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HomeMy WebLinkAbout121211_Agenda Packet Sandi Sterker Members: Chair Lawrence Chaffin Jr, Brant Fuchigarni Arryl Kaneshiro Glen Takenouchi Laurie Yoshida Dirk Apao Vice-Chair COUNTY OF KAUAI COST CONTROL COMMISSION NOTICE OF MEETING AND AGENDA Monday, December 12, 2011 1:30 p.m. or shortly thereafter Mo'ikeha Building, Liquor Conference Room 3 4444 Rice Street, Lihue, HI 96766 CALL TO ORDER APPROVAL OF MINUTES Regular Open Session Minutes of November 14, 2011 BUSINESS CCC 2011- 08 Review and discussion of the County's real property tax exemptions and rate setting procedures. (On-going) CCC 2011-19 Discussion and decision-making on the proposed draft of the 2011 Cost Control Commission Annual Report. CCC 2011-20 Cost Control Commission Meeting Schedule for 2012 CCC 2011-21 Election of Chair and Vice Chair for 2012 ANNOUNCEMENTS Next meeting: Monday, January- 9, 2012 at 1:30 p.m. at the Moikeha Building, Liquor Conference Room 3. An Equal Opportunity Employer NOTICE OF EXECUTIVE SESSION Pursuant to Hawai'i Revised Statutes. , §92-7(a), the Commission may. when deemed necessary, hold an Executive Session on any agenda item without written public notice if the Executive Session was not anticipated in advance. Any such Executive Session shall be held pursuant to H.R.S. §92-4 and §92-9 and shall be limited to those items described in H.R.S. §92-5(a). Discussions held in Executive Session are closed to the public. ADJOURNMENT PUBLIC COMMENTS and TESTIMONY Persons wishing to offer comments are encouraged to submit written testimony at least 24-hours prior to the meeting indicating: I Your name and if applicable, your position/title and organization you are representing 2. The agenda item that you are providing comments on; and 3. Whether you will be testifying in person or submitting written comment only. 4. If you are unable to submit your testimony at least 24 hours prior to the meeting, please provide 10 copies of your written testimony at the meeting. The length of time allocated to person (s) wishing to present verbal testimony may be limited at the discretion of the chairperson or presiding member. cc: First Deputy County Attorney Amy Esaki Send written testimony to: Cost Control Commission Attn: Mercedes Youn Office Boards and Commissions 4444 Rice Street, Suite 150 Lilme, HI 96766 E-Mail: myounAkauai.gov Phone: (808) 241-4920 Fax-, (808) 241-5127 SPECIAL ASSISTANCE If you need an alternate format or an auxiliary aid to participate, please contact the Boards and Commissions Support Clerk at (808) 241-4920 at least five (5) working days prior to the i meeting. P a g e Cost Control Commission--December 12, 2011 Kauai County Cost Control Commission Minutes of Meeting OPEN SESSION 1:30 pm. November 14, 2011 DRAFT With a quorum present, the regular meeting of the Cost Control Commission of the County of Kaua'i was called to order at 1:30 p.m. at the Mo'ikeha Building, Meeting Room 2A/1_B. Members present: Sandi Sterker, Chair Dirk Apao, Vice-Chair Brant Fuchigami Arryl Kaneshiro Glen Takenouchi Laurie Yoshida Absent/excused: Member Lawrence Chaffin, Jr. Others in attendance included: Sally Motta, Deputy Finance Director-, Steve Hunt, Real Property Review Officer; Amy Esaki, First Deputy County Attorney; Boards and Commissions Staff. John Isobe, Administrator; Paula Morikami, Administrative Aide, Mercedes Youn, Support Clerk. Public members testifying: Scot Tsuchiyarna, Lisa Murphy, Corinne King, Stephanie Y. Sakamoto, Walton D.Y. Hong, Councilmember Tim Bynum. Approval of Minutes Regular Open Session Minutes of October I0, 2011. Mr. Takenouchi moved to approve the minutes as circulated. Ms. Yoshida seconded the motion. Motion carried 6:0 COMMUNICATIONS CCC 2011-18 Communication dated 10/11/11 from Chair Sandi Sterker and Members of the Cost Control Commission, to Fall Rezentes, Jr. requesting that a representative from the Real property Tax Division be present at the next meeting to discuss the Credit Union exemption as well as other real property tax exemptions. 