Chapter 17

DEPARTMENT OF BUDGET AND FINANCE
Adoption of Chapter 6-17
Hawaii Administrative Rules
March 23, 2005
SUMMARY
Chapter 17 of Title 6, Hawaii Administrative Rules, entitled "Special
Purpose Revenue Bonds for Not-for-Profit Private Nonsectarian and Sectarian
Elementary Schools, Secondary Schools, Colleges, and Universities" is adopted.

HAWAIi ADMINISTRATIVE RULES
TITLE 6
DEPARTMENT OF BUDGET AND FINANCE
CHAPTER 17
SPECIAL PURPOSE REVENUE BONDS FOR NOT-FOR-PROFIT
PRIVATE NONSECTARIAN AND SECTARIAN ELEMENTARY
SCHOOLS, SECONDARY SCHOOLS, COLLEGES, AND UNIVERSITIES
Subchapter 1 General Provisions
§6-17-1 Purpose
§6-17-2 Definitions
§§6-17-3 to 6-17-5 (Reserved)
Subchapter 2 Application Process
§6-17-6 Letter of intent
§6-17-7 Determination of eligibility
§6-17-8 Application; application fee
§6-17-9 Fee agreement
§§6-17-10 to 6-17-12 (Reserved)
Subchapter 3 Review Process
§6-17-13 Determination of responsibility
§6-17-14 Project agreement
§6-17-15 Estimate of benefits
§6-17-16 Public access to information
§§6-17-17 to 6-17-19 (Reserved)
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§6-17-1
Subchapter 4 Miscellaneous Provisions
§6-17-20 Severability
§6-17-21 Waiver
SUBCHAPTER 1
GENERAL PROVISIONS
§6-17-1 	Purpose. 	This chapter is adopted pursuant to chapter 91, HRS,
and implements part VIII of chapter 39A, HRS, providing for the issuance of
special purpose revenue bonds to assist not-for-profit corporations that provide
nonsectarian and sectarian elementary schools, secondary schools, colleges and
universities serving the general public. The objectives of this chapter are:
(1) 	To offset the growth of the cost of providing elementary,
secondary, and post-secondary education to the people of the
State of Hawaii;
(2) 	To assist in the development and maintenance of sectarian and
nonsectarian elementary, secondary, and post-secondary
educational facilities by providing the proceeds of special purpose
revenue bonds to not-for-profit corporations for the purpose of
providing sectarian and nonsectarian elementary, secondary, and
post-secondary educational facilities, or for refinancing debt
incurred to provide sectarian and nonsectarian elementary,
secondary, and post-secondary educational facilities; and
(3) 	To provide a means for the not-for-profit corporations so assisted
to provide sectarian and nonsectarian elementary, secondary, and
post-secondary educatio~the ge~al public at the lowest
practicable cost. 	[Eff 	1 r 2ll"1 	] (Auth: HRS §26-
38) (Imp: HRS Chapter 39A)
§6-17-2 Definitions. 	For the purpose of this chapter:
"Bonds" means the special purpose revenue bonds or special purpose
revenue bond anticipation notes issued pursuant to part Vlll, chapter 39A, HRS.
"Loan" means the loan of the proceeds of bonds to a project party for the
purposes authorized by part VIII, chapter 39A, HRS.
"Project" means a facility eligible under part VIII, chapter 39A, HRS, to
be financed or refinanced with the loan of the special purpose revenue bond
proceeds and includes any property used primarily for private nonsectarian and
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§6-17-7
sectarian elementary schools, secondary schools, colleges and universities
serving the general public; provided that it shall not include any property to be
used primarily for sectarian instruction or study, or as a place for devotional
activities or religious worship, or any property used primarily in connection
with any part of a program of a school or department of divinity of any religious
denomination. 	[Eff 	,APR 1 1 2D1J§ 	] 	(Auth: HRS §2G-38)
(Imp: HRS Chapter 39A)
§§6-17~ 3 to 6- I 7-5 (Reserved)
SUBCHAPTER 2
APPLICATION PROCESS
§6-17-6 Letter of intent. 	An applicant shall submit a letter of intent for
a project agreement to the director of finance 	The Jetter shal1 contain, at a
minimum, the following information:
(1) 	The approximate principal amount of the special purpose revenue
bonds, not including bond issuance costs. This amount represents
the net proceeds of the bonds required for the financing of the
cost of the facility.
(2) 	A general description of tht: educational fadlity to be fiuam.:e<.l,
including the types of services to be provided and the number of
students to be served.
(3) 	The proposed security for the repayment of the bonds.
(4) 	If the facility involves new construction, the estimated timetable
for its construction and availability for use.
(5) 	The proposed timetable for the issuance of the bonds.
[Eff 	APR 11 ml> 	] (Auth: HRS §26-38) (Imp: HRS
§39A-252)
§6-17-7 Determination of eligibility. 	(a) The department shall review
the letter of intent and related documentation submitted by an applicant and shall
determine whether the applicant is a "project party" as defined in section 39A-
251, HRS, and whether the project described in the application is a "project" as
the term is defined in section 6-17-2.
(b) Within ten business days of receipt of a letter of intent, the
department shall send the applicant a written acknowledgement of the receipt of
the letter of intent and shall inform the applicant preliminarily, whether, based
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§6-17-7
on the information provided, the applicant is an eligible project party and the
proposed elementary, secondary, and post-secondary facility is a project eligible
for financing. 	[Eff 	APR 1 1 2tJli 	] (Auth: HRS §26-38) (Imp:
HRS §39A-254)
§6-17-8 Application; application fee. 	(a) Upon receipt of the
acknowledgement from the department containing the determination that the
applicant is an eligible project party and that the elementary, secondary, and
post-secondary facility is an eligible project, the project party may submit an
application for assistance on the application form prescribed by the director.
