## Facts

- The Hawaiʻi Legislature created the Convention Center Authority to develop, construct, and operate a state convention center.
- Act 7 (1993 Special Session) authorized financing that included up to $350 million in revenue bonds and also authorized reimbursable general obligation (GO) bonds for the project.
- Act 7 increased the transient accommodations tax (TAT) by 1% and earmarked that increment for a special fund dedicated to convention center development, construction, and operations.
- The 1% TAT increment and certain convention center revenues were deposited into the Convention Center Capital and Operations Special Fund, pledged to secure the revenue bonds and to reimburse the State for debt service on the reimbursable GO bonds.
- The Acting Director of Finance declined to proceed with issuance absent a judicial determination whether the bonds were excluded from the Hawaiʻi Constitution’s debt limit in article VII, § 13.
- The matter reached the Hawaiʻi Supreme Court as an original proceeding on an agreed statement of facts seeking a constitutional determination on the debt-limit exclusions.

## Issues

1. Whether the 1% TAT increment earmarked for the convention center is a constitutionally qualifying “user tax” so that Act 7’s convention-center revenue bonds are excluded from the article VII, § 13 debt limit as “revenue bonds.”
2. Whether Act 7’s convention-center reimbursable GO bonds qualify for exclusion from the article VII, § 13 debt limit as “reimbursable general obligation bonds.”

## Decision

- The court held the 1% TAT increment functions as a “user tax” for purposes of article VII, § 13.
- The court determined the convention-center revenue bonds, secured by the special fund supported by that user tax (and related project revenues), are excluded from the constitutional debt limit.
- The court held the convention-center reimbursable GO bonds do not fit within the constitution’s reimbursable GO exclusion when read according to its text and drafting history.
- As a result, the reimbursable GO bonds must be counted toward the State’s constitutional debt limit.

## Legal Principles

- A targeted tax may qualify as a “user tax” when imposed on a class closely connected to, and specially benefitted by, the financed undertaking, and when the receipts are dedicated to that undertaking.
- Revenue bonds payable from and secured by project revenues and qualifying user taxes may be excluded from the article VII, § 13 debt limit.
- Constitutional debt-limit exclusions are construed narrowly; courts rely on constitutional text and drafting history to determine the scope of an exclusion.
- Reimbursable GO bond exclusions do not extend to state-issued GO bonds for a state facility merely because repayment is expected from a special fund; the bonds must fall within the limited category contemplated by the constitutional language and history.

## Conclusion

The Hawaiʻi Supreme Court approved exclusion of the convention-center revenue bonds from the constitutional debt ceiling because the earmarked TAT increment qualified as a user tax tied to the project, but required the convention-center reimbursable GO bonds to be included in the debt-limit calculation because they did not meet the constitution’s narrow reimbursable GO exclusion.


Convention Ctr. Auth. v. Anzai, 890 P.2d 1197 (Haw. 1995)