18 Bills Vetoed, Including Molokini and Lānaʻi Legislation

Governor David Ige notified legislative leaders and key lawmakers that he will veto 18 of 20 bills on his Intent to Veto list, and allow two items to become law without his signature.

The list includes a vacation rental tax collection bill.  Governor Ige said he’s concerned that the collection of taxes on illegal transient accommodations could be viewed as legitimizing these operations. In explaining the veto, he said the state’s taxation of transient accommodations through hosting platforms should complement the counties’ regulation of short term rentals.

Another item that was vetoed would have limited the number of commercial use permits at Molokini islet to no more than 40 and prohibit the state from issuing new permits. It would have also limited access at any given time to 50 percent of the current number of permit holders.  Governor Ige said the measure was unnecessary as there are already limits in place.  He said language in the bill was counter-productive to state efforts to address overcrowding.  DLNR is in the process of working with the commercial use permit holders to adjust the operating schedules to coordinate access to better manage the impact of commercial activity at the site.

On Lānaʻi, a measure was vetoed that would have allowed the state Department of Land and Natural Resourced to lease Mānele Small Boat Harbor.  Governor Ige said that although DLNR had sought general authorization for public-private partnerships of small boat harbors, the measure would have designated Mānele Small Boat Harbor as a pilot program without public input.

PC: Office of Governor David Ige.

Below is a rundown of each item and Gov. Ige’s reasons for vetoing them:

HB290            RELATING TO THE UNIFORM CONTROLLED SUBSTANCES ACT.

This measure authorizes qualifying patients or out-of-state patients to transport medical cannabis between islands for their personal medical use.

Rationale: Marijuana, including medical cannabis, remains illegal under federal law. Both the airspace and certain areas of water fall within the exclusive jurisdiction of the federal government. This bill may lead travelers, acting in reliance on this provision, to erroneously believe they are immune from federal prosecution. Additionally, there are a number of operational concerns for both the State Department of Transportation and the State Department of Public Safety.

HB323            RELATING TO MOTOR VEHICLE REGISTRATION.

This bill would classify certain former military vehicles as special interest vehicles and enable owners to apply for registration of these motor vehicles. The change would allow specific pre-1995 vehicles including Humvees, Pinzgauers, Kaiser Jeep M715s, and DUKWs (“Ducks”) to operate on the public roadways.

Rationale: The original intent of the special interest vehicle legislation was to address the needs of collector enthusiasts who invest in acquiring, restoring and maintaining pre-1968 vehicles by allowing them to be showcased. Classifying these military vehicles as “special interest vehicles” will result in the violation of Federal Motor Safety Standards and allow vehicles that do not pass emission testing standards on our roadways.

HB407            RELATING TO EDUCATION.

This bill requires that Board of Education approval be obtained prior to the termination of a Department of Education complex area superintendent.

Rationale: The Board of Education already has the authority to establish a policy allowing the Board to approve the termination of a complex area superintendent. Moreover, this bill may impact the Board’s role as an appellate body as well as the appeal rights of complex area superintendents.

HB629            RELATING TO MEDICAL RELEASE.

This bill creates a formal medical release program within the Hawai‘i Paroling Authority (HPA) to allow inmates with terminal or debilitating diseases or illnesses to be released from custody before the expiration of their sentence. The Director of Public Safety, an inmate or an inmate’s representative may submit a written request for medical release. The bill also sets forth specific requirements for both HPA and the Public Safety Department (PSD) to follow when establishing and implementing the medical release program.

Rationale:  A Medical Release Program has been in existence in PSD and HPA policies since December 2014. This bill mandates that PSD and HPA complete certain tasks within short periods of time, but does not provide more funding for more staff. There are also concerns that this bill opens the referral process for medical release to an inmate or an inmate representative, who may or may not be medically trained. The PSD Health Care Division would be required to provide a detailed, comprehensive medical assessment within 20 days of receipt of each referral.

HB655            RELATING TO HEALTH.

This measure designates the month of September as “Suicide Prevention and Awareness Month” to increase public awareness of suicide prevention education, resources, and support available in Hawaii.

