HomeMy WebLinkAboutBudget Overview FY2013-2014 DEPARTMENTAL BUDGET REVIEWS Budget Overview
Honorable Tim Bynum
Honorable Gary L. Hooser
Honorable Ross Kagawa
Honorable Nadine Nakamura
Honorable Mel Rapozo
Honorable JoAnn A. Yukimura
Honorable Jay Furfaro, Council Chair
Chair Furfaro: Thank you, Mr. Rapozo. Aloha and good
morning, Mr. Mayor.
There being no objections, the rules were suspended.
BERNARD P. CARVALHO, JR., Mayor: Aloha and good morning.
Chair Furfaro: Are you going to have your Staff actually sit up
with you?
Mr. Carvalho: Yes. You know who you are. Come on up.
Chair Furfaro: Members, again, I would like to see if we can find
ourselves with the Mayor, then Ernie and Steve make their entire presentation, and then
we will go into questions and answers from there. Thank you.
Mr. Carvalho: Once again, good morning, Council Chair and
members of the County Council. Thank you so much for this opportunity. Of course, Chair,
I want to thank you for your opening. I like the canoe and the wa a, and the importance. I
would like to say that it would be nice for all of us, you and me, to be in the same canoe;
however, because of our husky size, maybe that would not be appropriate at the time.
(Laughter). I see us a two (2) canoes going side by side, and going through this unchartered
waters that is going to come before us, and the challenges that are before us just in general.
We, on our beautiful island of Kaua`i and Ni`ihau, are trying to do what we can with the
resources that we have, knowing that there are challenges not only throughout the State,
but throughout the world. With that, thank you so much for that connection.
Chair Furfaro: Mayor, for me to get the best view, I have to turn
the meeting back over to Mr. Rapozo.
Mr. Carvalho: Okay.
Chair Furfaro: I want to sit in and watch the presentation, and
then I will come back. During the presentation, I will turn it over to you.
Mr. Rapozo: Thank you. Like the Chair said, we will proceed
with your entire presentation, and then we will open up for questions after that.
Mr. Carvalho: Okay. Thank you. Before I actually get into the
presentation, I just wanted to do my little summary of what Chair just said which is
important and highlight some of the things that he talked about. Number one is the
reporting part. That caught me and how we need to do better in responding back to you,
Councilmembers, so that you can make the decisions that you need to make. I want to say
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that up front and do a better job, whether it will be Building Permits, financials, or our
Human Resources producing reports in a timely matter. There are similar findings in
Chair's presentation that I kind of caught on, because we are going to have some of the
same information, but I think it is good that we are talking the same way and providing the
same information, mainly being the tax. For the taxes and the fees, there is a comparison
slide that I will have for you, so I wanted to point that out that there are similar points that
is going to be heard shortly. Of course, there are some disagreeing areas such as the
Reserve Fund that the Chair mentioned. We are still talking and managing and working
through that,so I just wanted to point that out that I acknowledge that. I like the term
Trend Analysis. We have been doing that internally. I think that really gave us—all of us,
more so our Department Heads, an understanding of this Trend Analysis over the past
three (3) to four (4) years. You will see what I mean very shortly. There are similar areas
where "we" made decisions, such as the Bus services. "We" decided they wanted to increase
nights, weekends, additional routes, and additional opportunities for our people to get on
the Bus and get to where they need to go. I think that is a good thing. I believe the utility
cost of energy is another one that the Chair stated firmly, that "we" work together on that
and trying to look at our utility costs. Even through some of the studies that you,
Councilmembers, encouraged. I think we got some good data from that. Of course, the
fixed staffing slide and looking at that analysis as well. Chair, again, I really appreciate
the information that you shared with us. In summary, I wanted to let you know some of
the areas that really stood out for me.
We all know that this is the most important task as we move forward...to look
forward to working with you over the next two (2) months. I want to start by saying that as
important as it is for me to be here to speak to you directly this morning. We,
Administration and the Council, are actually speaking out to the people that we serve as
well. They are watching, and they also wanted to know how we are working together and
how we look forward to really managing ourselves as they continue to watch all of us
throughout these hearings. It is my hope that our people tune in, listen, get on Ho`ike, and
get on the of course the local newspaper, or whatever means of information that will help
our people understand the challenges that we have before us as we move forward. You will
note that our cabinet members are all here today. I wanted to have them present as well,
making sure that they got the message; the Chair's message and your message. We truly
come here as a team while trying to figure out every which way to make things as easy and
accessible as possible knowing the challenges that we have before us. I am proud of what
we have accomplished in light of the challenges. Our Department Heads have done a great
job in trying to look at each of their individual budgets. I will be here physically to offer
support, guidance, and clarification if need be, and our fiscal team will be here as well. I
would like to walk to you through a short presentation that will provide a big picture. I am
always in the big picture type of thinking and I hope having our team members really hone
in on some of the details and the subject matter of people who we have on our staff who can
really make things come to life. After I am done, I will turn it over to Steve Hunt, Ernie,
and our team members.
First of all, I would like to address our process for preparing our budget at this time.
It is a whole new process on how we came about in really managing and looking at the
numbers, and trying to figure out how to give support to our Departments as best as we
could. We appreciate your support last year, Councilmembers, in allowing us to create a
budget team. This team consists of our Director of Finance, Steve Hunt; Ernie Barreira,
Budget and Purchasing Director; our Budget Analysts, Ann Wooton and Ken Shimonishi.
Their existence really helped us to move and embrace the real challenges of budgeting and
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understanding the analysis that is so important, and using numbers and Trend Analysis,
and all of the things that you will see shortly. I really want to thank you folks for that.
This past summer, we came together and added capacity, like I said, in planning for
next year's budget. We started upfront in August. At the conclusion of our budget sessions
last year in May/June, we immediately began discussions and opened up administratively.
I wanted to get out of the gates as soon as possible in talking about the upcoming budget, so
the next three (3) slides will take you through the process preparing for this Fiscal year
2014's proposal. Up there you can see, we started in August of last year, laying out some of
the groundwork that could be communicated to our Department Heads very early in the
process. Then, in September, we shared a timeline and some preliminary budget
instructions to the Department Heads. I really wanted to give our Department Heads the
understanding of the direction. That was so important knowing the challenges before us.
In October, we instructed our Department Heads to meet with the Council Committee's
Chairs to find out what priorities they may have had for the upcoming year. This was very
important to begin the process of opening up a dialogue and conversations with
Councilmembers and Council Staff. Your Staff, Council Staff, has been awesome in really
working collectively together with our Staff. The Staff members here in these Council
Chambers, you guys have really been up front and open and able to respond back and forth.
While we are sitting here, they are behind the scenes making things happen. That has
been happening. I wanted to note that, that was very important as we continued to develop
our budget. In November, we began to talk about Revenue projections, knowing again, the
challenges before us. In anticipation of the release of our Comprehensive Annual Financial
Report or better known as the CAFR, that started discussions as well. Moving on into
December, draft budget worksheets transmitted to Department Heads, again, being
generated from our Budget Team and our Analysts, and then our pre-budget meetings held
between the Budget Team and Council Staff. That began 'in updating each other's
information in December. The public input received via online a survey. I will be showing
you the results of that survey. We wanted to at least try and pitch out an opportunity for
the public to decide or share with us on what their thoughts were. In January, our
Departmental budgets were inputted into the AS400, so wanted to make sure that
everything was consistent and was inputted so our Budget Team could do what they need
to do to make things happen and move. Of course, in that same month, there were
pre-budget consultation between the Finance Director and Councilmembers. Again, there
was another opportunity to dialogue and make sure that at least we kept you folks
informed as much as possible, every step of the way. In February, we had initial
Departmental Budget Review Meetings held, and then of course, we moved forward with
our Revenue projections, and of course the Department Heads instructed to complete a
"2012+10" exercise. I will explain that as we go through the next slides.
In this particular slide here, in the first week of March, our Department Heads
finished trimming their budgets, and received their revised proposals individually for any
final adjustments. That was in March. Finally, we submitted our budget to the Council
and released to the public at 12:00p.m. On March 15th. That kind of walked us through
some of the preliminary steps we took as we built towards the 15th submitted and
incorporating all of the information that was flowing back and forth between the
Administration and the Council. This process took a tremendous amount of work, focus,
and adjustments all along the way. One of the important takeaways we have from this
experience is that budgeting is a year-round process. It is true. It is year-round. It
continues every day and has to because we are finding more and more with numbers,
analysis, and information that is so important. We get that. The second big takeaway is
that we have done this, as we have done this year; we intend in the future to keep our
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County Council a prize of our progress every step of the way and really trying to
incorporate that as we move forward, to get information flowing in more of an expeditious
way. We feel that, that brings us much closer to the basic understanding right of the bat;
saving us all time in the process of collaboration and compromise. That is kind of like
where that leads.
Now, as a promise, I want to share with you how we conducted our budget trimming
exercise in late February. We had identified an acute gap between Revenues and
Expenditures based on the first budget proposals. As I said earlier, "Inputted by our
Department Heads." We knew we needed to trim significantly, and so instead of just
making adjustments just arbitrarily, we decided to use a formula based on historical
Expenditures. That is when we laid out the Expenditures over the fiscal years. That is
what we called a term "2012+10" exercise. Let us go through that.
First, we reviewed actual Expenditures for fiscal years 2010, 2011, and 2012. We
did that actual spending overview. We then took a baseline of fiscal year 2012, and added
ten percent (10%) to account for increase fixed costs. This became the target for the
Department Head to reach,and this came from our Budget Team's thinking and creative
minds on how to come to a place where we can look at in giving direction to our
Departments. We identified the Departments proposed fiscal year 2014's budget and the
dollar amount they were over from the 2012+10 target figure. This was a dollar amount
that they were asked to reduce. They were instructed to do so in a manner that would have
minimal impact on services or on on-going projects, so knowing that was in front of them,
they had to make their adjustments. In the case of the Mayor's Office—and you will see
when we do our presentation; this was an excess of three hundred thousand dollars
($300,000.00). You will see when we do our presentation. What are the results to that?
Department Heads were asked to cut anywhere from ninety-five thousand dollars
($95,000.00) to more than one point eight million dollars ($1,800,000.00). All Departments
experienced cuts and seventy percent (70%) of them met their mark in full. We can explain
the differences there as we move through the presentation. At the end of the day through
this particular exercise, we were able to reduce the proposed budget by seven point eight
million dollars ($7,800,000.00) from the current fiscal year, just based on that analysis and
layout of information that was posed or given to us by our Budget Team, as we moved
forward.
Let us look at some of the major areas—and I want to touch on the trimming that
occurred. First, was payroll and I know Chair touched on this as well. We achieved
significant savings there by disallowing any new positions and dollar funding fourteen (14)
positions that were currently vacant. Next, through the installation of photovoltaic panels
in various facilities, which we talked about earlier through the Chair's presentation, an
implementation of energy conservation policies; we are expecting to save one hundred sixty
thousand dollars ($160,000.00) next year. We are modifying our vehicle replacement policy
to extend the life of our fleet, which will reduce our vehicle replacement costs for next year
by sixty-nine percent (69%) versus fiscal year 2013. Our proposal to pursue a vertical
rather than a lateral expansion at the Kekaha Landfill at this time, will save us eight
million dollars ($8,000,000.00) in capital costs, and of course, that discussion is
forthcoming. We have made across the board reductions to travel budgets, saving us more
than one hundred three thousand dollars ($103,000.00) next year. Those were the cuts
saving measures. We move into the Revenues now, and as you know, we could not
completely close a gap between Revenues and expenses through the Departmental budget
cuts, but I wanted to start there first of course, and see how we can really manage that and
move to the next step. For the past three (3) years, our County, State, and Nation were in
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the throes of an economic crisis. We were able to hold off on significant tax and fee
increases due to the conservative fiscal policies that we had in place pre-2009. We got into
office in 2008, so we are kind of right in the middle of some of that turmoil that was
happening fiscally. We built up sufficient Reserves, which we all know balanced our
budgets for the past three (3) years. We are trying to manage it that way, hoping and
praying that things will be better, and as you all know, we are here now. However, those
fund balances no longer exist and we feel that it is time to make the necessary Revenue
adjustments to keep up with the costs of living adjustments and State averages for the
various fees that we are going to be proposing to you. We have proposed several Revenue
enhancement measures for next year, which we feel are prudent and necessary at this time.
