(BIVN) – A controversial short term vacation rental bill, out-of-state medical cannabis transport between islands, and limitations on civil asset forfeiture are on the chopping block, as Governor David Ige announced the measure he intends to veto in the coming days.

There is no guarantee the Governor will go through with any one veto. The Hawai‘i State Constitution requires the governor to notify the Legislature of the bills he intends to veto no later than the 35th day after adjournment, which is June 24. He could still change his mind.

The high profile measure concerning short term vacation rentals, SB1292,  is on the veto list. The bill relating to transient accommodations “would require hosting platforms that collect fees for booking services, to register as tax collection agents and collect general excise and transient accommodation taxes for transient accommodation bookings from operators and plan managers.”

The governor’s rationale for a possible veto:

The state’s taxation of transient accommodations through hosting platforms should complement the counties’ regulation of transient accommodations. While the taxation of illegal transient accommodation uses would not legalize these operations, there is concern that the collection of taxes on illegal transient accommodations could be viewed as legitimizing these operations.

Additionally, the recent passage of Bill 89 (2018) by the Honolulu City Council, which is pending signature by Mayor Kirk Caldwell, is an example of a county that has enacted specific enforcement provisions governing transient accommodations and hosting platforms. These measures, and other such county measures, raise significant issues for the Department of Taxation that were not fully contemplated by the Legislature when it passed SB 1292.

Both the federal Internal Revenue Service and the State Tax Department are obligated to collect taxes on business activity, whether legal or illegal, as affirmed by the U.S. Constitution (16th Amendment) and a hundred years of court decisions. While SB 1292 may make tax collection more efficient, the recent passage of Bill 89 (2018) by the Honolulu City Council could affect certain logistics in the collection of those taxes. Further review is required to ensure there are no adverse unintended consequences that were not fully contemplated by the Legislature or DOTAX when the bill was debated during the Legislative Session.

photo courtesy Office of Governor David Ige

The Hawaiʻi Lodging & Tourism Association was quick to applaud the governor’s intention in a media release. “HLTA had gone on record stating its official position and met with the Governor to make our feelings known on this matter,” said Mufi Hannemann, President & CEO. “We hope his actions will lead to a more collaborative effort between the state and the counties to reign in the illegal transit vacation rentals.”

Its a mixed bag for cannabis-related legal issues. The Governor said he intends to veto HB290, which authorizes qualifying patients or qualifying out-of-state patients to transport medical cannabis between islands for their personal medical use.

“Marijuana, including medical cannabis, remains illegal under federal law. Both the airspace and certain areas of water fall within the exclusive jurisdiction of the federal government,” Governor Ige reasoned. “This bill may lead travelers, acting in reliance on this provision, to erroneously believe they are immune from federal prosecution. Additionally, there are a number of operational concerns for both the State Department of Transportation and the State Department of Public Safety.”

However, House Bill 1383, decriminalizing the possession of three grams or less of marijuana, is not on the veto list.

“That was a very tough call,” Ige told reporters. “There’s many items and factors in that bill that I don’t like. The amount is very small. When you talk to law enforcement personel, 3 grams, essentially they will proceed as they always have. Because 3 grams is a very small amount of marijuana.”

Governor Ige also intends to veto HB748, which “prohibits civil asset forfeiture unless the covered offense is a felony for which the property owner has been convicted.”

Ige provided this rationale for his possible veto:

Civil asset forfeiture is an effective and critical law enforcement tool that prevents the economic benefits of committing a crime from outweighing consequential criminal penalties and punishment. This measure would also abolish civil asset forfeiture related to serious misdemeanor and petty misdemeanor crimes that negatively impact our society, natural resources, and environment. Furthermore, safeguards presently exist in Hawaii’s asset forfeiture statutes that prevent the abuses cited in the bill.