11 P a g e Mr. Takenouchi asked to be recused from participating in the discussion and decision- making due to a possible conflict of interest because he is a member of the Board of Directors of the Garden Island Federal Credit Union. Mr. Apao moved to receive the communication. Mr. Fuchigami seconded. Motion carried 5:0 Real Property Review Officer Steve Hunt stated that he and Deputy Finance Director Sally Motta were there to provide information and answer questions that relate to the credit union exemption. Mr. Hunt stated that for fiscal year 2012 there were a total of 12 exemptions that were given to the credit unions with an exchange value of$18.2 million in value relief. This is approximately $7.50 per thousand assessed and approximately $137, 000 in tax dollars. Chair Sterker asked how many credit unions received the exemptions. Mr. Hunt indicated that all 12 exemptions were given to the credit unions with the exception of a newer facility that probably represents a bulk of the building value because it was recently built. Chair Sterker asked if any credit unions sublet a portion of their building for commercial use other than for banking. Mr. Hunt said that he is not aware of any and that there are some buildings that are owned by the credit unions that are not being utilized and that they pay property taxes based on the property value. Chair Sterker asked whether any of the credit unions are truly a credit union and not a full- service bank. Mr. Hunt noted that the services offered by the credit unions vary. Chair Sterker opened the meeting to those wishing to testify. Scot Tsuchivama, Manager/Treasurer of the Kekaha Federal Credit Union, provided testimony asking the Cost Control Commission to look favorably upon the retention of the property tax exemption for credit unions. Hearing some of the comments, Mr. Tsuchiyama expressed concern that the Commission may be confused on what credit unions are. He explained that the credit unions' whole existence is based on the Credit Union Act of 19')4, when Congress in its wisdom thought that having cooperatives would infuse money back into the system. In contrast to banks, their members are both shareholders and depositors which mean that members reap the benefits of both the shareholders and depositors. Unlike banks, credit unions cannot raise capital from the financial market place. All capital in credit unions is derived from their earnings that are used to provide new services or make them affordable to its members. All of our credit unions have board member volunteers who are elected by the membership. On Kaua'i there are eight credit unions and out of the eight, the Kekaha Federal Credit Union ranges in size up to 350 million dollars in assets down to 6 million dollars in assets. The reason why there is such a diverse asset size is because each board of directors made a decision for their membership as to what kind of services they felt their members would like. The Kekaha Federal Credit Union chose to cater more to mortgages because on the Westside a lot of their members have low credit and are financially challenged. The other credit unions offer just loans and shares, which means that they don't have the full array of products and services because their board of directors have 2 1 P a g e determined that their members only want a higher return on their savings and low rates on their loans. Kekaha Federal Credit Union is a member-o-wned, not-for-profit financial cooperative, and should their taxes go up, there would be less benefits accrued to its members and the services that used to be free or affordable will become unaffordable. Chair Sterker asked what the loan rates are that KFCU is offering at this time and if they are different from a bank. Mr. Tsuchiyama stated that every credit union determines its own package of services via its volunteer board. Loan rates vary across the board, some pay really high rates, some pay the market rates, and some pay low rates. As for services, some credit unions offer only loans and shares, while others offer full services. Mr. Tsuchiyama noted that what the Commission needs to focus on is that what KFCU offers are based on what the members want. Chair Sterker asked how often does the credit union hold their board meetings. Mr. Tsuchiyama stated that by federal regulations the credit unions must meet once a month. Chair Sterker asked how many members are there on the KFCU Board of Directors. Mr. Tsuchiyama said that KFCU has seven members, while other credit unions may vary in the amount of members that sit on their board. Chair Sterker asked since KFCU provides monetary benefits to the community is this money that the County would not have to put into the community. Mr. Tsuchiyama stated that the County benefits more because you have to weigh in the amount of taxes that the County collects from the credit unions versus what the credit unions contributes to the community. For example, KFCU