Hawaii lawmakers are taking a new approach to financing construction of some future public schools in the state, including a really big and expensive one on Oahu.

The state Legislature has directed a recently formed state agency to seek cheap federal loans to finance schools in rural areas, starting with a planned $355 million “mega high school” serving the Kapolei and Ewa Beach region.

Lawmakers touted the $355 million expense for the long-planned East Kapolei High School in their capital improvement budget passed this year, though the sum represents only tentative federal funding because it is uncertain.

The idea is for Hawaii’s fledgling School Facilities Authority to borrow money from the U.S. Department of Agriculture’s Rural Development program to pay for new schools in rural parts of the state.

Such financing can be easier and cheaper to obtain compared with state general obligation bonds typically used to pay for new school construction and most other state capital improvement projects, which compete for limited budget allocations every year at the Legislature.

“We’re trying to do an experiment where we access federal Rural Development money,” Rep. Kyle Yamashita (D, Spreckelsville-Upcountry Maui), said during a conference committee meeting on the state budget bill on April 27, a few days before the bill was passed. “This is something new for us, and we’re hoping that we are successful with this. Most of the projects will be on the neighbor islands if we’re successful, because that’s the rural areas. But my hope is that by using this money, which is cheaper than (general obligation bonds), we’re going to be able to open up more capacity for projects statewide.”

Normally, the state wouldn’t be eligible for USDA Rural Development lending because borrowers must demonstrate a need for such financing as something they can’t obtain through other means. But the School Facilities Authority, or SFA, could be recognized as a special subdivision of the state that can qualify for the lending program.

“Definitely we would be more than happy to work with the state on that,” said Chris Kanazawa, director of the USDA’s Rural Development office in Hawaii.

Kanazawa said several Hawaii charter schools have been built using Rural Development program loans, including Ke Kula O Samuel M. Kamakau Laboratory Public Charter School in Kaneohe, Kihei Charter School on Maui and Kanu o ka Aina New Century Public Charter School on Hawaii island.

USDA’s Rural Development program can be used for a wide range of projects, including housing, utilities, hospitals and libraries.

“Just about everything you need in a community, we have funding programs that support that,” Kanazawa said.

Such projects must be in rural areas as determined by population estimates adjusted every 10 years. The East Kapolei region, based on preliminary 2020 Census data, is still regarded as rural.

To help the SFA pursue the federal financing, lawmakers appropriated $100,000 in the budget for a feasibility study on the approach.

Using USDA Rural Development program loans to pay for new public schools is one of several new tasks assigned to the SFA, which was formed in concept by the Legislature two years ago but had no staff until earlier this year.

The top priority of the new organization is to develop affordable teacher housing, possibly through private-sector partnerships, while also taking over planning and development of new schools from the state Department of Education, which remains responsible for maintenance of existing school facilities.

The SFA also has been directed by lawmakers to carry out an initial $200 million phase of universal preschool development in Hawaii.

A board guiding the authority held its first meeting in October, and in March longtime Hawaii public school teacher and administrator Chad Keone Farias was appointed by Gov. David Ige as executive director.

Farias, most recently superintendent for the Kau-Keaau-Pahoa school complex area on Hawaii island, was an initial SFA board member.

Before his appointment to run the SFA, Ed Sniffen, deputy director of the state Department of Transportation’s Highways Division, had been serving as the “administrative lead” for the SFA, supported by other DOT staff. Lawmakers in May included $1.3 million in the state budget for SFA operating costs, including four staff positions.

Farias said developing East Kapolei High School using USDA Rural Development financing won’t be easy, but that he intends to get moving on the objective once budget funds become available and staff is hired.

“It’s going to be a tough one,” he said. “I’m going to go at it. I’m going to go for it.”

DOE planning for East Kapolei High School dates back to 2014 in anticipation of major residential development in the region necessitating a new high school to avoid adding more students to Kapolei High School and Campbell High School.

Campbell, the largest high school in the state, was initially built for 1,700 students and has been repeatedly expanded with portable buildings and permanent additions to accommodate about 3,100 students in recent years.

Kapolei High School also has been expanded to serve around 2,000 students.

The DOE previously projected there would be a need to serve about 3,200 more high school students in the region based on ongoing and planned residential development that includes the Ho‘opili community, which began delivering the first of 11,750 planned homes in 2017.

D.R. Horton, the developer of the community bordered by Kapolei, Ewa Beach and Waipahu, is providing the state with 45 acres of land at Ho‘opili for a high school. Initially the school was slated to serve 1,600 students, but the DOE replaced that plan with the envisioned East Kapolei High School in 2017 after not being able to find a viable site for the mega high school.

To date, $6 million has been encumbered for planning, environmental studies and design work for East Kapolei High School, and lawmakers appropriated an additional $500,000 last year.

A timetable for building the school is uncertain, and the DOE is in the process of transitioning its new school development work to the SFA.

The DOE’s other new school plans being transferred to the SFA include a 10-story urban elementary school called 690 Pohukaina in Kakaako that has been delayed in part by legislative funding issues; the roughly $250 million Kihei High School on Maui, where construction is ongoing; an elementary school at Koa Ridge on Oahu; future phases of Honouliuli Middle School at Ho‘opili; and two elementary schools at Ho‘opili.

Lawmakers also included $20 million in their budget bill for work on a new elementary and middle school in Central Maui.

Sen. Kurt Fevella (R, Ewa Beach-Iroquois Point) is hopeful that the SFA and federal financing plan succeed in delivering East Kapolei High School and relieving pressure on the two existing high schools in the area as housing projects advance in Ewa Beach, Kapolei, Kalaeloa and Ho‘opili.

“Growth is still growing,” he said. “Kapolei cannot handle anymore. Campbell cannot handle anymore.”