Bill Text: HI SB304 | 2017 | Regular Session | Amended

Hawaii Senate Bill 304 (Prior Session Legislation)

Bill Title: Relating To The Hawaii Hurricane Relief Fund.

Spectrum: Partisan Bill (Democrat 4-0)

Status: (Introduced - Dead) 2017-02-17 - Report adopted; Passed Second Reading, as amended (SD 1) and referred to WAM. [SB304 Detail]

Download: Hawaii-2017-SB304-Amended.html

THE SENATE	S.B. NO.	304
TWENTY-NINTH LEGISLATURE, 2017		S.D. 1
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO THE HAWAII HURRICANE RELIEF FUND.

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

SECTION 1. The purpose of this Act is to address the Hawaii hurricane relief fund.

More specifically, this Act:

(1) Requires the interest earned on the balance of the Hawaii hurricane reserve trust fund to be retained in the trust fund; and

(2) Requires the board of directors of the Hawaii hurricane relief fund to conduct a study of the acquisition of a catastrophic hurricane loss financing arrangement with the premium to be paid by all or a portion of the interest earned in the Hawaii hurricane reserve trust fund.

The legislature finds that in 2002, the interest earned on the balance of the Hawaii hurricane reserve trust fund was transferred to the general fund to address the state budgetary shortfall that followed the "9/11" terrorist attack on the United States. The transfer to the general fund proved even more useful to mitigate the revenue shortfalls during the years of the Great Recession.

Now that the state economy has improved and general fund revenues from tax sources have and are projected to increase at fairly healthy annual rates, the legislature finds that the general fund no longer needs the interest transferred from the Hawaii hurricane reserve trust fund.

The Hawaii hurricane reserve trust fund serves as a de facto budget reserve for the State, although that was not its original purpose. The legislature finds that the fund should continue to serve in that capacity, augmented by the compounding of all or some of the annual interest earned on the principal.

The legislature further finds that hurricanes are constant seasonal threats to the Hawaiian Islands. A record of fifteen tropical cyclones entered the Central Pacific during the 2015 hurricane season. Fortunately, none of them directly hit the main Hawaiian Islands. The 2016 hurricane season was less severe, but nonetheless generated some serious threats to the Hawaiian Islands.

Given the annual exposure to potentially devastating hurricanes, the state government must engage in efforts to prevent damage from wind, rain, and tides; quickly repair any damage that occurs; and ensure the availability of capital for repair and reconstruction activities.

For this purpose, the legislature finds that the board of directors of the Hawaii hurricane relief fund should explore the purchase of a catastrophic hurricane loss financing arrangement using all or part of the interest earned by the hurricane reserve trust fund. The legislature intends that the board submit to the legislature its findings and recommendation on whether the proposal is feasible, practical, affordable, and in the public interest.

SECTION 2. Section 431P-16, Hawaii Revised Statutes, is amended to read as follows:

"§431P-16 Establishment of trust funds. (a) The fund shall establish outside the state treasury a hurricane reserve trust fund and any accounts thereunder and any other trust fund or account necessary to carry out the purposes of this chapter. Moneys deposited in the hurricane reserve trust fund and any accounts thereunder or any other trust fund or account shall be held by the fund, as trustee, in a depository as defined in section 38-1 or according to a similar arrangement at the discretion of the board, including, but not limited to, trust or custodial accounts created for the benefit of the fund's secured parties under contractual claims financing arrangements. These moneys may be invested and reinvested in accordance with the plan of operation. Disbursements from the trust funds shall not be subject to chapter 103D and shall be made in accordance with procedures adopted by the board.

(b) The hurricane reserve trust fund shall receive deposits of the special mortgage recording fee established by this chapter. Except as determined by board order, the special mortgage recording fee shall be imposed on each mortgage and each amendment to a mortgage which, in each case, increases the principal amount of the secured debt and which is recorded in the bureau of conveyances of the State under chapter 502 or filed with the assistant registrar of the land court of the State under chapter 501.

The special mortgage recording fee shall be an amount equal to one-tenth of one per cent of the stated principal amount of the debt secured by the mortgage or, in the case of an amendment or refinancing of a mortgage, an amount equal to one-tenth of one per cent of the amount of the increase of the stated principal amount of the secured debt; provided that the board may establish a lower special mortgage recording fee amount pursuant to section 431P-5(b)(14). With respect to an open end revolving loan, the principal amount of the debt on which the special mortgage recording fee is calculated shall be the maximum amount which may be outstanding under the loan at any one time. With respect to a mortgage securing a nonmonetary or inchoate obligation, the principal amount of the debt on which the special mortgage recording fee is calculated shall be the monetary amount which the mortgagee attributes to the obligation. If the debt is stated in a foreign currency, it shall be converted to U.S. dollars using an exchange rate published in a newspaper of general circulation in this State within one week prior to recordation of the mortgage or amendment of mortgage.

The special mortgage recording fee shall be in addition to any applicable fees under chapter 501 or 502. The special mortgage recording fee shall be submitted to and collected by the bureau of conveyances or the assistant registrar of the land court of the State and shall be deposited into the hurricane reserve trust fund. The special mortgage recording fee shall be submitted at the time the mortgage or amendment of mortgage is recorded together with any related forms or certifications required by the bureau of conveyances or the assistant registrar of the land court of the State.

