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HomeMy WebLinkAbout06/25/2014 Council minutes COUNCIL MEETING JUNE 25, 2014 The Council Meeting of the Council of the County of Kaua`i was called to order by Council Chair Jay Furfaro, at the Council Chambers, 4396 Rice Street, Suite 201, Lihu`e, Kauai, on Wednesday, June 25, 2014 at 9:07 a.m., after which the following members answered the call of the roll: Honorable Tim Bynum (present at 9:10 a.m. to 2:44 p.m.) Honorable Mason K. Chock, Sr. Honorable Gary L. Hooser Honorable Ross Kagawa Honorable Mel Rapozo (present at 11:21 a.m.) Honorable JoAnn A. Yukimura Honorable Jay Furfaro Chair Furfaro: Let the record show that Mr. Rapozo is excused until 11:30 a.m. May I have an approval of the agenda, please? APPROVAL OF AGENDA. Ms. Yukimura moved for approval of the agenda as circulated, seconded by Mr. Hooser, and carried by a vote of 6:0:1 (Mr. Bynum was noted as not present and Mr. Rapozo was excused.) Chair Furfaro: To Mr. Clerk, would you please read the Section (D), public comment? 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). Chair Furfaro: Thank you. Again, this period is being provided for those that can not stay and wanted specific time to speak. Is there anyone in the audience that so wishes to exercise public comment at this time? There being no one to provide public comment, the meeting proceeded as follows: Chair Furfaro: Let us go to item (E), please. COUNCIL MEETING 2 JUNE 25, 2014 MINUTES of the following meetings of the Council: May 28, 2014 Council Meeting June 4, 2014 Special Council Meeting Ms. Yukimura moved to approve the Minutes as circulated, seconded by Mr. Chock and carried by a vote of 6:0:1 (Mr. Bynum was noted as not present and Mr. Rapozo was excused.) Chair Furfaro: We will go to Consent Calendar. CONSENT CALENDAR: C 2014-181 Communication (05/27/2014) from the Director of Finance, transmitting for Council information, the following reports: (1) County of Kaua`i Bond Summary of General Long-Term Debt Amount Outstanding as of July 1, 2013; (2) County of Kauai Bond Supplemental Summary of General Long-Term Debt Amount Outstanding as of June 30, 2014; and Excluded County of Kaua`i Bond Supplemental Summary of Long- Term Debt Amount Outstanding as of June 30, 2012: CFD No. 2008-1 (Kukui`ula Development Project) Special Tax Bonds, Series 2012, sold April 25, 2012. (Copy on file in the County Clerk's Office.) Mr. Kagawa moved to receive C 2014-181 for the record, seconded by Ms. Yukimura, and carried by a vote of 6:0:1 (Mr. Bynum was noted as not present and Mr. Rapozo was excused.) C 2014-182 Communication (06/06/2014) from the Director of Finance, transmitting for Council information, the Condition of the County Treasury Statement quarterly report as of May 2, 2014: Mr. Kagawa moved to receive C 2014-182 for the record, seconded by Ms. Yukimura, and carried by a vote of 6:0:1 (Mr. Bynum was noted as not present and Mr. Rapozo was excused.) C 2014-183 Communication (06/12/2014) from the Director of Finance, transmitting for Council consideration, proposed amendments to Section 2, Ordinance No. 891, relating to the Authorization of the Issuance of General Obligation Bonds of the County of Kaua`i 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. Kagawa moved to receive C 2014-183 for the record, seconded by Ms. Yukimura, and carried by a vote of 6:0:1 (Mr. Bynum was noted as not present and Mr. Rapozo was excused.) C 2014-184 Communication (06/13/2014) from Councilmember Bynum and Councilmember Hooser, transmitting for Council consideration, a proposed Resolution Proposing A Charter Amendment Relating To The Public Access, Open COUNCIL MEETING 3 JUNE 25, 2014 Space, And Natural Resources Preservation Fund: Mr. Kagawa moved to receive C 2014-184 for the record, seconded by Ms. Yukimura, and carried by a vote of 6:0:1 (Mr. Bynum was noted as not present and Mr. Rapozo was excused.) Chair Furfaro: Going into area (G) on Communications, and it is my intent to go to the items dealing with the final audit reports on both the — members that are here from PKF Pacific Hawai`i LLP, should we go and pursue through this now? RICKY WATANABE, County Clerk: We are on page 3, on the last item on that page. There being no objections, C 2014-191 was taken out of order. COMMUNICATIONS: C 2014-191 Communication (06/16/2014) from Council Vice Chair Chock, requesting the presence of PKF Pacific Hawai`i LLP, to provide the Council with a briefing on the Audit of County Vehicles and the Audit of the County Furlough Program, including the Administration's responses to the respective audits: Mr. Kagawa moved to receive C 2014-191 for the record, seconded by Ms. Yukimura. Chair Furfaro: Thank you. Gentlemen, I am not quite ready to call you up yet. I am going to ask for public testimony on this item and then we will go right into your presentation. Mr. Watanabe: We have one (1) registered speaker, Chair. Ken Taylor. (Mr. Bynum was noted as present.) Chair Furfaro: Mr. Taylor. There being no objections, the rules were suspended to take public testimony. KEN TAYLOR: Good morning Chair, and members of the Council. My name is Ken Taylor. I am here to testify on C 2014-191. I am concerned that the proper and fair procedures may not have been observed as to the request for a briefing from PKF Pacific Hawaii LLC about the two (2) audits mentioned. First, the PKF Pacific Hawai`i LLC firm was retained by the County Auditor to assist on two (2) audits. Should the request for this testimony by the firm not been made by the Auditor and not by a member of the Council? Second, the testimony that may be sought could relate to the issues being presented in Pasion vs. County of Kaua`i lawsuit. Has appropriate notice been given to Mr. Pasion and his Counsel for the appearance being sought of PKF Pacific Hawaii LLC firm and the nature of the testimony expected? I hope that I am wrong, but the requested appearance has the earmarks of a runaround of Mr. Pasion. As you can see in my testimony, I do not know what procedures were followed and I think it is important that these questions be answered before we move forward with today's activity. Thank you. Chair Furfaro: So, Ken, let me share with you that first of all, the correspondence requesting this time was made by Vice Chair Chock through COUNCIL MEETING 4 JUNE 25, 2014 the Auditor. That correspondence is pretty well documented for its appearing on the agenda. This clarification, most importantly, is to understand that when an audit is concluded in the final form, it is usually presented to the Council in its final form. I will get that clarified when the auditors appear, but the request came through Vice Chair Chock. I hope I have answered your question. JoAnn. Ms. Yukimura: Yes, I just want to add to that. I believe that when the request was made, there was the expectation that the Auditor would be here. I know he is going through some health challenges, but we were not trying to do anything without the Auditor. It is his role as the Auditor, to present these reports and we have gone through him. Mr. Taylor: Unfortunately, when we get the agenda. Chair Furfaro: Excuse me. Mr. Taylor: ...the information is not available... Chair Furfaro: Excuse me, Ken. You need to be recognized if you have additional questions. I asked them to respond to the questions you posed during your testimony. Mr. Taylor: Right. Chair Furfaro: Do you have an additional question? Mr. Taylor: The question I have is, why not in the future, put the backup material that goes with these things along with the agenda so that we, the public, has the opportunity to see whether the procedures were properly followed or not? Thank you. Chair Furfaro: Thank you. We only had one (1) individual signed up for this. Alice, please come up. ALICE PARKER: I had too much breakfast. Alice Parker for the record. If this audit refers to the Mayor's use of gasoline, I think that it is so necessary that the Mayor uses a County car or County gasoline, it should be added to his income and taxed appropriately, and not subcutaneously as it were. Thank you. Chair Furfaro: Thank you, Alice. I want to point out those are points well made. I also want to say that these final audit reports are number one, directed at the vehicle usage and the second audit is directed at the summary of the furlough program. Those are the two (2) items in front of us today. Ms. Parker: Okay. Thank you. Chair Furfaro: You are welcome. I will now call up the PKF...did you want to speak, Joe? Please come right up. JOE ROSA: Good morning. For the record, Joe Rosa. Again, we are here to get to the bottom of this audit situation and problem that has been going on for at least twenty-nine (29) times. It is high time that these other audits that were completed, the seven (7) in all, be made known to the public. Why COUNCIL MEETING 5 JUNE 25, 2014 only the Kilauea Gym and the gas card thing? There are five (5) other audits that were completed by the Auditor's Office and his staff. Why all the secrecy other than the Kilauea Gym and the gas card thing? Those audits were published and they were confirmed by you, members of this Council before it got printed into a book form. So, what is the delay? Is somebody hiding something in the grass? Let us be realistic. Money was spent by the office, the publishing of those audits. Why is nothing made public other than those two (2)? This is an election year and one of the questions I am going to ask all of the candidates, the new ones and the incumbents, what is your feeling toward the Auditor's Office? Are you people afraid that things are going to happen? He did his job. He was hired to do that job by way of the Charter and he was appointed by this Council in 2009. So, he did his work, got seven (7) audits out so far, two (2) were made known, and after some heat was exposed and some irregularities everything came hush hush. Then they look into something for a dismissal of the Auditor, but like I always stress and say, there is no evidence and there is no just cause. All this is a bunch of personalities and personalities do not hold in a court of law, as was testified by myself and Judge Laureta. So, what is the delay? You have to do things for the public because you represent the public and you all took an oath to uphold the Constitution of the United States, the State of Hawaii, and the County Charter. So, I leave you with that thought. Be all man enough and lady enough to make a decision once and for all. There is no just cause... Mr. Watanabe: Three (3) minutes. Mr. Rosa: ...a man walks free... Chair Furfaro: Thank you, Joe, that is your time. Mr. Rosa: Yes, and I thank you too, Jay. Like I just said, I hope this thing comes to an end because it is an election year and I have been going around telling the people. You ask all of the candidates... Chair Furfaro: Your time is up, Joe. Mr. Rosa: Yes, Jay, I understand. I do not need...I am finishing up. I told you I am going to wrap it up. Let us have some courtesy, alright? Thank you. Chair Furfaro: I am extending you courtesy, sir. Okay, I would like to make a...Mr. Mickens. In the future, I would appreciate if people sign up in advance if they wish to testify. Mr. Mickens, you have the floor. GLENN MICKENS: Thank you, Jay. Thank you, BC. I just want to compliment Vice Chair Chock for getting these two (2) gentlemen up here, bringing this issue to the public. I understand and I agree with Alice one hundred percent (100%). I hope someplace on the agenda you will have a chance to put the gas thing on it also. I know that these two (2) things, as you pointed out Jay, are not it. I think it is way past time all of these good audits that have been done, I think they all should be brought up. So, anyway, I just want to compliment Vice Chair Chock for seeking these gentlemen and the system that they are testifying here. I appreciate you are allowing the public first time, but like Ken said, I hope that we, in the future, do get a little more information about how it is going to be, how the agenda will be. Thank you, Jay. COUNCIL MEETING 6 JUNE 25, 2014 Chair Furfaro: Thank you. Is there anyone else that wishes to testify? If not, I want to clarify a couple items. There being no further testimony, the meeting was called back to order, and proceed as follows: Chair Furfaro: First of all, it has been brought to our attention just now that there has not been reviews of other audit items. I want to remind the public that Kilauea Gym in fact, has been on over three (3) times as we proceed. We have also had draft reports. Draft reports. As we move forward, we get to a point where contracted services by the County Auditor go to certain firms to do specific work, and hopefully we find ourselves in accepting what today might be the final on the furloughs as well as the automobile use. They will cover things that deal with policy compliance, they will cover things like internal controls, the issues or standards that might have been violated or so forth, and they will give us some objective evidence as it relates to things that may need to be corrected or improving standards. That is the purpose of today, but again, I want to point out that there have been audits in front of us before in their final form. On that note, I would like now to suspend the rules to ask for Mr. Patrick Oki, the Managing Partner, and Tyler Kimura, the Senior Manager for PKF Pacific Hawaii LLC who were contracted by the Auditor's Office to do these audits. There being no objections, the rules were suspended. Chair Furfaro: Gentlemen, welcome. PATRICK OKI, Managing Partner: Good morning Chair, good morning Councilmembers. I am Patrick Oki. I am the Managing Partner of PKF Pacific Hawai`i LLC (PKF). PKF is a full service Certified Public Accountant (CPA) firm based in Honolulu, Hawaii. We are probably the fourth largest on O`ahu. I am a Certified Public Accountant. I am also a Certified Fraud Examiner. I have been in private practice for about twenty (20) years. With me is Tyler Kimura, and I will have him introduce himself. TYLER KIMURA, Senior Manager: Good morning Chair, good morning Councilmembers. My name is Tyler Kimura, Certified Fraud Examiner. I am a Senior Manager and the Advisory's Practice Leader at PKF. I have about ten (10) years of experience doing investigations, litigation support, and other performance improvement assessments. Good morning. Chair Furfaro: Good morning. I have this laid out that we would first approach the Vehicle Audit and then the Furlough Program. I have set at least an hour aside for each of those, but I will turn over the floor to you. If you can begin your presentation in that order, I would appreciate it. Mr. Oki: Sure. The first report that we are going to be presenting is the Audit on County Vehicles. The audit scope was to design and answer the following: the adequacy of internal and administrative controls surrounding the use of County vehicles; proper authorization of County vehicles usage, compliance with County policies and State and Federal laws and regulations; and to determine if there is any occurrence of any fraud or abuse. It was originally focused on take-home vehicles, but it was later expanded to include a July 2011 anonymous letter alleging use of County vehicles for personal use. In addition, we expanded the scope to include all County passenger vehicles. COUNCIL MEETING 7 JUNE 25, 2014 The audit objectives and methodology was to assess the internal and administrative controls. We interviewed people of the County. We met with the Department of Public Works Automotive Superintendent. We looked at the compliance on County policies, laws, and regulations. We obtained the existing vehicle policies and forms, and read the Take-Home Vehicle Policy, the 2013 Edition. We identified any potential instances of fraud or abuse. We performed data analysis using fuel transactions and maintenance records and we did inquiries with Directors and Supervisors. The timeline was from October 2012 to November 2012. We did our initial interviews with Departments and the Agencies, and from December 2012 through