I would like to step through that right now. This is similar to what Chair was saying
earlier. You can see from this chart that even with the increases that are proposed in the
various categories listed at the bottom, we are still at or below the State averages for these
classes of properties. The only exception is the agricultural class where we are slightly
above. The only class of property for which we did not propose an increase was the
homestead class, which represents mostly home owners who live in their primary residence.
This is because we believe it is time to work together on a comprehensive tax policy for
home owners that would reduce inequities and provide some measure of tax relief for those
most in need. This would include the rethinking of the Permanent Home Use Cap. We
talked about that in our discussions, so I wanted to let you know that this slide right here
gives us an overall view of all the different categories. We look forward to that discussion
with Council, once our fiscal 2014 budget is finalized. We estimate that these tax
adjustments, if approved, will help close our Revenue gap by approximately eleven million
dollars,($11,000,000.00) next year.
Our next slide goes into our Vehicle Weight Tax. Again, this was mentioned earlier.
This increase of a 0.0075% per pound still leaves us well below the State average, and the
additional cost for an average sized vehicle will be roughly twenty-five dollars ($25.00) per
year, as you can see in the graph there.
As we move onto Vehicle Registration, we are proposing to increase this annual fee
by five dollars ($5.00) per vehicle. With this increase, we are still below the annual fee
charged by the City and County of Honolulu and County of Maui. Again, the bar graph
shows you that right now.
Then, of course for Fuel Tax, we are requesting an increase of two cents (2¢) per
gallon. This would amount to an extra thirty cents (300) per fill-up on a fifteen (15) gallon
tank. Even with this increase, we are still below the taxes imposed by the State, the City
and County of Honolulu, and the County of Maui.
Then there are Bus Fares. The Kaua`i Multimodal Land Transportation Plan has
recommended fare increases for the next three (3) years for the Kaua`i Bus. For next year,
we are proposing to take the initial step in increasing Bus Fares by five dollars ($5.00) for
the bus monthly pass, and sixty dollars ($60.00) for the annual pass. We had this
discussion earlier with Chair. Even with these proposed increases, our bus service is still
heavily subsidized, and this graph tells you that. With the price of a single bus pass, actual
cost of regular fare, and of course the higher amount for paratransit, which you can see is
twenty-seven dollars ($27.00) or so versus the five dollars ($5.00). But we, I believe, are on
the right path in continuing to move forward in working closely together to address
transportation in general. This is the first increase of bus fares as we talked about.
Another change we are proposing is to rescind the complimentary bus passes offered to
County employees. I kind of went right to it, right down to the County employees. When
1
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we implemented this several years ago, it was thought that this would be a good incentive
to increase ridership, similar to our project with Kaua`i Community College, and it has been
effective; however, we feel it is time for all bus riders to pay for their share, and are hopeful
that our loyal County riders will continue to patronize the Kaua`i Bus, as well as all our
residents of Kaua`i. In closing on the Bus, we know it is a vital service that is needed.
This is our Solid Waste Tipping Fee that we talked about. We are proposing to
increase the Solid Waste Tipping Fee from ninety dollars ($90.00) to one hundred nineteen
dollars ($119.00). This would impact commercial deliveries to the landfill while it is our
hope to continue to encourage diversion. While this would impose an additional cost for
businesses and some residents, we prefer to look at this at a strong incentive for diversion
of materials from the landfill. The first slide shows you how tonnage deposited into the
landfill have decreased by nearly nineteen percent (19%) since 2008. That is a red line,
from 2008 down to 2012. At the same time, the amount of materials diverted represented
by the blue line, is steadily rising. That is some of the numbers coming from our Solid
Waste team.
The next slide shows you that our diversion percentage has risen to nearly forty
percent (40%) since 2008. As you know, there are many efforts ongoing to increase
diversion and decrease dependence on our landfill. All of those efforts will continue, and
continue, and continue until we can do whatever we can to get into all of our diversion
efforts islandwide. Increasing the Tipping Fee can play a major role in this effort. For a
historical perspective on our Tipping Fees, this just gives you an overview from the years
1996, 1997, 2007, and 2009; so averaging the increase over thirteen (13) years, and taking
to account our proposed increase for next year, this averages out to about two dollars and
ninety cents ($2.90) increase per year from 1996. The proposed increase to one hundred
nineteen dollars ($119.00) could raise an additional one million dollars ($1,000,000.00) in
this particular part of our fee structure.
Finally, on Revenues, let us touch on some of the proposed fee increases. I did say
this over in our delivery. Most of these fees have not been adjusted since 1972, and the
proposed increases here are designed and important to account for cost of living increases
over the years, and the current costs of providing services on various applications. Those
are the proposal in fees for our Planning Department, which is another one that is open for
discussion once we get to that part.
This is the survey. I mentioned earlier, an online survey was done. I wanted to get
out and try to encourage a sense of what the community or what kinds of services are most
valued by members of our community. This graph shows you—I mean the purple part is
the Eastside Anahola to Wailua, the lavender is Central Hanama`ulu to Puhi, and so on.
The green is `Ele`ele to Koke`e. The salmon color is more the South. North shore would be
the orange. There were a total of three hundred four (304) responses, and that graph shows
you the geographical layout of what we got. For the next graph, we asked respondents to
rank the types of services they felt deserved the highest priority in our budget. It is not
surprising that Public Safety namely Police,Fire, and Civil Defense came out number one.
The smaller bars, of course, are ranking it from one (1) being the most important. It is not
surprising for Public Safety. A very close second was infrastructure upgrades, which is not
particularly surprising because we have been talking about that as well. These two (2)
areas have the shortest bars like I said, and the lower score indicates the greater
importance based on the survey.
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The next slide is the "Most important County facilities to be improved or maintained
in your district?" This is another question. Without going into full detail, this slide gives
you a snapshot of the types of responses received. By far, our parks and neighborhood
centers were identified most frequently. The types of responses that were contained in the
other category ranged from roads to wastewater facilities. There are many great things
happening in our parks and facilities, and many things we need to look at and improve, and
many things that we need to develop and create. That is there. We can show you that.
You are going to be seeing that as our deliveries come before you. I am looking forward to
that discussion. There are other facilities such as wastewater and police substations. That
was another one that was listed in this particular survey. This input helped us move this
budget in a direction that was discussed in my Budget Message on March 15th, and again,
in the State of the County. That kind of gives us an idea based on this survey. That is a
raising of a bar, like I said, on our County facilities like getting our parks, roadways, and
public places back into that kind of condition that they should be. We all know that. As our
budget process continues to evolve, we will incorporate much more direct public input and
will do so earlier in the process. That change will begin next year.
As I say mahalo, hopefully this overview has provided you, Councilmembers, the
audience here and of course the people watching. The broad context of what we have to do,
what we started off with, when we started, and all of the different parts of this process of
budgeting until today. As I mentioned in my State of the County Address, as I go back to
opening remarks from Chair Furfaro regarding our wa a, or the canoe. I do hope that we
will conduct ourselves over the next few weeks, of course, as we do in our homes with our
families at the table; talking about all of the challenges they are having at the dinner table,
knowing that they still love each other because there is respect and suggestions, rather
than criticism; and of course with an intent to build up rather than to break down. That is
basically the overall piece on our side, and we are doing whatever we can. We will answer
questions on the floor. I want to get all your questions as they come up. We are prepared
for that. I want to say that upfront. Our guys are waiting back home, if you know what I
mean. Again, it is truly my intent; our intent to work closely with you as we navigate
through these waters side by side, knowing the people are watching us and seeing how we
can come up with good solid solutions that can help us move forward in these very, very
challenging times, but knowing that we can do it together. Mahalo.
Mr. Rapozo: Thank you, Mr. Mayor. Are there any questions
for the Mayor?_Mr. Bynum.
Mr. Bynum: Mayor, thank you for the presentation...
Mr. Rapozo: I am sorry, Mayor?
Mr. Carvalho: We want to do all of the presentations first before
questions.
Mr. Rapozo: Okay. That will work.
Mr. Bynum: Are you going to hang around, Mayor?
Mr. Carvalho: Yes, I will be right here. We will all be here I
said.
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ERNEST W. BARREIRA, Budget and Purchasing Director: Good morning. I am
going to recognize the Chair, Honorable Chair, Vice Chair Nakamura, and members of the
Council. Good morning, Ernie Barreira, Budget and Purchasing Director. I thank you for
the opportunity to begin our collective discussions for our fiscal year 2014 budget process.
The annual budget is reflective of the Mayor's vision, goals, objectives, and financial and
operational strategic intent for the County of Kaua`i, and a defining framework as to how
the County will meet its public service mission to our people. Our budget submission is
intended to convey the Mayor's intent to ensure the highest standards of accountability and
integrity in the expenditure of public funds. I am honored to be a part of this critical
process, and look forward to our collaboration and cooperation that we have already begun,
and that I intend to continue to foster as we embark upon the fiscal year 2014 Operating
Budget for the County of Kaua`i.
Under the leadership and direction of our Mayor, Mayor Carvalho, the fiscal year
2014 budget process was reflective of a system of detailed, systemic goals and objectives
with specific target dates and objectives clearly articulated. This detailed schedule of
events was provided to not only Department Heads, but to the Councilmembers and
support staff alike. In addition, the Administration's vision in the budget process was one
that highlighted the goal of openness and collaboration between both the Executive and
Legislative branches. In advancing this goal, Department Heads were instructed as part of
the formal budget critical path to schedule meetings, as the Mayor pointed out, with the
Chairs of the respective Council committees, in order to facilitate discussions about the
fiscal year budget process. Similarly, the budget team ensured that every formal budget-
related communication that was prepared and sent to our departments and agencies was
also shared with the Council leadership.
As conveyed to all Department Heads, and as we discussed with all members of the
Council during the course of our pre-budget submission meetings, the fiscal year 2014
budget was going to be highly focused upon maintaining excellence in the essential services
expected by the people that we serve. This strategy was deemed critical based on the
analysis provided that fiscal year 2014 would be a very lean year. The overall strategy to
submitting a balanced budget as required by law relied upon a multi-faceted approach that
factored in a number of critical elements in terms of meeting the demands for public
service, and in carefully proposing the expenditure of public funds given the current
economic challenges and limitations. The fiscal year 2014 budget also required an
acknowledgment that in times of financial and economic challenges, we have to intelligently
define critical services that we have an obligation to maintain, and differentiate these with
other discretionary spending, that, while serving valid and meaningful purposes, will
simply need to be deferred until the financial condition of our Nation, State, and County
improves. In short, we need to carry out the same level of financial awareness and
responsibility in Government that we all do in the management of our personal finances.
Our people expect and are deserving of that level of financial discipline.
As touched on by Mayor Carvalho, the comprehensive strategy upon which the fiscal
year budget process was developed relied upon critical financial analysis based on past
budgets and expenditures with a specific focus upon budget to actual spending patterns.
Actual audited numbers were relied upon in conducting this analysis. The financial and
budgetary value brought to the table by our Budget Analysts, Ann Wooton and Ken
Shimonishi, proved priceless to the new process that was undertaken this year. The high
level data analysis enabled the Administration to formulate our fiscal year 2014
decision-making based on actual and reliable data, and this facilitated a much more
comprehensive and accurate process. The detailed historical analysis provided by the
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Budget Analysts was provided to all individual Councilmembers as part of our budget
preparation process.
