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HomeMy WebLinkAboutCOM 0104.000 2000-2002 I-lany Kim l~ncola S.T. Eulilda tl~. F, cam., cR.m Takre t , . • ;~i rJ A},elmrt Copo,°,a, Cpun,d ~IIlt~ 1T# ~U~Lt ~ 1 ~ ~ , ~ L I OFFICE OF T'HE CORPORATION COiJI?j 101 Aupim~ 8tree4 Sulre J25 Hilo, fiiwdi %720-{262 (BOB) %1.8251 P~190B) %1-0622 ~ January 25, 2001 James Y. Arakalu, Chazrman Hawai i County Council 25 Aupuni Street Hilo, Hawaii 96720 Deaz Chairman Arakaki: The County of Hawaii, along with other counties, the State of Hawaii, and the maJor utilihes have reached settlement (see attached) on the matter of the public semce company tax that is collected m lieu of real property taxes pursuant to Chapter 239, Hawaz`i Revised Statutes. The State Legislature is currently considering legislation which would allow the counties to collect at least 1.885% of the public utilihes' gross revenues in lieu of real property taxes In order to correctly position ourselves for the anticipated passage of this legislation, we aze recommending amendment of Section 19-89, HawaJ`i County Code, as proposed, m order to effectuate the acceptance of the public service company tax by the utilities. We also ask that the Council ratify the agreement entered into by the parties Sinc/ere~ly~,?' G~~~tALD TAKA~SE`^ Assistant Corporation Counsel GT:de Encs a ~kallvkawa~trcouncil wpd cc• Managing Director Dine Kaetsu Finance Dvector William Takaba Real Property Tax Admuustrator Gary Kiyota APPROVED• Comm No. F51e No. HARRY ,Mayor Ret. Tot a`/1 A7 Ref. Date 5 2~~~ AGREEMENT In consideration of the terms and conditions and other good and valuable consideration set forth below, the undersigned pazties agree and enter into this Agreement 1. The Parties to this Agreement. a The following pazties aze the pazties to this Agreement, and shall sometimes be referred to individually as "Party" and collectively as "Parties". (1) STATE OF HAWAII ("STATE"), (2) COUNTY OF HAWAII ("HAWAII COUNTY"), (3) CITY & COUNTY OF HONOLULU ("HONOLULU"), (4) COUNTY OF MAUI ("MAUI', (5) COUNTY OF KAUAI ("KAUAI"), (6) VERIZON HAWAII INC ("VERIZON'), (7) CITIZENS COMMUNICATIONS COMPANY dba THE GAS COMPANY ("GASCO'~, (8) HAWAII ELECTRIC LIGHT COMPANY, INC ("HELLO"), (9) HAWAIIAN ELECTRIC COMPANY, INC. ("HECO'~, (10) MAUI ELECTRIC COMPANY, LTD. ("MECO'~, and (11) CITIZENS COMMUNICATIONS COMPANY, KAUAI ELECTRIC DNISION ("KECO") b. Unless otherwise expressly stated herein, any reference to any of the parties which are public utilities (i.e., VERIZON, GASCO, HELLO, HECO, MECO, or KECO) shall mean and be deemed to include that public utility and its predecessors, successors, and assignees; and its past, present, and future subsidiaries, divisions, receivers, trustees, and all persons and entities claiming by, through or under any of them c This Agreement concerns only public utilities which aze not airlines, motor carriers, common cazners by water or contract tamers. Therefore, unless otherwise expressly stated herein, any reference herein to "public utilities" or "public utility" shall not refer to any airline, motor carver, common tamer by water, or contract carrier d. Unless otherwise expressly stated herein, any reference to any of the parties which aze governmental entities (i.e., STATE, HAWAII COUNTY, AGREEMENT PAGE1 IMANHONO 339853 1 C-ro5~/b. ii ~9/fc HONOLULU, MAUI, or KAUAI) shall mean and be deemed to include that governmental entity and Its predecessors, successors, and assignees; and its past, present, and future executives, officers, agents, representatives, employees, divisions, departments, directors of departments (including related to taxation), agencies and suthonties, and all persons and entities claiming by, through or under any of them However, notwithstanding the inclusion of the term "divisions" in the preceding sentence, reference in this Agreement to "STATE" shall not be taken to refer also to the Parties which are counties of the State of Hawaii, i e., HAWAII COUNTY, HONOLULU, MAUI, OR KAUAI. When the counties are intended to be included in a particular provision or portion of this Agreement, each county will be expressly named, or the collective term "counties" will be used 2. No Admission of Liability The Parties understand and agree that this Agreement is in wmpromise of disputed claims and to avoid the costs and burdens of litigation and is not intended to be and shall not be deemed, construed, or treated In any respect as an admission of fault or liability as to any allegation or claim by any person or entity for any purpose. 3. No Admission Regarding Tax Laws. The Parties understand and agree that this Agreement is in compromise of disputed croons and to avoid the costs and burdens of litigation and Is not intended to be and shall not be deemed, construed, or treated in any respect as an admission regarding the validity, invalidity, or nature of the Public Service Company tax 4 No Expansion Of Counties' TaxingPower Or Lunitation Of STATE's Taxing Powers. Furthermore, no part of this Agreement shall be construed to expand the taxing authonty of the counties or to limit the exercrse of the STATE's power to enact laws of statewide concern. Nothing herein shall be interpreted or applied in a manner that is contrary to Article VII, § 1 of The Constitution of the State of Hawaii, which states that "The power of taxation shall never be surrendered, suspended or contracted away " 5 The Counties Shall Receive A Portion Of The Public Sernce Company Tax Revenues a. The parties hereby decide and agree that, under the terms and conditions set forth in the draft