September 2013, we did our audit fieldwork and follow-up with any inquiries that we had. Mr. Kimura: As part of our fieldwork we gathered data from various sources including Gasboy Data from July 2011 through November 2012. We looked at the Automotive Division Maintenance Odometer Readings, and we also looked at the Automotive Division Vehicle Registry. Among the analysis that we did, we performed a month-to-month mileage analysis to look at the average miles driven per month for these vehicles. We looked at...oh, I am sorry. Month-to-month to determine if there were any changes around the April 2011 time period, average month driven for each vehicle as well as the miles per gallon analysis on each vehicle. After our fieldwork, we E-mailed inquiries with the Departments where we saw some abnormalities to look at the overall use of the vehicle and to obtain explanations for high vehicle mileage, abnormal miles per gallon, or any change in usage, and we met with certain individuals as necessary. Some common explanations included: the vehicles being transferred to different Divisions, project locations change from month to month requiring more driving, or the vehicle was in the shop and not being used. We determined, based on our interviews, that the inappropriate usage reported in the July 2011 letter was no longer occurring. Throughout the course of our audit, there were some subsequent changes to processes in general. The Gasboy system was change to the Fuel Master Pro System, in May 2013. The Automotive Information Module (AIM) was also implemented on certain vehicles and Departments with automatically transmits odometer readings, a new Take-Home Vehicle Policy was effective July 1, 2013, and a Comprehensive Motor Vehicle Policy was approved in August 2013. We also became aware that the Department of Finance was developing a Motor Vehicle Pool Pilot Program. Moving on to the findings. The first overall finding was that the County's policy over the use of County vehicles is inadequate, leading to possible noncompliance, abuse, waste, and inefficiency. First sub-finding was that the 2002 policy summarized and referenced Chapter 105 of the Hawai`i Revised Statutes (HRS). Therefore, any instances of noncompliance with the policy were also noncompliance with the State law. As part of our recommendations, we recommended that the County modify the Comprehensive Motor Vehicle Policy to clarify that drivers understand their responsibility to be in compliance with the HRS, and that an additional note should be made in the policy regarding medical or family emergency usage of County vehicles. The County responded that the Comprehensive Vehicle Policy will include revisions so employees will understand their responsibilities in complying with County policy and State law. COUNCIL MEETING 8 JUNE 25, 2014 (Mr. Kagawa was noted as not present.) Chair Furfaro: Can I just interrupt for a second here? Mr. Kimura: Sure. Chair Furfaro: I just want to make note of the report here on Chapter 105 of the HRS Statewide process. That is the rule that designates a vehicle for the Police Chief, the Fire Chief, and the Mayor, and all other vehicles then must be reported to the Administration and assigned to a driver for what purpose. Is that Chapter 105? Mr. Kimura: Yes, and certain forms need to be filed with the Department of Finance and approval by the Mayor. Chair Furfaro: So, I assume that you would have reviewed this log. Mr. Kimura: Yes. Chair Furfaro: Thank you. Mr. Kimura: Second sub-finding. The 2002 policy did not provide adequate guidance to Departments on use of non-take-home vehicles or clear restrictions on use. This resulted in an overall lack of controls and difficulties in determining if abuse was taking place. We recommended that the Department of Finance should consider revising the Comprehensive Vehicle Policy to include the clarification of incidental and occasional use of non-exempt take-home vehicles and that procedures for monitoring vehicles that are shared within multiple drivers in a Department/Division could also be added to this policy for consistency across Departments/Divisions. The County responded that the Department of Finance will consider revisions to the Comprehensive Vehicle Policy to further illustrate what is considered acceptable and non-acceptable behavior. Third sub-finding. Lax monitoring and poor data sources create difficulties in determining if abuse is taking place. We recommended that the Department of Finance should require consistency in the manner that overall usage is monitored and that the Comprehensive Vehicle Policy should be revised to ensure that all scenarios of vehicle usage (including assigned, shared, or pooled vehicles) be included in the policy. The County responded that they will work with Department Heads and personnel delegated to monitor these activities and to seek ideas as to how to monitor and enforce protocol. Finding number 2 related to tax implications related to the benefit value of the use of County vehicles. Prior to July 2013, the County did not account for the benefit value of the use of take-home County vehicles to employees. As a result, the County may be liable for additional payroll withholding taxes. (Mr. Kagawa was noted as present.) Mr. Kimura: We recommended that the Department of Finance should retain a tax expert to provide guidance on any potential tax liabilities, including the applicability of relevant statutes of limitations, resulting from employees' usage of take-home vehicles. The County responded that the COUNCIL MEETING 9 JUNE 25, 2014 Administration is considering working directly with the Internal Revenue Service (IRS) to deal with this issue. That is a high level summary of our work. So, at this time, we will open it up to questions related to our report. Chair Furfaro: Very good. So, again, we are in the Vehicle Audit for this phase and I will open up questions for Councilmembers to these gentlemen from PKF. Mr. Kagawa, did you want the floor? No? Okay. Members? JoAnn. Ms. Yukimura: Thank you for this report. So, has the County Auditor approved this report? Mr. Oki: Yes. Ms. Yukimura: He has approved it. In his approval, did he make any requests for changes to your original drafts? Mr. Kimura: I am not sure. Mr. Oki: I do not recall. Mr. Kimura: No, I do not believe so. Ms. Yukimura: No? Okay, good. Mr. Kimura: I think as part of our normal procedures, we run a draft by the Auditor's Office, but I do not recall any substantial changes being made. Ms. Yukimura: Okay. So, you were saying that the County Take-Home Policy in 2002 is based on HRS Section 105 and 105(2). So, to take a car home without approval by the Mayor in writing via the Finance Department recommendation, is personal use that is prohibited by HRS 105 and 105(2)? Okay. So, this complaint that started this audit was a complaint according to your report. In July of 2011, the County Auditor's Office received an anonymous letter. I am reading from your report here, that accused certain County employees of using County vehicles for their personal use. This letter was received during the audit of fuel costs consumption and management that was being conducted, and you investigated this complaint? Mr. Oki: Yes, we did. Ms. Yukimura: Okay, and did you find that the County employee took the car home in 2011 without written okay by the Mayor? Mr. Kimura: Well, to clarify, it was not a specific investigation of this anonymous letter and that Department and that individual. The letter spurred the need for the overall audit for take-home vehicles in general. At that point, we performed procedures over all vehicles within the County and just to make it clear that it was not a specific investigation to this person. What we did do was interview the people at the Department to determine what use we could determine and also look at the data analysis that we performed for all other vehicles to determine the usage, mileage, gas use, and also to see what procedures they had in place going forward to prevent any further potential misuse. COUNCIL MEETING 10 JUNE 25, 2014 Ms. Yukimura: But was this a violation of HRS 105? Mr. Oki: Specific to that individual? Ms. Yukimura: Yes. Mr. Oki: We cannot, we did not determine that because that individual was no longer an employee. Ms. Yukimura: Well, you still cannot make factual determinations if something occurred that would have been a violation? Mr. Oki: Well, we could not determine if that individual was still using the car for personal use. There was no evidence to determine that. Ms. Yukimura: Did you investigate whether there was evidence at the time of the complaint that that occurred? Mr. Oki: No. As Tyler mentioned, we did not investigate that individual. Ms. Yukimura: Why not? Would this not be part of determining whether fraud occurred? Mr. Oki: Well, we wanted to take a more efficient approach in looking at the County as a whole to determine if there is abuse, not individually by a person. Ms. Yukimura: Is it not part of your job to also raise potential incidents of fraud? Mr. Kimura: We did. We noted other instances of employees driving close to their places of abode and parking the County vehicles there, other employees taking vehicles home to wash, and other employees taking vehicles home without proper authority, the protocol under HRS 105. So, there were other instances and in general, the issue was that overall policy was not being... Ms. Yukimura: Excuse me, but your audit scope says, "determining whether any fraud or abuse has occurred." That was part of your scope. Mr. Oki: And we had concluded that there is. Ms. Yukimura: There is fraud? Mr. Oki: Yes. Ms. Yukimura: Or potential. Mr. Oki: Potential fraud. COUNCIL MEETING 11 JUNE 25, 2014 Ms. Yukimura: So, has this matter been referred to law enforcement? Mr. Oki: I do not know. Ms. Yukimura: So, if the use of County vehicles to go to and from work is unauthorized, is the use of fuel also unauthorized? Mr. Oki: Again, that was not part of our scope and I cannot make that determination without the facts presented. Ms. Yukimura: The audit scope consisted of determining whether any fraud or abuse occurred. Mr. Kimura: But it was focused on the use of the vehicle itself. Ms. Yukimura: The audit scope consisted of whether fraud, well, it says, "determining whether the County's internal administrative control surrounding the use of County's were adequate, determining whether the use of County vehicles by County employees were properly authorized, determining whether any fraud or abuse occurred." There were three (3) prongs of this scope of work. Mr. Oki: I am sorry. So, what is the question? Ms. Yukimura: So, you have determined that there is potential fraud? Mr. Oki: Yes. Ms. Yukimura: And you have referred this matter to law enforcement? Mr. Oki: That is not our responsibility. Our responsibility is to report of such findings and I am not sure who will respond to those findings and take appropriate action. Ms. Yukimura: Okay. So, you say here in your report... Chair Furfaro: JoAnn, if you are not prepared, would you yield for another Councilmember at the moment? Ms. Yukimura: I would like to just finish this line of questioning. Chair Furfaro: Okay. Go right ahead. Ms. Yukimura: So, it says on page 13 of this report "results of our interview and inquiries related to our data analysis address the specific concerns that were brought up in the June 2011 anonymous letter. We confirmed inappropriate usage was no longer occurring." Okay. So, this letter was in July of 2011, when were you retained for this work? COUNCIL MEETING 12 JUNE 25, 2014 Mr. Oki: The latter half of 2012 and early part of 2013. Ms. Yukimura: Okay. So, why did it take a year before this July 2011 letter was investigated? Mr. Oki: I do not know. We were retained in 2012. Ms. Yukimura: Your contract was signed on July 9, 2012. So, one (1) year after this anonymous compliant was made, but yes, of course you would not be the one. We need to ask the County Auditor why it took one (1) year. Mr. Kimura: Yes. Ms. Yukimura: So, last question for now is...I have lost my train of thought. I will get back to this later....oh, I know. My last question is, if you found possible fraud, why is that not one of your findings? Mr. Kimura: It became incorporated into the overall finding that the policy was so broad and not pointed that there was a lot of potential misuse in all Departments, and those are laid out within that first finding. Ms. Yukimura: That was kind of like the Fuel Audit was it not? Mr. Oki: I do not know the details behind the Fuel Audit. Ms. Yukimura: Okay. Thank you very much. Mr. Oki: You are welcome. Chair Furfaro: Councilmember Hooser and then Councilmember Bynum. Mr. Hooser: Yes, good morning. Thank you. Mr. Oki: Good morning. Mr. Hooser: I realize that you are not the County Auditor, but you did the work on this. So, I appreciate you being here to answer questions. The issue of fraud, I would like to kind of narrow that down. I mean, you said there is a possibility or there may be, was there fraud or was there not fraud? Mr. Kimura: I think it stemmed more from the fact that the policy was unclear and that employees did not know that it was directly linked to State statute. Therefore, it may have been along the lines of abuse, but maybe not an intentional and deliberate act to commit fraud with using these vehicles. Mr. Hooser: And I notice the words also in the first finding. It says, "leading to possible noncompliance, abuse, waste, and inefficiency." I understand the need to massage words a little bit, but it is still not clear to me. It COUNCIL MEETING 13 JUNE 25, 2014 says "leading to possible." Was there noncompliance abuse, waste, and inefficiency? I think the answer is "yes." Is that correct? Mr. Kimura: Yes, there was. Mr. Hooser: Okay. So, rather than "leading to possible" perhaps the words should be "caused" or it is not "possible." There was noncompliance, there was abuse, there was waste, there was inefficiencies, and there might have been fraud. Mr. Oki: Yes, sure. Mr. Hooser: I do not want to put words in your mouth, but is that what you are saying here. Mr. Oki: Well, I think we are saying what is in the written form, but you can interpret that way as you have mentioned. Mr. Hooser: Okay. We are on a public record here and you mentioned the word "fraud." Mr. Oki: Right. Mr. Hooser: And you acknowledged "yes." I think it is important to be clear on what is going on. Is it just sloppiness and well, bad things might have happened or we know bad things happened. We do not know if it was intentional or not, but we know there was noncompliance, abuse, waste, and inefficiency. Mr. Oki: Well, the problem here is that the policy itself was not detailed for someone to make a determination if there was abuse or fraud or unauthorized usage because the policy itself, it is not a detailed wording of what you can do and cannot do. It just said, "refers back to the law itself' and the law itself is very unclear. So, in order to make the determination as an auditor, we have to compare it to some detailed policy. You cannot use the vehicle to take home and wash. If that was not authorized, then that would be an abuse for taking it home, but the policy itself was not that detailed. Therefore, we had to use that type of wording because we do not know whether they really complied or not complied with the policy. Mr. Hooser: Then the County's response on the audit findings, who does that come from? Is that the Administration, the Mayor? Mr. Kimura: The Department of Finance. Mr. Hooser: Department of Finance. So, reading those responses, it says, "Department of Finance will consider revisions in the policy." It says, "We will work together with Department Heads to monitor these activities." "We intend to seek ideas." "We are considering working directly with..." Was there any definitive response that we are going to make sure that noncompliance, abuse, waste, and inefficiency does not occur? It seems awful... Mr. Oki: I think that...I am sorry. They were being somewhat proactive. They did develop a policy