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HomeMy WebLinkAbout 08/28/2013 Council Meeting Minutes COUNCIL MEETING AUGUST 28, 2013 The Council Meeting of the Council of the County of Kaua`i was called to order by the Council Chair Jay Furfaro at the Council Chambers, 4396 Rice Street, Room 201, Lihu`e, Kaua`i, on Wednesday, August 28, 2013 at 9:06 a.m., after which the following members answered the call of the roll: Honorable Tim Bynum (present at 9:31 a.m.) Honorable Gary L. Hooser Honorable Ross Kagawa Honorable Nadine K. Nakamura Honorable Mel Rapozo Honorable JoAnn A. Yukimura Honorable Jay Furfaro APPROVAL OF AGENDA. Ms. Nakamura moved for approval of the agenda as circulated, seconded by Mr. Rapozo, and carried by a vote of 6:0:1 (Mr. Bynum was not present). Chair Furfaro: I do want to share a couple of housekeeping items with you folks. I believe the order today will start with some attendees that include people that might be from off-island, so we are going to do the Landfill presentation first. Mr. Dill has his other two (2) members wrapped up on another project in the Office. We are going to go to the Soil and Water Conservation. We have people here from the State. Afterwards, we are going to go to the Tax Bill. On that note, I understand I have one (1) person that is expressing interest to speak on an item for the Consent Calendar. JoAnn, go ahead. Ms. Yukimura: This is just a procedural question. There are eighteen (18) minutes set aside for three (3) minute commentary. We are still having that, right? Chair Furfaro: Yes, that is the Public Comment portion where we only have one (1) person signed up today. Ms. Yukimura: Okay. Chair Furfaro: Mr. Clerk, did you understand me when I said that? RICKY WATANABE, County Clerk: Yes. Chair Furfaro: Okay. We are going to go to item (D), which is the eighteen (18) minutes that JoAnn had queried about that is set aside for anyone who wants to testify now. There will be no questions and answers from the audience, and you will not have a second opportunity to testify on the agenda items that come up. Again, the order of today's business is the first three (3) items; the Landfill, the Soil and Water Conservation piece, and then the Tax Bill. Those are COUNCIL MEETING 2 AUGUST 28, 2013 the early items we have on today's agenda. On that note, I have one (1) person signed up to testify. PUBLIC COMMENT. Pursuant to Council Rule 13(e), members of the public shall be allowed a total of eighteen (18) minutes on a first come, first served basis to speak on any agenda item. Each speaker shall be limited to three (3) minutes at the discretion of the Chair to discuss the agenda item and shall not be allowed additional time to speak during the meeting. This rule is designed to accommodate those who cannot be present throughout the meeting to speak when the agenda items are heard. After the conclusion of the eighteen (18) minutes, other members of the public shall be allowed to speak pursuant to Council Rule 12(e). ALLAN RACHAP: Good morning. My name is Allan Rachap. I am resident of Koloa. I am not a frequent testifier here. This is only my second appearance, but B.C. said he is going to make me a television star. I am here to talk about one of two of life's inevitable things; the only certainty in life and it is not death that I am talking about. There was a guy who held the position that Councilmember Bynum, who unfortunately I do not see here, holds and he held that in the United States Senate for many years. His name is Russell Long. Senator Long had a saying and he was the Senate Finance Committee Chair for a long time so he had some experience with it. His saying was, "Do not tax me, tax that fellow behind the tree." We know taxes are necessary. It is the price we pay to support Government and without Government, we do not have civilization. People want services. We need to pay the firemen and the policemen, and all of that. Obviously, you guys have to raise money to support those Government services. The inventive minds of Government people over the years has created more types of taxes than you can shake a stick like income tax, property tax, ad valorem tax, sales tax, and excise tax. When taxes get to be a dirty word, you just change it to "fee," but a "fee" is something that you have to pay, not because you like to, but because you are ordered to, just like your taxes. I think people should understand the taxes a little bit better. I wrote an article, which was published in today's Garden Island. I sent copies to the Councilmembers and I have requested that it be introduced as testimony. Basically, here are my views on Bill No. 2495. I do not argue at all against the intent of creating a better, more sensible tax structure on Real Property, but we had extraordinary circumstances basically balloon in the value of real estate; a spike-up that took place in the early 2000's that raised assessments like a skyrocket. It is really simple—you multiply assessment by tax rate and you get how much you have to pay, that is dollars and cents, and that is what the people care about. To mitigate the effect that that skyrocketing assessment had over a few years—"California Proposition 13" style... Chair Furfaro: Allan, under our rules, this portion allows you three (3) minutes. Mr. Rachap: Can I wind it up? Chair Furfaro: If you can wind it up, I will give you one more minute. Mr. Rachap: Thank you. Basically after calling a bunch of my friends, I found that nobody actually took the time to figure out what it meant to them in dollars and cents. I think you owe it to the public to explain what it is COUNCIL MEETING 3 AUGUST 28, 2013 going to mean. For me, it means a forty-one percent (41%) increase in my taxes in one fail swoop. I called my neighbors and forced them to do the same calculations, and they said, "Yes, your math is right." I would suggest that there are ways to mitigate that big double digit increase. If you phase out the cap, let us say do it as a fifteen percent (15%) per year for three (3) years, and then gone. Basically, it is bump, bump and now we are even with the thing. I do not feel I am undertaxed- believe me, you take the value of my home and transplant it to the mainland, I would be paying three (3), four (4), or five (5) times as much in real estate taxes. I know that but look, there are a level of services that they provide that maybe we do not get here too. In any event, I would ask that you take a look at it and improve the Bill. The phasing, I think, is probably the best way to mitigate the impact on those that would be facing double digit increases in one fail swoop. Thank you. Chair Furfaro: Allan, thank you for the written testimony as well. Is there anyone else in the audience that chooses to speak on any item on the agenda? No one, okay. Based on that note, I am going close this period for item (D). Let us go to the Minutes, please. MINUTES of the following meetings of the Council: June 26, 2013 Council Meeting August 14, 2013 Special Council Meeting Mr. Rapozo moved to approve the Minutes as circulated, seconded by Mr. Kagawa and carried by a vote of 6:0:1 (Mr. Bynum was not present). CONSENT CALENDAR: C 2013-290 Communication (07/31/2013) from the Mayor, transmitting for Council consideration and confirmation, Mayoral appointee Anne K. Schneider to the Kaua`i Historic Preservation Review Commission for the County of Kaua`i (Designation – Planning) – Term ending 12/31/2015: Mr. Kagawa moved to receive C 2013-290 for the record, seconded by Mr. Rapozo, and carried by a vote of 6:0:1 (Mr. Bynum was not present). C 2013-291 Communication (08/20/2013) from Council Chair Furfaro, transmitting for Council consideration, a Bill for an Ordinance to Amend the Kaua`i County Code 1987, as amended, by Adding a New Article to Chapter 4, relating to the Registration and Regulation of Lobbyists: Mr. Kagawa moved to receive C 2013-291 for the record, seconded by Mr. Rapozo, and carried by a vote of 6:0:1 (Mr. Bynum was not present). C 2013-292 Communication (08/20/2013) from Council Vice Chair Nakamura, transmitting for Council consideration, proposed amendments to Chapter 8 of the Kauai County Code 1987, as amended, relating to Bus Stops for Commercial Development: Mr. Kagawa moved to receive C 2013-292 for the record, seconded by Mr. Rapozo, and carried by a vote of 6:0:1 (Mr. Bynum was not present). C 2013-293 Communication (08/22/2013) from Councilmember Yukimura, transmitting for Council consideration, a Resolution Amending Resolution No. 2013-02, relating to the Rules of the Council of the County of Kauai for the Organization of Committees and the Transaction of Business: Mr. Kagawa COUNCIL MEETING 4 AUGUST 28, 2013 moved to receive C 2013-293 for the record, seconded by Mr. Rapozo, and carried by a vote of 6:0:1 (Mr. Bynum was not present). Chair Furfaro: Before we go into Communications, I think it is appropriate that we speak to the Landfill item. There being no objections, C 2013-294 was taken out of the order. COMMUNICATIONS: C 2013-294 Communication (07/05/2013) from the County Engineer, requesting agenda time to provide a progress update of the Proposed New Landfill and Resource Recovery Park: Ms. Nakamura moved to receive C 2013-294 for the record, seconded by Mr. Rapozo. Chair Furfaro: On that note, I will suspend the rules. Mr. Dill, I am trying to comply to the fact that I know your two (2) assistants will not be joining you today, so you will be taking us through this update. We will try and get you back to your regular duties after a little question and answer. Go right ahead. There being no objections, the rules were suspended. LARRY DILL, P.E., County Engineer: Thank you, Chair. Good morning, Councilmembers and Chair Furfaro. For the record, Larry Dill, County Engineer. I have a PowerPoint presentation for you today. I assume you all have the hard copies before you, I hope. Chair Furfaro: Yes. Mr. Dill: Okay, good. I will introduce a brief background. Of course, we have been here before the Council several times on this project, so there is a lot of history that was already given to you. As a brief background, we are looking to site a new landfill in light of the fact that the Kekaha Landfill is approaching its expected life span. Briefly, we are receiving waste in Cell 1 of the Kekaha Landfill. We anticipate that will reach its capacity in the first quarter or so, or second quarter of next year. We are presently pursuing the permitting of a vertical expansion of Kekaha, which we estimate will give us an additional five (5) years of life span. Subsequent to that, if necessary, we are looking at a potential lateral expansion at Kekaha Landfill. That is pretty challenging right now, so we are currently working with the Department of Health (DOH) on issues with that potential lateral expansion. I will say that we are pursuing siting a new landfill because Kekaha is nearing the end of its useful life. On the Ma`alo site, the current site has been arrived at after a couple unsuccessful attempts to site landfills at other locations around the island. With the current Environmental Impact Statement (EIS) program, the first portion of that EIS was a siting study. On this slide we call it a "site selection." We looked at several candidates/sites, eight (8) sites around the island where we could potentially site a landfill after reviewing and analyzing those sites. Against multiple criteria, we came up with the current site at Ma`alo. That is the site we are currently analyzing and looking at with our Environmental Impact Statement right now. We are currently in the environmental impact stage. Of course, that is still an early phase of the project. There are several phases left to complete like land acquisitions, entitlements and permitting, final design and COUNCIL MEETING 5 AUGUST 28, 2013 Department of Health's approval, construction, and then the final Department of Health certification. Today, by way of giving you a brief update of the status, as far as the Environmental Impact Statement is concerned, we have published back in February, the Environmental Impact Statement Preparation Notice with the Office of Environmental Quality Control. We received many comments from the public, which we are very grateful for. It is important that we get a lot of input, as much as possible from this body, and the public so we can do the best possible job we can in addressing and mitigating any concerns that come up as a result of siting a landfill at Ma`alo. I do not want anybody to think that we think Ma`alo is the "perfect site" for a landfill. Unfortunately, I do not think there is a perfect site for a landfill on the island of Kaua`i. This is our preferred site amongst the candidates that we identified, so this is the site we are currently looking at. Our official stage in the landfill EIS project would be having done the EIS would be to move to the draft Environmental Impact Statement. In getting ready for that phase, some of the current challenges we are looking at—the first one I am going to talk about is the access road and driveway alignment to access the landfill. Essentially, the access will come from Kuhio Highway, but having said that, there are several alternate routes that we are working with our consultant to identify as potential accesses to the landfill. I do not have the routes shown on the slide because we are still working on that and firming that up. They are doing Traffic/Road Engineering Feasibility Study for us to analyze the impacts of those different possibilities. Having done that study and creating a final draft form, we will be going to the community with public hearings to solicit their input and comments on those alignments, so that will be happening over the next few months. That is something that is one of our next important phases of this project, which is taking a look at access and working with all of the effective landowners, as well as all of the affected communities as to which would be the best way to site or to provide access to the site. Of course, one of the challenges we have been working on for a while is the acquisition of the land. The land for the landfill site itself, about two hundred eighty (280) acres, is on State of Hawai`i land under the control of the Agribusiness Development Corporation (ADC). We have had multiple meetings with them and looked at various aspects for how they would be compensated for the loss of this site. They are very supportive of this effort, but also their mission is to provide agricultural opportunities and support agriculture in the State of Hawai`i. We need to compensate them for the loss of this Ag activity and any potential adverse impacts to agricultural activities that will remain up there, having sited the landfill there. Ms. Nakamura: Could you just point out the road going up to Wailua Falls? Mr. Dill: The road to Wailua Falls... Mr. Rapozo: Ma`alo Road. Mr. Dill: Okay. Actually, right there, it says "Ma`alo Road." The highway kind of bends through Kapaia Valley right here, and then the connection to Ma`alo Road—it is approximately this alignment up here. It is actually named "Ma`alo Road" right there. I do not know if it shows up better on your handouts or not. I printed mines small so I cannot see the names. COUNCIL MEETING 6 AUGUST 28, 2013 Ms. Nakamura: Okay. Thank you. Mr. Dill: You are welcome. Land acquisitions—in our discussions with the ADC, initially there were discussions about providing an irrigation system, which would be beneficial for their attendants up there to use for agricultural purposes. Then they stepped back from them and thought, "Well, we are reluctant to spend a significant amount on an irrigation system when they are not sure that it would be the best way for them to do that." We have stepped back and looked at other options to simply—it is not exactly a "purchase," but it is some sort of a fee that we would pay. We have been working hard with the ADC to try and arrive at something that works for them, but also works for the County. We do not have a number to present yet or the way that it would actually look in the end, but of course we would come to the Council when we have a proposal for that because it is only the Council that can (inaudible) the County for a long-term like that. We are working with them on that issue. Did you have a question? Chair Furfaro: Excuse me, Mr. Dill. We are going to hold all questions to the end. Mr. Dill: Okay. Another one of our challenges that came up during the initial siting criteria process was proximity of the site to the Lihu`e Airport. The Lihu`e Airport is governed by criteria that funneled down from the Federal Aviation Administration (FAA), so one concern we have been speaking to them lately about is the possible impacts. Wildlife bird strikes are what they are concerned about. The landfill is approximately three (3) miles from the Lihu`e Airport. The further you get from the airport, the less significant the concerns are, and the closer, the greater the concerns are. We are within a certain radius identified by the FAA, and so we have been working with them on scoping out a Wildlife Hazard Assessment to determine what the possible hazards actually are. Having identified those, then we would move into creating a Wildlife Hazard Mitigation Plan. These discussions are still fairly early on but I wanted to apprise you of what some of the current issues are that we are currently dealing with for the landfill. Of course, the cost of the overall project is significant. As we are still early in the environmental statement phase, we have not firmed up what those costs are. We have been working with our Finance Department, and they have identified several different potential means with us and a combination of these various things that might serve as a way to fund this expensive project for the County of Kaua`i. I will not run through these in detail. I just wanted to put these before you to let you know that some of the options that we are considering and looking at. It will likely be some combination of these things, and then also, it is not shown on here but some of the roadways may be eligible for Federal Highways funding. We would look to the Federal Highways through their State Transportation Improvement Plan (STIP) program to fund some of the accesses that we are proposing to do. I just wanted to give you an idea of some of the things we are looking at and considering to be able to fund this project. Also, of course as we get further down the road, the land use entitlements and permitting, as well as the entire Department of Health approval process is something that we are laying the ground for formulating a plan for how this is going forward. We are working with our Planning Department and our Attorneys to understand the best way, along with the Department of Agriculture (DOA), since the land is their land from the State of Hawai`i, of how this COUNCIL MEETING 7 AUGUST 28, 2013 process would eventually happen to transfer control of the site to the County of Kaua`i. Here is an overview of our EIS schedule. It shows that the siting study was completed and moved into the feasibility study/conceptual design and special studies that we are currently doing. The Final Environmental Assessment/ Environmental Impact Statement Preparation Notice (FEA-EISPN), as you can see, we have passed that phase in green. The second green is the draft Environmental Impact Statement that we are hopefully going to be publishing later this year. Another phase of public input and analyses until we get to the final Environmental Impact Statement. Some of the indications from the traffic study information that we are getting, as well as from DOT about the Wildlife Hazard Assessment, is that it may push that date further, but we have not gotten a firm date yet. This is the overall, what we call the "Master Schedule" for the landfill. The previous slide showed the EIS Schedule. All of that is compacted into that green bar you see on this slide. If you fast-forward to the end of the project, we are projecting a date of 2022 to have that new landfill actually open and receiving waste; which means that our Kekaha Landfill would be the goal to keep that in place, operating, and receiving waste beyond that date so we do not have a lapse in service. I wanted to take the opportunity to also mention a couple of diversion opportunities that we are looking at. We have drafted two (2) ordinances that we are very close to being able to present to the Council. One is a Commercial Recycling Ordinance which basically would look at making mandatory recycling for businesses on Kaua`i. The loophole, if you will right now in our recycling, the big one is mixed paper/office paper. This would close that loop, as well as various other commercial recycling things that are not getting diverted right now. We project ultimately a maturity that will be able to divert an additional eight thousand (8,000) tons of waste from our landfill. Secondly, a (Construction and Demolition (C & D) Ordinance that we are looking at—Coco Palms, as you are well aware, is a project that is coming to life very soon. There is a significant amount of demolition. Unfortunately, they are being very proactive about being very conscientious about recycling their C & D Materials from that project. It is an example of all the opportunity we have to make sure we do divert C & D Materials from our landfill. We have been working with the Contractor's Association on this. Again, this will be something that we will be coming to Council for approval, hopefully shortly. We project that we could divert up to an additional four (4,000) tons of waste from our landfill with the implementation of this Ordinance. For the Materials Recycling Facility (MRF), we are just in the process of getting a consultant on board right now to being the Environmental Assessment and Conceptual Design work for that facility. We also are very closely, we believe, to have finalizing a site selection for the MRF, and this is another six thousand (6,000) tons of residential waste that could be diverted through the curbside recycling and MRF, which would go hand in hand to make this happen. An update on our diversion—you can see that since 2008, we have had a fair amount of success in increasing our diversion rates. In 2008, we approximately had a twenty-nine percent (29%) diversion rate. In 2012, we are looking—we are just about forty percent (40%) diversion from our landfill through the various programs that we have been implementing through our Solid Waste Division. That completes my presentation. I will be happy to entertain any questions. COUNCIL MEETING 8 AUGUST 28, 2013 Chair Furfaro: Thank you very much, Mr. Dill. For the members, before I go to questions and answers, I just want to mention that the request of this update was presented to us by the County Engineer. It was his way of indicating the critical path as we follow through here as it covers the landfill, the negotiations, the acquisition, and the critical path as it relates to the building of what will be reflected in the Master Schedule. I do want to open this up to some questions and answers, but I also want to remind us that if we are going to get into any depths on anything presented today in the particular phase that you are most interested in, I would beg to ask Mr. Rapozo to post this in his Committee to go into further detail. Today was intended to be an update at the request of the County Engineer. Mr. Rapozo: Mr. Chair, I was actually going to suggest that, that being it is a Council Meeting, being that we have eleven (11) pages of agenda today, and we have many people from off-island who are planning to testify on other items, I would suggest that the discussion and the specifics should be done in the Committee. I would definitely ask that this matter be referred to my Committee so we can have the thorough discussion. I think it is unfair for the County Engineer, as well as for Councilmembers to have to rush or cut the discussions short because of time. I would ask that this matter be referred to the Committee. (Mr. Bynum is noted as present at 9:31 a.m.) Chair Furfaro: That will be my intent later today as I so stated, Mr. Rapozo. Again, to the members, this request for the update came from the County Engineer, and I want to compliment him on bringing us current as we go through this phase. We will open and entertain a few questions on your presentation, but anything more than that, I would like to refer it to Mr. Rapozo's Committee. I will start with Councilmember Yukimura, and then go to Councilmember Kagawa. Ms. Yukimura: Thank you. First of all, I just want to clarify that the referral will be to the next Committee Meeting next week. Thank you. Especially since it was your initiative to update us, I really appreciate it. I appreciate especially that you updated us on the diversion efforts that the County Administration is making because it is very significant that eight thousand (8,000) tons of waste could be diverted simply by a new Ordinance. You just pointed out that commercial paper is a big portion of that eight thousand (8,000) tons, which I think is not known to many people that extending the life of the landfill and diverting is actually quite simple in certain areas. I appreciate that. I want to know, what is the projected cost of the landfill? You said that is one of the challenges—the cost. What is the projected cost? Mr. Dill: If we can address that in the Committee Meeting, I would appreciate it. I did not bring the total costs with me. As I mentioned, many of these costs are fluctuating. For instance, a significant part of the costs will be the roadway alignment and the roadway alignment has not been determined yet. Ms. Yukimura: Okay. About the roadway realignment, we were told that the road is not a problem, and that is one of the reasons that the landfill site was chosen, but now we are finding that it is a major problem. COUNCIL MEETING 9 AUGUST 28, 2013 Mr. Dill: I do not think we ever stated that the road was "not a problem." Ms. Yukimura: You were saying that you did not need a bypass road and that the existing road system could work because the bypass road is a huge cost. Mr. Dill: I agree. The bypass road is a huge cost. I did say that our traffic studies determined that the bypass road was not warranted by the landfill in and of itself. By no way, shape or form did we indicate therefore access would be "easy, simple, or inexpensive." It is still a significant project. Ms. Yukimura: The impression was that it was "workable." Mr. Dill: It is workable, yes. Ms. Yukimura: Do you not have a range of the projected costs? Mr. Dill: That is what our consultants are working on right now. Ms. Yukimura: You do not have any ballpark figure? Mr. Dill: No. Chair Furfaro: I think it is fair and reasonable that Mr. Dill has indicated that he is prepared to discuss this in Mr. Rapozo's Committee, which is a week away and you will be better prepared for that discussion. Is that what I heard, Mr. Dill? Mr. Dill: Yes. Ms. Yukimura: I think you have given us ballpark figures before, so I am just surprised. My other question is why is the Ma'alo Landfill on State lands and the Resource Recovery Park (RRP) on Grove Farm lands? Mr. Dill: Actually, what is not shown on this exhibit— it is hard to read and I apologize, but the RRP site is an alternate site. When we first discussed this was Grove Farm, we did not feel we could accommodate the Resource Recovery Park and the Landfill on the same site, on the State lands. Since that time, we are now looking at both as potential sites. As we mentioned before to Council, one on the State land, within that yellow boundary identified there, or one on Grove Farm land. Ms. Yukimura: When will that decision be made? Mr. Dill: A recommendation will come out of the EIS process. Ms. Yukimura: Was it not initially that Grove Farm would give us their land for a landfill? Is that not why the landfill site was first chosen in Ma'alo? COUNCIL MEETING 10 AUGUST 28, 2013 Mr. Dill: Well, this site is on State land. I believe in previous siting studies or attempts, one of them—I think there was a Kalepa site on Grove Farm land. I apologize, that was prior to my time so I was not involved in that analysis. None of the sites are on Grove Farm land in this area, at least, in the current siting study. Ms. Yukimura: Okay. I am coming back to "diversion." On your diversion for the Committee Meeting, can you have a projection of diversion based on your plans for commercial recycling, commercial demolition, and the Materials Recovery Facility so we can see what your projected diversion is? Mr. Dill: Certainly. Ms. Yukimura: Can you also tell us how much landfill life we will be saving and extending? Mr. Dill: Okay. Ms. Yukimura: My last question is why is your Solid Waste Manager not making this report? Chair Furfaro: Excuse me. I announced at the beginning of this meeting that Mr. Dill asked to make the presentation because he had assignments for both gentlemen in preparation of continuing some work. I agreed that Mr. Dill could lead the point since this was an update. I am excepting some responsibility for the instructions that I gave Mr. Dill. Mr. Dill: Yes. Ms. Yukimura: When you have sewers here, you have Mr. Tschupp. When you have buildings, you have Mr. Haigh. I would expect that your Solid Waste Manager would make this report. Mr. Dill: They will be present for next week's Committee Meeting. Ms. Yukimura: Thank you. Chair Furfaro: Okay, that was your last question, JoAnn. We will go to Mr. Kagawa. Mr. Kagawa: Thank you, Chair. Thank you, Larry, for the presentation. I will reserve my questions for next week, but they are similar to Councilmember Yukimura's. I want to ask if you have ballpark figures on the land acquisition costs or are we paying rent, or what have you. I just want a ballpark figure if you can find some that we may be looking at. Thank you. Chair Furfaro: Vice Chair Nakamura indicated to me that she will reserve her questions for the Committee Meeting. I have two short questions, but I will yield the floor to Mr. Rapozo. Mr. Rapozo: Thank you, Mr. Chair. This is for the Committee members, and for all members, that if you have any specific questions, please get it to Mr. Dill ahead of time so he will be prepared and not be surprised COUNCIL MEETING 11 AUGUST 28, 2013 with questions. I think that is fair. Just route it through me so I can keep track of the questions. As many others, I will reserve my questions for next week. Thank you. Chair Furfaro: Mr. Dill, I want to make sure that when you come up in Committee under Mr. Rapozo's Committee, we are not expecting to be seeing any kind of format of the two (2) new ordinances; one deals with recycling and the other deals with the construction/demolition materials disposition. Is that at some future date when we will see these ordinances? Mr. Dill: That is correct. Chair Furfaro: Do you have any idea when that might be? Mr. Dill: We have a schedule laid out for that. If I could address that in Committee, I would appreciate that. Chair Furfaro: Okay. Fine. Mr. Rapozo, I will reserve that for a Committee question. Where are we at with our consultant at this point? Who have we encumbered for consulting services? Mr. Dill: For the landfill? Chair Furfaro: Yes. Mr. Dill: We have AECOM under contract and our prime consultant for the EIS is R. M. Towill. They have been under contract with us for some time. Chair Furfaro: The financial resources for the ongoing consultant services are covered in the Budget we just passed in the last sixty (60) days? Mr. Dill: That is correct. Chair Furfaro: I have no further questions for you, Mr. Dill. I want to thank you for the initiative. I am sorry, Councilmember Yukimura. You have a question or a problem? Ms. Yukimura: I have a follow-up to your question. Chair Furfaro: Okay. Ms. Yukimura: The Chairman said consultants—who is doing the conceptual design of the landfill? Mr. Dill: AECOM. Ms. Yukimura: Who is doing the special studies? Mr. Dill: AECOM with R. M. Towill...l believe they are handling all of the special studies. I can confirm next week if there are any other sub consultants to them if you would like. COUNCIL MEETING 12 AUGUST 28, 2013 Ms. Yukimura: Okay. Can we have a list of all the special studies that are being done? Mr. Dill: Okay. Ms. Yukimura: Thank you. Chair Furfaro: I believe there are no more questions. You are going to be prepared to have some discussion about the landfill acquisition costs, any estimates on the roadway work, as mentioned earlier, for discussion at the Committee level? Mr. Dill: Yes. The acquisition costs—actually, I really do not feel that I would be able to have any information for you on that because we have not reached a resolution with the ADC yet. Chair Furfaro: Okay. Who is the point person for the Agribusiness Development Corporation on that negotiation? Mr. Dill: The Executive Director is Mr. Jimmy Nakatani. Chair Furfaro: You will have some detail for us on the road costs though? Mr. Dill: I will talk to our consultants to see what we have available and what is done. Chair Furfaro: Thank you very much, Mr. Dill. We are going to refer this to Committee next week in Mr. Rapozo's Committee. Thank you for the update. For the public, knowing that it is going to show up in next week's Committee Meeting, is there anyone that would like to give any testimony now? Ken, come right up. Ken, before you start your testimony, you do understand this is coming back to Committee next week? This was an initiative by the Chief Engineer to give us an update at this point. KEN TAYLOR: Yes, I understand. Good morning, Chair and members of the Council. My name is Ken Taylor. I want to thank Larry for this update, but I do have some concerns. It starts with current challenges. I think besides what is listed here, this is a culturally sensitive area that should be included in "current challenges," as well as the environmental aspects of the area. I also want to bring in reference to the road access. When this site was first presented to the new host community, they were informed emphatically that a bypass road would be included. It is my understanding at this point in time that the bypass road has been eliminated from the EIS process. I think that when you make a presentation to the community that includes the landfill and a potential new bypass road that it all has to be covered in one EIS process. There will be challenges on that, if it continues as currently slated, but that needs to be addressed and addressed quickly because delays at this point in time in this process are not acceptable. Time is of essence to move forward with this project. The other concerns I have is looking at the site for the recovery park. As I understand it, the proposed landfill site itself is good for over two hundred seventy (270) years. It does not make any sense to me, at this point in time, to be renting or leasing additional land when that recovery park could be and should be part of the landfill site. I hope COUNCIL MEETING 13 AUGUST 28, 2013 as this goes to Committee and for further discussion, that these issues get straightened out quickly and we move forward. Again, I say we do not need any hitches in moving this project forward and it is imperative that we move this forward in a proper manner, addressing all of the issues upfront, regardless of what the costs are. Chair Furfaro: Excuse me, Ken. Your first three (3) minutes expired a while ago. I just want to let you know that. Mr. Taylor. Thank you. The bypass road is extremely important because the community was told under no circumstances that this site would be considered without the bypass road. Under those circumstances, it needs to be addressed in the EIS process for the landfill. Thank you. There being no objections, the meeting was called back to order, and proceeded as follows: Chair Furfaro: Thank you, Ken. Any further testimony? Do you have a question? Ms. Nakamura: I have a personal privilege. Chair Furfaro: Go ahead. Ms. Nakamura: While everybody was enjoying the fair this weekend, Ken was working really hard with Zero Waste Kaua`i, making it a zero-waste event, so I just wanted to say, thank you Ken, for your hard work this past weekend. Chair Furfaro: Thank you, Ken, for your work with Zero Waste over at the County Fair this weekend. Thank you very much. We are back to having a motion for the referral. Did we have a motion for referral? Mr. Watanabe: We need a motion to refer. Chair Furfaro: Thank you. Mr. Kagawa moved to refer C 2013-294 to the Environmental Services / Public Safety / Community Assistance Committee Meeting on September 4, 2013, seconded by Ms. Yukimura, and unanimously carried. Chair Furfaro: Thank you very much, Mr. Dill. I do want to go to the East and West Kauai Soil and Water Conservation District 2012 Annual Report. There being no objections, C 2013-295 was taken out of the order. C 2013-295 Communication (07/17/2013) from Council Chair Furfaro, requesting the presence of the Director of Economic Development, to provide an update on the East and West Kaua`i Soil and Water Conservation District 2012 Annual Report: Ms. Nakamura moved to receive C 2013-295 for the record, seconded by Mr. Rapozo. COUNCIL MEETING 14 AUGUST 28, 2013 Chair Furfaro: On that note, we do have copies of the Annual 60th Anniversary Report. The County is a contributor to the Soil and Water Conservation District, but I would like to see if there is a presentation. George, you have the floor. There being no objections, the rules were suspended. GEORGE K. COSTA, Director of Economic Development: Good morning Councilmembers and Chair Furfaro. For the record, George Costa, Director for the Office of Economic Development. I am here this morning, and along with us in the audience is Mr. Thomas Oi and Mr. Peter Tausend of the East Kaua`i and West Kaua`i Soil and Water Conservation Districts. What I am going to do is provide you with a few minutes of an overview of not only the report, but some of the really good things that the Soil and Water Conservation District members do to help our island community and agriculture. If there are any more questions or in-depth information that you need, then I would call upon Mr. Oi and Mr. Tausend to provide that information to you. First of all, the 2013 Annual Report, this past year they celebrated their sixty (60) years of service to Kaua`i, and we want to congratulate them for that and all the good things that they have done for our community. Their mission is of the districts to promote stewardship and conservation of natural resources by advocating the use of Best Management Practices by land users and the general public. Here are some of the great things that they do. They are two (2) of sixteen (16) conservation districts in Hawai`i and three thousand (3,000) in the Nation. They seem to help out our farmers through available, technical, financial, and educational resources. They also initiate and support Natural Resource Protection Conservation Outreach, working in partnership with the United States Department of Agriculture (USDA) Natural Resources Conservation Services' (NRCS) Emergency Watershed Protection Program. They are also involved with the permitting process with the County of Kauai Sediment and Erosion Control Ordinance. They help farmers and ranchers with erosion control plans and review of their ag land and operations. They also work in partnership with USDA Natural Resources Conservation Services on soil erosion, control, and water conservation on agricultural lands. NRCS is a prime conservation partner with the Soil and Water Conservation Districts. Other roles that they play include working with the Environmental Protection Agency (EPA) and the State Department of Health on nonpoint source programs. Some of those include pollution, watershed planning, and wildlife habitat preservation and conservation statewide. Also, conservation planning for agricultural purposes. Again, supporting ranchers and farmers in their efforts to obtain Government funding for repair and maintenance of irrigation systems, and also support initiatives that seek to protect and maintain those irrigation systems. For the Office of Economic Development, as Chair Furfaro mentioned, each year, we provide a grant and it is listed in our Budget under "Other Services." This is the account number. In the Fiscal Year 2012-2013, we provided a five thousand dollar ($5,000) grant to the East and West Kaua`i Soil and Water Conservation District. Although the Budget or the title of the line item is called "Grading Permit," it really is funds that help support the process of the East and West Kaua`i Soil and Water Conservation District in working in partnership with the Kaua`i County Sediment and Erosion Control Ordinance. COUNCIL MEETING 15 AUGUST 28, 2013 Members of the East Kaua`i Soil and Water Conservation District, as I mentioned, Mr. Thomas Oi is with us this morning. These are some of the members of that organization for the east side. For the west side, I mentioned Mr. Peter Tausend, who is here today, representing the west Kaua`i organization. As far as outreach programs and the Annual Report that you have with you, we just want to mention some of the highlights of that Report. This is a great opportunity not only for our Councilmembers to be briefed on the good things that they have done throughout the years, but for the general public here in the audience or who will be watching on television. One of the programs that they have is the "Outstanding Cooperators of the Year." For East Kaua`i, it is Marcia Harter. Marcia was honored for her work that she does on her property. I believe she dedicates about two (2) acres of her property and uses that for habitat for the (inaudible) and albatross. For that good work, she was honored and recognized. For West Kaua`i, former Councilmember, Daryl Kaneshiro. He has his Oma`o Ranch Lands. Daryl has been raising his sheep and he has got about four hundred (400) ewe that he grazes on three hundred (300) acres. Daryl has been instrumental in working with the Conservation Districts to eliminate a lot of the invasive species of plants that are found on his ranch lands, and helps with the watershed conservation as well. As far as another great program is the "Outstanding Water Conservationist of the Year." Griffin Shepherd of Aloha Organics is pretty much a one man operation. He works out of Moloa`a. He has twenty-six and a half(26.5) acres, and again, he is a one man operation. On his farm, he has got a lot of mature coconut, mango, and avocado trees. He had a situation where he had some irrigation problems, and working with the Soil and Water Conservation District, he was able to fine-tune some of his irrigation systems to be able to irrigate his crops properly. Also, we have West Kaua`i Conservationist of the Year, Kaua`i Coffee LLC. They had a situation where they have two (2) water sources. One is Alexander Dam and another one comes from a pump station that burned down and severely limited their ability irrigate their coffee crop. Again, through working with the Soil and Water Conservation District, one of the remedies was to prune a lot of the coffee trees. I am told that a pruned coffee tree requires less water. They were able to address it that way. Those are just some of the things that these great organizations do to help our ranchers and farmers. Some other programs—they have their "Conservation Awareness Program" which included five (5) high school students. Some of you may recognize their names. We want to acknowledge them: Erin Rynda, Chantal Rusaw, Layton Fleege, Jasmine Benham, and Eliza Vierra. They are very much involved with the Farm Bureau, Kaua`i County Fair, and the Garden Fair. They also conduct community meetings. Another outreach program is their annual Kaua`i Department of Water "Make a Splash Water Festival." Again, they bring hands on partnership with parents and students, and to raise awareness on water conservation. They had a poster contest that included one hundred twenty (120) students from `Ele`ele School and Kaua`i Christian Academy. These are winners of that poster contest. For Kindergarten to Firs Grade: first place, Isaac Hemingway of Kaua`i Christian Academy; second place, Leilani Kirkpatrick of Kaua`i Christian Academy. For Second and Third Grade: first place, Maeani Arbilera of `Ele`ele School; second place, Keisha Suga of `Ele`ele School. For Fourth Grade to Sixth Grade; first place, Hannah Lockrem of Kaua`i Christian Academy; second place, Kaya Evans of Kaua`i Christian Academy. We send out our congratulations to these students. That is pretty much a quick review of the Annual Report and the great things that they do. If there are any questions, I am open to take those now. We can call upon Mr. Oi and Mr. Tausend, as well. COUNCIL MEETING 16 AUGUST 28, 2013 Chair Furfaro: First of all, thank you, because this is the Annual Report and I would like Mr. Tausend and Mr. Oi to be available with you because I do have a couple of questions. Basically, what you reported to us is the money that goes through Economic Development, but we have other moneys that are available that deal with things such as irrigation systems—fifteen thousand dollars ($15,000) in building for irrigation upgrades and so forth. I also want to know that we are on target with the State because these are moneys that we subsidize, but the reality is, what is the status of the opening or the reopening of the upper Kapahi Reservoir? What prevents the reservoir from being reopened? What kind of options is the State considering at this time? We have users that are not getting any water. It has been a long time since some of these dam actions has been instituted that have affected the East and West Soil and Water Conservation groups. What actions are there at the State level to help resolve these problems with the State? Mr. Costa: Okay. First of all, as far as the additional funding, I believe that comes through the Department of Public Works. I am not... Chair Furfaro: You are correct on that, George. What I want to make sure is that it is not just the marketing kinds of money—Economic Development. No matter what Department it is, it is County money that is coming from this Council that deals with the maintenance of an irrigation drain for fifteen thousand dollars ($15,000), and so forth. If there is no water in these reservoirs, there is no agriculture. That is a bumper sticker we see. These projects that I am talking about seem to be really, agricultural activities that are the kuleana of the State. Where are they now on some of these dams and reservoirs? Is there any County role in there that we can help people who are looking for