The governor said he also intends to veto a bill relating to industrial hemp, SB 1353. The measure establishes an industrial hemp licensing program requiring the Department of Agriculture to create an industrial hemp plan to be approved by the United States Department of Agriculture, USDA. The bill also makes various statutory changes, including removing from criminal regulation the cultivation, possession or sale of either licensed or unlicensed industrial hemp. “There are concerns that this bill creates a licensing structure that cannot be enforced, will not meet USDA requirements for an approved industrial hemp program, and creates practical problems in the enforcement of existing medical cannabis,” the governor said.

When it comes to electronic smoking devices, Governor Ige said “there are considerable implementation concerns and unknown costs relating to certain provisions” in SB1405, which “requires public school teachers or educators to confiscate e-cigarettes or electronic smoking devices (ESDs) from students”. The bill also “requires the Department of Health to create a safe harbor program for disposing ESDs; and increases the fines from $10 to $100 for any person under the age of 21 who violates laws relating to electronic smoking devices.”

“This measure does not include a definition for an “electronic cigarette”. A definition is necessary to provide teachers, educators and students with an understanding of what items are subject to confiscation,” Governor Ige said. “Furthermore, confiscating and destroying evidence of a crime may hinder prosecution of those individuals responsible for selling or furnishing electronic cigarettes to persons under the age of 21. It should be noted that the costs to plan for and to create a safe harbor program, store and destroy ESDs, including the hazardous nicotine waste contained in these devices, are unknown and unfunded.”

Here are the other bills on the governor’s veto list:

HB323 – RELATING TO MOTOR VEHICLE REGISTRATION.

This bill would classify certain former military vehicles as special interest vehicles and enable owners to apply for registration of these motor vehicles. The change would allow specific pre-1995 vehicles including Humvees, Pinzgauers, Kaiser Jeep M715s, and DUKWs (“Ducks”) to operate on the public roadways.

Rationale: The original intent of the special interest vehicle legislation was to address the needs of collector enthusiasts who invest in acquiring, restoring and maintaining pre-1968 vehicles by allowing them to be showcased. Classifying these military vehicles as “special interest vehicles” will result in the violation of Federal Motor Safety Standards and allow vehicles that do not pass emission testing standards on our roadways.

HB407 – RELATING TO EDUCATION.

This bill requires that Board of Education approval be obtained prior to the termination of a Department of Education complex area superintendent.

Rationale: The Board of Education already has the authority to establish a policy allowing the Board to approve the termination of a complex area superintendent. Moreover, this bill may impact the Board’s role as an appellate body as well as the appeal rights of complex area superintendents.

HB629 – RELATING TO MEDICAL RELEASE.

This bill creates a formal medical release program within the Hawai‘i Paroling Authority (HPA) to allow inmates with terminal or debilitating diseases or illnesses to be released from custody before the expiration of their sentence. The Director of Public Safety, an inmate or an inmate’s representative may submit a written request for medical release. The bill also sets forth specific requirements for both HPA and the Public Safety Department (PSD) to follow when establishing and implementing the medical release program.

Rationale: A Medical Release Program has been in existence in PSD and HPA policies since December 2014. This bill mandates that PSD and HPA complete certain tasks within short periods of time, but does not provide more funding for more staff. There are also concerns that this bill opens the referral process for medical release to an inmate or an inmate representative, who may or may not be medically trained. The PSD Health Care Division would be required to provide a detailed, comprehensive medical assessment within 20 days of receipt of each referral.

HB655 – RELATING TO HEALTH.

This measure designates the month of September as “Suicide Prevention and Awareness Month” to increase public awareness of suicide prevention education, resources, and support available in Hawaii.

Rationale: HB655 HD1 SD1 should be vetoed because it was erroneously transmitted to the Governor. The Governor firmly believes in the merits of the bill and will designate September of this year as “Suicide Prevention and Awareness Month” by executive order. Additionally, he will work with the legislature to make the necessary legislative fixes so September will be properly designated next session.