legislation attached as Exhibit A hereto, the portion of the revenues generated from the Public Service Company ("PSC'~ Tax in excess of four percent of the gross income of each public utility from its public utility business will be paid beguuing July 2001 under Hawaii Revised Statutes ("JiRS") §239-5(a) by each public utility directly to the counties that (I) provide by ordinance for a real property tax exemption for real property used by a public utility in its publrc uttllty business and owned by the public utility (or leased to it by a lease under which the public utlllty is required to pay the taxes upon the property), and (ri) have not domed the exemption to the public utlllty (but excluding a demal based upon a dispute as to the ownership, lease, or use of a specific parcel of real property) Accordingly, the parties hereby decide and agree that the PSC Tax statutes shall be amended and admimstered consistent with the terms and conditions set forth In the draft legislation attached as Exhibit A hereto. AGREEMENT PAGE2 IMANHONO 339853 1 b. The revenues generated from the tax provided for in HRS §239-5(a) in excess of the four percent rate established therein shall be paid by the public utility directly to each county eligible to receive a share of the tax revenues based upon the proportion of HRS §239-5(a) gross income from its public utility business attributable to each such county, based on the allocation made in the public utility's filings with the State of Hawaii, provided that if the gross income from the public utility business attributable to each county is not so allocated in the public utility's State filings, then the gross Income from the public utility business shall be equitably allocated to each county. The relative number of access lines in each county shall be deemed an acceptable basis of equitable allocation for telecommunication companies. c If a county (i) does not provide or if a county stops providing by ordinance for a real property tax exemption for real property used by a public utility in Its public utility business and owned by the public utility (or leased to it by a lease under which the publtc utility is regwred to pay the taxes upon the property), or (ti) denies the exemption to the public utility (but excluding a denial based upon a dispute as to the ownership, lease, or use of a specific parcel of real property), then that county shall receive no Public Service Company Tax revenues from the public utility for any period during which the county has no such ordinance or denies the exemption to the public utility (but excluding a demal based upon a dispute as to the ownership, lease, or use of a specific parcel of real property), and the money that would have otherwise gone to that county as Its shaze of the PSC tax revenues in excess of the four per cent rate shall be retained by the public utility and shall not be paid or owed to either the State or the respective county. d. The legislation referred to above shall take effect July 1, 2001 Commencing with the July 2001 installment of the remaining quarterly or monthly installments of the tax upon gross income which has been levied and assessed for the calendaz yeaz 2001 under section 239-5(a), that portion of each such installment that is descnbed in Section 3 of Exhibit A as the tax in excess of the rate of four per cent that is paid to a county if the county provides for a real property tax exemption for real property used by a public utility in its public utility business, shall be paid to the respective county director of finance as provided m Section 3 of Exhibit A. Provided that for the period July 2001 through December 2001, if a public utility is not regwred to pay to a particulaz county director of finance tax in excess of the rate of four per cent, as provided in Section 3 of Exliibit A, the publtc utility shall not be liable to the State or respective county for such portion of the installments of the tax imposed m excess of the rate of four per cent under section 239-5(a) for the period July 2001 through December 2001 6 Laws and Ordinances Shall Be Made Consistent With Tlus Agreement Legislation to make the laws of the State of Hawaii and, tf necessary, the laws and ordinances of each county consistent with the terms of this Agreement shall be enacted 7 Suonort of and Co~eration on Enabling Legislation. Thus Agreement is contingent upon the enactment of enabling legislation substantially in the form of Exhibit A hereto, and the parties agree to support such legislation and to cooperate to actuevtng such legislation, including providing testimony to support of the legislation. The Parties other than the STATE disagree with the substance and the form of the second sentence of AGREEMENT PAGE3 IMANHONO 339853 I Section 1 of Exlubit A (the "Propose Clause"). However, for the purposes of avoiding the costs and burdens of litigation and as part of the compromise of the disputed claims and potential claims, the non-STATE Parties agree not to oppose in any manner the inclusion of the second sentence of the Purpose Clause as part of the enabling legislation proposed by the STATE The agreement herein to provide testimony in support of the legislation does not require any of the non-STATE parties to support the second sentence of the Propose Clause and, if asked by the Legislature or others to provide testimony or comment conccming the second sentence of the Purpose Clause, the non-STATE parties may and should decline to corrirrient on the second sentence of the Purpose Clause Nothing m the preceding two sentences shall restrict