All About the ConCon and Charter Amendments on Your 2012 Hawaii Ballot

BY SEN. SAM SLOM – A number of people have called, emailed, or asked me in person, “what about those two state constitutional amendments and two city charter proposals on my ballot?”  These four important proposals have received little attention in the media, and many people already have filled out their absentee ballots in advance of the November 6 election without understanding the proposed changes.

So, what about these proposals?  The Neighbor Islands also have charter proposals, but I’m only going to address the statewide Constitutional Amendments and the Charter Amendments for Oahu.

State Constitutional Amendment Proposals

All voters will vote on two measures passed by the Legislature during 2012. Remember, in Hawaii—and only in Hawaii— a blank ballot is counted as a “NO” vote, not blank, for constitutional amendments.

The first proposals reads, (H.B. No. 2594, H.D. 2, S.D. 1, C.D. 1)

“PROPOSING AN AMENDMENT TO ARTICLE VII, SECTION 12, OF THE HAWAII STATE CONSTITUTION TO ASSIST DAM AND RESERVOIR OWNERS. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The purpose of this Act is to propose an amendment to article VII, section 12, of the Hawaii State Constitution, to authorize the State to issue special purpose revenue bonds and use the proceeds from the bonds to assist dam and reservoir owners.”

Special Purpose Revenue Bonds (SPRBs) have been issued by the state, on behalf of specific public and private organizations and projects, for many years. Most of them have been for educational institutions.The state does not guarantee the bonds and does not have fiscal liability. The bonds are issued to provide the organizations with a reduction in interest and other bond costs. State law defines the purposes for which these bonds can be issued as follows:

“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. Manufacturing, processing[,] or industrial enterprises;

2. Utilities serving the general public;

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

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

5. Low and moderate income government housing programs;

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

7. Agricultural enterprises serving important agricultural lands.”

The current proposal, if voters approve, would add the following: “[,]; or

8. Dam and reservoir owners.”

 

As the public learned, after the deadly Ka Loko Dam breach disaster on March 14, 2006, in Kilauea, Kauai, most dams and reservoirs in Hawaii are privately owned. The owners have a legal duty to maintain these dams and reservoirs at their expense, and not to alter the construction of the dam without the proper government permits. The state has an obligation to inspect the dams every five years.

There have been civil lawsuits filed against Kaloko’s dam owner, James Pflueger, alleging he illegally graded around his dam, covering its main safety feature, its spillway, which led to the deaths of eight people. Mr. Pflueger was charged criminally with 7 counts of manslaughter and one count of reckless endangerment, and this case continues in state court. Mr. Pflueger has taken no responsibility for the breach, and instead blames the state for its lack of inspections. The state Department of Land and Natural Resources director at the time of the breach, Peter Young, said the state’s records show Mr. Pflueger did not respond to requests to let the state inspect the dam.

This proposal on the 2012 ballot would provide authority to the state to issue SPRBs and to use the proceeds to repair and maintain any dam.

The issue is safety vs. private owner responsibility. If passed, this amendment would expand the activities covered by a SPRB and shift the financial responsibility to the taxpayers if the state issues the bonds. The Legislature still has the authority to pass or reject individual SPRB requests. This proposal is a thorny issue because it changes the current dynamic between private owner and government responsibility.

 

The second state proposal (S.B. 650, H.D. 1)

“PROPOSING AN AMENDMENT TO ARTICLE VI, SECTION 3, OF THE CONSTITUTION OF THE STATE OF HAWAII AUTHORIZING THE CHIEF JUSTICE OF THE STATE SUPREME COURT TO APPOINT RETIRED JUDGES TO SERVE AS EMERITUS JUDGES. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

SECTION 1. The purpose of this Act is to propose an amendment to article VI, section 3, of the Constitution of the State of Hawaii to authorize the chief justice of the supreme court to appoint judges who have retired upon attaining the age of seventy years as emeritus judges, permitting them to serve as temporary judges in courts no higher than the court level they reached prior to retirement and for terms not to exceed three months.”

State law requires that judges retire at a mandatory age of 70. Remember several years ago when two prominent State Supreme Court judges were nearing retirement? Members of the Majority Party sought to change the law to allow the judges to continue. The Constitutional proposal at that time failed. The two judges were retired. There was little opposition to changing the law for future judges, since current judges knew the retirement age prior to accepting the position.

This current proposal does not change the retirement age. It does allow for retired judges to be appointed for interim duty, of not more than three months, at the same level (circuit court, Intermediate, or Supreme Court) that they served prior to retirement. Often, there is a judicial vacancy, a judge may be ill, or the case load is so substantial that an interim judge is required and appointed. This proposal adds retired judges to the mix and faced no opposition. There does not seem to be a downside for approval.

 

City & County of Honolulu Charter Amendments

There are two resolutions to amend the Honolulu Charter:

Resolution 121-44, CD1, FD1 reads,

“Should a minimum of one-half of one percent of annual general fund revenues be appropriated for grants in aid to be awarded by the City to federal income tax exempt non-profit organizations to provide services to economically and/or socially disadvantaged populations or provide services for public benefit in the areas of the arts, culture, economic development or the environment?”

Mandatory appropriations for grants are generally not a good fiscal idea. It locks the government, state or county, into continued funding, regardless of fiscal position. Grants are currently awarded by both the state and counties, but the grantee has to make its case and usually there is a single, direct grant appropriation. This proposal calls for a “minimum” of ½ of 1% of general fund revenues and if taxes rise, so does this amount. This is not a positive step in fiscal transparency or budgeting.

 

The second Honolulu proposal, Resolution 12-113, asks,

“Shall the Revised City Charter be amended to authorize the City Council, on its own initiative or on the recommendation of the Mayor, to establish funds to ensure that, when appropriate, moneys collected by the City from licenses, fees, taxes and other revenue sources are set aside and expended for their intended public purposes?”

I have to admit my bias—and Senate voting record—in opposing the creation of new “special funds.” (Lowell Kalapa, president of the Tax Foundation, Inc. of Honolulu, also has been a long time critic of special funds).  I think it is a bad idea and we have seen numerous negative results at the state level.  This proposal would not be good for Honolulu taxpayers either, in my opinion.

Special funds are supposed to be earmarked for a special, limited purpose, but as we have seen over and over again, there is no way of guaranteeing monies deposited in these funds can only be used for those purposes.

As a result, “raids” have taken place at the state—and Honolulu level—to scoop the monies out of these special funds—often without the public’s scrutiny— and place them in the general fund for any type of  spending. The state Highway Fund, Hurricane Relief Fund, Rainy Day Fund and others are current examples of taking monies away from the special funds. At the City level, the same has been done in the past to the Sewer Fund. Ultimate result? The objective of the fund is not realized, it is harder to track taxpayer money, the special funds are kept apart from the overall budget process, and taxes or fees go up to make up for the losses. This seems to be a lose-lose option.

 

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