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HomeMy WebLinkAbout071111_REGULAR_MINUTES Kaua'i County Cost Control Commission Minutes of Meeting OPEN SESSION July 11, 2011 With a quorum being present, the regular meeting of the Cost Control Commission of the County of Kaua'i Nvas called to order by Chair Sterker 1:39 pm at the Moikeha Building, Liquor Conference Room No. 3. Members present: Ms. Sandi Sterker Mr. Dirk Apao Mr. Lawrence Chaffin Jr. Ms. Laurie Yoshida Members absent and excused: Mr. Brant Fuchigami Mr. Glen Takenouchi Others in attendance included the following: Amy Esaki, Deputy County Attorney, John Isobe, Administrator, Gary Heu, Managing Director; Ernesto Pasion, County Auditor; Lani Nakazawa, Audit Manager; David Craddick, Water Manager& Chief Engineer, Sally Motta, Deputy Finance Director; and Steven Hunt, Real Property Appraisal Officer; Mercedes Noun, Support Clerk; and Paula Morikami, Administrative Aide. Approval of Minutes Meeting Minutes of June 13. 2011, Mr. Apao moved to approve the minutes as circulated. Ms. Yoshida seconded the motion. Motion carried 4:0 Communications CCC 2011-12 Communication dated 06/05/11 from Linda Faye Collins to Chair Sterker tendering her resignation from the Cost Control Commission, Ms. Yoshida moved to receive the communication. Mr. Chaffin seconded the motion. Motion carried 4:0 Business CCC 2011-09 Communication dated 04/28/11 from County Auditor Ernesto G. Pasion transmitting a copy of the Audit of Implementation of the Recommendations of the Cost Control Commission Concerning Energy Savings. Report No. 11-01. April 2011. (On file with the Office of Boards and Commissions Minutes of July 11, 2411 aj Communication dated 06/15111 from Chair Sterker requesting the County Auditor's presence to discuss the findings of the report entitled"Audit of Implementation of the Recommendations of the Cost Control Commission Concerning Energy Savings". b) Response dated 06/21/11 from County Auditor Ernesto Pasion relating to a request from Chair Sterker to discuss the findings of the audit report. Chair Sterker: I would like to consolidate items (a) and(b)and request that a motion is made to receive the communication. Ms. Yoshida moved to receive the communication; Mr. Chaffin seconded the motion. Motion carried 4:0 Chair Sterker: I now call on Mr. Pasion and Ms. Nakazawa to the seat. Chair Sterker: I go back to when the County Auditor first did the energy report; it was a very good report and it provided most of the information in the audit report. I do remember that the Cost Control Commission looked at a lot of things and I do not believe that the Cost Control Commission actually made all the 2008 recommendations as stated in the audit report. I believe at that time there was a hiring freeze going on, and nothing was said about the hiring of an energy manager. After you provide your input I would like to call upon Mr. Isobe to speak on what the Cost Control Commission actually did at that time. As I recall there were only six (6) recommendations that came from the Cost Control Commission. I certainly think that you have put everything together as to what really needs to be done and I appreciate all of the information provided in this report. I am especially looking into having an energy manager in a department that would actually do something with that. As I look at the recommendations, I think the Cost Control Commission has implemented most of them and think that Mr. Hen can offer more information on that. Chair Sterker: Mr. Pasion, do you have anything further that you would like to tell this Commission? Mr. Pasion: Good afternoon, Madam Chair and Members of the Cost Control Commission. For the record my name is Ernest Pasion, County Auditor and with me is Lani Nakazawa,Esq. / Auditor Manager. The mention of the energy manager is according to the best practices so...I understand that when we appeared before Council last Wednesday and they also had a recommendation of sustainability according to Chair Jay Furfaro. Chair Sterker: I am sorry but at that time I was off island and did not see it. y Ms. Nakazawa: Just to ftirther expand on the auditor's report. I would like to touch on clarification. The audit report comprises basically of(2)two sections: the first section is a follow-up on the implementation of the Commission's recommendations and the 2nd is the observation of the County's energy management strategy as compared to best practices. 21 P a g e The energy manager's proposed recommendation comes out more strongly in the latter because the best practices require a more organized energy strategy to be devised and led by personal endorsement by top management. So that*s where the energy manager recommendation comes from. However, in the follow-up interviews it became apparent as it was in the first round. Some of the individuals charged with ...let me put it this way...some of the County employees who had energy efficiency in their job titles, specifically Dough Haigh who is in charge of building and Glen Sato who is the energy coordinator, both expressed that they did not have the authority to implement the recommendations such as the green teams for example. Although they thought it might be helpful to have. They thought it might be essential for the implementation for those types of suggestions to have energy ...a single energy manager authority to actually make (inaudible). Chair Sterker: An outline for each division on what a green team would be. Ms. Nakaza-wa: Right. Chair Sterker: I think that was the problem because we did not include any directives that were sent to the Mayor. All we did in the 2008/2009 was suggested, and there was no mandate that -went with it. So, as far as to what the recommendations from the Cost Control were many of these were not recommended by the Cost Control Commission and I just wanted the other people to know that are specifically on pages (1), (2) and (3): which is attachment (A), after page (5) of the proposed draft. I see that there are a number of the ones that were done partially and the ones that we had suggested like tinting the windows facing the sun, painting the walls; and I know that when we come for a Cost Control Commission meeting the thermostat is turned up a bit. So it's a little bit warmer in here than it is probably for the other meeting so thank you very much for doing that. I think that I don't want the people here to feel that the County did not do anything that the Cost Control Commission had recommended. In actuality many of these were not recommended by the Cost Control Commission. So, therefore it is not up to us to implement any of these. So, I would like for you to state any further that you want to share with us. Ms. Nakaza-,va: Okay. The reason we took an objective look at this was based on the paper work that existed and we incorporated all the recommendations in the study because of the March 17`11 2007, transmittal to Mayor Baptiste which is Attachment(b). If you look at the second recommendation which is in Attachment(b), all departments should be asked to read the energy survey guide and to follow the recommendations outline therein. So,that's why the specific recommendations in the energy study were included in the review. Chair Sterker: Okay, do any of you have questions for these two. Ms. Yoshida: I think my only concern, and I guess Gary is going to address all of these red arrows, is that we had no idea whether the recommendations were being considered or targeted for future implementation. 31 P a g e rz Chair Sterker: Gary Heu will be addressing the Commission. Chair Sterker: Thank you very much and we do enjoy reading all of this; you know this is wonderful bedtime reading. Ms. Nakazawa: Well I certainly do appreciate all of your support, and I'm happy that I'm helping you at bedtime. Chair Sterker: Thank you very much Lani and Ernesto. Chair Sterker: Mr. Isobe would you like to come up and say a few words. Mr. Isobe: For the record, my name is John Isobe and I'm the Administrator for the Office of Boards and Commissions. As Chairperson Sterker has mentioned and it's for the benefit of the new members, well, I shouldn't say new members, but a benefit for the members that were not present when the initial County energy use policy and or recommendations were being initially discussed by the Cost Control Commission. At this time, I would like to just set a stage when all of these things occurred and provide an outline of what happened to the best of my recollection and to review what our office has done. First and foremost, I have here a document that was transmitted to the Cost Control Commission dated February 21, 2008. Just so that we are clear, these recommendations were offered to the Cost Control Commission at the request of the Cost Control Commission in conjunction with the office of the Mayor. So the recommendations that came forth were really not something that was recommended by the Cost Control Commission but in fact, a report that-was prepared by the Office of the Mayor. To my knowledge, this report that was presented to the Cost Control Commission was never officially adopted by the County of Kaua'i as an official document, meaning that the Mayor or County Council did not adopt these recommendations as an official document of the County of Kaua'i. However, the Cost Control Commission did take the time to review the report and as a consequence of them reviewing the report, and as Chair Sterker has previously stated, the Cost Control Commission made several recommendations. As I recall at least of what we can see, there was approximately, well not approximately but only six (6) recommendations that vvere made; some of which the Cost Control Commission at the time focused on areas that they felt would provide to the County of Kaua'i the largest cost savings upfront. They also had to deal with the Department of the Division of Wastewater relating to the sewer systems, and also the Department of Water as it relates to the pumps and equipment that are being used in the County's Water Department. The other recommendations were more...I would frame as low-end, and that at that time, the Commission felt it would be something that the County should consider doing at a least cost to the County. employees. 