water? That is the kind of update I would like to hear from the gentlemen associated with the Soil and Water Conservation Districts. Mr. Costa: Okay. Before I ask both gentlemen to speak on the different questions. I guess the first would be that the moneys that are provided from the Department of Public Works on those funding; what are those funds used for? Then I guess the second question, and I know we work closely and they probably do with the East Kauai Water Users Co-op—I believe their function is to provide the source of water, and then the Conservation Districts help the individual farmers with the actual irrigation systems...at least that is my understanding. Maybe these gentlemen can clarify that. Chair Furfaro: Okay. George, I want to pose a question to you. I really want to know what is happening with the reservoirs. If there are no water in the reservoirs and we are giving money for the maintenance of the irrigation system, but there is no water—it is all pending repair actions based on what happened with the dam closures, the reservoir closures. Where are we in the State with that action? That is what I would like to know because you have users in the Co-op that are making decisions whether to be part of the Co-ops financially or not because they are or they are not getting water. What action is being done and how close are we to get something of these resolved for the agricultural community? Mr. Costa: Okay. Maybe I can ask the two gentlemen. I am not sure if they are also members of East Kaua`i Water Users Co-op, but maybe they might be able to answer that question. COUNCIL MEETING 17 AUGUST 28, 2013 THOMAS OI, East Kaua`i Soil and Water Conservation District Member: My name is Thomas Oi. In my past life, I was the District Land Agent for Kaua`i for the Department of Land and Natural Resources (DLNR). When I was there, the dam issue came up because of the Ka Loko Dam incident. The State had to reevaluate the dams and improve it for safety purposes. This has been going on since I was there and I have been retired for almost two (2) years already. All of the dams in the East Kaua`i Water Users group are on—I think we turned it over to ADC, along with the—when we turned over the Kalepa lands to ADC. When I was there, the dam repairs were ongoing. I do not know if they completed it, but probably not because I know up in Kapahi, it is still under repair. I do not know what the situation is right now, but I presume at that time...I know at that time, we had problems with environmental situation at the upper Kapahi dam, and I think they needed to do some redesigns or look into other issues about the environmental concerns. Chair Furfaro: Tommy, let me say that we have a dam or a reservoir that comes under this jurisdiction with the State. They had to mitigate some issues about some liabilities and so forth, so we may have had landowners who have chosen to empty their reservoirs until such time that that mediation about the liability was completed. Mr. Oi: Yes, because I think the upper Kapahi had to be drained to a certain level so they could do the repairs of the reservoir. At that time, they found other ways to divert irrigation water to the users downstream. As far as I know right now, I have been out of it for a while, so I cannot really answer about what is going on up there. Chair Furfaro: Who replaced Mr. Lex Riggle at the Office here in Lihu`e? PETER TAUSEND, West Kaua`i Soil and Water Conservation District Member: Lex's replacement is Ben Vinhateiro. He is the District Conservationist for NRCS. Chair Furfaro: Is he a source for us to continue some discussion about the plan of action? Mr. Tausend: He would be a resource, but... Chair Furfaro: I did use the word "resource" as to what the plan of action is. Mr. Tausend: Yes. As far as reservoirs and source of water, I think the Districts will help if they can, but it is really not their primary responsibility. What we mainly do—I would mention that we do get funding also from Public Works, a line item of fifty thousand dollars ($50,000). That money is specifically targeted to fund a full-time Conservation Specialist, which is a person that is trained to help farmers and ranchers develop conservation plans. Chair Furfaro: I want to thank you for confirming the fact that we have these County moneys in different areas—fifteen thousand dollars ($15,000) for irrigation repair, fifty thousand dollars ($50,000) to offset staffing in positions, and so forth. The County wants to know when we are going to find an understanding of what the volume of water resources are going to be for both the COUNCIL MEETING 18 AUGUST 28, 2013 East and West Soil and Water Conservation that we are paying these moneys in for. That is what I am trying to know. Mr. Tausend: I might clarify the fifteen thousand dollars ($15,000)—I do not know where that goes, but that does not come to the Districts at all. Chair Furfaro: I will show you on our schedule so we get some clarity because I would like to know that we have ten thousand dollars ($10,000) for marketing, fifteen thousand dollars ($15,000) for irrigation, fifty thousand dollars ($50,000) for staffing requirements, and yet we have the farming community members who still are not keeping their membership in the Co-op because they are not getting water; it is not available. That is the concern here. Mr. Tausend: I think if you could get somebody from the Co-op here, they would certainly have much more knowledge about it than I do. Chair Furfaro: Okay. Mr. Oi: I think Les Milnes or Jerry Ornellas would be two (2) people to try to contact because they actually are part of the East Kaua`i Water Users group. I think as far as the reservoir, it would be good if you want to, the Council should contact DLNR. Engineering is part of the people who take care of the reservoirs. Chair Furfaro: Thank you for that, Tommy, because maybe that is our next approach to this; talking with DLNR. Mr. Rapozo, do you have questions? Mr. Rapozo: Thank you, Mr. Chair. This is kind of along the same lines and you may have even answered it already. In the last several months, within the last year, I have received calls from the community about potential illegal diversion of waterways where water is disappearing, whether it is from the reservoir. The issue regarding diverting streams and waters—who can we have these people call? Right now, I do not even know where to refer them to. There is DLNR, but who is the point person on Kaua`i that when someone suspects an illegal diversion, unpermitted diversion, o whatever you want to call it, where do they go? Mr. Oi: On Kaua`i, you would call the Commission on Water Resource Management (CWRM), which is under the DLNR. They handle illegal diversions of streams actually, not ditches. They do not handle ditches, just streams. Most of the diversions are on streams. Mr. Rapozo: So, the Water Resource Management Department under the DLNR? Are they located here on Kaua`i? Mr. Oi: We do not have an Office on Kaua`i. You would have to call Honolulu. Mr. Rapozo: Do you know if they even come down and inspect or investigate? Mr. Oi: I am not sure. COUNCIL MEETING 19 AUGUST 28, 2013 Mr. Rapozo: I feel for these people. Mr. Oi: When I was at DLNR, we would still have to call them ourselves, too. Mr. Rapozo: As far as the East and West Kaua`i Soil and Water Conservation Districts; that is not involving you folks at all? Can you lend any kind of assistance to these people? I am just trying to find a local resource because it is a legitimate problem. It needs to be resolved. Mr. Tausend: If we were made aware of it, we could help look into it, and probably find the people that are responsible to help correct it. Mr. Rapozo: Where is the contact person for your organization? Mr. Tausend: That would be our District Assistant, Marj Stanphill. Mr. Rapozo: I am sorry—Marj? Mr. Tausend: Yes. Marj Stanphill. Mr. Rapozo: What is her contact number? Do you know? Mr. Tausend: Her number is 245-6513, extension 107. Mr. Rapozo: Okay. Thank you. Mr. Costa: Chair Furfaro, if I could, this is just some clarification. You mentioned the fifteen thousand dollars ($15,000)—that is in the OED Budget and that goes to the East Kauai Water Users Co-op, and not this organization. That money is in working with Jerry Ornellas and Les Milnes. Those moneys are used to help clear irrigation ditches and streams, a lot of the work they do, and some of the supplies that they use. In the limited knowledge that I have, as far as the reservoirs, I know they are working with DLNR to try and open up the upper Kapahi Reservoir. I know there was some work started because I drive past there once in a while. They line the reservoir with rock to shore up that dam, and then were told to stop because the State was doing more... "investigative work," I guess, is the right term, but from what I understand, they are close to reopening that up again and letting water flow through or have some storage capabilities. Right now, my understanding is that whatever flow there is, they have to let it go through and not store it like we used to have. For me personally, we have so many reservoirs from the plantation days that are really resources for this island. As fuel costs go up, pumping and electricity costs go up, here we have not only a resource for water, but also we have some pump storage capabilities to generate electricity if we really look into it. Anyway, that is my statement. Chair Furfaro: I think you understand my bigger point. The first is maintaining some quality water flow in an organizational structure that is very varied and diverse in different political subdivisions. We are paying money in and yet, we know that there is no water coming to some users because so many of the reservoirs are quite frankly closed by the State. I am trying to find out COUNCIL MEETING 20 AUGUST 28, 2013 progressively on what is the timetable to get some of these or partial water resources back to the farming community. No matter where the money is, it starts to add up to a pretty piece of County money. Mr. Costa: Right. Chair Furfaro: I am going to give Mr. Bynum the floor, and then Mr. Hooser, and then Councilwoman Yukimura. Mr. Bynum: Good morning. Thank you very much for being here. Could you describe how the process about providing input and review on conservation plans? What is the process? Mr. Tausend: Yes. If a farmer, rancher, or land user has a resource concern, we direct them to work with the NRCS to understand those concerns and develop a conservation plan to address those concerns. After the plan is developed and is ready for review, it would be brought to either the East Kauai Board or the West Kaua`i Board for a review and a vote whether or not to approve that plan. We have regular monthly meetings. In the course of a year, the two (2) Districts review about thirty (30) conservation plans. Mr. Bynum: Members could provide input and the plans might be adjusted accordingly? Mr. Tausend: Correct. It may not be approved at the first meeting if there were concerns. They would be voiced by the board members and the plan would be updated, and then brought back at a later date. Mr. Bynum: You are looking at various conservation issues about water and erosion? Mr. Tausend: Yes, many plans are concerned with trying to prevent soil erosion and sedimentation. Mr. Bynum: Controlling dust, also? Mr. Tausend: Yes, dust to some extent. Mr. Bynum: Is that one of the topics that is discussed? Mr. Tausend: On occasion, yes. Mr. Bynum: The plan might have plantings to control that kind of thing? Mr. Tausend: Yes, whether it is a cover crop or wind break. There are a number of conservation practices that can be utilized for conservation plans depending on the concern. Once a plan is approved by a board, it is then—if the cooperator needs an exemption to Ordinance No. 808, it is up to that cooperator to follow the steps with the County to get that exemption. One part of the getting the exemption is an approved conservation plan. Mr. Bynum: Right, an exemption from the Grading and Grubbing Ordinance. COUNCIL MEETING 21 AUGUST 28, 2013 Mr. Tausend: Correct. Mr. Bynum: In order to do their practices, they are controlled by this conservation plan as opposed to the County Ordinance. Mr. Tausend: Correct. Mr. Bynum: Eventually, the plan gets presented to the County for review? Mr. Tausend: Yes. Whenever we have a plan, upfront, we would like to know if the cooperator intends to go for an exemption. If we know that, there will be a representative from Public Works at our monthly meeting to be aware of that plan and help review it also. Mr. Bynum: Is there a particular County person who might appear...a Staff person? Mr. Tausend: The contact to come to the Districts is Paul Togioka. Mr. Bynum: Who we know well. He is a member of one of the Districts. Mr. Tausend: Actually, yes. He is a resource person. Mr. Bynum: Right. Mr. Tausend: In the presentation, the listings were a little misleading because we just had a photograph on our Annual Report with who happened to be at the meeting. Mr. Bynum: He is not a commission member. He was there as a resource person. Mr. Tausend: That is correct. Mr. Bynum: You mentioned that the NRCS has a representative on Kaua`i. Mr. Tausend: Yes. Mr. Bynum: Who is that? Mr. Tausend: He recently arrived in January. His name is Ben Vinhateiro. Mr. Bynum: Ben Vinhateiro? He has an Office here on Kaua`i? Mr. Tausend: Yes. COUNCIL MEETING 22 AUGUST 28, 2013 Mr. Bynum: I was on the NRSC website last night looking for the State Office, and there is no listing for Hawai`i. Mr. Costa: They are in the Watumull Building. Do you know where Sue Kanoho's Office is? Mr. Bynum: Yes. Mr. Costa: They are right in there, further in the back. Mr. Bynum: On that national website, I wanted to find the State website. It has a listing of all of the states, and Hawai`i is missing. Thank you very much for those answers. Mr. Tausend: On page fifteen (15), there is a blurb about Ben's arrival and a picture of Ben. Mr. Bynum: Great. I am very appreciative of the work that you all do. Thank you very much. Just a (inaudible) Commission on Water Resource Management, for you information and for everyone, when I worked for Mayor Baptiste, we had this Ka Leo Outreach. A lot of community members from the North Shore made these similar inquiries that Councilmember Rapozo was making today. We had the Staff over here in community meetings and the basic story was that they need forty-five (45) people to monitor the streams. They do not have anybody to investigate. They are not following the State law to monitor streams and stream flows, at least at that time. I doubt that things have improved in the meantime. There are challenges for DLNR to follow through with the commitments that were made because of years of decreased funding. Thank you very much. Mr. Tausend: Thank you, County, for the funding also. Chair Furfaro: Let me recap this real quick for all of us. The NRCS Office, which was empty with Lex Riggle's departure, has been filled with this new gentleman. Mr. Tausend: Correct. Chair Furfaro: We are all encouraged to meet him at the Watumull Building. He is the person that these different farm groups would go to and get assistance in preparing their exemption for soil and water, and grubbing and grading. He is the resource to assist. He works on that plan and then comes to your board? Mr. Tausend: Right. Just to clarify, NRCS and Ben, his Office, would help develop the conservation plan. Chair Furfaro: That is what I am saying. He is the gentleman that helps develop the plan. Mr. Tausend: Yes. Chair Furfaro: They go to your board, and your board reviews it. Now, you have missed one small point. That is where it gets approved COUNCIL MEETING 23 AUGUST 28, 2013 and you issue what that goes to Public Works? A stamp? A letter? What happens then? Mr. Tausend: At the time of the meeting, there are three (3) signatures on the conservation plan; the NRCS line, the cooperator line, and the approving District Chair. Chair Furfaro: Okay. Mr. Tausend: After the plan is approved, the District sends out a letter to the cooperator, saying that we approved your plan on a certain date and that is also copied to Public Works. Chair Furfaro: At the end of the day, it is the person's plan that got approved. It is his kuleana to see that it gets to Public Works. Mr. Tausend: That is true and that is spelled out in the letter that we send. Chair Furfaro: Okay. I just wanted to reclarify that. Mr. Hooser, you have the floor. Mr. Hooser: Yes, good morning. It would be helpful on maybe your next Annual Report if you have contact—these names that we are talking about. I was looking for phone numbers and I cannot find any phone numbers. I see a few websites, but I cannot find the key people to call, so that would be helpful, maybe time. A cooperator is the person making the application for the conservation plan? That would be the farmer or the landowner? Mr. Tausend: Yes. Mr. Hooser: Okay. I have a few other questions. Councilmember Bynum asked some of what I was interested in, but I have a few more. If a landowner or farmer has one thousand (1,000) acres, let us say, and they want a new lease; they would then prepare a conservation plan, showing—correct me if I am wrong, I am just going to restate what my understanding. They would prepare a conservation plan showing their intentions and farming those thousand acres, whether they are going to till, and what crops they are going to grow maybe. The map would actually show the land that was proposed to be cultivated. Is that kind of how the process works? Then it would have details on how they intend to mitigate erosion, dust, and that kind of thing? Mr. Tausend: Every plan comes with a set of maps delineating the area that is covered, and then various practices that will be implemented. Mr. Hooser: Those plans are public information. If I wanted to look at them, I could? Mr. Tausend: There are some confidentiality concerns. I know NRCS places a high priority on confidentiality. It would probably be on a case-by-case basis. COUNCIL MEETING 24 AUGUST 28, 2013 Mr. Hooser: I can look at some of those plans and some I cannot, or some portions of them I cannot? Mr. Tausend: I am not really clear, to be honest. Mr. Hooser: Who do I ask if I want to be clear? Mr. Tausend: I would ask Mr. Tausend: She works for the Districts, but she is paid by a payroll service. Mr. Hooser: The Conservation District the cooperator. If you went to the person with the plan and said, "Can I look at your plan?" That would be the person. I think if you went to an agency, they would be reluctant to share the information without the consent of the cooperator. Mr. Hooser: What agency, if I did want to go to the agency because this would be my preference, what agency or individual would I go to to ask the question? Mr. Tausend: I would go to NCRS. Mr. Hooser: That would be Ben? Mr. Tausend: Right. Mr. Hooser: Do you have a phone number? I know you said it is in the Watumull Building next to Sue Kanoho's Office. Is there a contact number? Mr. Tausend: Yes, it would be 245-9014, extension 101. Mr. Hooser: Is he a Federal, State, or County employee? Mr. Tausend: He works for the NRCS, so part of the USDA which would be Federal. Mr. Hooser: Marj Stanphill—who does she work for? Mr. Tausend: She is a part-time District Assistant for the District, but we actually have her paid by ALTRES. Mr. Hooser: By who? Is she a Government employee or private employee? Mr. Tausend: She works for the Districts but she is paid for by a payroll service. Mr. Hooser: Is it public money that pays her or private money that pays her? I am just trying to get clear on this. Mr. Tausend: The funding for her position comes in part from the OED. COUNCIL MEETING 25 AUGUST 28, 2013 Mr. Hooser: The County pays her, but she is a temporary employee? Mr. Tausend: Right. She is a part-time employee for the Districts. Mr. Hooser: But paid for by the County? Mr. Tausend: With County money. Mr. Hooser: Okay. Chair Furfaro: Let us clarify that—"in part" by the County. Mr. Tausend: Yes. Chair Furfaro: She is not contracted as a County employee. Mr. Tausend: No. Mr. Hooser: For Mr. Tokioka, is he a paid employee? You said he is a resource person. Is he a volunteer? Mr. Tausend: He is with Public Works. Mr. Hooser: He is a County employee. Mr. Tausend: Yes. Mr. Hooser: Okay. I am just trying to get straight on who is who. When these maps are approved—let us say I am a farmer and I come in, one thousand (1,000) acres. Normally, do they map out the entire property or do they come back later? They say two hundred (200) acres now and come back later to do two hundred (200) acres? How does that normally work? Mr. Oi: From my understanding, it is whatever they are going to be cultivating. That is all they come in for; a conservation plan. They would not go out and do all of the acres. It is only what they will be using at the time. Mr. Hooser: Okay. They would come back later if they wanted to use more of that land? Mr. Oi: They would have to come in with another conservation plan. Mr. Hooser: Okay. Are those plans amended? Let us say they do a plan and it is approved... Chair Furfaro: Excuse me, Mr. Hooser. I want to point something out. The agenda item is reviewing their financial reporting system as it relates to the County funds. The agenda item—I have given some leeway, but it is not about their internal procedures with the Federal government. COUNCIL MEETING 26 AUGUST 28, 2013 Mr. Hooser: Right. Chair if I could, I think one of the main functions... Chair Furfaro: I am going to give you some leeway, but I want to remind you what the agenda item is and it is about finance. Mr. Hooser: Thank you. We spoke quite a bit about dams, waterways, and other things, and I think conservation plans are one of the main functions and it is an Annual Report. I could just ask a few more questions... Chair Furfaro: I am being very liberal. I just wanted to point that out. Again, it is about their Annual Report and the conservation plan. Mr. Hooser: Do the conservation plans have frequency of tilling? Let us say if they do one (1), two (2), or three (3) crops; does it have a type of crop they are going to grow? Mr. Oi: From what I remember—I just got back on the East Kaua`i Conservation District, but when I was a District Land Agent, I used to sit on the East Kaua`i Board as an Associate Member. When they come in with the conservation plan, they phase the work that they will be doing. It is not something like they are going to be tilling two hundred (200) acres at one time. It is all in units of what they are going to do and it is all phased. Mr. Hooser: Okay. The person who does the technical review would be Ben. Mr. Tausend: Yes. At Ben's Office, they have two (2) Conservation Planners or Soil Conservationists, so they all work together, including our person. Everybody works as a team to get these plans drafted and ready for review. I think the person who signs it for NRCS is the District Conservationist. Mr. Hooser: Okay. This was not included in the PowerPoint but it is included in your Annual Report? Mr. Tausend: Right. That was the statistics that NRCS provided. Mr. Hooser: It shows that there were thirty-one (31) plans totaling eighteen thousand four hundred ninety (18,490) acres. Those were conservation plans that were approved? Mr. Tausend: Correct. Mr. Hooser: That is eighteen thousand four hundred ninety (18,490) acres of expected land that would be cultivated on Kauai which conservation plans were approved? Mr. Tausend: Yes. Those figures came from either Lex or Ben. I am not sure who provided them. Mr. Hooser: Okay. Thank you. Thank you, Mr. Chair. COUNCIL MEETING 27 AUGUST 28, 2013 Chair Furfaro: Thank you, Mr. Hooser, for keeping your questions tied to the Annual Report. I appreciate that. JoAnn, you have the floor. Ms. Yukimura: Yes. Thank you, gentlemen. I appreciated the Report and the work. It seems to be really important work because your mission is to promote the stewardship and conservation of natural resources. It was very informative because I did not realize that the Conservation Districts are self-governing subunits of State government. Apparently, it is a very longstanding system of working with farmers and agriculturalists to make sure that soil is conserved and protected. Is that correct? Mr. Tausend: I think it goes further back than the six (6) years on Kaua`i. The national movement was started basically in response to the "Dust Bowl" situation in the 1930's. Ms. Yukimura: The Dust Bowl situation in Oklahoma and elsewhere in the 1930's. Dust is actually a big portion of the goals in terms of dust control? Mr. Tausend: As it relates to soil conservation, yes. Ms. Yukimura: Is there ever any measurement of the amount of soil either conserved or lost on this island annually? Mr. Tausend: I do not know if it is measured, but I know that the NRCS has a formula that calculates soil loss with and without different conservation practices. Ms. Yukimura: Okay. I just have a few questions. They do relate to soil conservation plans and I would just ask three (3), but who evaluates the adherence to the plans? Mr. Tausend: If resources permit, there is follow-up with the cooperators. Ms. Yukimura: By whom? Mr. Tausend: By the Districts and the NRCS. Ms. Yukimura: Okay. How long are the plans effective? Mr. Tausend: The letter states that one should consider revision every five (5) to ten (10) years. Ms. Yukimura: Okay. Who is the full-time person to help with soil conservation plans? You mentioned fifty thousand dollars ($50,000) in Public Works' Budget. Is those funds Paul's position? Mr. Tausend: No, it is another District employee. Her name is Jenny Scotty. Ms. Yukimura: Okay, so it is in the NRCS Office? COUNCIL MEETING 28 AUGUST 28, 2013 Mr. Tausend: Right. Marj and our Conservation Specialist work in the same Office as the NRCS Staff. Ms. Yukimura: Okay. Mr. Oi: Councilmember Yukimura, Paul is an employee of Public Works, and he handles the Grading Ordinance. Ms. Yukimura: He handles the Grading Ordinance... Mr. Oi: For the County of Kaua`i. Ms. Yukimura: Right. You do not need a Grading or Grubbing permits if you have a soil conservation plan? Mr. Oi: He yields our conservation plans for us to comply with the Grading Ordinance. Ms. Yukimura: Okay. Those conservation plans are also submitted to the County government? Mr. Oi: Yes. He is aware of it. We submit it to him and he reviews it. Mr. Tausend: If somebody goes in for an exemption with the conservation plan, they would get a copy of the conservation plan, as well as a lot of other supporting documents to satisfy the requirements. Ms. Yukimura: Those plans are submitted to the Public Works Department? Mr. Tausend: If somebody goes for an exemption. Ms. Yukimura: Okay. Mr. Tausend: Not every cooperator and not every plan needs or wants an exemption. Ms. Yukimura: Okay. Thank you very much. Thank you for your work. It goes on every year. I have been sort of aware of it, but I learn more and more every year. Thank you. Mr. Oi: I would like to say thank you for the funding of our Conservation Districts because as you know, the State DLNR requires on their leases and permits of agricultural land, a conservation plan. Without your help in funding our Districts, it would be pretty difficult to reveal all of these plans that are required by the State. Chair Furfaro: Thank you for that comment, Tommy, but I want to add that the funding that we give is for staffing of guidelines under the control of the Federal government. The reality is that the exemption process is through the State. Our funding has been consistent, but a comment that was just made—the plan adherence is inspected if the resources are available. That is scary. That is extremely scary. We are contributing our portion and we are the third COUNCIL MEETING 29 AUGUST 28, 2013 political subdivision in the line here, but with sequester at the Federal government and the cuts that the State made, the adherence is reviewed if the resources for staffing are available. That is pretty revealing. Mr. Kagawa, you have the floor. Mr. Kagawa: Thank you, Chair. In following what we did with the item that we referred to Mr. Rapozo's Committee—if we have deeper questioning, I would prefer that we go to Committee. We have many items today that are going to take up a lot of time and I do not want to rush through those items because we are spending a lot of Committee type time on issues before us. George, in the future, I would prefer that if we have a long presentation and we are going to get a lot of questions, let us maybe go to Committee and we can really have everybody here. I wish Mr. Togioka was here to answer for himself instead of getting secondhand answers from Mr. Oi. Thank you. Chair Furfaro: I want to point out this agenda item is on it only because it is your Annual Report. We contribute, and the request for the update on the Annual Report and the way the money was spent came, in fact, from me, the Chairman. It is one (1) Report a year. If members desire to further have discussion on this for a new posting, we can. Ms. Nakamura: Thank you. First of all, congratulations on your 60th anniversary. I wanted to ask the question on the resource conservation plans. I guess it sounds like from Mr. Oi said that is it mandatory on State-leased lands. What about for other privately-owned lands? Is it mandatory or voluntary? Mr. Tausend: Getting a conservation plan is not mandated for private landowners. Ms. Nakamura: Okay. Mr. Tausend: Often, there are concerns that they have and the expertise is there with the NRCS. Ms. Nakamura: Of the farms on this island, what percentage do you think may have conservation plans in place? Do you have any idea? Mr. Tausend: I would say that on the West side, probably eighty percent (80%). On the East side, I do not have that knowledge. There are many small operations, some of which have conservation plans. Ms. Nakamura: For enforcement of those plans, basically you are saying... Mr. Tausend: There are follow-ups that happen, usually annually with the Districts, and then NRCS going to the cooperators to see if the practices are being implemented. Ms. Nakamura: Okay. I agree with Councilmember Kagawa that this might be better—we could probably get more information if we put it in Committee. I think understanding the enforcement end of the conservation plans, to me, would be very helpful, especially with other items on our agenda. I would ask that it be referred to Ag Committee, if others agree that it makes sense. COUNCIL MEETING 30 AUGUST 28, 2013 Chair Furfaro: Are you finished with your questions for the individuals? Okay, Mr. Bynum, you have the floor, and then Ms. Yukimura. Mr. Bynum: I want to thank you guys for coming again. I agree with the discussion that you were answering questions that are better answered by others and so I appreciate your willingness to do that. It was several weeks ago when I asked for a Staff assignment to get conservation plans and explore how the County and conservations plans—I intended to ask for a posting. I think it might be more fruitful if we collect those documents and have some preliminary discussion about the interplay between the County Ordinance No. 808 and the conservation plans. I just want people to know that I am working on that. Chair Furfaro: I have not seen your request. Mr. Bynum: It was for a Staff assignment. I have not requested agenda time. I wanted to do some preparation first. Either way, I wanted to get some salient information or some data first. Thank you. Chair Furfaro: Understood. JoAnn, you have the floor. Ms. Yukimura: I feel like this is really timely, although it might not have been intentional because I have been looking into this area because of the concerns actually that come under Bill No. 2491. Dust is an issue for the community. The large agriculturalists there or the ag operations there are the seed companies. To me, it would be appropriate to have it at our hearings on Bill No. 2491 because we are able to focus specifically on that issue—both runoff and airborne dust or fugitive dust, and erosion runoff. It would help us focus our conversation but we would begin to see how the regulatory process works or does not work. At least, I am looking at amendments to strengthen the dust control aspects of the regulatory system. Chair Furfaro: Okay. It seems like we may not have any more questions. I will give the floor to Mr. Bynum one more time. I will take public testimony. I do want to get the Prosecutor's Office moved out of the audience. We also have the Tax Bill coming up. Mr. Bynum: This is just a follow-up to Ms. Yukimura's comments. Although those issues are related to Bill No. 2491, that Bill only covers certain agricultural entities and the issues that I am looking at are germane to all agriculture and not targeted at that issue, even though it may be interrelated. I wanted our discussion to focus on conservation plans for all agricultural entities, not just the ones that are identified. As we move forward, I think we will have more discussion, and in what format it occurs will be up to the Council and the Chair. Thank you very much. Chair Furfaro: First of all, I want to say to you gentlemen, "congratulations." I am sorry if we seemed very concerned about what amounts for us about sixty-five thousand dollars ($65,000) is not much in our budget and certainly not much in yours. We also have concerns that are coming in from members in our community, the agricultural community, about water diversion as Mr. Rapozo stated like dam/reservoir resources to promote farming. Those are things that are really covered in the scope of the East and West Water Conservation, in conjunction with the Feds and in conjunction with State. This may end up resurfacing as a new Committee item, but your work, again, for sixty (60) COUNCIL MEETING 31 AUGUST 28, 2013 straight years is much appreciated. We thank you very much for being present today with George. On that note, I am going to take public comment. Mr. Watanabe: Mr. Chair, we have one (1) registered speaker, George Rapozo. GEORGE RAPOZO: Thank you. My name is George Rapozo. I live at 5897-E Ka'apuni Road. I am sorry that I did not meet you people up there. My wife was telling me that you guys came and I was busy in the pasture. Anyway, the fifteen thousand dollars ($15,000), is that a one time deal that you guys give to these guys? Chair Furfaro: Actually George, I can create a history of what we have given for the past several years. Mr. G. Rapozo: Yes, I would like to have that fifteen million dollars ($15,000,000)... Chair Furfaro: Fifteen thousand dollars ($15,000)... Mr. G. Rapozo: Yes. I would like to have some of that and go up there and clean that ditch up. Now, if I get water today, can they send the water to my place? Chair Furfaro: I think part of the problem that I saw was also attached to the water levels that do not exist in any of the reservoirs. Mr. G. Rapozo: Do not exist in the reservoirs...what are they doing with all of the spring water that is coming out from up in the hills? Chair Furfaro: That is a question that we are going to direct towards the State. Mr. G. Rapozo: It is going down into that reservoir. What is happening to that water? Chair Furfaro: I do not know enough to tell you where the water is going but I was up there yesterday. It was empty. Mr. G. Rapozo: Jerry Ornellas, is he here? Chair Furfaro: No, Jerry is not here. Mr. G. Rapozo: I hear that the water is going down to his place. He is one of the Conservationist here on this paper. Why is it that he can get the water and we cannot get the water? Chair Furfaro: I do not have the direct answers for you. Mr. G. Rapozo: That is part of my question now. These two (2) guys were talking "this and that," but I did not hear anything come out about how our ditches are prepared. Right now, if you send water down to my place, the water will not reach me. It will all go over the bank and down to the valley below that, and whose property is that; I do not know. It is an overflow from the ditch. COUNCIL MEETING 32 AUGUST 28, 2013 No way in hell is that water going to reach down to my place. I walk that ditch and that ditch cannot handle that water going down to my place. There is no maintenance. Nobody is maintaining that thing. My neighbor up the road wanted to show me where the water was going, but I did not get enough time to meet him and all this and that. I found out that the water was going down to Jerry's. Jerry is one of the guys...he belongs to these guys here...environment or what the hell. I do not know. They are not cleaning that ditch. Those people are not using the money. Give me that fifteen thousand dollars ($15,000) and I will make sure that the water goes down to our people in our District. I will make sure of that. I will get me a machine that fits in there and go do the work. But no, nothing is happening. We have been talking to you and thank you, JoAnn. Mr. Hooser—I do not know. He has been talking about all kinds of other things and I was kind of getting disappointed because I said, "Hey, I want to know what is happening to the water in the reservoir and where the water is going." Chair Furfaro: George, your time is up, but I want to tell you that what is going to happen with this item is that I think although I put it on there and we move to receive it... Mr. G. Rapozo: Yes...get that guy to come around; that tall haole boy. He comes over there every time and tells me that I am using all of the water and explain to him why I was using all of the water. Chair Furfaro: I will tell you that I think there is going to be a motion to reconsider this to put it in Mr. Rapozo's Committee, so there will be further discussion. I am sorry I missed you, but maybe I will try in the near future and we will go up there. I went all the way up to Kapa'a stream, looked at the flow and several of the reservoirs, and I think we need a lot of State help. We will make another trip for sure. Mr. G. Rapozo: Okay. I want that guy, Les is his name. He is the haole boy who came around and told me that I was using all of the water and the guys down there do not have any water. I explained to him why I was using all of the water. If anybody wants to know why I am using all of the water, I will show him what I did...to prevent the water from coming down to my place, but no, it is not happening. Chair Furfaro: Okay. Mr. G. Rapozo: I wish somebody would come... Chair Furfaro: We will follow-up again. My cell phone is on my business card. I left it on your porch. Mr. G. Rapozo: I would even like to come and talk to you people about why the water is not coming down. Thank you. Chair Furfaro: We have a question for you. Mr. G. Rapozo: Okay. Chair Furfaro: You have a question from Mr. Kagawa. COUNCIL MEETING 33 AUGUST 28, 2013 Mr. Kagawa: Thank you. Have you contacted Representative Tokioka? Mr. G. Rapozo: The guy who was over here? Mr. Kagawa: No, James Tokioka. What about Derek Kawakami? I believe last year, Waimea ditch had a problem. They were not getting water. Representative Morikawa had moneys put in to clean it. If they appropriate the moneys, some of your problems can be solved. Mr. G. Rapozo: The County has been appropriating plenty of money, too. That is why I went to see the Chair, and he said that he is going to look into it, which he did. The other guys did not come. I do not see Jerry around or that other haole around now when we have the problem. There is water in that reservoir. Where the water is going is what I wanted to know. It is going to Jerry Ornellas. You tell him that I said that. Mr. Kagawa: I think the best way is to have the agencies that oversee it to get involved in the process. I believe that the reservoir and the ditches are a State issue. I will send minutes of this meeting over to Representatives Tokioka and Kawakami. Mr. G. Rapozo: Yes. I hope so. Mr. Kagawa: The State had a surplus last year, so they actually had... Mr. G. Rapozo: Fifteen thousand dollars ($15,000) is a lot of money. Put it in my pocket and I will open that ditch up if that is the problem. Mr. Kagawa: It is not a fact, but I believe the amount they appropriated for Waimea ditch was fifty thousand dollars ($50,000). Mr. G. Rapozo: Appropriate that money to me and I will give us water. Chair Furfaro: I will be in touch with you and come up to the house. Mr. G. Rapozo: Okay. Thank you. Chair Furfaro: Is there anyone else who wants to testify on the Annual Report for the Soil and Water Conservation District? Come right up. Just for the audience, I want to take care of the Prosecutor's Office and get them back in Court, and then we are going to take a break and go into the Tax Bill. I am sorry that it has been a long morning. LONNIE SYKOS: For the record, Lonnie Sykos. I found this Annual Report to be very interesting. I encourage you to bring this back into Committee. Of the items of interest, I am a farmer. I come from both sides of my family from thousands of years of farmers. I have farmed successful in Hawai`i. I am not commercially farming today, but I raised gourds for my gourd business. I have a garden at my house. I was intrigued by the fact that in the Annual Report, there is a man from Moloa`a who I believe had over twenty (20) acres of fruit trees. COUNCIL MEETING 34 AUGUST 28, 2013 Economic Development said more than once that this man runs this operation by himself. If you want to create economic development in agriculture on Kaua`i, this guy is the expert. How does one (1) man take care of all of that acreage, prune the trees, harvest the trees, move the fruit to the packing area, load all the fruit so it can be taken to market, take the fruit to market, and then run the office. Hey, tip of the hat, but I would like to find out more about how this actually occurs because this is a huge thing. If you can actually do that, this guy is onto something that could dramatically change agriculture on Kaua`i. One of the issues that all the islands face, but in Kaua`i in some ways more so, because we are not as steep and the water does not runoff as fast; is the entire system going back to when the Hawaiians began putting in flumes and irrigation systems. That is integral to our public safety during storms. One of the things that is lacking is a coherent plan for what to do in the long-term about maintaining our entire riparian water system. Every time somebody goes and monkeys with one section of it, it has a huge impact on everybody downstream, as well as laterally. For the soil and water conservation people, I encourage pushing to create a bigger, more inclusive plan than exists today. For example, I live in Wailua Houselots, and we have the remnant of the runoff system from when it was plantation land. As people fill those old ditches in front of their house in order to get more yard or to create a parking space... Chair Furfaro: Lonnie, that is your three (3) minutes. I am only taking increments of three (3) minutes, so please summarize. Mr. Sykos: Okay, I will summarize. That entire system needs to be looked at. We were also told that there are national best practices, which would provide an estimate for how much soil is removed over a period of time based on different ag and conservation practices. If we are going to spend money on anything in soil conservation, we should invest the money in having somebody actually run that for Kaua`i; these are the practices that we witnessed and this is what the government gives us as a standard to begin with so we can have an idea of how much soil we are saving and how much soil we are actually losing in the different regions. Thank you very much. Chair Furfaro: Thank you. Next speaker, please. LARRY TEVES: Councilmembers, my name is Larry Teves. I came here today to testify and support my good friend, George Rapozo. We have grown up together in Kapahi. I know the reservoir and all of the roads up there. I worked for the City and County for thirty-three (33) years, and I was the one that walked down the beach trail about two (2) months ago and seen that ditch full to the top, going down. Where was it going? It was not coming to Kapahi park. In the back of my property is Tony Arruda's property, and the tunnel goes underneath his property to come to Kapahi park. The water was going towards Jerry Ornellas' farm. If they were going to throw away the water, right by the reservoir is a water gate. They are going to empty the water. I was shocked to see that the water was going into the ditch, full. Today, I come here and ask that all of the farmers by Kapahi park have a chance to have the water restored back to the way it was. That ditch will have to be maintained because me and George—I took him, he came to my house, and we went to look at the ditch. It has never been maintained for years. It is all clogged up. You need somebody to go in there with a backhoe or excavator and clean it all up. I am going to recommend, like how George said, that he has been working construction all his life as his job; backhoe/excavator. If you guys need help to go out and look at the place, let me know the time, put on your guys' COUNCIL MEETING 35 AUGUST 28, 2013 work clothes, and I will walk you guys down the ditch and show you the entire area. Thank you. Chair Furfaro: Larry, I want to make sure but the visit that I had was by the Kapa'a stream where it deviates. One piece goes on by Joe Priggy's place and one turns south, which is one that goes to Kapahi park? Mr. Teves: Yes. Chair Furfaro: That is the one you are talking about? Mr. Teves: The one you are talking about by Joe Priggy's place—are you talking about Kahuna Road? Chair Furfaro: Yes. Mr. Teves: We have one ditch coming directly to (Inaudible) Road. The reservoir that they are (inaudible), there is another ditch coming from that one, and there is another ditch coming from the (inaudible) Wailua, crossing the game reserve, and emptying inside of there too. Chair Furfaro: Thank you, Larry. KEN TAYLOR: Chair and members of the Council, my name is Ken Taylor. Conservation—as long as you do not put water in the ditch, you have conserved as much as possible. I do not think that was intent of the Soil and Water Conservation District. I can tell you one thing; Larry grows a very strong and very delicious string bean when he has water. I think the question was asked earlier about the diversions that are going on around the island. I think we really need to look seriously at what is going on because I think there are two (2) things happening. One, there are a lot of diversions that are no longer legal. Second, I believe the State law says you cannot divert more than fifty percent (50%) of the stream flow... Chair Furfaro: No. Mr. Taylor: Yes... Chair Furfaro: No, I will clarify. Mr. Taylor: Okay. I have seen recent pictures of one of the streams up here above the diversion, which had good water flow. Below the diversion, it was totally dry for approximately three quarters of a mile. That is wrong. There is something terribly wrong with that and we need to resolve those problems. I think it is important that we take a good look at all of the diversion activities and I hope that when this goes to Committee, that will be one of the recommendations that comes out of it. Water is a very important issue for the County. We know that in the last twenty (20) years, we have had a twenty percent (20%) decrease in rainfall. The predictions are another twenty percent (20%) decrease in rainfall in the next twenty (20) years. Those are going to have major effects on the island and how we move forward with not only development, but feeding the island population. I think it is time to really take a good, hard look at what is coming and what has happened, and start preparing for all of that. I hope, COUNCIL MEETING 36 AUGUST 28, 2013 again, that as it goes to Committee, that some of these issues get flushed out and we move forward with them. Thank you. Chair Furfaro: Ken, I will be glad to meet with you about State water rules separately to give you an update. Thank you. Is there anyone else? Glenn, please, three (3) minutes. We have got a full calendar. GLENN MICKENS: Thirty (30) seconds, Jay. Thank you. For the record, Glenn Mickens. I want to sincerely thank Larry Teves for being here. Having knowing Larry from the past, he was one of the best people we ever had in Public Works for the organization and things that he did for the County. I wish he was still working. That is all I have to say. Thank you, Jay. There being no objections, the meeting was called back to order, and proceeded as follows: Chair Furfaro: Thank you. I want to point out this posting here was in relationship to the East and West Kaua`i Annual Report, as well as the items associated with development and the system itself for East and West Kaua`i water. We can receive this item and I will entertain a new posting with a broader narrative in someone's Committee. I do not think we should just refer this to a Committee the way it has been worded here. I think it needs a new posting. I think some members have expressed some interest in expanding other items. I do want to say that I think the business still stands here to receive this and come up with a new posting in a Committee. Mr. Hooser: Thank you. I agree. What I would like to do is look at—actually, I think there are two (2) separate issues here. While the East and West Soil and Water Conservation discussion about how soil conservations impact our agriculture in the broad sense, which obviously includes larger agricultural users, too, and some of the issues on the table. I think a broader discussion on that and having the right resource people would be the way to go, but I will give this some thought and send that communication to you. The second issue of the East and West Kaua`i water system—I would love to give that some thought too. I part of it is that I have worked with the East Kaua`i Water Co-op, Mr. Ornellas, and others on this issue in the past. I believe that essentially, the State dropped the ball and is not managing the ditches at all. Certain individuals like Mr. Ornellas and the Water Co-ops stepped forward to do that. It is my understanding that they are unable to manage the whole system, but I think that is a separate topic. We should also engage in that discussion. I am not quite sure whether it is with the East Kaua`i Water Co-op or whether it is the Commission of Water Resource Management. I think it is a separate issue. That is what I would suggest with my perspective moving forward. Chair Furfaro: I will watch for your communication. Mr. Bynum: I will share with the Committee Chair the things that I have put in motion and see if that jives so we are not duplicating efforts. Chair Furfaro: Okay. JoAnn, Mr. Kagawa, and then Mr. Rapozo. COUNCIL MEETING 37 AUGUST 28, 2013 Ms. Yukimura: I have a meeting this Friday with Mr. Vinhateiro in trying to learn about the soil conservation process in doing my research for Bill No. 2491. Depending on my meeting, I may be asking the Committee during the hearings or the Committee Meeting on Bill No. 2491 to have them as resource people or to be able to examine the issue of dust control. I do not have any objections to doing all of the other hearings or agenda items, but I just wanted to give a head's up that I feel this is an important issue with respect to the scope of Bill No. 2491. I may be asking for some resources to be brought before the Committee on that agenda item. Chair Furfaro: Okay. Mr. Kagawa: Thank you, Chair. I can sympathize with Mr. Rapozo and the Teves'. I had my house in Waimea Valley for about ten (10) years. There was the Menehune Ditch that had sporadic water, and then dries up. When it becomes dry, it becomes overgrown and plugs the drains up. When the water flows again, it creates clogging of the drains. The ditches are meant to have water flowing constantly. Something obviously happened. For a farmer, it is critical. We need to look into this. I will try to get the State people involved. Regarding dust, I just want to say that I grew up on the west side of Kaua`i. When the sugar canes were there, I think the dust problem was maybe even worse. It is not to say that we should not look at controlling dust, but it is either your island can have dust, can have ag, or you can have a lot of hotels and concrete all around. It is a give and take, and we have to manage what we have. The dust problem has been there as long as I have been alive. Thank you. Mr. Rapozo: I get really irritated every time the State issues end up here. It is just frustrating that—I am not frustrated at the people bringing it here; do not get me wrong, but it is just disgusting that we have to address the issues and probably use County tax resources to do the State's job. I hope the State is listening. I will ask that the minutes of this meeting, as Mr. Kagawa said, get sent to all of our legislators because they need to hear. It is unfortunate that their meetings are on Oahu and we cannot just fly over there, thanks to Hawaiian Airlines' compassionate airfares right now, so you guys come here. In my earlier questions on the group about, "Who is responsible for the illegal diversions?" Just for the record, I was not called by either Mr. Rapozo or Mr. Teves, so I have been hearing this from many people throughout the island; North shore, South shore, everywhere. Our State Constitution provides the mandate that we take care of our farmers. That is what our State Constitution says. These kinds of things cannot continue to happen. I got the name of this person Marj Stanphill. I do not know who she is but I have her contact information. Mr. Teves and Mr. Rapozo, if our Staff could get your contact information before you leave, and if Staff could note, I want to send a communication to this person with their information so that they can contact you folks directly. You can give them the information. I am not familiar with the ditch, to be honest. I would love to come up there and take a walk with you folks, but I know that in your situation, you are not alone. Something is happening throughout this island where people are diverting water illegally and that needs to be addressed. If the State cannot deal with that, then I think this County has got to take care of it. We have to hold our Representatives accountable like our Senators and our Representatives. Let us start with that so we can get your cases in front of this Stanphill person, and let us see how they respond. This is definitely a problem that has been going on for way too long. I really wish the County had the resources, or actually the authority to do so. If we could write a check to you, I know it would get done, Mr. Rapozo. I have COUNCIL MEETING 38 AUGUST 28, 2013 no doubt in my mind that those ditches would be cleared. There is a process in place that we have to follow. Let us let them tell us, "Sorry, we do not have money," and then we will take it from there. I am not sure what the reason is but let us take it to them and get it from them. If Staff could take that note and if you could stop by before you leave and we will get your information. You folks will be kept in the loop as far as the communication between us and this Ms. Stanphill. Thank you, Mr. Chair. Chair Furfaro: Mr. Bynum. Mr. Bynum: Thank you for this discussion. I look forward to this report every year because it shows how many people care about Kaua`i; the watershed, conservation, environment, and how hard they work as volunteers to address that. Many things are changing on Kaua`i and it is changing from the way they were before. One of the things that has changed, that is pointed out up here almost weekly, several times in the last month, is that the State Department of Land and Natural Resources cannot fulfill the very laws that they are required to do in many ways. Today, we talked about the Commission on Water Resource Management. Years ago when I worked in the Baptiste Administration, a whole bunch of people on the North Shore and Moloa`a said, "There are stream diversions mauka." They reached out to the County and they reached out to everybody, and I got involved and found out that it was about CWRM. We asked CWRM people to come to Kaua`i to a community meeting and tell us about the work that they do and what they could do about what we believe were stream diversions. It was eye-opening that these individuals at CWRM were outstanding people who were scientists, who care passionately about conservation. Since the 1980's, their staff have been cut over, and over again. The same thing happened at State parks and almost all of the State agencies. I think Mr. Oi would agree with me because he worked through that and watched good people trying to malama aina and not have enough to do it. I think it is good. We have three (3) separate issues. We are going to deal with them separately as is appropriate. For CWRM, they are required to monitor the streams and research but they do not do it. The law says "you shall," but they do not do it because they have maybe five (5) or six (6) employees, and they need forty (40) to accomplish that goal. The County, whether it is Civil Air Patrol, Coqui frogs, keeping water systems intact, or pesticide regulation; the State has not done their job and the County needs to step up because it is about the health and economic vitality of our island. We see examples every day. I am proud of our County where we have stepped up with those issues that I mentioned, and I think we will continue to step up because we cannot let this economic vitality and the safety our community slide because the State has not devoted sufficient resources. Thank you. Chair Furfaro: Okay. I am going to summarize this again, real quickly. Somebody touched on fact that there are items here that really need to be fulfilled by the State. Obviously with items dealing with ditch, water flow, and so forth; I want to make sure everyone understands that. I also want to throw the picture out here. We cannot keep gobbling up in our public role as the political subdivision of Kaua`i, everything from taking care of Coqui frogs to every other item that deals with—we do not even get the fees that come with tickets from our police officers. Now, we have been capped on how much money we are going to get in our share of the Transient Accommodations Tax (TAT), permanently. I want to make sure that I bring a little reality here. Our job, and I will be at your next Hawai`i State Association of Counties (HSAC) meeting Mr. Rapozo, will be to speak to other Council Chairs about the State needing to come to the table and do what is expected COUNCIL MEETING 39 AUGUST 28, 2013 of them and outlined their jurisdiction under the State Constitution. We cannot keep gobbling these pieces up. We have a slow-growth community. We only have so much of a tax base. It is very important for us to understand this. I also want to say to those serving on the Co-op, how we very much support their roles and volunteerism. From the Les Milnes' and Jerry Ornellas', the bill splits right down the line. I have see them as taking good stewardship in their roles, and I have to tell you that they are very knowledgeable and very sincere about wanting to help be part of the solution to the problem. I think it is only fair for me to say that. Together, we can get this to happen, and we can lobby for more attention from our Representatives at the State level from areas of taking care of business. That is really something that we should anticipate and expect the State to do. The motion here is to receive this item. To all of the members, I will accept your correspondence on any new posting that broadens the narrative that we propose to have in future postings. The motion to receive C 2013-295 for the record was then put, and unanimously carried. Chair Furfaro: Ten (10) minutes for the break. I am going to start as soon as I have four (4) members. We are going to take care of the Prosecutor's Office, and then go to the Tax Bill. Thank you very much. We are on a ten (10) minute caption break. There being no objections, the meeting was recessed at 11:17 a.m. The meeting reconvened at 11:28 a.m., and proceeded as follows: Chair Furfaro: We are back from our recess. Mr. Clerk, I want to take care of the Prosecutor's Office now, if I can, and then go into the Tax Bill, please. COMMUNICATIONS: C 2013-269 Communication (07/17/2013) from the Prosecuting Attorney, requesting Council approval to establish and hire one (1) fifty percent (.50) Full-Time Equivalent (FTE) Office of the Prosecuting Attorney (OPA) Special Investigator position on an 89-day contractual basis utilizing funding currently budgeted in OPA: Mr. Kagawa moved to approve C 2013-269, seconded by Mr. Bynum. Chair Furfaro: Who is going to be available to discuss this from the Prosecutor's Office? The rules are suspended. I will let you all introduce yourselves, and then we will go from there. There being no objections, the rules were suspended. KEVIN TAKATA: Thank you, Mr. Chair and Councilmembers. Kevin Takata, First Deputy Prosecutor. The essence of our request is to take one (1) full-time position and turn it into two (2) part-time positions at absolutely no additional cost. The reason to do that to maintain is we want to retain a present Investigator who can no longer be working full-time due to family commitments. COUNCIL MEETING 40 AUGUST 28, 2013 Chair Furfaro: I think this came out from Committee with acknowledgments from all. Are there any questions for the Prosecutor's Office? Mr. Kagawa, you have the floor. Mr. Kagawa: I just have one quick question. Is the efficiency of having two (2) part-time positions is going to be equivalent to at least having the full-time position? Mr. Takata: It may be even more because the present Investigator is very professional and often spends more time than he is actually paid for. Mr. Kagawa: Thank you. Chair Furfaro: Any further questions? Ms. Yukimura: I just want to commend you for being flexible in your personnel arrangements to allow for high-quality performance, and also to allow for people to accommodate their family needs. Mr. Takata: Thank you, but the flexibility is really because we have such an excellent person in the present position. We really did not want to lose him. Chair Furfaro: I know I do not have to caution the Prosecutor's Office on this, but I do want to point out when you said that he "often makes contributions to his work hours beyond the time." I want to make sure that if that is the case, that you are constantly reminding him he is a part-timer, so if we ever had to defend ourselves, it will be well-documented. Mr. Takata: We will do so, Mr. Chair. Chair Furfaro: Thank you very much. Any further questions? Thank you all for being here. Kevin, thank you very much. Mr. Takata: Thank you. Chair Furfaro: Any comment from the audience? Is there anyone wanting to speak on this matter? Seeing no one, members, I will call the meeting back to order. Any dialogue? There being no objections, the meeting was called back to order, and proceeded as follows: Mr. Rapozo: Mr. Chair? Chair Furfaro: Yes. Mr. Rapozo: Thank you. I am going stand on my comments from the Committee Meeting. My position on this in no way should be construed as my commentary or opinion of the quality of the Staff. I am very familiar with both of the Investigators at the Prosecutor's Office. I had a great flight over to O`ahu with Mr. Burgess, who is here, and gave me some updates on some of the cases. I am very pleased with what they are do and very happy with COUNCIL MEETING 41 AUGUST 28, 2013 what they are doing, but my philosophy is completely different. It has nothing do with quality of work. The goal that is trying to be achieved by the Prosecutor's Office can be done without the creation of a new position number. We all went through a very rigorous Budget process, and I thought we had an understanding that we would not expand the size. I understand what the First Deputy said at the Committee Meeting, which was that the intent is not to do anything more with this position, but there comes a point where that Investigator will leave the County and eventually retire, and then the position number will remain. They are seeking a position number, so they can create a contract position. I would go on the record saying that I believe we probably have one hundred (100) vacant positions. We see that every year in the Budget. It could be simply done by transferring a vacant position over to the Prosecutor's Office for the duration of this contract. That is all that needs to be done. You do not need to create more positions. When we were in the Budget Session, I know we talked about cutting back, and today we have a few Bills on the table, just today, that will increase people's taxes like fees for dogs and all of these things to meet the standards that we try to set. We can do this without expanding the size of Government. That is my message. The message is really to the Administration to work within your means. We have the resources available. We could do this. This could have been done without coming through Council by utilizing a vacant position somewhere in this County. But no, we continue to choose to increase the size. It is a position number that can be used in future for anything. I am not going to be supporting the request. I am not going to be supporting any request for new positions in this County, just because I think it is the wrong thing to do. I do commend the Prosecutor's Office for working with the situation so we can maintain that level of professionalism in that Office. I commend them for that, but I just believe that there is another way of doing it without having to create any new positions. Thank you, Mr. Chair. Chair Furfaro: Any further comments? Mr. Bynum: We are the legislative body and we have control of the purse strings. I make dozens and dozens of votes here where the Administration makes a presentation. In my mind, I think, "I would do it differently." But a lot of that has to fall into the category of "deference." These people have to run their Department. They are there day to day. I may think there is a better way to do it, but that is their choice to make. In my role, I am not going to try and interfere with that. We know the history of the Prosecutor's Office over the last few years and we know a number of positions were created, and the new Prosecutor came in losing one of those positions. We know what they are asking; no additional funds and no additional intention to expand services beyond what they are, other than what they might get from having a two (2) person team rather than one body. That is well within the deference category for me and I would not try to impose my role on how you choose to run your Department. Chair Furfaro: Is there any further discussion? Councilmember Rapozo, you have floor for the second time. Mr. Rapozo: I hope Mr. Bynum will continue with that philosophy as we go through the years. I sat here years ago approving a "signed violation person" for the County. The Administration came over and said, "We need a position to enforce the Sign Ordinance." Sure. We give them the position, but it disappeared and went somewhere else. We approved a "taxi cab inspector position" because it was much-needed. The Council said, "Okay Mayor, you can have it." Poof, be gone. I am not saying that is going to happen, but I am just saying that we COUNCIL MEETING 42 AUGUST 28, 2013 do not need to get the result that is being asked for by creating another position, which can be used later. That is all I am saying. It can be done. If there were no positions available or no vacant positions, I would definitely support this request because I think it is a very important request. I think it is a much needed request, but it can be done without affecting the increase on the size of this County. Thank you. Chair Furfaro: Any more commentary? Ms. Yukimura: I just want to say that a large part depends on past performance of the Department Head asking for the positions. We cannot apply judgment on one (1) Department Head to another. In this case, I think we have seen good rationale. We have not seen our trust violated and we need to support our Departments in getting their job done if we see that they are committed to their mission and if they are capable of doing a good job. Chair Furfaro: Any further comments? The Chair has one. For the Prosecutor's Office, I want you to know there is not a lot of money left. Your feet will be held to the fire. We take you for your word in what work performance improvements are going to occur by this change in this staffing. We are watching. We thank you for all your diligence to this point, but we may have to do more with less for a while here. I just made a comment about us being capped with our TAT permanently. These are real issues for our County that does not have a large tax growth base and personnel staffing is our single biggest cost in this County, as it is for many businesses. Good luck from me on your approach. I want to say how much I have been impressed your full-time employee who is becoming a part-timer. Thank you very much for all of your work in the Office there. We wish everybody success. Can I get a roll call, please? The motion to approve C 2013-269 was then put, and carried by the following vote: FOR APPROVAL: Bynum, Hooser, Kagawa, Nakamura, Yukimura, Furfaro TOTAL — 6, AGAINST APPROVAL: Rapozo TOTAL — 1, EXCUSED & NOT VOTING: None TOTAL — 0, RECUSED & NOT VOTING: None TOTAL— 0. Chair Furfaro: Thank you very much to the Prosecutor's Office. We are going to go to the Tax Bill now. There being no objections, Bill No. 2495, Draft 2 was taken out of the order. BILL FOR SECOND READING: Bill No. 2495, Draft 2 — A BILL FOR AN ORDINANCE AMENDING CHAPTER 5A, KAUAI COUNTY CODE 1987, AS AMENDED, RELATING TO REAL PROPERTY TAXES: Mr. Bynum moved for adoption of Bill No. 2495, Draft 2, on second and final reading, and that it be transmitted to the Mayor for his approval, seconded by Ms. Yukimura. Chair Furfaro: May I ask the Finance Department to come up. It looks like you have an additional presentation for us. To the Staff, a heads COUNCIL MEETING 43 AUGUST 28, 2013 up, if we decide to go to 1:00 p.m. today to take care of this Bill before we break for lunch. Be prepared for that. Go ahead, you have the floor, Steve. There being no objections, the rules were suspended. STEVEN A. HUNT, Director of Finance: Steve Hunt, Director of Finance, for the record. Thank you, Chair and Councilmembers. This has been a Bill that has been years in coming to fruition. It is sort of the last major component of tax reform that began through various iterations, one of which I served on, the Real Property Tax Task Force, another which came to the Administration when I was not here in 2008, and the current Bill today. Many of the pieces of both the Task Force and the recommendations in 2008 have been adopted, but one of the largest components that has not been adopted has to do with the potential removal of the Permanent Home Use Cap. The goals and objectives that we set forth on this last leg of the reform was really to return to a more simplistic property tax system, where taxes once again are related to valuations. We wanted to assure that there was equity and fairness among taxpayers of the same tax class and provide taxpayers with options to reduce their taxes and/or change their tax classifications with efforts that would be done by the taxpayer. Also, to establish a more reasonable minimum tax and to follow through on the tax reform that was articulated with Councilmembers during our Budget proceedings. The proposed initiatives are basically broken into four. One would be to eliminate the Permanent Home Use Cap on taxes and provide alternative measures that would result in a similar outcome in totality. Again, we are looking at not raising taxes, although individuals may see higher taxes. There will also be an equal or greater number that would get decreases in taxes with the totality being neutral. We would increase the minimum tax to one hundred dollars ($100) for Fiscal Year 2015 and one hundred fifty dollars ($150) for Fiscal Year 2016, with some exceptions which include those that are eligible and get the income exemption, as well as a change to the taxes that would be garnered from the credit unions. Then we are looking at increasing the home exemptions. The amounts would go from forty-eight thousand dollars ($48,000) to one hundred sixty thousand dollars ($160,000); from ninety-six thousand dollars ($96,000) to one hundred eighty thousand dollars ($180,000); and from one hundred twenty thousand dollars ($120,000) to two hundred thousand dollars ($200,000), depending on the age breaks. We would create a Home Preservation Tax Limit to assure those that are in outliers that would have the major tax hikes in this proposal would have options to seek some refuse. The properties that were analyzed were really categorized in two separate groups. I have provided some detailed tables earlier that actually broke them into districts as well, but I really want to focus on the two major groups which are the "Islandwide Group." These are all parcels that have home exemptions regardless of their tax class. These are the ones that would be outside of the homestead class and will include properties like vacation rentals where the owner lives on property, commercial properties that have both dual uses, and some other tax categories. Those are the primary two. Also, residential where there are multiple dwellings on the property and only one is the owner occupant. The second group is the "Homestead-Only Group," and that comprises the bulk of the properties that get the home exemption. There are ten thousand five hundred ten ($10,510) parcels in that group. COUNCIL MEETING 44 AUGUST 28, 2013 When we looked at the taxes, we analyzed the 2013 data which was the most current data set that we had, and really looked at the before and after tax implications of applying the higher exemptions and removing the cap. From the Islandwide category, fifty-seven percent (57%) of the properties in this class would seek tax decreases versus forty-three percent (43%) seeing tax increases. When we look at the Homestead-Only category, this grouping, sixty-three percent (63%) would see tax decreases, while about thirty-seven percent (37%) would have increases. Increased exemption amounts will have a much greater impact on the lower-valued properties as opposed to the recent tax rate decreases that have given more relief to those properties with higher values. This makes the proposed changes progressive and will have a greater influence on the median taxes rather than on the average taxes. The average taxes are skewed because some are much, much higher valued and are already paying higher amounts. The measured impact—this is looking both at the Islandwide and Homestead columns here. The average taxes actually go up a little bit on the Islandwide, but are decreased on the Homestead-Only. Again, if you think about that, we are talking about properties in the Islandwide that are about one thousand eight hundred thirty (1,830) additional properties that are currently classed at tax categories that pay higher rates, and typically, they are also higher valued. There is some skewing that they would pay a portion of the relief that would go into the homestead. The median taxes, both under the Islandwide scenario and in the Homestead, would actually show decreases. Now the gross impact, if you look at the Homestead in red, is approximately four hundred fifty-two thousand dollars ($452,000) and would be decreased, so it is not neutral within the Homestead class. Yet, if you look at the increase on the Islandwide, it is about four hundred ninety-six thousand dollars ($496,000). That is a swing of about nine hundred forty-eight thousand dollars ($948,000). What this represents is in totality, the Islandwide, the four hundred ninety-six thousand dollars ($496,000) is what is available to either be given in relief in terms of the home preservation limits or if insufficient, then there could be a tax rate decline to get that to revenue-neutral. I wanted to leave something there because I did not want to put the Administration and the Council in a position of having to raise taxes had this been exactly at revenue neutral and significant reductions were coming in for the home preservation limits. If you look at the counts by threshold, I think one significant one you would look at would be the third column on the Homestead. Approximately eighty nine point fifty-three percent (89.53%) would pay an increase—we are only looking at the increases, but would pay an increase of five hundred dollars ($500) or less. To get to over ninety percent (90%), you would have to be closer to about eight hundred fifty dollars ($850) or nine hundred dollars ($900) because at one thousdn dollars ($1,000), it is about ninety-three percent (93%) or ninety-two point six seven percent (92.67%). Another important number to consider is the actual counts. "The outliers," as I call them, you have approximately one hundred ten (110) islandwide that would pay an increase of over two thousand dollars ($2,000). Only seventeen (17) within the homestead category would pay an increase of over two thousand dollars ($2,000). This again assumes that there is no relief given through the Home Preservation Credit. Many of those could potentially seek additional relief if they were qualified under the Home Preservation Credit. From the aggregate results islandwide, again, this is just showing the numbers of about fifty-seven percent (57%) and forty-three percent (43%), the decreases to increases, and also on the Homestead side. The average decrease for COUNCIL MEETING 45 AUGUST 28, 2013 Islandwide is approximately two hundred twenty-one dollars ($221). The median decrease is approximately two hundred thirty-eight dollars ($238). On the increases, the average increase is approximately three hundred eighty-seven dollars ($387) versus the median increase of approximately two hundred eight dollars ($208). Those numbers are reduced when you get to the Homestead-Only, again, because of the values typically being lower within that class or within that grouping. Finally, the numbers were counted by a range so if you specially wanted to know how many would pay less than one hundred dollars ($100) islandwide on the increases, that is almost about thirty percent (30%), one thousand five hundred seventy-five (1,575), and within the Homestead, that is about almost thirty-six percent (36%) at one thousand four hundred eleven (1,411). You can look at breaks by category. As we start getting out towards the major increases, you see those numbers considerably dropping off. Again, those are "the Outliers." The timeline for any initiatives that we are looking at, the date of value for 2014 is October 1st, which is rapidly approaching. The filing deadline for exemptions is September 30th. For the Home Preservation limit, we are requesting to extend that deadline to December 31St. Those that would be potentially most adversely impacted by the removal of the cap would have an opportunity to apply for this program if qualified. Again, we must provide Council with a Certified Tax List by March 15th by Ordinance. We prefer to have it earlier to facilitate budgeting. The assessment appeal deadline is December 31St, so those that would be applying for the Home Preservation, it is an adjustment to the taxes, not the valuation per se. They would still be entitled to their normal process on assessment notices to appeal their value and use class. Finally, this graph is just a depiction of the values islandwide of the twelve thousand three hundred forty (12,340) properties. You can see a real long, flat line up until about a million, and if we go by numbers, the break is pretty much between about three hundred thousand (300,000) and six hundred thousand (600,000) that comprises that flattest part of this line; that is our median. At six hundred thousand (600,000) of properties that are of the twelve thousand three hundred forty (12,340), approximately nine thousand eight hundred thirty- one (9,831) have market values of less than or equal to six hundred thousand dollars ($600,000). Mr. Rapozo: Mr. Chair, may I ask a question? I have never seen a chart with only one (1) axis? What is the bottom axis? I am trying to figure out what that means. Mr. Hunt: This is just a depiction of the actual values. There was a bottom axis that just had numbers counting from property one to property twelve thousand three hundred forty (12,340), which really would not be meaningful to you. Mr. Rapozo: This is meaningless because I do not know what that means. Mr. Hunt: Right. Okay. Mr. Rapozo: I have no idea. What does it mean? Chair Furfaro: This is what it means; that there is no butter on either slice of the bread. That is what you are presenting to us. COUNCIL MEETING 46 AUGUST 28, 2013 Mr. Rapozo: Okay, from one million dollars ($1,000,000) to ten million dollars ($10,000,000); what does that mean? Mr. Hunt: That is the ramp-up and because it is so steep, it is showing very few properties are valued between a million dollars ($1,000,000) and nine million four hundred thousand dollars ($9,400,000), which is the peak. The Outliers, if you will, are that rapid escalation at the end; the tail. Mr. Rapozo: If there was a bottom axis, what would it be? A number? Mr. Hunt: It would be a property count—it is sorted by lowest value. I think the lowest valued property was seventy-six thousand three hundred dollars ($76,300) in this grouping up to nine million four hundred thousand dollars ($9,400,000). Mr. Rapozo: Okay. Mr. Hunt: This is just showing the distribution of the values, saying there is a very long, flat line that says the masses fall under one million dollars ($1,000,000) and greater than. There are properties at the very end that shoot up dramatically. Mr. Rapozo: Thank you. I got it. Mr. Hunt: I will field questions. Chair Furfaro: Excuse me, Steve. What I would like to do, because we are in such a time constraint, I want to take public testimony because I do not think we are going finish this Bill until after lunchtime for a vote. You will be around for the entire period. We have about five (5) credit unions here. I am going to allow three (3) of them to come up and make a credit union presentation using a combined eighteen (18) minutes of their time. Are you available to us all day? Mr. Hunt: Yes. Chair Furfaro: Okay. Members, if you do not mind, I would like to do it that way. Mr. Kagawa: Just to set the tone, I think it is a great idea that the credit unions are presenting. They have participated in last week's Committee Meeting as well. I have an Amendment in my hand again that I am proposing. It is the same Amendment that failed last week and hana hou again. I want to exempt credit unions from the taxes, just like the other Counties in the State. I look forward to their presentation, but I am proposing this Floor Amendment. I would prefer that we decide on the Amendment as a body so that at least they can get that direction as to what their fate is because I believe I have a ton of questions for Mr. Hunt, as well on the overall Bill. Thank you. Chair Furfaro: On that note, I am going to call the three (3) members of the various credit unions to come up and let them make a presentation COUNCIL MEETING 47 AUGUST 28, 2013 now. Gentlemen, do you want to come up now and bring us your point? You are going to have to introduce all three (3) of yourselves. DENNIS TANIMOTO, President, Hawai`i Credit Union League: Chair, members of the Council, my name is Dennis Tanimoto. I am the President of the Hawai`i Credit Union League. The league is a trade association for seventy-six (76) credit unions in Hawai`i and two (2) in Guam. MEL CHIBA, CEO, Kaua`i Community Federal Credit Union: Good morning. I am Mel Chiba, CEO of the Kaua`i Community Federal Credit Union (KCFCU). SCOTT TSUCHIYAMA, Manager, Kekaha Federal Credit Union: Hi, my name is Scott Tsuchiyama. I manage the Kekaha Federal Credit Union on the West side. Mr. Tanimoto: If I could proceed with my prepared remarks, I have submitted written testimony as well. This is going to vary a little bit from it based on conversations that we had recently. I thanked Mr. Hunt for his excellent presentation on the affairs or the State of the Budget for this County, and respectfully used some of his words, in that this proposal that he brings forward is meant to bring more equity and fairness to the taxpayers, and to those that are exempt. He also mentions that among other things, this Bill "seeks to increase the minimum tax paid by those who are paying under that minimum tax from twenty-five dollars ($25) to one hundred dollars ($100), and one hundred fifty dollars ($150) after tax year 2015." He says with "some exceptions." Of course, the credit unions are those exceptions. First of all, review why credit unions are tax-exempt. As you know, the determination as to which organizations are tax-exempt is typically done by the Internal Revenue Service (IRS) on behalf of the Federal government. Under Section 501(c)(1) of the Internal Revenue Codes, the Federal credit unions—in other words, those that are chartered by the Federal government are exempt from taxes. This is because of an Act of Congress and an as instrumentality of the Federal government. On the other hand, State chartered credit unions—I might mention that all seventy-six (76) credit unions in Hawaii are Federal chartered, and there are no State chartered credit unions at this point in time, but State chartered credit unions are also exempt. This is under Section 501(c)(14) of the Internal Revenue Code, which says, "Credit unions without capital stock organized and operated for mutual purposes and without profit," are also exempt. When we are talking about the exemptions, we are talking about the exemptions, we are talking about exemptions from; first, Federal Income Taxes; second, State Income Taxes and Franchise Taxes. Franchise Taxes are what they charge for banks in Hawai`i. We are exempt from State Income Taxes and Franchise Taxes, as well as State General Excise Taxes, also known as "Sales Taxes" on the purchase of tangible personal property. In other words, this is not for services that are purchased, but personal property, whether it would be office supplies or computer equipment, and so forth that is purchased is exempt from General Excise Taxes. Lastly, all four (4) Counties have exemptions for credit unions in Real Property Taxes. I might mention that the City and County of Honolulu had a Bill; Bill No. 36 this year and Bill No. 41 last year, that was looking to tax credit unions on real property, and both Bills have since been defeated or actually deferred indefinitely. This was in the Budget Committee of the Honolulu City and County. In other words, the credit COUNCIL MEETING 48 AUGUST 28, 2013 unions prevailed in making their tax-exempt status, and their mission unknown in that particular body. Section 7 of the Bill that we have is where the credit union tax exemption is being considered. What it would do, under Draft 1, is to reduce the credit union's Real Property Tax exemption from an entire tax-exemption; one hundred percent (100%) down to ninety percent (90%). Preliminary estimates given to us by the County shows that these taxes would range from two hundred fifty-three dollars ($253) for Kaua`i Teachers Credit Union, with an office in Lihu`e, to six thousand three hundred sixty-nine dollars ($6,369) for Kaua`i Community's Kukui Grove office. This represents an increase, and earlier, we had testimony from those that had double-digit increases and were complaining. This is the magnitude of the increases for credit unions under the Proposed Bill. It goes from one thousand fourteen percent (1,014%) increase. This is based on the twenty-five dollars ($25) current minimum Real Property Tax to over twenty-five thousand percent (25,000%) increase for the largest credit union; in other words, Kauai Community, and that is just for one of their properties. There is an added effect because Kaua`i Community has five (5) offices. On the other hand the Bill seeks, as mentioned earlier, to increase minimum Real Property Tax for other non-profit organizations from twenty-five dollars ($25) a year to one hundred dollars ($100) a year, and that in and of itself is a four hundred percent (400%) increase. By the way, I think in the testimony that was provided, it says tax year 2014 but according to Mr. Hunt's presentation, it is tax year 2015 and rises to one hundred fifty dollars ($150) a year; six hundred percent (600%) from the current minimum tax thereafter. Obviously, as shown by the numbers, going from one hundred dollars ($100) a year to one hundred fifty dollars ($150), and to even six thousand dollars ($6,000) for the largest credit union seems unreasonable. This inequity is grossly unfair to non-profit credit unions because we are treating non-profit credit unions differently from other non-profit organizations. In discussions with some of you earlier, we find that one of the hesitations about treating—not hesitations, but one of the causes for treating credit unions differently is because one of the credit unions on this island has a nice, new building in Kukui Grove. I am here to report that it is not the building itself that determines how the credit union is serving the public, but more importantly, the types of services and the types of products that the credit union offers, and the fact that it remains a non- profit cooperative, and is doing a public good. This presentation is not to bash by any means, do not get me wrong, any of the non-profits that are pictured here, but I just wanted to evidence. I am not familiar too much with the properties here, but I am familiar with the properties on O`ahu. Here are some of them. This is Young Women's Christian Association (YWCA) of O`ahu, Laniakea Building, which is right across from `Iolani Palace on Richard Street in Downtown Honolulu. This is significant in many ways because not only is this an historical building, and it is very beautifully constructed, but more importantly, the types of services that the YWCA of O`ahu has offered has even expanded to beyond what they originally offered from this Office. In other words, one of the things that they have done is to offer exercise classes for women in the Downtown Honolulu area during lunch and evening hours. They also offer childcare... Chair Furfaro: Dennis, let me just share with you that was nine (9) minutes. That was half of the eighteen (18) minutes. Mr. Tanimoto: I will rush through this. They not only offer exercise classes for women, but also childcare. These are "for-fee," in other words, it COUNCIL MEETING 49 AUGUST 28, 2013 is not free. This is the Fernhurst Building for the YWCA which is across from the Punahou School in Makiki in Honolulu. This building is important, not because of its elegance with, but because of the use of the building. That is that the building was originally meant for victims of domestic abuse; in other words, abused wives, abused mothers, and so forth. Yet, the over capacity of this building is used as a hotel for visitors to Hawai`i. They actually rent out rooms as a hotel would. This is Salvation Army. Many of you may have been to Wai`oli Tea Room in Manoa Valley. It is on historical land as well. It is owned and operated by the Salvation Army, and this is Salvation Army's Headquarters Building. Manoa Valley, if you know, anything about it is an upper middle-class income area that the University of Hawaii, Mid Pacific Institute, and others are located in. This is Salvation Army's Addiction Treatment Services Building in Nu'uanu Valley. It too, is in an exclusive high-rent area of O`ahu. This one is very interesting because this is Salvation Army's new Ray and Joan Kroc Center in Ewa Beach. If you notice on this left hand side—I am not sure where the pointer is, but on the left hand side you will see—in fact, this picture shows it better, a water slide. It is actually a water park that the Salvation Army provides. My point is not to put down Salvation Army because it does wonderful things, but it is going beyond what it was originally chartered for. It is doing it because of the needs of the community. This is Goodwill Industries with its brand new building in Kapolei. It is a beautiful building as well. My nature of going through this—here is American Red Cross in Waialae-Kahala. It is a very prestigious residential area right on the slopes of Diamond Head. Easter Seals—this is their brand new building in Kapolei. It is for early intervention services. We are all familiar, I think, with Queens Medical Center, right outside of Downtown Honolulu. This is Pali Momi Medical Center in Pearlridge, also not for profit; Carpenters Union Building, Laborer's Union Building, Operating Engineers, United Public Workers, and of course Kamehameha Schools and Punahou School. These are just examples that because you are not for-profit, it does not mean that you have to have an ugly building or that you cannot have a nice building to operate out of. Credit unions are tax-exempt, non-profit financial cooperatives, but they are different in structure and mission than for-profit financial institutions. The affordable services offered by credit unions