specific to take-home and they were COUNCIL MEETING 14 JUNE 25, 2014 also developing a new policy for County vehicles. Their responses relates to the policies that were implemented while we were doing the audit. Mr. Hooser: Okay. So, the policy that was implemented was done before the audit, the 2013 or was a result of the audit? Mr. Kimura: It was already being drafted when we were doing our audit. Mr. Hooser: Okay. Mr. Kimura: So, because it was in draft form, the existing policy was the 2002 policy. That was what we were auditing against. Mr. Hooser: So, the comments are relating to the 2013 policy? Mr. Oki: Yes. Mr. Hooser: When they say that we will include revisions, will consider revisions? Okay, that is all that I have for now, too. Thank you. Chair Furfaro: Mr. Bynum, then Mr. Kagawa, and then Vice Chair Chock. Mr. Bynum: Just in your answer a few minutes ago, you talked about other instances where you thought abuse might...and you said employees in proximity of their homes are taking home the vehicle. Mr. Kimura: Yes. Mr. Bynum: Explain that with a little more detail please. Mr. Kimura: For example, an employee that may work twenty (20) miles away from the County lot, but there is a substation or another County parking lot closer to their home maybe five (5) away. They would park their personal vehicle at that close lot and take the County vehicle from that lot into wherever they needed to work. Mr. Bynum: And the problem with that is? Mr. Kimura: It is written in Chapter 105 that driving a County vehicle or a government vehicle close to a person's place of abode, just for the purpose of basically using that vehicle for commuting purposes, is not allowed. Mr. Bynum: Thank you. Earlier you said it was not your responsibility to investigate these very specific things. That was not part of your scope-of-work? Mr. Kimura: Well, it was included as looking at all of the vehicles and the Department where the anonymous letter was addressing improper use, was part of our scope, but we were not tasked to specifically investigate this one (1) instance for the purpose of any further action. COUNCIL MEETING 15 JUNE 25, 2014 Mr. Bynum: So, let me just be clear. This one (1) instance that was reported, expanded the whole scope of the audit. You said that earlier, right? Mr. Kimura: Not by us, but by the Auditor's Office in determining that a... Mr. Bynum: So, this one (1) letter expanded the scope of the entire audit, correct? Mr. Kimura: No, the... Mr. Bynum: I mean the... Mr. Kimura: The letter was received during the Fuel Audit and along with the Fuel Audit...so the Fuel Audit combined with this anonymous letter. I believe the Auditor's Office determined that there should be a separate audit performed on the use of take-home vehicles. Mr. Bynum: But part of the rationale was this one (1) letter? Mr. Kimura: Part of the rationale, yes. Mr. Bynum: But you did not follow-up specifically on the allegations that were in that one (1) letter? Mr. Kimura: Well, we did talk to the Department related to that letter to see what the situation was. Mr. Bynum: But you found findings about other employees that park their car at a closer lot then they should have. What happened with those findings? Are those violations of the law as well? Mr. Kimura: I think because the policy was unclear, that ultimately, yes, it is a violation of the law, but the policy was so unclear that a lot of Departments had because the minor violations with the law. Mr. Bynum: So, if there are violations of the law, you said it is not your responsibility. Whose responsibility is it? Mr. Kimura: Well, I think it is... Mr. Oki: Probably the Prosecutor's Office? Mr. Bynum: Well, whose responsibility is it to report it to the Prosecutor's Office? Mr. Oki: Probably within the Department or that employee that repots to the Department Head. Mr. Bynum: So, your audit found potential law violations, but you do not feel like anyone is responsible to report those to law enforcement? COUNCIL MEETING 16 JUNE 25, 2014 Mr. Oki: No, I definitely feel that there should be accountability. I am just saying that we presented our report, delivered the report to the Office of the County Auditor, and I believe that the County Auditor needs to take appropriate actions and communication to the right individuals. Mr. Bynum: Thank you. Chair Furfaro: Mr. Kagawa, you have the floor. Mr. Kagawa: Thank you, Chair. Before I ask a question, I wanted to raise a point of order on public testimony. I am going to cite Rule No. 12(g), Public Hearings, that members of the public will be given a second time to speak. Chair Furfaro: At the discretion of the Chair. Mr. Kagawa: Yes, but I guess what concerns me is that we started off with public testimony and now that we are having questions & answers (Q&A) with members of PKF, the auditors, I was just hoping that maybe the Chair could look at offering the public another chance to speak and why I wanted to raise it now is so that they could prepare what they wanted to say as we move forward. Chair Furfaro: Your point of order is well taken. I do know that for example, in different Committees people take testimony at the beginning like in Mr. Rapozo's Committee, but your comment will be under my consideration at my discretion. I will consider it at the end. Mr. Kagawa: Thank you. First I want to thank you for the report, Patrick and Tyler. Have you folks done any other government type audits relating to, I guess, fuel or take-home use or what have you with the State or City and County, with Maui? Mr. Oki: This would be the first type of audit we have conducted. The only audit that is somewhat similar is the vanpool system on O`ahu. Mr. Kagawa: Okay. I guess my second question is you came up with some recommendations to bring forth to the Administration. I was wondering how far does PKF go with that process. Are you going to check at some later point if the Administration has implemented some of your corrective recommendations such as, I guess, better language regarding our Take-Home Policy and what have you? Mr. Oki: Currently, our contract does not expand that scope. We work for the Office of County Auditor. If the County Auditor wants us to follow-up, they can retain us for that task. Mr. Kagawa: So, we would have to write another contract or what have you? Mr. Oki: Yes. Mr. Kagawa: Thank you, Chair. Chair Furfaro: Mr. Chock. COUNCIL MEETING 17 JUNE 25, 2014 Mr. Chock: Thank you, Chair. Thank you, gentlemen for the work that you have done here. To clarify, yes, I think this session here is for us to gain insight, and gain information in order for us to be better so we can respond to it. I always talk about approach being really important in terms of what is the outcome that we are looking for. We only know how to respond when we have information. So, the question I have is about the specifics because I think that is where we are kind of getting lost. You have these great generalizations about the policy, what has occurred, but is there a listing of the specifics that you have found such as the car washing thing and others, that we can actually act on and respond to because from our side, if we are wanting to increase capacity and competency, we need to know what those things are and specifically so that we can address them and make a determination of how they fit into the law that we might be breaking. Mr. Oki: Understood. Mr. Chock: So, is there a list of those things that we can look at? Mr. Oki: There are, and maybe let me talk about the scope of the audit again. So, when we did the audit, we were auditing behavior on individuals that were following the 2002 policy. So, because the 2002 policy was very vague and unclear, there probably was abuse and I think people do know when they are doing something right and when they are not doing something right. With that said though, at the same time, the County had developed a 2013 Take-Home Policy. So, when we started to review that and understand that people started to understand those rules, those new rules that were very detailed, I would think that they had addressed those issues that we had found when the update policy was not available to the employees. Further, the Department had implemented a policy that not only included the take-home vehicles, but all County vehicles and that is the reason why we had expanded our scope of work because we were not sure if we should only just be looking at these vehicles that are designated as take-home because there were some County vehicles that were being taken home. So, we felt that we should take a look at all of the County vehicles rather than just the ones that had been designated as take-home, and because there was updated policy again on the entire County vehicles, I believe that the employees are much more aware of those rules. So, we did not test compliance to the updated policies, only understanding that there is some level of controls now that the Departments can use to better monitor their employees. Mr. Chock: And have you reviewed those most updated policies? Mr. Oki: Yes. Mr. Chock: And given feedback as well to Finance? Mr. Oki: Yes, and the Department has responded to adding more to their policies as a result of the audit that we have conducted. Mr. Chock: Thank you. Chair, I do not have another question, but I was thinking that whether now or later in writing or not, to get some sort of direction on how specifically we have responded to from the Director of Finance on these questions that they said they worked on. COUNCIL MEETING 18 JUNE 25, 2014 Chair Furfaro: Okay. Mr. Chock: Thank you. Chair Furfaro: Okay, I am going to take a turn now at this. So, I want to make sure we are all clear. So, we have really two (2) parts here. We have HRS 105, which is the law? Mr. Oki: Yes, State law. Chair Furfaro: That is the law, right? Mr. Oki: Yes. Chair Furfaro: And then we have these other pieces that are showing up as violations of internal policies, which could lead to changing a standard, reprimanding an employee, or so forth, but within the HRS, that is the law that perhaps you are indicating people were not aware of. That law basically states that the State is authorizing the Mayor, the Police Chief, and the Fire Chief to have vehicles. Anyone other than that is required to have a signoff to have a vehicle by the Chief Executive of the County of Kaua`i doing business in the corporation called the County of Kauai. That is required under HRS 105. We have this anonymous letter that comes in and indicates that there are people with cars who may have access to fuel who do not necessarily appear on the authorized list. Was that part of your findings? Mr. Kimura: Yes. Chair Furfaro: I just want to be really, really clear there. There were people that may have had vehicles that were not authorized to have vehicles and that is in direct conflict with HRS 105? Mr. Oki: Yes, that is right. Chair Furfaro: Thank you. JoAnn, I will come back to you. Ms. Yukimura: Thank you. So, you said that the 2002 policy was unclear and it is part of your addendum, but it says, "for liability reasons, any personal use of the vehicle no matter how minor it may seem, is not allowed. For example, giving a ride to a family member or to a friend even if it does not involve a detour from the employees' route." This is for people who are able to take cars home under proper procedure. "Stopping at the store on the way home in a County vehicle is likewise prohibited." That is pretty clear. Mr. Oki: Yes. Ms. Yukimura: And it also said, "The overall policy is that no person shall use any County vehicle for personal pleasure or personal use including travel by any employee to or from his place of service or work, or to his place of abode." Then it has three (3) exceptions. The Mayor, any officer or employee who has written approval, and any employee in the case of emergency. I mean, that is pretty clear. Mr. Oki: It is. COUNCIL MEETING 19 JUNE 25, 2014 Ms. Yukimura: So, anything in contravention of this policy would be noncompliance, right? Mr. Kimura: Yes. Ms. Yukimura: Then of course it goes beyond that. If it was done intentionally violation, it is fraud, right? Mr. Kimura: Yes. Ms. Yukimura: So, on the question of reporting, your scope-of-work says, "should fraud, abuse, or illegal actions be discovered during the audit, you folks, the contractor, should determine or assist in determining how the information gathered during the audit should be presented in the Audit Report and reported to responsible officials. So, you do not report that finding of potential fraud. Mr. Kimura: We discussed it. It is on page 17 of the report. When we noted these potential instances of abuse, we had a discussion with the Director of Finance to make him aware, and I believe that he issued a communication to Department Heads to further clarify the use of any take-home vehicles. Ms. Yukimura: Okay. So, you do not see it as your job...or who is the Officer in Charge of this contract? Mr. Oki: I believe it is Ernie. Ms. Yukimura: So, Mr. Pasion is the Officer in Charge, although I have heard from other sources that the reason why this went out to bid as an independent contract was that there was some potential of the Auditor, himself, not being able to maintain his independence in this matter. Are you aware of that? Was that part of your... Mr. Oki: Yes, we were told about that. Ms. Yukimura: So, it is your understanding that part of the reason for this becoming a private contract out was because there was a potential of Mr. Pasion not being able to maintain his independence on this matter? Mr. Oki: We are not aware as to why we were contracted, but when we were retained, Mr. Pasion did inform us that he would not be part of determining the scope of the work and that we would have to make that decision on our own without his input. Ms. Yukimura: Okay. So, you would have to do...but who determined the scope-of-work for your contract? The County Auditor, right? Mr. Oki: Right. Ms. Yukimura: Okay. So, the scope says, "should fraud, abuse, or illegal actions be discovered or assist in determining how that information gather should be presented in the Audit Report and reported to responsible officials." So, in your mind, "reporting to responsible officials" is just to the County COUNCIL MEETING 20 JUNE 25, 2014 Finance Director in terms of proactive future action and it was not your responsibility as Certified Fraud Examiners, to report it also for law enforcement purposes? Mr. Oki: That is right. That is not our responsibility. We are being retained by the client. So, the client is the County of Kaua`i and whoever within the County of Kaua`i should take appropriate action. Ms. Yukimura: Okay. Thank you. Chair Furfaro: I am going to give the floor to Mr. Bynum, and I would remind everybody that we have reached the first hour of the time set aside for the first item. Mr. Bynum. Mr. Bynum: I do not know if I heard you quite correctly. You were informed by the Auditor that he would not be part of determining the scope-of-work, that you would have to determine that on your own, is that what you said? Mr. Oki: Yes, but we did consult with his staff and we ran the scope of our work with their staff. Mr. Bynum: With which staff members? Mr. Oki: Lani Nakazawa. Mr. Bynum: I am sorry. Mr. Oki: Lani Nakazawa. Mr. Bynum: Okay. So, she was still at the office at the time? Mr. Oki: Yes. Mr. Bynum: So, you took your direction on the scope-of-work from Lani Nakazawa? Mr. Oki: The staff, yes. Mr. Bynum: Is that correct? Mr. Oki: Yes. Mr. Bynum: Okay. Now, Ernie was not part of it, but the office was? Mr. Oki: Yes. Mr. Bynum: Did you make recommendations to Lani regarding the scope-of-work? Mr. Oki: Yes, we did. COUNCIL MEETING 21 JUNE 25, 2014 Mr. Bynum: And were those recommendations accepted? Mr. Kimura: Yes. Mr. Bynum: So, you are happy with the scope-of-work? You think it was appropriate? Mr. Oki: I think it was and... Mr. Bynum: Okay. Mr. Oki: Can I explain? Mr. Bynum: So, you only reported potential fraud to the Director of Finance, only? Is that what I heard? You are nodding. We need an affirmative