As a result of the detailed analysis which began shortly after the preparation or
conclusion of the fiscal year 12 CAFR, the Administration developed a series of initiatives
to ensure the responsible financial management of the County in anticipation of a very
challenging fiscal year 2014 process. These initiatives modified budget instructions that
were originally sent to all departments on October 4, 2012, a full month earlier than ever
before. These supplemental instructions included: Operating Budget reductions relying
upon unencumbered fund projections based on spending patterns to date; Personnel Hiring
Moratorium; travel restricted, especially those funded by general funds; and equipment
purchase deferrals where possible.
In January 2013, as a result of detailed analysis of past budget to actual
expenditures and our revenue projections, supplemental budget instructions were issued to
all County departments which included: instructions that there are to be no new positions
identified in the fiscal year 2014 budget; prior Dollar Funded Positions that were funded in
fiscal year 2013, but not yet filled will remain unfilled so long as a formal job offer was not
made; a hiring moratorium will be in effect effective July 1, 2013 for all positions for a
period of six (6) months from the date that the position is vacated as a result of normal
attrition unless specific exception is granted by the Administration; the fiscal year 2014
budget shall not include any new vehicle purchases with the exception of emergency
vehicles that are deemed vital for public service and public safety interests. Our intent, as
articulated by Mayor Carvalho, is to prolong the life of our County vehicle fleet and to begin
looking more aggressively toward the development of a functional motor pool. With routine
and effective maintenance, it is possible to extend the life of our County vehicles. This is in
the County's best financial interests; and of course, in fiscal year 2014, there was a
substantial reduction as the Mayor pointed out, in travel and related-expenditures,
especially in the General Fund.
{
I would like to take this opportunity to thank you for allowing me to share a few
components of our budget strategy for fiscal year 2014. I commit to this Council honesty,
accuracy, and integrity in the exercise of the fiscal year 2014 budget process, and will
expect the same decorum of all who are instrumental to the final budget outcome. I look
forward to our continued efforts and partnership over the next two (2) months in delivery
an effective and meaningful budget for our people. Aloha.
Mr. Rapozo: Thank you very much, Mr. Barreira. Mr. Hunt,
this is your first budget presentation as the Director of Finance.
STEVEN A. HUNT, Director of Finance: That is correct. Again, Chair
Furfaro...
Mr. Rapozo: The Chair is watching. He just has that cough,
and he does not want to distract anybody.
Mr. Hunt: Okay. Aloha, Chair Furfaro and Vice Chair
Nakamura, Councilmembers, and citizens of Kaua`i. Eight (8) shorts weeks ago, I was in
Real Property Assessment trying to wrap up the 2013 Certified Assessment List and began
providing tax revenue projections for the Director of Finance. Now I sit before you as the
Director of Finance with about eight (8) weeks of"on-the-job training." Today I am here to
present an overview of the fiscal year 2014 budget and give some background as to how this
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budget was developed. This is not a budget that provides all the necessary resources to
each and every department, but rather an essential services budget that focuses on
delivering core services to Kaua`i's citizens and visitors alike. Months prior to my
appointment, the Budget Director, Ernie Barreira, and his two (2) Budget Analysts, Ann
Wooton and Ken Shimonishi, had already set into motion a number of initiatives to assure
tighter budgeting practices and a better understanding of the overall financial solvency of
this County. Given that expenditures have outpaced revenues for what will now be fourth
consecutive fiscal year, the Budget team needed to ascertain whether our Fund Balances on
the County's balance sheet could continue to offset the projected imbalance between
revenues and expenditures for fiscal year 2014. Once it became clear that this gap could not
be bridged using the Reserve Fund Balance alone, meetings were immediately scheduled
with individual Councilmembers in January 2013 to inform them of the financial situation
facing the County.
In the past, Kaua`i County has submitted and approved budgets that have, at the end
of the close of the fiscal year, shown budgeted expenditures to exceed actual spending.
During our economic downturn, our County has been able to weather the storm by utilizing
Unassigned Fund Balances, that surplus, which has accumulated from prior fiscal years to
balance our last three (3) year's budgets. The practice of using our surplus rather than
raising taxes or fees to balance the budget has kept us solvent, and has reduced any
unnecessary burden to our citizens.
Today's picture is a little different, however. We no longer have a large Unassigned
Fund Balances to budget the fiscal year 2014 where we are projecting expenditures to
continue to outpace our Revenue, even prior to enhancements. To address this imbalance,
the budget team has focused their analysis on actual historical spending over fiscal years
2010 to 2012 to assess what our fiscal year 2014 budget target should be. Before even
considering any potential revenue enhancements, it was crucial to make sure that our
spending was under control, and that each department's budget is a reflection of what they
are likely to expend during the forthcoming fiscal year to be able to deliver core services.
This year's proposed budget also incorporates audit findings, such as having to move money
from our roadway resurfacing, which would have been funded out of Capital Improvement
Projects and into our Operating Budget as this is a repair and maintenance expenses. The
initial departmental budget submittals for fiscal year 2014 did not seem to deviate from past
practices; thus a second round of budget submittals was required of each department.
Rather than making large, unilateral budget cuts, we had each department analyze
individually, and if expenditure reductions were deemed warranted, it became the
responsibility of the Department Heads, not the Budget Analysts, to make those decisions as
to what could be cut.
Our fiscal year 2014 General Fund Operating Budget was based on actual fiscal year
2012 expenditures, plus a ten percent (10%) allowance for inflation for the two (2) year gap
between the last known actual expenditures and our current proposed budget. Some of the
cost cutting measures implemented include: reductions in travel requests; increased number
of dollar funded positions; reduced number of new vehicle requested; reduced overtime
allowances; and reduced operational costs, where achievable. Another policy being
implemented is requiring a six (6) month lag prior to filling vacancies unless the position is
deemed essential. Reducing the fiscal year 2014 budget to a level that will more closely
mirror the actual, anticipated expenditures was an important step to submitting this year's
balanced budget.
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In comparison to the fiscal year 2013 budget, this year's proposed total operating
budget is approximately seven point nine million dollars ($7,900,000.00) lower. The
proposed General Fund Budget is also about three point seven million dollars
($3,700,000.00) lower. The results of our focused efforts to reduce operational expenses and
dollar fund vacant positions were unfortunately partially offset by the need to address two
(2) audit findings cited that were cited in our review of the fiscal year 2012 CAFR:
islandwide re-paving is considered a repair and maintenance expense and had to be funded
through the Highway Fund in the Operating Budget; and second, the contingent liability
associated with the cleanup of Puhi Metals must also be funded in fiscal year 2014 Operating
Budget in the General Fund. Together these two (2) findings reduced the overall
departmental budget costs by adding back nearly two point six million dollars ($2,600,000.00)
to the proposed Fiscal Year 2014 Operating Budget. The one bright spot is that the cleanup
expense is not a reoccurring expense. In spite of these budget reduction measures; however, the
gap between the budgeted Expenditures and Forecast Revenue could not be bridged by cutting
costs alone. At least without having a significant impact of the level of County Services offered or
a significant reduction in Staff. With a four (4) year trend of having our Expenditures exceed
our Revenues, combined with the depletion of our Unassigned Fund Balance, we can no
longer rely on having a Reserve to augment Revenue shortfalls in future budgets. Therefore,
additional Revenue enhancements are needed to be considered in balancing this year's
budget.
The largest revenue enhancement being proposed in the fiscal year 2014 budget is
increases to our Real Property Tax Rates. Kaua`i County has lagged other Hawai`i
Counties in terms of setting comparable tax rates by each classification. Kaua`i County is
the least populace of the four (4) Counties, so it would be expected that the average property
tax per capita would be the highest in that fixed costs would need to be spread across fewer
island residents. This is not the case, however, as both Maui County and Hawai`i County
have higher per capita property taxes than Kaua`i. Our tax rate proposal for fiscal year
2014 merely moves Kaua`i's rates closer to the State averages by tax class.
For the residential class, our current weighted average in fiscal year 2013 is four
dollars sixty-four cents ($4.64) per thousand assessed. That compares to the State average
of six dollars twelve cents ($6.12) per thousand. For fiscal year 2014, we are proposing a
rate of five dollars seventy-five cents ($5.75) per thousand. The vacation rental class, which
supplants the apartment class, is a new class. By comparison for fiscal year 2013, the
apartment class had a weighted average of seven dollars forty-six cents ($7.46) per
thousand, compared to a State average of eight dollars three cents ($8.03). In fiscal year
2014, we are proposing an eight dollar ($8.00) rate. The commercial weight has a weighted
average of seven dollars thirty-four cents ($7.34) per thousand assessed. The State average
is nine dollars forty-seven cents ($9.47) per thousand. We are proposing a rate of eight
dollars ($8.00). The industrial weight has a weighted average of seven dollars sixty-six
cents ($7.66). The State average is nine dollars fifty-three cents ($9.53). We are proposing
an eight dollar ($8.00) rate. The agricultural class currently has a weighted average of six
dollars one cent ,($6.01) per thousand. The State average is six dollars sixty-eight cents
($6.68) per thousand. We are proposing a rate of six dollars seventy-five cents ($6.75). For
conservation, our` current fiscal year weighted average is six dollars forty-three cents
($6.43) per thousand. The State average is seven dollars twenty-five cents ($7.25). We are
proposing six dollars seventy-five cents ($6.75). For hotel and resort, Kaua`i current
weighted average is seven dollars eighty cents ($7.80) per thousand. The State average is
ten dollars forty-seven cents ($10.47). We are proposing nine dollars ($9.00). For
homestead, we are currently at three dollars five cents ($3.05). The State average is four
dollars fifteen cents ($4.15). We are proposing no increase leaving it at three dollars five
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cents ($3.05). The combined impact of these rate proposals is approximately eleven million
dollars ($11,000,000.00) in additional revenue to the County. Other proposed revenue
enhancements include increases to the vehicle weight tax, fuel tax, and vehicle registration
fees received by the County. Again, these proposals do not put Kaua`i County at the
forefront of rates and fees, but merely get us closer to what other Hawai`i Counties are
already charging their citizens. If adopted, these proposed rate increases would still keep
Kaua`i County at or below the current rates charged by the City and County of Honolulu
and Maui County. Hawaii County is an exception in that they receive a disproportional
amount of Federal Highway Subsidy, which keeps their rates and fees at the lower end of
the spectrum.
The combined effect of these vehicle related tax and fee increases is approximately
two hundred eight thousand dollars ($208,000.00) increase to the General Fund and about
one million six hundred fifty thousand dollars ($1,650,000.00) more to the Highway Fund.
Bear in mind that the Highway Fund helps support Public Works Roads Division, as well as
Transportation. While the recently added bus routes may provide our citizens with a more
convenient means of getting around the island, it has also added to the amount of subsidy
that this Department requires maintaining its operations.
Many of the permit fees charged by the Planning Department have not increased
since 1972 when the Comprehensive Zoning Ordinance was originated. Therefore, the
Consumer Price Index (CPI) was applied to these permit fees to bring them in line with
inflationary changes since the time when these fees were established. The estimated
impact is approximately one hundred forty thousand dollars ($140,000.00) in additional
revenue based on estimated permit applications forecast for fiscal year 2014.
Another proposed rate increase is to the commercial Solid Waste Tipping Fee. This
proposal would increase the Tipping Fee from ninety dollars ($90.00) per ton to one
hundred nineteen dollars ($119.00) per ton which, based on current projected commercial
waste tonnage of approximately thirty-seven thousand seven hundred (37,700) tons, which
would generate approximately one million ninety-four thousand dollars ($1,094,000.00) in
additional revenue for the County in the Solid Waste Fund. Raising the commercial tipping
fees not only lessens the reliance on General Fund moneys to support Solid Waste
operations, but it may also have the added benefit of cajoling those impacted by the higher
fees to give greater thought to diversionary efforts.
