The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the Senate Committee on Judiciary and Hawaiian Affairs on March 14, 2023.
March 14, 2023
Conference Room 325 and via videoconference
To: Senate Committee on Judiciary and Hawaiian Affairs
Senator Karl Rhoads, Chair
Senator Mike Gabbard, Vice Chair
From: Grassroot Institute of Hawaii
Joe Kent, Executive Vice President
RE: SB1295 SD 2 — PROPOSING AMENDMENTS TO ARTICLE VII, SECTIONS 12 AND 13, OF THE HAWAII CONSTITUTION TO EXPRESSLY PROVIDE THAT THE LEGISLATURE MAY AUTHORIZE THE COUNTIES TO ISSUE TAX INCREMENT BONDS AND TO EXCLUDE TAX INCREMENT BONDS FROM DETERMINATIONS OF THE FUNDED DEBT OF THE COUNTIES.
Dear Chair and Committee Members:
The Grassroot Institute of Hawaii would like to offer comments on SB1295 SD2, which proposes an amendment to the state constitution that would allow the Legislature to authorize the counties to use tax increment bonds and would exempt such bonds from the counties’ debt limits.
Tax increment bonds — used for tax increment financing (TIF) — are a common economic development tool in many states. We are concerned, however, that their track record is mixed and in many cases they are ineffective at generating meaningful economic growth.
For example, a 2019 study by the Brookings Institution on tax increment financing in Broome County, New York, reports that “TIF is associated with significant growth in property values and tax revenue in TIF neighborhoods, but it has very little impact on growth in employment.”
In addition, Hawaii’s already sky-high property values may make it difficult for tax increment programs to boost property values much higher, which would render them largely ineffective at generating additional tax dollars or economic activity.
Further, we are also concerned that this constitutional amendment would exempt such bonds from the counties’ debt limits. The state Constitution currently provides that counties may have outstanding debt equal to no more than 15% of the assessed value of the properties in their jurisdictions.
These limits were put in place to protect county taxpayers from excessive debt and spending. Weakening them with dubious tax increment bonds could put taxpayers on the hook for much higher amounts of debt whenever the tax increment programs fail to pay for themselves.
If this measure moves forward, we encourage the committee to amend it to subject tax increment bonds to the counties’ debt limits.
Thank you for the opportunity to testify.
Executive Vice President
Grassroot Institute of Hawaii