HB702 – RELATING TO SATELLITE NAVIGATION TECHNOLOGY.

This measure prohibits the sale or offering for sale of location data that is recorded or collected by a satellite navigation technology-equipped device without the explicit consent of the individual who is the primary user of the device.

Rationale: This measure attempts to regulate a complex national industry without sufficient and appropriate wording to ensure consistent compliance and enforcement. There are concerns about unintended consequences if this measure becomes law.

HB1032 – RELATING TO STATE BOATING FACILITIES.

This measure would establish a state boating facility lease pilot program within the Department of Land and Natural Resources (DLNR) to be implemented and managed by the Division of Boating and Ocean Recreation (DOBOR). DLNR would be able to lease Manele Small Boat Harbor in its entirety, to include fast lands and submerged lands within it, for the private development, management, and operation of its facilities.

Rationale: Although DLNR had sought general authorization for public-private partnerships of small boat harbors, this measure designates Manele Small Boat Harbor as a pilot program without public input.

HB1133 – RELATING TO MARINE LIFE CONSERVATION DISTRICTS.

This measure would limit the number of commercial use permits for the Molokini Shoal marine life conservation district (MLCD) to no more than 40 and prohibit the Department of Land and Natural Resources (DLNR) from issuing new permits. It would also limit access at any given time to 50 percent of the current number of permit holders.

Rationale: This measure is unnecessary as DLNR already limits the number of Molokini Shoal MLCD commercial use permits to 40. The language that limits access to 50 percent of the current number of permits at any given time is actually counter-productive to DLNR’s efforts to address overcrowding. DLNR is in the process of working with the commercial use permit holders to adjust the operating schedules to coordinate access to better manage the impact of commercial activity on this precious natural resource.

HB1276 – RELATING TO EDUCATION.

This bill would establish a working group to develop best practices for collaborative teacher preparation time and expanded learning time for students in public schools. Some of the items to be considered are the establishment of collaborative teacher preparation time, the placement of classroom desks to facilitate group learning, and the rotation of principals among the public schools. The working group would submit a report of findings to the legislature, superintendent of education and all complex area superintendents.

Rationale: While this bill is well-intentioned, it would encourage the development of a “one-size-fits-all” approach to schools. Issues involving planning and expanding learning time are best left to the specific schools to address, as these matters must consider the distinct needs of a particular school as well as the unique needs of our students. Furthermore, planning and learning time are matters better left to the Board of Education, as they fit squarely within its statutory and constitutional authority.

SB33 – RELATING TO ECONOMIC DEVELOPMENT.

This measure would increase the annual rolling cap for the motion picture, digital media and film production income tax credit from $35 million to $50 million. It would further require the University of Hawaiʻi and Hawaiʻi Technology Development Corporation (HTDC) to execute a memorandum of understanding for a no-cost lease agreement that would include a provision requiring the title be transferred to HTDC within six years.

Rationale: The administration supports the growth of Hawaiʻi’s thriving film industry. Unfortunately, this bill infringes on the University of Hawaiʻi’s constitutional autonomy. Article X, section 6 of the Hawaiʻi Constitution gives the University Board of Regents “exclusive jurisdiction over the internal structure, management, and operation of the university.”

SB92 – RELATING TO POLICE REPORTS.

This bill would allow surviving immediate family members of murder or manslaughter victims to receive a copy of the closing police report at the conclusion of all related criminal and civil proceedings for the offenses of murder and manslaughter.

Rationale: Immediate family members of victims of all crimes already have the right to receive closing police reports, which makes this bill unnecessary. Furthermore, restricting this right to immediate family members of only murder or manslaughter victims may lead to a narrow interpretation of the law, leaving family members of victims of other crimes without access to closing police reports. Under current law, members of the general public can obtain copies of any police report after the conclusion of criminal and civil proceedings, provided certain conditions are met in accordance with the Uniform Information Practices Act.