While admittedly this is my first budget, I have been pleasantly pleased with the
ongoing efforts to find ways to better utilize Staff, leverage technology, and look for
operational efficiencies. Initiatives such as subsidizing non-pursuit vehicles for qualified
Police personnel, rather than leased vehicles will save the County money in both the
near-term through lower lease expense and in the long-run for ongoing maintenance being
held by those officers that utilizes programs. Also, developing and integrating a County
wide time and attendance, and payroll software package should create greater
accountability and interdepartmental efficiencies. I am pleased to announce that we have a
team in place that have already held two (2) meetings on this issue, and are proceeding in
that direction. Other cost savings may occur by developing a motor pool program for
departments that require less frequent vehicle usage, thereby giving the County an
opportunity to reduce the size of its overall fleet. The use of performance based contracts
for renewable energy projects may provide some longer-term stability to the County's
annual energy expense, as well as support diversification with the use of clean energy.
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Based on the 2012 audit findings and subsequent conversations with our Auditors,
the Budget team has revamped many of the antiquated budget terminology and developed
the fiscal year 2014 budget in accordance with Government Finance Officers Association
(GFOA) best practices and current Government Accounting Standards Board (GASB)
terminology. Research into past budgeting practices showed that Kaua`i County that had
relied on "estimated Unappropriated Fund Balances" rather than actual "Fund Equity
Balances" for balancing the succeeding year's budgets. Therefore, the fiscal year 2014
Operating Budget was prepared under GFOA best practices, their guidelines; and utilizes
only equity known from Fund Balances that exist on a ledger, not from projected surplus
estimates that may or may not lapse from the fiscal year 2013 budget. Our external
Auditor, N&K CPA's Inc., confirmed that Fund Equity budgeting is to be the best practice
in their March 12, 2013 letter to the Finance Department.
In closing, this year's budget process has been unique in that it started much earlier
than prior years; has been more transparent with the County Council; included a greater
degree of historical budget analysis at the Departmental level, looking at actual versus
budget expenditures; required a number of adaptations to account for last year's audit
findings in present day GFOA and GASB best practices. It was developed with a much
greater collaboration from the Department Heads. This year's budget proposal is also
unique in that some of the proposed revenue enhancements that aimed to bring Kaua`i
County closer to the Statewide averages for rates and fees are likewise unprecedented.
Please understand that achieving a balanced Operating Budget for fiscal year 2014
required both cutting approximately eight million dollars ($8,000,000.00) in expenditures,
as well as increasing revenues by over fourteen million dollars ($14,000,000.00). This is by
no means a budget that will make everyone happy. This is a budget that merely preserves
our essential services and provides adequate maintenance to our existing County assets.
There being no objections, the meeting was called back to order, and proceeded as
follows:
Mr. Rapozo: Thank you very much. The Chair is back.
Chair Furfaro: Thank you, Mr. Rapozo. I had a couple of
coughing fits. Thank you, Mr. Rapozo for that.
Mr. Rapozo: Gary, do you have a presentation or you are just
here for...you are the collar commentator? (Laughter). Okay. Mr. Chair, I was thinking
that we are coming up on a caption break. We might want to do that now so that we can go
straight into the questions, rather than go for fifteen (15) minutes and then have to stop.
Chair Furfaro: I agree.
Mr. Rapozo: Okay. We will take a ten (10) minute recess for
caption break, and then we will return with Mr. Bynum. He will have the floor.
There being no objections, the meeting was recessed at 10:46 a.m.
The meeting reconvened at 11:01 a.m., and proceeded as follows:
Chair Furfaro: Aloha. We are back from our caption break.
Members, I want to make a few housekeeping announcements about the rest of the day.
We will now go into some questions and answers on the items presented to us by the Mayor
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today. I want to make sure we understand that if it is focused on a very specific item, like
vehicle leases or something of that nature, we will take that at the appropriate time in the
appropriate group, whether it is police vehicles or so forth. I really want to have some
discussion on the general overview and the tone of the budget, and then either break for
lunch early or actually go into the Mayor's Office, which includes Boards and Commissions
and Life's Choices. Let us see, again, the tone of the questions now because we have two (2)
weeks to go into the real detail when Finance comes up on taxes. We have got staffing
items that we want to talk about in Transportation and so forth. That is where our
questions and answers should go, and then we should move towards the Mayor's Office, as
it stands as a Department. Thank you, Mr. Rapozo, for following for me and I think I have
shaken this cough. Let me ask you a couple of questions here before I turn it over to the
group. Steve, do we know at this time when we look at the six (6) month financials, if we
had budgeted for six (6) months, forty million one hundred three thousand dollars
($40,103,000.00) of property taxes? The six (6) months that I have just reviewed came in at
forty-two million eight hundred thousand dollars ($42,800,000.00). Was there any
settlement or some of this additional unexpected collection? Could it have been related to
any settlement of any appeals that we had?
Mr. Hunt: To my knowledge, I do not believe there is a
settlement of an appeal in there, so much as I believe there are buildings that are picked up
that are called omitted properties that have to pay back taxes, and some of that all comes in
the one fiscal period as collections.
Chair Furfaro: Okay. Thank you for that. When we look
towards the Auditors' reports, I think many of you know that it has always been my opinion
that the Roads Division, and when we come to more specifics later, should have always
been a Repair and Maintenance item as the basic standard for accounting practices. We
made that adjustment this year based on the Auditors'recommendation.
Mr. Hunt: That is correct.
Chair Furfaro: Is there anything more that I should look at, like
classifying "Repair and Maintenance" items as "Repair and Maintenance" items?
Mr. Hunt: New roads will still fall under Capital
Improvements, but repairing and resurfacing existing is an operational expense that will
come under the Highway Fund.
Chair Furfaro: I just wanted to get that clarified because that
had been my argument in the past, which if we have a new road that we are adding, we are
adding an asset to the inventory; but if we are doing standard repair and maintenance, it
should not be treated the same way.
Mr. Hunt: That is correct.
Chair Furfaro: Actually, you had mentioned something that
dealt with a comparison of ratios between the County of Kaua`i and the other Counties like
population versus tax rates and so forth. Will we be able to see something when we get to
Finance that shows us a more specific comparison?
Mr. Hunt: Yes, and I used"de facto" as the basis for that.
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Chair Furfaro: Okay, so we will wait.
Mr. Hunt: Department of Business, Economic Development
and Tourism (DBEDT) 2011 was the most recent.
Chair Furfaro: Okay. Thank you. Mr. Bynum.
Mr. Bynum: I want to thank you all for a great presentation,
all of them. I thought they were going to be redundant, but you each covered different
aspects so I was appreciative of that. I cannot tell you how much it warms my heart to hear
the word "actual" in your budget practice, because this is my eighth budget and for many
years we said, "Here was the budget last year, and look, we are the same budget as last
year," but that budget had a fifteen million dollar ($15,000,000.00) variance. In about five
(5) years ago, I started looking at actuals and I started saying over and over again that we
should make our decisions based on our actual behavior, not on budget plans; and I see
Ernie nodding. That is what you are doing. Is that correct? I think it has been an eye
opener for the Departments and it managed—is it also true that a lot of the savings that
you are talking about are budgetary savings because of that practice, realizing that you did
not have to budget as high as you had. Is that correct?
Mr. Hunt: Yes, there are a lot of budgetary savings in this.
g
That is correct.
Mr. Bynum: That is fine because we are working on a budget.
We are making a plan. With this budget, we are much more likely to be close or our actual
behavior is going to be closer to our budget plan. Do you all agree with that? That is a very
positive thing for Kaua`i. I appreciate it. I am actually a little concerned about fourteen
(14) positions being Dollar Funded because last year, the Mayor's Budget Message was that
we have held off these positions; we have kept them Dollar Funded during this fiscal
downturn, and it is time to get back to normal and start realizing some of those
improvements in park maintenance because that was an expectation from the community
when we created parks. We have to respond, and I think the Mayor did an outstanding job
since he has been Mayor of budgeting expenditures. My issues have always been about
managing revenues. The fact is that we lost more than thirty million dollars
($30,000,000.00) of revenues from seven (7) tax categories over four (4) years. People can
see these rate increases as a tax increase because it is year over year. Basically, it brings
back folks to where they were in 2008. Those tax categories have realized millions of
dollars of savings. They paid less. In essence, they are being brought back to the 2008
levels. Correct? We had to act this way. You did not have a whole lot of choices. The last
thing I want to mention is—and I know how we are going to (inaudible), but the way we are
using the Fund Balance, and I think this came a lot from the new team saying, "Wait a
minute, how can we assign these funds? We have not got the CAFR, and you are assigning
them twice." Yes, that has been our practice for many years. This practice, I applaud of
saying, "No, we are going to live within those budget constraints if we assign it this much,
and that it be consistent with the Reserve Policy we discussed, where you can assign half if
that policy was in effect." You would never have this circumstance that we have had many
times over the last fifteen (15) years, where we were estimating the surplus, and then
committing it before it actually showed up in the CAFR. I see a commitment from both of
our Auditors and us to not do that any longer, and that will discipline our budget
process...the nature of it will discipline it. At first, when we said, "We cannot do that," my
reaction was, "What do you mean? That is what we have been doing all along." This
change will make us better. It is a better management practice, but it is also going to
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16
discipline budgets going forward. I will predict that we will not have fifteen (15) years
where tax rates do not change because with this discipline, and with the tightening of the
budget, we are going to have to have a robust analysis of revenues each year. What we had
was a big drop, and now an increase. I would like to not see those big spikes and increases,
but have us manage and do more regularly; and I think we are all in agreement a bo u t that.
Is that accurate?
I like the perspective Steve gave on fee increases. Our fees for many things were
way behind and have not been changed for many years. I hear now that it was conscious
decision of, "Let us hold off on that," and bringing us up to par during this downturn
because our economy, thank goodness, is recovering. I just got an E-mail over the break.
Visitor arrivals in February were up almost ten percent (10%) over previous years. We
were pleased. Everybody was surprised at how strong February was, and if it keeps up,
that is going to have an impact. This is my last comment, believe it or not. Unfortunately,
those increase in visitor arrivals no longer equate to an increase in revenues for us because
we have been capped. If that remains to be the case where us, the burden of hosting
visitors, continues to follow us on increasing levels but no increase in revenues to do that;
we are going to have to factor that in to our property taxes at some point if we are not going
to have these other revenue sources. I think I am very pleased about the direction we are
moving in terms of our budgeting. I am very pleased that we are going to have a full day to
discuss revenues, and not five (5) minutes. Thank you very much.
Chair Furfaro: Mr. Heu, I believe last year, we had half a day.
We are getting better.
GARY K. HEU, Managing Director: For the record, Gary Heu. Chair, I just
wanted to respond to comments made by Councilmember Bynum. I would agree that
collectively I think everybody is saying that this new budget process relative to budgeting
based on our actual run rates, our past run rates, is a good thing. I think we are all in
agreement there. I think having gone through the process this year, it certainly is a
paradigm shift. It is so much different from how our County has approached budgets in the
past, since 2002 and 2003 when I first got here. I think it is going to take us all a little
while to get used to this transition that we are going through. I think that we would also
acknowledge that as much as we would like it to be so, that County government or
government in general does not necessarily operate like a private sector business. In the
private sector, when you budget so close to actuals; if you need to make adjustments, you
are a lot more limbo in being able to respond to unanticipated requirements, not so much in
government. We have what we call a "money bill process" that if we find that if in fact we
had not estimated properly for the budget that we need it to go through a money bill
process to affect the type of transfer and the type of change. That is a good process and it
needs to be done, but it just takes a lot longer than if you were the owner of your own
business and you found out that you had an unanticipated need in a certain area of your
business so you could react a lot more quickly. I think we need to be aware as we move
through this transition with some of the things that we are going to be dealing with as we
budget closer to actuals and our actual spending. I think we are going to see that, that is
going to overtime reduce the Fund Balance that we have historically carried over to
subsequent years in order to help budget subsequent years. I see those as just things that
within the Administration, we are aware of and that collectively, we need to be aware of
that as we move towards this good thing in this good place that it is also going to have
impacts that we are going to have to get better and learn how to manage. I just wanted to
make those comments. Thank you.
