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HomeMy WebLinkAbout072213 Cost Control Commission approved minutes 1m(tt)COUNTY OF KAUAI Minutes of Meeting OPEN SESSION Board /Committee: I COST CONTROL COMMISSION Meeting Date July 22, 2013 Location Mo'ikeha Building — Meeting Room 2AB Start of Meeting: 1:26 p.m. End of Meeting: 2:26 p.m. Present Chair Sandi Sterker; Vice -Chair Arryl Kaneshiro; Members: Dirk Apao and Lawrence Chaffin Jr. Also present: First Deputy County Attorney Amy Esaki; Boards & Commissions Office Staff. Support Clerk Mercedes Youn; Administrator Paula Morikami; Finance Director Steve Hunt; Budget Analyst Ken Shimonishi; Council Chair Jay Furfaro; and Council Services Review Officer Scott Sato Excused Commissioners Joann Nakashima, Glen Takenouchi and Laurie Yoshida Absent SUBJECT DISCUSSION ACTION Call To Order Chair Sterker called the meeting to order at 1:26 p.m. Approval of Regular Open Session Minutes of June 10, 2013 Commissioner Chaffin moved to approve the Minutes minutes as circulated. Vice Chair Kaneshiro seconded the motion. Motion carried 4:0 Communications CCC 2013 -18 Memorandum dated June 3, 2013 from Council Chair Jay Furfaro to Chair Sandi Sterker and Members of the Cost Control Commission, regarding a request for a deferral of the Cost Control Commission meeting. (Deferred on 6/10/13) Chair Furfaro provided the Commission with a chart that reflects his own projections on actual budget amounts for the past eleven months regarding the General Fund, Highway Fund, Golf Fund, Solid Waste and Sewer Fund. He gave an interpretation on the numerical data for each fund as it relates to inter - government revenues, service charges, miscellaneous, total revenues, departmental spending, excess of revenues and variances. He described the various departmental spending for each fund and pointed out that although the numbers are negative he felt that it was a positive indenture for the County because it showed that the County spent less for that spec fic eriod in time. He explained because the County is a cash Cost Control Commission Regular Meeting - Open Session July 22, 2013 Page 2 SUBJECT DISCUSSION ACTION accounting system, it does not receive all of its bills in a timely manner which makes projecting a forecast quite difficult even though the County has already entered into contracts to pay those bills. He mentioned that the County is not estimating any accruals to be spent, which is an issue that he and the Director of Finance have shared differences. Council Chair Furfaro pointed out to the Commission that the actual expenditures for the Golf Fund are $2.016 million dollars with a budget of $2.254 million dollars; and a variance of minus $238 thousand dollars. He shared his concerns that the service charge and revenue for the golf course continue to lag creating a variance of $57 thousand dollars. He mentioned that the County has no operating date for the restaurant, which includes the bar lease, and from what he understands the parks department has not fulfilled their request to Council that they would be in operation by July 15tH Council Chair Furfaro stated that the County is preparing a 13 month report which in essence gives the Finance Department an additional 90 days to collect all outstanding bills and complete a compilation report of the final costs for the year. He indicated that the County will not know where it stands financially until the final bills are paid and are confirmed by an outside certified audit for the County. He voiced his concern that this is not a great way to do business because as with the resort business the books are usually closed and the reports sent to the owners within thirty days before the ending of the year. Council Chair Furfaro stressed how difficult is it for the Council to get a reasonable understanding of where the County stands financially. He encouraged the Commission to make a request to the Director of Finance that they do a quarterly financial presentation on the County's major funds Cost Control Commission Regular Meeting - Open Session July 22, 2013 Page 3 SUBJECT DISCUSSION ACTION regarding the General Fund, Highway Fund, Golf Fund, Solid Waste Fund and Sewer Fund. He noted that these accounts have the biggest and largest variances. Chair Sterker asked for his opinion on whether he felt the other funds did not have as much variances as the major funds. Council Chair Furfaro stated that he cannot confirm whether the other funds have more variances in the way of percentages compared to the major funds. Chair Sterker asked if combining all of the other funds would make up a major fund. Council Chair Furfaro stated that it would only make up half of a major fund and asked whether it would be appropriate to ask the Finance Director if he agreed in principal on his interpretation of the numbers. Director of Finance Steven Hunt indicated that he agrees with the principal aspect because it is similar to the exercise that the Department of Finance goes through. He