participated in the Internal Revenue Service (IRS) free income tax preparation program (VITA) last year completing over 200 tax returns for people who are income challenged. These returns totaled over $300,000 that was directly infused into the West Kaua'i economy. In the last four years, that infusion totaled over $900,000, much more than what the KFCU taxes would have been. Another example was that KFCU was instrumental in obtaining a$500,000 grant to buy the Old Waimea Dispensary. Subsequently, another 1.5 million dollar grant was secured to help with the renovation of the structure. The building has recently been turned over to Easter Seals Hawai'i to benefit clients on the Westside of Kaua'i. Chair Sterker asked whether the amount of taxes paid that range from $5,000 to $7,000 per year would that make a big difference to the KFCU. Mr. Tsuchiyama said that at this point in time it would. Stephanie Sakamoto, Legislative Officer of the Hawaii Credit Union League said it was seeking to retain the credit union real property tax exemption because credit unions are not-for-profit, member-owned financial cooperatives with the sole purpose of serving member needs. She felt that the credit unions are important, especially in today's economy and humbly asked that the Commission consider the impact that this would have on all credit unions' ability to deliver low- cost services to its members. 3 1 P a g e Walton D.Y. Hong, Kaua'i Community Federal Credit Union, Chairman of the Board of Directors, urged the retention of the real property tax exemption for Kauai's federal credit unions. He offered to provide the Commission with supplemental information on the different loan rates as was requested. He also felt that the loss of the real property tax exemption would have significant effect on continuing to provide services to its members and the community at little or no cost. The loss of the real property tax exemption will have the effect of imposing an additional tax to the credit union's members since any increased cost of operations gets passed on to its members. Chair Sterker stated that the Cost Control Commission is not only looking at the credit union tax exemption, but other tax exemptions as well. Mr. Hong stated that he understands what the Cost Control Commission is doing. His concern is focused on not taking the tax exemption away from the credit unions. Chair Sterker asked how much money does the KCFCU gives back to the community programs per year. Mr. Hong did not know the dollar amount, and offered to provide the information. Chair Sterker stated that the Cost Control Commission needs to know just how much money goes into the community programs. Lisa Murray, Kaua'i Government Employees Federal Credit Union, Marketing Specialist, respectfully asked for the retention of the real property tax exemptions for the Kaua'i Government Employees Federal Credit and for all Kaua'i credit unions. She felt that KGEFCU's success is further exemplified by the services they provide to the community. Chair Sterker requested an itemized list on the amount of money KGEFCU gives to each community program. Ms. Murray stated that she would send a written response. Corinne King, Chief Executive Officer of KGEFCU said that it is the second largest credit union with assets over$85 million. KGEFCU is a not-for-profit, member-owned organization that passes on its entire savings to its members from not having to pay additional taxes, fees and expenses. She pointed out that the money that is loaned out to its members stays here on Kaua'i. The interest that is paid on their loans stays here with the credit unions and is re-invested back into the community. With regards to bank loans, Ms. King noted that the interest paid on a loan from a bank does not stay here on Kaua'i, it goes to their corporate headquarters somewhere off island. She humbly asked the Commission to consider her written testimony to retain the credit unions real property tax exemption. Ms. Yoshida asked if the charitable tax exemptions fall under the 501 C3 category. Mr. Hunt believes that it does fall under 501 C3, but is unsure and needs to check on it. The real asset test for the nonprofits is not ownership or structure; it is whether the property is employed for charitable purposes. Mr. Hunt stated that the County does have nonprofit churches that o-vNn real property and vacant land that do not receive the exemption. 