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Chair Furfaro: Okay.
Mr. Bynum: Can I just respond to that?
Chair Furfaro: I will go ahead and give you the floor, and then I
will go to Mr. Kagawa. Go ahead.
Mr. Bynum: I think those are all good observations, Gary. I
would just say that we need to manage that Fund Balance. When the economy turns and
home values start rising which for that, the corners have already turned. It will take our
assessments a year. We always lag a little bit, and that is just the nature of government.
When those values start going back up, I still want us to manage the rates and bring them
down so that we do not create this huge surplus because that huge surplus that we once
had made us complacent. It kept all of us, collectively both sides, from having to really
manage our finances that tightly because we were fat. We were never going to be fat again
if we adopt a Reserve Policy that says, "No, County, you cannot keep tens of millions above
your actual Fund Balance needs." I see the heads nodding. I very much appreciate that. It
was easier before because we just relied on, "Well, we will just dip into the Fund Balance."
We are going to have to (inaudible) these revenues. You are not going to see like what we
saw years of rates not changing at all. I think we are going to do what our Budget
Ordinance says, "determine your needs, do the math," so you are not going to see round
numbers like eight dollars ($8.00). You are going to see eight dollars three cents ($8.03) if
we are managing it properly. Thank you.
Chair Furfaro: Mr. Kagawa, you have the floor.
Mr. Kagawa: Thank you very much, Mr. Chair. Thank you for
your presentation earlier. I want to thank you, Mayor, and your budget team for your
handouts as well and your presentations. I really appreciate the comparisons to the other
islands, where we are at, and what are our justifications of wanting to increase those.
Steve, I kind of talked to you earlier about but I just want to clarify because for the public
who was watching your presentation on the vehicle weight tax, the vehicle registration fee,
and the fuel tax. I am sure that if this passes, the public may be quite alarmed and they
are going to want to know why. Even for me, there was a time maybe about ten (10) years
ago where I paid it, and it was maybe a couple hundred dollars. Then the last time, I
looked at it—because my wife normally pays the bills, and she paid it and it was like five
hundred dollars ($500.00) or whatever; and I asked, "What happened?" Prices go up. In
this handout, I am looking at Hawai`i island's vehicle weight tax and it is a one dollar
twenty-five cents ($1.25) less. Our registration fee is twelve dollars ($12.00) less. For their
fuel tax, they are about half the price. If you could just explain so the public knows why
Hawai`i island is so much lower than ours?
Mr. Hunt: Sure. Councilmember Kagawa, the reason
Hawai`i island is able to hold their rates at lower rates is that they really receive a
disproportional amount of Federal funding. They have what I believe is called Saddle Road
and Volcano Road. They get Federal funding for the maintenance of those highways. Also,
although the registration fee for Hawai`i island is only five dollars ($5.00), they charge an
annual disposal fee of twelve dollars ($12.00), so technically, their total combination of the
two is seventeen dollars ($17.00). None of the other Counties charge a disposal fee.
Mr. Kagawa: Thank you, Steve. That twelve dollars ($12.00)
right there probably picks up the differences. Like you said, they have Volcano National
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Park, which is probably Federal road. I have another question. One of the things that
alarmed me since I have come onto the Council was the number of lawsuits that we have
been settling, the pending ones that we have, and the kind of amounts that I am seeing that
are pending. Do you have any comparison that we may get to the budget process on that
overtime? I assume last year we went up a lot over the previous year.
Mr. Hunt: Actually, the peak was about two (2) fiscal years
ago in terms of the settlement payouts and associated costs for Special Counsel. I do not
have the current for fiscal year 2013. We are still in it and there was a number of pending
suits, so we still have a claims in judgment account that we are holding on because we
anticipate paying out some this year. There has been ongoing training. Human Resources
has been very active in making sure that the management and staff are trained to help
avoid some of these internal lawsuits, some that were outside the County or just
unavoidable where we get sued for a number of reasons.
Mr. Kagawa: I understand. This is why I ask that question
because I am worried that even with all of these increases; we are leaving ourselves with a
very small Reserve. Just one big lawsuit could eat that up. If the next lawsuit comes and
we do not have the money for it, I am kind of worried that we could go belly up. What is
your take on that? These are unchartered waters where we get a Fund Balance for two
point whatever million, and I am just kind of worried that will not be enough. Do you have
any comments on that?
Mr. Hunt: Again, I am not sure if I am the best one to be
projecting what our payouts are going to be. Probably someone from the Attorney's Office
would be able to have a better understanding of what that anticipated payout may be. To
my knowledge, we are hopefully funded adequately through the remainder of fiscal year
2013. We did increase our claims and liability by about one million three hundred thirty
thousand dollars ($1,330,000.00) for the Puhi Metals remaining payout, and there is a
Money Bill currently that is moving some money from Beautification and the Unassigned
Fund Balance back into the fiscal year 2013 to payout some of that this year for the work
that has already been done on the Grove Farm site. I believe we are adequately funded,
but...
Mr. Kagawa: I have a couple more questions. I looked at the—
the survey...this community survey that you did, Mayor. Number one (1) was of course
Public Safety, and I am wondering if Public Safety was touched in those reductions of 2009
plus 2010, because I am talking about the Fire and Police budgets.
Mr. Hunt: Specifically the Police, we could not use the fiscal
year 2012+10 percent formula because we added a number of positions that were certainty
needed and held off for many, many years. I believe it was fifteen (15) recruits, and then
there is another recruit class ongoing, so no, that was not—when we did our analysis on
Police, although they were required to make some operational adjustments, but from a
staffing level, no. If anything, we were impacting increases to that. Fire held the line.
They have been very good about actual budgeting and spending to their budget. They have
not have a lot of deviation in their budget.
Mr. Kagawa: Okay. I have one last question. I noticed this
last one that I was really happy to see that it came out to what I am seeing, as I talk to
people in the community is Parks being at such a high level, and our neighborhood centers
which are really used by the community but some are actually too small for the needs.
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Whether we get to do it or not, there are going to be tough times. I love that survey. I am
just wondering if you included the bike paths and walkways into the "Parks category," or
was that in the "Others category?"
Mr. Carvalho: It is all in Parks.
Mr. Kagawa: Okay. Do you have a further breakdown of that
Parks one for a later date?
Mr. Carvalho: I think when we get into the Parks discussion we
can get into that.
Mr. Kagawa: Only if you have it, if not...
Mr. Carvalho: Just in general terms, just trying to get that
information, which ties in to a lot of the commitments we have made to whether it would be
projects, upgrade to Parks, and making sure we maintain our current facilities, which are
mainly Parks' neighborhood centers. It all ties in. The specifics will come when we do a
Parks presentation.
Mr. Kagawa: Thank you, Mayor. Thank you, Steve and
Budget Team. I look forward to working together with you. Mahalo for everything.
Chair Furfaro: That is a preview of a question that will come up
in Parks. Okay. Vice Chair.
Ms. Nakamura: Thank you very much, all of you, for your
presentations. I particularly want to thank you for including the follow-up to the audit
findings, and really taking action to address those concerns because we spend so much on
those audits that it is good to know that we are following up on them. Several times, we
have seen audits with the same findings, so this is a good thing. I also want to thank the
Budget Staff because some of the presentations of the budget this year make it more
accurate. I believe we sat down late last year and gave some suggestions and I am glad to
see the presentation following—I think it was Maui County's budget presentation. Also, I
wanted to just ask that because you are looking at Real Property Tax increases as well as
increasing a number of fees, when the public asks, "What are these increases? What are
these taxes? What are these increases, taxes, and fees going to produce for the County?"
What is your response to that question?
Mr. Hunt: I think the issue is the core services that we are
trying to maintain, and the fact that we have been doing that through using Fund
Balances. I think there was always the hopes that the economy was going to turn quicker
than it would and that we would not have to get into increases, and that maybe property
values would increase again and there would be growth in the base; but it has not
happened that way and we are at the point now where we can no longer sustain what we
have been doing through Fund Balances.
Ms. Nakamura: So you would not point to any new initiatives or
anything? This is just maintaining core services?
Mr. Hunt: Yes, the existing facilities and core services. We
are just trying to maintain this level of service.
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Ms. Nakamura: Okay. As you were saying, Steve, about
budgeting closer to actuals and the importance of the Reserve is raised to a higher level. I
think we cannot rely on that Fund Balance, so I am just looking at the budget and trying to
figure out what—and I think the Chair alluded to this, but where in the Budget Ordinance
is there a description of the Reserve amount?
Mr. Hunt: The Reserve amount is actually not an Operating
Budget item. It is a Balance Sheet Ledger item.
Ms. Nakamura: Okay.
Mr. Hunt: Currently, we have the number for the fiscal year
2014. We are rolling over what we have in the balance which is two million six hundred
five thousand six hundred eighty-one dollars ($2,605,681.00), and the difference—and this
is what Chair brought up the earlier of the discrepancy between three million eight
hundred eight thousand sixty-two dollars ($3,808,062.00), which was the original balance;
was that we expended three million eighty-two thousand seven hundred sixty-one dollars
($3,082,761.00) on Federal Emergency Management Agency (FEMA) projects for emergency
relief, some of which we have gotten back, which was about one million eight hundred
eighty thousand three hundred eighty dollars($1,880,380.00). Some of those projects have
not been completed yet. There is still a fifteen percent (15%) contingency on some of the
larger projects, but we are obligated for the twenty-five percent (25%) match for those, so
we will not be getting the full Fund Balance of three million eight hundred eight thousand
sixty-two dollars ($3,808,062.00) back. I believe we did come to the Council at that time to
expend those funds for those emergency projects.
Ms. Nakamura: Okay.
Chair Furfaro: May I just expand on that?
Ms. Nakamura: Sure.
Chair Furfaro: Before year's end, we should be able to reconcile
that?
Mr. Hunt: If these projects are wrapped up before year end,
we will know what the remaining balance is.
Chair Furfaro: Including the retained fee for budget completion,
which is about fifteen percent (15%)? It is about right?
Mr. Hunt: Yes. Again, the timing of the projects and their
completion will be—we may not get that back by the end of fiscal. It may roll into the next
but that will be refunding...whatever we do get back, will go back to replenish that Fund.
Chair Furfaro: That is what I wanted to hear. Thank you,
Nadine.
Ms. Nakamura: Just to follow-up, the eleven point five million
dollars ($11,500,000.00) you are showing as a contribution to and from the Reserve; what
Reserve is that? Is that separate?
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Mr. Hunt: That is from the ledger that is the Unassigned
Fund Balance actual equity that we have in that account.
Ms. Nakamura: That is the Unassigned Fund Balance?
Mr. Hunt: The remainder of the fifteen point four million
dollars ($15,400,000.00) that was cited in the CAFR.
Ms. Nakamura: That we cannot use to balance the budget?
Mr. Hunt: No, we are using that. What we cannot use is
what we anticipate lapsing currently, which based on Chair's estimate, is about six point
eight million dollars ($6,800,000.00) halfway through the year.
Ms. Nakamura: Okay. With respect. to the survey, I wanted to
find out who completed the survey and was this in-house, or was this a contracted survey?
BETH TOKIOKA, Communications Director: Good morning, Councilmembers. I
am Beth Tokioka. We did the survey via Survey Monkey. It was very simple and I think
we asked six (6) questions just to get some basic feedback, which was very general on
priorities. We can try to pull out in Parks. I think that is a good exercise to see what the
highest priorities were. Parks came up most often, but it was via Survey Monkey.
