RELATING TO COOPERATIVES.

SB2716

THE SENATE

S.B. NO.

2716

THIRTY-THIRD LEGISLATURE, 2026

STATE OF HAWAII

A BILL FOR AN ACT

Relating
to cooperatives
.

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

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SECTION 1.
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Chapter 201, Hawaii Revised Statutes, is
amended by adding a new part to be appropriately designated and to read as
follows:

"
Part
.
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cooperative
Development program

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201-A
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Findings and purpose.
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The legislature finds that cooperatives can
provide high-quality jobs, increase worker and community ownership of
productive assets, and strengthen local economies, particularly in rural and
agricultural communities.

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The
legislature further finds that organizing a new cooperative or converting an
existing business to a cooperative typically requires significant
administrative startup and transition costs, including feasibility studies,
business planning, legal and accounting services, governance design, development,
and financial modeling.
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These costs are
often beyond the reach of workers, farmers, and other community members,
creating a barrier to cooperative formation and conversion, even where such
cooperative ownership would retain jobs, improve job quality, and preserve
locally rooted enterprises.

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The
legislature additionally finds that other states have successfully supported
cooperative enterprise by offering cost-share grants for cooperative administrative
startup and conversion expenses and by funding nonprofit cooperative
development centers that provide technical assistance to cooperative groups at
low or no cost.
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The legislature finds
that a similar approach in Hawaii, focused on worker ownership and job quality
outcomes, would advance the department of business, economic development, and
tourism's mission to improve employment opportunities and foster planned
community development.

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T
he
purpose of this part is to establish within the department of business,
economic development, and tourism a cooperative development program that:

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(1)
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Provides cost-share grants to eligible
cooperatives to defray administrative startup and conversion costs;

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(2)
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Provides grants to nonprofit
cooperative development partners to deliver technical assistance and
administrative startup services to cooperatives; and

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(3)
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Prioritizes projects that support
worker ownership, job retention or creation, and economic resilience in communities
across the State, including rural and agricultural communities and underserved
populations.

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201-B
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Definitions.
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As used in this part:

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"Administrative
startup costs" means the reasonable and necessary costs incurred to plan,
organize, and establish a cooperative or cooperative conversion project,
including:

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(1)
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Feasibility studies and market
analyses;

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(2)
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Business planning and financial
modeling;

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(3)
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Legal services to organize or convert
an entity to a cooperative, including drafting or revising articles of
incorporation, bylaws, operating agreements, and related documents;

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(4)
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Accounting and tax planning services
directly related to organizing or converting to a cooperative;

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(5)
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Cooperative governance and financial
education for members or prospective members; and

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(6)
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Other professional services directly
related to the administrative startup or conversion activities.

"Administrative
startup costs" does not include the costs to purchase real property or
equipment, wages or salaries for ongoing operations, payment of existing debts,
or other general operating expenses.

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"Cooperative"
means:

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(1)
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An association organized under chapter
421, 421C, or any other statute providing for the formation of cooperative
associations;

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(2)
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A limited liability company,
partnership, or other business entity that operates according to cooperative
principles, including democratic member control, limited return on equity
capital, and distribution of net proceeds based on patronage; or

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(3)
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A business entity that is in the
process of organizing or converting to cooperative ownership under any of the
structures described in paragraphs (1) and (2).

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"Cooperative
conversion project" means a project to convert an existing business entity
to ownership and control by a cooperative, including a worker, producer,
consumer, or multi-stakeholder cooperative.

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"Cooperative
development partner" means a nonprofit corporation or institution of
higher education that is authorized to do business in the State and provides
technical assistance or training for cooperative development.

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"Department"
means the department of business, economic development, and tourism.

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"Director"
means the director of business, economic development, and tourism.

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"Eligible
applicant" means:

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(1)
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A group of two or more individuals who
reside in the State and intend to organize a cooperative;

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(2)
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A cooperative that is newly organized
or expanding into a new line of business; or

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(3)
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A group of workers, producers,
community members, or a cooperative acting on their behalf that is undertaking
a cooperative conversion project.

