date of this section, but only for as long as reimbursement by the
political subdivision to the State for the payment of principal and interest on
such bonds is required by law; provided that in the case of bonds issued after
the effective date of this section, the consent of the governing body of the
political subdivision has first been obtained; and provided further that during
the period that such bonds are excluded by the State, the principal amount then
outstanding shall be included within the funded debt of such political
subdivision.

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8.
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Bonds constituting instruments of
indebtedness under which the State or any political subdivision incurs a
contingent liability as a guarantor, but only to the extent the principal
amount of such bonds does not exceed seven percent of the principal amount of
outstanding general obligation bonds not otherwise excluded under this section;
provided that the State or political subdivision shall establish and maintain a
reserve in an amount in reasonable proportion to the outstanding loans
guaranteed by the State or political subdivision as provided by law.

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9.
�
Bonds issued by or on behalf of the State or
by any political subdivision to meet appropriations for any fiscal period in
anticipation of the collection of revenues for such period or to meet casual
deficits or failures of revenue, if required to be paid within one year, and
bonds issued by or on behalf of the State to suppress insurrection, to repel
invasion, to defend the State in war or to meet emergencies caused by disaster
or act of God.

����
10.
�
Housing infrastructure growth bonds issued
pursuant to section 12 of this article.

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The total
outstanding indebtedness of the State or funded debt of any political
subdivision and the exclusions therefrom permitted by this section shall be
made annually and certified by law or as provided by law.
�
For the purposes of section 12 and this
section, amounts received from on-street parking may be considered and treated
as revenues of a parking undertaking.

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Nothing in
section 12 or in this section shall prevent the refunding of any bond at any
time."

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SECTION
4.
�
The question to be printed on the
ballot shall be as follows:

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"Shall
the Hawaii State Constitution be amended to authorize counties to issue housing
infrastructure growth bonds, the repayment of which shall be secured solely by
the incremental increase in real property tax revenues attributable to the
increase in assessed real property values within a designated district
established for housing-related public improvements?"

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SECTION
5.
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Constitutional material to be
repealed is bracketed and stricken.
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New
constitutional material is underscored.

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SECTION 6.
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These amendments shall take effect upon compliance with article XVII,
section 3, of the Constitution of the State of Hawaii.

INTRODUCED BY:

_____________________________

Report Title:

Counties;
Housing Infrastructure Growth Bonds; Constitutional Amendments

Description:

Proposes
constitutional amendments to expressly provide that the Legislature may
authorize political subdivisions, such as the counties, to issue housing
infrastructure growth bonds, and exclude these bonds from determinations of the
funded debt of the political subdivisions for specified public works, public
improvements, or other actions necessary for new housing development.

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