Ms. Nakamura: Did it go to certain random people so it is
statistically relevant data?
Ms. Tokioka: No, it was open to anybody who wanted to
participate, so we did a press release and sent an E-mail blast with the link to the survey so
that anybody on the island could have participated in that survey.
Ms. Nakamura: Okay. We need to keep that in mind when we
look at this data. I think it is good information and I think we should be doing it, but I
think in the future we might want to put a budget and make it a statistically relevant
survey that looks at whether it is going to be households or voting data, but at least do it in
a way that...
Mr. Barreira: Vice Chair?
Ms. Nakamura: Yes...but I think this is a good tool that we
should be using.
Mr. Barreira: We have been receiving guidance from GFOA in
terms of some of these elements which in fact, the public survey and public involvement is a
critical element when budgeting for outcomes, and this is why part of the reason why try to
entertain this option is to try and get some public input. GFOA has some interesting
strategic guidance that they can provide in how to grasp that type of information, not only
in terms of data, but in terms of actually putting people in the same room to contribute
their thoughts and ideas about how to budget and what their priorities should be.
Ms. Nakamura: Thank you.
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Chair Furfaro: Okay. Yes, go ahead, Mayor.
Mr. Carvalho: I just wanted to inform you, because
Councilmember Nakamura, you asked, and we do have another survey coming out. I
wanted you folks to hear this from Brandon, who is heading this particular survey. It is
just another attempt to get information with the survey coming up.
BRANDON RAINES, Information Technology (IT) Manager: Brandon
Raines, IT Manager for the record. The Mayor wants me to talk about an upcoming survey
initiative that we have, since we are on the subject on surveys. Our plan by the end of this
fiscal year is to launch a Citizen Technology Survey, where we are going to reaching out to
the citizens to look at how we develop priorities based upon their perceptions, and how we
can best serve the community through technology. We have got a lot of smart people out
there in the County and rather than assume that we know everything that they need or
want from us, we are planning to do a survey based upon technology and how we can serve
them through that, gather those ideas, bring that feedback back in, and publish it back out
again; and then from that, generate a couple of projects, and kind of create this feedback
loop with the community in terms of how to best use technology to serve them, whether that
be transactions on website or other services. That is kind of where we are going with this
as a Holo Holo 2020 initiative. Again, we are just trying to find ways to serve the public
better with technology and gather some of their input as part of that.
Mr. Rapozo: May I ask a question?
Chair Furfaro: Go right ahead.
Mr. Rapozo: Thanks, Brandon. That is going to be a different
survey. This was a community survey based on what is important to the people as far as
Parks and Public Safety. Yours is specifically targeted at "what we can do better in IT?"
Mr. Raines: Yes, to serve the public.
Mr. Rapozo: Okay. That is something different from what
Councilmember Nakamura is saying. I agree with her that Survey Monkey is a wonderful
tool, but yet you can be on the mainland submitting Survey Monkey results, and I think
what Councilmember Nakamura and I would agree is that we need something that is
more—but I think the results should pretty much the same with Public Safety. That will be
number one all the time. Thank you.
Mr. Raines: Thank you.
Mr. Bynum: I just want to concur with Councilmember
Nakamura that the survey is great, but it statistically does not have any significance.
Merriman River Group and Ward Group; these guys do telephone surveys that are quite
elaborate, and it is not that expensive, and it is statistically significant. You can count on
that, that this is really the opinion of the folks. It is just something that you might want to
consider.
Mr. Carvalho: I just want to say that I think the intent of the
survey was really just to try and see how we can really hash up what the public needs are.
(Inaudible).
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Mr. Bynum: No criticism. It is an effort.
Mr. Carvalho: That was the intent.
Mr. Bynum: Yes.
Chair Furfaro: I would like to recognize Councilmember
Yukimura.
Ms. Yukimura: Thank you, Mayor and your Budget Team, bravo.
I think your presentation was excellent, and I really appreciated the thought and the effort
that went into this, both in terms of your presentation, and in terms of the budget process
that you outlined. The fact that it is year-round...it is recognized as a year-round effort and
also your inclusion of Council input and dialogue was most appreciated. I feel like there
has been a quantum leap in the improvement or quality of the budget process, and I know it
is just the beginning. I am very grateful and look forward to doing our work together in a
much better framework, and hopefully we will get much better results for the people of
Kaua`i. Your cuts are very impressive and I like your budget-cutting process because it was
not just across the board by edict of your Budget Officer or whatever, but it involved your
Department Heads and had them make specific cuts based on their knowledge and
priorities for their kuleana. I also appreciate your very careful and mindful approach to
raising revenues, which I do not believe is a bad thing necessarily, as long as it is done so
that people get value from it, and that it is done responsibly, because in order to do our jobs,
we have to cover our costs. In being able to cover our costs, we are able to do the jobs for
the people of Kaua`i. I have a couple of questions, and I guess I will start with the survey
since that was raised recently. Can we get a copy of the questions that were asked?
Mr. Carvalho: Yes.
Ms. Yukimura: I too, feel there is great value in a community
survey. I have been talking about how important data is in the two (2) areas of the
Committee that I Chair, Housing and Transportation. While we do these Housing surveys
every three (3) years, as part of a statewide effort, I think we need more detailed
information. There were some of those ideas I brought back from the Smart Growth
Conference,but I feel like we also need information for our General Plan Planning Process.
If we can develop a system of data in terms of our various Departments, and I know you
cannot do a really long survey, so there are a lot of considerations in how you structure it,
but I certainly would support a community survey of some sort that is—what is the word?
"Statistically significant," and gets us really good information for a variety of jobs that we
have to do as a County. My other question is about the bus fees. I think it is appropriate to
terminate the free bus passes for our County employees. My guess is that they will
continue to ride the bus, because it is still a great economic advantage to them. I have said
before, it is savings of about two thousand four hundred dollars ($2400.00) a year, and as
gas prices go up, the savings will increase. I was wondering if we could include bus—and I
was talking to the Chair the other day, and I think we both were interested in whether we
could include bus transportation costs of our employees as an eligible Flexi Benefits item.
We already cover child care, and we covered medical. I think if we check on other
jurisdictions, I think Transportation might be an eligible expense to look at. I would make
that request, and ask if you could look into that. That would allow our employees—they
would still have to pay, but pay with pretax money at some good savings for them. I also
wanted to talk about your Solid Waste.
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Chair Furfaro: Remember, you have a whole day scheduled for
that, but that date is not today.
Ms. Yukimura: Yes. I am glad that we are saving eight million
dollars ($8,000,000.00) from the retrofit of the Kekaha Landfill; the vertical versus landfill
expansion, and I guess we have the Department of Health to thank for that because I am
guessing that we might have proceeded, and spent eight million dollars ($8,000,000.00)
instead of three hundred thousand dollars ($300,000.00) if they had not stopped us. I did
ask Mr. Dill in the last meeting and I hope that you will be ready to discuss it at our
hearings on Solid Waste. I want to know the cost of an emergency accelerated diversion
program. If we were willing to spend eight million dollars ($8,000,000.00) to retrofit the
landfill because we are not ready for the new landfill, and we are still not sure that we are
going to be ready for the new landfill even after going vertical, then we are still in a really
tight crunch. Why are we not willing to spend part of those eight million dollars
($8,000,000.00) for an emergency accelerated diversion program? I am glad to see that we
increased our diversion from thirty plus percent (30%+) to forty percent (40%). Really,
when you look at page—is it Page 15 of your presentation, Mayor? The landfill tonnage,
part of the reduction is because our economy slowed down, and whenever the economy
slowed down, construction waste, all kinds of waste going into the landfill slows down. All
of that drop in diversion is not because of our—I am sorry, the drop in the amount of
garbage going to the landfill is not because of our diversion efforts alone; it is partly
because of the economy and we can expect—and I think Mr. Stokes' economic analysis
showed something going up. If the economy goes up, we can expect our Solid Waste to go
up as well. The recycling tonnage growth is not that impressive, and if we could increase
that dramatically, that would extend the life of our vertical expansion, while at the same
time putting us on the long-term track that we want to be on. I did make the request and I
hope that we will be able to discuss that in our Solid Waste conversation. Thank you.
Chair Furfaro: Okay. Mr. Hooser.
Mr. Hooser: Thank you, Chair, Mayor, and everyone. Thank
you for all your hard work. This Council clearly represents a diversity of opinion, and I
have to say I am a long way from "bravo"...a long, long way. Mayor, I understand you have
a difficult job to do but when the Administration comes and asks us to raise gas taxes, raise
property taxes, raise permitting fees, raise Solid Waste fees, and raise every fee imaginable;
I have a hard time celebrating that. I want to be part of the team. I want to be full of aloha
and I want to move the canoe forward, but myself—and I know a lot of members of
community are really having a hard time accepting the scale of these increases. The
economy—and I think most of us know that personally of how much we pay for gas every
day and what we pay at the first of the month when we pay our bills. People are still
struggling. In yesterday's discussion, you are probably aware that a few of us voted against
the fuel tax proposal on first reading. I made a comment at that time that I felt I was being
asked to support the bad management of the County's finances and referring to the
Administration. The Chair corrected me, or added the comment if you would, that the
Council is also responsible for the situation. I acknowledged that; however, I have not been
on the Council and neither has Council member Kagawa. If I understand it correctly, we
were in this situation today because we spent more money than we have had over the last
four years. There has been less money coming in and more money going out, year after
year, after year. I am troubled by that. We have been spending the money in our savings
account until we ran out of the money, and our Accountant tells us we cannot spend it
anymore of the little bit that is left. We have hired one hundred forty (140) employees since
the Lehman Brothers crashed, even though people all over the world, all over the United
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States, and certainly all over Hawai`i; governments were cutting back and holding back and
we have been expanding. I understand some of this is by Charter, and I understand that
Council supported it, but the Administration holds the checkbook. The Administration is
the one who pays the bills and manages the funding. I would be remiss in not doing the
community justice, if I did not raise this issue to be clear about it...about my concerns and
about these concerns that are shared by a lot of people in this community. We use words
like "revenue enhancements" and words like "spending budget surpluses" or "fund
balances," but I want to be clear that in my understanding, that is why we are here today
because we have been living beyond our means. Could you address someone look down the
line and say, "Okay, we are living beyond our means. We need to cut back and scale back
slowly and cut our expenses while maybe raising our revenue slowly," instead of letting it
get to this point where we have to make these adjustments at such a scale that is here
today. Anyone who wants to respond can respond.
Mr. Heu: Again, for the record, Gary Heu. Councilmember
Hooser, I think you raised some good points. What we would need to do in order to give a
response that will give your inquiry some justice is to be able to go back and take a closer
look at what actually transpired during those years. I think from a global perspective, I
would say that looking back at things, I think that people on this side of the railing as well
as that side of the railing would probably acknowledge that there was probably something
that we could have done relative to revenues. Based on expenses—again, if you give us an
opportunity to do some due diligence on this, I think you will find that when we were in the
{ mood of budgeting based on previous years' budgets versus actual spending; you will see
that during those critical years, the actual operational costs or operational budgets were
not increasing. There were other factors that may have played in to why an overall budget
number may have increased, but if you broke it down on an operational basis in that period
of time that we are talking about, you will find that there were in number of years where
the budget remained either the same or reduced by a small amount. Again, I think to be
able to have a more accurate and honest discussion about you will need to give us an
opportunity to go back and put that information together and take a look specifically at the
positions that were outlined in the Chair's presentation this morning. I would hate to sit
here and speculate as to why certain things look the way they did. I think it would benefit
us all to have that understanding. I think it is fair to ask that question to take a look back.