41 P a g e One of the recommendations that the County establish"Green Teams" and that the County departments review the document to see whether or not some of these recommendations could be implemented in each of the departments. At no time did the Cost Control Commission say that all of these recommendations obtained in this report that was prepared by the office of the Mayor state that these recommendations should be adopted as being the policies and/or direction of the County of Kaua'i. The other thing that I believe is the Administration did respond to that and that the Commission should be aware that there was a misunderstanding that I believe happened on the Council's floor. This again is to set the record straight because there seems to be an impression that the Cost Control Commission requested at that time that the Mayor adopt an ordinance and that the Mayor at least offer to the County Council an ordinance implementing the recommendations of the Cost Control Commission. If you look at the recommendations made by the Commission, at no time did the Commission say that an ordinance should be adopted. But rightfully so, had the Commission recommended that an ordinance be adopted, then, correctly, the Mayor is obligated to transmit that ordinance with its comments thereon, within thirty (30) days of the Commission making the recommendations. Again, as it relates to the energy use recommendations made by the Commission, the Commission never recommended that an ordinance be adopted. In fact, if the Commission had recommended that an ordinance be adopted, the Commission with the assistance of the Office of Boards and Commissions would draft the recommendations in ordinance form for submittal to the Mayor. This could be seen when the Commission reviewed the Wailua Golf Course fees which some of you were here when the Commission did its review of the Wailua Golf Course fees. Chair Sterker: and the Bus. Mr. Isobe: The Bus was in fact drafted in ordinance form and submitted to the Mayor. The Mayor did in fact affix his comments to it and at that time did not agree with all of things that were in the ordinance. But, rightfully so, he affixed his comments and submitted that ordinance along with his comments to the County Council. So, again, I just want to make things clear for the record and for the members that were not present that some of the recommendations in the report did not come from of the Cost Control Commission as indicated in the audit report. Secondly, the Commission did not adopt all of the recommendations attained in this document and that this document that I'm holding was never adopted, at least to my knowledge, formally as an official policy and/or energy document for the County of Kaua'i. The Commission did in fact make specific recommendations as a result of reviewing this report. Mr. Hen, at least relative to the Commission's recommendations, is better able to speak about it that I am. 51 P a g e Lastly, as for the Commission's recommendations, at no time did the Commission state that the Mayor should adopt an ordinance to implement the recommendations of the Commission, and as I said previously, the fact is that if the Commission did make that recommendation, the Commission would have sent the draft ordinance up to the Mayor for his consideration which was not in this case. Chair Sterker: We did not, and I think for the low-end cost there were many of those that have been implemented and partially implemented. and I think that they are actually doing a fairly good job with the recommendations that is stated on page three (3) of the Executive Summary. I think that you have explained that very nicely Mr. Isobe and thank you for doing that. Mr. Chaffin: How does that relate to all of these? Chair Sterker: Those actually were not recommendations that came from the Cost Control Commission. Mr. Chaffin: So that is a misnomer? Chair Sterker: Yes, because it did not come from the Cost Control Commission. Mr. Chaffin: So we do modify it. Ms. Yoshida: No, it is not our document. Chair Sterker: It is not up to us. Mr. Chaffin: Okay. Chair Sterker: Okay,the next person we would like to hear from...oh I'm sorry Lani, would you like to say something else? Ms. Nakazawa: I just wanted to say that I appreciate the discussion...but I just want to add some comments about the audit. Chair Sterker: Okay. Ms. Nakazawa: The audit is primarily. as I said previously, in two (2)parts, The first part is related to your recommendations which was a process oriented audit...so in the spirit of not losing the forest for the trees...you know the whole idea was to provide you, as well as the public and others, input as to the process issues and those issues...the process issues, can be summarized as follows: When the Cost Control Commission makes recommendations what happens? Is there an institutionalized process to comply which these recommendations are reviewed and implemented and tracked? So I would like to recommend that issue for your consideration. It is not...it was not designed to be an audit that says these are good things in the recommendations that are being (inaudible) are bad things. 6 1 P a g e The implementation and non-implementation is always recognized as an administrative conscience and that the audit was simply intended to be informational to you as well as the public and the policy makers and the administration and the Council as to what kind of processes are in place because I know historically there are somewhat of frustration by past Commissioners that you know you all spend a great deal of time pondering and reviewing issues and sometimes they never see the light of day...so it's mostly intended to provide suggestions to the process issues. Like what kind of things process-wise, that are in place and what types of things might � be put into place to make sure that whatever the recommendations the Commission make are in fact implemented or reported on in a timely manner. I think Mr. Heu's response was very helpful because you know he had said that the Mayor intends to, when there are recommendations made, implement and provide the Commission with timely and periodically reports on the implementations and non-implementations. So, I would like to take it away from this issue on whether or not it was a recommendation because that was not the focus of the audit itself. The audit itself was intended to provide you and the others and as I said information about what happens once a recommendation leaves you. Is there a process in place to make sure that it moves along, and for the recommendations that the Mayor intends to implement. is there a circle back to you in terms of reporting back to you exactly what has occurred? Chair Sterker: Thank you very much...and yes. we of course have Amy Esaki who can very nicely tell us when we can do something and when we can't do something. We are thankful for her guidance in that. I just want to tell you I don't think that we were putting anything on you. I think the purpose was to clear up things for the new Commissioners and I was the only one that is a hold over. I'm sorry that we don't have other two new Commissioners here to let them know what is happening...Thank you. Chair Sterker: Mr. Hen, I know that you have some good insight for us. Mr. Hen: Chair Sterker and members of the Cost Control Commission, for the record, my name is Gary Hen, Managing Director. First of all, I would like to say that this is the first board and commission meeting that I have attended uninvited...without an official invitation. Mr. Isobe had asked if I would spend a few minutes with you to clear up some of the issues that are being discussed. I certainly appreciate the auditor's comments and the clarification made by Lani Nakazalwa. I guess one of the concerning things for me is that I know that this audit was done with the best of intentions on how can we improve on how we conduct business. Lam spoke about the process and I think that it is right on target. What concerns me is that if you were a casual observer and just happened to tune in to the Council meeting last week at the time the County Auditors report was up for discussion by the County Council you know when you throw out a number of forty (40) recommendations being made by the Cost Control Commission and only three (3)have been completed that catches everyone's ear. So, again I would choose not to necessarily focus on the numbers today. 7C P a g e at I would like to do, because I think it would be appropriate, is for the Administration to come back to the Cost Control Commission and say hey you made two (2)recommendations to us in 2008 and then you made four(4) additional recommendations in 2009, all relative to energy cost savings. What we would like to do is schedule either at the next Cost Control Commission meeting in August or the September...we can work-with the Commission's secretary for scheduling. We-,would like to come back and provide this body with a comprehensive report on the actions that we have taken actions relative to those six (6)recommendations that have been put forward in 2008 and 2009 and to give you a really comprehensive view of what has been taking place because when you look at attachment (a) in the audit report, I don't think a simple yes or no gives you a real good picture about what has or has not been done. It might be misleading if you did not have all of the information to support that. As an example, F11 just use the recommendation in 2008 for the Department of Water and Wastewater that they should be required to develop cost-savings opportunities for their operations through the use of alternative energy sources. We agree that, that's a recommendation that should be looked at and pursued whenever possible, and that this recommendation whether it is implemented. To say no does not necessarily give you the whole picture. Currently down at the Waimea Wastewater treatment plant, we are doing some facility improvements that address the cost-savings relative to energy both from an equipment standpoint. In other words, more energy efficient type of equipment in terms of our expansion of the plant down there and in conjunction with the work that is being done there, we are also in the process of installing PV photovoltaic panels which will offset some of the energy costs associated with that expansion. So I would say, that yeah, we took a look at it and ive are trying to employ alternative forms of energy to benefit some of these facilities so again is that work completed...will the whole plant be working off of PV now9 that's not true. but I think where it is feasible and in a sense we are trying to head into that direction. To simply imply a yes or no does not provide that type of information. So again, using that as an example, I would like to once again propose that the administration return either in August or September to provide a comprehensive report on how the administration is addressing the recommendations of the Commission, and I think some of the things you will find will be on the recommendations that the Commission has made relating to the energy cost-savings. I will be working with staff to arrange the scheduling. Chair Sterker: Can I ask you one question? I see a lot of things that can be done if we have an energy manager and sometimes you have to spend money to save a lot of money. I think the w problem that we have seen with the Green Teams is that nobody really knows what to do. You need someone who has the knowledge on what to do with a Green Team in order to implement it. Mr. Hen: I agree, and I think that will be part of our report to the Commission in August or September. For this fiscal year, our current budget has been approved by the County Council and the Mayor and what you will find is that the position has been approved and will be called a Green Manager/Sustainability Manager. 