41 P a g e Chair Sterker asked who does the assessments for the County. Mr. Hunt stated that it depends on the type of property. The County has a commercial appraiser that handles all of the commercial properties. At 21:37 p.m. Chair Sterker called for a 5 minute recess. BUSINESS Chair Stoker reconvened the meeting at 2: 42 p.m. CCC 2011-08 Review and discussion of the County's real property tax exemptions and rate settings procedures. (Ongoing) (h) Presentation by Councilmember Tim Bynum regarding issues relating to the real property taxes of homeowners. Councilmember Bynum presented a power point analysis of the County's revenues and expenditures as well as real property taxes collected. He stated that homeowners are paying way too much in property taxes when compared to the other tax categories and this inequity needs to be fixed. He showed how the homestead resident's(owner-occupied home) property taxes were up 20.65% in 2011 when compared to the year 2008. In the other property tax categories including Conservation, Agriculture, Single- Family Residential, Apartment, Hotel & Resort, Commercial, the property taxes paid in 2011 were below that of 2008. The category of Industrial showed a modest increase. Councilmember Bynum explained that the budget is made up of revenues and expenditures. However, he felt that the Council does not spend enough time talking about revenues. As Chair of the Finance Committee, he would like to change how the Council determines the County's revenue needs, and how the Council determines which tax class should carry a bigger tax burden once that is determined, the Council can then set the tax rates accordingly. He noted that the process would occur each fiscal year and there could be changes to the tax rate, but not much. He felt that each tax class rate should have equal and fair treatment and the burden seems to be on the Homestead class. Councilmember Bynum stated that in 2004 a citizen's real property tax task force was formed and it made substantive proposals to the County Council. Subsequently, none the proposals were implemented. In April 2011, Councilmember Bynum introduced Bill 2408. This Bill would increase the homeowner's exemption. Initially he intended to introduce the Bill this fiscal year, but it was too late to implement it. In October 2011, the current Administration introduced Bills 2416 and 2417 which he felt were structurally significant and applauded the Administration for moving the Bills forward. His only concern is that the bills do not address which tax classes should carry a bigger portion of the tax burden. Councilmember Bynum felt that his presentation on the general principles of the real property tax system would provide the Cost Control Commission with better insight on how the real property taxes of homeowners are structured. 5 1 P a g e ANNOUNCEMENTS • Chair Sterker announced that the next meeting will be on Monday, December 12, 2011. at 1:30 p.m. at the Mo'ikeha Building, Meeting Room '-),A,,2B. • For the December agenda, the Cost Control Commission will review a proposed draft of the 2011 Annual Cost Control Commission Report. With no further business to discuss, Chair Sterker called for the motion to adjourn. At 3:55 p.m. Mr. Fuchigami moved to adjourn the meeting. Mr. Takenouchi seconded the motion. (Note: Ms. Yoshida requested to be excused from the meeting at 3:25 pm) Motion carried 5:0 Submitted by: Mercedes Youn, Support Clerk Approved by: Sandi Sterker, Chair 61 P a g e Sandi Sterker Members: Chair Lawrence Chaffin.Jr. Brant Fuchigami Dirk Apao Arryl Kaneshiro Vice Chair Glen Takenouchi OF Laurie Yoshida COUNTY COST CONTROL COMMISSION 2011 Annual Report Overvlelv Established by Charter in 1988, the goal of the Cost Control Commission is to reduce the cost of county government while maintaining a reasonable level of public services. The Cost Control Commission is charged with the responsibility to review and scrutinize personnel costs, real property taxes, travel budgets, and contract procedures with the intent of eliminating, consolidating or reducing overlapping or duplicate County services and programs. The Commission is empowered to secure, through the Office of the Mayor or the Chairman of the Council, any reports or information from their respective departments or employees that are appropriate to accomplish its work. The Cost Control Commission conducted nine(9) regular meetings in the 2011 calendar year and is hereby submitting its Annual Report summarizing its recommendations which will be advertised as required in Section 29.05 of the Kaua'i County