for the record. Mr. Kimura: Yes. Mr. Bynum: But the scope was...the Director of Finance only covers the Administration. The scope of the work was the entire County including this office, correct, and the Office of the Prosecutor as well, correct? Mr. Oki: Yes. Mr. Bynum: That the Director of Finance has no responsibility over whatsoever, correct? Mr. Oki: They have a responsibility on the policy itself. So, if anyone is violating that policy, we thought that is the appropriate individual to report the violation of the policy to. Mr. Bynum: So, were there reports made to the Director of Finance about specific County employees? Mr. Kimura: I do not believe they were named, but we described the actions that were being performed. Mr. Bynum: And that was employees in a number of Departments including...did it include Council Services, the Office of the Prosecutor, the Fire Department or the Police Department that are covered by Boards and Commissions, or have other separate boundaries from the Administration, correct? Mr. Kimura: Well, the Fire and Police Departments were excluded from this whole thing. Mr. Bynum: I am sorry. Mr. Kimura: Fire and Police were excluded from our scope-of-work. It was focused on passenger vehicles for both take-home and... COUNCIL MEETING 22 JUNE 25, 2014 Mr. Bynum: Were there other Departments? I had not heard about this scope-of-work precluding certain Departments. What other Departments were not examined? Mr. Kimura: I believe it was just Fire and Police. Mr. Bynum: So, they do not have administrative personnel who take home similar vehicles? Mr. Kimura: They do, but it was determined for this scope-of-work, for this contract, that they would be excluded. Mr. Bynum: And how was that determined? Mr. Kimura: I think through discussions with the Auditor's Office. Mr. Bynum: So, other than Police and Fire, the scope included every other County employee whether they are in the legislative branch or the Prosecutor's Office or anywhere, correct? Mr. Kimura: Yes. Mr. Oki: Yes. Mr. Bynum: Thank you. Chair Furfaro: Again, members, I want to let you know we have come up on the first hour, but I would like to recognize Councilmember Yukimura before we move forward on the next item. Ms. Yukimura: Thank you. So, when doing a government audit, are you bound by the same standards as government auditors, i.e. the Yellow Book? Mr. Oki: Yes, Yellow Book. Ms. Yukimura: So, paragraph 7.21 of the Yellow Book states that "When auditors conclude, based on sufficient, appropriate evidence, that fraud, noncompliance with provisions of laws, regulations, contracts or grant agreements, or abuse either has occurred or is likely to have occurred which is significant within the context of the audit objectives, they should report the matter as a finding." So, you feel that you have done this? Mr. Oki: Yes. Ms. Yukimura: If you feel that based on sufficient appropriate evidence, but that fraud might have occurred and the matter should be investigated further, will you also recommend that? Should you not recommend that? Mr. Oki: We did, and we did further analysis because we detected some abuse. That analysis was looking at the mileage of each vehicle COUNCIL MEETING 23 JUNE 25, 2014 and looking at the gas usage, and then sampling to determine if there was a specific individual or a specific vehicle that was being abused. Ms. Yukimura: Well, I am not talking about abuse. I am just talking about taking home cars without appropriate authority, like the 2011 complaint. You were sufficiently satisfied that there was no violation and no possible fraud in that instance? Mr. Oki: In that instance, there probably was. Ms. Yukimura: So, are you not obligated to report that? Mr. Kimura: Well, it was without sufficient evidence because the employee was no longer in office. Ms. Yukimura: You cannot...I mean, there are a lot of murders and other kinds of things that are investigated after they happen. Mr. Oki: Right, but I think the allegations were using the vehicle to go to a softball game. So, we cannot observe that abuse happening when that employee is no longer using any vehicle. Ms. Yukimura: You did not have witnesses who saw it in the past? Mr. Oki: I am sure that there were witnesses, but I think it would be very difficult to identify that witness. Ms. Yukimura: And so you feel it is not worth trying to do that? Is that your professional conclusion about that, that there was certainly not enough evidence and also not enough reason for further investigation? Mr. Oki: I think personally, because we are using public funds, we could have gone about to try to attempt to look at that, but I think that the big picture is looking at how you can reduce the abuse County-wide versus just at the individuals that were found. Ms. Yukimura: No disagreement that the main idea is to, but is it not your obligation under Yellow Book standards also to raise or address the issues of potential fraud? Mr. Oki: And I believe we have in our report. Ms. Yukimura: Okay. So, it is your conclusion that there was not fraud? Mr. Oki: No. I mean, I think in the findings we basically are saying, you have a problem, there have been abuse, there has been possible violations of the rules," and therefore, the County has already addressed it by having updated policies and they were also willing to further update those policies to make sure that there is no further abuse or fraud out there. Ms. Yukimura: So, there is not enough basis to report that to a law enforcement officer, that is also you conclusion? COUNCIL MEETING 24 JUNE 25, 2014 Mr. Oki: Yes, because we did not go down to the individual level. Someone may have made mention that, okay, I have employees that are able to take home their vehicles to wash it, and therefore, they are actually using that vehicle to drive home, which is in violation, but he may not have made mention as to who are those specific individuals. Ms. Yukimura: Right. I think that is very different than a situation where people take home a vehicle with no right to take home a vehicle. Mr. Oki: I think it is the same, right. Ms. Yukimura: So, your judgment is that it is the same? Mr. Oki: Yes. Ms. Yukimura: Thank you. Chair Furfaro: Members, I would like to, at this point, really see if we can move onto the second item in the agenda, but to do so, I would like to go uninterrupted for the next portion. By our rules, we are required to take a caption break every two (2) hours. So, I would like to take a ten (10) minute caption break now so we can go uninterrupted for the last hour and a half. Okay? For those of you that have got your hands up, I will consider, this is a single agenda item, I will consider revisiting, at Mr. Kagawa's request, additional time at the end of the whole report. So, on that note, we will take a ten (10) minute caption break. There being no objections, the Council recessed at 10:13 a.m. The meeting was called back to order at 10:24 a.m., and proceeded as follows: (Mr. Bynum was noted as not present.) Chair Furfaro: Okay, we are back in session and we are now going to move into the second audit summary by PKF of the County Furlough Program. Gentlemen, I will do that same as we started the first one. You go ahead and give us your overview and your bullet points, and we will go from there. Mr. Oki: Okay. Thank you, Chair. We did do that Audit of the County Furlough Program. It was designed to answer the following: what was the financial impact of the furlough on the County and did the County plan and manage the furlough effectively and efficiently? The procedures that we performed, we obtained information to determine the reasons for the furlough and details regarding its planning and execution, we requested payroll records of all furloughed employees between July 1, 2010 and December 31, 2010 to estimate the cost savings and to calculate overtime incurred, we analyzed the payroll records, which were performed by Dr. Murray Simpson of Peoplefluent. He examined the payroll records from June 2010 for those who received pay increases prior to the furlough and we also compared payroll costs during the furlough to those of each prior six (6) month period, starting with July 1, 2008. We conducted research of best practices for planning and implementing furlough programs. We reviewed Comprehensive Annual Financial Report (CAFR) among other County reports to determine the County's financial COUNCIL MEETING 25 JUNE 25, 2014 position. We read Proclamations, press releases, legislative testimony, County Council minutes, and employee communications by and to the Mayor. Mr. Kimura: The first audit finding was that the County realized salary savings as a result of the furlough, but the savings could have been better if the County monitored and set clear cost objectives for the furlough program. We recommended implementing future furlough or other employee cost reduction programs. The County needs to establish an adequate and transparent justification for the program, set financial targets, and monitor program implementation to achieve the necessary results. The County's response, which was from the Mayor's Office, stated that adequate justification was made to the unions, but internal communication might not have been clear or sufficient, and that the County will provide information about the financial necessity and targeted savings to all Departments, and will monitor program implementation should employee cost reduction programs be necessary in the future. (Mr. Kagawa was noted as not present.) Audit Finding 2 was that the Furlough Program was effective, but it could have been more efficient if the County had followed best practices. With the recommendation, when planning furloughs or other wage reduction programs, the County Administration should consider the following: 1) Expanding its implementation team to include departmental human resource specialists or other human resource line personnel who are familiar with the salary practices of the various Departments to minimize withholding errors. The Mayor's Office responded, the Department of Personnel Services has expanded since the furlough, and will be the lead Department to ensure personnel are actively engaged as resources to minimize payroll errors should wage reduction programs be necessary in the future. Second recommendation, improving internal communication so each employee group receives adequate information about the effects of the furlough. The Administration should also consider issuing guidance for Department Heads and others responsible for implementation to ensure uniform program administration. The Mayor's response, the County concludes the Frequently Asked Questions were adequate because minimal questions were posed, but agrees additional guidance will be provided in the future. Recommendation 3) Ensuring the legal and strategic bases for the furlough are evaluated, that viable alternatives are considered and these processes are documented. The Mayor's response, preparation time for the furlough was limited and the County will look at viable cost reduction programs prior to contract settlements if necessary. Fourth recommendation, ensuring a furlough plan is developed that: (a) provides adequate notice to affected employees; (b) is workable, neutral and fair; and (c) complies with applicable collective bargaining agreements, contracts, or handbook requirements, as well as statutes, and regulations. The Mayor's response, the Furlough Program was unprecedented and there were many lessons learned. The final recommendation was taking the time necessary to train those who will implement the plan, especially those responsible for communicating with employees and making payroll entries. The Mayor's response, staff will be trained COUNCIL MEETING 26 JUNE 25, 2014 to implement a successful program in the future and adequate notices will be developed. Chair Furfaro: So, gentlemen, with your summary of findings, did you actually end up with a net amount that reflected a savings? Mr. Kimura: There were items that you can actually quantify and others that were just estimated for economic theory purposes. The net savings for salaries was listed as at about one million seven hundred thousand dollars ($1,700,000). Chair Furfaro: Okay. Did we, or was the scope large enough to determine that during these furlough periods when revenue intake such as counter space where licenses are paid, fees are paid, and so forth, did it cause any increases in delinquencies because we were not functioning? Mr. Oki: We were not able to establish that amount. Chair Furfaro: You were not able to? Mr. Oki: Yes. Chair Furfaro: So, we could not establish if there was any actual loss of business or loss of revenue because of not being open for operational hours? Mr. Oki: That is right, including the inability to service the public, that cost. Chair Furfaro: Okay, that is not real tangible, but it is certainly a service delivery problem that we should ascertain if we ever do this again, but you were not able to measure that? Mr. Oki: We made mention of it, but we were not able to quantify it. Chair Furfaro: Okay, quantify it? Mr. Oki: Yes. Mr. Kimura: There is an estimate just based on the County's spending of salaries and if you reduce the employee count by ten percent (10%), then that is an approximate output loss of ten percent (10%), but again, that is just an estimate. Chair Furfaro: Okay. Members, I have a few questions, but I am not ready to proceed. Would anyone else want to ask some questions at this time? JoAnn, I will give you the floor. Ms. Yukimura: You mentioned "best practices" on page 7 of your presentation. What are those? Mr. Kimura: These were based from the National Association of College and University Attorneys. In searching for various best COUNCIL MEETING 27 JUNE 25, 2014 practices, because furloughs are not, as relatively new and did not occur that often, finding best practices is somewhat difficult, but we were able to find this set of best practices that we thought were applicable to this situation. Ms. Yukimura: Like expanding the implementation team to include Departmental Human Resources Specialists? Mr. Oki: In our report on page 24, it does list those recommendations. I can read them through it if you would like me to. Ms. Yukimura: Yes. Mr. Oki: Okay. So, it is to carefully prepare for any furlough plan by developing a team approach to decision-making and communications. (Mr. Kagawa was noted as present.) Ms. Yukimura: Yes. Mr. Oki: Establish a clear communication plan that will be effective with internal and external consistencies, evaluate and document the basis for legal and strategic for a furlough, and document the considerations or use of viable alternatives; develop a furlough plan that provides adequate notice to affected employees, is workable, neutral, and fair; complies with an applicable collective bargaining agreement, contracts, or handbook requirements as well as applicable statutes and regulations; take the time necessary to train those who will implement the plan, especially those responsible for communicating with employees affected during an emotionally charge time; and that is it. Those are the five (5) best practices. Ms. Yukimura: I see, and I do concur with the Administration's response about time because there was not much time for that. Discussion by the Council is not really where it happens in terms of figuring out how to...this is really, mainly administrative, I think, but I see what you are saying. I appreciate that you have clarified what the best practices are that you are referring to. When you say "set clear cost objectives" on page 5 of your presentation, you mean a cost savings, defined what our cost savings intentions are? Mr. Kimura: Yes, to be clear on what the projected cost savings are. Ms. Yukimura: And what did we say? I was not here when this was all happening. So, what were the articulated cost objectives at the beginning and what was the resulting cost savings? You said one million seven hundred thousand dollars ($1,700,000)? Mr. Kimura: Yes. Ms. Yukimura: What was the intended savings? Mr. Kimura: I will read from page 8 of our report. During the Mayor's budget testimony on April 9, 2010, he projected that the furlough could COUNCIL MEETING 28 JUNE 25, 2014 save the County four million three hundred thousand dollars ($4,300,000) over the one (1) year budget period... Ms. Yukimura: Oh, I see. Mr. Kimura: ...or two million one hundred fifty thousand dollars ($2,150,000) over six (6) months. Ms. Yukimura: How long did the furloughs last? Mr. Kimura: The six (6) month time period, July through December 2010. Ms. Yukimura: So, the intended objective was two million one hundred fifty thousand dollars ($2,150,000) and your assessment is that we actually saved one million seven hundred thousand dollars ($1,700,000)? Mr. Oki: One million seven hundred thousand dollars ($1,700,000) is just the salaries. It could also include, related to that, maybe electricity or... Ms. Yukimura: Benefits? Mr. Oki: Benefits. Ms. Yukimura: So, if you added everything in, we may have gotten close? Mr. Oki: Yes. Ms. Yukimura: Okay. Thank you. Chair Furfaro: I have a few questions now. So, would your scope have included going to the laborer or the bargaining units that were involved to interview them or find out how the understanding of the County's financial picture at the time, was driving the need to go into furloughs, and were you satisfied with the way it was communicated to them as part of their bargaining agreements? (Mr. Bynum was noted as present.) Mr. Kimura: We felt that we were not provided with sufficient information related to those discussions with the unions and noted that in our report. Chair Furfaro: Yes, I saw that. So, you felt there could have been a better job in communicating to our bargaining unit and labor organizations, a little more information to understand that the County's financial condition at the time, was what was driving this need? Mr. Kimura: At least to us, it was unclear on exactly what was communicated to them. COUNCIL MEETING 29 JUNE 25, 2014 Chair Furfaro: The adjustments that were made as it related to the six (6) months of reducing individual's payroll increases and/or reductions, were you satisfied that the appropriate adjustments were made in their withholdings for their other benefits and so forth? Mr. Kimura: I believe so. There were withholding errors in terms of the amounts of actual salary, both over and under withholdings that occurred primarily for employees working ten (10) hour shifts. So, there were just some discrepancies related to that. Chair Furfaro: Are you satisfied that whatever corrective action was necessary has been made by the Administration? Mr. Kimura: Communications stopped, I believe, at about January of 2012 asking the Director of Finance at the time, for a response on how it would be handled, and I believe we have not received any further communication. Chair Furfaro: You have not received further communication? Mr. Kimura: Have not, yes. Chair Furfaro: Was your firm, PKF, were you participants in the recent press release that was made by the County Auditor's Office on the furlough evaluation? Mr. Oki: Yes, we read that. Chair Furfaro: You were part of that? Mr. Oki: Were we part of it? We read it. Chair Furfaro: I am asking if you were a part of it in its formulation. Mr. Oki: Oh, no. Chair Furfaro: No? Okay. The Auditor's Office is responsible for setting clear standards of performance in an unbiased way and there were a couple points in that report that concerned me, and it did not necessarily reflect without substantial confirmation, the impartial reconciliation of what they did in the press release. For example, there was a comment about a certain Deputy County Attorney who is paid above the amount allowed. Was that ever verified? Mr. Kimura: Well, the salaries... Chair Furfaro: The salaries are established by the Salary Commission, but in that press release, it referenced a claim that a Deputy County Attorney was actually paid above the amount allowed by the Salary Commission. Mr. Oki: We did not make that determination if it was above or below. We just noted the amount. COUNCIL MEETING 30 JUNE 25, 2014 Chair Furfaro: Okay. So, no confirmation there on your part? Mr. Oki: No confirmation whether it was above the amount, but we did know the amount. Chair Furfaro: Okay. Is there anything that you felt might have been missing in the communication to our labor partners about the County's fiscal condition at the time? This was about the time that the State took back Transient Accommodations Tax (TAT) moneys from us to the tune of about twenty-seven million dollars ($27,000,000) over three (3) years, but it actually was money that was forecasted in the budget that we were not going to have. Was anything like that communicated to our bargaining unit partners about the impact of the change in TAT as one of the issues? Do you recall that? Mr. Oki: No, I do not recall seeing that. Chair Furfaro: Okay. Are there any outstanding corrective actions that the Administration should be taking in adjusting anything related to the furloughs, in your opinion right now? Is there anything outstanding? Mr. Oki: No, there is nothing outstanding. Chair Furfaro: Okay. Other members, questions? Mr. Hooser. Mr. Hooser: Yes, thank you again. I apologize if you have already addressed the issue, but I am kind of multitasking here. So, the question is what was the financial impact of the furlough on the County. So, by that question that means on the impact on County government as opposed to the population of the County. I am assuming that if we furlough employees, have less people working, there will be impacts on services delivered and those impacts would result in perhaps increased cost in other areas of the County and certainly increase cost of citizens standing in line, maybe waiting longer to get their driver's license or whatever. So, did you consider those impacts? Mr. Oki: Yes, it is disclosed in our report, but we did have to disclose what is the hard dollar savings versus the soft dollars as far as the impact or the cost to the public. Chair Furfaro: Intangibles. Mr. Hooser: So, you estimated the soft dollars also? Mr. Oki: Yes, it is about ten percent (10%). Mr. Hooser: Ten percent (10%) of? Mr. Kimura: Of salaries, just as an estimate of output loss. Mr. Hooser: So, if you saved one hundred dollars ($100) hard cost, ten percent (10%) is the cost of that? So, you are only saving ninety dollars ($90)? Help me out, please. COUNCIL MEETING 31 JUNE 25, 2014 Mr. Kimura: It was just an estimate of output loss. Because salaries were reduced, about nine percent (9%), nine and a half percent (9.5%), that if you looked at the overall salary amount for the County per year, which is about thirty million dollars ($30,000,000), it was just an estimate saying ten percent (10%) reduction in pay, ten percent (10%) reduction in output. Mr. Hooser: So, the total hard dollars saved from the salaries, the actual savings were reduced, is what you are saying, by that estimated ten percent (10%) due to inefficiencies or other cost that might accelerate for that overtime and things like that? Mr. Kimura: Yes. Mr. Hooser: So, did you actually look at overtime? Mr. Kimura: No, sorry, not overtime, but just as a one (1) year estimate, that is what it is. Mr. Hooser: So, ten percent (10%) is just kind of a plug in the number type of thing? Mr. Kimura: Right. Because output is not measured in any other way by the County, it was just an estimate that was used. Mr. Hooser: Okay. I am just trying to wrap my arms around it because if we are making cost savings of netting four million dollars ($4,000,000) a year or so, and not impacting services at all, then what is wrong with this picture? So, I have to think that we were impacting services. Mr. Oki: Right. So, you saved about one million seven hundred thousand dollars ($1,700,000) in salary within the six (6) month period. So, that is hard cash, saved cash. Mr. Hooser: Right. Mr. Oki: You probably were not able to deliver to the public, the same amount of services that you had if you were at full capacity. Mr. Hooser: Right. Mr. Oki: So, that may have been about a ten percent (10%) decrease in services. Mr. looser: So, the estimate of the cost of that reduction of services is the ten percent (10%) that you are estimating? Mr. Oki: Yes. Mr. Hooser: Okay, thank you. Thank you, Chair. Chair Furfaro: Other questions at this point, members? May I ask you, is it my interpretation as you have delivered this document to us, this is your final report on these two (2) items? COUNCIL MEETING 32 JUNE 25, 2014 Mr. Oki: Yes, this is our final report. Chair Furfaro This is your final report, okay. I just wanted to make sure I understood that. Mr. Bynum? Mr. Bynum: May I ask one (1) question? Chair Furfaro Sure. Go ahead. Mr. Bynum: Regarding the press release that was discussed, Mr. Pasion says, "What jumps out from the audit report is the need for the furlough. Press releases and notices said the furlough was needed to address the County's financial difficulty. The public and employees were told that County offices need to be shut down because the County was in financial difficulty. This was not true." Was that a finding of the...did he accurately reflect the finding of our report and was that looked at? Mr. Oki: It was not part of our scope of our work. Mr. Bynum: Okay. So, are you aware what the County's surplus was when this furlough began? Mr. Kimura: Yes, the surplus is in our report. Mr. Bynum: How was the surplus measured in your report? I am sorry for not knowing the answer. What CAFR numbers did you use? Mr. Kimura: It was based off of the County Auditor's, I think, report to the County and it was based on the Unassigned Fund Balance and also a balance for future budget shortfalls. Mr. Bynum: What was the assigned budget balance in the year that this happened? What was the unassigned budget balance? Mr. Kimura: For Fiscal Year 2010, which is June 2010, unassigned was forty-three million dollars ($43,000,000). Mr. Bynum: Forty-three million dollars ($43,000,000)? Mr. Kimura: Yes. Mr. Bynum: So, the furloughs began when the County had at least a forty-three million dollars ($43,000,000) unassigned balance, correct? Mr. Kimura: Yes. Mr. Bynum: So, is Mr. Pasion's statement here incorrect? Mr. Kimura: I think that... Mr. Oki: What is his statement? Mr. Bynum: I just read it. You are not familiar with this press release... COUNCIL MEETING 33 JUNE 25, 2014 Mr. Oki: I read it. Mr. Bynum: ...that came out related to this audit? Ms. Yukimura: Read it again. Mr. Bynum: I will read it again. "The public and employees were told that County offices needed to be shut down because the County was in financial difficulty. This was not true. In reality, the financial need had not been analyzed and the County has an unappropriated surplus," unappropriated, which is probably correct as well, and you reported unassigned, of fifty-eight million six hundred fourteen thousand dollars ($58,614,000). So, Mr. Pasion said in a press release related to this furlough, that the justification for the furlough was not true. I mean, that is a pretty strong statement. "This was not true." Do the numbers reflect that is an accurate statement? Mr. Oki: I think that has given a number, yes, but I think you need to also factor in other situations as far as the future. Mr. Bynum: Like political situations? Mr. Oki: Not political, but future revenues for the County. If you were having a shortfall... Mr. Bynum: Future revenue. Okay, I do not disagree. Did you look at that, analyze that? Mr. Oki: No. Mr. Bynum: Did you do an analysis of what the revenue picture was for the County at this time? Mr. Oki: No, we did not do any analysis like that. Mr. Bynum: Okay. Thank you. Chair Furfaro: Okay, gentlemen, thank you very much. I want to say that I am going to ask those that spoke earlier to give them an additional three (3) minutes, and then we will probably be moving to receive your report, but for all intents and purposes, this is the final documents? Mr. Oki: Yes. Mr. Kimura: Yes. Chair Furfaro: Thank you very much. Mr. Kimura: Thank you. Chair Furfaro: Now, for those that signed up at the beginning, and at the discretion of the Chair as requested by Mr. Kagawa, my consideration, for those of you that had signed up and wish to speak for an additional three (3) minutes, I will be yielding that time. Mr. Kagawa. COUNCIL MEETING 34 JUNE 25, 2014 Mr. Kagawa: Thank you, Chair. Chair Furfaro: Ken, you got to speak the first time, you get three (3) more minutes. Mr. Taylor: Chair and members of the Council, thank you for having this discussion today, but it brings to mind a bad situation. I see a lot of talk about fraud in the first audit that you talked about today, vehicles. It brings to my mind, another audit that was done, the gas audit, and the fraud that was pointed out there, and yet, this Council has neglected to this day, to address those fraudulent issues that were raised in there. That audit pointed out that possibly the Mayor was using gas, a gas card that was issued to another vehicle and that an employee of the County was entering that gas use into the books, not under the Mayor's vehicle, but under the vehicle that the card was issued to. I think it is very important... Chair Furfaro: Excuse me, Ken, the agenda item today is the automobiles, okay? Mr. Taylor: I understand that and I am making a... Chair Furfaro: No, you do not understand it. The subject matter being discussed today is not the Fuel Audit. I am giving you three (3) additional minutes to talk about the vehicle operation and the furloughs. Those are the agenda items. Mr. Taylor: I think it is very unfair that you move forward and talk about fraud in one audit, but not in the other one. I think it is imperative that this Council bring the Fuel Audit forward and have this same discussion. Thank you. Chair Furfaro: Thank you. Did you have a question? Mr. Bynum: Yes. Chair Furfaro: Mr. Bynum has a question for you. Mr. Bynum: Ken, you must be aware of the public reports that were made that all of those allegations regarding the Mayor were referred to the Attorney General. You have seen that, correct? Mr. Taylor: I do not believe so. Mr. Bynum: You have not seen that public statement being made several times during the course of all of this? Okay, you have answered my question. Thank you. Chair Furfaro: Who else had signed up earlier? Glenn, come right up. Mr. Watanabe: It was Glenn Mickens, Alice Parker, and Joe Rosa. COUNCIL MEETING 35 JUNE 25, 2014 Chair Furfaro: So, Glenn, just a housekeeping item. Glenn, I am extending you the additional three (3) minutes, Alice and Joe. Mr. Mickens: Thank you, Jay. For the record, Glenn Mickens. I really appreciate the job that these people from PKF have done. If I heard them correctly, they were not going after any one person or Department, but the systemic problem that was occurring in 2002, and after 2013 I understand that it has been corrected. I do object to certain Councilmembers trying to accuse fraudulent action to our Auditor or any other specific individual without that person being present or having legal counsel to represent them. I think they did their job. I do not think they were entitled to go beyond the scope of what they were entitled to do and I thought they did their job correctly. Thank you, Jay. Chair Furfaro: Thank you, Glenn. Alice, you are next. Ms. Parker: Mice Parker for the record. I have several things to comment on. When County vehicles are taken home, it is essentially a commuting use. Commuting use is not tax deductible and it is not part of the employee's term of contract. So, I do not think they should be taken home for any reason except for the top Executives as outlined in HRS 105. The other thing is the employees do not need to take vehicles home to wash them. When I was a County employee back in 2002 to 2004, I used the bus washing facilities over at Transportation to wash the County car. It was very efficient. Hey, I would like one of those big mops to wash my own car, but County employees, okay, it is out of their way, but it is not necessary to