any county councihnember from testifying or commenting in any manner upon the second sentence of the Purpose Clause nor upon the inclusion of the second sentence of the Purpose Clause. Regardless of whether or not the enabling legislation is enacted, a county's and/or a public utility party's (1) negotiating, signing or entenng into the settlement, (2) failure to comment upon or testify rn opposition to the inclusion of the second sentence of the Purpose Clause, or (3) other act or omission, shall not be deemed to be an admission or evidence that the language in the second sentence of the Purpose Clause is valid, a correct statement of law or fact, or binding in any way upon any party hereto, and shall not be used by any party to this agreement against any other party to this agreement in any dispute. The STATE will be responsible for inittating the enabling legislation. The STATE expressly reserves the discretion and right to veto any legislation not substantially in the form of Exhibit A, including legislation that deletes or substantially modifies the Purpose Clause. 8 August 20.2000 HAWAII COUNTY Real Propertv Tax Installment. VERIZON, HELCO, and GASCO have paid under protest on or before August 20, 2000 the real property tax payments that were due at that time to HAWAII COUNTY based on the HAWAII COUNTY real property tax assessments that were issued in March 2000. If the enabling legislation is not successfully enacted, VERIZON, HELCO, and GASCO and HAWAII COUNTY may continue their protest and/or litigation over those payments. If the enabling legislation is successfully enacted, HAWAII COUNTY may keep those August payments. 9. Febniary 20.2001 HAWAII COUNTY Real P%perty Tax Installment. If this Agreement has been signed and in February 2001 the parties are still working on getting the enabling legislation passed, the HAWAII COUNTY real property tax installment due on February 20, 2001 based on the March 2000 assessments need not be paid by VERiZON, HELCO, and GASCO, and no interest or penalties will be assessed for such nonpayment and the continued nonpayment as allowed under this section. If the enabling legislation rs successfully enacted, the Febniary 20, 2001 installment never needs to be paid. If successful enactment of the enabling legislation does not occur, and the Tax Appeal Court determines that the efforts to enact such legislation have failed and those efforts should be abandoned, VERIZON, HELCO, and GASCO and HAWAII COUNTY may then continue their litigation over the installment that was originally due on February 20, 2001, but for the postponement allowed by the first sentence of this paragraph. In the event the Tax Appeal Court determines that the efforts to successfully enact the enabling legislation have failed, VERIZON, HELCO, and GASCO shall have AGREEMENT PAGE 4 IMANHONO 339857 I 30 days from the filing of the Tax Appeal Court's determrnation of such failure in which to pay the February 20, 2001 heal property tax installment to HAWAII COUNTY without assessment of interest or penalty and without prejudice to their right to challenge that tax installment payment. 10. Pre-July 1.2001 Taxes If the enabling legislation is successfully enacted, the counties waive and release any claims for real property tax based upon the public utility's public utility business or based upon real property related to its public utility business for taxes due and payable for any period before July 1, 2001, except that HAWAII COUNTY may keep the August 20, 2000 payments referred to in Section 8 above. If the enabling legislation is successfully enacted and the countres waive and release claims for real property tax as mentioned in the preceding sentence, the public utility Parties agree to waive all challenges to assessment or collection and claims for refund or payment of any portion of Publrc Service Company tax paid or to be paid before July 2001 to the extent such challenge or claims aze based on the chazactenzatron of the Public Sernce Company Tax as a tax on real property. If the enabling legislation is successfully enacted, the counties agree to waive and release any claims for any portion of the Public Service Company Tax for any period before July 1, 2001. 11. Postponement of Leval Proceedings. The parties that aze engaged in legal proceedings related to the subject matter of this Agreement shall stipulate to the postponement of those proceedings for such time as is necessary to allow the parties to pursue the enactment of the enabling legislation. 12. Dismissal of Claims. If the enabling legislation is successfully enacted and the counties waive and release any claims for real property tax based upon the public utility's public utility business or based upon real property related to its public utrlity business for taxes due and payable for any period before July 1, 2001, all the complaints and tax appeals pending before January 11, 2001 concerning the subJect matter of this agreement and involving counties exemptrng public utilities from real property tax pursuant to this agreement will be voluntarily dismissed with preJudice by the public utility Parties. 