8 1 P a g e We are currently working on the job description for that newly created position and fully funded position which will augment our capacity relative to addressing energy issues and a broader stance of issues. We also have on board Mr. Ken Stokes who I'm sure even., one of you is familiar with. As a contractor, he is working with all of the departments by taking a look at our carbon footprint issues and how it is being measured. I think that out of that initiative, we will find a real nice dove tailing end with an energy savings contract that'Are would like to begin to develop a general county facilities. There is an Energy Performance Contract that is now in procurement and at the tail-end of negotiations and that is specifically for wastewater because that was identified as one of the biggest hitters. We felt that that particular contract should be moving on, ahead of the more general facility type energy performance contract,which we*11 get to. We think that the work that Ken Stokes is doing identifying meaningful measurements in terms of carbon footprint would dove tail nicely with the energy performance contract that we intend to initiate in the near future. But I'm probably getting way ahead of myself in terms of what we are going to report to you in August or September but the short answer to your question, Chair Sterker, is that yes. there is a position that is fully funded and so now we need to take a look at the existing position of the energy coordinator and this new position, and we need to do some adjustment relative to some of the responsibilities, but certainly it is our intent to have that new=position drive those energy green teams. W Chair Sterker: That's wonderful news and thank you very much, we really look forward to having you back in August or September. Mr. Hen: So I will go ahead and schedule it with Staff. Chair Sterker: Is there any more questions? Mr. Chaffin: Yes, I would like to request that your report have an executive summary of one or maybe two (2) pages accompanying your fully blown report. Chair Sterker: Thank you very much Mr. Heu. Ms. Yoshida: Do we need to do a request because we are requesting for them to come in a motion or letter? Staff- We will do the request. Ms. Yoshida: Okav, thank you. Ms. Esaki: Chair Sterker, one of the questions that the Council members had last week was whether the Cost Control Commission with its recommendations was to recommend an ordinance. I believe from what I heard in the past meetings I don't think that was the intent. If you took at the recommendations, it would not have been possible to write up an ordinance with those recommendations. Chair Sterker: That's right. 91 Page Ms. Yoshida: Do we need to respond to the Council? Ms. Esaki: I will be responding to the Council on behalf of the Commission. Ms. Yoshida: Okay. Chair Sterker: Thank vou very much Chair Sterker: Moving on to CCC 2011-09 c) Communication dated 06/15111 from Chair Sterker requesting a representative from the Department of Water be present to provide an update of the department's energy cost-savings measures and future plans of implementation based on the recommendations and findings of the Auditor' report. Chair Sterker: I call on Mr. Craddick. Ms. Yoshida: I think that he needs to state his name for the record. Mr. Craddick: Hello, my name is David Craddick, and I am the Manager for the Kaua'i Board of Water Supply. Chair Sterker: Before we get started, I got this wonderful email from Apollo Kaua'i and the Department of Water that on Thursday evening they are going to be presenting at the L-ihu'e Civic Center a plan of the Department of Water until 2020. 1 think that this is a wonderful thing and hopefully you will give us some of that information today. Mr. Craddick: Yes, Chair Sterker: Thank you. In looking at this, I see that there are a lot of things that are going to be done or at least have been started; maybe you can give us some insight. We see things that W you have plans to add five (5) mg's of storage and another 4 mg's of storage, and I have no idea how much a 4 mg or a 5 mg is. I Mr. Craddick: Almost nothing...it will get us up to where we can save a day's worth of water use. Chair Sterker: Okay, and one of the problems is that a lot of times it is emptied and then you must pump at a time when it is peak hours...Is that the problem? Mr. Craddick: Not really. We only have so many wells and we cannot over pump those because then you run the risk of pulling out salt water especially in the L-ihu'e area where there are low yield wells. So what happens is that the wells just suck down and basically goes empty of water and then you have to it shut off then wait for it to fill back up again. The thing that they have here about pumping water up to the other storages is typically done with water, and you wouldn't do it with treated water because you have to build a big reservoir to hold that water to pump it up to you because once water comes out of our wells, it is disinfected and it is ready to be used. If 101 P a g e you are moving it around by running it through the machinery, you would have to re-disinfect it again. Typically that type of scheme is used only with raw water where it's not being treated and it goes from a lake to a lake. You would have to put in pumps that are minimum in size and pumps about 10 thousand gallons a minute. We don't even supply 10 thousand gallons a minute as an average over awhole day hereon Kauai. So, to put in that type of equipment would require infrastructure that is far beyond what's in our 2020 Plan. Chair Sterker: So some of the modifications that you're saying are pipe size modifications. If you have a smaller pipe it would restrict it enough that you are not over using it. Mr. Craddick: Well, the smaller pipe lines that we have are typically put in at a time when nobody was following the fire requirements. Chair Sterker: I see Mr. Craddick: So, some of the subdivisions were somehow able to build without meeting the fire requirements. Because the fire requirements have been in, well in place for over 40 years, I don't know if it was because of the Ag zones where they were allowed smaller size lines in the past where there-wasn't much building going on in those places;. Now, people who brought those properties are building houses that now require fire protection and that's driving that, not any effort to try to reduce the pumping cost because of friction loss in the pipeline; that is relatively a pretty minor issue. Chair Sterker: It says here that all under sized pipes on the island were replaced with appropriately sized pipes that would be using less energy required to pump water. Is the cost prohibitive to do that? Mr. Craddick: Well, that is what the main portion of the 2020 Plan is. It is going to cost about $600 million dollars to do that and it's not going to get done in the next seven (7) years...it's looks more like a 20/60 plan if we are going to implement the whole thing. I guess portions of the plan that are relevant to what you are talking about today are our high level wells which are are currently in the RFP process. I am a little reluctant to talk about that right now. However,the cost is relatively high so it will be interesting to see whether the Board of Water Supply would want to try something like that Aith its risks. The other issue is just something that we would place on the Board's agenda and budget this last year. )Vhich at the time we had these groups going around and offering to the County to cut its power usage and, A and by the way we will pay for it and take our money out of the savings we got. We did a little study of these lights and found out that one of these units takes up about .8 amps. If you replace it with lighting admitting (inaudible) it takes .4 amps so that is a 50% savings and power, provided that whatever time the light is on during the day. What we have done in our office is physically go around and pick the areas where the lights are on all the time and change those. 111 Page Also, we looked at the fact that these last about 50 thousand hours and because we are planning to put up a new building and we didn't want to install new lights only to have them ripped out in a couple of years. The buildings that are remaining we are currently being worked on. One of the recommendations that is in the report is to do a power factor correction and we expect to be able to succeed maybe 10%of our power bill which is about 5300,000 and that it will cost us about $800,000 to implement that. Chair Sterker: Explain to us what a power factor is...correction a capacitor is. Mr. Craddick: When you start up these big horse powered motors there is apparently heavy draws of current in the line and as a result the voltage drops and the power companies charge you for that. So if you have the capacitor it stores the energy and when you need it right away, it comes out of the capacitor and not out of the power lines. And the more of these capacitors you put in the closer you get to one as a power factor then at that point you are charged for this heavy draw on the line is zero, if you have a power factor of one. The lower the number is when you get into point 8 and really at point 8 anybody should be correcting their power to bring it up. We have some that are .84 and .85 and some that are .99 so that is a very good power factor there. So we are doing what needs to be done and it won't take 20 years. Chair Sterker: Do you want to talk about the alternate energy that might be used? Mr. Craddick: Well it depends on what the high level well are being used. Chair Sterker: Talking about anything that is being done as far as UV and all of that type of things. Mr. Craddick: Please keep in mind that we are land poor and any of those kinds of things definitely require land. We have been talking about somebody with wind powered generation. And as long as there is no reeling rate on the power lines, there really is little incentive for people to get involved in that. From my estimate, because the power company pays such a small amount if you were going to do that, you basically need to be using the power yourself to really get a return on your money. Chair Sterker: So wind is not a... Mr. Craddick: I think that wind is mainly what everybody is looking at because of the shearwater bird issue and watching what is going to happen about that. Because if you take out a couple of these birds... Chair Sterker: Then there goes all of your savings. Chair Sterker: Tell us a little about the RI and UV impacts. Are we still using chlorine? 12 1 Page ri Mr. Craddick: We are, but the RI and UV is...to my knowledge the Kaua'i Lagoons put in an RI facility, but they already had an agreement where they would take all of the water for the irrigation so there is not much water to spare. Chair Sterker: Where are the gravity systems? Mr. Craddick: Moloa'a and Kapa'a. We do have a perpetual use of the water at the Kaldheo treatment plant which is a 1906 agreement when the land got exchanged-,with the State and McBrvde. The State got watershed area just below the Alexander dam and McBryde used to own that but they traded land so that they could grow sugar. Along with that, the County got a perpetual right to take a half a million gallons of water a day from the Wahiawa Stream. As a result, we are looking to re-build the treatment plant up there which basically hasn't been running since 1993. Because of that, the half a million gallons of water up there really saves money but we need to pump it up some 1200 feet. It is cheaper to treat the water at that elevation then it is to pump it up even though typically at the elevation here in Llhu'e, where we have a treatment plant. costs more to treat the water than to pump it. The problem in L-ihu'e is that we just don't have the water to pump. Chair Sterker: Can you tell me what happens when a water hydrant blow? Mr. Craddick: It shoots out. (laughter) Chair Sterker- How much water and electricity goes into having one water hydrant blow? Mr. Craddick: There usually is anywhere between 15 minutes to half an hour of water flowing which is about a thousand gallons a minute or maybe as much as two thousand gallons of water a minute. 