are deemed now more than ever, to help our economic recovery. Non-profit organizations can have, and they do have nice facilities. Just because of that, they should not be penalized. Lastly, the Real Property Tax Exemption should be the same for all non-profit organizations, including credit unions. That concludes my presentation. I will present Mr. Mel Chiba. Mr. Chiba: Thank you, Dennis. Real quick, I personally feel bad because had I known that creating a building for the credit union would potentially hurt the credit unions on Kaua`i, perhaps, we would take a different stance. We never thought that the brand-new large building would take precedence over our objectives and missions of credit unions on Kaua`i. I want to bring you back to 1974, when our Board of Directors decided to build our building on Hardy Street. In 1974, that building was ahead of its time. It had large glass windows, c central air conditioning, and underground parking. It stood out like a sore thumb here in Lihu`e for everybody. If you fast forward forty (40) years down the line to 2010, it is almost the same thing. It is a large building. It is out there. Everybody sees it and it is very visible. Just understand that the reason for that building is that it is intended to last us another forty (40) years as we grow. When we put up the building and we did our projections. We looked and tried to gauge where we are going to be over the next forty (40) years. We feel that this one building will satisfy that needed operation. We went one step further and we choose at that point to try COUNCIL MEETING 50 AUGUST 28, 2013 to develop a leed certified building. With that, it led to certain types of glass, roofing, and overall design to save energy and take care of the environment in which we live. In other words, we wanted to give back to the community in that sense. We also designed what is known as the bioswale which captures the water that falls on the property and circulated amongst the plants to cleanse itself. It goes through the bioswale which cleans the water and then it gets released into the County's draining system. That added approximately two million dollars ($2,000,000) to the property, but we thought it was worth it in giving back to the community. I agree that it is large and it is nice, but please understand it does not change our philosophy and our contribution to our membership and our community. We are going to stay the same. Our plan is to continue to do what we have done over the past sixty (60) years and on into the next forty (40) years, at least. This building is included as part of our long-range plans. Again, I apologize for being a part of creating a building that threatens the credit union business on Kaua`i because I fear for the other ones that it would effect, if a large reason for losing the tax exemption is because of the large building at Kukui Grove. I have been with the credit union for thirty-nine (39) years now. It has been a good business. I have seen it grow from a six million dollar ($6,000,000), two thousand three hundred (2,300) members credit union to a four hundred thirty million dollar ($430,000,000), nearly thirty-two thousand (32,000) members right now. Please understand that our mission has always been, and I quote, "to improve the financial situation of our membership." That is our main focus. This quote was given at our first annual meeting back in 1954. This mission and our objectives have never changed, and we plan to keep it the same. We deal with the island residents on Kaua`i only. In the course of my thirty-nine (39) years, I have experienced working with parents, who opened an account for the first child. They then grow up and need moneys for their first loan, autos, weddings, and everything else. My point here is that I think we have done a lot of good, and not only us, but all the credit unions on Kaua`i, in serving our membership with affordable and beneficial services that enhances their financial well-being on this island. We want to continue that. As in any other business operation, we do incur expenses and it is in our best interest to try to maintain or avoid expenses that we can. I feel that although it is a small amount right now with regards to the proposal for removing our tax exemption, it is a start that could go higher later on, while our mission and what we do will stay the same from what we were created for. That will never change. I can tell you that. All I ask is that you consider what we have done, what we intend to do, and how we have helped the island residents and in the community live, what we have given back to the community in the form of loans, which pumps up our economy, and then serves our economy itself. One quick one in a sense that there was also discussion on low-income designation and what it is, and everything—Kaua`i Community, Kekaha, Garden Island, and Kaua`i Government are designated low-income designation credit unions. The way we do that is we had to qualify for that and what it meant is that our membership had fifty percent (50%) plus one more that was designated as a low-income household. I thank you very much for your time both prior to today, and here afterwards in regards to your considerations towards credit unions. Thank you all very much. Chair Furfaro: That was perfect on your six (6) minutes. Mr. Tsuchiyama: I would like to touch on more of the human aspects of the credit unions. When I started the business, I came from an industrial finance company. I do not know if you know anything about industrial finance companies, but they do their loans for refrigerators and things like that, and charge COUNCIL MEETING 51 AUGUST 28, 2013 higher rates for stuff. We turned down loans that we could not understand how they got a loan because they came back and they had money. I asked Mel when I started in the credit unions, "Mel, we turned down these loans and they got a loan from you." By all reason, there is no logical way you should make the loan; it is a bad business decision." His response at that time, twenty-two (22) years ago was, "Well, these are our members and we give everybody a chance. Even if they have bad credit and even if they are not earning a lot of money, we give them a chance. We will take a chance on them at least for the first time." In Kekaha, we extend that. When the plantation sold plantation housing out there, the banks turned away and nobody would finance those things. We had to go to Kaua`i Community Federal Credit Union and borrow money from Kaua`i Community Federal Credit Union to make those loans. All of the plantation housing—most of it was financed by Kekaha Federal Credit Union. It goes from buying the house, to their kids, to where they are now. We are so successful that most of the kids do not come back to Kaua`i. They become lawyers, and get degrees from Notre Dame, University of Southern California (USC), and the University of California at Los Angeles (UCLA). They never come back, but at least we put people on the right track. We do grassroots financing—our members' money that deposits in the community comes to us. Imagine a place like Kekaha with twenty million dollars ($20,000,000). We take that twenty million dollars ($20,000,000) and we fund private loans. You walk down Waimea street and you see the businesses there; we gave a lot of those businesses their start. It may have been a thirty thousand dollar ($30,000) loan or a fifty thousand dollar ($50,000) loan, but a lot of those businesses got their start with us. As they grew, they grew out of our capabilities. Now, most of them have accounts with banks. That is how we touch our members but as being a social good, we not only touch our members, but we touch the general public as a whole. Everybody here, I think, the one thing everybody knows about credit unions is that we have the best rates on loans and we have the best dividends on your savings. Can you imagine if credit unions went away? If we went away, you look at the next guy up the line; Bank of Hawai`i, American Savings, and First Hawaiian Bank. That is the rates that you guys would be paying. With us in the marketplace, we keep the general public's rates lower. We are the proverbial "flea on the behind of the elephant." We keep them in check. For the thirteen thousand dollars ($13,000) that you guys expect to raise from us, it is like, "Why?" We provide so much of a service to you guys. Just for Kekaha alone, we gained national recognition for our newsletter that we send out to our members for financial education. We have also garnered two (2) national recognition awards; one for helping Kekaha School when they were sliding into receivership with the Federal government and the next one was for our involvement in the Free Income Tax Service. I think Mr. Hooser put in a recognition award or something with the State Senate that hangs on our wall. Thank you for that. I think one other thing that we have done, the biggest project we have undertaken was—I know Nadine was at the Waimea substation dedication along with Mel. We were the incubator for all of that. First Hawaiian had the loan on that property when it was a dispensary and they went bankrupt. The community came to us and said, "We think this is a valuable building and we should save it. Can you give us a loan?" I told them, "How can we give you a loan because you guys went bankrupt with no money and no source of income, but I am going to work on this." We went to Washington D.C. and we got them the money. Out of the seven hundred thousand dollars ($700,000) seed money that we got from Senator Inouye's Office—we went to a four million dollar ($4,000,000) project and Easter Seals now has a place on the West side where all of the people that they serve on the West side used to have to go to Kapa'a on the bus both ways. The school is happy because the truancy problem is down because people cannot cut COUNCIL MEETING 52 AUGUST 28, 2013 classes and go into the building or go down the cliff. The Police Department is really happy because they have a larger space to work in. Again, why are we treated different from any other non-profit organization? For the amount of Real Property Tax that you will raise, it is, like, "Why?" I know Nadine was trying to help our situation by putting in a "sliding scale." I call it a "sliding scale," taking a percentage of our assessed value. It raises our costs, makes our costs uncertain and our services do not change. We have a hard time planning for the future. As you know, property taxes go up and go down. We have to put in a big buffer for the fact that, "Okay, taxes might double, triple, quadruple, or in this case, go up twenty thousand (20,000) times." We cannot properly budget for that. In closing, I would like to give you a couple of words of advice here. One is, "Do not throw the baby out with the bath water." You are going to throw away what we do for the community. You are going to throw that out by trying to collect thirteen thousand dollars ($13,000). Again, do not try to use a hand grenade where a surgeon's knife is probably the better tool to use. We have had one (1) month of hearings on this; three (3) meetings and in the three (3) meetings, every time there is an Amendment to the Bill, so you know the Bill is not perfect. I think you guys even admitted that the Bill is not perfect and you guys are going to go through the Bill, even after it is approved. What I am saying is to just defer the Bill, have further study done on it, and get something that will not hurt the people. If you do not learn from the past, you are going to repeat it. A lot of the cap and everything was put in because... Chair Furfaro: I gave you an additional thirty (30) seconds here, but your time has expired. Mr. Tsuchiyama: Thank you, Chair. If you do not learn from the past, you will repeat the past. Caps and things are put in because at one time Real Property Taxes tripled and quadrupled. We saw that in Kekaha and we had to bail our members out because of their tax bills. That might happen again if we jump the whole system and start all over. Thank you, Chair. Chair Furfaro: What you have really presented to us is the business practice that some of us know as "tanamoshi," in the old plantations. Everyone kokua each other and you put money in the pool. I assume the non-profit, in this tanamoshi practice, that any earnings actually goes back to the members in the way of dividends, free checking, lower rates on credit cards, and bigger dividends on savings. That is the practice with the credit unions. Mr. Tsuchiyama: Right, and service because service costs money also. Chair Furfaro: Okay. Mr. Kagawa. Mr. Kagawa: Thank you, Chair. I just want to thank you for your presentation. I think it is as thorough as it can be and also your oral testimony as to why it is not fair to tax credit unions. I also want to thank the credit unions for the help I have had over the years like every car that I had. Now I use my home equity to help pay for my thirty-eight thousand dollar ($38,000) a year for my daughter's tuition, room, and whatnot. I do not have thirty-eight thousand dollars ($38,000) in my savings. I have to use my home equity, but those are the kinds of ways that credit unions have helped our local people. I just want to thank COUNCIL MEETING 53 AUGUST 28, 2013 you. I will introduce this Amendment because I fully support what you have said. Thank you. Ms. Yukimura: Thank you to all of you. Scott, you did a really good job of showing how much...I think the word is "compassion" that is built into your system and how grassroots you folks are. I guess what I am having a hard time understanding is the proposal that is presently before us is credit unions paying ten percent (10%), so they are getting a ninety percent (90%) exemption of the amount. Are you saying that that will kill the credit unions or hurt you severely? Mr. Tsuchiyama: It puts uncertainty and burden on the credit unions, and uncertainty being that depending on what assessments come in at, our tax bill goes up, goes down, or stays the same. We have to plan for all of those things. We usually budget out five (5) years. Ms. Yukimura: You do not know what interest rates will be next year, or gas prices. We are all hit by uncertainty. Mr. Tsuchiyama: Yes. We usually budget with a three percent (3%) increase on most expense items. In the case of property taxes, if it is on the value of your property, which to us almost has no meaning because we do not have any use for the equity in the building. Like a taxpayer, like a Real Property Tax Bill to Ross Kagawa—he uses the equity in his house to do something with it, but we cannot do anything with equity in our building. Ms. Yukimura: I would think you can. Mr. Tsuchiyama: We cannot borrow. We do not borrow against our building. Ms. Yukimura: Okay. Mr. Tsuchiyama: Our stock price... we do not have stocks... Ms. Yukimura: I think there are other situations where people may not be able to use the equity in their building. The thing about Real Property Taxes is—I think Mr. Rachap said it well. If you do not have Government, nobody can operate. If you do not have Police, Fire, Water, and all those different services, the community cannot operate so everybody has to do their share to keep Government going. We in Government have to do our share to keep Government as efficient as possible. To me, that is our end of the bargain. Like a credit union, even tanamoshi, everybody has to put something in. You have to charge interest rates because that is part of the way you can operate. Mr. Tanimoto: Let me try to respond to your questions. Ms. Yukimura: Yes, please. Mr. Tanimoto: I do not think anybody is objecting to paying the minimum tax because that is what the minimum tax is supposed to do. In other words, it is supposed to pay for the services that a tax-exempt organization may be using and so forth. In my opinion, what the disparity is on this Bill is that it is treating credit unions differently from other non-profit organizations. As I COUNCIL MEETING 54 AUGUST 28, 2013 mentioned earlier, the non-profit organizations are being asked to increase the Real Property minimum tax from twenty-five dollars ($25) to one hundred ($100). Yet, credit unions, as evidenced by the schedule, are going to pay two hundred fifty-three dollars ($253), six thousand dollars ($6,000), plus. Why are credit unions being treated differently from other non-profit organizations? It is akin to, let us say, treating different neighborhoods on the island with different tax rates. Can you imagine if you said to a certain section of the island that we are going charge you ten dollars ($10) for your tax rate? Ms. Yukimura: I do not think that is a good analogy. Let us stick with non-profits because I think the hospital, Kaua`i Island Utility Cooperative (KIUC), and Child and Family Services is a non-profit. That is why I was asking for information about operating budgets. I think KIUC pays four million dollars ($4,000,000) to five million dollars ($5,000,000) in-lieu taxes. They do not pay property taxes, but they pay an alternative. I do not know what Wilcox Hospital pays, but credit unions do seem to be of a different nature of non-profits in that it is a business model and it seems, and I stand to be corrected because I have not done a systematic study, in terms of financial capacity and budget seem to be far larger than most non-profits. Mr. Tanimoto: I guess that is a reason that I used the analogy that I did because if the assumption is that people that live in a certain community can afford to pay more, to me it would be nonsensical to say that their tax rate is higher than the tax rate for another community. Ms. Yukimura: No... Chair Furfaro: Hold on for just a second. This is not a discussion about philosophy. It is about questions to be posed. If you came back with a question and said, "The credit unions were non-profits, so they made no profit. How much did Wilcox Hospital make?" That is a question posed, but we are coming up on a time that we need to take a break because we have a scheduled public hearing at 1:30 p.m. We also have a presentation at 1:45 p.m. I do not think we are going to get past this Proposed Amendment until after lunch now. I think that is just how I have to call the shots for us managing through this agenda item. If you want to close on a response to that, it looks like we are going to be back here at 2:00 p.m. Mr. Tanimoto: No, I have nothing further to say. Thank you. Chair Furfaro: Members, do you understand what I am saying? I also want to remind you that at 4:00 p.m., we have a conversation with our Legal Counsel. We also have three (3) other groups that are signed up to testify on this Bill. I am sorry this has taken so long, but we are going to break for lunch on time. We will be back for a public hearing at 1:30 p.m. There being no objections, the meeting was recessed at 12:30 p.m. The meeting reconvened at 2:13 p.m., and proceeded as follows: Chair Furfaro: Aloha, we are back. JoAnn, I had shared with you to stay away from some of the philosophical pieces, but you had the floor for questions. If you want to continue with questions, you may. If not, I can go to COUNCIL MEETING 55 AUGUST 28, 2013 other members. Any other members have questions as it relates to the presentation from the credit union group? Mr. Kagawa: If everybody is done, and we are called back to order, I would like to see if this Amendment passes or not. Chair Furfaro: To the Clerk's Office, while these gentlemen are here, the intent is that we are going to deal with one (1) Amendment, and then go back to public testimony. I will call the meeting back to order. Mel, I will excuse you folks. We are going to do business on this Amendment right now, and then we will go from there. Other than the three (3) senior management people from the credit union, is there anyone in the auditorium that wants to speak on the credit union portion of the Tax Bill? Okay. The rules are still suspended. Please come back up. CORINNE KING: My name is Corinne King. I currently serve as Chief Executive Officer of the Kaua`i Government Employees Federal Credit Union. I have been a part of the credit union movement since 1974 when I first volunteered as a Credit Committee Member, unpaid, later as a Director on the Board of Directors, and then following that as Chairman of the Board of the Montana, Wyoming, and Colorado Farm Bureau Employees Federal Credit Union. I have been in this industry for a very long time as a volunteer, as a member, and as an Executive now, which I am very committed to serving those people in my community. I am speaking in opposition to this Bill. First, we are disappointed that it singles out the credit unions from other Kaua`i non-profits. We believe it sets a bad precedent. Additionally, it singles us out, this County, from the other Counties in the State of Hawai`i; Maui County, Hawai`i island, and the City and County of Honolulu; all who have a minimum tax and do not do a percentage of real estate tax to the credit unions. I would like to talk a little bit about what our credit union has contributed to this community during the great recession. We have served a very high number of members who have been turned away from the banks. Our credit union, at least since the year 2007, has had a low-income designation, which allows us more flexibility in serving our community. We also take in select employer groups, which are small businesses that can allow their employees to join as members and enjoy the benefits of their non-profit credit union. We are not a community credit union. We have a limited membership base based upon our Charter. At the beginning of`The Great Recession," as of the end of December 2008, we were servicing one thousand four hundred seventy-six (1,476) loans totaling twenty-two million five hundred ninety-six thousand two hundred fifty-seven dollars ($22,596,257). As of the end of June 2013, we had two thousand five hundred thirty-seven (2,537) loans on the books totaling seventy-five million three hundred fifty-six thousand four hundred thirty dollars ($75,356,430). That was an increase of one thousand sixty-one (1,061) people on this island into which we pumped fifty-two million seven hundred sixty thousand dollars ($52,760,000) worth of loans to those people who needed it. Chair Furfaro: That was three (3) minutes. Would you like to summarize? Ms. King: Yes, I will summarize. At the beginning of the recession, we were serving five thousand (5,000) members. We now have seven thousand (7,000) members. Recognizing that so many of those of modest means were being turned away by the banks or being preyed on by the pay-day lenders, we established several programs to assist your community. The first was a series of COUNCIL MEETING 56 AUGUST 28, 2013 credit union or credit-builder products that actually offered loans to people with poor credit or no credit at all. Understanding that some of our members had to drive to three (3) jobs, and were being turned down for a used-car loan because their vehicles were too old, we established a signature vehicle lending program so that they would get to be able to get to work. We also offer smaller signature loans for shorter periods of time to help those who had been laid-off from a job, who just needed to make their rent. We have given away twenty-two (22) scholarships to Kaua`i High School students and Kaua`i Community College students during that time. All of the profits that we earn with our credit union are plowed back into serving our members and our community through scholarships, paying dividends, and encouraging our thrifty members to save with us, and by offering lower loan rates to those who need to borrow money. We have also contributed learning devices such as iPads to Kaua`i Community College students to further their education. In summary, I just want to say I feel badly that we are being singled out, not only as non-profit credit unions within this County being looked at differently, but also under Federal and State regulations. This concludes my testimony. Thank you. Chair Furfaro: Thank you very much. Are there any questions for the testifier? JoAnn, you have the floor. Ms. Yukimura: Corrine, you just gave us a very impressive record of performance and commitment to community. Ms. King: Thank you, yes. Ms. Yukimura: It just makes me realize again, and again how valuable credit unions are. I do not know if it is singling out. I think it is trying to recognize that credit unions have a much bigger income-generating capacity, and in that way, are somewhat of a hybrid between a business and a social service non-profit. They can do more probably than most non-profits in terms of doing their share of contributing to Government which is another way of contributing to community. Does that make any sense to you? Ms. King: That makes sense to me, but I disagree. We are designed as a non-profit and we are not in any way constructed as a for-profit business model where people get to drive the Mercedes or paying stockholders dividends. There is constant pressure upon us to earn huge profits on the bottom line. We have credit unions not only here on Kaua`i, but in Hawai`i, and across the Nation who are negative earners. There are times when we will be a negative earner. It does not mean that we are doing a bad job. At any given time, it means that because of our Charter, we are committed to maintaining enough capital so that we can serve our community in the worst of times. Our business model cannot be compared to a for-profit business model. Ms. Yukimura: That is why we are not taxing you on a "full on" business model. Banks are paying their share of property taxes based on assessed value. The proposal on the table is to exempt you ninety percent (90%) of what is owed. Ms. King: I guess my objection to that, and I can only speak to myself, is that the ninety percent (90%) is different from establishing a fixed amount as we had before, which gives us parity with the other non-profits. I do not believe—I am only speaking for myself here that we would be objecting to the COUNCIL MEETING 57 AUGUST 28, 2013 one hundred dollars ($100) or the one hundred fifty dollars ($150), which is certainly a more fair amount than the ninety percent (90%) of our real estate value in a market where we do not know whether it is going to heat up again. We are going to have difficulty budgeting and if we have to cutback—our building is small and it is not worth a lot. That is true, but it could be, because of its location. Does that mean at a time that my ten percent (10%) actually represents three hundred (300) or one thousand percent (1,000%) increase in the value that I would have to pay in taxes? Just on the ten percent (10%). It would mean that in a bad time, I would have to reduce the benefits that I am paying to my members. I do not think that is fair. Ms. Yukimura: Actually, in bad times we all have to cut costs and tighten our budgets. Thank you very much. Ms. King: You are welcome. Chair Furfaro: Any more questions for the testifier? No? Thank you very much. On this portion of the Bill, is there anyone in the crowd that has signed up to give testimony on the credit union? No one? Okay. I am going to call the meeting back to order and recognize Mr. Kagawa on this point. There being no objections, the meeting was called back to order, and proceeded as follows: Mr. Kagawa: My Amendment will exempt credit unions from all property taxes. Mr. Kagawa moved to amend Bill No. 2495, Draft 2, as circulated, as shown in the Floor Amendment which is attached hereto as Attachment 1, seconded by Mr. Rapozo. Chair Furfaro: I want to restate the motion. Your Amendment would exempt credit unions from all property taxes. Is that what you said? Mr. Kagawa: Yes, but they will still be subject to the one hundred dollars ($100) and one hundred fifty dollars ($150) in 2015. Chair Furfaro: Okay. Is there any discussion from the members? Mr. Bynum: I think this has been a very interesting morning. I very much appreciate the credit unions providing testimony here. This is an issue that is being debated nationally as we speak, but it is at different levels. The American Banking Association is pushing hard for credit unions to lose their Federal tax-exemption. They make arguments that a few credit unions—there are mega credit unions that dominate. There is a discussion about raising the amount that credit unions at the national level that they can—it is currently at fourteen percent (14%) of the largest loans that they can make and there is a proposal to increase that, which for these very large credit unions would put them basically in direct competition with commercial banks without paying. Those big mega credit unions do not have the same mission as our credit unions here on Kaua`i. It is a very different animal on Kauai. If I were a Congressman or Senator, I would not vote to reduce the— I would keep the non-profit status for credit unions at Federal COUNCIL MEETING 58 AUGUST 28, 2013 level because we need credit unions to compete with banks who have behaved very badly with the last ten (10) years, with the exception of our Hawai`i banks who behaved quite well. I pay close attention to these finance issues. To me, the issue that is before us is totally different than those big national issues. It is at this local level with the credit unions who give us wonderful service. They are an important alternative and they serve low-income communities. Everything that you guys said today is true. I appreciate it, but we are talking about funding County Government. In this discussion, to me, it is a different issue and we have come up— the proposals was, like at County level, eliminate any tax benefits for credit unions is what some people are advocating. I believe the Council has come up with a very reasonable compromise. I understand the credit unions not wanting to set a precedent and the other Counties are looking at credit union taxation, as well. They may look at what the County of Kaua`i has done and that may inspire them to change theirs. I understand all of those concerns from the credit union. In spite of all of those concerns, I believe especially since it was amended last time, to address some of the concerns, and in recognition that not all credit unions even on Kaua`i are created equal. I think we have a very good and reasonable proposal that I intend to support, so I am not going to be voting for this Amendment. Thank you. Chair Furfaro: First Mr. Kagawa, let me ask if there is anyone who wants to testify on this Amendment only and has not spoken yet. No? Mr. Kagawa, you have the floor. Mr. Kagawa: Thank you, Mr. Chair. We just had a great presentation by the credit unions. The presentation stated all City and County Real Property Taxes in all four (4) Counties are exempt. We on Kaua`i do not have to be the first one to change this rule. Are we that hard up for money? Thirteen thousand dollars ($13,000)? We are going to be the first County that charges our credit unions differently in the State? For this past Budget, we gave seventy thousand dollars ($70,000) to the Young Men's Christian Association (YMCA), a non-profit, for their photovoltaic system. Do we give seventy thousand dollars ($70,000) to every non-profit? We gave the YMCA those moneys because our residents need a pool in Lihu`e. We gave it because we felt they needed it and that our residents need it. Our residents need good loans that they can afford and that they can qualify for. What could be more important to have young residents be able to start their families here when big banks will not help them because their credit scores are too low, or they do not have the debt to income ratios? We have local people on the board that gives our local people a chance, and if we increase fees and taxes on those credit unions, they may be forced to increase rates and bank fees as well. It is silly. I just think we should follow the other Counties. Should one of them decide to tax Real Property Taxes onto to the credit unions, then I would be willing to follow, but I do not want Kaua`i to be the first in this direction because I feel that the credit unions fill a very valuable void in our community. I just really hope members would try and look at it from that perspective, and not be the first ones to set this negative tone towards the credit unions. Let us be supportive of them. Thank you. Chair Furfaro: Anyone else willing to speak on the Amendment? Mr. Rapozo, you have the floor. Mr. Rapozo: Thank you, Mr. Chair. I think I introduced the Amendment and it failed. I think Councilmember Kagawa introduced an Amendment in a prior meeting and it failed. I kind of have a good idea of how it is going to turn out today. I am going to supporting the Amendment simply because I COUNCIL MEETING 59 AUGUST 28, 2013 think Mr. Kagawa touched on a lot of things of the presentations today. The thirteen thousand dollars ($13,000) is what this will impact, which is minute, and I think a lot of people in the community will say, "They should be paying. How are they complaining about thirteen thousand dollars ($13,000)? If you divide it among all of their members it comes out to forty-two cents ($0.42)," or whatever the rationale is. At one point, years ago, I was very lucky to be on the Board at the Kaua`i Government Employees Federal Credit Union. It was a very short stent, but nonetheless, was able to attend a conference that educated me about credit unions, why credit unions evolved, what they perform, and what they do for our citizens and their members. Not only that, I have been a member of a credit union ever since I first got a paycheck with the County many, many, many years ago. Since then, I have taken advantage of the credit unions many times. Now my son, as I said in one of the prior meetings, has tuition loans from the credit union because we just did not qualify for loans anywhere else. I will say that if not for those student loans, my son would probably not be in Western Oregon right now. This is more of a symbolic vote for me. This is almost saying, "Hey, credit unions, we know what you do, but we still think you have to pay." For thirteen thousand dollars ($13,000)—there was an Amendment at the last meeting to reduce the Hunting Dog License Fees because of the service that they do for the community. I support that because they do provide a valuable service. We provide a lot of concessions for different segments of the community, whether it is for age or income. This is an opportunity for us to say, "Thank you, credit unions, because you do provide a valuable service to the community." "Are we that hard up for money?" as Mr. Kagawa said, but apparently not because we approved a new position today for this County; for the Government. Thirteen thousand dollars ($13,000) is, for me, a vote for this against the Amendment is really sending the wrong message to the credit unions and to the function that they provide for our members. I am going to support the Amendment. I have problems with the Bill in general, but as far as this Amendment, I am going to be supporting the Amendment. I believe that the credit unions should be exempted. I think that the credit unions should be provided every opportunity to continue their service to the community that they do because nobody else will do it. I think we went through that period. I used to own a pawn shop and a lot of people would go to the pawn shop and pay twenty percent (20%) interest a month. That is two hundred forty percent (240%) annual percentage rate, which should be illegal, but it is legal. Often times, we referred them to the credit unions and some of them never came back because the credit unions helped them. I am a very strong supporter of the credit union movement. I think that you do provide a valuable service. Again, I do not think this County is in a financial position that is so bad that we have to raise thirteen thousand dollars ($13,000). Thank you. I will be supporting the Amendment. Chair Furfaro: Mr. Hooser. Mr. Hooser: Thank you, Chair. I am going to be opposing the Amendment. To me, it is also philosophy to a large extent. I think Councilmember Yukimura said it at a past meeting that there is this fundamental belief that everybody should pay at least a little bit. I think the credit unions raise a very good point about equity and some non-profits pay more, and some pay less. I think the County Finance Department, Tax Office, should look down the road and come up with better methodology for evaluating the various non-profits. We apply the law more equitably in the future. We are based on property taxes—our income. If you own property, you need to pay. That is the general rule, I believe. There are good people and elderly people who live in their homes who never use any County services at all to speak of. They do not leave; they are retired—very little burden on COUNCIL MEETING 60 AUGUST 28, 2013 the economy, and they have to pay their fair share. There are good people who volunteer in the community every day, and we give awards out to a lot of them every day that make huge contributions and they still have to pay their property taxes. I think if we go down the path to say who contributes less or more in terms of the contributions to the community; it is a very difficult decision to make. I think giving a ninety percent (90%) discount is very generous for the County. There are clearly non-profits that have multi-million dollar, if not, larger bottom lines or net worth, paying Executives' high wages around the world. There are all kinds of examples of non-profits that make a lot of money. We need to look at that and come up with some formulas for the future, but I will be opposing the Amendment and moving forward in supporting the provision. Chair Furfaro: We have to take a break for a tape change. I do not want any members to move. We will be right back. There being no objections, the meeting recessed at 2:37 p.m. The meeting reconvened at 2:50 p.m., and proceeded as follows: Chair Furfaro: We are back. Mr. Kagawa has the Amendment on the floor. Is there any more discussion before I call for the vote on that Amendment? Ms. Yukimura: It has been said that thirteen thousand dollars ($13,000) is just small money, but it actually would pay for one of our grants to an after-school or preschool program. It would also help to put music back at the airport, which was removed from the Budget. It could contribute to soil conservation or Transient Vacation Rentals (TVR) enforcement. It is not a small amount of money. Every dollar counts in terms of being able to do services for this community and Government services. That is why we are saying that everybody needs to do their share. Chair Furfaro: Does that include the State of Hawai`i, who all of those programs you just mentioned were their cuts? Ms. Yukimura: Well, we can go into that. I do not think we should compare the credit unions to the State of Hawai`i, but your point is well-taken, Chair. Chair Furfaro: Thank you. Ms. Yukimura: It does go back to the idea that everybody should pay an appropriate share. I think what we are grappling for is, "What is an appropriate share?" We do not want to hurt the credit unions, but we also want the credit unions because—anyway, so far I see them as a bit distinct from the smaller social services in their income approaches. We are still distinguishing them from the big banks with a ninety percent (90%) exemption if we go with the existing proposal, which is twenty-two cents ($0.22) per member in one of the credit union cases, and probably less in some of the others. I will not be voting for the Proposed Amendment. Chair Furfaro: Is there anyone wanting to speak on the Proposed Amendment before I have myself speak? I am going say that I am very traditional here when it comes to the role of credit unions in our community, and COUNCIL MEETING 61 AUGUST 28, 2013 with four hundred thirty million dollars ($430,000,000) of investment; Kaua`i/local investment; and I know members in my family, children, and parents who found themselves in financial needs as it relates to the 1957 closing of Wai`anae Sugar and no homes while the only one having to turn to was Chinn Ho or 1972 August C. Brewer in Kilauea. People did not have jobs or opportunities for homes. I think we heard a similar story about the Kekaha side financing used-cars and regular new automobiles for families, and kind of carrying the tradition of tanamoshi where people pull together to kokua each other. A lot of that was also used for educational leverage for our families. Do I want to be the first one that looks at what I see? I think Mr. Bynum said that it is the kind of tradition that Hawai`i credit unions have done for our community. Do I see it being the first one to implement this kind of a tax on this non-profit that is also expected during hard times to carry their own operating losses? I do not think so. I think I am going to support this Amendment. Even if the Amendment was a fee of three hundred dollars ($300), I think I would support it. For me, I do think it is the fact that on Kaua`i and in our community, it is about four hundred thirty million dollars ($430,000,000) of investment in our credit unions that help leverage and fund. I just do not see us being the first ones across the board to be taxing them. They are federally exempt until the Feds change. They are State exempt until the State—for good reason. I will support this Amendment. On that note, I will call for the vote on the Amendment. The motion to amend Bill No. 2495, Draft 2, was then put, and carried by the following vote: FOR AMENDMENT: Kagawa, Rapozo, Furfaro TOTAL – 3, AGAINST AMENDMENT: Bynum, Hooser, Nakamura, Yukimura TOTAL – 4, EXCUSED & NOT VOTING: None TOTAL– 0, RECUSED & NOT VOTING: None TOTAL – 0. Chair Furfaro: The Amendment fails. Are there any further Amendments before we move forward on this item or any other discussion regarding the tax unit relating to credit unions? Vice Chair, you have the floor. Ms. Nakamura moved to amend Bill No. 2495, Draft 2, as circulated, as shown in the Floor Amendment which is attached hereto as Attachment 2, seconded by Mr. Bynum. Ms. Nakamura: I will explain the Amendment. In recent conversations with the representatives from the credit unions, I have learned a little bit more about some of the services that at least one (1) credit union is offering on this island. What impressed me is that they are offering free income tax services to underprivileged communities, low-income communities, and bringing earned income tax credits to the island of Kaua`i because of a gap in services. That really impressed me because that goes beyond just their membership. This is a community service that I think they recognize there is an islandwide need. I also learned at the blessing that it was Kekaha credit union that provided some initial funding for the Easter Seals Police Substation Facility which also impressed me because it means using membership resources to invest in community facilities. I wanted to pause and take a look at what—this was just one (1) credit union and some specifics that Manager offered to kind of open my eyes to some of the larger contributions that are being made. I am sorry. I am just uneducated so I put this Amendment together as an opportunity to learn more about what the other credit unions are doing in terms of contributions to the larger community. I also know that other credit unions in Honolulu and on the mainland do some pretty COUNCIL MEETING 62 AUGUST 28, 2013 progressive things. Some of them are Community Development Financial Institutions (CDFI). They do micro lending to serve underserved communities. Some actually do specific grants to non-profits. They do financial literacy and tax assistance. I felt like I want to learn more about what the other credit unions are doing, so this is kind of a place holder to say for this upcoming tax year and to look at the three hundred dollars ($300) cap per year. Then after that, go to the ninety percent (90%) of assessed value that could be considered. Chair Furfaro: On that note before I go any further, I had mentioned I could support the three hundred dollars ($300) in my last comment. I am also very impressed with our credit unions. I had promised the State of Hawai`i today at 3:00 p.m. that we would take a moment of silence to recognize the fifty (50) year anniversary of the speech at the Lincoln Monument that recognized in commemoration of the certain activities that we have moved forward in equal rights and equal services across our Nation. I want to ask the audience for a moment of silence, as well, because it is 3:00 p.m. The whole State of Hawai`i is attempting to recognize this fifty (50) year anniversary. (A moment of silence was taken, as mentioned by the Chair.) Chair Furfaro: Thank you very much. Many State and County Government buildings were recognizing this 3:00 p.m. hour as well. Please continue your narrative. Ms. Nakamura: I am complete. Thank you. Chair Furfaro: Councilmember Yukimura, did you want to add to this new Proposed Amendment? Ms. Yukimura: I just wanted to get some clarification. I, too, was looking for another alternative, so I am thankful for Council Vice Chair's proposal. I think the second part of the Amendment provides for, in 2015, that it would be ninety percent (90%) of assessed value of Real Property based on the 2015 assessed values, but then it says "for each tax year thereafter." I am reading and I just want to be clear that if the taxes would be fixed to a 2015 assessed level. Ms. Nakamura: That is to address the concern of certainty. Ms. Yukimura: I just want to signal Steve Hunt if he has any key inputs on this. Maybe he can come forward. Chair Furfaro: I am not going to suspend the rules. Can you share specifically what you... Ms. Yukimura: It is somewhat of a cap, but it is for nine (9) properties. I just want to be clear because I did not at first glance understand it. It is tied to the 2015 assessed values. It does give some certainty to the credit unions versus their concern that it would constantly change. Chair Furfaro: I believe that was the intent of the introducer. Mr. Kagawa, you have the floor. Mr. Kagawa: Thank you, Chair. Thank you Councilmember Nakamura. I will be supporting this Amendment reluctantly. The COUNCIL MEETING 63 AUGUST 28, 2013 three hundred dollars ($300) for 2014 is fair. I would agree with it but I would not say that it is totally fair. I would like it to be the minimum tax amount; however, at three hundred dollars ($300), I feel that is a compromise. I will not be happy for future years and this is better than what it was previously, so I will be supporting it. Thank you. Chair Furfaro: Okay. Mr. Bynum. Mr. Bynum: As I indicated in my previous comments, I think that not all credit unions are created equal and there are national—but our credit unions here are clearly community oriented and providing all of the services that they said. I was happy with the compromise. I can support this Amendment because it does accomplish certainty this year and an opportunity for other Councilmembers to put forward other proposals if they feel that there is a better way to go. For those reasons I can support this, but I was happy with the way it was. I think it is reasonable. This is really a creative way to give the Council a full year, in essence, about this time next year; a Bill would have to be considered in order to impact 2015. I am going to support this Amendment. Chair Furfaro: Okay. Mr. Rapozo, you have the floor. Mr. Rapozo: Thank you, Mr. Chair. I still am struggling with why we are targeting the credit unions as non-profits that will pay more tax. I am having a problem with that. It just seems like we have to charge you something and I do not know the rationale or the logic. I am not going to be supporting this because I believe that the fact that the 2015 assessed values—who knows what that will be? Why not anchor it with the 2014 assessment? I am not sure. What is more confusing to me is why do we separate the credit unions from the other non-profits that are paying the minimum tax? That is, I guess, what I am troubled with. I will not be supporting this. I just do not see the nexus at all. Thank you. Chair Furfaro: Any further dialogue? As I mentioned, I am impressed with the services provided by our credit union and their investment. There are twenty-one thousand (21,000) specific members in our credit unions on Kaua`i, representing over fifty thousand (50,000) accounts. They are leveraging investments in our community of about four hundred thirty million dollars ($430,000,000), which is very much focused on the stewardship of our island, so I will be supporting your amendment. On that note, let us do a roll call, please. The motion to amend Bill No. 2495, Draft 2, was then put, and carried by the following vote: FOR AMENDMENT: Bynum, Hooser, Kagawa, Nakamura, Yukimura, Furfaro TOTAL – 6, AGAINST AMENDMENT: Rapozo TOTAL– 1, EXCUSED & NOT VOTING: None TOTAL– 0, RECUSED & NOT VOTING: None TOTAL – 0. Chair Furfaro: The Amendment for the credit unions has passed. On that note, I know we have two (2) additional speakers on other items of business today relating to the Tax Bill. Is there anyone who has not signed up to speak today? Scott, we have people who want to sign up for the tax bill here. Would you direct them to the proper form? The next speakers are Carl Imparato and Glenn Mickens. If you could target a specific portion of the Tax Bill or COUNCIL MEETING 64 AUGUST 28, 2013 highlights from the Tax Bill that you want to give testimony for, I would appreciate it. We will recognize when three (3) minutes comes up, Carl. There being no objections, the rules were suspended. CARL IMPARATO: Thank you. Aloha, Councilmembers. My name is Carl Imparato. I have already submitted testimony on August 6th and 21St so I will just summarize the five (5) main points of that testimony without repeating the underlying arguments and details. Number one, Bill No. 2495 proposes a major change to the very principles that underline the way that the County of Kaua`i taxes homesteads. It is a regression back to an ad valorem tax system that did not protect families from large, unfair tax increases in the past, and it will not protect them when real estate prices jump in the future. Number two (2), the existing cap has protected and continues to protect all homeowners from large unfair tax increases, protects people who bought their homes a long time ago, those who bought them recently, and those who will buy them in the future, including first time homebuyers. The credit union representatives stressed how important the matter of certainty is and you actually just proposed and added a cap for credit unions because uncertainty is a very important thing to eliminate. Number three (3), Bill No. 2495, so called "Home Preservation Tax Limitation" is a sham. It is a sham that even the sponsors admit would provide no protection for most of the island's homeowners who are protected by the existing cap. The only homeowners that would qualify are those who have had homestead status on their property for at least ten (10) years, and have no ownership or equity interests in any other piece of property anywhere else in the world, and have total family income of less than one hundred thousand dollars ($100,000) as interpreted by the County where for example, the cost of producing income do not offset gross income, and whose homesteads have assessed values after exemptions of at least seven hundred fifty thousand dollars ($750,000). As Steve Hunt said the last time, less than seven percent (7%) of homestead properties would even qualify for the fourth criterion. When you add the other three (3) criteria, it is really a sham. Because of the many inequities in the so-called "tax limitation," the reality is that it is not a replacement for the existing cap, and middle-class homeowners will be hit hard. Number four (4), eliminating the existing protective cap and replacing it with this Home Preservation Tax Limitation would create a variety of new inequities that would far more arbitrary than the supposed inequity attributed to the existing cap. Number five (5), the assertion is made that future County Councils will protect homeowners by cutting tax rates and increasing exemptions. That is extremely disingenuous because number one, it is mathematically impossible to treat all neighborhoods fairly through the mechanisms of reducing tax rates and/or increasing homeowner exemptions. This is going to shift the burden from one neighborhood, which is hit the hardest by real estate speculation—it is going to shift the burdens to those neighborhoods, excuse me, that are hit the hardest by real estate speculations. Second, we know that the County Councils will almost certainly never drop tax rates and increase exemptions to the point needed to be. Chair Furfaro: Carl, that is your first three (3) minutes. I will let you go on. Mr. Imparato: It has not happened in the past and it will not happen in the future. The reality is that the repeal of the cap means open season on increases for County spending. I think everything that I said, I have provided accurate and supportable data. I believe they deserve further consideration and that ignoring these points would be irresponsible and a COUNCIL MEETING 65 AUGUST 28, 2013 disservice. None of these issues should be dismissed without in-depth discussion as to the consequences. That has not taken place. It is incredible to me that for a matter that will have such important consequences for Kaua`i's families, and that the most significant change that we are proposing in property tax rules in a decade, is being rushed through in less than a month. The public hearing was three (3) weeks ago. No discussion of these issues then, just the credit union issue. The first discussion was a week ago and that was a very limited discussion. I continue to believe there is no reason to rush this to eliminate the cap that protects homeowners and capitulating to that rush would be reckless. Dismantling the cap and replacing with a half baked cap would have major consequences for many people. Where is the rush? Indeed, a number of Councilmembers already said that they have concerns that this Bill is being rushed through. I ask you all to ask consistently with those concerns and not succumb to the rush. The final point that I want to address is that Councilmember Bynum has claimed that Bill No. 2495 is the culmination of three (3) years of comprehensive tax reform effort. I have to disagree with that. I do not think that is true. Bill No. 2495, at least the portions that would eliminate the existing protections for homeowners and replace them with protections for very few, would actually eliminate the only true property tax reform that this County Council has instituted in the past decade. This Bill would mandate just a return to the old tax system, the system that did not work. That is not reform. That is just regression. When we talk about future Councils having the responsibility to keep tax rates, homeowner exemptions, and manage them to keep increases in check—after all, the Council has always had this ability, so this is not reformed. The Council has always had the ability to do this, never had a requirement to do so, and does not have a requirement to do so and still will not do so under this Bill. The only true tax reform we have seen in a long time was actually Council Chair Furfaro's successful legislation to move away from strict ad valorem property taxation and towards taxing residents based on what they paid for their homes. It was successful in addressing the biggest problems that we saw, and dismantling that framework for reform and reverting back to the old way is not reform. I do not disagree that there has been three (3) years of effort, but effort and progress are two (2) very different things. Three (3) years of effort trying to undo reform and going to the old status quo is not in my opinion "reform." In conclusion, I strongly urge you to delete Sections 4 and 9 from the Bill. Delete Section 4 because eliminating the existing cap on the rate at which property tax increases would be bad public policy. It would be very short sighted and Steve Hunt's presentation about what would happen to taxes about winners and losers, looked at what would happen in the next year. It hides the elephant in the room. The real question is five (5) years from now and three (3) years from now, when prices double in Kilauea and go up fifty percent (50%) in Hanama'ulu and seventy-five percent (75%) in Wailua Houselots; what is the impact of this Bill then? The fact is that the impact of that Bill will be that you cannot be fair to all three (3) of those neighbors simultaneously through tax rate cuts and homeowner exemptions. Finally, delete Section 9 because Section 9 would replace the existing protections with bogus home protection rules that very few would qualify for. It would create more inequities than we have seen under the existing tax cap. I think this Bill needs a lot more discussion. There are issues and ways to solve these problems. They are not in this Bill. Thank you for your time. Chair Furfaro: Thank you, Carl. Councilmember Yukimura, you have the floor. COUNCIL MEETING 66 AUGUST 28, 2013 Ms. Yukimura: Thank you as always, Carl. You said that this Bill would create more inequities. I am sorry because I do not understand what inequities you are talking about. Mr. Imparato: Let us consider the Home Preservation Tax Credit or tax limitation, right? If someone bought a home ten (10) years in the past, that person would have, if they qualify for the other parts of this Home Preservation/tax limitation, would be able to keep their taxes to three percent (3%) of their income. Someone who bought their home five (5) years from now will not be able to do that until maybe five (5) years in the future. Five (5) years from now, in that intervening five (5) years, their taxes may have doubled if we have another round of speculation. Is it fair that someone that a family who earns ninety-nine thousand dollars ($99,000) a year might qualify for this tax home preservation limitation, but if they work overtime and make one hundred thousand dollars ($100,000) a year, they get hit with a really big increase in property taxes? Is it fair that someone owns one million dollars ($1,000,000) in stock, but does not own a second piece of property can have this home preservation tax limitation? Ms. Yukimura: What? Mr. Imparato: If someone owns one million dollars ($1,000,000) in stock, and that does not produce one hundred thousand dollars ($100,000) in income in any way, shape, or form. If someone owns one million dollars ($1,000,000) in stocks or something else, and they meet the other three (3) criteria; that they have owned the house for ten (10) years and had the homestead for ten (10) years; that their home is worth more than nine hundred thousand dollars ($900,000); and... Ms. Yukimura: They do not have any other home or property. Mr. Imparato: Right. Then those one million dollars ($1,000,000) in stock does not exempt them from this criterion. On the other hand, if instead of having one million dollars ($1,000,000) in stock... Ms. Yukimura: I think the one million dollars ($1,000,000) in stock is counted. Mr. Imparato: No, it is not income; it is just property. If someone owns one million dollars ($1,000,000) in stocks, bonds, and other things, that is just property; that is not income. The point is that one type of property ownership is okay. Another type of property ownership, a small second piece of land at your mother's house—that is not okay and you get disqualified. Lastly, to me, the biggest inequity is that if your home is worth nine hundred thousand dollars ($900,000) or more...seven hundred fifty thousand dollars ($750,000) after exemptions more of less, then you might qualify for this. If your home is worth three hundred thousand dollars ($300,000), then you do not qualify for this. Ms. Yukimura: But you qualify for other kinds of support... Chair Furfaro: Excuse me, let the testifier complete. Mr. Imparato: Let us take an example here. If someone has a three hundred thousand dollar ($300,000) home in Hanama'ulu and they have got COUNCIL MEETING 67 AUGUST 28, 2013 exemptions; one hundred thousand dollars ($100,000) worth of exemptions or two hundred thousand dollars ($200,000) under this Bill, right? They have one hundred thousand dollars ($100,000) worth of assessed value on the house. Their house will have to go up to one million one hundred thousand dollars ($1,100,000) in assessed value—excuse me, around one million dollars ($1,000,000) in assessed value so that they can be back down to seven hundred fifty thousand dollars ($750,000) to cross the seven hundred fifty thousand dollar ($750,000) threshold. Ms. Yukimura: We are not trying to help those people who do not live in high priced property areas. Mr. Imparato: No, but the problem... Chair Furfaro: Excuse me. Members, let the testifier complete answering the question before we interject. You will be given a time to question the definition. I was trying to follow you and I lost track of what you were saying. Mr. Imparato: My point is that if someone had a three hundred thousand dollar ($300,000) home after exemptions, it has one hundred thousand dollars ($100,000) in assessed value. That home can increase in assessed value. It can go up from three hundred thousand dollars ($300,000) value; five hundred thousand dollars ($500,000); seven hundred thousand dollars ($700,000); nine hundred thousand dollars ($900,000) during the next realm of land speculation. During that period of time, their property taxes would be the property taxes on a one hundred thousand dollar ($100,000) home (inaudible) then it would be property taxes on a three hundred thousand ($300,000) home, and then it would be property taxes on a seven hundred thousand dollar ($700,000) home. Their taxes could actually go up by a factor of six (6) or more before they would end up qualifying for this home preservation tax limitation. It is just the math that is involved there. I agree that this is not going to hit them right now. When this will hit people is when we have the next batch of the real estate price increases, and it is coming down the pipeline. This Bill exposes everyone. Ms. Yukimura: We cannot make decisions today for every year after. The way our Real Property Tax situation is setup, is that if property valuations skyrocket, we will look at both increasing exemptions and decreasing tax rates. That has to be done year by year as the situation occurs. We cannot make a decision today that is going to guarantee something is going to happen one (1), two (2), three (3), four (4), or five (5) years down the road. There is no decision that can do that. Mr. Imparato: Understood, but when people say that we can address this by changing tax rates and homeowner exemptions, that is mathematically impossible to do. Let me give you a simple example. If property values on the island doubled, your argument would be, "Let us just cut the tax rates in half. Everybody is fine. We collect the same amount of money. Twice the tax rate, half the tax rate; it is all in the same." The fact of the matter is when property values double islandwide, what happens is that they go up two hundred percent (200%) in Kilauea, and they go up fifty percent (50%) somewhere else. Cutting the tax rates in half shifts more of the burden to the neighborhoods that were hit the hardest by the speculation. The same is true when we talk about addressing this through changing the exemption. When property values double, a two hundred thousand dollar ($200,000) house maybe goes to four hundred thousand dollars COUNCIL MEETING 68 AUGUST 28, 2013 ($400,000). A five hundred thousand dollar ($500,000) house goes to one million dollars ($1,000,000) million. If you increase the homeowner exemption by two hundred thousand dollars ($200,000) to protect the first homeowner, the second homeowner still has a three hundred thousand dollar ($300,000) increased tax liability that tax assessment is not covered. It is impossible, Councilmember, to deal with this through those mechanisms. Ms. Yukimura: Your presumption is that we have to save everybody from the fact that their property is more expensive than another. We cannot do that. If we were to do that, all we would do is do flat taxes per property like one thousand five hundred dollars ($1,500) per property for everybody or per owner. If you want to change the Real Property Taxes to an income tax, then we can do that, but Real Property Taxes do not work that way. What we are doing is a constant balancing with a combination of ways to address the tax burden on people. Real Property Tax's basic framework is valuation of property. Mr. Imparato: That is where we have the, I will say, "basic problem." If you want to accept the premise that real property taxation should be ad valorem, despite the problems it creates in inflationary markets, then fine. Then we have the situation that we had in the early part of the century and it will be replicated five (5) years from now. Alternatively, we look at other approaches. The property tax cap was definitely a move away from ad valorem. It was a move to deal with something that ad valorem paradigms do not handle. There is no reason why there could not be other approaches. For example, the property tax cap approach does not say that Government spending has to be limited. For example, there needs to be a four percent (4%) increase in Government spending when there is a three percent (3%) Consumer Price Index (CPI) increase. This Council could basically say, "We are going to keep the property tax cap for homeowners in order to give them certainty, but we will make it "CPI plus x," and every year the County Council decide whether it is two percent (2%), three percent (3%), four percent (4%), or just CPI." Ms. Yukimura: That does not give much certainty. Mr. Imparato: It gives much, much more certainty than the fact that someone's property is reassessed up thirty percent (30%) in a given year. Ms. Yukimura: It does not address the terrible inequities between long time owners and new owners, often whom are young people who do not have any equity, and who are then having to pay bigger tax bills for property that is the same as their neighbor who is paying much less. We have to balance all of these issues. I think what we are trying to set is... well, remove those inequities right now among property owners in the same class, as well as between classes, and then also trying to make sure that we are not unduly burdening our people. Mr. Imparato: You claim that that is an inequity for two (2) people with the same house on the same street to pay some difference in property taxes. On the other hand, you will eliminate the tax and it says that two (2) property owners with similar houses in different neighborhoods are going to experience major inequities, when those two (2) neighborhoods appreciated different rates. Ms. Yukimura: The basic foundation is valuation. COUNCIL MEETING 69 AUGUST 28, 2013 Mr. Imparato: Then we are talking in circle. I do not mean this respectfully. Chair Furfaro: I am going to end the dialogue here. Members, pose specific questions. Carl, I heard your point that maybe another solution is a cap plus an index determined by the Council every year. Did I hear that? Mr. Imparato: Correct. Another alternative for dealing with the first time homebuyers is to create a "first time homebuyers credit" of fifty percent (50%) tax holiday, for example. Chair Furfaro: Vice Chair, you have the floor. I have a housekeeping announcement first. At 4:00 p.m., this Council has a scheduled consultation with our Legal Attorneys in Honolulu. We will be taking a break around that time as well. Vice Chair, you have the floor. Ms. Nakamura: Thank you, Carl, for your testimony today and last time, we met. I have formed some questions that I would like to send over to the Finance Director as a result of your concerns that you raised. I just want to get your feedback. The question I am asking is to please address the concern regarding the increase in assessed value that varies by region. Is there a formula that could be applied to highly speculative regions, for example, North Shore, before applying the standard homestead tax rate to account for market variability? The second question that I would like to pose is, are there any other tools employed by other municipalities to address speculative markets? I am thinking that dialogue is needed, which would strengthen future decisions. I think you have raised the concern and I would like to follow-up on that conversation. Mr. Imparato: I think your questions are very well targeted because not that there is something wrong about the property tax cap. Especially on this island, there is the issue of land speculation or off-shore interest which drives up prices. That is a fundamental problem that needs to be addressed. If it could be addressed in other ways, that is fantastic. Ms. Nakamura: The suggestions that you tossed out just now like the first time homebuyer credit, cap, or index; I think those are tools that we need to be aware of. What are some of the cutting-edge tools being used elsewhere? We are not the only market with a lot of speculation going on? Anyway, I just wanted to tell you that I am trying following up on that. Mr. Imparato: I appreciate that because anything would be better than going naked into the world in the future. Ms. Nakamura: However, I would like to move forward on this Bill but I feel like this is something that can be done in the interim. We may have some difference of opinion on that. Mr. Imparato: Probably so. Chair Furfaro: Mr. Kagawa, and then Mr. Bynum. Mr. Kagawa: Thank you, Chair. Thank you, Carl, for your testimony. I think you even made me feel I am even more rushed now. There is a COUNCIL MEETING 70 AUGUST 28, 2013 lot to consider when we are passing something so important that is going to affect everyone. I went through those times when our property values went haywire and we did not have a cap. For those of us who were affected by it, we were thinking, "What is the County doing? They are doubling our tax bills." We put in the cap and I think it led to some stability. After your testimony, you are saying that you are skeptical as to whether, I guess, drop those homestead ones that maybe were too high, and raise those homesteaders that were maybe paying too little? Do you think that is not going to happen? Mr. Imparato: I cannot disagree. I have not seen the data, but I will assume that the data that Steve Hunt presented was accurate, and that in the very near term, the results that he postulated will be there. Again, you are creating supposedly "tax reform." It is something that is not supposed to be something that is good for one (1) year, but something that is supposed to last for a long time. What Mr. Hunt's presentation does not do is ask the question, "What will happen three (3), four (4), or five (5) years from now when property values go up twenty percent (20%), thirty percent (30%), and forty percent (40%)?" If I were asking the question, I would say, "I want to see some simulations that shows if neighborhood one, whatever it may be, Po`ipu goes up one hundred fifty percent (150%) in assessed value and neighborhood two (2) goes up thirty percent (30%), and another neighborhood goes up eighty percent (80%). Then let me know what the consequences of this Tax Bill were, compared to keeping the cap." To me, that is the germane question. It is not what is going to happen in the very next year, but coming up with something that has staying power. To me, that is what "reform" means, which is solving the problems. My last response to what you have—I do not mean to disrespect anyone on this Council or future Councils by saying that they do not care about property taxes on people, but the bottom line is that most Council people have pet projects here and there so there is a built-in incentive in the system for various Council people to say, "Let taxes go up because this is important to me and this is important to you, et cetera." That is why Councils, in general, do not keep property taxes at the level by cutting the tax rates to keep things consistent with inflation. Mr. Kagawa: I have one more question. When they talk about working on this tax reform, were you included in any talks with Steve and Mr. Bynum? You seem to know a hell of a lot more than me. You opened my eyes with some of the points that you made and the things that we have to look at. I think the thing is that we want to be fair. I feel like the market is not fair. You can have an old house in Lihu`e and it is worth just as much as a mansion in Waimea. I mean the mansion should be paying more, but you would be basically paying the same. Even North Shore compared to Lihu`e, it is much higher there. The inequities are all over, but it is because of the market. If we go to ad valorem, there you have it. Mr. Imparato: To answer your question, years and years past... Councilmember Bynum was gracious enough to speak with me on these issues and issue that I have risen in the past; the issue getting rid of the cap was not proposed. For this Bill, all I know about it is what I read. I was never brought into this. I just read it. I think about it. Ironically, I am one of the few people who would actually qualify for this Home Preservation Tax Limitation. I should be in favor of this Bill if I just cared about my own taxes. I am just concerned that I hate to see progress that has been made in tax reform with Council Chair Furfaro's Bill from years ago, just tossed down the drain and we go back to the old way. It bothers me that Government does not learn from the past. COUNCIL MEETING 71 AUGUST 28, 2013 Mr. Kagawa: Thank you. I can see you huffing there, but I just want to make sure when we pass something important, we take our time and do it right. I think in this case, seeing all of the Amendments, and hearing some of these legitimate concerns that you bring up, I would say that we have not taken our time enough. Thank you. Chair Furfaro: Carl, we have Mr. Bynum next. Mr. Hooser, were you after Mr. Bynum? Mr. Hooser: Chair, are we going to have an opportunity to speak to the Director at some point? My question is for the Director. Chair Furfaro: I understand. I want to reinstate what I said, "Steve, you are available to us all day," and maybe I should have said "evening." We have four (4) people signed up for other testimony. I want to get those out of the way before we go into Executive Session. That is kind of my plan. Mr. Hooser: Fine. As long as we will have time to talk to the Director. Chair Furfaro: We will. Mr. Hooser: Thank you. Chair Furfaro: Mr. Bynum, you have the floor. Mr. Bynum: Carl, thank you as always for your testimony. It is well-thought out. I do not have the time to go point by point with everything that you just said, although half of it is philosophical. I personally have a problem with somebody paying four hundred dollars ($400) in taxes year, after year, and then a new, young family finally gets homeownership and they pay one thousand five hundred dollars ($1,500) for the exact valued home. Philosophically, that is a problem for me. It may not be for you, and then we will come to different opinions. However, I object strongly to the idea that this is being rushed. Are you aware, Carl, that I have made great change proposals every year for the last five (5) years? Mr. Imparato: Yes, and I said that we have talked about them in the past. Mr. Bynum: Are you aware that I put forward a proposal to this Council to keep the cap and reset it, in a way that was more equitable? You and I discussed that, right? The Council refused to do that. They said, "No. Last year we want to get rid of the cap and we want to do these things." All of these things that are in this Bill were discussed over the last three (3) years. Do you disagree with that? Mr. Imparato: I agree with the longer term history, but this Bill came out and was first discussed three (3) weeks ago. There was no discussion of the ramifications of eliminating the cap, a number of them which I have raised. To basically say with three (3) weeks—and not even three (3) weeks of discussion because the first week of discussion was always about the credit union. To say that COUNCIL MEETING 72 AUGUST 28, 2013 three (3) weeks or two (2) weeks, or whatever it may be is not being rushed, I could not agree with that. It is being rushed. Mr. Bynum: I think the Bill was introduced more than three (3) weeks ago. I do not know the exact date, but we had the public hearing. Mr. Imparato: You even had the public hearing on the same day as the discussion. Mr. Bynum: I do not want to have a debate. I just want to ask some questions. Are aware that under the cap and circuit breaker, unintended, people who owned homes valued at multiple millions of dollars who had six (6) figure incomes, were paying minimum tax of twenty-five dollars ($25)? Multi-million dollar home, person making more than one hundred thousand dollars ($100,000) in income a year—income, not value, paying twenty-five dollars ($25,000). Mr. Imparato: That may be. Mr. Bynum: Is that something that you think we may need to address? Mr. Imparato: It may be something to address. Mr. Bynum: So it is something that we need to address? Mr. Imparato: Is the correct way to address is to throw out the entire property tax cap for every homeowner on the island? Mr. Bynum: The property tax cap is not producing the intended consequences—yes, you need to fix it. Mr. Imparato: I think it has produced the expected consequence. What it has done, primarily, is protect homeowners for the past almost ten (10) years from skyrocketing property tax bills. That, in my opinion, is far more important a benefit than the example that you raised of two (2) houses, one next to the other, four hundred dollar ($400) Property Tax Bill versus this one thousand two hundred dollar ($1,200) Tax Bill. In fact, if we want to talk about the homeowner who wants to buy that house and is going to have to pay one thousand two hundred dollars ($1,200) in property taxes; that owner will be much, much better served by knowing that it is going to pay one thousand two hundred dollars ($1,200) in property taxes, than buying the house and finding out that his or her property taxes double or triple three (3) or four (4) years down the line, and then having to be basically forced out because they cannot make payments. There are multiple sides to this. I do not disagree with the idea of trying to resolve that one disparity, but I do not think this is the way to do it. Mr. Bynum: Okay. I just have a couple more. In the example you used; a three hundred thousand dollar ($300,000) home in Hanamd'ulu, two hundred thousand dollar ($200,000) deduction. Next year, the Tax Bill would be three hundred five dollars ($305). If that individual had low-income, we have instituted—this is why this is not rushed. We did this two (2) years ago. We instituted a higher low-income exemption of one hundred twenty thousand dollars ($120,000) so that person would pay minimum tax. The value of COUNCIL MEETING 73 AUGUST 28, 2013 their home could go up several times and they would pay minimum tax. The example you used about a house in Hanama`ulu might have to reach seven hundred fifty thousand dollars ($750,000). I do not understand. Maybe we can talk later. The last thing I think is in the real world, we just had a lowering of values. We have local families; young couples who get married. They do not buy fancy trucks with their income. They save their money. They go to our homeowner's classes, get on a list for affordable housing, and they finally get into some affordable state. Everybody does this. They look at the Multiple Listing Service (MLS) list and say, "County taxes are four hundred dollars ($400)." They do the math and say, "Hey, we can finally get into a home because here is the mortgage payment. Here is our borrowing power." Then they find out that the taxes are not four hundred dollars ($400), but one thousand eight hundred dollars ($1,800). You want certainty; that is uncertainty because they have to go out and find out. They go to their mortgage lender, come here and testify, and say, "I am sorry. You do not get homeownership because the person across the street from you gets four hundred dollars ($400) in taxes, but you get one thousand eight hundred dollars ($1,800), and you cannot afford this house. Sorry." Is that something that we should be concerned about as well, Carl? Mr. Imparato: I said we should be concerned if we want to make homeownership more affordable for the first time homebuyers, you can look at targeted tax holidays and tax credits for them. As to the uncertainty that you are talking about, I do not see it because everyone who is buying a home should have the knowledge that you do not calculated your taxes based on what the previous guy is paying for it. You base your taxes on what you paid for the house times three dollars and five cents ($3.05) per one thousand (1,000). That is not difficult for anyone to figure out. If they have gone all the way to the lender without figuring it out first, they probably should not even be buying a house. Mr. Bynum: In most communities, when you look at what the County taxes are, the next buyer pays the same taxes, or near it. I have enjoyed our dialogue on taxes for years. Philosophically, we disagree. Mike Dyer was here and somebody else that I have engaged with very extensively on taxes, and he supports the Bill. We are at a point now where we will get—we can do some of the things that you are talking about in the future. The fact is, and I will talk about this later, our current status is chaos. We have to get back to something that is manageable, fair, and then if there are additional issues that come up, we can deal with it. We can do some of the things that you suggested, but not when everybody is being treated differently. This is the last thing that I have to say. I know I said it three (3) times, but it is true. This is the last thing. In ad valorem taxation, you trust your elected officials to manage the finances of the County, but I do not think anyone expects that we can control the market. Homes in Hanalei are probably going to forever be more expensive, than homes in Hanamaulu. I do not think any Government can control changes in the market. I cannot afford to live in San Francisco, and a lot of people there could not and they had to move further out. Chair Furfaro: We need to pose this as a question because we are on a time constraint. Mr. Bynum: Thank you for your involvement. Chair Furfaro: Carl, thank you very much for your very precise testimony. I want to make an announcement to those in the audience and to the County Attorney's Office. The only ones that we are going to break for 4:00 p.m. COUNCIL MEETING 74 AUGUST 28, 2013 on are those that have specific times with off-island Counsel. The rest of the Executive Sessions will come towards the end of our business day, Al. We have three (3) more people to take testimony from. I want to do that before our break. Glenn, you are up. GLENN MICKENS: For the record, Glenn Mickens. Thank you, Jay. I want to say first that I agree with Carl one hundred percent (100%). I think he has more than done his homework. Section 4 is the Section that you wanted, Jay, that I think eliminates the cap. I urged the Council to... Chair Furfaro: Excuse me, you said it is something that I wanted? Mr. Mickens: You asked for the Section of the Bill that we are particularly talking on. That is what you made the statement before. Chair Furfaro: I think there was a misinterpretation. Go ahead. Mr. Mickens: It is Section 4. That is the Section that eliminates the cap. I urge the council to retain... Chair Furfaro: I got you now. I am sorry. That is the Section that eliminates the cap. Mr. Mickens: Right. Chair Furfaro: That is not something that I have been discussion. I am the author of the cap. Mr. Mickens: Right. Chair Furfaro: Go ahead. Now I understand what you were saying. Mr. Mickens: I urge the Council to retain the cost of living cap for the homestead class. For me, this cap is the critical part of the Bill and has certainly worked for ten (10) years to protect the homeowner class; the class who pays nine percent (9%) to ten percent (10%) of the total tax revenue collected. Chair Furfaro wisely put this cap in place. As Walter Lewis says, "If it is not broken, do not fix it." In my opinion, Mr. Lewis, through his efforts to pass the "`Ohana Kaua`i Charter Amendment," basically, the two percent (2%) cap that keeps seniors from being taxed out of their homes as it did for my mom and dad, help get the cost of the living index in place, so leave it alone. The cap has been relied on by our homeowners for nearly ten (10) years to stabilize their tax obligations. Its removal would unfairly expose them to significant increases. I also want to thank Carl Imparato for his many hours of work in testimony of this Bill, and only hope that those who want to pass this Bill, which I appreciate Jay—you have given Carl a lot of time and the members have had dialogue with him, and I really appreciate that. Chair Furfaro: I gave Carl the time he is entitled to, and then the members asked questions which he responded to. It was not a gift from me. That is the way the rules read. Go ahead. COUNCIL MEETING 75 AUGUST 28, 2013 Mr. Mickens: Right. I appreciate being here, hearing this dialogue back and forth because I think it was extremely informative to the people who are watching this meeting. Why do you think the cap and the safety net it provides needs to be removed? It is the safety net that needs to stay in place. Even if you have a home that is worth five million dollars ($5,000,000) or ten million dollars ($10,000,000) million, like the McLaughlins, you want to live in that home. You do not want to ever be taxed out of that home. Maybe you will live there until you die. You are not making a tremendous amount of money, but the property value has skyrocketed. I do not think anybody should ever be taxed out of their home just because the assessed value of that home is that high. I think you should be able to live there as long as you want to live there with a reasonable thing. Again, the cap on that thing was the thing that kept things relatively stable. That is why I am highly for this cap. Thank you, Jay. Chair Furfaro: Glenn, we do have one question for you. You did understand Carl's testimony which is saying that we could keep the tax cap in place, and then each year for the following year, negotiate an index that goes on top of that. Mr. Mickens: Are you are talking about the Cost of Living Index? Chair Furfaro: The Consumer Price Index (CPI) is currently the cap. Mr. Mickens: Right. Chair Furfaro: Then, if we find ourselves venturing into financing more and more projects that perhaps should have gotten caught up in the sequester by the Federal government, that we could put a new index on top. That is kind of what Allan Rachap said in testimony earlier this morning, too. You did understand that? Mr. Mickens: Yes. You could go ahead and change the rate, could you not? Chair Furfaro: The rate we can always change, but the reality is that I want to make sure—Carl was talking about a cap and then index each year. Mr. Mickens: Right. Chair Furfaro: Mr. Bynum, you have the floor. Mr. Mickens: You mentioned some people who came and testified. As I recall, they live in Oahu and they own a home in Hanalei that they inherited as their second home, and they are using it as a vacation rental and staying in it when they want a vacation. You are saying that we should protect them for paying full market value of taxes in that circumstance? Mr. Mickens: Tim, I do understand there were extenuating circumstances. I do not approve of owning more homes, et cetera. In that example, I am saying that I think they said their property was worth eight million dollars ($8,000,000) or something. I believe I heard that. If it is worth eight million dollars COUNCIL MEETING 76 AUGUST 28, 2013 ($8,000,000) and young lady says she is a school teacher, and it does not sound like they are making big bucks, I am using an example that maybe not quite of same as what they were saying. They had property and taken and put the property in their family's name now, which I guess changed the tax rate on that. I am saying that if under the circumstances, if they just lived there, and they wanted to live in that home, they should not under the present tax system—the property tax was escalating almost out of sight. Mr. Bynum: Glenn, that is why we put in low-income exemptions, homeowners exemption, and this Home Preservation Tax Credit, for these people who own these really high-end homes, who it is their only home and they really do not have another income from investments, that we have a provision for that. That is why we put it there. There are not many of those. They are more like the couple that you mentioned, who have other homes, live elsewhere, and this is their—and the reason their taxes went up so dramatically is because it is a vacation rental. We said for five (5) years on this Council, "Hey, you guys that are running vacation rentals, be aware because you are getting the residential rate with everybody else and we are going to move you to commercial if you do commercial." Chair Furfaro: I have to make sure—I know you are explaining it to Glenn, but it has to be a question at this point. Glenn, I encourage you to... Mr. Bynum: The question is that we should leave this beneficial tax in place for people who own really high-end homes, which is their second home. Mr. Mickens: Basically, I am saying to leave the cap alone. That is my basic statement. Leave the cap in place. Mr. Bynum: Thank you. Mr. Mickens: Thank you, Tim. Chair Furfaro: I have a couple of housekeeping items over here. First of all, Celia, I have solicited some comments on your reoccurring grant amount from the Councilmembers. You do not need to stay because we could stay into the evening. To the County Attorney, I want to ask you if the scheduled 4:00 p.m. Executive Session could be postponed for a week or two (2) weeks. I want to ask that now because we have got a lot of business going on here. Could you come up for a moment? ALFRED B. CASTILLO, JR., County Attorney: Council Chair and Councilmembers; County Attorney, Al Castillo. Council Chair, which one are we referring to? Chair Furfaro: Please give me the number, Madame Clerk. You know which one I am talking about. JADE K. FOUNTAIN-TANIGAWA: This is ES-669, Jeffrey Sampoang versus Harvey Brothers. Mr. Castillo: Yes. COUNCIL MEETING 77 AUGUST 28, 2013 Chair Furfaro: That is the one we were told we had Legal Counsel calling at 4:00 p.m., and they have indicated to us that they could postpone the dialogue for a week. Mr. Castillo: Okay. Chair Furfaro: They need a time when their offices are open. Is that acceptable to you? Mr. Castillo: It is. Thank you. Chair Furfaro: Okay. To the Clerk's Office, may I ask that we postpone this item and contact the conference call in Honolulu? The rest will have to come to the routine of the end of today's agenda. Mr. Castillo: Thank you. Chair Furfaro: Who is the next speaker? Ms. Fountain-Tanigawa: The next speaker is Doug Blackburn. Chair Furfaro: Doug, come right up. DOUGLAS BLACKBURN: Good afternoon, Councilmembers. My name is Douglas Blackburn. I have lived in Hanalei since 1977. I grew up on O`ahu before that. Carl pretty much said everything that I needed to say. He handled it much better than I could. I just want to address one issue, and that was that I have often heard from several of the Councilmembers that it is unfair for young families getting started that there is a discrepancy in their taxes. The main problem for me is that I am retired, my income is fixed, and I made all of my income twenty (20) years ago at a different rate than what younger folks are making now. I was a Carpenter at three dollars ($3) an hour and Carpenters get thirty dollars ($30) an hour today. They are making a lot more money today than I could have made back then. The money that I saved and put away is fixed because I only have so much in the bank. To say it is unfair for younger; it is also not very fair for older people, too, if you are going to change the laws radically. I am totally in favor of the two percent (2%) cap because it gives me certainty at least. What is going to happen next year? Before that, I have been in Hanalei for a long time. I have seen a lot of things. When I first moved in, my property taxes were one hundred forty-seven dollars ($147). They have skyrocketed to all the different speculations and stuff that go on. I am lucky to still be there. There are not very many residents left anymore. They are all gone and they leave every year because someone else is kicked out of their area. In my community, I do not even have any neighbors anymore to speak of and the few that are hanging on there are going to be affected and they do not even know it. I have talked to a few of them and they say, "You are talking about what? They are getting rid of the two percent (2%) cap?" They do not know. I only heard about it three (3) weeks ago and I