Rationale: HB655 HD1 SD1 should be vetoed because it was erroneously transmitted to the Governor. The Governor firmly believes in the merits of the bill and will designate September of this year as “Suicide Prevention and Awareness Month” by executive order. Additionally, he will work with the legislature to make the necessary legislative fixes so September will be properly designated next session.

HB702            RELATING TO SATELLITE NAVIGATION TECHNOLOGY.

This measure prohibits the sale or offering for sale of location data that is recorded or collected by a satellite navigation technology-equipped device without the explicit consent of the individual who is the primary user of the device.

Rationale: This measure attempts to regulate a complex national industry without sufficient and appropriate wording to ensure consistent compliance and enforcement. There are concerns about unintended consequences if this measure becomes law.

HB748            RELATING TO PROPERTY FORFEITURE.

This bill would prohibit civil asset forfeiture unless there is a felony conviction of the owner of the property. The bill also would also change the distribution of forfeiture proceeds from the state and local law enforcement agencies to the state general fund.

Rationale: Civil asset forfeiture is an effective and critical law enforcement tool that prevents the economic benefits of committing a crime from outweighing consequential criminal penalties and punishment. This measure would also abolish civil asset forfeiture related to serious misdemeanor and petty misdemeanor crimes that negatively impact our society, natural resources, and environment. Furthermore, safeguards presently exist in Hawaii’s asset forfeiture statutes that prevent the abuses cited in the bill.

HB1032         RELATING TO STATE BOATING FACILITIES.

This measure would establish a state boating facility lease pilot program within the Department of Land and Natural Resources (DLNR) to be implemented and managed by the Division of Boating and Ocean Recreation (DOBOR). DLNR would be able to lease Manele Small Boat Harbor in its entirety, to include fast lands and submerged lands within it, for the private development, management, and operation of its facilities.

Rationale: Although DLNR had sought general authorization for public-private partnerships of small boat harbors, this measure designates Manele Small Boat Harbor as a pilot program without public input.

HB1133         RELATING TO MARINE LIFE CONSERVATION DISTRICTS.

This measure would limit the number of commercial use permits for the Molokini Shoal marine life conservation district (MLCD) to no more than 40 and prohibit the Department of Land and Natural Resources (DLNR) from issuing new permits. It would also limit access at any given time to 50 percent of the current number of permit holders.

Rationale: This measure is unnecessary as DLNR already limits the number of Molokini Shoal MLCD commercial use permits to 40. The language that limits access to 50 percent of the current number of permits at any given time is actually counter-productive to DLNR’s efforts to address overcrowding. DLNR is in the process of working with the commercial use permit holders to adjust the operating schedules to coordinate access to better manage the impact of commercial activity on this precious natural resource.

HB1276         RELATING TO EDUCATION.

This bill would establish a working group to develop best practices for collaborative teacher preparation time and expanded learning time for students in public schools. Some of the items to be considered are the establishment of collaborative teacher preparation time, the placement of classroom desks to facilitate group learning, and the rotation of principals among the public schools. The working group would submit a report of findings to the legislature, superintendent of education and all complex area superintendents.

Rationale: While this bill is well-intentioned, it would encourage the development of a “one-size-fits-all” approach to schools. Issues involving planning and expanding learning time are best left to the specific schools to address, as these matters must consider the distinct needs of a particular school as well as the unique needs of our students. Furthermore, planning and learning time are matters better left to the Board of Education, as they fit squarely within its statutory and constitutional authority.

SB92               RELATING TO POLICE REPORTS.

This bill would allow surviving immediate family members of murder or manslaughter victims to receive a copy of the closing police report at the conclusion of all related criminal and civil proceedings for the offenses of murder and manslaughter.

Rationale:  Immediate family members of victims of all crimes already have the right to receive closing police reports, which makes this bill unnecessary.  Furthermore, restricting this right to immediate family members of only murder or manslaughter victims may lead to a narrow interpretation of the law, leaving family members of victims of other crimes without access to closing police reports. Under current law, members of the general public can obtain copies of any police report after the conclusion of criminal and civil proceedings, provided certain conditions are met in accordance with the Uniform Information Practices Act.

SB301            RELATING TO TAXATION OF REAL ESTATE INVESTMENT TRUSTS.