noted that as Chair Furfaro previously mentioned, the issue is with timing because it is a funding account. He explained that some of the items that still need to be processed are the larger payments that include the County's annual retirement contribution of $7 million dollars due at the end of year; a third party contract for the landfill for $2 million dollars also due at the end of the year; and the solid waste recycle program for $500 thousand dollars which was encumbered internally but was not executed in time. He noted that these funds would essentially show up as an encumbered cost for FY 2013. Council Chair Furfaro stated no matter how difficult it is to get an exact projection, what is more important is to have at least an understanding of where you are at and at what point. He indicated that an average person may not comprehend the whole picture and may think that the County has a hue surplus, which is certainly not, in this case. Cost Control Commission Regular Meeting - Open Session July 22, 2013 Page 4 SUBJECT DISCUSSION ACTION Council Chair Furfaro referred to a strategic plan that is being developed that will deal with the employee wage increases. He explained that negotiations with Bargaining Units 1- 4 were reached which will add roughly $1.1 million dollars to the County's payroll budget. He mentioned that through an arbitration process a contract agreement between SHOPO (State of Hawaii Organization of Police Officers) and the Counties was finally reached which resulted in a four year contract agreement equal to a 16.8% pay increase for police officers. Ms. Morikami asked for clarification on whether the numbers he referred to in his discussion came from Finance or his own estimates. Council Chair Furfaro clarified that the numbers are his own estimates. Chair Sterker asked whether the revenue report summary also reflects his own estimates. Council Chair Furfaro clarified that the data in the revenue report summary are actual numbers taken from the last nine months. He pointed out that the details regarding the settlement of each bargaining unit came from the newspaper. He noted that it is no secret that the City and County of Honolulu has to find $50 million dollars to cover the pay increase for its police officers because the pay increase affects every County. Council Chair Furfaro stated that the Council is trying to find a better way to help the Finance Department expedite a monthly revenue summary report of the County's expenses to the Council on a timely basis. He indicated that Vice Chair Nakamura is currently working on a bill. The purpose of the bill will require the Director of Finance to complete a list on the County's financial exposures on a timely basis. He recalled in history that the Council had to wait four to five months just to get an interpret ion of a financial report that came before Council. Cost Control Commission Regular Meeting - Open Session July 22, 2013 Page 5 SUBJECT DISCUSSION ACTION Chair Sterker asked what he would recommend the Cost Control Commission do with the information. Council Chair Furfaro stated that the Commission should encourage a more timely process in getting financial reports out to the Council highlighting the major expenditures so that Council can get a better understanding on where it's at. He voiced his concern that once he leaves office no one will carry on in reviewing the financial reports. He questioned why the Council would want a financial report if it weren't able to digest what the numbers mean. Chair Sterker asked whether he felt that is what the Cost Control Commission should be doing. Council Chair Furfaro said yes and that the Commission should be kept in the loop at least on a quarterly basis so that it can have a better understanding of the County's financial position. He shared with the Commission that the Council has received a pledge from the Finance Department expressing their willingness to work together in getting out a monthly financial report to the Council. Chair Sterker questioned whether it would be appropriate to request a quarterly financial report from the Department of Finance on the County's major expenditures. Council Chair Furfaro encouraged the Commission to move forward with its request to obtain the same quarterly financial report that the Council receives from the Finance Department. Commissioner Chaffin asked if it was right for Council Chair Furfaro to assume that once he leaves office this practice would not continue. Council Chair Furfaro stated that he has fourteen months left on his term and if he chooses to run for office one more time he could, but for now this is being done by him alone; there is nothing that requires him to do it when in actuality it should be done by the Department of Finance. Cost Control Commission Regular Meeting - Open Session July 22, 2013 Page 6 SUBJECT DISCUSSION ACTION Commissioner Chaffin questioned whether it would be appropriate to propose a draft bill or an ordinance to ensure that this