The following testimony was submitted by the Grassroot Institute of Hawaii for consideration by the House Committee on Housing on Feb. 12, 2025.
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Feb. 12, 2025, 9 a.m.
Hawaii State Capitol
Conference Room 430 and Videoconference
To: House Committee on Housing
Rep. Luke Evslin, Chair
Rep. Tyson Miyake, Vice-Chair
From: Grassroot Institute of Hawaii
Ted Kefalas, Director of Strategic Campaigns
RE: HB422 — RELATING TO SCHOOL IMPACT FEES
Aloha Chair Evslin, Vice-Chair Miyake and other members of the Committee,
The Grassroot Institute of Hawaii supports HB422, which would abolish school impact fees and transfer all unencumbered monies the state has collected from these fees to the School Facilities Special Fund.
Grassroot believes school impact fees increase housing costs and might be unconstitutional. In addition, the money generated by the fees has never been spent, so why have the fees at all?
Concerning housing prices, the fact is that homebuilders quite naturally are going to incorporate the cost of their various fees into their sales prices, which means higher home prices and higher rents.
It is no coincidence that school impact fee waivers were included in Gov. Josh Green’s 2023 emergency order relating to housing. In fact, the first action taken, in 2024, by the Beyond Barriers Working Group established by the emergency order was to waive the school impact fee for a 52-unit rental project in downtown Honolulu.
The school impact fee for projects in the downtown area is $3,864 per unit, which would have added $200,928 to the project’s overall construction costs.[1]
A couple of years before that, in 2022, Howard Hughes Holdings had to pay the DOE $3,864 per unit in school impact fees to build its 565-unit Ward Village condo on Oahu — for a total of $2.18 million. To recoup its costs, the company passed the fees along to its buyers in the form of closing costs.[2]
Regarding constitutional concerns, the Hawaii Office of the Auditor warned in a 2019 report that the DOE’s school impact fees might violate the constitutional requirement that there be a “nexus” between proposed new units and the need for more classroom capacity.[3]
Meanwhile, the negative effect of school impact fees on housing growth is not offset by a commensurate benefit to local schools. The state auditor’s 2019 report noted that between 2007, when the fees were established, and 2018, the DOE had collected $5.34 million in impact fees,[4] yet had not spent any of that amount on anything.
Just last month, in December 2024, Tax Foundation of Hawaii President Tom Yamachika wrote that “we now have a cumulative balance of a little less than $20 million in the [school] impact fee accounts, [and] we continue to ask when this money is going to be used to do something at these schools.”[5]
So ultimately, Hawaii’s school impact fees are contributing to Hawaii’s high housing costs, are likely unconstitutional, and are not being used in any way to benefit the schools they are intended to benefit.
Thank you for the opportunity to testify.
Ted Kefalas
Director of Strategic Campaigns
Grassroot Institute of Hawaii
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[1] Andrew Gomes, “Housing panel makes first development decision,” Honolulu Star-Advertiser, Jan. 3, 2024.
[2] Andrew Gomes, “Ward Village Builder Charges Buyers Separate Fee to Cover School Impact Assessment,” Honolulu Star-Advertiser, Oct. 2, 2022.
[3] “Audit of the Department of Education’s Administration of School Impact Fees: A Report to the Governor and the Legislature of the State of Hawai‘i,” Office of the Auditor, State of Hawaii, September 2019, p. 11.
[4] “Audit of the Department of Education’s Administration of School Impact Fees,” p. 6.
[5] Tom Yamachika, “Hoarding More School Impact Fees,” Tax Foundation of Hawaii, Dec. 30, 2024.