This measure would not allow “dividends paid deductions” for real estate investment trusts (REITs).

Rationale: This measure could discourage the business community from investing in Hawai‘i. Disallowing dividends paid deduction for REITs could potentially stifle economic development and scare away investment capital to address our aging infrastructure. From an economic development perspective, REITs provide stable economic growth and long-term benefits – including job creation – that will extend the supply chain into rental and commercial properties.

The benefits of continuing with this federally established legislation are clear and quantifiable. REITs are an important investment vehicle for all types of investments in Hawai‘i. If the state corporate income tax is imposed on a REIT, there may be negative impacts to the state’s economic health and business climate, such as the reduction of general excise, property and state income taxes.

Overall, the unintended consequences of imposing a corporate tax on REITs, are not worth the potential benefits. Hawai‘i needs to be a place that is able to attract investment capital in order to create jobs and a sustainable economy.

SB1292          RELATING TO TRANSIENT ACCOMMODATIONS.

This bill would require hosting platforms that collect fees for booking services, to register as tax collection agents and collect general excise and transient accommodation taxes for transient accommodation bookings from operators and plan managers.

Rationale: The state’s taxation of transient accommodations through hosting platforms should complement the counties’ regulation of transient accommodations. While the taxation of illegal transient accommodation uses would not legalize these operations, there is concern that the collection of taxes on illegal transient accommodations could be viewed as legitimizing these operations.

Additionally, the recent passage of Bill 89 (2018) by the Honolulu City Council, which is pending signature by Mayor Kirk Caldwell, is an example of a county that has enacted specific enforcement provisions governing transient accommodations and hosting platforms. These measures, and other such county measures, raise significant issues for the Department of Taxation that were not fully contemplated by the Legislature when it passed SB 1292.

Both the federal Internal Revenue Service and the State Tax Department are obligated to collect taxes on business activity, whether legal or illegal, as affirmed by the U.S. Constitution (16^th Amendment) and a hundred years of court decisions. While SB 1292 may make tax collection more efficient, the recent passage of Bill 89 (2018) by the Honolulu City Council could affect certain logistics in the collection of those taxes. Further review is required to ensure there are no adverse unintended consequences that were not fully contemplated by the Legislature or DOTAX when the bill was debated during the Legislative Session.

SB1353          RELATING TO INDUSTRIAL HEMP.

This measure establishes an industrial hemp licensing program requiring the Department of Agriculture to create an industrial hemp plan to be approved by the United States Department of Agriculture (USDA). The bill also makes various statutory changes, including removing from criminal regulation the cultivation, possession or sale of either licensed or unlicensed industrial hemp.

Rationale: There are concerns that this bill creates a licensing structure that cannot be enforced, will not meet USDA requirements for an approved industrial hemp program, and creates practical problems in the enforcement of existing medical cannabis.

Although the 2018 Farm Bill removes hemp from the controlled substances list, there are restrictions in SB1353 that would prevent Hawai‘i from properly regulating this industry. Hawai‘i’s unique tropical environment and year-round growth calendar allows between 3 to 4 crop cycles per year. While this is a positive for most crops, the fine line between hemp and marijuana creates complexities. The limitation of inspection to one time per calendar year would allow hemp growers to cultivate marijuana for the remainder of the calendar year following their one allowed inspection.

Although I support the growth and development of Hawai‘i’s hemp industry, the increased THC concentration in new marijuana strains is a concern for our communities. We cannot allow unregulated growth cycles of hemp if it could result in unsupervised growth of marijuana.

I want to assure you that the veto of this measure will not delay Hawai‘i’s industrial hemp program. All states are patiently awaiting USDA’s implementation of its final rule for the Hemp Protection Program. Upon release, HDOA will work with the legislature to mesh the federal rules with our local legislation to ensure that we have a program that meets federal requirements and provides proper oversight of the industry.

SB1405          RELATING TO ELECTRONIC SMOKING PRODUCTS.

This bill requires public school teachers or educators to confiscate e-cigarettes or electronic smoking devices (ESDs) from students; requires the Department of Health to create a safe harbor program for disposing ESDs; and increases the fines from $10 to $100 for any person under the age of 21 who violates laws relating to electronic smoking devices.