700 gallons a minute is a million gallons a day, so it could be flowing at a rate of 300 million gallons a day for about V2 an hour. You need to divide that number by 48 to get some kind of estimate of how much water you lost. This is not a loss of a whole lot of water. Chair Sterker: Is there a systematic check of most of the water hydrants being done? Mr. Craddick: Every three years we check usually every single water hydrant. There is some debate going on whether that is fast enough. I will leave it at that. Chair Sterker: Are there any more questions? Ms. Yoshida: I was just wondering how accurate are the statements that are being made on page 38 8 of the energy guide which says "There is very little opportunity for the Department of Water to reduce its electrical use,"and it goes on stating after the first bullet: "There are few opportunities for the Department of Water to potentially reduced the demand for electricity." then they ftirther talk about how you pump and when you pump. Mr. Craddick: That was an issue of somehow doing all of your pumping at-night when you have the loxvest price that you can get. 13 1 Page Ms. Yoshida. But you can only do that if you have the storage facility. Mr. Craddick: Well, you not only need the storage but you need to double the number of wells you have. Ms. Yoshida: So this is accurate but not really a feasible solution. Mr. Craddick: Right. It says that we have little opportunity to reduce the use of electricity. If that high level well goes in, we could develop anywhere from 2 to 8 million gallons a day and we deliver 12 million gallons a day so we were at the high side of that. You would see a significant not only drop in electricity but we would probably be able to generate anywhere from 2 to 4 million dollars a year in power coming out of the mountains off of that water. So that project even though it does cost a lot of money, if you look at the security issues two ways you look at one of just a normal manmade disaster...still at least we still had good pipes and still continued to get water ..but having all of your eggs in one basket is a lot easier to take out then it is to take all of the wells and spread them all over the island. 70% of your water...is very easy to take out. Chair Sterker: I have no further questions and appreciate you being here and talking to us and look forward to hearing about the 2020 Water Plan. Mr. Isobe: If I may again,just to clarify on behalf of the Commission on some of the comments made earlier relative to the auditor's report. The reason why I just wanted to take this opportunity and I know that we have people waiting so I will keep this brief, is that one of the recommendations that were made in the audit report that very specifically had to do with the Office of Boards and Commissions on what the auditor felt the office should be doing and what they indicated that our office should be responsible for following up on all of the recommendations that were made by the Cost Control Commission relative to not just the Commission's report but the recommendations that least pertained to the Mayor's survey or report that were used as guide lines or whatever your may want to call it. Although we would be happy to assist the Commission we totally appreciate what our function is. I still question whether or not what the auditor contends our responsibilities and fatictions are as the Office of Boards and Commissions is it in fact accurate, at least in terms of what they are recommending that our charge is. You need to again understand that our office oversees something like fourteen (14) boards and commissions, and in fact, if we had to do follow-up for fourteen boards and commissions including the Board of Water Supply, all of the recommendations that they put forward on behalf of the County Kaua'i, it would be a monumental task and we would become a huge department. We would in fact become the monitor or watch dog over the entire County relative to the recommendations that are being made by the boards and commissions in general. Just look at the Planning Commission as an example. The other thing that I found curious is that in fact when the Cost Control Commission asked very specifically when they reviewed the initial report that came from the Mayor and the question was posed who should, in fact, who should have the oversight responsibility for the recommendations that were being offered on behalf of the Office of the Mayor. The response that was given at that time...again I am not trying to deflect or place responsibility, was that perhaps a good place for these recommendations to be monitored was from the Budding Division because they, in fact, control a lot of the things that had to do with the air conditioning and the lighting. Again, I am just pointing out that I found it 141 P a g e curious that the auditor would, in fact. , place that responsibility in the Office of Boards and Commissions when, in fact, the Mayor's Office, at that time the representative of the Mayor's Office, felt that perhaps it should be the Building Division. The reason why I am bringing this up and want it in the record is because part of what was stated earlier in the meeting today is that the purpose of the auditor's report was not to go beyond the specific recommendations but in fact, to set the ground work on who should be responsible for implementing, and again, I mean no disrespect to the auditors for their recommendations but I just wanted to state for the record that I question the validity that our office should be, in fact, the office that should be monitoring all of the recommendations. That is my only comment...Thank you. Chair Sterker: Thank you Mr. Isobe. Please make that part of the record. Ms. Esaki: May I ask a question? For 2011-09 c) did you make a motion to receive the testimony from Mr. Craddick? Chair Sterker: No I did not. Ms. Esaki: Do you want to? Chair Sterker: May I have a motion to receive Mr. Craddick's testimony? Ms. Yoshida moved to receive the testimony; Mr. Chaffin seconded the motion. Motion carried 4:0. CCC 2011-07 Discussion and possible decision-making regarding,,the establishment of an Employee Incentive Program related to energy cost savings. (Deferred from 05/09/11 meeting, awaiting a response from the Mayor Chair Sterker: Next item: CCC 2011-07 Discussion and possible decision-making regarding the establishment of an Employee Incentive Program related to energy cost savings. It was deferred from the 05/09/11 meeting and I would like to move that we defer this item again because we do not have any response to it. Ms. Yoshida moved to defer; Mr. Chaffin seconded the motion. Motion carried 4:0. CCC 2011-08 Review and discussion of the County's real property tax exemptions and rate settings procedures. (On-going) a) Communication dated 061115/11 from Chair Sterker requesting additional information and requesting that a representative from the Department of Finance be present to discuss items relating to real property tax exemptions. b) Response dated 06/21/11 from Deputy Finance Director Sally Motta providing additional information related to real property tax exemptions. Chair Sterker: Can I have a motion to receive items (a) and (b). 15 1 P a g e Mr. Chaffin moved to receive items (a) and (b); Ms. Yoshida seconded the motion. Motion carried 4:0 Ms. Matta: Good afternoon Chair and Commission Members. For the record,I am Sally Mona, Deputy Finance Director and with me is Steve Hunt from our Real Property Assessment Department. he has five (5) hats that he wears and I am not sure which one he has on today. But he is a licensed appraiser. Chair Sterker: We have a number of things that we would like to talk about real property taxes and I know that we are certainly not going to get that done today. There are two (2)things that we would like to talk about. The first issue is about making an age difference with the exemptions. I would like to know if there is any way that we can find out how much of a difference that that would make by raising the ages. I didn't see anything in the information to indicate that. Ms. Matta: Let Steve Hunt explain to you the difficulty on trying to provide you with that information based on our complex system. Mr. Hunt: The age difference kicks in automatically. It is when you file your claim for home use exemption that you put in your birth date. If it's a married couple we would use the older of the two (2)to start that so long that they are both on title. Now as soon as the older of the two hits age 60 prior to the beginning of the next assessment year which, is January I"of each year, that's when it kicks in. We can monitor those that are receiving the age 60 to age 69 exemption and the age 70 exemption and beyond. But between age 60 and age 65 we would have to have a Zn programmer to look at all of the birthdates of the owners and basically provide us with a list of how many would be in that...and it is very difficult to monitor and obviously as the properties turn over the exemption claims,people moving on island, people moving off island, it's a moving target. So it is somewhat of a guest estimate if you are looking for a number. Ms. Yoshida: So can we guess about half of this. Chair Sterker: I don't know and that is -why I have no idea. Mr. Hunt: I would say the rough estimate may be half for this age bracket and when you get above age 70, 1 -would say a little lower only because people are living longer. As you know the ages beyond 78 or 90 would be compressed more towards the 70's whatever that cut is going to be. Honolulu did move to a single age exemption and they no longer have a two (2) part, whereas here on Kaua'i we have two (2)thresholds to meet. Ms. Yoshida: What is that number? Mr. Hunt: For? Ms. Yoshida: Age 65 plus. 16 1 Page Mr. Hunt: Honolulu is age 65 plus. Chair Sterker: Does Maui have an age differential? Mr. Hunt: Maui has just a single large exemption. Currently, its $300,000 for homeowner and they have a Bill coming down. I believe they are lowering it to $200,000 this coming year. Ms. Yoshida: The Big Island has the same ages but lower dollars than us. t�l Mr. Hunt: Yes, I think that at one point we all had the same breaks 60 and 70; 0'alm consolidated to one... to 65, and Maui just replaced it by having just one (1) large exemption for all property owners with no age break and both Kaua'i County and Big Island County maintain their original exemptions. Chair Sterker: It really varies between the islands. Mr. Hunt: In all likelihood, it came from the State. The counties inherited rural property tax assessment function from the State, so that 60 to 70 age break probably was standardized as a State function. Chair Sterker: I see. Mr. Hunt: The individual counties started to put their own prints on what they wanted for their plan. Chair Sterker: There are a couple of things looking at the next page of the exemptions. I would t, like to know what Kuleana is. I know that you told us before but, I forgot. I do know the Kuleana's responsibility. Mr. Hunt: Sure. The Kuleanas are lands that were titled prior to the great Mahele. This was basically gifts from the Ali'i. king at the time, depending on what jurisdiction they were in. Those Kuleanas are in many cases moveable; there are not always maps showing the metes and boundaries. Sometimes you have unlocated Kuleanas and whereas some that have been given a TMK, Tax Map Key... it just depends on the type of property that you are dealing with. The Kuleana exemption itself essentially says that if you can show your Hawaiian blood lineage to the original grant and from whatever royalty that gave that property, you are entitled to an exemption. You can get the entire value of the property so all that you pay is the minimum tax. There is a caveat that it cannot be used for a vacation rental. It can only be used by yourself as the primary resident, or as a family member as a rental, or it can be used for agricultural purposes. Chair Sterker: Is there something about the heiau fitting into any of this. Mr. Hunt: No. typically the heiau does not represent individual tax keys or haven't; it hasn't I p been described by metes and bounds and are solely parcels that are,A know of a couple that have used it mainly for gifting- they wanted to get rid of their Kuleana by giving to the State or 171 Page whoever wanted to accept it. They were looking for a federal tax credit. The heiau themselves are typically contained within larger parcels an d'you call them an amenity but it is more of a hindrance to the property. Chair Sterker- So they are not getting a tax break because they have a heiau located on their property? Mr. Hunt: Not unless it's been described in some sort of metes and bounds of a description where we would know the size and the area of that heiau. The heiau can be considered a waste land or have a nominal value. But if it is part of a larger parcel does that small piece (heiau) really affect the overall value? It may or may not. It is more of an evaluation concern than anything else. Chair Sterker: I guess the one that comes to mind is in Waipouli. Mr. Hunt: Oh, is that where they have the burial area? Chair Sterker: Yes. Mr. Hunt: They actually described that as a metes and bounds area and took off... I believe about an acre and a half of the land that was unusable. It doesn't have a value. Chair Sterker: Is that taken away from the tax? Mr. Hunt: Yes, that's correct. We must treat it like you do if you have designated easement that cuts off a portion of your property that's unusable. Chair Sterker: I thought maybe it was considered a church because we have so many churches on this island. There are about 150 churches on this island. What constitutes a church? Mr. Hunt: A church has to be, well, first it has to be of a non-profit status and registered as 501 C3 and they also have to demonstrate that they have a church that is being used and have regular business operations. We've had applications for churches for retreats and are seldom used for retreats and we had to deny them because they were not open to the public and you cannot join the denomination and use the facility; its specifically for their people who are either from the mainland coming over for a retreat. So those ones we scrutinize a little more and we do that through the process of the application when they apply-, we look at their 501 C3. First, we look at the property itself of how it's being used. Churches that own property but don't use them for church purposes are not exempt. So if you have a vacant piece of land that is owned by let's say, the Roman Catholic Church, but it's vacant and there was a donation to the church and they are not using it for church purposes, church grounds do not get the exemption for that. When they build and have services and open it up and the place has a lack of privacy now, you have now actually opened up this property to the public, that's when you are able to get the tax exemption. Chair Sterker: So is a parsonage considered an exemption then? 18 1 P a g e Mr. Hunt: Parsonage,, if it is part of the operating church. If it is off church grounds and somewhere else no. Ms. Yoshida: So in other words, I cannot remember the name of the church. I know that the Immaculate Church has some way back there and they have their own school and that's where the nuns live. So that's not exempted?Because it's not part of where the church operates? Mr. Hunt: It's a school though, right? Ms. Yoshida: It was an old school. Mr. Hunt: okay...I know the school would be under the school exemption. Ms. Yoshida: But if it's just now where the nuns live. Mr. Hunt: Right, if it's just a housing...than no. Ms. Yoshida: Okay. Mr. Chaffin: But if it houses the rector from the church, does that qualify? Mr. Hunt: Is it on church grounds? Where you have the church and the parsonage adjacent to the property or the church is in K61oa and the parsonage is up in Kaldheo. Mr. Chaffin: They are two separate properties. Mr. Hunt: Unless there is some sort of restriction that would prohibit that church from renting to someone, you know if it is specific and tied to it and there is a deed restriction where it says it has to use for church purposes, then we would consider that as a potentially qualifying property. But if it is unlimited and they decide to let the pastor stay there for one (1) day and then next month they decide to rent it out,then it is considered income producing and they wouldn't be entitled. Mr. Chaffin: Thank vou. Chair Sterker: Is there anything that says how many people they must have in their...I mean can there be just three (3)people that belong to that church? Or as long as they have the 501 C3 it's okay. Mr. Hunt: There are not a lot of administrative rules that deal with this issue. We scrutinize more for ones that we believe we would like to call to the map and say "Show us your operating hours; I would like to visit your church." On those instances if they cannot provide...we've had relating to schools,had people who had Ag zone property who had it dedicated to Ag use and they are getting a great break on their taxes, but the Ag dedication, but they want to get to the minimum tax so they actually want to be considered as a charitable use. It's an open air environment. We have some pavilions set up and we have kids that come to help us plant native 191 Page plants and so my questions are well.. "Do you do this, quarterly? Is this a weekly function? A daily function?" The more we scrutinize the better, and the way we have dealt with that if it's on Ag zoned land.. and if you are running a school or a church, you need a use permit. So we somewhat have shifted the burden back to Planning and saying you know you are going to have provide to me a use permit...you are going to have to go through the planning permit process in tn order to get that use permit to show that you are a bonifide school or church. Chair Sterker: You know that it's fairly easy to get a 501 C3. Mr. Hunt: No. it's gotten harder. Chair Sterker: Is it really? Ms. Yoshida: Didn't you see the list of the 1500 that got kicked out? Mr. Hunt: And I believe there are some minimum income thresholds for them now also. Ms. Motta: Chair. I need to be asked to be excused, Steven can handle this really well, I have a procurement that I need to sign for the County. Chair Sterker. Thank you for being here, Sally, and I'm sure that we will see you again. Chair Sterker: I just don't want to belabor the subject but I just think that there are a lot of these that that might not really be tax exempted and that*s a lot of money. Mr. Hunt: As part of the requirements for filing for a non-profit you have to provide your Charter, you have to provide your 501 C3 status update, and you also have to name, in an event your organization goes out of business, a subsequent 501 C3 qualified to replace them. So there are some...you know even in the process of applying you have to have your ducks in a row in order to get that exemption. The bigger abuses that I see again are more of these.. you know in the Ag. school and some of these types of things that they are getting creative as to their 501 C3. I think I saw one that was the preservation of Waikualua Valley or something like that and it basically it was someone's residence that was put into a non-profit which he was the chair of the non-profit or the trustee so he has it for his use and would occasionally open it up to show that he is doing green things here and how we are preserving this valley which is like an open space dedication. Again, this is one that I denied on the fact that you would need a use permit to do some of these things that you are talking about in terms of the educational offerings on Ag land and that you haven't provided us with a copy of your use permit nor do I have records that You had applied for one. Again, we have been working in concert with Planning to kind of tighten us down in lieu of having better administration rules to deal with it this. Chair Sterker: I remember a few years ago that there were a lot of people that said that they were a farm and they really were not a farm. They had three (3)papaya trees and they all of a sudden had to owe a lot of back taxes. Mr. Hunt: Yeah,we have definitely weeded out a lot of the fake farmers. 20 1 P a g e Chair Sterker: Is this done yearly? To kind of check on these people that say they are a farm? Mr. Hunt: Yes, their minimum requirement for fanning is a ten (10) year dedication. There is a ten (10) year and twenty (20) year dedication, so actually would record that document which essentially becomes a lien on the property in an event you breach your dedication. And there are stringent hold back penalties and interests that are tied to the fact that you're going from an Ag value back to a market value on your property like breaching. We have one person incur office who is Damien Ventura who is an Ag inspector as well as an appraiser and that is his sole responsibilities to run that program. Chair Sterker: Another thing that I would like to look at is the tree farms; only Kaua'i has tree farms...isn't that interesting that only Kaua'i would have 114 tree farms. What constitutes a tree farm? Mr. Hunt: A tree farm has to have a minimum of ten(10) acres planted, there are forestry hardwood trees, typically they have a...because of the maturity before they can be harvested they have a long growth period which I believe is twenty(20) years or twenty-five (25) years is the period of which they can be dedicated as a tree farm. The 114 are not all farms that are the parcel count, there may be four(4) or five (5) that are tree farmers that have multiple parcels involved in these tree farms. Chair Sterker: Oh so those are parcels. Mr. Hunt: Yes there are parcels. Chair Sterker: Now that makes much more sense. Mr. Hunt: And that's the case for all of these...these are all parcel counts. So the 152 churches are not 152 denominations it's just the count of how many churches. Chair Sterker: Thank you... because I went through the yellow pages to see which ones...I really did. Mr. Hunt: If you look at the count in the 2"d Column, those are the parcels that are receiving the exemptions. Chair Sterker: We know what a safe room is it is a hurricane proof thine,type of and what are t:1 the qualifications for a safe room? Mr. Hunt: A safe room has to be designed by an architect With an architect stamp on it. It has to have ventilation; it has to have a 4 inch concrete ceiling. If there are any windows, they have to be approved at hurricane strength and not be shattered like a tempered glass and it has to have a door which opens in, so you cannot get locked in the room in case something falls on it. We go out to inspect after they apply for the exemption; typically you spend a lot more just to build a safe room than you would save in an exemption. 