For us who are sitting around this table, our focus now is taking a look at, "Okay, this is
where we are This is the transition that we are going through." I think you are right. You
are relative to...there probably should not be any high-flying and happy dancing going on
right now. I think during my ten (10) years here with the Council, this is the most
challenging budget that I have ever seen, for many different reasons. There was a year
that we actually went through furloughs where we implemented furloughs and that sort of
thing. I see this year as being even more difficult than that because primarily, what we
have asked Department Heads to do relative to holding the line on expense as well as
having to go to the community and asked everybody to contribute a little bit more relative
to revenues. I would grant you that if given the choice, like the Mayor said in his State of
the County Address, "If given the choice, this is not where we want to be." But it is where
we are. I think for me, and I think for the Mayor and the Budget Team, we are very
hopeful that things that we are coming to grips with today and also the processes that we
are implementing today will certainly go a long ways to make major improvements in my
estimation for us collectively as a County. Again, I know I did not answer your specific
questions, but can you allow us that time to go back and put that presentation together, I
think it would be instructive for us all.
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Mr. Hooser: Thank you. I will certainly allow you the time. I
have no intent on beating up on this topic all the
way through the budget session, but I felt
compelled personally, to raise the issue because it is like the six thousand(6,000) pound
gorilla in the room. I know a lot of members of the community are very, very concerned. I
certainly would welcome the presentation and allow you the time to do that. Thank you
very much.
Chair Furfaro: Before I recognize you, Mel, I just want to say
something. If you are preparing something for Mr. Hooser, that is fine. If you want
calendar time, you can talk with me.
Mr. Heu: Okay. Thank you.
Chair Furfaro: I have no embarrassment of what we have come
to. I can sit here and say for eight (8) years, we did not raise property taxes. I can sit here
and say that we got through two (2) critical storms. I can sit here and say that we are only
one (1) of two (2) Counties who have funded one hundred (100%) of our employees liability,
where others are taking the short cut and will pay the dancer a little bit later. We have
new fire stations, did a lot of investment in energy that has proven that our kilowatts are
managed appropriately. We substantially expanded public transportation. The Fire
Department has equipment that is current. We got no help on Coqui frogs. We fought a
battle on birds. You can prepare that list, but I have gone through those periods where all
of those challenges have hit us pretty directly and we have not seen other help. I do not
have to apologize for supporting some of those things, especially eight (8) years of no Real
Property Tax increases. We have excellent bond rating. We have a Reserve, even though it
is small. We can look at that over the history and say—but we are where we are right now
because we do not incrementally raise some of these fees in a logical year to year review. I
created a separate revenue review at budget time because we have to start doing that. We
are doing things right now that are labeling us because we did not raise a fee for a fifty
dollar ($50.00) permit for a developer from 1979. That is the cost of doing business.
Anyway, if you want to answer them, and if Gary you want to talk to me about an agenda
item to respond to that. This is the wa a. We were in every one of these emergencies'
respondents about birds and Coqui frogs. We were all in that together and we are where
we are. Mr. Rapozo, you have the floor.
Mr. Rapozo: Thank you, Mr. Chair. I just told
Councilmember Nakamura, I bet Gary Hooser looked at my notes on the break because I
think a lot of what you said is the feelings I share. Like you, I want to be part of the team. I
think this is ago budget. This is a good method of budgeting and I have been trying to ask
for this for a very long time, to get the actuals and stop working off of last year's budget. I
am glad we finally made that change.
The first thing is that the Kekaha Landfill is not a true savings because we cannot
use that money. It is not cash; it is Bon money. We cannot even use that money so it is not
a true savings, and if it was and if there is a way to use that, we could offset Real Property
Tax increases by using that funding, so it is not a true savings. It is in an account now that
we cannot use. We need to figure out a way to use that eight million dollars
($8,000,000.00). Not no Materials Recovery Facility (MRF); we are going to offset Real
Property Taxes before we...and I think that is where we...Mr. Hooser mentioned and I just
said it, "Revenue enhancements sounds nice, but it is property tax and fee increases." In a
recession is not the time that we want to do that. We have to find ways to get away from
that.
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Gary, you said something else, you said, "Why did someone not say hey, take a look
down the road?" I was yelling that. "Hey, think about five (5) years from now?" Where are
we going—we were taking the money, spending the money. You said it best saying that,
"We are spending our savings account." We were spending the accounts in different
accounts; revenue accounts, special accounts, special funds. I did not think it was going to
come this quick, but it is here now, and we do not have...now we have to look at the
possibility of raising taxes and fees. I guess one of my concerns is that we keep comparing
Kaua`i to other Counties but you have all been to Honolulu, and you are all familiar with
Honolulu and Maui. For Honolulu, they have got Satellite City Halls. Their level of service
to the citizen is that they provide much more. A lot of it is because they have a bigger base.
They have a lot more money. Like what was mentioned earlier, the citizens are asking
"what are we going to get for this increase?" Really, it is paying for the spending that we
did earlier. That was always my concern, and we are here today. I am going struggle with
this Budget. I did not support the last two (2) Budgets because of that. I was beginning to
think that we need to be more like the State and do a two (2) year Budget, or even a three
(3) year Budget because at least we have assurances going down the road but now we are in
a position where I am not sure how we will get through this without raising taxes or fees. I
think this is a bad time.
What is a Fund Balance, really? What is a Fund Balance? A Fund Balance in all
the years past is made up of property taxes, right? That is what it is. We collect the taxes
and put them in our Budget. The entire surplus over the years; that is property tax money,
so to say we have not raised taxes in the last several years is true but in essence, what have
we done? We overtaxed them. We taxed them too much, so we had all of this extra, but we
did not give it back. No, we spent it. When they were testifying, and Mr. Chair, I did not
hear—I did not speak. I would ask that you folks please keep your comments because it is
distracting when I am talking and I can hear.
We collect the taxes. Those taxes become Fund Balance if we do not spend it.
Maybe we should have reduced property taxes but we did not. We spent it, and we spent
more. -We spent even what went into the Special Revenue Funds. Today, now we are
tapped because we have no surplus, we have no revenue, and we have a lot of our Bond
moneys that—a lot of our General Fund Capital Improvement Projects are moved over to
Bond, so that does not allow us the opportunity to cut any projects to utilize those funds to
balance the budget. We are in a position now that I do not know how we can get out of this
without raising taxes and fees. It is a horrible situation to be in. I like being in the canoe
and I like being in the two (2) canoes, and you are right, Mr. Mayor, we would never fit in
one (1) canoe, not all of us. I agree that the two (2) canoes should go along sideways, but in
any canoe regatta, you get winds and bumpy, choppy seas. I hate to be that person. I am
almost really appreciate Mr. Hooser going before me, but I hope you understand where I am
coming from. I am not tying to be here...like Mr. Hooser, I will not beat on this throughout
the budget process. I want to get through this in best way for our people and our taxpayers.
I just do not know how to do it. That is, I guess, the dilemma that I am in.
We compare ourselves to other Counties and it is selective comparison, but when it
works in our advantage, we use them and when it does not, we do not. I think we have to
consider using as a separate kingdom. We are our own. We are different. We need to do
what is best for our people. I know we are all trying and you guys have the tough job
because you have to produce this Budget with what we have. Our job is to try to figure out
how we make it work and not put the burden on the taxpayers because like Mr. Hooser
said, everyone is struggling. Everyone is struggling. I know Mr. Bynum talked about the
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visitor counts rising in February. I think we all know that you cannot judge the economy
by visitor arrivals and real estate sales on this island. You understand? Do you agree with
that? One, a big sale of a real estate property, all of a sudden, everybody is jumping and
happy dancing. But look at number of people losing their homes. Look at the number of
people losing their jobs. Look at the amount of people losing hours at work. Look at the
unemployment. That is the true indicators. I know this because it is part of my business
and we serve papers. I serve human beings on this island, citizens, collection notices and
foreclosure notices, so I know the real dilemma that this island is going through. A little
report that, "The real estate sales last month was through the roof because some rich
p g
Hollywood actor bought a property." That does not do anything for this economy. Maybe a
little bit more Real Property Tax, but the filtration to the community to the citizens is not
significant at all. I think we have got to understand that yes, the economy may be showing
signs of recovery, but we are far from recovery; very far from recovery. I think we have to
keep that in mind as well. We have people in this community that cannot afford another
twenty dollars ($20.00) a month. They simply cannot. They are already putting that bill on
the side because they just do not have it. Maybe one of our circles of friends is different, but
I know the people that are in that situation. It is very tough for me to go back and say,
"You know what guys, we have to raise everything." It might be minimal to some, but to
me, I think whether it is one million dollars ($1,000,000.00) or ten dollars ($10.00). If you
do not have those ten dollars ($10.00), you may as well make it one million dollars
($1,000,000.00) because they do not have it. The Chair talked about the accomplishments
in the last eight (8) years and he is right. A lot was done. A lot of this stuff was done
through Bond, and obviously our Debt Service is higher today. We have got to figure out a
way to get through this Budget with the least burden on the people, and I am not sure how
right now. Hopefully throughout the process, we will be able to get through some kind of
agreement because as it stands right now, it will be pretty tough. Thank you for listening
and we will have a colorful budget process. Thank you.
Chair Furfaro: Go ahead, Mr. Heu.
Mr. Heu: Thank you, Chair. Just to respond to
Councilmember Rapozo, and certainly we do not want to spend all day going around in
circles.
Chair Furfaro: We are not going to.
Mr. Heu: Thank you. However, I just wanted to say a
couple of things. Number one, I think we agree with the Councilmembers' statement and
observation that you do not increase taxes and fees when we are in a recession or when,
things are really bad. That was exactly the Mayor's point that in fact, during the darkest
days of economic downturn, we made a conscious decision not to increase property taxes
and fees. If you look back over that period of time, there were a few adjustments made;
however, to a great intent, we stayed away from proposing new tax increases and fee
increases for that very reason. It was the worst of times. Relative to where we were and
where we are now, yes, the economic downturn touched my own family. My daughter lost
her job just like I am sure how everybody around the table was impacted in some way
shape or form. I am glad to say now that she has been recalled to her position. That tells
me that again, we are making some improvements. I would agree with the
Councilmembers' analysis of how large real estate transactions might tend to skew the
results; however, I think just for my own personal situation and own personal knowledge...I
thought I would never mention my wife's name on this Council floor, but my wife is very
.much into—she is not into real estate, but for our own personal reasons, she does do a lot of
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29
tracking. Certainly, she has raised to my attention to the fact that...and I am not talking
about the multi-million dollar homes because we are not in that market, but certainly the
market is improving for people in our category and maybe people who can afford a little
Tess. She has seen those and she is relaying it to me, so it is not scientific. It is not coming
from some real estate journal, but this is just her personal observation. I just wanted to
share that in terms of—I think we are all in relative s agreement here that with all things
g
considered, we would not be taking the steps that we are proposing today; however, we
have to collectively find a way to deal with and manage this proposed Budget. Thank you,
Chair.
Chair Furfaro: Okay. Mayor, did you want to say something?
Mr. Carvalho: I just want to say something in closing if that is
okay.
Chair Furfaro: I will close the meeting, but you have the floor.
Mr. Carvalho: Okay. I really appreciate the conversation on the
table. Believe me, I know most of the guys you know, Councilmember Rapozo, like the
aunties and uncles who are struggling. It is difficult for all of us to sit here and tell them
that we are going to raise it even by five dollars ($5.00). I struggle with that every single
day as we move through each step of the way. I understand Councilmember Hooser's
concern. There are people out there wondering, "What are we doing?" At the same time,
we are trying to figure out how we are going to navigate through this situation we are in. It
is not only me, we, all of us is trying to figure it out in a way that can best serve the people.