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"Program"
means the cooperative development program established pursuant to section
201-C.

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"Worker
cooperative" means a cooperative, limited liability company, or
partnership in which:

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(1)
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The majority of the equity interest is
owned by workers;

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(2)
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The majority of the board of directors
or governing body is elected by workers on a democratic basis; and

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(3)
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Allocation of profits and net savings,
if any, is primarily based on patronage, including labor contributed, hours
worked, or other measures of worker participation, rather than capital
contribution.

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201-C
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Cooperative development program;
establishment.
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(a)
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There is established within the department
the cooperative development program to support the establishment of new
cooperatives in the State.

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(b)
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The program shall include:

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(1)
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A cooperative development cost-share
grant program; and

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(2)
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A cooperative development partner grant
program for nonprofit providers of technical assistance or training for
cooperative development.

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(c)
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The program shall prioritize funding for projects
that:

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(1)
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Increase worker or community ownership
through the integration and application of cooperative principles;

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(2)
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Retain or create jobs in the State,
with consideration given to job quality;

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(3)
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Improve economic resilience in rural or
agricultural communities; and

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(4)
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Benefit underserved communities,
including Native Hawaiian communities, socially disadvantaged farmers or
ranchers, and communities with high rates of poverty or unemployment.

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201-D
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Cooperative development cost-share grants; criteria;
proportional contributions; amounts.
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(a)
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Subject to the availability
of funds, the department may award cost-share grants for administrative startup
costs.

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(b)
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The department shall establish criteria for the
awarding of grants under this section, including requirements that the eligible
applicant:

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(1)
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Demonstrate reasonable project
feasibility;

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(2)
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Demonstrate job retention or creation
benefits;

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(3)
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Complete the project within three years
of the grant award; provided that the deadline may be extended for good cause;
and

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(4)
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Provide the required proportional contribution
pursuant to subsection (c).

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(c)
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To qualify for a grant under this section, an
eligible applicant shall make a contribution with a value of at least
twenty-five per cent of the awarded grant amount towards the cooperative's
administrative startup costs.
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Contributions to meet this requirement may be in the form of:

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(1)
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Cash;

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(2)
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Other grant funds, as permitted by the
department by rule; or

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(3)
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In-kind contributions, such as
documented volunteer labor or donated professional services; provided that
in-kind contributions shall be valued at the fair market rate for equivalent
services and documented through timesheets, service agreements, or other
verifiable records, as specified by the department by rule.

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(d)
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Unless otherwise provided by law, cooperative
development cost-share grants awarded pursuant to this section shall be in an
amount not less than $10,000 and not more than $50,000 per cooperative.

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201-E
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Cooperative development partner grants; eligibility;
terms; rules.
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(a)
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Subject to the availability of funds, the
department may award grants to cooperative development partners to:

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(1)
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Provide technical assistance to
cooperatives;

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(2)
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Assist eligible applicants in preparing
cost-share grant applications;

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(3)
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Provide education and training to
promote cooperative development; and

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(4)
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Conduct outreach relating to
cooperative development opportunities.

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(b)
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The department may require a cooperative
development partner to make a monetary or in-kind contribution to the
cooperative development partner's cooperative development services to qualify
for a grant under this section.
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The
value of the contribution shall be determined by the department by rule;
provided that the contribution may match or be proportional to the grant
amount.

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(c)
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The department may award grants under this
section for multiple consecutive years to ensure continuity of cooperative development
services; provided that the total award term shall not exceed three years.

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201-F
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Applications; review; awards.
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(a)
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Applications for grants under this part shall be submitted in the form
required by the department.