Rationale:  There are considerable implementation concerns and unknown costs relating to certain provisions in this bill. This measure does not include a definition for an “electronic cigarette”. A definition is necessary to provide teachers, educators and students with an understanding of what items are subject to confiscation. Furthermore, confiscating and destroying evidence of a crime may hinder prosecution of those individuals responsible for selling or furnishing electronic cigarettes to persons under the age of 21. It should be noted that the costs to plan for and to create a safe harbor program, store and destroy ESDs, including the hazardous nicotine waste contained in these devices, are unknown and unfunded.

SB1423          RELATING TO PAYMENT OF BAIL.

This bill allows defendants for whom a monetary amount of bail has been set, to pay the bail amount seven-days-a-week on a twenty-four-hour basis and be released from custody upon posting or payment of bail.

Rationale: This bill is redundant to bail reform provisions within HB1552 Relating to Public Safety and is unnecessary. It requires the Department of Public Safety to establish a process to collect bail funds on a 24/7 basis without additional funding to staff and support this new mandate.

SB1459          RELATING TO THE STATE SURFING COMMISSION.

This bill establishes a temporary State Commission on Surfing within the Department of Accounting and General Services (DAGS) to promote surfing internationally and within the state.

Rationale:  While the Administration supports the promotion of surfing, the purpose of the commission is clearly outside of DAG’s mission of delivering quality support services in the areas of physical, financial and technical infrastructure support for state departments and agencies. Additionally, no funds were appropriated for this bill, making it extremely difficult for the commission to operate. Legislation can be introduced next session to establish the commission in a more appropriate department and provide the necessary funding to successfully operate the commission.

SB1530          RELATING TO THE HAWAII COMMUNITY DEVELOPMENT AUTHORITY.

This measure would convert the means of financing for the Hawaiʻi Community Development Authority (HCDA) staff from the Hawaiʻi Community Development revolving fund to the general fund. This is contingent upon HCDA developing a plan to transfer control of the Kakaʻako Community Development District to the City and County of Honolulu.

Rationale: The tight timeline to complete the required work to meet the conversion requirements could potentially threaten funding for 13 HCDA positions in the third quarter of the upcoming fiscal year. This could cause instability over the biennium and force a temporary reduction in force. HCDA is committed to developing a comprehensive transition plan to transfer control of the Kakaʻako Community Development District to the City and County of Honolulu and propose legislation for next year’s legislative session.

Bills on the Intent to Veto List that will become law WITHOUT the Governor’s signature:

SB33               RELATING TO ECONOMIC DEVELOPMENT.

This measure would increase the annual rolling cap for the motion picture, digital media and film production income tax credit from $35 million to $50 million. It would further require the University of Hawaiʻi and Hawaiʻi Technology Development Corporation (HTDC) to execute a memorandum of understanding for a no-cost lease agreement that would include a provision requiring the title be transferred to HTDC within six years.

Rationale: I’m allowing this bill to become law without my signature because Hawaiʻi’s thriving motion picture, digital media, and film production industry play a critical role in strengthening our local economy. The increased tax credit will help to fulfill one of my administration’s goals of creating an environment that encourages economic growth and creates jobs throughout our islands.

Although this bill infringes on the University of Hawaiʻi’s constitutional autonomy, the portion of the bill that requires the execution of a memorandum of agreement between the University of Hawaii and HTDC does not go into effect until December 31, 2020. My administration will be working closely with the legislature next session to reevaluate this requirement and make the necessary changes to restore the university’s autonomy.

SB551            RELATING TO CONDOMINIUMS.

This measure clarifies the right of condominium associations to conduct non-judicial foreclosures, even if the governing documents do not have an explicit power of sale provision. The bill also requires the foreclosing association to offer mediation with any notice of default and intention to foreclose and the prescribed procedure when mediation is chosen by the consumer.

Rationale: I am allowing this bill to become law without my signature because it provides a necessary clarification for our condominium law. Although there are concerns with the retroactivity, the prospective application has utility and value. The severability clause in this measure will allow appropriate judicial review.

The attorney general’s office will work with affected parties to address the bill’s implementation challenges to help both foreclosing associations and delinquent homeowners in condominiums achieve the legislative intent of this measure.