13. Disputes Over This Arueement. The Parties agree that the Tax Appeal Court of the State of Hawazi has the power to be the final arbiter concerning any language or filrther details needed to implement the Agreement to which the parties have agreed. In the event any dispute occurs among any of the Partres concerning performance, breach, or enforcement of this Agreement, the prevuling party or parties shall be paid attorneys' fees and costs incurred to enforce the provisions of this Agreement (however, this provision is not to be interpreted contrary to the STATE's right of sovereign tmmumty and shall not be taken to be a wazver of such Irnmumty). In the event any Party fails to perform any of the terms of this Agreement, any other Party shall have the right to bring an actron for specific performance and/or any remedy at law. The Tax Appeal Court of the State of Hawaii shall retazn and have exclusive Jurisdiction to enforce this Agreement and to help facilitate its implementation, Including but not limited to the enactment of the enabling legislation. The Parties agree to submit to the Junsdiction of that court for any action brought to enforce this Agreement. AGREEMENT PAGE 5 IMANHONO 339853 I (4. tension of Ttme for STATE. The STATE will have an extension of time to respond to the pending complaints concerning the Public Service Company Tax while the parties seek to obtain the enactment of the enabling legislation. The STATE will not file a response or objection and does not waive any objection to the pending complaint during the attempt to obtain the enactment of the enabling legislation. In the event the Tax Appeal Court determines that the attempts to obtain the enactment of the enabling legislation have failed, the STATE shall have thirty days from the filing of the Tax Appeal Court's determination of such failure in which to file a response to the pending complaints Therefore, the STATE vnll not file a motion to chsmiss while the enactment of the enabling legislation is still being worked on. 15. Attorneys' Fees. Costs. and Exgenses Each Party will beaz its own attomeys' fees, costs, and all other expenses and will not make claim against the other Party or any other party for attomeys' fees, costs, and other expenses incurred in the prosecution, defense, or settlement of the claims and matters involved herein. (however, this provision should not be deemed to contradict section 13 above concerning breach or disputes concerning this Agreement.) 16 No Pnor Assignment. The Parties represent and warrant that they have not assigned to any other pazty or entity any claim or interest in a claim which would otherwise be a claim released or wazved under this Agreement 17. Counterpazts. Tlus Agreement maybe executed in several counterparts, each of which shall be deemed an onginal, and all such counterparts together shall constitute one and the same instnunent 18. Facsimile Signature. Tlus Agreement maybe executed vta facsimile transrrussion 19. Knowledge of Terms and Advice of Counsel. The Pazties have been advised by legal counsel with respect to this Agreement, and they understand and acknowledge its terms, significance, and consequence 20. Authon .The execution and delivery of this Agreement by each of the Parties shall constitute a warranty and representation by that party that this Agreement has been duly and validly suthonzed by or on behalf of said Party and constitutes a legally binding obligation of such party, enforceable in accordance with its terms 21. Joint PreQaration. It is agreed that this Agreement was prepared jointly by the Pazties and that it shall not be construed for or against any party merely by reason of the fact that an opposing party prepazed a pazticulaz portion of the Agreement 22. Governing Law This Agreement shall be subject to and governed by the laws of the State of Hawaii. 23 Voluntary Agreement The Pazties hereby warrant and represent that the execution of this Agreement is being done freely and voluntarily AGREEMENT PAGE6 IMANHONO )39853 I 24 Further Assurance The Parties will, from trine to trine, each at the request of the other, and without further consideration, execute and deliver such further documents, and take such other action as each may reasonably request in order to further accomplish the final dismissal with prejudice of the abovementioned litigation, and the other acts, the performance of which is provided for herein, all as contemplated herein. 25 Entrre Aiueemcnt Amendments. This Agreement maybe changed, amended, or modified only by a wntten instnunent signed by the Parties. This Agreement contains the entire agreement between the Parties and supersedes all other pnor or concurrent oral or written agreements, letters, or understandings (except for the understanding/agreement between the Public Utrlity Parties and HONOLULU contained in the electronic mail communication sent by HONOLULU on January 2, 2001 regarding appeals from the 2001 notices of property assessments and corrected notices of property assessment rssued by HONOLULU, which understanding/agreement exists apart from and surnves this Agreement). 26. No Representation. None of the Parties nor anyone on their behalf has made a representation of fact, opinion, or promise to induce this compromise and, in entermg this Agreement, the Parties are not relying upon any statements, representations, opinions or promises except for the matters set forth in this Agreement; and the consideration for this Agreement is all the consideration that shall be given. 27. No Waiver. A waiver of any breach of this Agreement by any of the Parties shall not be deemed to be a waiver of any other breach of this Agreement Any waiver of any breach of this Agreement shall be made only by a signed, wntten instrument 28 Captions or Headings The captions or headings of sections in this Agreement are inserted for convenience, reference, and identification purposes only, and shall neither control, define, limit, nor affect any provisions of this Agreement 29. Severability. Each provision of this Agreement shall be interpreted in a manner as to be valid and enforceable under applicable law. If any provision of tlis Agreement should be held to be prohibited or invalid or unenforceable under applicable law, such invalidity shall not affect the validity or enforceability of the remuning provisions of this Agreement AGREEMENT PAGE 7 IMANHONO 339853 1 d.