The following testimony was submitted by the Grassroot Institute of Hawaii on March 28, 2025, for consideration by the Senate Committees on Ways and Means and Education.
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March 28, 2025, 10 a.m.
Hawaii State Capitol
Conference Room 211 and Videoconference
To: Senate Committee on Ways and Means
Sen. Donovan Dela Cruz, Chair
Sen. Sharon Moriwaki, Vice-Chair
Senate Committee on Education
Sen. Michelle Kidani, Chair
Sen. Donna Mercado Kim, Vice Chair
From: Grassroot Institute of Hawaii
Ted Kefalas, Director of Strategic Campaigns
RE: HB422 HD1 SD1 — RELATING TO SCHOOL IMPACT FEES
Aloha chairs, vice-chairs and other members of the committees,
The Grassroot Institute of Hawaii supports HB422 HD1 SD1, 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’s new brief “Getting schooled: The case against school impact fees in Hawaii” outlined why school impact fees no longer make sense for Hawaii.
For starters, school impact fees increase housing costs — as evidenced by the fact that Gov. Josh Green suspended them via emergency proclamations for the rebuilding of Lahaina and for affordable housing projects covered under his housing orders.
In addition, Hawaii’s school impact fee system is likely unconstitutional, the money generated by the fees has never been spent, and student enrollment in areas subject to the impact fees has been declining.
Regarding 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 the first action taken by the Beyond Barriers Working Group, established by the governor’s emergency order on affordable housing, 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 has not been 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 state Department of Education had collected $5.34 million in impact fees,[4] yet had not spent any of that amount on anything.
This past December, 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.
