Currently, chapter 39C, HRS, allows for and provides for the state to pool bond allocations with local municipalities.
The bill does not mention the process for deciding on allocation pool partners. Who would become a partner and why would they be chosen?
HD1 (current draft) is an adopted proposed HD1 draft. It is quite different from the original bill that related to technical amendments to state budget laws on transfer of non-general funds to the general fund.
The Department of Budget and Finance testified that according to the State’s bond counsel, there are federal tax regulations that would prohibit the State from pooling bond allocations with other states. Any inter-state pooling of bond allocations made possible in this bill would be a violation of federal tax regulations.
By partnering with other entities, the state may expose itself to more risk and will be dealing with larger amounts of allocations not previously experienced. The other entity may not be credit worthy or cause a higher interest rate to be applied hurting the State.
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