~..K., ~ ~1,..,..,~ Date: -k+naaru ~1 -Zme/ DIRECTOR OF TAXA~ ~ , STATE OF HAWAII Date: COUNTY OF HAWAII Date: CTfY & COUNTY OF HONOLULU Date: COUNTY OF MAUI Date: COUNTY OF KAUAI VERIZON HAWAII, INC. Date: Its HAWAII ELECTRIC LIGHT COMPANY, INC Date. Date• Its President Its Secretary AGREEMENT PAGE 8 UTANHONO 379833 1 Date: STATE OF HAWAII Date. i A o1 DIXIE KAETSU, Managing Director WILLIAM TAKABA, Director of Finance, COUNTY OF HAWAII Date: CITY & COUNTY OF HONOLULU Date: COUNTY OF MAUI Date: COUNTY OF KAUAI VERIZON HAWAII, INC Date. Its HAWAII ELECTRIC LIGHT COMPANY, INC. Date. Date• Its President Its Secretary AGREEMENT PAGE 8 IMANHONO 779851 1 Date. STATE OF HAWAII Date COUNTY OF HAWAII i ~ D .IA 2 a BENJAMI B. EE ,MANAGING DIRECTOR , CITY & OF HONOLULU Date: , , COUNTY OF MAUI Date: , COUNTY OF KAUAI VERIZON HAWAII, INC. Date: Its HAWAII ELECTRIC LIGHT COMPANY, INC. Date: Date: Its President Its Secretary AGREEMENT PAGE 8 GIANHONO 379!5) I Date: STATE OF HAWAII Date: COUNTY OF HAWAII Date: CITY & COUNTY OF HONOLULU Date: J ar 1 00l JAMES H. APANA, JR., OUNTY OF MAUI COUNTY OF MAUI Date: COUNTY OF KAUAI VERIZON HAWAII, INC. Date: Its HAWAII ELECTRIC LIGHT COMPANY, INC. Date: Date: Its President Its Secretary AGREEMENT PAGE 8 UfANHONO 31%3J 1 Date: > > STATE OF HAWAII Date: COUNTY OF HAWAII Date: CTfY & COUNTY OF HONOLULU Date: COUNTY OF MAUI iiAid.ACS G. YSZRiTFS, v' S 0S ASSISTANT COUNTY OF KAUAI VERIZON HAWAII, INC Date• Its HAWAII ELECTRIC LIGHT COMPANY, INC Date: Date Its Pres>dent Its Secretary AGREEMENT PAGE 8 Qr1ANHONO 339833 1 Date: STATE OF HAWAII Date COUNTY OF HAWAII Date > , CITY & COUNTY OF HONOLULU Date. COUNTY OF MAUI Date: COUNTY OF KAUAI xn o VERIZON HAWAII, INC Date: sanuarv 22, 2001 ;,,,,f~ ~61 Its President HAWAII ELECTRIC LIGHT COMPANY, INC Date Date Its President Its Secretary AGREEMENT PAGE 8 IMANHONO J39853 1 Date. STATE OF HAWAII Date: COUNTY OF HAWAII Date. CITY & COUNTY OF HONOLULU Date: COUNTY OF MAUI Date: COUNTY OF KAUAI VERIZON HAWAII, INC. Date: Its HAWAII EL CTRIC LIGHT COMPANY, INC. Date. San k.. n~LZy LoOI ate:_J4 n z i, T-oeJ Its President Its Secretar~ AGREEMENT PAGE 8 NIANHONO 33%33 I CITIZEN COMMUNICATIONS COMPANY dba MPANY ate: Z o I Its Yb HAWAIIAN ELECTRIC COMPANY, INC Date: Date: Its Financial Vice President Its Secretary MAUI ELECTRIC COMPANY, LTD. Date: Date: Its President Its Secretary CITIZENS COMMUNICATIONS COMPANY, KAUAI ELECTRIC COMPANY DIVISION Date: Its Approved as to form and legality: EARL I. ANZAI KURT K. KAWAFUCHI CHRLSTOPHER J. MUZZI Attorneys for STATE OF HAWAII GERALD A. TAKASE Attorney for COUNTY OF HAWAII DIANE T. KAWAUCHI CHRISTINE KURASHIGE Attorneys for CITY AND COUNTY OF HONOLULU AGREEMENT PAGE 9 IMANHONO 379!53 I CITIZENS COMMUNICATIONS COMPANY dba THE GAS COMPANY Date. Its HAWAIIAN ELECTRIC COMPANY, INC ` ~ /rl Date: ~ az z-o v ate .Ta Zz z~,~,~ Its Financ~al Vlce Press ent Its Secretary MAUI ELECTRIC COMPANY, LTD. Date: Ja..~,.~-.~..'~z~ z_oo ~ ate• Q0...... z-z ze, ~ Its President Its Secretary CITIZENS COMMUNICATIONS COMPANY, KAUAI ELECTRIC COMPANY DIVISION Date: Its Approved as to form and legality EARL I. ANZAI KURT K. KAWAFUCHI CHRISTOPHER J. MUZZI Attorneys for STATE OF HAWAII GERALD A TAKASE Attorney for COUNTY OF HAWAII DIANE T. KAWAUCHI CHRISTINE KURASHIGE Attorneys for CITY AND COUNTY OF HONOLULU AGREEMENT PAGE 9 a1ANHONO 739837 1 CITIZENS COMMUNICATIONS COMPANY dba THE GAS COMPANY Date Its HAWAIIAN ELECTRIC COMPANY, INC Date Date Its Financial Vice President Its Secretary MAUI ELECTRIC COMPANY, LTD Date• Date: Its President Its Secretary CITIZENS COMMUNICATIONS COMPANY, KAUAI ELECTRIC CO ANY DIVISION ~ ~ ~ ~ Date: 1/24/01 Its Vice President and Manager Approved as to form and legality EARL I. ANZAI KURT K. KAWAFUCHI CHRISTOPHER J. MUZZI Attorneys for STATE OF HAWAII GERALD A TAKASE Attorney for COUNTY OF HAWAII DIANE T KAWAUCHI CHRISTINE KURASHIGE Attorneys for CITY AND COUNTY OF HONOLULU AGREEMENT ? PAGE ?9? rMANHONO 339853 1 CITIZENS COMMUNICATIONS COMPANY dba THE GAS COMPANY Date. Its HAWAIIAN ELECTRIC COMPANY, INC Date. Date• Its Financial Vice Pres>dent Its Secretary MAUI ELECTRIC COMPANY, LTD. Date: Date: Its President Its Secretary CITIZENS COMMUNICATIONS COMPANY, KAUAI ELECTRIC COMPANY DNISION Date: Its Approved as to form and legality EARL I ANZAI KURT K. KAWAFUCHI CHRLSTOPHER J. MU Attorneys for STATE OF HAWAII GERALD A. TAKASE Attorney for COUNTY OF HAWAII DIANE T. KAWAUCHI CHRISTINE KURASHIGE Attorneys for CITY AND COUNTY OF HONOLULU AGREEMENT PAGE 9 UtANHONO 33%33 I CITIZENS COMMUNICATIONS COMPANY dba THE GAS COMPANY Date: Its HAWAIIAN ELECTRIC COMPANY, INC Date: Date: Its Financial Vice Peis>dent Its Secretary MAUI ELECTRIC COMPANY, LTD Date: Date: Its President Its Secretary CITIZENS COMMUNICATIONS COMPANY, KAUAI ELECTRIC COMPANY DMSION Date Its Approved as to form and legality EARL I. ANZAI KURT K. KAWAFUCHI CHRISTOPHER J. MUZZI Attorneys for STATE OF HAWAII GE A. TAKASE Attorney for COUNTY OF HAWAII DIANE T. KAWAUCHI CHRISTINE KURASHIGE AGREEMENT PAGE9 IMANHONO 579653 I CITIZENS COMMUNICATIONS COMPANY dba THE GAS COMPANY Date Its HAWAIIAN ELECTRIC COMPANY, INC. Date: Date: Its Financial Vice President Its Secretary MAUI ELECTRIC COMPANY, LTD. Date: Date: Its President Its Secretary CITIZENS COMMUNICATIONS COMPANY, KAUAI ELECTRIC COMPANY DIVISION Date: Its Approved as to form and legal7ty EARL I. ANZAI KURT K. KAWAFUCHI CHRLSTOPHER J. MUZZI Attorneys for STATE OF HAWAII GERALD A. TAKASE Attorney for COUNTY OF HAWAII l.0-uc,:~t~ T. DIANE T. KAWAUCHI CHRLSTINE KURASHIGE Attorneys for CITY AND COUNTY OF HONOLULU AGREEMENT PAGE 9 a.1ANNONO 379E53 I B T. TO Att e OUNTY OF MAUI GALEN T NAKAMiJRA Attorney for COUNTY OF KAUAI MICHAEL K. TANIGAWA KEITH S. AGENA Attorneys for CITIZENS COMMUNICATIONS COMPANY dba THE GAS COMPANY; CITIZENS COMMUNICATIONS COMPANY, KAUAI ELECTRIC DNISION MILTON M. YASUNAGA DONNA Y.L. LEONG Attorneys for VERIZON HAWAII INC., HAWAII ELECTRIC LIGHT COMPANY, INC., HAWAIIAN ELECTRIC COMPANY, INC., and MAUI ELECTRIC COMPANY, LTD. AGREEMENT PAGE 10 ' CNANHONO 739833 I BRIAN T. MOTO Attorney f~~o//r COUNTY OF MAUI ,fh GAL T. NAKAMLJRA Attorney for COUNTY OF KAUAI MICHAEL K. TANIGAWA KEITH S. AGENA Attorneys for CITIZENS COMMUNICATIONS COMPANY dba THE GAS COMPANY; CITIZENS COMMUNICATIONS COMPANY, KAUAI ELECTRIC DIVISION MILTON M YASUNAGA DONNA Y.L. LEONG Attorneys for VERIZON HAWAII INC , HAWAII ELECTRIC LIGHT COMPANY, INC , HAWAIIAN ELECTRIC COMPANY, INC., and MAUI ELECTRIC COMPANY, LTD AGREEMENT PAGE 10 G7ANHONO 339853 1 BRIAN T. MOTO Attorney for COUNTY OF MAUI GALEN T. NAKAMiJRA Attorney for COUNTY OF KAUAI ti~oL acp ~?r~. MICHAEL K. TANIGAW KETTH S. AGENA Attorneys for CITIZENS COMMUNICATIONS COMPANY dba THE GAS COMPANY; CITIZENS COMMUMCATIONS COMPANY, KAUAI ELECTRIC DMSION MILTON M. YASUNAGA DONNA Y.L. LEONG Attorneys for VERI7AN HAWAII INC., HAWAII ELECTRIC LIGHT COMPANY, INC., HAWAIIAN ELECTRIC COMPANY, INC., and MAUI ELECTRIC COMPANY, LTD. AGREEMENT PAGE 10 QAANHONO 339853 1 BRIAN T. MOTO Attorney for COUNTY OF MAUI GALEN T NAKAMURA Attorney for COUNTY OF KAUAI MICHAEL K. TANIGAWA KEITH S. AGENA Attorneys for CITIZENS COMMUNICATIONS COMPANY dba THE GAS COMPANY; CITIZENS COMMUNICATIONS COMPANY, KAUAI ELECTRIC DNISION i'i'~~L~%G ~ ~ MILTON M. YASUN A DONNA Y.L. LEONG Attorneys for VERIZON HAWAII INC., HAWAII ELECTRIC LIGHT COMPANY, INC., HAWAIIAN ELECTRIC COMPANY, INC., and MAUI ELECTRIC COMPANY, LTD. AGREEMENT PAGE 10 QdANHONO 339853 1 .B. NO. A BILL FOR AN ACT RELATING TO THE PUBLIC SERVICE COMPANY TAX. BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII: 1 SECTION 1. The purpose of this Act is to effectuate an 2 agreement entered into by and among the State of Hawaii, the 3 city & county of Honolulu, the county of Maui, the county of 4 Kauai, the county of Hawaii, and a number of public service S companies by providing for a sharing of the public service 6 company tax revenues with those counties that establish by 7 ordinance an exemption from real property tax for public service S compan>.ea. Although no party to the agreement has made any 9 admissions with respect to issues involved in the pending 10 litigation, one of the purposes of this Act is to clarify the 11 tax imposed by section 239-5(a), Hawaii Revised Statutes, as a 12 lawful exercise of the State's taxing authority, >.n accordance 13 with Article VIII, sections 3 and 6 of the Hawaii Constitution. 14 SECTION 2. Section 239-4, Hawaii Revised Statutes, ie 15 amended to read as follows: 16 "§239-4 Raturas. Each public service company, on or before 17 the twentieth day of the fourth month following the close of the IS taxable year, shall file with the office of the department of Exhibit A TAX-14 (01) p1ANHONO 339114 1 Paget NO. I taxation for the district within which the principal office of 2 the public service company is maintained a return in such form 3 as the department may prescribe, showing its taxable gross 4 income for the preceding taxable year. In case any public 5 service company engages in lines of business other than its 6 public service company business, the receipts therefrom shall 7 not be subject to tax under this chapter, but the same tax 8 liabilities shall attach to the public service company on 9 account of the other lines of business as would exist if no 10 public service company business were engaged in. In the case of 11 a public utility aub7ect to the rate of tax imposed by section 12 239-5 (a) or (b), if the public utility engages in lines of 13 business other than its public utility business the real 14 property used in connection with the other lines of business 15 shall be taxed in accordance with the applicable county tax 16 ordinance, the same as if no public utility business were done. 17 In the case of a public utility remitting payments to a county 18 of a portion of the revenues generated from the tax imposed by 19 section 239-5(a), the public utility shall also file with the 20 director of finance of the county to which such payment is paid, 21 a statement showing all gross income from the public utility TAX-14(01) AiANHONO )79114 1 Page3 NO. 1 business upon which the tax is calculated and the allocation of 2 that gross income among the counties." 