21 1 Page Chair Sterker: I was just going to say that...that sounds like a lot of money. Mr. Hunt: Yeah. Chair Sterker: What is a native forest? Mr. Hunt: These are properties that you have to have declared as native forest land and I believe you do so with fisheries or wildlife or it might be forestry services. .I cannot remember, but you are giving up some rights because you are now allowing the federal government to be in control of that property. There is some Robinson's land that would qualify but they don't want to give it up or concede their control to the fells. Chair Sterker: So again the cemeteries are parcels? Mr. Hunt: Yes. Chair Sterker: Are hospitals considered parcels? Mr. Hunt: There are non-profit hospitals and there may be for-profit hospitals as well with the exemptions. Ms. Yoshida: Don't forget that the State hospitals are on government land. Mr. Hunt: And they would fall under government. Chair Sterker: You know it's interesting about the disabled, and we have the disabled veterans and we have the totally disabled, and then we have the deaf and blind and leprosy. Is being disabled have anything to do with being physically disabled? And 377 is a big number of totally disabled people. Mr. Hunt: I 'in showing 390.- is that the number that you are referring to? Chair Sterker: No, I'm looking at the ones that are deaf and blind and after that is says totally disabled. What constitutes a totally disabled other than a veteran or a deaf/blind person? Mr. Hunt: To be honest I don't know off the top of my head. I would suspect it's the inability to function or work or either bound to a wheelchair. Or you may have issues with earning a wage. Chair Sterker: And this would be somebody who is under 62 years of age. Mr. Hunt. You could be totally disabled at any age and as long as you are a property owner. It does require a doctor's certification of being totally disabled. Chair Sterker: Could we request from you to find out a little bit more about that....on how you would qualify for that. 22 1 P a g e Mr. Hunt: Sure. Chair Sterker: I am interested because being blind/deaf... I can understand. I can understand physical disabilities, but 377 people sounds a bit high to me that have physical disabilities that are home owners that are totally disabled. Ms. Motta: (Inaudible) Chair Sterker: Under charitable, are all of those under 501 C3's? I would guess that charitable is like the Salvation Army and the United Way Office? Mr. Hunt: It says here that eligible includes schools, colleges, hospitals, old nursing homes, churches and cemeteries. Those dedicated to public use like labor unions, government employee associations and patriotic societies. So there are a lot that can be qualified. The list states that you must submit articles of incorporation and cessation to another nonprofit in event of dissolution. Charitable use,not non-profit ownership, is the determining factor in awarding exemption. Property becomes totally exempt but must pay minimum tax. If it's the Salvation Army that owns the vacant lot, and the Salvation Army has its facility there and is operating as a Salvation Army, the one with the facility would get the exempt of the vacant land, by ownership would not. Mr. Chaffin: That brings up the question that in Kaloa the Salvation Army property that is not used (to my knowledge) by the Salvation Army and that they just have meetings maybe twice a week there. Would that qualify? Mr. Hunt: It's being used for charitable use and it doesn't have to necessarily be used by the Salvation Army. If it becomes a point where they start to rent out the facility or nonprofit schools are using it then clearly there is a break. If it's one nonprofit using it by other nonprofits, the use is okay...we wouldn't be removing the exemption. Mr. Chaffin: Thank you. Chair Sterker: So, is it the Y,M.C.A camp up in Hdnalei. Mr. Hunt: You mean Camp Naue? Chair Sterker: Yes, 'would they be paying taxes on that? Mr. Hunt: I believe that they are using it for non-profit or they may be renting it out for profit. I'm not sure. Chair Sterker: They rent it out. 231 Page Ms. Yoshida: Yeah...they do but I think it's just to cover cost. Just because you take in income it doesn't mean it's for profit. It may be just to cover the cost of running the camp and it still should be considered a charitable thing right? Mr. Hunt: Yeah ..I would... Chair Sterker: So they would have to be very careful about showing how much it cost to rent it out. Mr. Hunt: I believe that they are probably offsetting some of it there...because they do provide it for schools. I have been there when I was a kid and my kids have also been there, so they are providing it at no cost to other organizations. and I am assuming that they are renting it to offset the free offers that they are doing. Ms. Yoshida: Because it's like the Y. You pay membership but it's still a non-profit and I don't think that the membership covers the cost to run the pool. I mean they still have to apply. Because I remember when we use to apply, we didn't own the property but because we rented and had to go through a whole process. Part of the building when I was at the Chamber we use to get the non-profit, so we didn't pay it; they didn't charge it to us and the owner didn't pay. Mr. Hunt: Yeah, we do that on a pro rata assessment based on the portion that is being used by a non-profit. We also had a church who rented to a non-profit school a portion of their property and so they lost a portion of their exemption for the one that they were leasing to the non-profit school. Ms. Yoshida: I guess my overall question is... and I think the purpose of asking for the breakdown was to see whether there were areas that we could eliminate some of the exemptions because it's kind of ridiculous to manage, and you know to have only one means ifs so easy to manage and we don't have to worry about it. You know like native forest there is only one; another one is hospitals, there are only four (4) parcels in that and it could be just one (1) hospital that sits on four(4)parcels which hospitals are so large. Or whatever...you know. Schools with three could be just one (1)parcel...I mean one (1) school on three (3) TMK numbers right?...because it's big enough. So I guess you know it's kind of one of those to say well since those are so easy there only is one or two, why bother to eliminate them because they are not really costing much. I guess the overall picture was to look at what can be changed or tweaked and what can be eliminated to reduce the amount of exemptions we are giving... if that's what we're saying that needs to be done so that we have more income for the County or make it more manageable for the office to make this whole cost control type of thing ... -which is why one of the things we said before. When we inherited, the age 60 it was a good age. Now at age 60 nobody gets anything, you get it at age 65 so...you know very few places are below age 60 and so you know that's kind Of the question. 24 1 P a g e I guess part of my question to you guys would be, and I don't want to put you on the spot to say well eliminate this, are there areas that you see that are more abused than others or harder to implement and are those some of the ones that we should look at because it's just too difficult to you know? Because if it's a school or a hospital and you go there and you can see that they are operating as a school or a hospital, it's not so hard, but some of them, it's like you know...are they operating as a farm just because they have 5 or 10 trees`? So as you can see some of them are a little bit more difficult and you know by having some of the things like the ten (10) year dedication... well that eliminates those you know...a lot of the people who are just trying to get it. So I think that would be my question. Mr. Hunt: I think for me the ones that would be the hardest to justify why they still have an exemption, and this has been tried once before. is the Credit Unions. The Credit Unions at one time. membership was very difficult to get into and there was a reason for having that exemption. But now they are a full financial service and they actually have a competitive advantage by having no property taxes or minimum taxes. It allows them to offer higher interest rates and do other things which may be good for the consumer. Ms. Yoshida: So that's twelve (12) at eighteen (18) million. Mr. Hunt: There are only twelve (12), but for instance,the new Credit Union facility just spent over twelve (12) million dollars for their new facility and they will pay twenty-five dollars in taxes for that. Ms. Yoshida: This exemption, basically by reading this cost, is costing the County $18 million dollars. Mr. Hunt: No, that is actually the exempt value—it's $18 million dollars in value. Ms. Yoshida: So that's $18 million dollars in value and they are getting charged just$25.00. So we're guessing with the new building it's worth about 30 million plus. If someone actually went out and did a current appraisal. Mr. Hunt: I believe there is a portion of that building that is reflected in here and some of the older building is aging so it may be closer to 24 to 25 million then 30 million. With the move to their new location they lost their exemption on the older building. Ms. Yoshida: And it's vacant now so they pay regular taxes. Mr. Hunt: Yes, they now pay for it. Mr. Apao: How long does a person from the mainland have to stay on island to be considered a homeowner? Mr. Hunt: Currently, we did put something in writing with the number of days but it's only one w of the attributes. Ultimately they have to live here and the way that we check is by asking the 251 P a g e question like, are they filing Hawaii income taxes from a Hawai'i location and if they are a registered voter. Another thing that we check for is you cannot file for another exemption in another state or country. We've had Canadians who have filed who cannot be legally a resident. You have to make this your primary and you can only have one. To answer your question, 180 days is the minimum requirement for one of our criteria. Ms. Yoshida: So back to that age thing.. so we're talking 3100...the counts are not in the thousands only the value. Mr. Hunt: Correct. Ms. Yoshida: So now we're talking 3000 are between ages of 60 & 69 and if we should guess it's about 1500. Would that fall into the basic 48. 