SB301 – RELATING TO TAXATION OF REAL ESTATE INVESTMENT TRUSTS.

This measure would not allow “dividends paid deductions” for real estate investment trusts (REITs).

Rationale: This measure could discourage the business community from investing in Hawai‘i.

Disallowing dividends paid deduction for REITs could potentially stifle economic development and scare away investment capital to address our aging infrastructure. From an economic development perspective, REITs provide stable economic growth and long-term benefits – including job creation – that will extend the supply chain into rental and commercial properties.

The benefits of continuing with this federally established legislation are clear and quantifiable. REITs are an important investment vehicle for all types of investments in Hawai‘i. If the state corporate income tax is imposed on a REIT, there may be negative impacts to the state’s economic health and business climate, such as the reduction of general excise, property and state income taxes.

Overall, the unintended consequences of imposing a corporate tax on REITs, are not worth the potential benefits. Hawai‘i needs to be a place that is able to attract investment capital in order to create jobs and a sustainable economy.

SB551 – RELATING TO CONDOMINIUMS.

This measure clarifies the right of condominium associations to conduct non-judicial foreclosures, even if the governing documents do not have an explicit power of sale provision. The bill also requires the foreclosing association to offer mediation with any notice of default and intention to foreclose and the prescribed procedure when mediation is chosen by the consumer.

Rationale: This legislation includes a retroactive application that may present constitutional concerns.

SB1423 – RELATING TO PAYMENT OF BAIL.

This bill allows defendants for whom a monetary amount of bail has been set, to pay the bail amount seven-days-a-week on a twenty-four-hour basis and be released from custody upon posting or payment of bail.

Rationale: This bill is redundant to bail reform provisions within HB1552 Relating to Public Safety and is unnecessary. It requires the Department of Public Safety to establish a process to collect bail funds on a 24/7 basis without additional funding to staff and support this new mandate.

SB1459 – RELATING TO THE STATE SURFING COMMISSION.

This bill establishes a temporary State Commission on Surfing within the Department of Accounting and General Services (DAGS) to promote surfing internationally and within the state.

Rationale: While the Administration supports the promotion of surfing, the purpose of the commission is clearly outside of DAG’s mission of delivering quality support services in the areas of physical, financial and technical infrastructure support for state departments and agencies. Additionally, no funds were appropriated for this bill, making it extremely difficult for the commission to operate. Legislation can be introduced next session to establish the commission in a more appropriate department and provide the necessary funding to successfully operate the commission.

SB1530 – RELATING TO THE HAWAII COMMUNITY DEVELOPMENT AUTHORITY.

This measure would convert the means of financing for the Hawaiʻi Community Development Authority (HCDA) staff from the Hawaiʻi Community Development revolving fund to the general fund. This is contingent upon HCDA developing a plan to transfer control of the Kakaʻako Community Development District to the City and County of Honolulu.

Rationale: The tight timeline to complete the required work to meet the conversion requirements could potentially threaten funding for 13 HCDA positions in the third quarter of the upcoming fiscal year. This could cause instability over the biennium and force a temporary reduction in force. HCDA is committed to developing a comprehensive transition plan to transfer control of the Kakaʻako Community Development District to the City and County of Honolulu and propose legislation for next year’s legislative session.

The State Legislature can attempt to override a veto. The lawmakers may convene before noon on Tuesday, July 9, 2019, “for the sole purpose of acting upon any such bill returned by the Governor,” the State House says.

“The House Democratic Caucus will meet tomorrow morning to discuss the Governor’s list. We will also consult with the Senate leadership concerning the possibility of convening an override session if any bills are actually vetoed,” said House of Representatives Speaker Scott Saiki in a released statement. “If an override session is not held, any vetoed measures can be reintroduced in the 2020 legislative session. We will use this interim to address the Governor’s objections to vetoed bills.”

If Governor Ige does not sign or veto a measure passed by the legislature by July 9, 2019, it will become law with or without his signature.