3 SECTION 3. Section 239-5, Hawaii Revised Statutes, ie 4 amended by amending subsection (a) to read as follows: 5 "(a) There shall be levied and assessed upon each public 6 utility, except airlines, motor carriers, common carriers by 7 water, and contract carriers taxed by section 239-6, a tax of 8 such rate per cent of its gross income each year from its public 9 utility business as shall be determined in the manner 10 hereinafter provided. The tax imposed by this section is in lieu 11 of all taxes other than those below set out, and is a means of 12 taxing the [real property (owned by the public utility or leased 13 to it by a lease under which the public utility is required to 1~ pay the taxes upon the property), and the] personal property of 15 the public utility, tangible and intangible, including going 16 concern value. In addition to the tax imposed by this chapter 17 there also are imposed income taxes, the specific taxes imposed 18 by chapter 249, the fees prescribed by chapter 269, any tax 19 specifically imposed by the terms of the public utility's 20 franchise or under chapter 240, the use or consumption tax 21 imposed by chapter 238, and employment taxes. TAX-14(01) afANHON0 3J9114 1 Page4 NO. 1 The rate of the tax upon the gross income of the public 2 utility shall be four per cent, provided that if: 3 (1) A county provides by ordinance for a real 1 property tax exemption for real property used 5 by a public utility in its public utility 6 business and owned by the public utility (or 7 leased to it by a lease under which the 8 public utility is required to pay the taxes 9 upon the property), and 10 (2) the county has not denied the exemption to it the public utility, but excluding a denial 12 based upon a dispute as to the ownership, 13 lease, or use of a specific parcel of real 14 property, 15 then there shall be levied and assessed a tax in excess of the 16 four per cent rate determined in the manner hereinafter provided 17 upon the gross income allocable to such county. The revenues 18 generated from the tax in excess of the four per cent rate 19 hereinbefore established shall be paid by the public utility 20 directly to such county based upon the proportion of gross 21 income from its public utility business attributable to such 22 county, based upon the allocation made in the public utility's TAX-14(01) U4ANNONO 339114 1 Pages NO. 1 fil3.ngs with the State of Hawaii, provided that if the gross 2 income from the public utility business attributable to such 3 county is not so allocated in the public utility's State 4 filings, then the gross income from the public utility business S shall be equitably allocated to each county. The relative number 6 of access lines in each county shall be deemed an acceptable 7 basis of equitable allocation for telecommunication companies. 8 The rate of the tax in excess of the four per cent rate 9 hereinbefore established upon the gross income [of] from the to public utility business shall be determined as follows: 11 If the ratio of the net income of the company to >.te groea 12 income is fifteen per cent or less, the rate of [the] tax in 13 excess of the four per cent rate on gross income shall be 14 [5.885] 1.885 per cent; for all companies having net income >.n 15 excess of fifteen per cent of the groea, the rate of the tax on 16 gross income shall increase continuously in proportion to the 17 increase in ratio of net income to gross, at such rate that for 18 each increase of one per cent in the ratio of net income to 19 gross, there shall be an increase of .2675 per cent in the rate 20 of the tax. 21 The following formula may be used to determine the rate, in 22 which formula the term "R" is the ratio of net income to gross TAX-14(01) a1ANHOHO 33911{ 1 Page 6 . ~ . ~ O . 1 income, and "X" ie the required rate of the tax on gross income 2 for the utility in question: 3 , X=[(1.8725+26.75R)] (26.75R-2.1275)$; 4 provided that >n no case governed by the formula shall "X" be S less than [5.885] 1.885 per cent or more than [8.2] 4.2 per 6 cent. 7 However, if the gross income is apportioned under section 8 239-8 (b) or (c), there shall be no adjustment of the rate of tax 9 on the amount of gross income so apportioned to the State on 1o account of the ratio of the net income to the gross income being 11 in excess of fifteen per cent, and >.t shall be assumed in ouch 12 case that the ratio is fifteen per cent or less." 13 SECTION 4. Section 239-7, Hawaii Revised Statues, is 14 amended to read as follows: 15 "§239-7 Aaeeaemeatel paymeatef chapter 235 applicable. (a) 16 The tax imposed by this chapter shall be assessed against each 17 public service company in the manner provided by this chapter, is and shall be paid to the department of taxation at the times(,] 19 and in the manner (in installments or otherwise) provided by 28 this section, except as provided in section 239-5(a), where 21 there is levied and assessed a tax in excess of four per cent 22 upon gross income, the revenues generated from the tax >.n excess TAX-14(01) UtANHONO 739111 I Pagel NO. 1 of the four per cent rate shall be paid to the respective county 2 director of finance at the times and in the manner (in 3 installments or otherwise) provided by this section. 4 (b) The total amount of the tax imposed by this chapter S shall be paid on or before the twentieth day of the fourth month 6 following the close of the taxable year. The public service 7 company may elect to pay the tax in four equal installments, in 8 which case the first installment shall be paid on or before the 9 twentieth day of the fourth month following the close of the l0 taxable year, the second installment shall be paid on or before 11 the twentieth day of the sixth month following the close of the 12 taxable year, the third installment shall be paid on or before 13 the twentieth day of the ninth month following the close of the 14 taxable year, and the fourth installment shall be paid on or 15 before the twentieth day of the twelfth month following the 16 close of the taxable year. Notwithstanding the preceding, if the 17 total tax liability under this chapter for the taxable year 18 exceeds $100,000, the taxes so levied shall be payable 3.n twelve 19 equal installments, in which case the first installment shall be 20 paid on or before the tenth day of the first month following the 21 close of the taxable year, and the remaining installments shall 22 be paid on or before the tenth day of each calendar month after TAX-14(01) atANHONO 319114 1 Page 8 . ~ . ~ O . 