take it home to wash. The other thing is I do not see an exception for Kaua`i Police Department (KPD) or Kauai Fire Department (KFD). We have a neighbor on Jerves Street who parks his police car there and that is...I mean, it is used for commuting. Also, some of my neighbors are concerned because they feel we are targets for anti-police actions. There are a lot of drug use and homeless in the area. That is possible. Also, the place is a wholly mess and it does not speak well for the policemen or the County, that the house is such a mess. I think the Mayor has addressed that from a neighbor's complaint. The other thing is the PKF contract does not need to refer for criminal investigation. As an IRS Tax Auditor, I did very few referrals. The paperwork was enormous. I did one on an employee who had basically fabricated his schedule saying, "forget it," and he was kicked out. Anyway, it is too much work, but the contract needed to specify when fraud is discovered, to whom PKF should refer it. I would assume the Auditor's Office, but the contract should say "for further evaluation or prosecution." I feel the contract was a little vague there. Thank you. Chair Furfaro: Thank you. Mr. Rosa, you are the last of those that signed up. Mr. Rosa: Good morning, again, members of the Council. For the record, Joe Rosa. After listening to the testimony from the auditors that gave their testimony, it is a close-knitted business, the County operates and it seems it is friend with friends, but when it comes to work and to laws and regulations, I see that, like taking home the car. You take home the car, you wash it, but it is a benefit that they are given it and benefits, it is all supposed to be reported as income in your tax returns for the employee. In turn, you cannot use gratuity for special benefits. While working, I had contractors when I went over payroll audits that they were using money that was paid by the government and not giving that person their regular pay. Then I confronted the office staff and the COUNCIL MEETING 36 JUNE 25, 2014 contractor and they said, "We pay his medical." That is gratuity. That does not work because that is fraud because the government pays you to pay that employee the wage that he is deserving and yet, they were taking the cream off the top by way of gratuity of a medical payment. So, those are irregularities that I, myself as an inspector, had to check on payroll affidavits like an auditor's job is, I had to make those reports. I was not about to go to jail for those contractors. So, this is the same principle. If people have to be eliminated from jobs because of irregularities of the law, and as of today, nothing has been done from what I have observed from the audits and investigations, something is wrong. You have to do things according to your gut feeling and friends of friends. I was called names by the contracts as the "bad guy," but I was not going to go to jail for somebody. If they go to jail, it would be those people and it was my job to look at it. So, the "buddy-buddy" when it comes to government and the taxpayers are involved, you have to go by what is the law and if heads have to roll, they have to roll. Thank you and I leave you with that thought. Chair Furfaro: Thank you, Joe. Members, I would...Mr. Hooser. Mr. Hooser: Yes, Chair. I apologize. I think it would be useful to speak with the Administration since we are on this topic. Chair Furfaro: No, that is my plan. Mr. Hooser: Okay, that is your plan. Chair Furfaro: That is my plan. Mr. Hooser: Okay. Great. Thank you. Chair Furfaro: Let me just continue on the roll I have here. Mr. Hooser: Go ahead. Chair Furfaro: So, members, on that note, everybody has had an extra opportunity to speak at the discretion of the Chair by our rules. I am going to ask the Finance Director if he can come up, and then I would like to call us back to order. Nadine, please come up as well. Steve, I am going to start with a statement here that first of all, I want to thank the PKF people for being here today and there is very clearly two (2) parts to this. Obviously, there is the Hawai`i Revised Statutes 105 that is clearly State law about compliance. I think all of our people need to understand by those guidelines, certain things are to happen with the Administration to have the authority of the vehicle. The second piece seems to be certainly a standout in my mind from PKF's report, of having these standards of policy and conduct as it relates to our own employees and an understanding that these policies and guidelines could be subject to corrective action by the Administration. We have upgraded the Gasboy system now, we clearly need to have policies enforced that according to them, they have revised, and I think this Council would like to hear from the Administration on those particular points; HRS 105 compliance, policies and standards. You have the floor. COUNCIL MEETING 37 JUNE 25, 2014 STEVEN A. HUNT, Director of Finance: Thank you, Chair and Councilmembers. Steve Hunt, Director of Finance, for the record. When I took my position in February 2013, a draft of the Take-Home Policy had already begun. Former Director Wally Rezentes, Jr. and other members of the Administration has already begun a draft of these, both Comprehensive Vehicle Policy and the Take-Home Policy. I took that and continued on with the efforts dealing with our collective unions to make sure that they had a chance to comment on that, making sure with the County Attorneys that it complied with HRS 105, and setting up a means by which a County employee would have to apply and justify the purpose for that take-home vehicle. Again, this was a marketed improvement from the 2002 policy that was in place and much more stringent in terms of being able to account for and have records of those that are eligible for take-home vehicles. I do have an updated list I can share with you that I believe came over by request as well from Councilmember Yukimura in a prior communication. Currently, we only have, as of today, one hundred eighteen (188) vehicles that are eligible for take-home. Of that, ninety-one (91) are marked police vehicles; four (4) are response vehicles for the Fire Department; five (5) are what we call "labor wagons" that are basically employee carpools; thirteen (13) are with the Department of Water and again, those are primarily for callout from water main break, emergency services; we do have four (4) with Transportation, and one (1) for callout for crime scene investigations from the Prosecuting Attorney's Office. So, again, one hundred eighteen (118) vehicles, and because of the carpool sharing that goes on with the labor wagon, there are one hundred forty-one (141) employees on this list. So, again, when you narrow out those that are Police, Fire, emergency service type vehicles, there are not that many that are actually being used for general County purposes and most of those are responding to issues that are related to infrastructure or emergency situations that relate to not necessarily to public health, but the safety and stability of our roads and water systems. Chair Furfaro: I would like that to come back through the formal system for our record purposes so that we can attach it to this agenda item. Mr. Hunt: Sure. As mentioned in terms of the response and follow-up to the response, they did say that a letter was sent out informing what "incidental or occasional use" was meant. Again, these included anyone who was taking it home for washing cars, activities prior to the beginning of normal work hour operations, repair to another authorized take-home vehicle, and those types of situations. This was sent out to Department Heads November 4, 2013. So, we did follow-up on that. The policy itself, there were recommendations. So, we have a 2013 Edition and now we have a 2014 draft. Some of the language that was incorporated include the incidental use definitions as recommended by the audit, as well as other changes that we felt would be more effective to making sure that it is compliant with both HRS and a better policy for monitoring. So, that is again, in draft form. We have not issued this yet. Part of the reason, we are also looking to incorporate this into the Comprehensive Plan as well as now we have a motor pool that we need to develop policies. So, the intent is to develop the rules that would govern the motor pool vehicles and then incorporate all of that into the Comprehensive Policy. Part of the monitoring may also now come, certainly, with the motor pool vehicles and the devices that will be installed will include Global Positioning System (GPS). So, we will actually have some tracking devise that can help with enforcement and monitoring where the vehicles are being used. Chair Furfaro: Thank you for that update. I will then ask the Managing Director, Nadine, can we be assured that the documentation of these COUNCIL MEETING 38 JUNE 25, 2014 policies being shared with Division Heads and so forth will be recorded as such and that there is a clear understanding from an operation standpoint what these standards are? NADINE K. NAKAMURA, Managing Director: Nadine Nakamura, Managing Director. Yes, Chair. We will be sharing the revised...the procedure has been with new policies, that we first share it with the Department Heads to point out the revisions to the policies or if it is a new policy, making sure that we receive Department feedback before it is finalized, and then once it is finalized, that is what we will be implementing. Just in the short time I have been there, I have seen the changes, Steve really incorporating the concerns from this audit into the policies and procedures, really getting an uproar from some of the Departments who are used to certain practices, but being told that we are doing things differently based on this new policy, and just kind of working through some of those issues with the Departments. I can tell you that it is a change in the practices of the County. I think the auditors, PKF, did a very good job in pointing out how we can improve on how we do our take-home vehicles. Chair Furfaro: I do also want to say that because it is a policy and it is not a HRS, that it should be understood that also if these guidelines are established, the standard is not followed, and that there is some form of consequence. That needs to be part of that delivery as well. Mr. Chock, did you want the floor? Mr. Chock: Just a follow-up question, Chair. Chair Furfaro: Go ahead. Mr. Chock: Thank you. Can you share how often our policies are reviewed and looked at for necessary changes? Is there any certain guideline that you folks use in terms of changes? Mr. Hunt: We are sort of both new to our positions. So, this is something that in both knowing that there had been an audit and reviewing the internal policies that we had, it was something that came on concert, I guess. Actually, to be honest, I do not even know whether the policy started before the audit or the audit before the policy, but certainly, it was incorporated into both our current policy and our future policies going forward based on these finds. I cannot comment on other policies and how long they have been established. I have revisited a Travel Policy and we do have a new Travel Policy that is established for any County employee that travels. Mr. Chock: My only reflection is that after hearing sort of the process that this audit went through and the lack of or the need for us to address these things, what we might be able to do in order to be more self-correcting in the future so that we do not need an external audit to actually tell us all of these things that are happening. Mr. Hunt: Coincidentally, it just seems to be a lot of those actions. For instance, I will take the payroll merger with Department of Personnel Services (DPS) actually is now going to be the same as the audit, but we had come out and said we are doing this, but now at the same time, there is an audit. So, there may be some efficiencies that will be gained from that, but again, it is something that we are correcting and we are trying to see how it can be better COUNCIL MEETING 39 JUNE 25, 2014 integrated to have accurate information, but at the same time, we are going to be audited at the time of the transition. So, it will be difficult, but again, hopefully, we will learn some things from that. Mr. Chock: Thank you. Chair Furfaro: Mr. Kagawa, you have the floor. Mr. Kagawa: Thank you, Chair. When did we become aware of this, I guess, the County audit of the take-home vehicles and such? When did we receive... Mr. Hunt: A draft report? Mr. Kagawa: Yes, because you mentioned that Wally Rezentes started working on our Take-Home Vehicle Policy, well, updating the 2002 policy. So, did he start working on it prior to getting... Mr. Hunt: Well, I cannot speak in terms of when the audit started, but my first notification on the draft audit was November 27th. Of course, that was after they have already been here. So, I did work with the while they were here on Kauai. Ms. Yukimura: What is the year? Mr. Hunt: 2012. Mr. Kagawa: 2012 is when... Ms. Yukimura: They started in June. Mr. Kagawa: This was a County Auditor audit, right? Mr. Hunt: Right. Mr. Kagawa: So, I am thinking that... Ms. Nakamura: They started in July of 2012. So, I believe it was in the Auditor's work plan in 2011. Mr. Kagawa: I guess this is where I am going, our draft that we have, it incorporates a lot of the recommendations that they have made? Mr. Hunt: Yes. Mr. Kagawa: Is there going to be a subsequent review by them on this new report as far as how they see effective this new plan... Mr. Hunt: Well, that would be, I guess, subject to the County Auditor, whether they want to hire them to do a compliance check, if you will, of the implementation of these new policies. Mr. Kagawa: Because a lot of their recommendations came because of the evidence or samples that they took. So, I am just wondering if it is COUNCIL MEETING 40 JUNE 25, 2014 worthwhile for us to have them, being that they have kind of become knowledgeable in it. Mr. Hunt: I think, again, and I cannot put words in their mouths, but I think a lot of the corrective actions were already addressed in the 2013 policy. So, there were some suggested refinements to that we will be doing in 2014, but I think by in large, I think the majority of those concerns are addressed in the new policy. Mr. Kagawa: Well, I feel like if they brought out some obvious, and just like what you are reporting. If they brought out some obvious things that should be improved, could be improved to make things fair, I guess the worse part for me is when it comes from coworkers who may bring it up. If things are fair and clear, then it is easy for us to investigate those complaints and to give them reasons, but when we do not update things for ten (10) years or so, of course, we are going to find things that could be improved, I guess. Mr. Hunt: Just to comment on that as well, one of the items that was cited in here was not having a specific definition of the incidental use. Again, one of the items cited was for car washing. Well, we are addressing it by including that, but rather than have more car washes, what we have done this year is we put in budget moneys to have an outside service do the washing so we are not even exposing ourselves to having employees taking home cars for car washes. So, that reduces the volume of take-home vehicles to begin with. Mr. Kagawa: In response to that, I have kind of often wondered we have a lot of these nice looking white cars and I am just thinking it can be dangerous too when it does not get washed for the employees. So, I was wondering who washed all of our cars? I think it is great that if our employees can take it upon themselves if it is really dirty to help out, but again, just to have everything clear and legal so the public can be assured that it is legitimate use. Thank you. Thank you, Chair. Chair Furfaro: Councilmember Yukimura, you have the floor. Ms. Yukimura: You mentioned a Comprehensive Plan and then Comprehensive Policy. So, is it that you are building a