was just lucky that I happened to be here when it happened. Most of the community... maybe we need tax changes, but I do not think we need to rush this through quickly. I think a lot more discussion—a lot of people are unaware of what is going on, so they are not going to be too happy if suddenly they find out that their taxes go way up. Hanalei's taxes in the homestead group will go up because we have been protected for years. That was my concern. I hope that you guys give it a little bit more time and think about this. There is a lot more input from a lot of other people, other than me. COUNCIL MEETING 78 AUGUST 28, 2013 Chair Furfaro: Doug, that is your first three (3) minutes. Mr. Blackburn: That is all I have to say. Chair Furfaro: Are there any questions for Doug? Ms. Yukimura: Doug, the Home Preservation provisions do not apply to you? Mr. Blackburn: I have looked at those very carefully, and I might be able to pass them, but I recently got married. Chair Furfaro: Congratulations. Mr. Blackburn: It now includes my wife's income. Ms. Yukimura: Okay, household income. Mr. Blackburn: She does not own the house. She is not on the deed and she has nothing do with it. This is a community property, not a community property estate. Why should her money even come into play into all of this? Ms. Yukimura: Because you are married. Mr. Blackburn: Well, we are married, but her income is her income and my income is my income. It is just another issue that popped-up in the Bill that I have to deal with. Ms. Yukimura: You know for a fact that her income would disqualify you from Home Preservation? Mr. Blackburn: It will not disqualify me the first year because we just got married. We are looking at the 2012 taxes. For the next year, it just pushes us over the one hundred thousand dollar ($100,000) limit for the one (1) year because she made a little income that year. I will be disqualified. Then the question comes, "Will I be able to reapply next year?" If I manage to get through the process and actually make it into this little exemption, then if I get kicked out one (1) year, can I get back in the next year? Ms. Yukimura: I think it is a year-to-year certification. Mr. Blackburn: Right, but the qualifications for this—I would be lucky to find very few people that can qualify. That is seven hundred fifty thousand dollar ($750,000) limit really hurts a lot of older people who are in houses less than seven hundred fifty dollars ($750,000). That is totally unfair. It should be zero. It should not even be in the Bill. Ms. Yukimura: Seven hundred fifty thousand dollars ($750,000)—I think there are provisions for those who are in less expensive neighborhoods. COUNCIL MEETING 79 AUGUST 28, 2013 Mr. Blackburn: I am not an expert on the Bill. All I know is that seven hundred fifty thousand dollars ($750,000)... if your house is not that, then say a couple living in another part of the island other than Hanalei where I live; their houses may not reach that. Ms. Yukimura: But they will have a two hundred thousand dollars ($200,000) exemption. The exemptions are going up. Mr. Blackburn: If you want to take me for an example, my mother owns the house with me. She is eighty-eight (88) years old, so we qualify now for one hundred forty thousand dollar ($140,000) exemption that would pass in this Bill... Ms. Yukimura: In Hanalei, those exemptions are not that useful. Mr. Blackburn: It does not help me at all. It is a couple hundred dollars on a property tax that is thousands... Ms. Yukimura: That is why we have the seven hundred fifty thousand dollars ($750,000) for high-priced places. Mr. Blackburn: Well, that is good for me, but what about a family who is not going to meet that, that is less than that in another area? Ms. Yukimura: I was just saying that there other provisions that apply to them. Mr. Blackburn: I am not an expert on the Bill, but... Ms. Yukimura: It is kind of you to be concerned about other families, as well. I was just trying to focus on your situation because we do not want to Tax Bill to push people out of their homes. That is one bottom line, I think, we all have. Mr. Blackburn: Luckily, I have lived in my house for more than ten (10) years and I will probably be able to qualify for this, and like Carl, we might be the only two (2) ones on the whole North Shore that might actually qualify. Ms. Yukimura: Then that is the kind of people we want to apply to. Mr. Blackburn: I know all of that, but the biggest concern for me is that at least I know my taxes are going to be the following year. This two percent (2%) deal; it can be fixed to some other type of things. Ms. Yukimura: The main purpose of taxes—we try to keep things as certain as possible, but that is not the main purpose of taxes. Anyway, I hear you. I hear that that is your concern, so thank you for that. Mr. Blackburn: Thank you. COUNCIL MEETING 80 AUGUST 28, 2013 Chair Furfaro: Doug, we did hear your comments that predictability on your taxes is important. Mr. Blackburn: It is very important. Chair Furfaro: I also want to make sure that you understand that the two percent (2%) is actually an indication of the Consumer Price Index (CPI) now. Mr. Blackburn: I know that. I understand that. Chair Furfaro: I just want to make sure that we are all talking with the right information. Mr. Blackburn: That was changed similarly a few years back. Chair Furfaro: Yes, it went to the CPI. Mr. Bynum: I want to answer a question that you asked which is, "What about the guy at seven hundred fifty thousand dollars ($750,000)?" I do not think seven hundred fifty thousand dollars ($750,000) was arbitrary. There was some thought that went into it because in the circumstance, you say seven hundred fifty thousand dollar ($750,000) value; if it is a senior person, they get two hundred thousand dollars ($200,000) off of that. If they have low-income, because we added that provision, an additional one hundred twenty thousand dollars ($120,000). That makes the taxable value four hundred thirty thousand dollars ($430,000) at the homestead rate of three dollars and five cents ($3.05). That is less than one thousand three hundred dollars ($1,300), so that person will be paying less than one thousand three hundred dollars ($1,300) on a seven hundred fifty thousand dollar ($750,000) home. You get into a three million four hundred thousand dollar ($3,400,000) home, then at those numbers, you could have real significant increase, and that is why we put the Home Preservation Credit in. It is also what I think all Councilmembers understand is that we had dozens and dozens of circumstances where people had homes value in the multiple millions that were paying almost no taxes. Chair Furfaro: Questions, please members. Mr. Bynum: I just wanted to answer your question. Thank you. Chair Furfaro: All of your points are registering with the group. Mr. Blackburn: Okay. Chair Furfaro: I understand that certain areas in the neighborhoods are expanding. My family goes back to the Spanish cowboys from 1848. Everybody that moved in around... Mr. Blackburn: Well, you know Hanalei well. I know that. COUNCIL MEETING 81 AUGUST 28, 2013 Chair Furfaro: I know all the moving parts. My wife has been with the same employer for forty-three (43) years. We make one hundred twelve thousand dollars ($112,000) because we both only have one job. My Council job is my job. I do not have a house that is even close to the seven hundred fifty thousand dollar ($750,000) mark. I am not quite at sixty-four (64) at the retirement age, so there are a lot of moving parts that I am hearing in your piece. Are there any more questions for Doug? No. Okay. Mr. Blackburn: Thank you very much for let letting me speak. Chair Furfaro: Is there anyone else in the crowd who wishes to give testimony before I ask Steve to come up? Steve, could you come up. I am going to go to Mr. Hooser first, since he raised the question. Then I will come back to you. Mr. Hooser, you have the floor. Mr. Hooser: Sure. I will start is with some basic stuff. I mentioned this before which my concern is about abrupt increases. Many of the Councilmembers mentioned that there are taxpayers paying four hundred six dollars ($406) now, and someone in the same house value is paying one thousand eight hundred dollars ($1,800) or whatever. I am concerned that if this passes, all of a sudden a person paying four hundred six dollars ($406) is paying one thousand five hundred dollars ($1,500) and they are caught with this huge increase. Is there a mechanism that we could put into place to limit that increase, whether it is a fifteen percent (15%)/twenty percent (20%), whatever it is, so over time, assuming values keep going up, that they would slowly catch up but it will not be this abrupt shock. That is my question. Mr. Hunt: One of the challenges I guess with working with percentages is right off the bat, if you are looking at going from a minimum tax of twenty-five dollars ($25) to one hundred dollars ($100), it is a four hundred percent (400%) increase. If you are living at fifteen percent (15%) or twenty percent (20%), it is a few dollars increase. Percentages also do not work well because if you are looking at a comparison of an increase to a decrease, the same fifty dollars ($50); if you go from a one hundred dollar ($100) tax to a fifty dollar ($50), it is a fifty percent (50%) decrease. If you go from a fifty dollar ($50) tax to a one hundred dollar ($100) tax, it is a one hundred percent (100%) increase. It is the same fifty dollars ($50) one swing or another, but the percentages just do not work well. I think hard dollars work better if we are looking at a cap on the amount of dollar increase might be a better way than a percent increase that can increase no more than five hundred dollars ($500) or one thousand dollars ($1,000) or whatever, but assuming again that is a stagnant property. If you are doing additions or built a second home, you would have to look at that and say, "Does it still deserve the cap?" Mr. Hooser: I am talking about a situation where the homeowner is doing nothing, and then all of a sudden they get the Bill and there is this big increase. Whether it is a—I can imagine it would be a floor where you maybe do not do percentages for one hundred dollars ($100) or twenty-five dollars ($25). I think I heard the answer that there is a way to do it. Mr. Hunt: We do not have a way within the system now. It would be a programming change, so if Legislation came that said we had to have a cap on a percent increase or dollar increase, then that would have to be worked out with our vendor to program that change. COUNCIL MEETING 82 AUGUST 28, 2013 Mr. Hooser: Okay. Mr. Hunt: We have been tweaking the system more and more, but it is really an ad valorem system. It is value less exemption times tax rate. Everything that we have departed from that, we have had to create these fixes. Mr. Hooser: So, a group of smart people sitting together could probably work out a formula to put some kind of caps on the increases that would work within our system. Is that fair to say? Mr. Hunt: It could be fair to say, but then the premise would be the amount of exemptions that we are proposing here. What we are looking at is neutral. If you release some of the revenue but give a lot of decrease, now we are in a negative position where we are actually underfunded. Mr. Hooser: Okay. I am trying to get to the point. We are being asked to pass a legislation that has all of these exemptions and formulas put into it. If we wanted to, as a body limit those increases—if there was a majority here that wanted to limit the increases, could that be done at a later date? What later date would be the outside date of that? Basically, we are being told that in order to meet the internal deadline, this has to be passed now. If we were going to put in some kind of caps on the increase, is there another later date that can happen? Mr. Hunt: We have proposed that ourselves with the home preservation limit, understanding that this is very close to a deadline. The application deadline for exemptions that we internally would say, "We want to extend that to the end of December," understanding that typically that we are already having budget discussions. In February, we are hoping to have projections on revenue. For March, we have to deliver the assessment list to you with our revenue. Mr. Hooser: In March? Mr. Hunt: March 15th by Ordinance, so on or before. We kind of can work back from that date, but I would say the end of December would probably be the latest that we would want to have any of those programming fixes done so that from a budgeting perspective, we can actually determine what kind of revenue and what the impact would be. If, in fact, this passes with the current exemption amounts, that is already a certain level of decrease in revenue. If we limit, on the cap, the amount of increase in revenue, now we have created a hole. Mr. Hooser: Then we would have to fix that with the rates or the exemptions when it comes to Budget time? Mr. Hunt: Possibly. One of the challenges with rates in managing the cap as taxes are decreased; every time there is a rate change or exemption increase including the cap, lowers that threshold but creates a new ceiling. So someone who is paying one thousand dollars ($1,000) gets some relief either from a rate or an exemption that goes down to five hundred dollars ($500), and you want to try and raise the rate to get it back to one thousand dollars COUNCIL MEETING 83 AUGUST 28, 2013 ($1,000); the two point four percent (2.4%) cap kicks in. There is no way to recoup that, which is dangerous from an assessment perspective because if an assessor makes a bad assessment for any given year that lowers a neighborhood, you are stuck with that. You cannot recoup that. Mr. Hooser: Right. I want to avoid too much a—what we have been having here in terms of back and forth dialogue. Just to be clear, if this body wanted to put in such a mechanism as I am discussing, we can do that, and it can become as late as December to pass it. That is number one. Number two (2), as you said, that may affect income but that income could be compensated when we do the Budget as all this other stuff that we had talked about—the (inaudible) are exemptions. Those that can be done... Mr. Hunt: First through the Budget perspective, we would have to have funding to the programming, so we would have to find some General Funds to carve out to do program changes. We would have to have that timeframe to implement that. It can be done, but the latest date I would think would be... we would want to have the changes in place by the end of December, which means whatever legislation would have to be perceived at, so we could schedule the programming on the tax calculations to determine the revenue side of this. Mr. Hooser: The calls I am getting—and it is a shock. It is the unknown. It is the certainty as you heard. For bills to go up large amounts; it hurts. People are not planning for it and people do not have the income for it. I am hoping that there is some kind of shared consensus on the Council with this, that we can do something to minimize... if we want to adjust it and make it fair, we do not have to do it all in five (5) minutes or in one (1) year and one (1) tax. In my opinion, we could phase that in a little bit. Thank you. (Chair is noted to have left the room.) Mr. Kagawa: Steve, when we had the Bill for First Reading, I asked you for some real life examples of how this Bill would fix some of the inequities and how it would help the homestead class, actually. I wanted real life examples and we never got to do those. I thought it would be important to share with the members being that I feel rushed. I could have seen some of those real life examples of inequities being fixed, I guess I could have felt a little better. Instead, you have given us just a broad worksheet of how it affects the whole island. I am not criticizing that. It is good, but just to have that real life example. When I look at an average tax bill of seven hundred dollars ($700) or something like that, I wish my tax bill was close to that. Mine is almost doubled or tripled. I have an old forty (40) year old small house, so I do not know what average median tax that equates to. My question is this forty-two point eight nine percent (42.89%) of Islandwide that are going to be increases; what percentage of those are local people who may be have a second home and maybe inherited their parent's home and were saving it for their children? On Kaua`i, that is how a lot of local families keep their families here, which they pass down or help their children start their life once they finish college. I am just wondering, how much of those forty-two point eight nine percent (42.89%) are going to see tax increases—local people? Mr. Hunt: It depends on the thresholds. I think I provided the threshold breaks. If you are looking at Homestead only versus Islandwide, which would include properties that have been classified as "Vacation COUNCIL MEETING 84 AUGUST 28, 2013 Rentals" or "Residential" because they have other income residential-producing on the property. You could either look at either one (1) of those two (2) columns in terms of the Islandwide or Homestead. It will break them down. For instance, if you look at sort of the Homestead, of the increases, which are the thirty-seven point four five percent (37.45%) in that Homestead—almost ninety percent (90%)... eighty-nine point five three percent (89.53%) would be five hundred dollars ($500) or less increase in tax dollars. Mr. Kagawa: Okay. I guess I am worried that we are selling the positiveness of passing this Bill and that we will be helping the local people and actually lowering their homestead class, but our local people also have second homes and rentals. In fact, if that goes up, they will be paying more so we are not saving them money. Mr. Hunt: That is a very good point. I think what really has to be looked at is—the cap protects only those who have Home Use Exemptions. Every other type of property is subject to the market. If the amount of taxes that is garnered from there is somewhat stagnant or growing less than the expenditures, that shift is going to every other property. I cannot speak for Mike Dyer, but he testified...I actually expected him to testify against the Bill, but he owns other types of properties. I think he sees it. Whatever savings he has retained at his personal residence, he is paying for for the commercial and Ag. This really is trying to take the group that we are talking about is the group that has exemptions, and has by far, the lowest rate. We are talking about equity within that group. The outliers, and certainly like Mr. Blackburn, is an outlier that we want to protect because he is not an investor; he is not a speculator; he is just holding his personal residence. That is what we are trying to provide the means to protect. If you have three (3) or four (4) properties, and you choose to live in your most expensive property, you are an investor. You are basically just finding a way to carve out your lowest taxes. The cap has provided you means to do that. Mr. Kagawa: My final question is how did we pull up the amounts that you have like seven hundred fifty thousand dollars ($750,000)? How did you pull that up? Mr. Hunt: I looked at the breakdown in values in terms of the counts. I wanted to find one where we are not in a position where the tax office is reviewing twelve thousand (12,000) tax returns annually, and everyone is eligible for it because then we are not even taxing on property taxes. It is an income tax. I wanted to isolate those that I felt were sort of the outliers and on a percentage basis. Mr. Kagawa: The reason I bring this up is because having that combination of having a property worth over seven hundred thousand dollars ($750,000), and having an income of less than one hundred thousand dollars ($100,000) combined if you are married, does not often work. Mr. Hunt: Having a property that is over that value and income under? Mr. Kagawa: Yes. It is like a teacher owning a Mercedes. It does not happen often. COUNCIL MEETING 85 AUGUST 28, 2013 Mr. Hunt: I think that is the point. Those are the outliers. The tax rates and the exemptions themselves should cure most of the issues with taxation. It is the ones that have these extreme anomalies that are high, need the protection. Mr. Kagawa: I just get reservations when we just have these amounts because for people who just do not need it, they do not get it. It is just like our Federal taxes that we pay. You are in a higher tax bracket if you are at one hundred thirty-four thousand dollars ($134,000). Just one dollar ($1) more and you are in a totally different bracket than the guy making one hundred thirty-three thousand dollars ($133,000). Mr. Hunt: That one hundred thousand dollars ($100,000) is not meant to be stagnant either. It is something that as we are looking at annual household median incomes, we want to look at that annually as well, to determine what is appropriate. Mr. Kagawa: Well, I would just like some flexibility, maybe in the future, if this passes, I would look forward to keep on tweaking it, and working with people like Carl. I would be willing to even work on it to try and see if we can make it even better or fairer. I know there are some who think they have done it all and there is nothing to fix, but to me, something important as taxes can always use improvement as far as being fair. Thank you. Ms. Nakamura: Councilmember Rapozo, and then Councilmember Bynum. Mr. Rapozo: Steve, I only have one question. Carl brought up the point about the CPI plus; in other words, you would maintain the cap at CPI plus one percent (1%) or two percent (2%). Is that something that could be worked into... Mr. Hunt: Again, it depends on when that number would be provided. If the cap maintains, all of the people who have been at lower levels will remain at lower levels. Those that are coming in will still have the same cap. You would still be doing two (2) sets of calculations; the market tax, PHU tax, and whatever that is will still have a very difficult time projecting revenue. When we want to suggest rate changes, we are still going to have to run every hour scenario to tell you what the impact might be of that. It is possible to have it, but I think having both the higher exemptions and maintaining a cap would not be workable because we are going to lose a tremendous amount of revenue by trying to do it both. Mr. Rapozo: I am not looking at the higher exemptions; I am looking at the cap. I think it makes sense that you would have that flexibility to massage the cap. Mr. Hunt: I just want to clarify one other thing that was said that might have an imprint on you. The taxes that were established for the cap were not based on purchase price; that is a misnomer, that is a California Prop 13. Mr. Rapozo: Right. COUNCIL MEETING 86 AUGUST 28, 2013 Mr. Hunt: That is not what we do. We actually set value based on comparables, and you could have a high sale or a low sale in the neighborhood. It does not matter what you particularly paid, it is what the collective analysis tells you that area is worth. That is the starting point. Some of the areas that started off from a `03 basis were areas where there was not a lot of activity, so they may have gone in with a very low tax base that was immediately adjusted in '04 or `05 but was never captured because of the cap. They remained at these somewhat arbitrary that have nothing to do with value anymore. Mr. Rapozo: Do we know how many of those exist? Mr. Hunt: I do not have a count, but anyone who is receiving a cap is getting some sort of benefit. It is just a matter of how much and... Mr. Rapozo: Right, but some of them started the cap with a legitimate number. Some of them, obviously as you mentioned, if there was not a lot of real estate activity, they may not. They may have been subject to an advantage, I guess you could say. You do not know what that number is. Mr. Hunt: No, and that would be somewhat arbitrary to figure out what that would be and what neighborhoods because even in '03, some neighborhoods were fine value wise, and some were not. Mr. Rapozo: Okay. Thank you. Ms. Nakamura: Councilmember Bynum, and then Councilmember Yukimura. Mr. Bynum: Steve, I want to go back for a minute to what Councilmember Hooser was asking you about. This is something that you and I have discussed in the past. I think if I understood what you are suggesting, these increases... to say they are over four hundred dollars ($400), we are going to phase it in in essence. Four hundred dollars ($400) this year and next year, an increase until you meet market. It is just something you can plan for. Eventually it will time out and there will not be anymore, right? The big part of the cap is this incredibly convoluted, complex analysis that your Office—if we were to institute what Councilmember Hooser is saying; is that as big of a complication as the cap, or is it something that is more manageable? Mr. Hunt: It depends on whether you are trying to maintain or preserve some of the elements of the existing cap, if you will. Again, I think it highly depends on whether we are talking about a stagnant property. Once we start getting into renovations and improvements; are you keeping two (2) sets of book? You are only going to allow the value or tax to increase on four hundred dollars ($400) on their old original portion, but the new portion you can collect market on? Some hybrid? The more complicated we make it, the more complicated it is to implement. That is what has happened with the system we have now. We had to think about every alternative and scenario: losing an Ag dedication, gaining one; losing an exemption, gaining one; building a house, taking down a house; CPR a portion. All of that has to be sort of factored into this cap tax. It is a very, very complicated and often difficult to explain to the taxpayers how we have arrived at their taxes. COUNCIL MEETING 87 AUGUST 28, 2013 Mr. Bynum: To realize that intention, if a Councilmember were to work closely with you, we could work out something that would not be too convoluted or complex. It is a possibility. I thank you for that. I want to look at other side of your data. They are all focusing on the increases, and we should. I just want to make sure that everybody understands that every person who is paying an increase means that they are paying less, and have been paying less for sometime than this market rate that we would set with this Bill, which would be a combination of the three dollars and five cents ($3.05) rate that we set last year, and the Homeowners Exemptions, which have increased. A few years ago, the market rate was four dollars and five cents ($4.05) and four dollars and fifty cents ($4.50), and the exemption was forty-eight thousand dollars ($48,000). Now we are talking about making the exemptions as high as one hundred sixty thousand dollars ($160,000) to two hundred thousand dollars ($200,000), and the rates at three dollars and five cents ($3.05). We have lowered the market rate a lot over the last couple of years and we would lower it more with this. Is that right? Mr. Hunt: Correct. Mr. Bynum: Even at this new market rate that is lower, all of these people who are paying increases have been getting less than that new market rate. Is that correct? Mr. Hunt: I am not sure if I follow that exactly. Mr. Bynum: If we pass this Bill, the market rate will be based on exemption plus a three dollars and five cents ($3.05) rate. Mr. Hunt: Are you talking about the net taxable? Mr. Bynum: Yes, this whole analysis is based on that. Mr. Hunt: Correct. This is based on replacing the cap with a lower net taxable basis, if you will, for the majority of the people that will give relief to at the cost of some other people "ponying up" a little bit more to bring them into parity, but those are now based on market factors, market exemptions, market tax rates, and market values. Mr. Bynum: We are talking about with this "lowering the market rate for the homestead class" overall? Mr. Hunt: Yes, the median taxes overall will decline. The median represents the midsection. (Chair is noted as back in the meeting.) Mr. Bynum: In that scatter, here are these people that pay increases. Most of them are under four hundred dollars ($400) or five hundred dollars ($500), but those are four hundred dollars ($400)/five hundred dollars ($500) less they have been paying than other people. Councilmember Hooser and I are concerned about whether they got this benefit or not to have a big change in one (1) year is difficult. We are looking at "can we ameliorate that?" What I want to look at is that the other side of this. I want Councilmembers and our Administration to be as concerned about the other side; the sixty-two percent (62%) that will get a decrease. Okay? If we look at that for a minute, at those numbers which are on COUNCIL MEETING 88 AUGUST 28, 2013 page three (3)—increase by threshold. What this number says to me is that one thousand one hundred seventy-five (1,575) people are currently paying less than one hundred dollars ($100) over market, so their refund is going to be somewhere between one dollar ($1) and one hundred dollars ($100). But there are four thousand six hundred ninety-one (4,691) people that are paying seven hundred fifty dollars ($750) above this new lowered market that we would pay. We need to be concerned about those people that are paying one thousand seven hundred dollars ($1,700) more than this market. We also have to be concerned for those paying seven hundred fifty dollars ($750) less than market. That spread is huge. I just want Councilmembers to say, "Hey, they are sixty-two percent (62%) of the people that are paying higher than these market rates. We are talking about lowering the market rate. Here is my last question. The other thing is when we set the rates—if we set the rates at two dollars and fifty cents ($2.50), which would be a huge revenue loss, but the number of people who showed increases in the amount of increases would fall dramatically. Mr. Hunt: The rate has the biggest impact on the values that are outside of where the exemptions will cover. Mr. Bynun: The point I am making is that if Councilmembers are concerned about the people who are getting increases, I hope they are equally concerned about the people that are paying too much. If they think those increases are too great, we can do something along the lines of Councilmember Hooser's suggestion. I will help with that to analyze it, but it will be a really complex thing or we can lower the rates further, and make up the revenue from the class taxes that are undervalued and undertaxed. I believe the resort industry is undertaxed. I am going say it out loud as possible because we just lost ten million dollars ($10,000,000) from that industry. We are making it up from our taxpayers and from citizens. I just want to make sure that I am correct that these numbers that show increases, four thousand six hundred eighty-one (4,681) are currently paying seven hundred fifty dollars ($750) a year more. Five thousand nine hundred (5,900) are paying one thousand two hundred fifty dollars ($1,250) more than this new market rate. Five thousand one hundred eighty-three (5,183) are paying three thousand dollars ($3,000) a year more than this market rate, than the level that people come up to have to pay in increase. I think we need to be equally concerned about both sides of that equation; either Councilmember Hooser's concept or adjusting the rates at Budget time, can dramatically change the amount of people who pay increases and the amount they pay. Am I correct? Mr. Hunt: Those are options. I do not want to say correct on the "undertax" of the hotel because the State is, in fact, collecting those TAT. It is just that we are not getting that portion. Chair Furfaro: Well, then say it correctly. We did not lose it; the State took it. Mr. Hunt: Correct. Mr. Bynum: It is both accurate, Chair? The State took it and we lost it. Chair Furfaro: But those hotels, because of the average daily rates and the occupancy improvements, are paying more already. COUNCIL MEETING 89 AUGUST 28, 2013 Mr. Hunt: Actually, in property tax as well for the nine dollar ($9) rate. That is correct. Mr. Bynum: They have the lowest tax rate in the State? It is all true. Anyway, thank you very much, Steve, for all of your hard work. Chair Furfaro: I think I am recognizing JoAnn, but just to make sure that we are all clear, the State took, as Mr. Bynum said, about ten million dollars ($10,000,000) of our tax share. The fact of the matter is that we did raise the property rate on resorts to nine dollars ($9), so there was an increase. Mr. Rapozo: Mr. Chair, I have a process question for you before you go to Councilmember Yukimura. I am sorry if I interrupted. Chair Furfaro: You have a question? Mr. Rapozo: Yes, for you. Chair Furfaro: Go ahead. Mr. Rapozo: We have sat here for several hours now, and this should be time for questions, but I have heard discussion. Chair Furfaro: You have heard me say three (3) times to keep it to questions. Mr. Rapozo: It is not fair because we are limited to five (5) minutes each in discussion. If Councilmembers are going to debate and encourage other Councilmembers, and stay off the questions, then I would suggest that it comes off the time because it is simply not fair. Chair Furfaro: Understood. Mr. Rapozo: To make a statement, and then follow up with saying, "Am I correct?" That is not what the intention is. I mean no disrespect, but we have a lot of people here waiting for other Bills as well today. I would ask that we keep the questions here and when we go into the discussion, the members have an opportunity to utilize their five (5) minutes or ten (10) minutes to make their points. Thank you. Chair Furfaro: Okay. I want to reiterate several times before I stepped out, I pointed out questions to those people testifying. Anyway, I just wanted to make sure that I summarized the point about the property tax increase and the State's share. JoAnn, you have the floor. Ms. Yukimura: Thank you. This is a follow-up to Tim and Gary, in terms of how big an impact of how much people's taxes will be increased. I think you were trying to show that on pages three (3) and four (4) of your PowerPoint, or slides six (6) and seven (7). Are you saying that the maximum increase median and average increase is about four hundred dollars ($400) for people? Mr. Hunt: On slide seven (7), correct. For Islandwide, the average increase is about three hundred eighty-seven dollars ($387) and the COUNCIL MEETING 90 AUGUST 28, 2013 median is two hundred seven dollars ($207), which essentially means that a few that pay either a large increase that skews the average, but the median or standard increase is closer to two hundred eight dollars ($208). Ms. Yukimura: The average increase for the homestead, which are the owner-occupants, is two hundred forty-three dollars ($243)... your median increase is one hundred fifty-four dollars ($154). Mr. Hunt: Correct. Ms. Yukimura: Those are the increases, or something above that, is what we would try to phase? Mr. Hunt: I am not sure. Are you looking at phasing it only for the Homestead or are you also looking at those who are in other classes that still retain the Homeowner's Exemption? There are about one thousand eight hundred thirty (1,830) parcels in the Islandwide that have home exemptions, but are also classified as vacation rentals or residential because they have multiple homes and they are generating income from that. Ms. Yukimura: I guess I will hear from my colleagues in terms of how urgent or how difficult the perceived burden will be in terms of a one time change versus a phase change. I am not clear and maybe some of my colleagues can help me with that. I am just trying to measure what the necessity is for some amendments or some further mechanisms after this Bill is passed. Thank you. Chair Furfaro: Did you get an answer to that question? Did you pose that as a question? Ms. Yukimura: I think his answers are here. If you have other data, thoughts, or information about how I assess that need, I am open to that. Mr. Hunt: Right now, we have been giving cap to anyone with a home exemption, regardless of this tax class. This year, we implemented tax on use, so there was some release of this cap to adjust for rate increases. Someone who had an established base from 2007, base on a Homestead tax class that is now—or even Residential, more likely—Residential tax class that is now in Vacation Rental because that is how they are using it. The differential in rate times the original capped assessment resulted in an adjustment to the cap that was brought forward. There was an adjustment for rates, stilled capped. They were not released completely, but there was a rate adjustment. We call it the (inaudible), tax rate change. There was an adjustment to the base to account for the change in use. Some of that adjustment has already occurred and I think those are some of the taxpayers that you may have been hearing from that are having some of these adjustments or that were classed differently, and went from Residential to Vacation Rental because that is their actual use. That is who we are hearing from. For Islandwide, those additional one thousand eight hundred thirty (1,830) are income-producing, so there could be some justification that the income itself would help support and pay that additional tax increase or whether you want to continue to cap both of those and allow only certain percentage of the tax increase to occur in a given year. That is a decision you would have to deliberate on. COUNCIL MEETING 91 AUGUST 28, 2013 Ms. Yukimura: Basically, we have phased it in a sense because part of the increase has been this year, from the change to use? Mr. Hunt: Certain properties. Again, a handful of those with home exemptions, only one thousand eight hundred thirty (1,830) out of twelve thousand three hundred forty (12,340) fall into that category. Ms. Yukimura: The next step will be this Bill, which in removing the cap for some people will result in another increase? Mr. Hunt: Correct. Ms. Yukimura: That is what we need to measure if we want to consider phasing that change in. You are saying that the average increases for the Homestead only is two hundred forty three dollars ($243). That is a single-use owner-occupant? Mr. Hunt: Correct. Ms. Yukimura: Where there may be mixed-uses, that is your Islandwide category? Mr. Hunt: Correct. Ms. Yukimura: That would be roughly four hundred dollar ($400) increases. Mr. Hunt: Three hundred eighty-seven dollars ($387) on average. Ms. Yukimura: Right. Which means their amounts over or under? Mr. Hunt: When you think about it, the addition of those one thousand eight hundred thirty (1,830) parcels included in this group made a significant increase on the taxes. It went from two hundred forty-three dollars ($243) to three hundred eighty-seven dollars ($387), basically the same initial group of Homestead but adding in the one thousand eight hundred thirty (1,830). Those are obviously the ones that are having some higher taxes. Ms. Yukimura: I see. Are you saying it would cluster around there? Mr. Hunt: The bulk of it is going to fall within the Homestead. The other ones that are not Homestead... Ms. Yukimura: The bulk of the increase? Mr. Hunt: There are more decreases than increases, but of the increases, the bulk falls within the Homestead. Ms. Yukimura: That is an average of two hundred forty-three dollars ($243)? COUNCIL MEETING 92 AUGUST 28, 2013 Mr. Hunt: Yes. Ms. Yukimura: Thank you. Chair, I appreciate your further drilling and encouraging us to drill further. Thank you. Chair Furfaro: Okay. I believe Mr. Hooser had a question, and then I will go to you Mr. Rapozo. Mr. Hooser: Thank you. Focusing on the increase, the maximum increase—for example, I live in the Kawaihau District. That says that some homeowners will have an increase of five thousand five hundred eighty-eight dollars ($5,588) in their tax bill. Mr. Hunt: One (1) homeowner. That is the max, correct. Mr. Hooser: That is the extreme, I guess? Mr. Hunt: Yes. Mr. Hooser: That homeowner may or may not be able to afford it, right? Mr. Hunt: Or may or may not be eligible for the Home Preservation. Mr. Hooser: Right. I understand the median that says in the Kawaihau District, the median increase will be two hundred dollars ($200). To me, it is an annual of one hundred dollars ($100) per six (6) months. That is not significant in my book, but it is the owners that have multiple, large increases. We have no idea of their personal situations, so it is just troubling. We get lots of calls and very few people will call us to tell us that they are saving fifty dollars ($50) or one hundred dollars ($100), but when they get hit with the multi-thousand tax increase out of blue—that is the situation I am trying to help figure out a solution for. We would be able to work with you to help work on a solution or some mechanism, at least, to propose to the Council between now and the time that we need to do it? Mr. Hunt: I am willing to work with you on any changes that need to come out of this body and what we can do to do that. Again, my only concern is that there are certain assumptions in the Bill that are tied to the amount of the exemptions that are levied. I do not know between tax rates and where we go with this to—I did not want to be in a position of giving additional money away because I know what we are facing in next year's Budget. I am trying to hold the line to at least be a revenue-neutral proposition. If we cannot recoup some of those increases that would offset the relief we are giving to those on the sixty-two percent (62%) who get the decrease, then we are going to be in a pickle. Mr. Hooser: Right, so that would be part of the conversation. Mr. Hunt: Yes. Mr. Hooser: Okay. Thank you. COUNCIL MEETING 93 AUGUST 28, 2013 Chair Furfaro: Mr. Rapozo. Mr. Rapozo: Thank you, Mr. Chair. Steve, these numbers that you provided us here, the increases and decreases; are these in addition to what the last Tax Bill created? We are getting E-mails from a lot of people that got their taxes increased. I think some testified here. Are these numbers in addition to those increases? Mr. Hunt: Yes. Mr. Rapozo: Okay. Mr. Hunt: On an individual basis. Mr. Rapozo: Correct. Mr. Hunt: Again, we are not increasing the totality of things, but it is increases that an individual may have received in 2013 for the Fiscal Year 2014 Tax Bill. Mr. Rapozo: Okay. Thank you. Chair Furfaro: Are there anymore questions? Steve, I am going to ask you a question. The special assessment for the garbage collection is a fee or tax, whoever wants to interpret it; these averages that you have shared with us of two hundred eight dollars ($208), the median, that is all calculated without the collection fee? Mr. Hunt: Correct. Chair Furfaro: For many, the collection fee is in addition to... Mr. Hunt: It is already in the Tax Bill, correct. Chair Furfaro: Are there more questions for Steve? Steve, I want to ask you another question. I can speak about this because it was on the legislative agenda last year and I think I sent the question over. As we find ourselves with tighter and tighter belts, and we seem to be finding ourselves more and more involved with services that perhaps should have been handled by a different political subdivision; has the Administration evaluated the Bill that talked about giving the Counties the authority for the half percent General Excise? Mr. Hunt: We, or at least I, have not had that discussion with Mayor or other Administrative members. I know it is something that I have put on the back of my mind to talk about as to how we may fund the Landfill in the future. Chair Furfaro: Okay. I would like to share those numbers with you so you can check my math, based on what I did for the last period around. It was my understanding that the State is now saying they may take the entire TAT and give us the half percent. The half percent would come to about nineteen million dollars ($19,000,000) to substitute the thirteen million dollars ($13,000,000) that COUNCIL MEETING 94 AUGUST 28, 2013 they have capped us on now, but we should have been entitled, as Mr. Bynum pointed out, to sixteen million seven hundred thousand dollars ($16,700,000) based on average daily rate and occupancy. They also take a service fee off of that of another one million nine hundred thousand dollars ($1,900,000) for their general accounting services. I think as we look at our total revenue picture, we better have a pretty good understanding of what we might be in for, should that kind of legislation surface. I would hope that between the Council of Mayors, and the Hawai`i State Association of Counties (HSAC) people, that we have studied that impact and we know what kind of position to take. It is very concerning, but it is part of the overall fee and tax revenue. Eighty-five percent (85%) of our money comes from property taxes. That is how we do business, but we have got to start remembering, too, that the people in the community are looking to us and saying, "This is a tax that I pay. How do I relate that to the value of services that I get?" We have got to get a real understanding that we can explain value versus services and what some of these other options are, especially with the Landfill on the horizon. I think we are going to take a caption break here. Steve, will you still be available as we take a ten (10) minute recess here? Mr. Hunt: I will. There being no objections, the meeting was called back to order, and proceeded as follows: Chair Furfaro: Okay. We are on a caption break. There being no objections, the meeting recessed at 4:45 p.m. The meeting reconvened at 4:56 p.m., and proceeded as follows: Chair Furfaro: I have a couple of housekeeping items here. It is possible that the Council will be losing a quorum to go into Executive Session, so the plan for the County's people here is that we are going to schedule the Executive Sessions in a Special Session next week from 8:30 a.m. to 10:00 a.m., and then go into Committee Meetings. On that note, there is a legal briefing on the licensing of animals, but we do have the agenda item here, so I will take testimony for those who are here. We will then go into the final vote on the Tax Bill, and we will then follow with Kukui`ula's piece. Mr. Cremer, thank you for coming back. I will read the dog item, and then you can give your testimony today, but we will be deferring the item. There being no objections, Bill No. 2490, Draft 1, was taken out of the order. BILL FOR