1 such date. If any installment is not paid on or before the date 2 fixed for its payment, the department or the county director of 3 I finance as to payments due the county under section 239-5(a), at 4 [its] the election of the department or the county director, may S cause the balance of the tax unpaid to become payable upon not 6 less than ten days' notice and demand, and this amount shall be 7 paid upon the date so fixed in the notice and demand from the 8 department or the county director of finance as to payments due 9 to the county. 10 (c) The department shall prescribe the forme in which 11 returns shall be made so as to reflect clearly the liability of 12 each public service company subject to this tax, and may provide 13 in the forma for such additional information as it may deem 14 necessary. All provisions of the laws, not inapplicable and not 15 inconsistent with this chapter, relating to returns for income 16 tax purposes, the assessment (including additional assessments), 17 collection, and payment (in installments or otherwise) of income 18 taxes and the powers and duties of the department and the State 19 director of finance in connection therewith, and relating to 20 appeals from or other adjustments of such assessments, 21 limitation periods for assessments, enforcement of attendance of 22 witnesses, and the production of evidence, examination of TAX-14(01) UTANHONO 339114 1 Page9 NO. 1 witnesses and records, the effect of assessments, tax books, and 2 lists and other official tax records as evidence, delinquent 3 dates and penalties, and the rights and liabilities (civil and 4 criminal) of taxpayers and other persons in connection with any 5 matters dealt with by chapter 235, are made applicable (1) to 6 the taxes and the assessment, payment, and collection thereof, 7 provided by this chapter, and (2) to the department and the 8 State director of finance in connection with the taxes and the 9 assessment, payment, or enforcement of payment and collection 10 thereof, and (3) to taxpayers and other persons affected by this it chapter, as the case may be. The provisions of chapter 235 12 regarding the limitation period for assessment and refunds shall 13 run from the filing of the return for the taxable year, or the 14 due date prescribed for the filing of the return, whichever is 15 later. Provided further, that with respect to payments due to a 16 county of the revenues generated from the tax in excess of the 17 four per cent rate imposed under section 239-5(a), a county 18 director of finance shall be afforded such rights and procedures 19 of the department in the enforcement of payment and collection 20 of the taxes assessed and levied under this chapter." 21 SECTION 5. Section 239-10, Hawaii Revised Statutes, is 22 amended to read as follows: TAX-14(01) ONANHONO 379114 1 Page 10 . ~ . ~ O . 1 "§239-10 Dispositioa of revenues. All taxes collected 2 under this chapter shall be state realizations[.] provided 3, that where a tax in excess of the four oer cent rate u on roes 4 income is levied and assessed under section 239-5(a), such tax s revenues to be paid to the county shall be realizations of such 6 county." 7 Section 6. Section 239-3, Hawaii Revised Statutes, is 8 repealed. 9 ["§239-3 Exemption fraam real property taxes. In order to 10 secure under this chapter an exemption of county real property 11 taxes, a public utility shall annually file with the county in 12 which the real property is situated, a claim for exemption in 13 ouch manner and by such date as prescribed in the respective 14 county ordinance. The claim may include real property under 15 lease to the public utility, under which lease the public 16 utility is required to pay the taxes upon the property, and the 17 claim to exemption shall be determined the same ae if the public 18 utility were the owner of the property."] _ 19 SECTION 7. Statutory material to be repealed is bracketed. 20 New statutory material is underscored. 21 SECTION 8. Transition period. Commencing with the July 22 2001 installment of the remaining quarterly or monthly TAX-14(01) U4ANHONO 3J9111 1 Page 11 . ~ . ~ O . 1 installments of the tax upon gross income which has been levied 2 and assessed for the calendar year 2001 under section 239-5(a), 3 that portion of each such installment that ie described in 4 Section 3 of this Act as the tax in excess of the rate of four S per cent that is paid to a county if the county provides for a 6 real property tax exemption for real property used by a public 7 utility in its public utility business, shall be paid to the 8 respective county director of finance ae provided in Section 3 9 of this Act. Provided that for the period July 2001 through 10 December 2001, if a public utility is not required to pay to a 11 particular county director of finance tax in excess of the rate 12 of four per cent, as provided in Section 3 of this Act, the 13 public utility shall not be liable to the State or respective 11 county for such portion of the installments of the tax imposed 15 in excess of the rate of four per cent under section 239-5 (a) 16 for the period July 2001 through December 2001. 17 Section 9. This Act shall take effect on July 1, 2001. 18 INTRODUCED BY: 19 TAX-14(01) AIANHONO 379114 1