000 exemptions? Mr. Hunt: Yes. Ms. Yoshida: And the others can stay the same and then you're saying maybe twenty-five percent or so... not even that...twenty percent of age 70, It's a guess. Mr. Hunt-. Where are we looking, I hate to guess on a high number like that. Is it above the age 75? Ms. Yoshida: Yes. Mr. Hunt: 30 to 35 percent maybe. Ms. Yoshida: So you think that it's that high...between the ages of 70 & 75. Mr. Hunt: Above 70 yeah...so if you're going from ages 70 to above 75 there are only 30% who are above age 75. Chair Sterker: If you go to any function around this island and you look, it will surprise you. Ms. Yoshida: No, I would think there were more over the age of 75 than between the ages of 70 & 75. Chair Sterker: Well. I think the ages 70 to 75 is a very large group. Ms. Yoshida: If we were to recommend a change to this section, would you recommend that we kept the two (2)tier system now that we also see that the other counties don't have that? In other words,just tweaking the ages that would show ages 65 to 74 and then age 75 plus. And have two (2) levels and keep the dollars the same. Or should we look at something like Honolulu which just has pick-an-age and say that if you're over, that's when you get it? Because what I'm seeing is that about half of those people would go from $96,000 to $48,600, and the other half would get $24,000 more, but I think in the net we would actually gain back value because they would only get the basic $48,000 as an exemption. So I guess the question is...is it easier to do 26 1 Page just one (1)tier system? If we decide to propose a change anyway.. would it is better to Just propose one age, one exemption so you're either a basic homeowner or a certain age or nothing or the two (2) tier system? Mr. Hunt: Implementation wise, I think going to a single tier where you are either above the age 65 or not is easier. But it's a group of people that I don't particular want to take on and it's a group of people that it's hard to tell income levels and I think the most important if anything, if we're taking away something on age, we have to provide it on the income side. So, someone who is on a fixed income who has $120,000 goes down to $96,000 or someone who has $96, 000 goes down to $48,000 if there some sort of supplement on the income side that they can re- qualify for. Because there are a lot of elderly people that have a lot of income and there are also people who are just getting by Nvith social security...so I am always leery about sort of a blanket plan to change any kind of threshold without having a backup alternative and my advice would be if we're looking at revamping some of these exemptions was maybe to offer a higher amount of exemption for the income. Ms. Yoshida: What I'm seeing is that whether we're doing a one (1)tier or a two (2) tier, what we kind of discussed today but have not actually said it would be the ages 60 to 64 would actually lose it and go back to $48,000. What the question would be at age 65, do we say age 65 to age 75 gets the lower exemption? And actually at age 65 that means those age 65 to age 69 would actually get more if we did a one (1)tier system. Because we wouldn't have the $96,000 at all. We would probably just go to the $120,000. So there would be a group that would get more and the group that would get less would be getting less no matter what. Even if we did a two (2)tier system. Mr. Hunt: Because our tax system has become more complex with our cap, exemptions are one thing that still affect direct taxes so when you gain an exemption or lose an exemption, there actually is a tax implication whereas value can run wildly up or down until the point where it actually crosses the threshold where you got the cap on. So from age 60 to age 64 if we were to remove the $96,000 exemption they would actually have that amount added to their tax bill in addition to their two (2)percent cap. So it would actually generate revenue for the County, but it would be a direct impact...it wouldn't be protected by the cap for that loss exemption amount. Ms. Yoshida: Would we be able to then...because it's only a five (5) year thing, could we word it to grandfather those people in? In other words, it goes up a year and when those people hit age 65 there in that other group and those who are age 59 now... Mr. Hunt: So we could just do it with the grandfather clause 'where we would have it set up for age 60 (currently) age 61 next year and so on. So we would be tracking everyone. Ms. Yoshida: Yeah. and I know it's going to be a pain but it's the only way you1I get the people who...N-vell I guess there are some people out there, who are ages 58 or 59. If we ever do propose this, some will say I was just looking forward to that next year only to lose it but at the same time you know if you are talking about people on fixed income like social security, you are not on social security at 60,you can't be or you can be but.....(inaudible) 271 P a g e (Inaudible, everyone speaking at the same time) Ms. Yoshida: If we were going to propose just one change which is a one (1) tier system and you are saying yeah but we are getting something better to those who are age 65 then you jump immediately to the $120,000 not the $96,000. So, that's a decision that we have to make. Mr. Hunt: If you provided an outlet of having a higher income exemption for people who really can't afford to absorb that $1921 a year, at least match that up with the income side to give it a $192 in value and give that$48,000 back and if they qualify then they are right back into where they were. Chair Sterker: Still there are a lot of people that are living a lot longer and here you end up with these people who are age 60 and are still working. There are lots of people between ages 60 and 70 who are still going to work every day. Mr. Hunt: Just so you know too, on the public utility it shows a pretty large number but they do pay taxes...we have exempted their real property tax and they pay in lieu of a tax which is 1.885 percent of the gross receipts of electricity charged. Ms. Yoshida: So it just comes into the County in a different manner? Mr. Hunt: Correct Ms. Yoshida: Can I ask if all of these Ag-related types are different and better than the general being considered Ag...I mean I just have to go back to the other one that tells me how many exemptions there are. Like the tree farm, rather than being just a dedicated Ag use you get a better exemption. Mr. Hunt: The difference is the Ag dedication is an evaluation chain; you get Ag value for your property instead of market value. The tree farm is an actual exemption on the property and they pay a minimum tax of$25.00. Up until the first harvest or I think is twenty-five years. Ms. Yoshida: So they get a much better deal for their tree farm, and the same would be for native forest and crop shelter. Mr. Hunt: With native forest, basically their hands are tied... they can't do anything. They have to preserve it. So it's not income generating. The tree farm also because they are not generating any income between now and the time that they harvest. Ms. Yoshida: So this one may go away after so many years. Mr, Hunt: Correct. Chair Sterker. Are there a few others in here other then the Credit Unions? 28 1 Pane Mr. Hunt: The historic residential is highly debatable on Oahu. Like the house that President Obama stayed in. It was on the market for 36 million and they were only paying a$300 minimum tax. IVs is a beach front and it is a historic building and the issue is how much is it worth to preserve these old buildings, and they are costly to preserve because the maintenance on the buildings are much higher than the modem day facilities. When they do their dedication to the State Historical Society they can't do lot to the property, they can't do additions and any renovations have to be approved by the Historic Society or Historic Preservation Society in advance. So there are some limitations. The value that they get in relief—there are some significant savings. Here we only have eight (8) of them here but there are more that could qualify and it could be a problem in the future. There are maybe 2 or 3 that I find somewhat pretty abusive because of their relationship to value and what they pay in taxes. One of them is not so bad because they are not living there and they actually have to pay half of the land value and a lot of the value is in this Hanalei land as opposed to the building itself. 100% ofthe building and only 50%on the land. This is an area that I keep an eye on yearly. Chair Sterker: Road ways—are a lot and is that the easements that we are looking at? Mr. Hunt: Basically they are roads that are privately held that haven't been dedicated to the County that has a TMK and the developer usually developed them, gave it a lot number, and once all of the inventory was sold out, the developer just closed shop and now iVs just sitting there with nowhere to build. They are not part of an association per se; they are owned by the individuals and often they just will continue to rack up the minimum fee of$25.00. There was actually a policy made on Oahu, the City and County did this first because they were having the same problem except we were starting to exempt them giving them zero and not even minimum tax because the minimum tax was too hard to collect and they started running these bills, penalties and interest were starting to kick in. They had to go to Council to try to basically get them off the books and they said too much of an administrative nightmare just to create a road code for an exemption that has zero tax. Ms. Yoshida: So those are non-governmental roads? Mr. Hunt: Right. Some of them are non-government because they do not meet the government standards and cannot be dedicated. Other ones choose to be private. Ms. Motta: That is something that should never have been allowed to happen. Planning, when they have a road,they should have divided the road between all the owners that were going to...(inaudible) Ms. Yoshida: They were going to keep it private? Ms. Motta: Yeah, they pretty much abandoned it. Ms. Yoshida: So who pays to re-pave it? Eventually the owners need to get together and pay for it themselves. Mr. Chaffin: Is that an casement problem? 291 Page Mr. Hunt: It depends on how the roads were created; some are easements and some are actual lots. Ms. Yoshida: Okay.. but that one is a 100% so they don't need to pay the $25.00 tax? Mr. Hunt: Correct. Ms. Yoshida: But those are a problem to collect any-vvay. Mr. Hunt: And most of them are valued at a $100 because they don't have value in themselves. Ms. Yoshida: So the value would be...I mean this...trying to figure out a way to fix that would not help the County much. Mr. Hunt: No. Ms. Yoshida: Planning has to do something in the future to fix these roads. Ms. Motta: Another option is to raise the taxes. Ms. Yoshida: It's a Council decision. Ms. Motta: Yeah. Ms. Motta: But the minimum tax is $25.00. You guys are talking about people between ages 60 to 65 and yet you have people who are paying $25.00. Ms. Yoshida: What is that on the other islands...do you know.? Mr. Hunt: I believe that Maui is a$150 and Oahu is $100...no $300...yeah $300. $300 is the minimum for Oahu. But they may have a different one for homeowners; they might be a lower minimum tax, but for non-homestead class or non-homeowner class its $300. The Big Island has a tiered one and it ranges from, I believe, from $50.00 to a$100. Ms. Yoshida: So ours is the lowest...ours is $25.00. Mr. Hunt: Yeah, and their tiered one has to do with the value of the property, so the higher up the value...I think that their standard income tax is $100 but in certain situations they go down to $50.00. Ms. Yoshida: So now you're talking rather than trying to eliminate all these people that have this, so that we don't fight with them. You talk about a 100 bucks versus 25 bucks...I don't know I'm just throwing a number out there. So now you're talking $75.00 times all those number of parcels. 