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(b)
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An application for a cooperative development
cost-share grant shall include but not be limited to:

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(1)
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Project description;

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(2)
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Budget of administrative startup costs;

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(3)
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Documentation verifying the eligible
applicant's ability to satisfy the proportional contribution requirement
pursuant to section 201-D(c);

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(4)
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Ownership and governance plan;

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(5)
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Anticipated outcomes relating to job
creation, retention, and quality; and

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(6)
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Project timeline.

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(c)
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The department shall establish scoring
criteria for the award of grants under this part.
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Scoring criteria may include but need not be limited
to:

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(1)
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Worker or community ownership
potential;

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(2)
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Projected job creation or retention
outcomes;

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(3)
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Benefits to rural or agricultural
communities;

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(4)
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Benefits to underserved communities;

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(5)
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Project feasibility and applicant
capacity; and

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(6)
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Adequacy of the proportional
contribution.

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(d)
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The department may conduct competitive grant
cycles.

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(e)
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Each grant awarded under this part shall be
subject to a written grant agreement.

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201-G
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Use of funds; prohibited uses.
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(a)
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Grant funds awarded under this part may be used only for authorized
administrative startup costs and cooperative development services as
applicable.

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(b)
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Grant funds shall not be used for:

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(1)
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Purchase real property;

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(2)
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Motor vehicles or capitalized
equipment; provided that for the purposes of this paragraph, "capitalized
equipment" means equipment with a useful life exceeding two years and an
acquisition cost exceeding $5,000;

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(3)
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Wages or salaries for ongoing
operations;

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(4)
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Dividends or patronage refunds; or

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(5)
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Fines or penalties.

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(c)
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Expenses funded by grants awarded under this
part shall not be reimbursed under any other state grant program if reimbursement
would result in a duplication of benefits.

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201-H
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Coordination.
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The department shall coordinate with other
state and federal programs, including organizations supporting Native Hawaiian
economic development, to implement this part.

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201-I

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Grantee reporting.
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Each grantee awarded grant funds under this
part shall submit an annual report to the department no later than July 1 of each
year.
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The report shall include:

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(1)
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Description of activities funded;

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(2)
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Administrative startup costs incurred;

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(3)
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Cooperative progress and status;

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(4)
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Conversion outcomes, if applicable;

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(5)
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Jobs created or retained; and

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(6)
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Any other information required by the
department by rule.

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201-J
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Reports.
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The department shall submit a report on the cooperative development
program to the legislature no later than twenty days prior to the convening of
each regular session
.
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The report shall include:

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(1)
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The number and total funding amount of
grants awarded;

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(2)
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Descriptions of funded projects;

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(3)
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Job-related outcomes;

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(4)
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Activities undertaken by cooperative
development partners; and

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(5)
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Any additional findings and recommendations,
including proposed legislation.

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201-K
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Rules.
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The department shall adopt rules pursuant to chapter 91 necessary to implement
this part."

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SECTION
2
.
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The department of business,
economic development, and tourism shall conduct a comprehensive evaluation of
the cooperative development program and recommendation on whether it should
continue, and submit a report of its findings and recommendations, including
any proposed legislation, to the legislature no later than twenty days prior to
the convening of the regular session of
2031.

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SECTION
3.
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There is appropriated out of the
general revenues of the State of Hawaii the sum of $750,000 or so much thereof
as may be necessary for fiscal year 2026-2027 to establish and administer the
cooperative development program.

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The
sum appropriated shall be expended by the department of business, economic
development, and tourism for the purposes of this Act.

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SECTION
4.
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This Act shall take effect on July 1,
2026; provided that section 1 shall be repealed on June 30, 2031.

INTRODUCED BY:

_____________________________

Report Title:

DBEDT;
Cooperative Development Program; Grants; Rules; Reports; Appropriation

Description:

Establishes
a Cooperative Development Program within the Department of Business, Economic
Development, and Tourism to award grants to support the establishment of new
cooperatives in the State.
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Requires the
Department to adopt rules.
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Requires
annual reports to the Legislature.
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Appropriates funds.
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Sunsets
6/30/2031.

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not legislation or evidence of legislative intent.