binder, if you will, or a collection of all County policies now? (Mr. Chock was noted as not present.) Mr. Hunt: No, what I mentioned specifically was to the vehicles. There is a Comprehensive Vehicle Policy. Ms. Yukimura: I see, and that is the one that is here in the... Mr. Hunt: No, that is the Take-Home Policy. Ms. Yukimura: Oh. Mr. Hunt: So, a Comprehensive Vehicle Policy will be like, all use of County vehicles you have to be a licensed driver. You cannot drive without a license, obviously. COUNCIL MEETING 41 JUNE 25, 2014 Ms. Yukimura: I see. Mr. Hunt: Things like that. Some are obvious, but you put them in writing and say, "These are the minimum requirements for all County vehicles," which there are many County vehicles that are used in day-to-day service that are not taken home. Ms. Yukimura: Right. Mr. Hunt: Field inspections, those types of things. There are County vehicles that are used for that. Because we are incorporating a motor pool which will take out some of the vehicles from the Department level and put them into a pool, we did not want to do that Comprehensive Vehicle and then pull it and redact it. We wanted to incorporate all of that because the Motor Pool Plan is also moving along quickly. Ms. Yukimura: Right. Mr. Hunt: So, Sally Motta is working on that now. Ms. Yukimura: So, that is very good to hear, that there is going to be a Comprehensive County Vehicle Policy and within that, a Take-Home Vehicle Policy. Mr. Hunt: Yes. Ms. Yukimura: And I am seeing that "failure to comply is subject to an employee to disciplinary action in accordance with collective bargaining agreements and also has possible tax ramifications" and so that the enforcement is the responsibility of each Department or Agency Head." So, that is good and clear. Okay. I mean, I think your point is well taken about what audits should focus on. This audit itself, cost one hundred forty-five thousand dollars ($145,000). I mean, just like attorney's fees for Special Counsel, we have to look and see what the most efficient way to do things and to do an audit on something that is already in transition and changing does not make sense to me. (Mr. Chock was noted as present.) Ms. Yukimura: So, I guess, I just want to thank you for your work and the Take-Home Policy is complete now? Mr. Hunt: We have a 2013 completed policy. We have some revisions that we are incorporating for the 2014 that has not been finalized yet. Ms. Yukimura: Thank you. Chair Furfaro: I have yet to hear from Mr. Hooser and Mr. Bynum. Mr. Hooser: Yes, thank you. You are at a disadvantage because you have only been here a short time, six (6) months or less or less than a year and a half or so. This Administration has been in charge for five (5) or six (6) years now and the audit was done covering 2011 and 2012. So, it is a little COUNCIL MEETING 42 JUNE 25, 2014 troubling that it takes this long to deal with an issue where they use words of "fraud, noncompliance, abuse, waste, and inefficiency." While I am positively thrilled that we have a new policy and that we are working on that, that does not really convince me that we do not have or we are actually addressing the nuts and bolts of the issue. So, are you confident that the use of County vehicles...this statement, it says, "leading to possible noncompliance, abuse, waste, and inefficiencies," we heard fraud mentioned earlier. Is that not happening anymore? Is everything okay? Mr. Hunt: To my knowledge, the crackdown that we did in 2013 and current has eliminated that possibility, but it is still, in terms of compliance, it is really up to the Department Heads to monitor. All the keys for all County vehicles are not locked up in one (1) location that the Mayor and I have access to, to release. We do sign the forms that say the Director of Finance and the Mayor authorizes this individual or the vehicle for use, but in terms of monitoring that, until we get something akin to a sign out system that requires passwords and keys that are either locked or assigned in the car somehow, there is no way for us to see who was driving what vehicle at what time. GPS may be able to allow us to track some of that, but again, I think by in large, that a lot of the potential misinterpretation of the 2002 policy, which may be either noncompliance or depending on the legal interpretation, "fraud," has now been squashed. Mr. Hooser: Have "heads ever rolled?" Has anyone ever been disciplined for abusing the Vehicle Policy for County vehicles? Mr. Hunt: I cannot speak historically. I have taken away purposes. Ms. Nakamura: Not that I am aware of. Mr. Hooser: Okay. So, not that I am anxious for "heads to roll," but enforcement certainly is a big part of this, as you know. I mean, policies are good and we need them, but they can be tossed in a drawer and it is business as usual as well. So, I am hopeful that the Administration is double checking to reinforce the need to enforce these policies. Ms. Nakamura: I think a big part of this is taking the policy and the written document and educating the workforce, educating the Directors, Deputies, and Division Heads so they are aware of the new clarifications that have been made, and what you can and cannot do with your vehicles. That is what it is going to take, I think, for this and every policy that we have, to make sure it is being implemented. (Mr. Rapozo was noted as present.) Mr. Hooser: Great. Thank you. Chair Furfaro: Mr. Bynum, you have the floor. Mr. Bynum: I just want to go back briefly to some of the thing the auditors said about they have identified specific instances and specific employees that they made you aware of and felt like it was you responsibility to make... COUNCIL MEETING 43 JUNE 25, 2014 Mr. Hunt: That is not mine. Mr. Bynum: That is what I heard. Mr. Hunt: No... Mr. Bynum: So, I would like you to respond to that. Mr. Hunt: No individuals have been pointed out. In fact, that is kind of what I am hoping for because part 2 of the finding has to do with the potential back tax, IRS, and State Employee Retirement System (ERS) issues, which I have been in contact with Mallory Fujitani at the State level, but we need sort of a workout plan because identifying those uses is the challenge. There may have been commute miles that were not logged, employees that were taking home vehicles. Again, if it was not authorized by us, they were taking home essentially, against the statute, but for us to be able to identify that is part of the solution and I do not have a list. I have never been notified of a single individual that has been taking home a vehicle that is either taxable and not reporting taxes or has done it without authorization. I do not have a list of that. I would love to get one. Mr. Bynum: Well, that is not consistent with what I heard. I heard they started talking about specific instances where an employee went to the wrong lot that was closer to their home. If those are law violations... Mr. Hunt: Again, these... Mr. Bynum: What is the response? I will have follow-up questions. So, you do not feel responsible to identify those individuals? They have not been identified. Mr. Hunt: They have not been identified. The activity has been identified. So, again, if someone saying that someone is taking a County car to a base yard that is near their home and swapping it for their short drive home and back and forth, that certainly is expressed as something that is not allowable in our current policy, but as far as identification of those individuals, only the generic situations have been suggested, not specific. Mr. Bynum: So, I think, and I want to...I agree, I think, with your analysis that overall, this is a helpful audit that looks at these issues generically and that the Administration is responding. I am very aware of the things that you have been doing and the proposals you put forward. They are all appropriate and so on that level of this audit, I think is meaningful and useful. I appreciate your response. Part of the elephant in the room here is that in previous audits, this Yellow Book standard that Councilmember Yukimura has been aggressively pursued by the Auditor, and this Yellow Book standard that these individuals must be identified and reported to law enforcement was aggressive. Are you aware that was aggressively pursued in previous audits? Mr. Hunt: I am aware of one (1) previous audit where that was pursued. I am not aware of other instances. Mr. Bynum: But that was not...in this audit, that was not the case from your involvement in it thus far? COUNCIL MEETING 44 JUNE 25, 2014 Mr. Hunt: Not my involvement, no. Mr. Bynum: Okay. Thank you very much. Were you aware that, this is related to the follow-up...I am sorry, I forgot. I will come back to it if I can because it is germane about previous things we worked on years ago that may apply. When I remember it, I will come back to it. Thank you. Chair Furfaro: Steve and Nadine, first of all, thank you very much. I want to point out similar to what Mr. Hooser had said earlier. When this is all finally implemented, communicated, and policy statements made, the fact of the matter is deviations need to have consequences and we depend on you folks. The tax item that Alice has brought up a couple times here today, again, you need to stay very close to it. That could be as much as one hundred eighty dollars ($180) per employee at fifteen dollars ($15) a month, that they should be exposed to some tax criteria as it is related to a benefit if they were assigned. So, it sounds to me that you are going to stay close to that. For our gentlemen from PKF, I just want to say thank you very much. I will probably see you afterwards. I know you have a 1:00 p.m. flight to catch, but your work is much appreciated and we will stay in touch very much so. So, are there any concluding questions on the two (2) audits there were on the agenda today? If not, thank you very much. There being no objections, the meeting was called back to order, and proceeded as follows: Chair Furfaro: We are looking to receive this item. Do I have a motion already? Mr. Kagawa: We have it. Mr. Watanabe: We have a motion and a second. Chair Furfaro: Okay. Further discussion, if not, all those in...oh. Further discussion? Okay, go ahead. Mr. Bynum: I want to thank the auditors even though they got some tough questioning here today. I do believe it is a helpful and useful audit, but it came clear that these people stepped into a very politically charge environment that they talked today about not taking direction from the Auditor and then taking direction from the Auditor. Everybody wants the truth, right, but the truth in our system sometimes obscures it at times to say the least. The elephant in the room is this Yellow Book standard that the Auditor very aggressively pursued, saying that his responsibility, and I agree with Councilmember Yukimura's perception that when they identify fraud, it needs to be reported. That was aggressively pursued by the Auditor and then in this audit, not pursued at all. It is like...so, the Auditor progressively pursues the standard on one and does not pursue it at all on another, but this is about justice and justice needs to be equal. It needs to be presented. The same set of assumptions here need to apply over here. So, as a result, accusations and misconduct by the Mayor and others have been investigated by law enforcement. Well, allegations against other high level County officials, including elected people, have not been even provided to law enforcement, that I am aware of, much less investigated. Equal justice and equal application of the law is our right as citizens under the Fourteenth Amendment. The law is the COUNCIL MEETING 45 JUNE 25, 2014 law and you cannot apply it over here because it is comfortable and then not apply it over here because it is uncomfortable or even worse, apply it here because you are in some political feud with one person and then not apply it here because that person is your ally in the same political feud. This here is serious Fourteenth Amendment issues and I am constrained about what I can say by confidentiality, but there is sufficient things in the public record about these issues and they need to be pursued. There are other lawsuits and there are depositions that have been taken that are public records that address these allegations specifically. Are we going to have equal application of justice in the County of Kaua`i, is one (1) of the many big struggles we are dealing with right now. Thank you very much. Ms. Yukimura: I just want to say what...well, first of all, I do appreciate what the auditors have done. I do believe that the main goal here is prospective, that is setting up very good clear regulations and guidelines, letting our employees know, and have the Department Heads be good managers in this area. So, I am glad that we are moving in that direction. I guess the main thing, and this ties into what Councilmember Bynum has said, for me, is that there was a years' delay on this 2011 anonymous complaint about certainly noncompliance and potential fraud that was not pursued. If you look at the timing, it allowed not having any results in an election year. There are a lot of questions that are raised in terms of, for me, in terms of not following the Yellow Book. Chair Furfaro: Mr. Hooser, did you want the floor? Mr. Hooser: No, but if you will give it to me, I will use it. Chair Furfaro: You got it. Mr. Hooser: Thank you, Chair. I am sitting here thinking about this whole thing. I wanted to just say that I think it is a good thing that we are doing these audits and having this discussion about how to do better, how to run our County better, and how to use taxpayer resources better and more efficiently. What I am thinking about actually, is a perception that many people have in the community about government, waste, and people are increasingly paying more taxes. So, I think it is important that County employees take this serious because all it takes is one (1) person driving their car to the beach on a weekend and it just sends stories going around in the community about all of the waste. The vast majority of employees, I think, are high level, high integrity people who take their job serious, but it is important that the managers and employees supervise each other and hold each other accountable because at the end of the day, that is really what it is. We want to provide good services for the people, nice parks, good facilities, and good equipment, but if there is a perception that of abuse by County employees, we are talking about the cars now, that makes it harder for us to do our job and makes it just hard for everybody. So, I thank the auditors for the work that they have done. I thank the Administration for acknowledging the importance of sending the message to all employees that this is serious and this affects all of us. Thank you, Chair. Chair Furfaro: Mr. Kagawa...I am sorry. Mr. Kagawa, did you want the floor? Mr. Kagawa: Real fast. Chair Furfaro: Go ahead, you have the floor. COUNCIL MEETING 46 JUNE 25, 2014 Mr. Kagawa: First of all, I would like to thank the auditors the Administration, and Ernie and his office, especially for the audit regarding the vehicles. To me, that was most useful to us. We all know that there is always good and bad to furloughs and we should avoid them whenever we can, but regarding the audit, I am pleased with the Administration's response to the audit. The only step that I feel that is missing that we could potentially add in the future is a follow-up on the recommendations by the auditors because I feel that next step...if we are spending one hundred forty-four thousand dollars ($144,000) and we are getting good data, let us finish the job. So, I feel that if we can in the future add that next step so the auditors can review what steps have been taken by the Administration, I think we could have really done a complete job. So, that is for the future. Thank you. Chair Furfaro: Mr. Chock. Mr. Chock: Thank you, Chair. Just to echo, thank you again to our auditors and the Administration for responding on these issues