SECOND READING: Bill No. 2490, Draft 1 — A BILL FOR AN ORDINANCE AMENDING SECTIONS 22-10.2, 22-10.4, 22-10.5, AND 22-10.6 OF THE KAUAI COUNTY CODE 1987, AS AMENDED, RELATING TO DOG LICENSES AND REGULATIONS Chair Furfaro: Thank you. Is there anyone other than Mr. Cremer that is here to testify on this? COUNCIL MEETING 95 AUGUST 28, 2013 Ms. Nakamura moved for adoption of Bill No. 2490, Draft 1 on second and final reading, and that it be transmitted to the Mayor for his approval, and seconded by Ms. Yukimura. Chair Furfaro: We have a motion to approve and a second, but we may be deferring this item today. Mr. Cremer, you can come up now, followed by Mr. Mickens. There being no objections, the rules were suspended. ROBERT CREMER, JR.: For the record, my name is Robert Cremer, Jr. I know what the popular vote is going to be here. The majority will rule for the Humane Society because it is the popular people over here. Regardless if you say "yes" or "no," we all know who you are going to vote with, which is the popular person in your guys life; the person who will be serving the community, and then those community people will vote for you guys. That is straight up. I say we should have never even brought this Bill to the floor again. I am going to say it over and over again to you, Mr. Bynum, whether you like to hear it or not. You guys have to learn to have thick skin. I am sorry for pointing fingers the other week. You guys have to have thick skin, just like I have to get thick skin as a supervisor sitting there at the table. You guys have to be able to take criticism of whatever you guys get. Mr. Hooser said that the does not think that all animals should pay because his two (2) chickens feed him with eggs. My dogs feed me and everybody in the community that I give meat to. This weekend, there was a party that I gave meat to. Last week, there were two (2) funerals that I gave meat to. Do not go with a certain animal for another certain animal. It should not work that way. All animals should be created equal like how humans being are. We are not God here. All animals like all human beings should be created equal. His chickens feed him eggs and my dogs feed me with food like smoke meat. We should have never brought this Bill to the table. Never. Now, I am going back to the numbers that Ross put up over there: Six hundred sixty (660); six hundred sixty (660); and six hundred sixty (660) for three (3) years in a row. Why was there not gripe back then, and now we have seven hundred sixty (760). There is nothing personal against Penny because she has a job to do and a business to run, whether it is non- profitable or not. Then JoAnn asks her, "Is it going to affect you?" Of course. If I am coming to you for money, I am going to tell you "yes," JoAnn. Why am I going to tell you that it is not going to affect me if I have money that I need or that I do say that I need? We have to look at the bigger picture here. We cannot just pass things, tax people, and make a burden on people, and a certain burden on only certain people. Everybody has services, regardless. Even the seabirds have services from this thing because there is a cat program that is protecting the birds. I am not saying that they do not need the money. I just said that we need balance on who is going to pay for this thing. That is what I am asking. I am not asking to not pay anything. I want it equal across the board. It should not be fifteen dollars ($15) and seven dollars ($7) for me because I am a hunter, and fifteen dollars ($15) and fifteen dollars ($15) for the other guy, like how it was amended. That is wrong too. I am about being right and having fairness in my life. I have been crooked a lot of times in my life from playing Pop Warner to everything in life. I do not like that. I want things fair across the board for everybody. Everybody should pay. This Bill should be killed right here, but we know what the popular vote is going to be with the majority because we are going to the popular people who is the Humane Society that a lot of people feel generous to. Thank you for my three (3) minutes. COUNCIL MEETING 96 AUGUST 28, 2013 Chair Furfaro: Okay. I do want to say something, Robert. I was not here last week, but I do want to clear the air that the Humane Society did not remain flat for this whole period. They did get a one hundred thousand dollars ($100,000) more than the previous year, which equals a fifteen point seven percent (15.7%) increase. I just want to make sure that we clear the air. That has raised questions about the value related to that service. I think Mr. Rapozo raised that question, so your comments did not fall on any deaf ears. Mr. Cremer: That is why I said the "six hundred sixty (660), six hundred sixty (660), and then seven hundred sixty (760)." I know about the one hundred thousand dollars ($100,000). Chair Furfaro: It was an increase, that is what I wanted to say. Mr. Cremer: I know that. Chair Furfaro: Very good. Glenn, please come up. GLENN MICKENS: Thank you, Jay. For the record, Glenn Mickens. I believe that Robert Cremer has more than made the case that it is discriminatory to raise licenses fees on dogs and not license other animals like horses, cats, rabbits, or whatever. His major concern is for hunting dogs, but he wants no discrimination for any dogs. I commend him for this attitude. Mel is one hundred percent (100%) that we should not be raising fees seven hundred percent (700%) since it was not the fault of the dog owners that our Government has not incrementally raised rate for twenty (20) years. Those in power have failed and so why now put the burden on the owner in one gigantic raise? As Mel also said, "By raising these fees by seven hundred percent (700%), it just means that fewer people will get licenses for their dogs." Robert has made the case that there are probably more than twenty-five thousand (25,000) dogs on Kaua`i and only 5,000 five thousand (5,000) licenses have been issued, so this gigantic increase will only exacerbate the problem. Yes, the Humane Society needs funds to operate and do the good work that they have been doing but we are giving them almost eight hundred thousand dollars ($800,000) a year plus the three hundred thousand dollars ($300,000) they get in donations. Is it not possible, as Mel said, to find an in-house operation that is more cost-effective? Could we not do an audit to show if we are actually doing the best job possible for the amount of money being spent? Maybe we are, but an audit would certainly show the results needed. As Robert also said, if we license every dog, cat, and domestic animal on Kaua`i, we would not need to raise rates. At my last testimony, I said that under the present system, there is just not enough enforcement mechanisms in place to monitor the animals needed to license. This is a problem with every law and ordinance passed, but this issue would undoubtedly be low priority so it would be even harder to enforce. Before we do our usual "ready, fire, aiming," let us defer Bill No. 2490 and have far more discussion and workshops on the problem, and not make it discriminatory for dogs. Thank you, Jay. Chair Furfaro: Glenn, I want to note that I did listen to the testimony and the discussion from the last session. I was absent for my granddaughter's birth, but I do know that there was discussions led by Councilwoman Yukimura to see about a way to incrementally raise fees for all animals. I think that needed to be said, because that is what I heard. I do not COUNCIL MEETING 97 AUGUST 28, 2013 know where the outcome is going to be, but Councilwoman Yukimura did talk about that discussion. Ms. Yukimura: May I just clarify? Chair Furfaro: Yes. Ms. Yukimura: I did make a commitment to work on a cat licensing bill. At this point, I am not willing to take on all animals, though maybe we can do that at some time, but I think cats are the next step, if you will. Mr. Mickens: The Humane Society did say they were spending something like two hundred thousand dollars ($200,000) on cats. Ms. Yukimura: There is a lot of time that the Humane Society spends on cats, as I think even Robert has pointed out. That is part of the County's responsibility for animal control. It is a legitimate funding source, if you will, for us to look at. Mr. Mickens: I do hope you will progress with that before you pass this Bill. Ms. Yukimura: No, I believe there is certain urgency for this Bill, but you have my commitment that we will do the cat ordinance as fast as we can. Mr. Mickens: Okay. Thank you. Chair Furfaro: Glenn, thank you for your testimony. Mr. Mickens: Thank you, Jay. Chair Furfaro: Is there anyone else who wants to testify on this? I am asking for a deferral on this, Jade. There being no objections, the meeting was called back to order, and proceeded as follows: Mr. Bynum moved to defer Bill No. 2490, Draft 1, seconded by Mr. Kagawa, and unanimously carried. Chair Furfaro: Very good. Now, I would like to go back and finish the Tax Bill. Members, we are going to have an opportunity for discussion before I call for a roll call vote. I will start with you, Mr. Kagawa. Mr. Kagawa: Thank you, Chair. I want to thank Steve, the Finance Director. I know you have worked in the Real Property Tax Division for many years. I know you are a solid, honest individual. I know you put in a lot of thought into how to make things fairer for our residents. I know you believe in that. I know you work towards that. There is no doubt in my mind that you are that kind of individual. I am just scared of what the ramifications are. I know we can show the big numbers on the big spreadsheet, but I am just worried that there will be people hurt in this legislation. It is hard to be perfect with something that affects so many different things and so many different fluctuations in market. I will COUNCIL MEETING 98 AUGUST 28, 2013 be voting "no" today, but it is not to discredit your efforts. It is more on the feeling of having being rushed by this date. I wanted to see some real examples. In hindsight, maybe I should have spent some individual time with you. Maybe that would have been better than providing individual examples to the whole body. I also know that there are very valuable people with the same intentions like you, like Mr. Imparato and Mr. Dyer, who while he said he supports a lot of what is in the Bill, he definitely feels like more tweaking could be done with a little more time and more experts in trying to make it a little better. Nothing is going to be perfect when it is that huge. I hope that the intentions of the Bill do come forward, and you will get the credit along with Mr. Bynum and so forth, of who have worked on this Bill. If things turn out bad and the Bill does not work as intended, then I think all of you will shoulder the blame because I have made my plea today that we sit down, have that roundtable, and spend a few more months or what have you on working on something that maybe is a combination of both; a hybrid. I am not sure if just going with this ad valorem way and using exemptions is going to totally bring things to fairness, which is what I am looking for. The second part of why I am voting "no," is that of course the credit union part. It is in the Bill and a "no" vote would keep the credit unions as a non-profit. For those reasons, I will not be supporting this Bill. Thank you. Chair Furfaro: Mr. Rapozo, I will give you the floor next. Mr. Rapozo: Thank you, Mr. Chair. I think for similar reasons, I will not be supporting the Bill. I think the unknown consequences that may occur; I think now we are finding out the unintended consequences of the last Property Tax Bill that we passed, that now people are getting their tax bills and it is substantial increases for many people that I have heard from. This is in addition to that, so I am really, really concerned. I think the removal of the cap at one time— I know I was very aware that the cap was causing a lot of equity problems, but I think to just remove the cap at one time is going to cause a whole lot more problems for a lot of people. I know it has been said many times this is a "revenue-neutral Bill," but one hundred twenty-seven (127) people will have at least a two thousand dollar ($2,000) a year increase. Some unlucky soul is going to get a tax bill increase of thirteen thousand five hundred seventy-five dollars ($13,575). I do not know who that lucky person is, but can you imagine that person when they pick up that tax bill? For someone in the Homestead class, which means someone who lives in the home and owns the home, is going get a tax bill increase of twelve thousand seven hundred fifty-three dollars ($12,753). That is not revenue neutral to them. I do not care what anyone says. It is a tough, tough issue. Mr. Imparato brought up some really great suggestions. I think the CPI plus one percent (1%) or two percent (2%) increase; I think it is fair and still provides that stability. It may be hard to implement, but I think it would bring some stability to the tax payers. I think the first-time home-buyer credit is a great idea. If you are buying your home for the first time, I think that is something we can look at. I do not buy the story about the guy who buys his house looking at the records because I think when you go and purchase a house—somebody mentioned it, and it may have been Mr. Imparato, that you will look at what the tax rate is and what the value of your house is. If your real estate person or loan person is not doing that, then they are doing a terrible disservice to the customer. Obviously, when you put all of your expenses on the application for the mortgage, you just do not look at what the last guy paid. That is just not what happens. COUNCIL MEETING 99 AUGUST 28, 2013 Do I feel rushed? Absolutely. I think someone brought it up. We had the public hearing and the first Committee Meeting on the same day. That rarely happens. That is being rushed. I think a lot of things that were brought up today— at last meeting, I believe there were multiple amendments because people were starting to get the calls and the concerns from the public. We are trying to fix that, so I think this definitely warrants more time to take a look into other options because I think we need to provide some stability for people. Someone also mentioned that the public has to tighten up the belts when it comes to tough, difficult times. I agree one hundred percent (100%), but so does the County. I think the County has to tighten up the belts and that something that I do not see. I keep seeing attempts to raise taxes, fees, and everything else. What I have not really seen is a—I send this message to the Administration and the Cost Control Commission, is that what I really have not seen is the Administration's attempts to cut spending. We keep looking for more revenue. That is troubling for me because the economy is so bad and people are struggling. Five hundred dollars ($500) or one thousand dollars ($1,000)—God forbid a thirteen thousand dollar ($13,000) increase in property taxes could well put someone out of their home. That is my concern. I think Ross called it best that "he is scared" and so am I because I would hate to be one who approved a Bill that gets someone kicked out of their home. I will not supporting the Bill, but I do stand committed to work with the Finance Department in more of a roundtable format to look at some ways that we could get to the same result, but in a more gradual way. Thank you. Chair Furfaro: Mr. Bynum, go ahead. Mr. Bynum: I will try to keep this brief, I really will. In 2008, the Administration at the time identified the inequities that were unintended and inadvertently being caused by the cap. In 2008, the Administration put forward—I am very comforted by a public record. These numbers are real. We can look at them. It is difficult to analyze the data in this County, but we can. In 2008, the Administration said, "Look, we need to deal with this equity issue. We need to get equitable and the best way to do that is also to make a policy decision that we reduce taxes for the resident homeowners by thirty-five percent (35%)." That was the proposal. Everybody on the Council, and you can read the public record, said "Yes, we need to reduce taxes for local people. We need to bring it down. It is tough to live in Hawai`i, but maybe not this way." There was lots of controversy and it did not pass. We did not reduce taxes thirty-five percent (35%), and right then, we went into an economic downturn. These are facts. You can look them up. Over the next four (4) years, homeowners continued to pay increases while the economy tanked. While business classes, commercial, had forty million dollars ($40,000,000) in tax reductions in the same period of time. We did not go down thirty-five percent (35%) for local people. We stayed the same, and then their taxes went up while business taxes went down. In fairness during the run-up, we took lots of money from the business classes because we did not adjust rates. Right where we are at now, we can bring fairness back to things. There is no perfect Tax Bill. We have been working on this for three (3) years. I have answered about twenty-seven (27) specific calls and have done specific follow-ups for people who have said, "Hey, my tax bill went up." Almost all of those were people running vacation rentals, when the Council has been saying for several years that you are not going to continue to have homeowner's rates or residential rates when what you are really doing is a commercial business. When their taxes went up, to most of them I explained all of that and they said, "Oh, okay I get it." I found a few instances where there were some mistakes that needed to be corrected, but vast majority of these who were people that the increase was because of business. I said we have forty million COUNCIL MEETING 100 AUGUST 28, 2013 dollars ($40,000,000) in reductions. Last year, and Council Chair is correct, we took the rates back up to kind of like parity, so homeowners went up, business came down, and then we brought them back up to where they kind of were in 2004. That is where we are at right now. This is next stage of doing this comprehensive reform and nothing is perfect, but I heard a strong commitment from Councilmembers to work on specific issues. To not pass this Bill today, and leave the status quo, means that sixty-two percent (62%) of the people who are homeowners will continue to pay way above the current market, ongoing. I do support this Bill. Thank you. Chair Furfaro: Mr. Hooser, do you want to speak now? No. JoAnn? Ms. Yukimura: Thank you. I want to really acknowledge Councilmember Kagawa's very humbling acknowledgement of the complexity of this system. It requires tremendous balancing, attention, and courageous decision-making. We have had a lot of time living under the cap system. This is Councilmember Kagawa's first term, so he has not had the experience that the rest of us, and some of us old timers, have had really long experience with it. In fact, I remember I think it was the last Budget, when Councilmembers Kuali`i and Rapozo voted against the Budget and said that we should remove the cap instead because at that point, they saw some of the real problems that we had with the cap like the really terrible inequities. As Councilmember Bynum pointed out, in the end, the Real Property Taxes of homeowners going up, while the taxes of the other categories were controlling down. I believe this change that we have been making over the last year or so have been important, and this is a very important piece of that change. I think the more we delay, the greater the discrepancies will be among owners of comparable properties, and it will be we harder to correct the system. I think we have to do that now. I appreciate Carl Imparato's and others concerns about the potential hardship if property taxes skyrocket. We all know that they have and will in the future. I have floated a system with Steve just today about how we might address that. There are many problems with it, but I am going to work on addressing those problems to see if we can be ready to put that in place as we approach that problem. Chair Furfaro: I wanted to share that agree with what we have been trying to do for the last three (3) years here, which is really kind of having a comprehensive reform to the taxation process in the County of Kaua`i. I have been talking as the original author of the two percent (2%) cap. I do not think it is as bad as everybody makes it out, but my message to Steve and the Finance Department was that, "You need to work on something. I am at a point that if you can come up with something that is in the form of a reform, I certainly want you to know that I am not going to vote to remove my cap, but I will take a vote that would be silent and we will go with majority. You need to focus your votes on the people on the Council that will, in fact, understand the rationale behind lifting the cap." It is very hard as the author to say that I am actually going to cast a "yes" vote to remove the cap. The idea is that this Bill is supposed to start bringing back fairness, but I am not absolutely sure that some of the solutions that I have talked about—I used the term "cap plus an index." I think one of our testifiers today talked about a three (3) year increment to make the equity come out, but that did not gain any traction and it has never been the possibility that this Council would not staff Personnel to be tracking these costs and these variables that Steve mentioned. That should not be part of what the problem is. If you need staffing to do it, ask us for the staffing. I also know that my family lives on the North Shore. I simply use the formula that I am going to have one hundred forty-three dollars COUNCIL MEETING 101 AUGUST 28, 2013 ($143) a year more in taxes. The cap is going to be gone. The cycle is going to start, and the Administration as they watch what we are all predicting, is another economic swing. We got to look at more controls in this particular process. I have been married forty-one (41) years. When my wife and I bought our first home, I made six hundred dollars ($600) a month and she made four hundred twenty-five dollars ($425) a month. We bought an old plantation home in Kilauea, which happened to be from my family so we got a good price at thirty-seven thousand dollars ($37,000), but we bought it. We raised a family. Those prices at that time, and for what we were earning, was a challenge as a young family. But the people who had the kind of job that I had in 1972 are not still making six hundred dollars ($600) a month. Their spouse as a Legal Secretary probably makes a lot more than four hundred twenty-five dollars ($425). I think one of the people that testified today said that they were making three dollars ($3) as a Carpenter back then. It provided us an opportunity, and quite frankly an opportunity with the cap as owner-occupied, that we could keep the property. I hope we are thinking in those kinds of terms going forward. I am not going to vote against this Bill. I think it is the start, but it is exactly that; just the start. Wherever the vote falls, my silent vote will go with the majority. I think there were some good ideas that came out of today. There were some things that Mr. Bynum recognized that we have to do more on, some commitments from JoAnn, and some red-flag concerns from Mr. Kagawa. Certainly, a lot of discussion today was on the value of our credit union system here that contributes to our economic value. I am glad we came up with at least an Amendment for that. On that note, I would like to have a roll call vote on the Bill. Mr. Rapozo: Mr. Chair, I just want to make sure that we clarify that the silent vote goes with the motion. Chair Furfaro: Yes, and the motion is to approve. Mr. Rapozo: Correct, so a silent vote is essence... Chair Furfaro: What I am saying is that the motion is to approve. Again, you cannot expect me after ten (10) years to vote against my own Bill. Mr. Rapozo: I agree. Chair Furfaro: Consider the fact of the matter of my discussion however you want to interpret it. Do a roll call, please. The motion to approve Bill No. 2495, Draft 3, on second and final reading was then put, and carried by the following vote: FOR ADOPTION: Bynum, Hooser, Nakamura, Yukimura TOTAL— 4, AGAINST ADOPTION: Kagawa, Rapozo TOTAL — 2, EXCUSED & NOT VOTING: None TOTAL — 0, RECUSED & NOT VOTING: None TOTAL — 0, SILENT: Furfaro TOTAL— 1. Chair Furfaro: Please record me as a silent vote. Thank you. Silent vote goes with the motion. To the Administration, I hope this is the beginning of continued reform on the Tax Bill. Okay, this portion of the meeting is COUNCIL MEETING 102 AUGUST 28, 2013 done for this agenda item. We have a couple other things before I lose a quorum, so let us move on. There being no objections, C 2013-302 was taken out of the order. LEGAL DOCUMENTS: C 2013-302 Communication (08/15/2013) from Ian K. Jung, Deputy County Attorney, recommending Council approval of the following: • Dedication Deed by Kukui`ula Development Company (Hawai`i), LLC, conveying to the County of Kaua`i Roadway Lot 18, Kukui`ula Large Lot Subdivision III (TMK: (4) 2-6-015:018) and Roadway Lot 19, Kukui`ula Large Lot Subdivision III (TMK: (4) 2-6-015:019), Koloa, Kaua`i, Hawai`i. • Dedication Deed by Kukui`ula Development Company (Hawai`i), LLC, conveying to the County of Kaua`i Lot 427-C, Land Court Application No. 956 (Amended) (TMK: (4) 2-7-003:009), Koloa, Kaua`i, Hawai`i for the Western Bypass Road Link. • Kukui`ula Improvements Maintenance Agreement with Kukui`ula Development Company (Hawai`i), LLC, TMK: (4) 2-6-015:018, TMK: (4) 2-6-015:019, and TMK: (4) 2-7-003:009, Koloa, Kaua`i, Hawai`i, for maintenance commitments as outlined in the agreement. Ms. Yukimura moved to approve C 2013-302, seconded by Mr. Rapozo. Chair Furfaro: Mr. Jung, please come up. There being no objections, the rules were suspended. IAN K. JUNG: Good afternoon, Deputy County Attorney Ian Jung. I know we are running out of time here, but I could put up the diagram of where we are talking about if you want. I did attach a locational map to the transmittal that kind of identifies where Ala Kalanikaumaka Street is, which is referred to as the Western Bypass Road. Would you like me to put it up? Chair Furfaro: Members, do you want to see the map up there or can you look at your individual texts. We have two (2) people in the audience and I think both of them can do without the map. Mr. Jung: Okay. Mr. Bynum: I have a quick question. Chair Furfaro: Go ahead, Mr. Bynum. Mr. Bynum: This is the Western Bypass Road? COUNCIL MEETING 103 AUGUST 28, 2013 Mr. Jung: This is the Western Bypass Road, sort of referred to as Kukui`ula Road, but legally named as Ala Kalanikaumaka Road. If there are any questions, there are two (2) Dedication Deeds; one is for Lot 18—I will refer to them as their Tax Map Key numbers as it says on the documents; Parcel 18 and Parcel 19. The other Dedication Deed is for Parcel 9. The Council did accept the portion of this road in 2011 and it was Lot B-5 that was already accepted. The reason why these are coming together is because there is a Improvements Maintenance Agreement because Kukui`ula plans to have certain levels of improvement such as upgraded improvements, as well as private improvements outside of what our standard County improvements are. The Maintenance Agreement refers to their obligation to undertake maintenance and repair of those particular improvements. That is what is outlined in the Maintenance Agreement. The Maintenance Agreement is a stand-alone document, which attaches the two (2) Dedication Deeds. There is one correction if the Council is going to approve this. The one correction we do need to ask the Council to allow us to make so we can go back and clear this up is the Dedication Deed for Parcel 9 as Lot 427-C. It actually is the wrong Kukui`ula name. It should be Kukui`ula Development Company, Inc. rather than Kukui`ula Development Company Hawai`i LLC, so if you guys can make some kind of amendment or reference so we can go back and make that change. The only reason for that is that A&B has... Chair Furfaro: I would like for you to refer to us as "members," and not "guys" because we have two (2) ladies here at the table. Can you start with that correction? Mr. Jung: I apologize. It is a generational thing. Members, do you have any questions? Chair Furfaro: You have a question from Mr. Rapozo. Mr. Rapozo: Is this time sensitive? If it is, we would need to do the amendments. Is this something that can wait for two (2) weeks? Mr. Jung: I think the way I have done it before with the members is that you approve the document with the proposed change and I would go back, make the change, and then Ricky, as the County Clerk, would have authority to execute on your behalf. Mr. Rapozo: If that is legal, I am okay with it. Chair Furfaro: Sorry, what did you say? Mr. Rapozo: I said if that is legal, then I am okay with it. I just want to make sure of it. Chair Furfaro: I think he is saying that we are holding your feet to the fire. Mr. Jung: They are feeling hot right now anyways. Chair Furfaro: JoAnn, you have the floor. COUNCIL MEETING 104 AUGUST 28, 2013 Ms. Yukimura: We would just amend the motion to approve with an addition that we are approving along with the proposed change to the proper Kukui`ula name? Mr. Jung: Correct, that would be the only proposed change. Chair Furfaro: Okay. Mr. Bynum. Mr. Bynum: I just have one question. Is this related to or will it impact in any way, the potential connection of Lopaka Paipa Boulevard to the Western Bypass. Mr. Jung: From what I understand, Lopaka Paipa was a separate subdivision action and as a condition of the zoning approval that set forth this requirement for the construction and ultimate dedication of the Western Bypass Road. There is no requirement to allow for the connection there. For Lopaka Paipa, the issue is in a separate subdivision which from what I understand is still only tentative. It has not achieved final. There is a condition that they draw the connection to it. If that is the case and they move forward with that subdivision, then it can be connected to this road. But from what I understand, since 2006, that subdivision has not been acted upon. Mr. Bynum: Will this action impact that in any way? Mr. Jung: No, because once the roadway is dedicated to us; if anyone is going to draw connection to it, they can certainly do that. Mr. Bynum: So the answer is no? Mr. Jung: The answer is no. Mr. Bynum: There is no impact on this action on the eventual connection of that street? It is a separate issue? Mr. Jung: It is a separate action, right. Mr. Bynum: That is all I need to know for now. Thank you. Chair Furfaro: Are there any further questions? If not, I am going to excuse you and call the meeting back to order. Is there any discussion from the members before I call for a vote? There being no objections, the meeting was called back to order, and proceeded as follows: Ms. Yukimura moved to amend the motion to approve with the proposed change to correct the Kukui`ula Development name, seconded by Mr. Bynum. Chair Furfaro: Okay. That will be reflected in the minutes. Do we need any document in any way or that will be fine? Ms. Yukimura: We need to vote on the Amendment. COUNCIL MEETING 105 AUGUST 28, 2013 Chair Furfaro: I know that JoAnn. I just want to make sure that we do not need a written piece. Ms. Yukimura: Thank you. Chair Furfaro: Sometimes you get a little further ahead of me and I am still talking, and I have that Wai`anae withdrawal. Ms. Yukimura: Sorry. The motion to amend the motion to approve the name change in C 2013-302 was then put, and unanimously carried. Chair Furfaro: With that notation for the County Attorney reflected in the minutes, I am now going to ask for a roll call vote. The motion to approve C 2013-302, as amended, was then put, and carried by the following vote: FOR APPROVAL: Bynum, Hooser, Kagawa, Nakamura, Rapozo, Yukimura, Furfaro TOTAL— 7, AGAINST APPROVAL: None TOTAL— 0, EXCUSED & NOT VOTING: None TOTAL — 0, RECUSED & NOT VOTING: None TOTAL — 0. Chair Furfaro: Kukui`ula, thank you for spending so much time for us today. Sorry you were the "low-man" on the totem pole, but thank you very much and have a good evening. I am going to excuse Mr. Bynum at this time. I would like to see if other members can give me a quorum until 6:00 p.m. Thank you. Let us go to next item. (Mr. Bynum was noted as excused at 5:35 p.m.) COMMUNICATIONS: C 2013-296 Communication (08/01/2013) from the Executive on Transportation, requesting Council approval to receive, indemnify, and expend the Federal Fiscal Year 2013 Federal Transit Administration (FTA) Section 5311 Annual Apportionment provided to the County of Kaua`i for the following: 1) "Formula Grant for Other Than Urbanized Areas" in the amount of$1,000,000 to support public transit operations. 2) "Rural Transit Assistance Program" for an unspecified portion of the statewide award of $95,947, which will be allocated among the State of Hawai`i Department of Transportation (DOT), County of Maui, County of Kaua`i, and County of Hawai`i for transit training and technical assistance. Ms. Yukimura moved to approve C 2013-296, seconded by Ms. Yukimura. COUNCIL MEETING 106 AUGUST 28, 2013 Chair Furfaro: Is there anyone who wishes to testify on the item? Seeing no one, is there any discussion, members? This is a reoccurring grant. I excused Celia earlier. If not, we can just do an approval by voice. The motion to approve C 2013-296 was then put, and unanimously carried. C 2013-297 Communication (08/01/2013) from Jennifer S. Winn, Deputy County Attorney, transmitting for Council information the Quarterly Report on Settled Claims Against the County of Kaua`i from April 1, 2013 through June 30, 2013: Ms. Nakamura moved to receive C 2013-297 for the record, seconded by Mr. Rapozo, and unanimously carried. C 2013-298 Communication (08/07/2013) from Councilmember Yukimura, requesting Council consideration to release the County Attorney opinion dated May 2, 2013 relating to County Funding Of Trap-Neuter-Release Efforts: Ms. Yukimura moved to approve C 2013-298, seconded by Ms. Nakamura. Chair Furfaro: Is there any discussion? Go right ahead, JoAnn. Ms. Yukimura: Mr. Chair, I know we usually meet in Executive Session, but we did get a written indication from the County Attorneys that they had no objections to release. Chair Furfaro: Okay. Al, may I ask you to come up just to acknowledge the narrative that came over? A quick acknowledgment would be all that I need. There being no objections, the rules were suspended. Mr. Castillo: Council Chair and Councilmembers, Al Castillo, County Attorney. That is correct. We have no objections. Chair Furfaro: You have no objections. Thank you very much. Mr. Castillo: You are welcome. There being no objections, the meeting was called back to order, and proceeded as follows: The motion to approve C 2013-298 was then put, and unanimously carried. C 2013-299 Communication (08/14/2013) from the County Attorney, requesting authorization to expend funds up to $50,000 for Special Counsel's continued services provided in County of Kauai vs. Michael Guard Sheehan, et al., Civil No. 11-1-0098 (Condemnation), Fifth Circuit Court, and related matters: Mr. Rapozo moved to defer C 2013-299 to September 4, 2013, seconded by Ms. Yukimura, and unanimously carried. C 2013-300 Communication (08/14/2013) from the County Attorney, requesting authorization to expend funds up to $20,000 for Special Counsel's continued services provided for the County of Kaua`i in Jeffrey Sampoang vs. Harvey Brothers, LLC; et al., Civil No. 12-1-0294 JKW (Fifth Circuit Court), and COUNCIL MEETING 107 AUGUST 28, 2013 related matters: Mr. Rapozo moved to defer C 2013-300 to September 4, 2013, seconded by Ms. Yukimura, and unanimously carried. C 2013-301 Communication (08/15/2013) from the Director of Finance, transmitting for Council information, the Inventory Report for the Fiscal Year Ending June 30, 2013. (Copy on file in the Clerk's Office.): Ms. Yukimura moved to receive C 2013-301 for the record, seconded by Mr. Kagawa, and unanimously carried. EDR 2013-02 Communication (07/24/2013) from Councilmember Yukimura, requesting agenda time to discuss and approve a proposed amendment to Chapter 196, Hawai`i Revised Statutes (HRS), (Solar Water Heating Law for New Single-Family and Duplex Construction) that would require an application for a variance based on consumer choice and energy efficiency, for inclusion in the 2014 County of Kaua`i and Hawai`i State Association of Counties (HSAC) Legislative Packages: Ms. Yukimura moved to approve EDR 2013-02, seconded by Mr. Hooser. Chair Furfaro: Is there any discussion? Ms. Yukimura: I just want to point out that per Council Vice Chair's request, and thanks to Scott, we have the current figures for the variances granted. They do not show a lot of change. Thank you. Chair Furfaro: Scott, my compliments on doing the quick report. Thank you very much. Is there any further discussion? If not, this is for approval. The motion to approve EDR 2013-02 was then put, and unanimously carried. EDR 2013-03 Communication (07/24/2013) from Councilmember Yukimura, requesting agenda time to discuss and approve a proposed amendment to Senate Bill (S.B.) 16, Senate Draft (S.D.) 2 amending Chapter 196, Hawai`i Revised Statutes (HRS), (Solar Water Heating Law for New Single-Family and Duplex Construction) by requiring variance applications and requirements to be handled by the Counties, for inclusion in the 2014 County of Kaua`i and Hawai`i State Association of Counties (HSAC) Legislative Packages: Ms. Yukimura moved to approve EDR 2013-03, seconded by Mr. Hooser. Chair Furfaro: Is there any discussion, members? Go right ahead. You have the floor, Vice Chair. Ms. Nakamura: I did ask for a breakdown on what the fiscal impact of this statutory change would be to the County of Kaua`i. We have a memo dated August 24th from Larry Dill and the Mayor breaking down the cost. If we were to bring this program in-house, I believe the annual cost—it is four hundred thousand dollars ($400,000) if we contract it out, and if we do it in-house, the annual cost is one hundred forty thousand dollars ($140,000) plus vehicle, computer, and office furniture. I think when you add that up, it is about one hundred eighty thousand dollars ($180,000). Is that the best way to interpret this memo? Chair Furfaro: I interpreted it that way. COUNCIL MEETING 108 AUGUST 28, 2013 Ms. Nakamura: Okay. I have some concerns about this approach. I will probably not support this. Chair Furfaro: Ms. Yukimura, you have the floor, followed by Mr. Hooser. Ms. Yukimura: My understanding is that—first of all, in speaking with the Mayor, he expressed the concern about additional costs. I went directly to Doug Haigh, and I wish someone were here to explain it, but we agreed that—and I agreed that anything I did, in terms of a follow-up Ordinance, would be in terms of third party certification. I do not know where this five thousand dollar ($5,000) figure came from, but it would basically be non-County costs because it would be a professional who certifies that the system is properly oriented and sized. I do not know that it has to be an additional five thousand dollars ($5,000). I do not know where that comes from. Chair Furfaro: I have called for Mr. Dill. He is on his way over, so let us go on to the next item. Is that acceptable, members? Ms. Yukimura: Yes. Chair Furfaro: Okay, let us go to the next item. EDR 2013-05 Communication (08/02/2013) from Councilmember Rapozo, transmitting for Council consideration, House Bill (H.B.) 215 Relating to Liability, for inclusion in the 2014 County of Kaua`i and Hawai`i State Association of Counties (HSAC) Legislative Packages: Mr. Rapozo moved to approve EDR 2013-05, seconded by Ms. Nakamura. Chair Furfaro: Is there any discussion, members? Mr. Rapozo: I do not anticipate any problems with the vote, but I just want to say this is one of the bills that has to pass this year. It removes a sunset date that protects the Counties from liability at State beaches and so forth. It is one that keeps getting deferred, but this is the year that it has to be removed. Chair Furfaro: JoAnn, you have the floor. Ms. Yukimura: Thank you. Mel, it has been part of our package the last five (5) years or so. Ms. Nakamura: We missed it last year. Mr. Rapozo: I believe probably the last three (3) years, maybe. It did not make the package last year. Ms. Yukimura: It did not? Mr. Rapozo: It was an oversight, not that it mattered. I do not think it would have mattered. They deferred it. The personal injury attorney lobby is very strong, but this is one that we are going to have to unify statewide and make sure that we get the Legislature to remove that sunset date. COUNCIL MEETING 109 AUGUST 28, 2013 Ms. Yukimura: Very good. Thank you. Chair Furfaro: Okay. The motion to approve EDR 2013-05 was then put, and unanimously carried. CLAIMS: C 2013-303 Communication (08/09/2013) from the Deputy County Clerk, transmitting a claim filed against the County of Kaua`i by Milagros M. Ibanez, for damage to her vehicle, pursuant to Section 23-06, Charter of the County of Kaua`i: Mr. Rapozo moved to refer C 2013-303 to the County Attorney's Office for disposition and/or report back to the Council, seconded by Ms. Yukimura, and unanimously carried. C 2013-304 Communication (08/13/2013) from the Deputy County Clerk, transmitting a claim for reimbursement filed against the County of Kaua`i by Liberty Mutual Fire Insurance Company as subrogee for Kaua`i Island Utility Cooperative, pursuant to Section 23-06, Charter of the County of Kaua`i: Mr. Rapozo moved to refer C 2013-304 to the County Attorney's Office for disposition and/or report back to the Council, seconded by Ms. Yukimura, and unanimously carried. COMMITTEE REPORTS: ENVIRONMENTAL SERVICES / PUBLIC SAFETY / COMMUNITY ASSISTANCE COMMITTEE: A report (No. CR-EPC 2013-11) submitted by the Environmental Services / Public Safety / Community Assistance Committee, recommending that the following be received for the record: "Bill No. 2493 A BILL FOR AN ORDINANCE AMENDING SECTION 22-5.4 OF THE KAUAI COUNTY CODE 1987, AS AMENDED, RELATING TO DESIGNATION OF EXCEPTIONAL TREES," Mr. Rapozo moved for approval of the report, seconded by Ms. Nakamura, and carried by a 6:0:1 vote (Mr. Bynum was noted as excused). Chair Furfaro: I do want the record to reflect that there are only three (3) people in the audience. ECONOMIC DEVELOPMENT (SUSTAINABILITY / AGRICULTURE / FOOD / ENERGY) & INTERGOVERNMENTAL RELATIONS COMMITTEE: A report (No. CR-EDR 2013-02) submitted by the Economic Development (Sustainability / Agriculture / Food / Energy) & Intergovernmental Relations Committee, recommending that the following be approved: "EDR 2013-02 Communication (07/24/2013) from Councilmember Yukimura, requesting agenda time to discuss and approve a proposed amendment to Chapter 196, Hawai`i Revised Statutes (HRS), (Solar Water COUNCIL MEETING 110 AUGUST 28, 2013 Heating Law for New Single-Family and Duplex Construction) that would require an application for a variance based on consumer choice and energy efficiency, for inclusion in the 2014 County of Kaua`i and Hawai`i State Association of Counties (HSAC) Legislative Packages," Mr. Hooser moved for approval of the report, seconded by Mr. Rapozo, and carried by a 6:0:1 vote (Mr. Bynum was noted as excused). A report (No. CR-EDR 2013-03) submitted by the Economic Development (Sustainability / Agriculture / Food / Energy) & Intergovernmental Relations Committee, recommending that the following be approved: "EDR 2013-03 Communication (07/24/2013) from Councilmember Yukimura, requesting agenda time to discuss and approve a proposed amendment to Senate Bill (S.B.) 16, Senate Draft (S.D.) 2 amending Chapter 196, Hawai`i Revised Statutes (HRS), (Solar Water Heating Law for New Single-Family and Duplex Construction) by requiring variance applications and requirements to be handled by the Counties, for inclusion in the 2014 County of Kaua`i and Hawai`i State Association of Counties (HSAC) Legislative Packages," Mr. Hooser moved for approval of the report, seconded by Mr. Rapozo, and carried by a 6:0:1 vote (Mr. Bynum was noted as excused). A report (No. CR-EDR 2013-04) submitted by the Economic Development (Sustainability / Agriculture / Food / Energy) & Intergovernmental Relations Committee, recommending that the following be approved: "EDR 2013-05 Communication (08/02/2013) from Councilmember Rapozo, transmitting for Council consideration, House Bill (H.B.) 215 Relating to Liability, for inclusion in the 2014 County of Kaua`i and Hawai`i State Association of Counties (HSAC) Legislative Packages," Mr. Hooser moved for approval of the report, seconded by Mr. Rapozo, and carried by a 6:0:1 vote (Mr. Bynum was noted as excused). FINANCE & ECONOMIC DEVELOPMENT (TOURISM / VISITOR INDUSTRY / SMALL BUSINESS DEVELOPMENT / SPORTS & RECREATION DEVELOPMENT / OTHER ECONOMIC DEVELOPMENT AREAS) COMMITTEE: A report (No. CR-FED 2013-13) submitted by the Finance & Economic Development (Tourism / Visitor Industry / Small Business Development / Sports & Recreation Development / Other Economic Development Areas) Committee, recommending that the following be approved as amended: "Bill No. 2489 A BILL FOR AN ORDINANCE AMENDING CHAPTER 5A, KAUAI COUNTY CODE 1987, AS AMENDED, RELATING TO LOW AND MODERATE-INCOME HOUSING AND LONG TERM AFFORDABLE RENTALS," Mr. Rapozo moved for approval of the report, seconded by Ms. Nakamura, and carried by a 6:0:1 vote (Mr. Bynum was noted as excused). COUNCIL MEETING 111 AUGUST 28, 2013 A report (No. CR-FED 2013-14) submitted by the Finance & Economic Development (Tourism / Visitor Industry / Small Business Development / Sports & Recreation Development / Other Economic Development Areas) Committee, recommending that the following be approved as amended: "Bill No. 2490 A BILL FOR AN ORDINANCE AMENDING SECTIONS 22-10.2, 22-10.4, 22-10.5, AND 22-10.6 OF THE KAUAI COUNTY CODE 1987, AS AMENDED, RELATING TO DOG LICENSES AND REGULATIONS," Mr. Rapozo moved for approval of the report, seconded by Ms. Nakamura, and carried by a 6:0:1 vote (Mr. Bynum was noted as excused). A report (No. CR-FED 2013-15) submitted by the Finance & Economic Development (Tourism / Visitor Industry / Small Business Development / Sports & Recreation Development / Other Economic Development Areas) Committee, recommending that the following be approved as amended: "Bill No. 2495, Draft 1 A BILL FOR AN ORDINANCE AMENDING CHAPTER 5A, KAUAI COUNTY CODE 1987, AS AMENDED, RELATING TO REAL PROPERTY," Mr. Rapozo