301 Page Mr. Hunt: Well, the ones with the minimum tax. M . Yoshida: It's only 411 times 75 bucks...not even a 100, it's not even $48,000. Ms. Motta: Those are the little ones. Mr. Hunt: I did do an analysis on what I call the effective tax rate and that is taking the revenue that was generated by each class and dividing it by the gross value before exemptions and caps and all these benefits that were brought in. I wanted to specifically look at the homestead class to see what they were paying as an effective rate and at its low when the market was the highest and the caps were already in. and I believe it was about a dollar for the effective tax rate on gross value. And right now I believe on the 2011 it's about a$1.92 so when we speak of a$').44 building rate and a $4.00 land rate, by the time you add on all of the exemptions and the benefit of the cap which are credits towards your bill, the average is actually a $1.92 effective tax rate of that category. Ms. Yoshida: Because you are not taxing the whole value. Mr. Hunt: Or the caps or credits would offset the....you know we are not getting the gross value. Chair Sterker: It says"Hawaiian Home Lands (all types.)." What are all types other than homes? Mr. Hunt: There are Hawaiian Home Lands....I believe that they are leased lands, there are lands owned by 014A (Office of Hawaiian Affairs) or Hawaiian Home Land Groups, so depending on whether it's own by Hawaiian Home Lands or it's leased to a family through Hawaiian Home Lands there is ownership and lease. Some are also vacant lands, some are improved lands and the way it works is the building is exempt from taxation, and the even minimum taxation for seven(7) years and the land is exempt forever. After the seven(7)years the building becomes minimum tax so you only pay the $25.00 after the seven (7) years. Although I think they also now have the solid waste refuse collection. Chair Sterker: Okay, that's probably enough for today...it's a lot to think about and a lot to digest. Ms. Yoshida: So the only thing that we wanted back...what do you want back? Mr. Hunt: She asked me for information on what defines the requirements necessary to qualify for an exemption for a disabled person. Chair Sterker: Thank you both for all of the information and we will be seeing you again. Ms. Motta and Mr. Hunt: Thank you Commissioners. Ms. Esaki: Excused me Chair, but on 2011-08 (b) did you make a motion to receive? Chair Sterker: Oh I'm sorry motion to receive. 311 Page Ms. Yoshida moved to receive the response dated 06/21111 from Deputy Finance Director Sally Motta; Mr. Chaffin seconded the motion. Motion carried 4:0. CCC 2011-11 Discussion and decision-making on a proposed Charter Amendment from May Bernard P. Carvalho Jr.. amending Article XV Relating to Establishing a Department of Human Resources. (Deferred on 06113/11 meeting) a) Communication dated 06/15111 from Chair Sterker to Chair Ryan De La Pena of the Civil Service Commission requesting written comments relating to a draft proposal from Mayor Bernard P. Carvalho Jr., for a Charter Amendment to Article XV Relating to Establishing a Department of Human Resources. b) Response dated 06123:'11 from Chair Ryan De La Pena of the Civil Service Commission relating to a draft proposal from Mayor Bernard P. Carvalho Jr., for a Charter Amendment to Article XV Relating to the Establishment of a Department of Human Resources. Chair Sterker: May I have a motion to receive this response dated 06,123111 from Chair Ryan De La Pena. Mr. Chaffin moved to receive the response dated 06/23/11 from Chair Ryan De La Pena of the Civil Service Commission; Ms. Yoshida seconded the motion. Motion carried 4:0. Chair Sterker: I did go to the meeting of the Civil Service Commission and testified to them on why we wanted to do that. I thought it was very interesting because there was dissension about that, and that was from Malcolm Fernandez; he urged them not to pass it but the Commission unanimously passed it. c) Communication dated 06/15/11 from Chair Sterker requesting the County Attorney's legal review and recommendations relating to a draft proposal from Mayor Bernard P. Carvalho Jr., for a Charter Amendment to Article XV Relating to Establishing a Department of Human Resources. Chair Sterker: May I have a motion to receive this communication. Ms. Yoshida moved to receive the County Attorney's legal review and comment; Mr. Chaffin seconded the motion. Motion carried 4:0 Chair Sterker: May I have a motion to add the County Attorney's legal review to the agenda. Ms. Yoshida moved to add the County Attorney's legal review to the agenda; Mr. Chaffin seconded the motion. Motion carried4:0. Chair Sterker: MaNjr I have a motion to waive the Commission's rights to confidentially and allow the opinion to be publicly released. 32 1 P a g e Ms. Yoshida moved to waive the Commission's rights to confidentially and allow the opinion to be publicly released; Mr. Chaffin seconded the motion. Motion carried 4:0. Chair Sterker: May I have a motion to receive. Ms. Yoshida moved to receive the County Attorney's legal review; Mr. Chaffin seconded the motion. Motion carried 4:0. Chair Sterker: From what I read in this, it says that the county charter proviso regarding personnel/human resources are legal provided they are not inconsistent with Chapter 76, FIRS. The first proposed amendment is to "Section 15.01" which changes the word"personnel"to "human resources" and slightly alters the purpose of the department. These changes appear legally sufficient. The amendment specifically provides. "He shall be appointed and may be removed by the commission and come under the general supervision of the Mayor-. I think that it is enough for us to know that it can be done. Ms. Yoshida: So the actual proposed charter amendment is now making the general provisions to the Mayor? Chair Sterker: No it is still under the Civil Service Commission. Ms. Yoshida: So the reference to the Maui one is that that did make it under the supervision of the Mayor and that is why it was struck down. Chair Sterker: Yes. Ms. Yoshida: Which we are not doing. Mr. Isobe: Just for the purposes of clarification. The amendment that was proposed by the Mayor...the difference between on what was proposed on Maui versus what is being proposed here is that on Maui what they recommended was that the director be appointed by the Mayor. In other words, it comes under the complete control of the Mayor. In this particular instance,the proposed amendment is that the Civil Service Commission under the Charter, would still appoint and remove the director. However, we want to clarify that the daily operations should still be under the office of the Mayor because the Civil Service Commission, like most of the Commissions, doesn't handle the daily functions of the County-, daily functions comes under the purview of the Mayor. In other words, the Mayor can still direct the director of personnel services to do things on behalf of the County without going to the Civil Service Commission for approval in order to do those operational fatictions. However, the ultimate appointment, evaluation and/or removal of the director would still be solely with the Civil Service Commission, whereas Maui said that the Civil Service Commission will not be involved in the appointment or the removal. Mr. Chaffin: In all of the Commissions, I believe the Mayor recommends and the Commissions approve. 33 1 P a g e Mr. Isobe: The way it works is the Mayor sits as an ex-officio member of all boards and commissions, and he can suggest but ultimately does not have a vote in the appointment and/or removal of a department head that is appointed and/or maybe removed by a commission. And those would involve the Civil Service Commission, Fire Commission, Liquor Commission, Police Commission, Water Board, and Planning Commission. Those are commission-appointed and removed department heads. The Mayor has no say in that. He obviously can participate in the conversation but the final decision rests with the commission. Ms. Yoshida: And he may or may not choose when Malcolm was selected. The Mayor did not participate in the selection nor did he come down to the interviews and deliberations. I know because I sat on that Commission. Chair Sterker: The one thing that the Civil Service Commission was somewhat worried about was if anybody would be losing their jobs or-whether the people would be taken away from a department and placed in another different department. And as long as they were taken away from one department and given the same responsibilities in the Human Resources Department, they should be quite happy because they would be having more unity with the whole thing rather than having to go off by themselves. There are still some of them who are doing partial work and if you could take it away from them and let them do their full time job of what they are supposed to be doing. would also be very good. I was happy that they were open to hearing the possibilities. Ms. Yoshida: The only thing that they might complain about is if someone doesn't want to move physically to another department. Chair Sterker: In this day and age you wouldn't find too many people who would feel too unhappy because of that. Ms. Yoshida: So is the Commission ready to make a recommendation regarding this? Chair Sterker: I think that we can move forward on this as far as I see because we now know that it is possible. We have the attorney's opinion that says it could be done. Mr. Isobe: Madam Chair, if I may. Chair Sterker: Yes. Mr. Isobe: If in fact this body is prepared to move it forward, the proper entity to move it forward would be the Charter Review Commission so that they can begin to look at this so it can be placed on the ballot. The two (2) attachments that I would also recommend if in fact the Commission is going to transmit this to the Charter Review Commission that I think would be informative for the commission is the attorney's opinion, now that you have waived your rights I Z11 to confidentially, and the second is the support letter from the Civil Service Commission so the Charter Review Commission in its review is clear that the Civil Service Commission is supportive and the Cost Control Commission is supportive and, in fact, the attorneys had reviewed at least the proposed amendment for legal sufficiency. 341 Page Chair Sterker: Thank you. May I have a motion to refer this to the Charter Review Commission with the two {2) attachments? Ms. Yoshida moved to refer it to the Charter Revie-Ar Commission that they consider adoption of the proposed Charter Amendment and place it on the 2012 General Election ballot; Mr. Apao seconded the motion. Motion carried 4:0. Announcements Next Meeting- Monday, August 8, 2011 at 1:34 p.m. at the Mo'ikeha Building.. Liquor Conference Room 3. Ms. Yoshida: I will not be attending the August meeting. Chair Sterker: Can we have a motion to adjourn the meeting? Mr. Chaffin moved to adjourn the meeting at 4:15 p.m. Ms. Yoshida seconded the motion. Motion carried 4:0 Submitted by: Mercedes Youn, Staff Support Clerk Reviewed and Approved by: Sandi Sterker, Chair 35 1 Page