I feel the "bravo" part that Councilmember Yukimura mentioned is not about jumping up
for joy. It is that we are finally getting to a place where we can agree on the process, agree
that we are getting some good data and numbers, agree that we are getting good people
coming in and surrounding ourselves with good hearts and souls that want to make good
decisions and try to figure out how to get to a place where we can say one day, "Forget it, we
can give you back some money. We can give you back support, people of Kaua`i and
Ni`ihau." I think that is the message of the "bravo" part, with all due respect,
Councilmember Hooser, is that. I think that is where we are at now. Me, personally being
in the County for twenty-eight (28) years; I started right out of the gates from college. I sat
at my desk, and thinking to myself, "One day, if I had a chance..." You would never want to
raise taxes to people and give more people burden, especially during challenging times;
however, we have gone through many (inaudible) as being Mayor in 2009. It was already
pretty difficult. You know as being at the Legislature and us coming over and trying to
survive and make sure to keep the TAT, and make sure how to navigate through that part.
At the same time, yes we did increase people's—surrounding yourself with people that need
to be part of the team, but at the same time it gives you way more if you get good people
coming in and helping you along to get the information you need so you can do what you
have to do. It is a balancing thing here. I feel really good right now; good in a sense to the
people watching that we are trying our very best, good that we are coming to a place where
we can understand each other and understand what we need to do. I feel that. I think that
is what it is. I will leave it at that. I know we are going to disagree like I said earlier, but
hopefully we can get through the pieces knowing the people are at the forefront and we are
trying our best to provide you the information so we can collectively make the right
decisions, and that is what it is. Thank you for the time. I know it has been long but
mahalo.
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30
Chair Furfaro: Okay. Thank you very much for today, Mayor. I
did not have an opportunity to finish all of my points, but the first one I want to make is
when I sent over the Council's budget assumptions and requests; whether it was on pay,
bargaining, or even thank you for taking the suggestion and running with it on the actuals,
comparing actuals to actuals; that is what some of us are used to. We need to make sure we
find ourselves that when we do a budget, we are doing assumptions over here and
understanding revenues and expenses, and we cannot let that scare us. The people expect
us to make the right decisions. One of those decisions may even be, "Do we want to
continue to make one hundred percent (100%) contributions to our retirement funds?" as I
mentioned, if we are in that kind of shape. We have to very proud of what we have done so
far. A couple of other items that still need some attention is that I hope when Police and
Fire come up, both Police and Fire can talk to us honestly and openly about their
equipment. We talk about one hundred twenty thousand (120,000) along the Wai`anae
Coast have two (2) fire stations. We have sixty-eight thousand (68,000) people on our
island with eighteen thousand (18,000) visitors, and we have eight (8) fire stations because
of the nature in the areas that we have to serve. The ratios are not always equal in many
ways. We have to do a better job on salvage credits, Steve. The episode we had yesterday
with the cars going almost two (2) years before we actually got them out of the barnyard,
and took a salvage credit. We have got to be routine about those kinds of things. We cannot
have assets that we cannot use sit and not give any return on them, so we will be talking
more about that. I want to make sure what you are presenting to us about no new
purchases on equipment on so forth, sit well with public safety, meaning Fire and the
Police. On that note, again, I want to thank you. I want to thank the members for the
discussion today. I look forward to a mutually, beneficial, and appropriate questions and
answers as we go forth with the other Departments. I need to take some public testimony
now, so I am going to excuse you, gentlemen. Thank you for having your staff here today.
Mr. Heu: Council Chair?
Chair Furfaro: Yes, Gary.
Mr. Heu: I have a question. When we reconvene at
1:30 p.m., we are going to take the Mayor's Office.
Chair Furfaro: We are going to go right into the Mayor's Office,
yes.
Mr. Heu: Thank you.
Chair Furfaro: The Mayor's Office, and then we have Boards
and Commissions and Life Choices in there. We have one (1) individual signed up for
public testimony today. Come right up.
There being no objections, the rules were suspended.
ROB ABREW: Aloha, Councilmembers. Thank you for the
presentation today. One thing as a common person in this town, and I do not understand
why we do this in the Budget, but we consider our surplus as income. It is not income. It is
the taxpayers' money that has not been spent. I look at the last three (3) years...in 2010;
we had a sixty-eight million dollar ($68,000,000.00) surplus. That is sixty-eight million
dollars ($68,000,000.00) that the County did not spend, but they took from the
people/taxpayers. Those sixty-eight million dollars ($68,000,000.00) is added into next
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Budget Overview (cy)
31
year's surplus, and for next year's surplus we have fifty-seven point million dollars
($57,300,000.00). There is still fifty-seven point three million dollars ($57,300,000.00) that
was not spent. In 2012-2013, we had a fifty million plus (+$50,000,000.00) surplus again.
My question is why is the budget one hundred fifty-eight million dollars ($158,000,000.00)?
Why is it not one hundred million dollars ($100,000,000.00)?
Chair Furfaro: If you are referring to the CAFR, I will be glad to
go through the reading of that balance sheet separately with you. I will be glad to do that
with you.
Mr. Abrew: I am just curious because last year we had this
money that was leftover that has already been taken by the taxpayers, so I as a taxpayer
look like the last four (4) or five (5) years, I already had a tax increase because they had
taken the money from me. Where is that money? That is my big question.
Chair Furfaro: I will be glad to show that to you because that is
the report that ended in June 30th, and then there were certain amounts that were
earmarked for special projects. I can show you as we roll into next year. I will be glad to do
that with you, Rob.
Mr. Abrew: Okay. I just see the Budget. I see they are
pulling the balance over from last year, and if they do not spend the money in that year, it
is my understanding is that it goes into the surplus. Does that still mean that those
projects that were budgeted that year are still going happen? So that money is set aside
and nothing—and we come back with one hundred fifty-seven million dollars
($157,000,000.00) more, we are going to assume. Basically, we have sixty million dollars
($60,000,000.00) sitting in a fund out here that has not been spent, and has already been
appropriated for, but the taxpayers are not getting anything for it?
Chair Furfaro: I will be glad to show you how they earmark a
future amount that has been earmarked as "allocated," and I will get right down to what is
about fifteen point three million dollars ($15,300,000.00). That is the real Reserve. Now,
these terms keep getting interchanged as a "surplus" but we want to refer to it going
forward as a "Reserve" so it is more transparent for you folks.
Mr. Abrew: Okay.
Chair Furfaro: - I will glad to set-up time for you.
Mr. Abrew: So we are transforming into now, theoretically
the surplus-well not the surplus, but the stuff that was budgeted that was not spent is
now going to go into a Reserve Fund and keep building so the Administration decides they
want to build it?
Chair Furfaro: It will show up on a balance sheet. It will not
show up in the Operational piece.
Mr. Abrew: Okay.
Chair Furfaro: I will be glad to go through it with you.
Mr. Abrew: Okay. Thanks.
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32
Chair Furfaro: Okay. Anyone else in the audience that would
like to speak today? If not, I want to thank the Mayor's team for being here. I want to
thank my colleagues, but before I do, I want to call our meeting back to order. Are there
any further comments before we adjourn for lunch and come back at 1:30 p.m.? Go ahead,
JoAnn.
There being no objections, the meeting was called back to order, and proceeded as
follows:
Ms. Yukimura: Yes. I just wanted to say that some of the work
that we are doing as a County is helping people save money. When we make more bus
service available, people can save up to two thousand four hundred dollars ($2,400.00) a
year. When we pave their roads, they are avoiding hundreds of dollars of expenses to
repairing their vehicles. When we give them services, whether it is elderly services or
police services, which is a great value that we have to keep giving them. When we say we
are saving people by not raising fees or taxes; that is not always true. This fuel tax
increase that the Mayor is proposing on the average will cost an extra ten dollars ($10.00) a
year. If that allows us because we are taxing...tourist cars that have to pay for it and we
are fixing our roads well and we are saving people money that way; it is worth it. It is
almost our responsibility to do that. It is true. We will have more conversations, but I just
want to show that if we do Government properly, and that means incremental raises to at
least cover inflation, it also means...I have yelled and screamed about this thing, about
doing work efficiently, planning well, not wasting money, and managing our contracts and
services well. If we can do that, these incremental increases are valid and necessary.
Mr. Kagawa: Thank you, Mr. Chair. The worst thing that I
would like to see is when you see what you call a "couch coach." That is when the game is
played, it is over, and you have a lot of people saying, "The coach should have done this.
They would have won." Unfortunately, when you get elected into public office, you need to
express your true self so that the people who elected you know what you stand for. For me,
we are here in this position not because of the Administration, because it is the Council who
appropriates the budgets and approves the budgets. In the past four (4) years, we have
been spending more than we have been making. To make the same mistake in one (1) year
to me, is acceptable. To make it for two (2), maybe. To make it for four (4), that is
unacceptable. If you voted for the Budget in the past as a Councilmember, I think you are
partly to blame. Let us not point fingers at the Administration. The Administration—they
do not have to spend it but if you are given the money, you are going to try and spend and
improve the lives of the people. I think the Council is the one to blame, but we are going to
go forward from here. I am not going to be a couch coach from now. We have a game to
play. It is a big game. It is a big opponent. It is not only us who are suffering through it.
The Federal Government, the State Government; they are all in trouble and we are no
different now. I look forward to working with you all. I think we have got a great
quarterback named Steve Hunt, and he has a great team. We are going to get through this.
Thank you.
Chair Furfaro: Mr. Bynum.
Mr. Bynum: One of things that make me feel good is that we
have a public record. What happened over the last four (4) years is all in a very detailed
public record. Who voted for what? Who voted to reduce taxes for local people and who did
not? It is all in the public record. You can look at that. There are some facts. The facts is
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Budget Overview (cy)
33
the Mayor gave us reduced budgets his first two (2) years as Mayor, and not only that
because I like to look at actuals, but our actual spending went down two (2) years in a row
at the beginning of this downturn. That is from our CAFR. That is audited. That spending
went down even in years where we had to pay increased costs that were built-in and salary
increases that were already negotiated. Our workers, most of them like Hawaii
Government Employees Association (HGEA) and United Public Workers (UPW) have had
no raises for a number of years. This year they are going to and appropriately get some
consideration, and we have not even dealt with that in this Budget. I said this before, but I
believe the Mayor—I did not agree with everything that he did, but overall his budgets
have reflected an appropriate response to the downturn. It was the revenue where we have
not managed it well, right? There were people saying that three (3) or four (4) years ago
and there were people putting forward proposals to reduce taxes for local people and to
ameliorate the loss of thirty million dollars ($30,000,000.00) that went to primarily
corporations and people who do not live here. Those are facts. There was thirty million
dollars ($30,000,000.00) on tax reductions to some people, but there was one million and a
half$1,500,000.00) increase to the people who lived here during the same period. Those are
facts. We are starting to make the right adjustments now. We started at the end of the
Budget last year to make a few changes. We need to continue in that process to do things
that are equitable. You can see this as we are bringing taxes back to 2008, but do not forget
about that thirty million dollars ($30,000,000.00) that went unfortunately in my mind, a lot
of that lost revenue went to Starwood or people who live in Connecticut and own homes
here that they vacation rental or have second homes. We are going to be to talk about that
at length because the Mayor mentioned more information. We have more information.
Getting access to information is difficult and it is really important. Next week we are going
to look at the corrected data for those years and what our performance was because some of
the data was not correct. It is correct now. I think the next step of this discussion—and a
lot of people wanted to look back on the last four (4) or five (5) years and who did what. We
are going to do that next week in the Finance Committee and I think it is good timing in
terms of this. I know I tend to be redundant. Mayor you did a great job budgeting
expenditures over the last four (4) years, in my opinion. We collectively did not do a good
job of managing our revenues. What Mr. Kagawa said is that ultimately, the responsibility
lies here. Thank you.
Chair Furfaro: Okay. I would like to end on that because I do
take responsibility for everything that has transpired. Please refresh yourselves with some
of the history I presented in my piece, including the fact that we added a whole new
Department called"Office of the County Auditor." See you at 1:30 p.m.
There being no objections, the meeting recessed at 12:26 p.m.