practice continues. Council Chair Furfaro explained that Vice Chair Nakamura is currently working on a bill to establish protocol. Chair Sterker indicated that she does not understand the process in obtaining a quarterly /monthly financial report from the Department of Finance. Council Chair Furfaro suggested that the Commission put its request in writing. Vice Chair Kaneshiro asked for clarification on whether the issue falls under the scope of the Cost Control Commission. First Deputy County Attorney Esaki stated that the issue does allow the Commission to request for the information because it would also include personnel cost. Chair Sterker called for a motion. Commissioner Chaffin moved that the Cost Control Commission obtain a financial report on the County's expenditures from the Department of Finance on a quarterly basis. Vice Chair Kaneshiro seconded the motion. Motion carried 4:0 Council Chair Furfaro shared with the Commission that he will be introducing a new bill. The purpose of the bill is to require that certain fees are to be reviewed on a scheduled basis. He explained that the intent is to prevent the County from playing catch up at one time for fees that should have been looked at previously. He stated that he would like the fees to be reviewed in increments of three years such as dog licenses, car registration fees and licenses. He asked that the Commission provide some input at some point regarding his proposed bill. Chair Sterker stated that in the past, the Cost Control Commission has Cost Control Commission Regular Meeting - Open Session July 22, 2013 Page 7 SUBJECT DISCUSSION ACTION made recommendations to increase the playing fees at the Wailua Golf Course; minimum real property tax from $25 a year to $150 a year; and most recently the increase in service charge for bad checks from $7.50 to $30.00. She stated that the Commission has always been open as far as looking for ways that are fair to the people and the County. Council Chair Furfaro explained that he wanted to share his intentions because he didn't want the Commission to find out later that he was doing something without seeking input first. He then referred to a bill that was introduced by the Commission and reviewed by Council to increase the minimum real property tax; subsequently a new bill is now being proposed that would eliminate Hawaiian Homelands from paying any taxes. He strongly expressed his opposition of the bill because he felt that the minimum real property tax should remain. He questioned how could anyone justify not paying for ambulance, police and fire services when they are part of the community. Chair Sterker agreed. Council Chair Furfaro mentioned a proposal that he introduced to Council to give an additional $100,000 to the Kauai Humane Society. The proposal was approved and became part of the KHS budget of $650,000 for FY 2013/14. He explained that the County of Kauai is the only county mandated to provide services at the cost of the County. He indicated that once the budget is approved it is left up to the Director of Finance to negotiate the terms of the contract. He voiced his concern that this type of practice does not sit right with him because the right way to approach the issue is to find out what needs to be covered first and then allocate the funds accordingly; not the other way around. He commented, for that kind of money the County could probably do the job of collecting stray cats and dogs by creating a new department with a Charter amendment. Cost Control Commission Regular Meeting - Open Session July 22, 2013 Page 8 SUBJECT DISCUSSION ACTION Council Chair Furfaro also voiced his concerns that the County is charging a separate fee for each hunting dog that a hunter acquires. He noted that the County needs to be more understanding when dealing with this type of situation because a hunter's main goal is to provide food for his family. Another concern Council Chair Furfaro brought up was a lack of a concession, amenities, and ATM at the Wailua Golf Course. Council Chair Furfaro stated that the Charter does not provide the Council with the opportunity to spend and forecast money for the long term. He noted that the Council is only allowed to appropriate funds for the year and in the year. He remarked that he would like to see a strategic plan in place to make forecasting easier. He asked that the Commission get involved in cost saving measures by finding a new location for the Kauai Historical Society, in which he suggested the old Big Save building, so that the County Auditor's office can be relocated to the old County Historic Building. Council Chair Furfaro stated that in light of the fact the State has placed a cap on the County's TAT and that it has no resource to other funds to make up the difference brings into question how Council funds are administrated. Mr. Hunt stated that he wanted to clarify any issues regarding the Wailua Golf Course. He stated that the golf pro -shop concession was bid on and awarded, but he