Charter. I. RELATING TO COUNTY EMI PLOYEE TRAINING AND CONSOLIDATION OF PERSONNEL FUNCTIONS Findings 1. The Cost Control Commission conducted a survey in 2010 and received responses from fourteen (14) County departments. These departments submitted a list of the trainings their employees have attended as well as a prioritized list of trainings that would benefit their department. The top six (6)most desired trainings were: a. Sexual Harassment b. Leadership/Supervisory Management c. Workplace Violence d. Industrial Injury e. Computer Skills f First Aid/CPR 2. The Cost Control Commission also learned that the responsibility for training employees within the County rests with each individual department and is not I Page CCC 20t1 - 19 consolidated under a single department such as the Department of Personnel Services. 3. Additionally, the Commission discovered that each County department has staff members that are responsible for varying levels of personnel and/or human resources related duties. As a result. the Commission feels that there may be duplication of work effort among the various County departments that could be consolidated to improve coordination, effectiveness, and efficiency. 4. The Cost Control Commission requested that the County Auditor's Office conduct a pre-audit on the feasibility of consolidating the training and all personnel and/or human resources functions under the Department of Personnel Services. 5. In its response, the County Auditor's Office indicated that the Personnel Department's limited scope of responsibility as provided for in the County Charter made it difficult for their Office to conduct the pre-audit requested by the Cost Control Commission. Furthermore, the Auditor's Office suggested that the Cost Control Commission pursue a Charter amendment or seek a legal opinion regarding the scope of the Personnel Department's responsibility and authority under the Kaua'i County Charter. 6. The Cost Control Commission thus requested a written opinion from the County Attorney's Office on the scope of responsibilities and services that the Department of Personnel Services can provide under the current charter language. Based on the opinion, the Commission learned that pursuant to Section 6.02, County Charter, the Mayor is authorized to assign new related functions to any administrative department such as the Department of Personnel Services. The Commission finds that the issue raised by the County Auditor's Office regarding Department of Personnel Services limited scope of responsibilities as currently provided for in Article XV, Kauai County Charter has merit and feels that the Charter should be amended to include a more comprehensive human resource focus. Recommendations I. Request that the Mayor assign the responsibility of coordinating and conducting personnel related training of County employees to the Department of Personnel Services. Such trainings should include but not be limited to Sexual Harassment, Leadership/Superv,isory Management. Workplace Violence, Industrial Injury, Computer Skills, and First Aid1CPR. 2. Request the Administration to conduct an internal review to determine the feasibility and cost implications if personnel within the various departments who are currently performing personnel and for human resources functions were transferred to the 2 1 P a g e CCC 2011 - 19 Department of Personnel Services for the purpose of consolidating responsibilities and eliminating duplication of work. Upon completion of the Administration's internal review, the Commission requests a copy of the findings and cost determination of this proposed consolidation. 3. Request that the Charter Review Commission with assistance and input from both the Cost Control Commission and Civil Service Commission, consider proposing a Charter amendment to chancre the title of "Department of Personnel Services" to "Department of Human Resources" and further expand the functional responsibilities of the Department to include employee training, worker's compensation, safety awareness and injury prevention, employee benefits,and workforce planning. The Cost Control Commission requests that a copy of these Findings and Recommendations be transmitted to the Department of Personnel Services, Civil Service Commission and Charter Review Commission for further consideration and implementation. IL RELATING TO THE COUNTY AUDITOR'S REPORT: "AUDIT OF IMPLEMENTATION OF THE RECOMMENDATIONS OF THE COST CONTROL COMMISSION CONCERNING ENERGY SAYINGS" The