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Council committee advances bill creating taxable general improvement bond fund for mixed-use housing
Summary
The Honolulu City Council Budget Committee amended and reported out Bill 54, creating a fund to receive and expend proceeds from taxable general obligation bonds to finance executive capital budget improvements—aimed at projects with mixed commercial/residential uses that require taxable financing to avoid federal arbitrage rules.
The Honolulu City Council Committee on Budget on Jan. 10 advanced Bill 54 of 2024 after adopting a hand-carried CD1 that specifies the new fund will pay appropriations for improvements in the executive capital budget ordinance and sets the bill’s effective date to July 1, 2025.
Committee Chair Del Santos Tam said the CD1 (OCS 2025-0037/1/10/2025, 2:24 p.m.) narrows the fund’s use to the executive capital budget and makes technical, non-substantive edits. The committee amended the bill to the CD1 and reported it out for passage on third reading with no objections.
The Department of Budget and Fiscal Services Director Andy Kawano told the committee the fund is intended to improve controls and administration when the city issues bonds on a taxable basis to support mixed-use or multifamily rental development on city property. Kawano said projects that include business activities—such as ground-floor restaurants open to the public—may require taxable financing to avoid federal arbitrage rules and limits on tax-exempt financing for privately used facilities.
Kawano said the department reviewed the CD1 and had no objections. He explained that taxable bond proceeds will help the city avoid restrictions that apply to tax-exempt bonds (including potential requirements to return arbitrage earnings to the U.S. Treasury) when bond-funded projects include income-producing activities.
No public testimony was offered. With no committee objections, Chair Del Santos Tam recommended the bill be reported out for passage on third reading.
The committee record shows the CD1 and the OCS document number for the amendment; the bill will take effect July 1, 2025, if enacted.
