Overview of RISE Bonds Proposal

In the upcoming Hawaii general election, voters will decide whether to authorize the issuance of “Resilient Infrastructure for Shelter and Equity,” or RISE bonds. This proposal aims to expand the state’s ability to finance public infrastructure by adopting a specific form of funding known as tax increment financing. The measure, however, introduces a constitutional amendment with significant implications for Hawaii’s debt limit and fiscal policy.

Understanding Tax Increment Financing

RISE bonds operate through tax increment financing. Under this system, once an area is designated for development, the city or county borrows funds to construct essential infrastructure—such as water and sewer lines—within the zone. As development progresses, increased property values lead to higher property tax revenues. The difference (the 'tax increment') between pre- and post-development tax collections is dedicated to repaying the principal and interest on the bonds. The hope is that successful development covers the bond repayment through this incremental tax revenue.

Existing Legislation and Need for Amendment

Although Hawaii law already authorizes tax increment bonds under Sections 46-101 to 46-113, HRS, these have never been fully implemented. Some in the Attorney General's office believe a constitutional amendment—not just a statute—is required to authorize this specific kind of bond. This proposed amendment therefore seeks explicit constitutional approval.

The Debt Limit Exemption

An important aspect of the proposed amendment is that it would exempt RISE bonds from Hawaii’s constitutional debt limit. Hawaii has maintained a state debt limit since achieving statehood, serving as a safeguard to prevent excessive borrowing and minimize long-term risk to taxpayers. Traditionally, all county debts, repaid primarily from the same property tax base, count toward this limit. The amendment would create an exception for RISE bonds, allowing the counties to borrow more overall, provided these bonds are repaid with the tax increment from development zones.

Potential Risks and Unanswered Questions

While RISE bonds promise to fund housing development and public infrastructure, there are notable risks. If planned developments face setbacks—such as cost overruns, permitting delays, or unexpected site issues like the discovery of ancient Hawaiian burial sites—the county still must repay the bonds and interest. This scenario raises the question of how shortfalls would be managed: would developers bear increased costs, potentially raising housing prices, or would the burden shift to a broader property tax increase across the county? The amendment’s exemption from the debt limit, and its reliance on future property tax increments, deserve scrutiny regarding the balance of risk and overall county borrowing capacity.

Looking Ahead

As Hawaii voters approach the general election, the decision on whether to authorize RISE bonds and exempt them from the debt limit carries major implications for public finance, housing development, and financial risk. Comprehensive explanations and analyses from sources such as the Hawaii Institute for Public Affairs are available for those seeking further information. Voters are encouraged to consider the benefits, risks, and unanswered questions surrounding this unique approach to funding Hawaii’s future infrastructure.

Source: hawaiireporter.com.