Hawaii collects money from home builders for new schools. It’s never spent a dime
Nearly two decades after the Legislature gave the Hawaiʻi education department a way to raise money from housing construction to pay for new schools, lawmakers may take that power away.
A 2007 law allows the Hawaiʻi Department of Education to collect fees and accept parcels of land from developers and others who build houses. The land and money is supposed to help the state build or expand schools to serve the influx of students in new housing developments.
But the state hasn’t spent any of the $20 million it has collected under the law.
“No one wants to be paying for nothing,” said Lee Wang, executive director of Housing Hawaiʻi’s Future, which advocates for housing affordability. His group supports ending the “impact fee.”
DOE officials have said there are too many restrictions on how they can spend the money. State law requires it to go toward building or expanding schools in the same area as the housing development. But the money collected from any one development amounts to a small fraction of the cost of a new school.
“The amount of money is so small because it’s all in these districts,” said Riki Fujitani, executive director of the School Facilities Authority, which oversees new school construction. “You can hardly do anything with the money collected.”
The original law said the fees could be used only to build a school or develop new facilities at an existing campus, but not to purchase portable classrooms.
In 2021, legislators loosened the restrictions. The revised law allows the money to be used to renovate facilities to accommodate more students and to buy portable classrooms and other temporary facilities. But lawmakers kept the requirement that the money stay in the community. Money collected from a development in Honolulu, for instance, can’t be used to expand a school in Waipahu.
Still, the money sat unused. Now lawmakers appear to favor doing away with the fees altogether.
They say the fees, which must be paid by individuals building homes as well as developers, drive up the cost of housing in a state where it’s already expensive. The fee ranges from roughly $2,000 to $5,000 per house, depending on its location and size.
“When you’re collecting these fees from folks who are barely able to afford, a lot of times, these houses, and you put it into a fund and it never gets spent, then you really have to question it,” said Sen. Troy Hashimoto, who serves on the Senate Housing Committee.
The bill has passed through the House and will be considered at a joint meeting of the Senate Education and the Ways and Means committees on Friday.
Program Isn’t Doing What It’s Supposed To
The core problem, said Arjuna Heim, director of housing policy at the economic justice advocacy group Hawaiʻi Appleseed, is that the program fails to generate substantial revenue and yet is a burden on homeowners. There aren’t enough large housing projects under construction to bring in enough money to actually help build schools. But homeowners end up paying the costs when they build on their own or buy in a development.
In testimony for a related bill, the Department of Hawaiian Home Lands estimated that a $53 million housing project in ʻEwa Beach would yield about $1.6 million for schools. The fee for a smaller project on Maui costing $17 million would be just $381,000. (For now, DHHL doesn’t have to pay those fees when it develops housing.)
In comparison, DOE spent $245 million to build a Kīhei high school that opened in 2023.
Developers of projects with 50 or more housing units also can be required to contribute land on which a school can be built. But DOE Deputy Superintendent Dean Uchida said in a legislative hearing last week that he knows of only one time that has happened: a 12-acre parcel in Central Maui that’s part of a planned housing development.
Failing to spend the money isn’t the only problem. Critics say the fees are unfair because they are not levied on construction everywhere in the state. They apply only to areas projected to have significant residential growth, including central Maui, urban Honolulu and Leeward Oʻahu.
On the Big Island, former Mayor Billy Kenoi refused to recognize the law, arguing that impact fees were just passed on to homeowners. The fees aren’t assessed on Kauaʻi either; state school leaders never set up rules to collect them.
The state auditor found in 2019 that DOE had no policies on how to determine which communities were subject to the fees. It also said the process of calculating and collecting fees varied among communities and were based on faulty assumptions by a single employee.
“We do not believe implementing the school impact fee law based on ‘intuition’ or even someone’s undefined ‘professional judgment’ is appropriate,” the auditor’s office wrote in the report.
‘New Dirt Costs A Lot Of Money’
Despite the problems, Uchida said the program should remain. The law standardizes the fees that developers must pay, he said, and it ensures that the state has the money and land needed to accommodate students as more housing is built.
“New dirt costs a lot of money,” he said in a Board of Education meeting this month.
State Rep. Luke Evslin, who introduced the bill to eliminate the fee, said the state and counties still could require large developers to contribute to new schools. Counties could make zoning amendments conditional on a developer offering land for a school, he said. The state Land Use Commission could do something similar when it assesses the impact of a proposed development on a community’s resources.
Board of Education member Wesley Lo said he’s torn on the issue. DOE needs to ensure that schools have space to accommodate their students, he said, but the state is considering closing schools in some communities because enrollment has declined. Those communities may not need new schools if more students move in.
Enrollment has dropped 13% statewide, although it’s risen in communities such as ʻEwa Beach and in central Maui.
The proposed bill would give the $20 million already collected to the School Facilities Authority, which now collects the fee, Fujitani said. But it would need the Legislature’s approval to spend the funds — and the money still would have to be used in the communities they came from.
“The process to spend is very, very complicated,” Fujitani said in a hearing. “It’s very, very problematic.”
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This story was originally published by Honolulu Civil Beat and distributed through a partnership with The Associated Press.