Cost Control Commission discussed the April 2011 report prepared by the Office of the County Auditor at its July meeting. Although the Auditor's report stated that the Commission had made 40 energy savings recommendations, the Commission clarified that in 2009 and 2010 it had made a total of six (6) recommendations on energy savings as follows: 1. The Department of Water and the Wastewater Division of the Department of Public Works should be required to develop cost-saving opportunities for their operations, through energy efficiency and conservation measures and the use of alternative energy sources (for example, methane, wind and solar power). These alternatives should be considered for implementation particularly during expansions or renovations to existing facilities and the construction of new facilities. 2. All Departments should be asked to read the Energy Use Survey Guide and to follow the recommendations outlined therein. 3. The County should execute a new Energy Savings Performance Contract to improve energy efficiency in the County's buildings and facilities. 4. The County should develop cost saving opportunities for its operations through energy efficiency and conservation measures by exploring the issuance of a new Performance Contract proposal solicitation for County facilities. 5. The County should form a County Departmental Green Team Committee to assess work environments, identify opportunities and make recommendations to reduce waste and improve efficiencies in their daily work. 6. The County should engage and promote employee awareness, understanding, and sense of personal and departmental responsibility among all employees for how they use energy and other resources and how they can reduce waste and improve 3 Page CCC 2011 - 19 efficiency in their daily work by creating an "Employee Green Team- in the County, The Commission noted that the other recommendations described in the report were prepared and offered by the previous Mayor's Administration. The Commission requested that the Administration provide an update on their six (6) recommendations, and on October 10th, Managing Director Gary Heu and Energy Specialist Glenn Sato gave the Commission an update on the status of the six (6) energy savings measures. In addition, the Commission was provided an update on other energy savings measures that were completed by the County. Based on the update presentation, the Commission found that the current Administration was astute in following through on the Commission's recommendations and was pleased to learn that the County was progressing with the hiring of the Sustainability Manager. The members felt that the Administration's presentation was thorough and comprehensive and anticipates additional follow-up discussions with the new Sustainability Manager regarding the continued expansion and implementation of energy saving programs within the County. RELATING TO REAL PROPERTY TAX EXEMPTIONS From June 2011, the Commission initiated a review the County's real property tax exemptions to determine whether revisions to the existing exemptions are recommended. The Commission is undertaking this review with the assistance and cooperation of the County's Real Property Tax Division who has been very helpful in providing technical support and information to the Commission. The discussions are expected to continue into 2012. The Cost Control Commission would like to thank the Finance Department and its Real Property Tax Division for making themselves available at the meetings to present information requested and answer questions. Respectfully Submitted: COST CONTROL COMMISSION By Sandi Sterker, Chair Dirk Apao, Vice Chair Larry Chaffin, Jr,, Commissioner 4 Page CCC 2011 - 19 Brant Fuchi ami, Commissioner Arryl 1{aneshiro, Commissioner Glen Takenouehi. Commissioner Laurie Yoshida, Commissioner Date Submitted: S1Page CCC 2011 - 1 Sandi Sterker Members: Chair Lawrence Chaffin, Jr. Brant Fuchigami Arryl Kaneshiro, Dirk Apao Glen Tak-enouchi Vice Chair Laurie Yoshida COUNTY OF KAUA'l COST CONTROL COMMISSION' C/o Office of Boards and Commissions 4444 Rice Street, Suite 150 Uhu'el, HI 96766 DRAFT 2012 MEETING SCHEDULE d Meetings occur on the 2. Monday onday of each month (unless specified) at 1.30 p.m. at the Mo'ikeha Building, Liquor Conference Room 3 4444 Rice Street, L-ihu'e, HI 96766 January 09 February 13 March 12 April 09 May 14 June 18 July 09 August 13 September 10 October 08 November 05 December 10 Approved on: *Subject to change CCC 2011-20