(b) Any application submitted by a project party must be accompanied by
an application fee of $1,000, payable by certified or cashier's check made
payable to the department. The application fee shall be applied against the
amounts owing under the fee agreement. 	[Eff 	APR 1 1 2(16 	] (Auth:
HRS §26-38) (Imp: HRS §39A-254)
§6-17-9 Fee agreement. 	An executed copy of a fee agreement in the
form prescribed by the director shall be submitted with the application. The fee
agreement shall obligate the project party to reimburse the department and the
State for any and all costs and expenses incurred in:
(1) 	The processing and reviewing of the project party's application for
assistance under part VIII, chapter 39A, HRS, whether or not the
special purpose revenues bonds are ultimately issued to finance the
project; and
(2) 	The issuance of bonds to finance a loan to the project party.
[Eff 	APR 1 1 20l1S 	] (Auth: HRS §26-38) (Imp: HRS
§39A-254)
§§6-17-10 to 6-17-12 (Reserved)
SUBCHAPTER 3
REV lEW PROCbSS
~6-17-13 Determination of re~J29!1Sibility. 	The department shall
determine whether a project party is a responsible party. The determination shall
be made on a case-by-case basis. 	The following elements shall be considered in
making the determination:
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§6-17-15
(1) 	The experience of the project party in providing elementary,
secondary, and post-secondary education to the general public
and in providing the type of service represented by the project;
(2) 	The financial condition of the project party and the ability of the
project party to make the payments that would be required by the
project agreement from reveuut:s ueii vt:u frum tht: prujet:t or
otherwise;
(3) 	The security proposed for the loan including, if any, the real or
personal property, or both, to be pledged, mortgaged, or leased,
and the presence of a guaranty of a third party, including a
controlling party of the project party;
(4) 	If determined necessary or desirable by the department, a
financial feasibility study prepared by an independent party
approved by the department, or other projection of the future
ability of the project party to repay the loan;
(5) 	The project party's credit reputation including, if the project has
been previously financed, the project party's experience with
respect to the prior financing of the project; and
(6) 	Any other factors the department deems relevant to a
determination of responsibility with respect to any project party.
[Eff 	APR 1 1 Lffl> 	] (Auth: HRS §26-38) (Imp: HRS
§39A-254)
§6-17-14 Project agreement. 	Upon a determination of eligibility and
responsibility, and with the approval of the governor, the department shall enter
into a project agreement with the project party. The project agreement shall
conform to the requirements of part VIII, chapter 39A, HRS, and shall contain
any additiona 1 terms and conditions as the department deems necessary or
desirable. 	[Eff 	APR 1 1 2005 	] (Auth: HRS §26-38) (Imp: HRS
§39A-255)
§6-17-15 Estimate of benefits. 	(a) Each project party that has entered
into a project agreement with the department shall prepare an estimate of the
benefits to be derived trom financing the project with the proceeds of a loan.
The benefits shall be the amount projected to be saved by consumers of the
services of the project party over the life of the bonds to be issued to fund the
loan as a result of financing the project with the proceeds of a loan rather than
by alternative means. The following shall be elements of any estimate of
benefits:
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§6-17-15
(1) 	The interest rate to be assumed on the bonds proposed to be
issued to finance the project shall be the interest rate supplied to
the project party by the department;
(2) 	The interest rate to be employed in calculating the cost of
alternative financing of the project shall be:
(A) 	In the case of a proposed refinancing through a loan, the
interest rate on the existing financing; or
(B) 	If the loan is to be the initial financing of the project, the
interest rate that would be charged to the project party by
a financial institution with which the project party has a
continuing relationship or the interest rate supplied by
another source, in either case, as approved by the
department for use in the estimate of benefits.
(b) The estimate of benefits shall demonstrate a savings in interest
expense that will result in a savings to consumers of the services of the project
party by reducing the amount of allowable costs that would otherwise be
incurred by the project party, and consequently a reduction in payments by
consumers using the project. In addition, the effect of decreased interest expense
shall be reflected in lower charges by the project party to consumers than would
be the case if bonds were not issued to finance the project. The foregoing shall
be demonstrated by calculating:
(1) 	The interest expense to the project party if the project is financed
at the interest rate set forth in subsection (a)(l); and
(2) 	The interest expense to the project party if the project is financed
at the interest rate set forth in subsection (a)(2).
(c) The department may furnish the project party with the format to be
used in ,aking the .calculations required by subsection (b).
[Eff 	iPR I l 2IDi 	] (Auth: HRS §39A-271) (Imp: HRS §39A-271)
§6-17-16 Public access to information. 	Records maintained by the
department relating to the special purpose revenue bond project shall be
available to the public pursuant to chapter 92F, HRS.
[Eff 	APR l t 2fll 	J (Auth: HRS §39A-270) (lmp: 	HRS §39A-270)
§§6-17-17 to 6-17-19 (Reserved)
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§6-17-21
SUBCHAPTER 4
MISCELLANEOUS PROVISIONS
§6~ 17-20 Severability. If any part, section, sentence, clause, or phrase
of this chapter, or its application to any person or transaction or other
circumstances, is for any reason held to be unconstitutional or invalid, the
remaining parts, sections, sentences, clauses, and phrases of this chapter, or its
application to other persons or transactions or circumstances, shall not be
affected. 	[Eff 	APR 1 1 2005 	] 	(Auth: HRS §26-38) (Imp: 	HRS
§39A-252)
§6-17-21 Waiver. 	The director of the department may waive or vary
particular provisions of this chapter to conform to applicable federal
requirements. 	[Eff 	~R 	• 	] 	(Auth: HRS §26-38) (Imp:
1HRS §39A-252) 	l
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