moved for approval of the report, seconded by Ms. Nakamura, and carried by a 6:0:1 vote (Mr. Bynum was noted as excused). COMMITTEE OF THE WHOLE: A report (No. CR-COW 2013-15) submitted by the Committee of the Whole, recommending that the following be approved: "Bill No. 2492 A BILL FOR AN ORDINANCE TO AMEND SECTION 2, ORDINANCE NO. 891 AUTHORIZING THE ISSUANCE OF GENERAL OBLIGATION BONDS OF THE COUNTY OF KAUAI FOR THE PURPOSE OF FINANCING CERTAIN PUBLIC IMPROVEMENTS AND REFUNDING CERTAIN BONDS OF THE COUNTY; FIXING OR AUTHORIZING THE FIXING OF THE FORM, DENOMINATIONS, AND CERTAIN OTHER DETAILS OF SUCH BONDS AND PROVIDING FOR THE SALE OF SUCH BONDS TO THE PUBLIC," Mr. Rapozo moved for approval of the report, seconded by Ms. Yukimura, and carried by a 6:0:1 vote (Mr. Bynum was noted as excused). A report (No. CR-COW 2013-16) submitted by the Committee of the Whole, recommending that the following be approved: "Bill No. 2494 A BILL FOR AN ORDINANCE AMENDING CHAPTER 3, ARTICLE 1, KAUAI COUNTY CODE 1987, AS AMENDED, RELATING TO THE CODE OF ETHICS," Mr. Rapozo moved for approval of the report, seconded by Ms. Yukimura, and carried by a 6:0:1 vote (Mr. Bynum was noted as excused). RESOLUTIONS: COUNCIL MEETING 112 AUGUST 28, 2013 Resolution No. 2013-66 – RESOLUTION CONFIRMING MAYORAL APPOINTMENT TO THE KAUAI HISTORIC PRESERVATION REVIEW COMMISSION (Anne K Schneider): Mr. Rapozo moved for adoption of Resolution No. 2013-66, seconded by Ms. Nakamura. Chair Furfaro: Is there any discussion? I just want to say that I was very impressed with her during the interview period. I am delighted to be able to vote for her appointment to the Historic Commission. Any further discussion? JoAnn. Ms. Yukimura: I understand that Council Vice Chair had a role in identifying Anne Schneider, so thank you for that. Chair Furfaro: Very good. Kind of like military recruitment; I want you and you went out and got her. Thank you. The motion to adopt Resolution No. 2013-66 was then put, and carried by the following vote: FOR ADOPTION: Hooser, Kagawa, Nakamura, Rapozo, Yukimura, Furfaro TOTAL – 6, AGAINST ADOPTION: None TOTAL – 0, EXCUSED & NOT VOTING: Bynum TOTAL – 1, RECUSED & NOT VOTING: None TOTAL – 0. Resolution No. 2013-67 – RESOLUTION AMENDING RESOLUTION NO. 2013-02 RELATING TO THE RULES OF THE COUNCIL OF THE COUNTY OF KAUAI FOR THE ORGANIZATION OF COMMITTEES AND THE TRANSACTION OF BUSINESS: Ms. Yukimura moved for adoption of Resolution No. 2013-67, seconded by Ms. Nakamura. Chair Furfaro: Is there any discussion? Ms. Yukimura: Yes. This allows in our rules for the taking of testimony of experts via speakerphone or not being physically present. I think it is time in this day and age to allow that or to guide that through our rules process. That is what this Resolution would do. Chair Furfaro: Thank you very much. I want to make sure you all understand that I put this on because it referenced "experts." Mr. Hooser: I support the intent, but I am not sure about the language, quite frankly. I think "experts" needs to be defined. I am not sure because there are cultural and economic experts. It is not just science and medical. I have some concerns that this could just be used to whoever can add value and cannot make the meeting, and be construed as an expert by the Chair. I am also not sure about the Sunshine requirements that testimonies being taken in the (inaudible). I do not know if we need to look into it more. Taking testimony remotely—it begs a lot of questions, I think. I support it—I know Hawai`i County has remote opportunities for the general public to testify. I would like to move in that direction, but I am not sure about the language. Chair Furfaro: I want to point out that there is something going over to expand this legal definition of"expert." I also want to say on Hawai`i COUNCIL MEETING 113 AUGUST 28, 2013 Island, they use it for all public testimony, which is not the intent here. That is why I pointed out the fact of the definition. For example, if the Council Meeting is in Hilo, they can go to other stations. They video text from Waimea in Hawi and Kamuela, and they also video text from Kona for the Waikoloa and Kona Districts, so point well-taken. Mr. Hooser: It could be a valuable tool for State people and people all over, but I just think we need to think about it a little more. Chair Furfaro: Like I said, that query has gone over to expand the definition. Mr. Rapozo, you have the floor. Mr. Rapozo: Thank you, Mr. Chair. I guess I have a question for Councilmember Yukimura. Was this sent through the Attorney or the Office of Information Practices (OIP)? Ms. Yukimura: No. Mr. Rapozo: The reason I bring this up is because years ago, we had this discussion about video teleconferences and allowing people to testify. We were told that if we did this, we would have to post in the location of where that person would be. I have read the Sunshine Law, and I do not think that is true, but what the Sunshine Law does say is that if we allow interaction using interactive conference technology, we do have to post the notice as if we would post a regular meeting, but it has to identify all the locations where the participating members will be physically present and indicates that members of the public may join board members at any identified locations. Like on Hawai`i Island, you post all of the locations but any member of the public can go there. In my opinion, you cannot say we are going to allow "Doctor so and so" from Pittsburgh, Pennsylvania, the opportunity to testify via conference technology, unless he is going to open up his location for anyone to participate. I have some serious concerns that this violates the Sunshine Law. The other part, as Mr. Hooser said, is that paragraph "C" says that any time you lose a signal, the meeting is done so that could cause problems, logistically for us, should we lose a signal. It says "the meeting held by interactive conference technology shall be terminated when audio communication cannot be maintained with all locations where the meeting by interactive conference technology is being held." I think there are some major issues that have to be addressed and needs to be reviewed by OIP and maybe the County Attorney's Office, so I am not prepared to support this today. Chair Furfaro: The question is going over to the Attorney's Office, but OIP was not included. I do want to say also that OIP was the one that told us that for those of us who are not on the Committees could not participate in the meeting until we made ourselves "ex-officios." Mr. Rapozo: Right. Chair Furfaro: Maybe we want to defer this until we get that clarity. Mr. Rapozo: I definitely will not support it until we get the clearance from OIP. Again, more specifically to Hawai`i Revised Statutes Section 92-3.5 subsection "a" and subsection "b." COUNCIL MEETING 114 AUGUST 28, 2013 Chair Furfaro: Do you want to make the motion to defer? Ms. Yukimura: May I talk first? Chair Furfaro: I am going to recognize Nadine. Ms. Yukimura: That is fine. Chair Furfaro: Vice Chair, you have the floor. Ms. Nakamura: I would like to get feedback from Staff of some practical considerations, technological capabilities, and also feedback from Ho`ike on the logistics of making it happen. Chair Furfaro: Okay, Nadine is making that request. We will structure something to Mr. Roberts and go from there. JoAnn, you have the floor. Ms. Yukimura: I appreciate all of this input. It is very important and valuable input. I am thinking that maybe we say at least that they be "off-island and unable to attend the meeting." We are limiting it to experts. The intention here was that it was going to be in the judgment of the Chair. If there are other ideas about how we can—we did look at the definition of "experts" in the Courts and did not want to get that complicated. Chair Furfaro: We may have to. Ms. Yukimura: Yes, and that is fine. I welcome any suggested amendments. Thank you for the head's up about the Sunshine Law, Councilmember Rapozo. It sounds really unwieldy, but we will have to address it if it is part of the law. We already take speakerphone testimony in working with our Attorneys in Executive Session, so we know that technology works, but there are issues in terms of a more public venue. I have no problems with deferring it, and will look into these aspects. Thank you. Chair Furfaro: This will be part of my Staff meeting tomorrow morning with members of the Council Staff. Mr. Rapozo: Thank you. I just want to make sure that we understand that the Executive Session is not open to the public, so that is what differentiates it. Chair Furfaro: That is the difference, yes. Mr. Rapozo: It is a huge difference. Keep in mind that if we allow for this, then we would have to make the arrangements to have that place a public place that any member of the public could show up at that public place, whether it is in Honolulu, Hawai`i Island, Los Angeles, or wherever it is, so others will be able to utilize that connection. I am not sure, logistically, how that would work, but I do believe that any remote testimony would be a burden on the Staff. Thank you. Chair Furfaro: Again, thank you very much for your commentary. As I said, we are drafting something to go over on the legal questions, COUNCIL MEETING 115 AUGUST 28, 2013 but it will be inclusive of OIP and we will have further discussion at our Council Services Staff meeting tomorrow morning. Ms. Yukimura: This came up because of our possible need for expert testimony from the United States Department of Agriculture (USDA), Environmental Protection Agency (EPA), and the Food and Drug Administration (FDA) regarding Bill No. 2491. One of my efforts might be to get a reinterpretation of the application of the Sunshine Law because an expert testimony would be, I think, very different than another public forum feeding into this public forum. I think if it is necessary, we might have to pioneer that distinction. It does not seem to make sense as applied to expert testimony. If it is just another place from which the public can testify, then I can see the Sunshine Law applying. We definitely have to address this issue. Thank you. Chair Furfaro: Okay. On that note, we are looking at a deferral here and wagons westward; we have got some things left to do. Mr. Kagawa moved to defer Resolution No. 2013-67, seconded by Ms. Yukimura, and unanimously carried. BILLS FOR FIRST READING: Proposed Draft Bill (No. 2497) — A BILL FOR AN ORDINANCE TO AMEND THE KAUAI COUNTY CODE 1987, AS AMENDED, BY ADDING A NEW ARTICLE TO CHAPTER 4, RELATING TO THE REGISTRATION AND REGULATION OF LOBBYISTS: Mr. Kagawa moved for passage of Proposed Draft Bill No. 2497 on first reading, that it be ordered to print, that a public hearing thereon be scheduled for September 25, 2013, and that it thereafter be referred to the Committee of the Whole, seconded by Ms. Yukimura, and carried by the following vote: FOR PASSAGE: Hooser, Kagawa, Nakamura, Rapozo, Yukimura, Furfaro TOTAL— 6, AGAINST PASSAGE: None TOTAL — 0, EXCUSED & NOT VOTING: Bynum TOTAL — 1, RECUSED & NOT VOTING: None TOTAL — 0. Proposed Draft Bill (No. 2498) — A BILL FOR AN ORDINANCE TO AMEND CHAPTER 8, KAUAI COUNTY CODE 1987, AS AMENDED, RELATING TO BUS STOPS FOR COMMERCIAL DEVELOPMENT (Kaua`i County Council, Applicant): Mr. Kagawa moved to refer to the Planning Commission, seconded by Ms. Yukimura. Chair Furfaro: Do we have a date specific referral? Ms. Yukimura: I have a question. Chair Furfaro: JoAnn, you have the floor. Ms. Yukimura: I am sorry that I did not read the Bill, but I did talk to Celia Mahikoa about it, and it came out of our discussion where in Puhi, there are bus stops on both sides of the block. There are bus stops within fifty (50) yards of each other. The question is whether there is a requirement for consultation with the Transportation Agency. Is there? COUNCIL MEETING 116 AUGUST 28, 2013 Ms. Nakamura: Yes. This Bill was prepared in consultation with our Transportation Planner and the Transportation Agency. This incentive would be available where both the Transportation Planner and the Transportation Agency believes is an appropriate location for a bus pullout or a bus stop. The whole point is not to penalize them for doing so because it will take away from off-street parking. Again, this is supposed to be an incentive to provide these amenities to improve our transit system. Ms. Yukimura: That sounds like a concept that is great. Thank you. Chair Furfaro: On that note, this has been referred. May I please have a roll call vote? The motion to refer Proposed Draft Bill No. 2498 to the Planning Commission was then put, and carried by the following vote: FOR REFERRAL: Hooser, Kagawa, Nakamura, Rapozo, Yukimura, Furfaro TOTAL — 6, AGAINST REFERRAL: None TOTAL— 0, EXCUSED & NOT VOTING: Bynum TOTAL — 1, RECUSED & NOT VOTING: None TOTAL— 0. Chair Furfaro: Thank you. Before we go to Bills for Second Reading, we have Mr. Dill here. Thank you for making yourself available and coming back. We are back to page 4 on item EDR 2013-03. We have some questions for you in particular on the Solar Water Heater piece. I will go ahead and recognize Councilmember Yukimura first. There being no objections, the rules were suspended. Mr. Dill: Larry Dill, for the record. Ms. Yukimura: I am looking at your August 26th memo in response to Gary Hooser regarding the cost of implementing Senate Bill (SB) No. 16 if it were to pass. Mr. Dill: Yes. Ms. Yukimura: In speaking with Mr. Haigh, it was clear to me that we should go with the third-party certification program, so that is the cost that I am focusing in on now. Mr. Dill: Okay. Ms. Yukimura: You show here of five thousand dollars ($5,000) per permit for variance application and plan review, site inspection, and submittal of certification. These five thousand dollars ($5,000) would not be paid for by the County. Is that correct? Mr. Dill: Correct, that would be paid for by the applicant. COUNCIL MEETING 117 AUGUST 28, 2013 Ms. Yukimura: Okay. How did you arrive at this figure? Mr. Dill: It was based on that we would have a licensed Mechanical Engineer do the review. We figured that individual would take about ten (10) hours to review and do any analysis, ten (10) hours for a site inspection because we believe that individual would likely have to come from O`ahu, since we are not aware of any appropriate Mechanical Engineer on Kaua`i that could do that, and then five (5) hours for miscellaneous permitting requirements. That would be a total of twenty-five (25) hours at two hundred dollars ($200) an hour. Ms. Yukimura: When I spoke to Mr. Haigh, he told me that it would be a Plumber. Mr. Dill: A Plumber to review the Solar Permit Application? Ms. Yukimura: Yes. Mr. Dill: That is not the discussion that he and I had. Ms. Yukimura: We talked about working with the State, so that it would become part of their licensing knowledge, and that there would be workforce training, but that that would be part of the kind of transition that our workforce has to make in order to move into a renewable energy society. To think that we would have to get somebody to come from O`ahu is really to my way of thinking, not realistic. I very much question this, especially if we have a commitment to moving our society to a new energy scenario. Even if this Bill does not pass, I am going to introduce an Ordinance that—I hear there was support from Public Works because they are concerned about consumer protection, that people are not going to be getting the best solar water heating—they are not even now for those who are putting it in because it is not property oriented or sized. I do not understand why this is being raised as an obstacle to this Bill. Mr. Dill: I am sorry... Chair Furfaro: She wants to pose that to you in a question. Ms. Yukimura: I would like to hear a response. Mr. Dill: I think our response is still as it was the last time I was here that this is not something that the Building Division of Public Works currently has to expertise or resources to manage. We feel that the way it is being currently managed with the variance system being done by the State is the appropriate manner. Ms. Yukimura: The State law is not addressing the issues of orientation and sizing. What I am saying is that this whole issue comes up in other ways that are not related to this Bill, whether this Bill passes or not. Mr. Dill: I apologize. I cannot speak to the orientation and sizing issue. Doug was not able to stay around late enough and he would have been better equipped to speak to that. COUNCIL MEETING 118 AUGUST 28, 2013 Ms. Yukimura: Perhaps, we should move to defer until he can come. Chair Furfaro: So you understand that we want clarity on this. We do not want somebody who spent last night at the Holiday Inn. We want somebody with expertise to come to the table. Mr. Dill: Okay. I got it. Chair Furfaro: Gary, you have the floor. Mr. Hooser: I also question the numbers actually. It is my understanding that basically, the party that comes in for a variance right now— they just get them without any review and that is where the abuse is. We are talking about a solar hot water system; we are not talking about a computer technology thing. This is real low tech stuff, so I do not understand why it has to be so complicated. You base your numbers on eighty (80) installations and last year there were only forty-seven (47) installations or variances. Number one, I think that is a number that is off. It should be much less than eighty (80). It should be fifty (50) or so if you want to just pick a number. Again, I am not an Engineer, but someone comes in, they want to put something other than a hot water heater or whatever hot water heater system they want. They want a variance, fill out a form, and come in requesting a variance. A Plumber or someone looks over it, checks the boxes, makes sure it is complete, and questions them on whether or not they deserve a variance. There are only fifty (50) a year. There are two hundred twenty (220) work days, so I cannot imagine a full-time employee spending all day long looking at one variance. Even if they do a site inspection, it is only fifty (50) days. I do not get where it would cost so much. I understand if you are hiring someone from Honolulu, and they have to fly over and do multiple trips, but it just seems like this is low technology. This is just a solar hot water system. There are only fifty (50) of them a year. I do not even know if a site inspection is needed or they can do it from the desk, and have them sign an affidavit. Right now, it seems like there is no barrier at all. These variances are given out like candy, apparently. Could you relook at your numbers? Could you also think about maybe a way to down-size it, or just take into account the questions we have asked and the comments? Mr. Dill: Certainly. Mr. Hooser: Okay. Thank you. Chair Furfaro: Mr. Dill, that is one of the reasons I had some sarcasm there with the guy staying at the Holiday Inn. This is not complicated. The fact of the matter is that two (2) years ago, when we first started talking, we had solar installers that were here really indicating to us that as contractors, how simple this securing the facility and the hook-up with the plumbing and so forth was. It was not complicated. We will probably defer this tonight. If you could have someone look into it, it would be appreciated. Mr. Dill: Okay. Chair Furfaro: Mr. Kagawa, and then JoAnn. Mr. Kagawa: I was going to make the motion to defer. If we are going to discuss it later, let us just defer it. COUNCIL MEETING 119 AUGUST 28, 2013 Ms. Yukimura: I was informed by Staff that we do not have the luxury of deferring if we want to put this into the HSAC package. I am thankful to Councilmember Hooser because in order to give a variance, you do not need to do a site inspection; you just check a box because they are not going to want a solar water heater. The processing of a variance—you want to verify that they are an end user. If we get our Ordinance passed, and that is not even a given if Senate Bill No. 16 passes, it still has to come to this body. Then there would be full discussion with the Administration about what we would set as "variance standards." A variance application would not need a site inspection or a plan review even. I do not think you have to inspect a non-demand gas water heater. All it would take is some checking as to whether the variance standards have been met. Chair Furfaro: Are there anymore questions for Mr. Dill? Mr. Dill, I appreciate you coming over on short notice. Thank you very much. Okay, we have a critical deadline meeting here for the HSAC package. I will call the meeting back to order. Members, how do you want to handle this? There being no objections, the meeting was called back to order, and proceeded as follows: Ms. Yukimura: I would like to pass it if there are enough votes, and then withdraw it if we vote as a majority after we get the information from Larry Dill. Chair Furfaro: Okay. Are you okay with that, Mr. Rapozo? Mr. Rapozo: No, I am not okay with that. I am not okay with passing anything until I am ready to pass it. There are other options. This adds another... Chair Furfaro: What are the other options? Mr. Rapozo: Having another County introduce it and getting it into the package. Chair Furfaro: Our package is due by next Friday. Mr. Rapozo: Yes, only because our meeting is here. This brings another level of work to our County. This increases again what our County is responsible for doing. I am uncomfortable with that. I understand it is just a solar heater and checking the—we see the problems in Public Works every day, and to add one more duty that should by handled at the State, it is like we continuously try to bail these guys out. I just have a problem with that. I am not going support it. Like I said, Mr. Dill and the Buildings Division Chief Haigh; they are not even on the same page. One told Councilmember Yukimura one thing and the other said another, so I do not like being rushed. I think we had this discussion with the Tax Bill. I am not prepared to pass it today. Chair Furfaro: Let me get some housekeeping items. The deadline for the HSAC package is this Friday? Ms. Yukimura: For any County? COUNCIL MEETING 120 AUGUST 28, 2013 Chair Furfaro: Yes, for all Counties. The County of Kaua`i's package deadline is September 13th. Do we have enough time to work on this until September 13th? Ms. Yukimura: It is true. I understand that if we do not make HSAC, we can still put it in our County package, but there is always a lot more power if all of the Counties can support it. Chair Furfaro: I want to make a clarification. I said the date of September 13th for the County's package, but it is September 20th, so we have a little longer than I thought. Mr. Kagawa: Thank you, Chair. I support Councilmember Rapozo. As Chair of the Public Works / Parks and Recreation Committee, I think we have enough on your plate in Public Works and Parks. Without good information, I am hesitant to volunteer to grab more responsibility at this time. Maybe when Larry comes back with better answers, perhaps I may change my mind. Thank you. Mr. Hooser: At the end of the day, I will defer to the introducer of the Resolution of whether or not she wishes to proceed with the vote or defer it, but I would be inclined to go forward and vote, and put it on the main package. It is clear to me that the communication we have grossly overstates the costs. It says eighty (80) units, and last year, there were forty-seven (47) units or variances, I should say. I resist having the Administration—my experience is that every Department will always resist new things to do, and it is our prerogative to set policy. In this particular case, this is an area of policy that is near and dear to my heart. It is clear that Kaua`i is an abuser of the intent of this legislation. Again, I defer to the introducer to vote and put it on the HSAC package. Thank you. Chair Furfaro: Council Vice Chair, you have the floor. Ms. Nakamura: Yes. I am not going to support this communication. I had a chance to speak with one of the Architects that is requesting many of the variances, and he said that many of his clients are asking for the variance because they are basically building box homes. These are people who are just trying to become homeowners where every penny counts, and unfortunately, they do not have the resources to invest upfront. They can barely make the loan payments, so to add to these additional costs, I cannot see supporting this based on the information that I have today. I also think that not all of the other Counties have been through a hurricane and people are making choices. We also have a large percentage of part-time residents who we heard from the expert last year that it is difficult for part-time residents to monitor solar water heating systems. There are some additional concerns that they need to take into consideration. I am not comfortable proceeding at this point. Chair Furfaro: Okay, just from looking around the table, the best scenario here might be a tie today, which makes it come back in two (2) weeks. It comes back in two (2) weeks and if the HSAC deadline has passed, we could still make the September 20th. Mr. Hooser: I misspoke. I misread the information. The last full year was sixty-five (65) variances and forty-seven (47) was half the year. I COUNCIL MEETING 121 AUGUST 28, 2013 just want to clarify that because Councilmember Yukimura pointed that out to me. Thank you. Chair Furfaro: Okay. Ms. Yukimura: I have not checked the permits this year, but in the first two (2) years at least—and I spoke to the person who has been signing most of the variances. There were variances for houses in Kukui'ula where there is a huge amount of sun and arguably, they should be putting solar water heaters on. I am fine with a deferral. I will vote against it, but I can understand the desire for a deferral. I do not mind addressing it for our County package. Chair Furfaro: Okay. Did I have a motion from a deferral from Mr. Kagawa at one point without a second? Mr. Rapozo: I do not think the motion was made, but if it... Chair Furfaro: No, someone did, but we did not get a second. Mr. Rapozo: I would make a motion to receive because a deferral is going to be an empty deferral because it shows up, but all we can do at that time is receive it because it will have already passed the deadline. Chair Furfaro: I would like to say something here when you are finished... Mr. Rapozo: I say this only for our Staff because when we defer something, they do a Committee Report on that item, and they have to do it again in two (2) weeks for really nothing. In this situation, because we know that a deferral is equal to a receipt because it is going to kill it, that I would just suggest that we do a motion to receive, really for the sake of our Staff. That is all. Chair Furfaro: My thinking on a deferral is the fact of the matter that the Chief Engineer has just left and he knows it is going to show up for sure in two (2) weeks, so go do your homework with some urgency because I can tell you how many times I have gone to the Cost Control Commission meetings about projects where so many times, the left hand does not know what the right hand is doing, which was just demonstrated to us here. Mr. Rapozo: I agree. Chair Furfaro: That is my rationale. Mr. Rapozo: I guess my suggestion would be to repost another identical item, but instead of the—I am sorry. You already have it in the posting. It is the "County of Kaua`i and HSAC." Ms. Yukimura: Yes. Mr. Rapozo: Okay. Chair Furfaro: Yes. COUNCIL MEETING 122 AUGUST 28, 2013 Ms. Yukimura: So, the deferral would not render it moot. Mr. Rapozo: I apologize. I misread the item. Ms. Yukimura: Thank you. Chair Furfaro: You folks understand my request as being more firm towards a deferral. Mr. Kagawa moved to defer EDR 2013-03, seconded by Mr. Rapozo, and carried by a 4:2:1 vote (Mr. Hooser and Ms. Yukimura voting no, Mr. Bynum excused). Chair Furfaro: This will show in up two (2) weeks, and that will give us one (1) week to know if it is going to be in the County package or not. Let us go to Bills for Second Reading. BILLS FOR SECOND READING: Bill No. 2489, Draft 1 — A BILL FOR AN ORDINANCE AMENDING CHAPTER 5A, KAUAI COUNTY CODE 1987, AS AMENDED, RELATING TO LOW AND MODERATE-INCOME HOUSING AND LONG TERM AFFORDABLE RENTALS: Mr. Rapozo moved for adoption of Bill No. 2489, Draft 1 on second and final reading, and that it be transmitted to the Mayor for his approval, seconded by Ms. Nakamura. Chair Furfaro: I am sorry, we are on page 8? Ms. Fountain-Tanigawa: Yes. We are on the bottom of page 8, Bill No. 2489, Draft 1. Chair Furfaro: This is for second reading, so it came out of the Committee. Was I absent? Ms. Fountain-Tanigawa: Yes. Chair Furfaro:. Okay. I am sorry. I was trying to grasp my own understanding of this Bill. Can I get a roll call vote, please? The motion to adopt Bill No. 2489, Draft 1, on second and final reading was then put, and carried by the following vote: FOR ADOPTION: Hooser, Kagawa, Nakamura, Rapozo, Yukimura, Furfaro TOTAL — 6, AGAINST ADOPTION: None TOTAL — 0, EXCUSED & NOT VOTING: Bynum TOTAL— 1, RECUSED & NOT VOTING: None TOTAL — 0. Bill No. 2492 — A BILL FOR AN ORDINANCE TO AMEND SECTION 2, ORDINANCE NO. 891 AUTHORIZING THE ISSUANCE OF GENERAL OBLIGATION BONDS OF THE COUNTY OF KAUAI FOR THE PURPOSE OF FINANCING CERTAIN PUBLIC IMPROVEMENTS AND REFUNDING CERTAIN BONDS OF THE COUNTY; FIXING OR AUTHORIZING THE FIXING OF THE FORM, DENOMINATIONS, AND CERTAIN OTHER DETAILS OF SUCH BONDS COUNCIL MEETING 123 AUGUST 28, 2013 AND PROVIDING FOR THE SALE OF SUCH BONDS TO THE PUBLIC: Mr. Kagawa moved for adoption of Bill No. 2492 on second and final reading, and that it be transmitted to the Mayor for his approval, seconded by Ms. Yukimura, and carried by the following vote: FOR ADOPTION: Hooser, Kagawa, Nakamura, Rapozo, Yukimura, Furfaro TOTAL— 6, AGAINST ADOPTION: None TOTAL — 0, EXCUSED & NOT VOTING: Bynum TOTAL — 1, RECUSED & NOT VOTING: None TOTAL— 0. Bill No. 2493 — A BILL FOR AN ORDINANCE AMENDING SECTION 22-5.4 OF THE KAUAI COUNTY CODE 1987, AS AMENDED, RELATING TO DESIGNATION OF EXCEPTIONAL TREES: Mr. Kagawa moved to receive Bill No. 2493 for the record on second and final reading, seconded by Mr. Rapozo, and carried by the following vote: FOR RECEIPT: Hooser, Kagawa, Nakamura, Rapozo, Yukimura, Furfaro TOTAL— 6, AGAINST RECEIPT: None TOTAL— 0, EXCUSED & NOT VOTING: Bynum TOTAL — 1, RECUSED & NOT VOTING: None TOTAL — 0. Chair Furfaro: My apologies for calling for a voice vote. For the next item, Bill No. 2494, I understand that we have an Amendment that is being worked on. Is that correct? Ms. Fountain-Tanigawa: Yes. Chair Furfaro: Okay. Jade, let us do some housekeeping items here on these Executive Sessions that we can defer to next week. Ms. Fountain-Tanigawa: Okay. This would be Executive Sessions that would be moved to the Special Council Meeting on September 4, 2013. EXECUTIVE SESSIONS: ES-667 Pursuant to Hawai`i Revised Statutes (HRS) Sections 92-4 and 92-5(a)(4) and the Kaua`i County Charter Section 3.07(E), on behalf of the Council, the Office of the County Attorney requests an Executive Session with the Council to provide the Council with a briefing, discussion and consultation regarding the quarterly report on pending and denied claims. This briefing and consultation involves the consideration of the powers, duties, privileges, immunities, and/or liabilities of the Council and the County as they relate to this agenda item: Mr. Rapozo moved to defer ES-667 to the September 4, 2013 Special Council Meeting, seconded by Ms. Yukimura, and unanimously carried. ES-668 Pursuant to Hawai`i Revised Statutes (HRS) Sections 92-4 and 92-5(a)(4) and (8), and Kauai County Charter Section 3.07(E), the purpose of this Executive Session is to provide the Council with a briefing on County of Kaua`i vs. Michael Guard Sheehan, et al., Civil No. 11-1-0098 (Condemnation), Fifth Circuit Court, and related matters. This briefing and consultation involves consideration of the powers, duties, privileges, immunities and/or liabilities of the Council and the County as they relate to this agenda item: Mr. Rapozo moved to defer ES-668 to the COUNCIL MEETING 124 AUGUST 28, 2013 September 4, 2013 Special Council Meeting, seconded by Ms. Yukimura, and unanimously carried. ES-669 Pursuant to Hawai`i Revised Statutes (HRS) Sections 92-4 and 92-5(a)(4) and (8), and Kaua`i County Charter Section 3.07(E), the purpose of this Executive Session is to provide the Council with a briefing in Jeffery Sampoang vs. Harvey Brothers, LLC, et al., Civil No. 12-1-0294 JKW (Fifth Circuit Court), and related matters. This briefing and consultation involves consideration of the powers, duties, privileges, immunities and/or liabilities of the Council and the County as they relate to this agenda item: Mr. Rapozo moved to defer ES-669 to the September 4, 2013 Special Council Meeting, seconded by Ms. Yukimura, and unanimously carried. ES-670 Pursuant to Hawai`i Revised Statutes (HRS) Sections 92-4, 92- 5(a)(4), and Kaua`i County Charter Section 3.07(E), on behalf of the Council, the Office of the County Attorney requests an Executive Session with the Council to provide the Council with a briefing and to discuss legal issues concerning the application and enforcement of Kaua`i County Code Chapter 8, Article 17, specifically the sections enacted under Ordinance Nos. 864, 876 and 904, and related matters. This briefing and consultation involves consideration of the powers, duties, privileges, immunities and/or liabilities of the Council and the County as they relate to this agenda item: Mr. Rapozo moved to defer ES-670 to the September 4, 2013 Special Council Meeting, seconded by Ms. Yukimura, and unanimously carried. ES-671 Pursuant to Hawai`i Revised Statutes (HRS) Sections 92-4 and 92-5(a)(4), and Kaua`i County Charter Section 3.07(E), the purpose of this Executive Session is to provide Council with a briefing and request for authority to settle claim against the County by Joseph L. Wildman, Esq., on behalf of Allan Albert, filed on February 25, 2013 and related matters. This briefing and consultation involves consideration of the powers, duties, privileges, immunities and/or liabilities of the Council and the County as they relate to this agenda item: Mr. Rapozo moved to defer ES-671 to the September 4, 2013 Special Council Meeting, seconded by Ms. Yukimura, and unanimously carried. ES-672 Pursuant to Hawai`i Revised Statutes Sections 92-4, 92-5(a)(4), and Kaua`i County Charter Section 3.07(E), on behalf of the Council, the Office of the County Attorney requests an Executive Session with the Council to provide the Council with a briefing regarding the impact of the Koontz vs. St. Johns River Water Management District on the County's ability to impose exactions on developers and issues relating to the County's liability with respect to public access easements, and related matters. This briefing and consultation involves the consideration of the powers, duties, privileges, immunities and/or liabilities of the Council and the County as they relate to this agenda item: Mr. Rapozo moved to defer ES-672 to the September 4, 2013 Special Council Meeting, seconded by Ms. Yukimura, and unanimously carried. Chair Furfaro: We just have this one item that we are waiting for on the Amendment. We are going to take a short recess. To all the members, please stay put. There being no objections, the meeting was recessed at 6:30 p.m. The meeting was reconvened at 6:47 p.m., and proceeded as follows: COUNCIL MEETING 125 AUGUST 28, 2013 (Ms. Yukimura was noted as excused at 6:47 p.m.) Chair Furfaro: We are back from our short recess. We have five (5) members to finish up our business today. Mr. Kagawa, I will give you the floor. There is an Amendment coming. If we are a minute away from that, I would like to ask the members if I could have a personal privilege. First of all, the form may also be a little bit in the apology as I interceded today in discussion when Mr. Bynum was talking about our Tax Bill, Bill No. 2495. He made reference in his narrative that we lost resort contributions of ten million dollars ($10,000,000), but it was not real clear when that was said as we were talking about property taxes. The shortfall came from the TAT, and that is very important for us to understand. This shortfall continues to be an item we should all be watching for. For example—and I will share this chart with you tomorrow; the transient accommodations tax over the last three (3) years with the improvement in general occupancy and rate in the State has gone from two hundred seventy-one million dollars ($271,000,000) to what is forecasted for this next year at three hundred fifty-two million dollars ($352,000,000). The Counties have been permanently frozen and divvying up the ninety-three million dollars ($93,000,000), but we have continued to expand services related to visitor costs from rescue, water safety, park facilities, and roads, et cetera, and yet, our share is frozen. The ten million dollars ($10,000,000) shortfall that Mr. Bynum was referring to—I want to make sure we are all clear, was what we have come up short as part of our revenue package because those moneys had gone to the State. It is contributing one of the factors that the State has a surplus at this particular time. It is something that we need to continue to lobby for or make certain that the State finds them in a situation where they fund these items that they have reduced in the overall coverage, especially with this additional revenue. Anyway, I wanted to take a moment. I broke my own rule by interceding Mr. Hooser. I want to acknowledge my difficulties, but I felt it was very important to make sure that everybody understands. The ten million dollar ($10,000,000) shortage was not from the property tax; the ten million dollar ($10,000,000) shortage was the three (3) years of transient accommodations tax that has actually gone to the State and not to us. Thank you for the moment of personal privilege. On that note, I will give you the floor, Mr. Kagawa, for the Amendment. Bill No. 2494 – A BILL FOR AN ORDINANCE AMENDING CHAPTER 3, ARTICLE 1, KAUAI COUNTY CODE 1987, AS AMENDED, RELATING TO THE CODE OF ETHICS: Mr. Rapozo moved for adoption of Bill No. 2494 on second and final reading, and that it be transmitted to the Mayor for his approval, seconded by Ms. Kagawa. Mr. Kagawa moved to amend Bill No. 2494, Draft 1, as circulated, as shown in the Floor Amendment which is attached hereto as Attachment 3, seconded by Mr. Rapozo. Mr. Kagawa: If I may, Mr. Chair? Chair Furfaro: You have the floor. Mr. Kagawa: I just want to thank Staff for catching this. I wanted to add, as far as Code of Ethics, under "Section 3.14 Gifts." We wanted to add "any gift cannot be given to any Councilmember or employee," so we are adding "or employee" in influencing their decision. Thank you. COUNCIL MEETING 126 AUGUST 28, 2013 Chair Furfaro: On that note, Peter, I want to thank you for this housekeeping item as I have a meeting with Rob Abreu and some others in the public asking for the clarification as it relates to the Code of Ethics and gifts. Thank you very much for taking care of the housekeeping item. Is there anymore discussion here? If not, may I have a roll call vote? The motion to amend Bill No. 2494 was then put, and carried by the following vote: FOR AMENDMENT: Hooser, Kagawa, Nakamura, Rapozo, Furfaro TOTAL— 5, AGAINST AMENDMENT: None TOTAL— 0, EXCUSED & NOT VOTING: Bynum, Yukimura TOTAL — 2, RECUSED & NOT VOTING: None TOTAL — 0. Chair Furfaro: Thank you very much. We will go to the main motion, and that will conclude our business for the evening. We are now on the main motion as amended. Roll call vote, please. The motion to approve Bill No. 2494, Draft 1 on second and final reading was then put, and carried by the following vote: FOR ADOPTION: Hooser, Kagawa, Nakamura, Rapozo, Furfaro TOTAL — 5, AGAINST ADOPTION: None TOTAL — 0, EXCUSED & NOT VOTING: Bynum, Yukimura TOTAL — 2, RECUSED & NOT VOTING: None TOTAL— 0. Chair Furfaro: This is a reminder to everybody that the Executive Session items that were deferred today are now scheduled for September 4, 2013 at 8:30 a.m. to 10:30 a.m. On that note, good night and thank you everyone. ADJOURNMENT: There being no further business, the meeting was adjourned at 6:52 p.m. Res ectfully submitted, J lir K. FOUNTAIN-TANIGAWA Deputy County Clerk :cy ATTACHMENT 1 (August 28, 2013) FLOOR AMENDMENT Bill No. 2495, Draft 2, Relating To Real Property Taxes Introduced by: ROSS KAGAWA 1. Amend Bill No. 2495, Draft 2, SECTION 7, Sec. 5A-11.24 to read as follows: "Sec. 5A-11.24 Credit Union Exemption. (a) Real property owned in fee simple or leased for a period of one (1) year or more by a Federal or State credit union which is actually and exclusively used for credit union purposes shall be exempt from all real property taxes [up to ninety percent (90%) of the assessed value of the real property]. If the property for which exemption is claimed is leased, the lease agreement shall be in force and recorded in the Bureau of Conveyances at the time the exemption is claimed. As used in this Section, "Federal credit union" means a credit union organized under the Federal Credit Union Act of 1934, 12 U.S.C. Chapter 14, as amended, and "State credit union" means a credit union organized under the Hawaii Credit Union Act, HRS Chapter 410, as amended. (b) If any portion of the property which might otherwise be exempted under this Section is used for commercial or other purposes not within the conditions necessary for exemption (including any use the primary purpose of which is to produce income even though such income is to be used for or in furtherance of the exempt purposes) that portion of the premises shall not be exempt but the remaining portion of the premises shall not be deprived of the exemption if the remaining portion is used exclusively for purposes within the conditions necessary for exemption. In the event of an exemption of a portion of a building, the tax shall be assessed upon so much of the value of the building (including the land thereunder and the appurtenant premises) as the proportion of the floor space of the nonexempt portion bears to the total floor space of the building." (Material to be deleted is bracketed.) V:\AMENDMENTS\2012-2014 term\RPT Bill Floor Amendment 08-28-13 RK SS_dmc.doc ATTACHMENT 2 (August 28, 2013) FLOOR AMENDMENT Bill No. 2495, Draft 2, Relating To Real Property Taxes Introduced by: NADINE K. NAKAMURA 1. Amend Bill No. 2495, Draft 2, SECTION 7, Sec. 5A-11.24 to read as follows: "Sec. 5A-11.24 Credit Union Exemption. (a) Real property owned in fee simple or leased for a period of one (1) year or more by a Federal or State credit union which is actually and exclusively used for credit union purposes shall be exempt from all real property taxes over three hundred dollars ($300.00) for tax year 2014; and up to ninety percent (90%) of the assessed value of the real property based on 2015 assessed values for each tax year thereafter. If the property for which exemption is claimed is leased, the lease agreement shall be in force and recorded in the Bureau of Conveyances at the time the exemption is claimed. As used in this Section, "Federal credit union" means a credit union organized under the Federal Credit Union Act of 1934, 12 U.S.C. Chapter 14, as amended, and "State credit union" means a credit union organized under the Hawaii Credit Union Act, HRS Chapter 410, as amended. (b) If any portion of the property which might otherwise be exempted under this Section is used for commercial or other purposes not within the conditions necessary for exemption (including any use the primary purpose of which is to produce income even though such income is to be used for or in furtherance of the exempt purposes) that portion of the premises shall not be exempt but the remaining portion of the premises shall not be deprived of the exemption if the remaining portion is used exclusively for purposes within the conditions necessary for exemption. In the event of an exemption of a portion of a building, the tax shall be assessed upon so much of the value of the building (including the land thereunder and the appurtenant premises) as the proportion of the floor space of the nonexempt portion bears to the total floor space of the building." (New material to be added is underscored.) V:\AMENDMENTS\2012-2014 term\Bill No 2495 Draft 2 Floor Amendment (NN) SS:aa ATTAG NE NT 3 (August 28, 2013) FLOOR AMENDMENT Bill No. 2494, Draft 1, Relating to the Code of Ethics INTRODUCED BY: , Councilmember Ross Kagawa 1. Amend Bill No. 2494 by amending Section 5 to read as follows: "SECTION 5. Section 3-1.4 of the Kaua`i County Code 1987, as amended, is hereby amended by amending subsection (b) to read as follows: "Sec. 3-1.4 Gifts. (a) No Councilmember or employee of the County shall solicit, accept, or receive directly or indirectly any gift, whether in the form of money, service, loan, travel, entertainment, hospitality, thing or promise, or in any other form, under circumstances in which it can reasonably be inferred that the gift is intended to influence him or her in the performance of his or her official duties or is intended as a reward for any official action on his or her part. (b) The prohibition against gifts in Section 3-1.4(a) shall not apply to: (1) An occasional non-pecuniary gift, insignificant in value, or (2) An award publicly presented in recognition of public service, or (3) Any gift which would have been offered or given to the Councilmember or employee if he or she were not an official or employee." 2. Amend Bill No. 2494 by renumbering Section 5 to Section 6 to read as follows: "SECTION [5.] 6. If any provision of this Ordinance, or the application thereof to any person or circumstances is held invalid, the invalidity does not affect other provisions or applications of the Ordinance which can be given effect without the invalid provision or application, and to this end the provisions of this Ordinance are severable." 3. Amend Bill No. 2494 by renumbering Section 6 to Section 7 to read as follows: "SECTION [6.] 7. Ordinance material to be repealed is bracketed. New Ordinance material is underscored. When revising, compiling, or printing this Ordinance for inclusion in the Kaua`i County Code 1987, the brackets, bracketed material and underscoring shall not be included." 4. Amend Bill No. 2494 by renumbering Section 7 to Section 8 to read as follows: 1 "SECTION [7.] 8. This Ordinance shall take effect upon its approval." (Material to be deleted is bracketed. New material is underscored.) 2