cannot confirm the name of the awardee on record. He explained that as part of that package, the driving range concession was milled together with the pro -shop to make it palatable for someone to come in and bid for it. He noted that on one side it would save a half time employee which is a cost to the County for running the driving range. Cost Control Commission Regular Meeting - Open Session July 22, 2013 Page 9 SUBJECT DISCUSSION ACTION He also noted that on the flip side the collected revenue is considerably down based on the bid although it was higher than the County's initial bid when the last pro -shop was there. Given that it was seventy thousand dollars a year revenue back then, the County is now looking at a potential loss in revenue from that total operation. Chair Sterker noted that without the pro -shop there would be no club rentals and no merchandise sales which include the sales tax paid on these items. Chair Sterker asked if there were other resources coming in. Mr. Hunt stated that the County would strictly rely on the lease rental and not the rental of clubs or sales from the merchandise. But to the extent that it may bring in more rounds of golf and carts being rented, which ultimately may lead to more green fees and lockers being used, which will generate more revenue. He noted that the combination of having the concession professionally run and the ability in taking credit cards, as opposed to cash, will hopefully increase the number of rounds to help off- set the loss in revenues from the concession itself. Mr. Hunt stated that he agrees with Council Chair Furfaro that the restaurant lease will not be confirmed until August or September. He stated that the restaurant is currently undergoing renovation including improvements to the driving range by installing new netting and range poles. Chair Sterker asked if the restaurant will have a liquor license. Mr. Hunt explained that decision would be up to the lessee because it is not the responsibility of the County to apply for the liquor license. Mr. Hunt explained that once the lease is confirmed the County will not have any control over the concession such as the time of operation, what type of Cost Control Commission Regular Meeting - Open Session July 22, 2013 Page 10 SUBJECT DISCUSSION ACTION food the restaurant can serve or type of merchandise it sells. He noted that it is an open bid process and whoever pays the County the highest rent are the ones who are going to win the concession. He added that there will be some criteria in terms of making sure that the person who is coming in has experience in the restaurant business. Council Chair Furfaro clarified that any requirements or requests that both the lessee and County have can be worked into the bid because it is part of the strategic plan to ensure success for both parties. Mr. Hunt stated that in terms of the quarterly financial reports his department is currently working on a draft format which is an executive summary and will be coming out quarterly. The report will incorporate not only the expenditures but three year comparisons that account for seasonality. He noted that some of the revenues and expenditures have some seasonality to it and they want to make sure that when they look at the analysis they are comparing it to prior years and what they have encumbered or encountered during these periods. Ms. Morikami asked for clarification on the timeframe from the completion date to when the report is distributed. Mr. Hunt explained that the first quarter is the most challenging because it is the time when they are also using the same accounting resources to prepare the CAFR (Comprehensive Annual Financial Report). Typically, periods one through six tend to come in bulk at a much later time. They are going to make a conservative effort, and fortunately the department has Budget Analysts Ken Shimonishi and Ann Wooten on their team, so they would not rely too much on the accountants. He noted that some leeway was iven for the first and fourth quarters. Cost Control Commission Regular Meeting - Open Session July 22, 2013 Page 11 SUBJECT DISCUSSION ACTION Ms. Morikami stated that once the report is received by the Office of Boards and Commissions, Staff will place the report on the agenda. Mr. Hunt stated from a problematic standpoint and based on the timing of the report, he would like to present the report to Council first to make sure that they have the information before he presents the report to the Cost Control Commission. Announcements Next meeting: Monday, August 12, 2013, at 1:30 p.m. at the Mo'ikeha Buildin , Liquor Conference Room 3. Adjournment Chair Sterker called for the motion to adjourn the meeting Commissioner Apao moved to adjourn the meeting. Vice Chair Kaneshiro seconded the motion. Motion carried 4:0 Submitted by: Mercedes Youn, Staff Support Clerk (X) Approved as circulated on September 9, 2013. ( ) Approved as amended. See minutes of meeting. Reviewed and Approved by: Sandi Sterker, Chair