(c) The Hawaii hurricane relief fund shall implement the assessments of all property and casualty insurers as authorized by section 431P-5(b)(8)(A) and (B) and the proceeds from the assessments shall be deposited into the hurricane reserve trust fund or into trust or custodial accounts, created for the benefit of the fund's secured parties, that are held inside or outside the hurricane reserve trust fund.

(d) If the Hawaii hurricane relief fund offers to issue policies of hurricane property insurance, the premiums for the policies shall be deposited into the hurricane reserve trust fund.

(e) After each covered event, if the board determines that the moneys in the hurricane reserve trust fund, excluding moneys determined by the board to be needed to continue fund operations following the covered event, will be insufficient to pay claims and other obligations of the fund arising out of that covered event, the Hawaii hurricane relief fund shall levy a surcharge not to exceed seven and one-half per cent a year on premiums charged for all property and casualty insurance policies issued for risks insured in this State. These moneys may be deposited into the hurricane reserve trust fund or into trust or custodial accounts created for the benefit of the fund's secured parties that are held inside or outside the hurricane reserve trust fund. The surcharge shall remain in effect until all claims and other obligations of the fund, including but not limited to claims under fund policies of hurricane property insurance, claims financing transactions, bonds, notes, and other obligations arising out of that covered event have been fully discharged. The amount and reason for any surcharge made pursuant to this subsection shall be separately stated on any billing sent to an insured. The surcharge shall not be considered premiums for any other purpose including the computation of gross premium tax or the determination of producers' commissions. The fund may establish procedures for insurers to collect the surcharge from customers who hold property or casualty policies.

(f) Any proceeds, experience refunds, or other return funds under reinsurance shall be deposited into the hurricane reserve trust fund.

(g) Any proceeds from loans or other moneys from the federal government, any proceeds from bonds issued pursuant to this chapter loaned by the director to the Hawaii hurricane relief fund, and other moneys as the State may make available from time to time shall be deposited into the hurricane reserve trust fund.

(h) Any interest earned on the balance of the hurricane reserve trust fund shall be retained in the trust fund.

[~~(h)~~] (i) Moneys in the hurricane reserve trust fund or in trust or custodial accounts, created for the benefit of the fund's secured parties, shall be expended by the Hawaii hurricane relief fund or its authorized designee and used solely for the purposes of this chapter.

[~~(i)~~] (j) Moneys in the hurricane reserve trust fund may be disbursed upon dissolution of the Hawaii hurricane relief fund; provided that:

(1) The net moneys in the hurricane reserve trust fund shall revert to the state general fund after payments by the fund on behalf of licensed property and casualty insurers or the State that are required to be made pursuant to any federal disaster insurance program enacted to provide insurance or reinsurance for hurricane risks are completed; and

(2) If such moneys are paid on behalf of licensed property and casualty insurers, payment shall be made in proportion to the premiums from policies of hurricane property insurance serviced by the insurers in the twelve months prior to dissolution of the fund[;

provided that all interest earned from the principal in the hurricane reserve trust fund shall be transferred and deposited into the general fund each year that the hurricane reserve trust fund remains in existence]."

SECTION 3. Study of acquisition of catastrophic hurricane loss financing arrangement. (a) The board of directors of the Hawaii hurricane relief fund shall conduct a study to determine whether the acquisition of a catastrophic hurricane loss financing arrangement by the fund is feasible, practical, affordable, and in the public interest. The board shall conduct the study under the following assumptions:

(1) That the only source of annual premium payments is all or a portion of the annual interest earned on the balance of the Hawaii hurricane reserve trust fund; and

(2) That payouts from the financing arrangement shall be deposited into the Hawaii hurricane reserve trust fund, but subject to expenditure by legislative appropriation or, when an emergency is proclaimed by the governor, gubernatorial directive.

The board shall develop and study alternative scenarios of coverage, limits, premiums, interest amount available for premium payments, the deposit of insurance payouts into the major disaster fund established under section 127A-16, Hawaii Revised Statutes, and other terms and conditions of the catastrophic hurricane loss financing arrangement.

The board shall also study the best and quickest way to receive payouts and make the payments available for immediate expenditure by the state government. This shall include the deposit of payouts into the major disaster fund for immediate expenditure by the governor under an emergency proclamation.

(b) The board of directors shall submit the study, with findings, recommendations, and any proposed legislation, to the legislature and governor at least twenty days before the convening of the regular session of 2018.

SECTION 4. (a) There is appropriated out of the Hawaii hurricane reserve trust fund the sum of $50,000 or so much thereof as may be necessary for fiscal year 2017-2018 to conduct the study on the feasibility of acquiring a catastrophic hurricane loss financing arrangement as required under section 3 of this Act.

The sum appropriated shall be expended by the board of directors of the Hawaii hurricane relief fund for the purposes of this Act.

(b) Notwithstanding any law to the contrary, the board of directors of the Hawaii hurricane relief fund may expend the appropriation under this section for the specified purpose.

SECTION 5. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 6. This Act shall take effect on July 1, 2017.

Report Title:

Hawaii Hurricane Relief Fund; Interest Earned, Catastrophic Loss Financing Arrangement Study; Appropriation

Description:

Requires the interest earned on the balance of the Hawaii hurricane reserve trust fund to be retained in the trust fund. Requires the board of directors of the Hawaii Hurricane Relief fund to conduct a study of the acquisition of a catastrophic hurricane loss financing arrangement with all or a portion of the interest earned in the trust fund. Appropriates hurricane reserve trust fund moneys for the study. (SD1)

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