for continuous improvement. It is so important that we move forward. I think we are amazingly skilled at skating around specific issues and not having to totally get there, but really what is happening is, I mean, there is a lot of finger pointing and this behavior, this culture, has got to stop. I mean, we have so many important things to get done and work on. So, that is just my message, is when can we get there? I am longing for that to get there. This is important. The audits are important. We need to create an environment where we can take responsibility, be accountable, acknowledge that this is wrong or that we need correct it, and then react appropriately to it. I think that too often there is just this fear of not being able to go there. Well, we have to create an environment where we are willing to make mistakes. That is why our system is so behind because we are not willing to take these little mistakes and then respond to them, and change takes longer for that. That is what we need. We need faster change. So, make many mistakes and adapt to them as soon as we can, but yes, definitely, there is no room for lack of integrity in public service. So, that is my message. Thank you. Chair Furfaro: Mr. Rapozo, I know you were not here...okay. I would just like to say, again, point out that the introduction of an Audit Department in a Charter Amendment was actually my item. So, I want to point out that there is a reason that I put that on, might we have a Division. It is about constantly making improvements and understanding the difference between having a standard operating procedure as well as what the law expects of government. So, we are moving forward to establish these standards. Thanks to Steve and Nadine for briefing us on that. I am very pleased with the work we got from PKF. Gentlemen, thank you so much. Part of this is going to be basically also reminding Department Head and Division Heads that we have these standards in place and when we have a deviation from the new policy, there must be consequences. That may even actually take some training of Department Heads to understand it is their role to take corrective action when it comes to an issue that deviates from what our practices are. Our practices are based on the fact that we want to improve service, improve delivery, and contain cost. That is what these controls are all about in the Audit Department and we need to be consistent. We have a motion to receive. The motion to receive C 2014-191 for the record, was then put, and unanimously carried. COUNCIL MEETING 47 JUNE 25, 2014 Chair Furfaro: Again, to PKF and the Administration, thank you very much, but this agenda item is completed and I am going to turn over the gavel to the Vice Chair, and I will see you gentlemen outside. If I could see you outside. There being no objections, Chair Furfaro relinquished Chairmanship to Mr. Chock. (Council Chair Furfaro was noted as recused.) Mr. Chock: Thank you, Chair. We are moving onto agenda item C 2014-190. Let it be known that the Chair has recused himself from this item. We do have our Special Counsel, Greg Sato, here. So, I think the intention here is to approve this communication and then move into Executive Session, members. So, can we...oh, Executive Session (ES) first. We will call Stephen Hall, our County Attorney, to read this item. There being no objections, the rules were suspended. STEPHEN F. HALL, Deputy County Attorney: Good morning Councilmembers and Council Vice Chair. Stephen Hall, on behalf of the County Attorney's Office. EXECUTIVE SESSION: ES-737 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 Office of the County Attorney requests an Executive Session with the Council to provide the Council, with briefings regarding Ernesto G. Pasion vs. County of Kauai, et al., Civil No. 13-1-0340 (Fifth Circuit Court), and related matters. This briefing anal 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. Chock: Thank you so much. Mr. Rapozo moved to convene in Executive Session for ES-737, seconded by Mr. Kagawa. Mr. Chock: Thank you. At this time, we will take public testimony. Mr. Watanabe: We have two (2) registered speakers, Glenn Mickens and Alice Parker. Mr. Chock: Mr. Mickens, you are up. Mr. Mickens: For the record, Glenn Mickens. Thank you, Vice Chair Chock and BC. You have a copy of my testimony. It is not long. Let me read it for the viewing public, please. As this County Auditor issue drags on and on, I find it deplorable that more millions of dollars are being spent on a case that has no business being done. This is not just another lawsuit like the Bynum case that cost the taxpayers one million dollars ($1,000,000). This appears to be a vengeance activity by our Mayor and Council against this County Auditor, Ernie Pasion, for his uncover of illegal activity of gasoline usage by County vehicles. By the Mayor COUNCIL MEETING 48 JUNE 25, 2014 and the Council cutting the Auditor's budget to an amount that made his operation impossible to continue at the level his eight (8) audits were done and praised by all, he was forced to fight for his job and reputation, and thus the ongoing lawsuit. Does this whole fiasco not add further credence to the recent Resolution of Councilmember Rapozo and Councilmember Hooser to take dismissal action with our County Attorney for his office's lack of properly handling cases like this? To-date, after a record twenty-nine (29), I believe this is thirtieth Executive Session we are going into, the public and the press have not heard one shred of evidence that shows just cause for Mr. Pasion being forced out of a position that he has excelled at. I compliment Councilmember Rapozo and Councilmember Hooser for their efforts to delve into causes of these outrageous suits that are costing the taxpayers millions of dollars. I say a big mahalo to Ross Kagawa for his lone vote to not pass the budget since we should be going after waste before we raise taxes. By adhering to the eight (8) fine audits that Mr. Pasion has so well done, we should be able to do exactly that. I am sure you people are familiar with the Shadow. Finally, Jerome Freitas, also known as (aka) The Shadow, asked this question, how much has the County spent on the Ernie Pasion issue? The answer was "nothing." When our County Attorney is asking for up to another two hundred thousand dollars ($200,000) in C 2014-190, how can this Administration not tell the public the truth about the amount spent and being asked to spend for this vengeful action? Anyway, these are my thoughts, and they are thoughts that I am sure as you are reading the letter to the Editor, a lot of other people are asking these same questions. Where is the money going? It is just the waste is there, as Ross pointed out. Why keep raising taxes on our vehicles and everything else until we delve into the waste? If we will just go after the eight (8) audits that Ernie has done so well, I am sure we can find enough waste to cut there that we will not have to raise our taxes. Thank you, Mason. Mr. Chock: Thank you. Ms. Parker. SCOTT K. SATO, Council Services Review Officer: Next speaker is Alice Parker. Ms. Parker: Alice Parker reading a letter submitted by Joe Bulatao, Jr. To our esteemed public officials of the County of Kaua`i, "These are the time that try men's souls." The opening line of Thomas Paine's essay entitled Common Sense is applicable to the dilemma which confronts us today, here on our beloved island of Kauai. As an island constituency, we are struggling with multidimensional array of charges and counter-charges dealing with audit reports submitted by Auditor Ernesto Pasion. Will another lawsuit be settled from the taxes paid into our County's coffers because of the continued and prolonged argumentation ensuing? Media reports focus upon the positions taken by various officials and agencies which pit their adversarial remarks against the would be opponents, which widens the chasm of suspicion and distrust between the camps in combat. Are there no other alternatives worth pursuing? Is there room for going beyond accusatory remarks in search of seeking ways which resolution can be attained? Have you taken the time to explore the realm of possibilities which include the ho oponopono approach to problem solving; to put aside differences in search of attaining common ground? Are there other methods and approaches in the realm of communications and/or conflict resolutions which should be looked into and applied? So many, if not all of you, have ably demonstrated ways in which you COUNCIL MEETING 49 JUNE 25, 2014 are analytical, articulate, focused, and steadfast in your commitment to public service. These have been the qualities which got you elected or appointed. So many, if not all of you, have been able to establish your professionalism in being thorough in your research as well as being responsive in dealing with others. Should not these characteristics prevail? If the opportunity arises to seize the moment to build bridges of understanding, shared kuleana, and collaborative efforts and still maintain the integrity of your individuality, your work ethic can be maintained and be highly respected. To continue down the path of"my way or the highway" may not be the best choice to make. I humbly urge all of you to take a deep breath and consider whether it may be possible to move forward in other ways through other approaches. Sincerely, Jose Bulatoa, Jr. Thank you. Mr. Chock: Thank you. Anyone else? No? Please. Mr. Rosa: Good morning once again, members of the Council. For the record, Joe Rosa. Like I said earlier, this is going on too long and it is utterly ridiculous. It is the laughing stock. You people were elected to uphold rules and regulations, and the integrity of you people is looked upon to get to the bottom of these things. Sometimes, the acts that goes on in this Council Meetings, it seems so juvenile, not like thinkable adults. How can you drag this thing out so long? Come on. The taxpayers are paying you people and they are not getting the answers. This is a democracy. People died for it, to preserve this democracy. Let us shape up or ship out or get out. This is an election year. Like I said, my questions to any members that are running and even the present members, what are you going to do about the Auditor's Office? Do you believe in the Auditor's Office? It was established by the Charter and you people elected that Auditor, like I said earlier. Do you not have faith in the audits that were done? You people approved it before it was printed and it became a legal document. Where are the answers for the people? Think about it. I am not here just talking for my health. I have people approach me and say, "What is the question? What is the issue?" I cannot go overboard from you people who deny the people and the public the results of those audits. This is an election year. People are saying "heads are going to roll, people have to go look for jobs." You might hit that unemployment road and start walking the beach. It is too long, too long. Put yourself in Mr. Pasion's shoes. Would you be able to stick with it and hopefully you will have a job tomorrow. Because there is no just cause, you cannot do anything. So, why linger? Let the person walk free. In a court of law if it is a hung jury, the person walks out of the court free. Come on. Let us be acting like adults and do something about it. Mr. Sato: Three (3) minutes. Mr. Rosa: Even like the... Mr. Chock: Thank you, Mr. Rosa. Mr. Rosa: Okay, one more. I am just going to wrap it up. A lot of these things here like on this job things, when you sign up for a job, it is our portal. You have to get to your own portal of work with your own transportation. That is another thing that is causing a lot of these problems with cars taking home. Mr. Chock: Thank you. COUNCIL MEETING 50 JUNE 25, 2014 Mr. Rosa: You have a portal, you report to your portal with your own car and gas. Thank you. Mr. Chock: Thank you. Anyone would like to testify on this? Mr. Taylor, you are up. Mr. Taylor: Chair and members of the Council, my name is Ken Taylor. In reading from the agenda item C 2014-190, "Communication from the Office of the County Attorney, requesting authorization to expend up to $200,000 for Special Counsel's continued service..." how much have we spent at this point in time or are allocated to this activity? It would really be helpful for myself and I think a lot of people in the public, if when these requests come in, that they include past amounts of money so we can keep a visual idea of what these things are costing us because you have a request for two hundred thousand dollars ($200,000) today and the last time I do not know what it was or if there were other times. I think it is really important for people to know because a lot of us believe that the mishandling of audits from the beginning has created a problem that instituted this particular lawsuit. I think that it is a shame that poor management, not only at the Administration level, but here at the Council level, has created this situation. So, please, in the future, keep a running tab on what is being requested on these different lawsuits. Thank you. Mr. Chock: Thank you. I know we have had some response from our County Attorney in terms of how to keep track of these items, and they are reported to us in a timely fashion. So, we are happy about that movement. Anyone else would like to testify? There being no further testimony, the meeting was called back to order, and proceeded as follows: Mr. Chock: Discussion. Councilmember Kagawa. Mr. Kagawa: I have a question for the County Attorney. I believe it is public record. Mr. Chock: Mr. Hall. Mr. Kagawa: Thank you, Chair. There being no objections, the rules were suspended. Mr. Hall: Good morning again. Stephen Hall, Deputy County Attorney. Mr. Kagawa: Thank you, Stephen. I just want to answer Mr. Taylor's question. I think that is public record. How much have we spent excluding this two hundred thousand dollars ($200,000) that is on the agenda? So, how much have we spent up until this request on the Ernesto Pasion case? Mr. Hall: On the lawsuit of Mr. Pasion suing the County? Mr. Kagawa: Ballpark. Yes, sir. Ballpark figure. COUNCIL MEETING 51 JUNE 25, 2014 Mr. Hall: Two hundred two thousand three hundred fifty-two dollars ($202,352). Mr. Kagawa: Two hundred... Mr. Hall: Two hundred two thousand three hundred fifty-two dollars ($202,352). Mr. Kagawa: And with this two hundred thousand dollars ($200,000) that is being asked of today, it would become four hundred thousand dollars ($400,000). Mr. Hall: It would give us the ability to expend up to four hundred two thousand dollars ($402,000), yes. Mr. Kagawa: Thank you. Mr. Rapozo: Follow-up real quick. Mr. Chock: Further discussion. Councilmember. Mr. Rapozo: Thank you, Mr. Chair. So, the two hundred two thousand three hundred fifty-two dollars ($202,352), are we up-to-date? Mr. Hall: As far as what? I mean, that is a current figure, yes. Mr. Rapozo: So, I mean the two hundred thousand dollars ($200,000) that you are asking for, is any of that going to be used to pay outstanding bills? Mr. Hall: It is not. Mr. Rapozo: So, the two hundred two thousand three hundred fifty-two dollars ($202,352) is as of today's, we have paid up to? Mr. Hall: Yes. As previously requested by this body, we are in front of our bills versus behind them. Mr. Rapozo: Thank you. Mr. Chock: Councilmember Yukimura. Ms. Yukimura: So, these costs are caused by a lawsuit brought by the County Auditor, right? Mr. Hall: That is correct. Ms. Yukimura: Thank you. Mr. Chock: Thank you. Councilmember Bynum. Mr. Bynum: Does the County have an insurance policy? COUNCIL MEETING 52 JUNE 25, 2014 Mr. Hall: The County does have an insurance policy, yes. Mr. Bynum: And what is the limit that after which the Council loses its say? Mr. Hall: There are some particulars to that policy. It is probably an item better discussed in Executive Session because of the intricacies of that policy. Mr. Bynum: Thank you. Mr. Hall: So, there is not a clear answer. Mr. Bynum: There is not a clear answer? Mr. Hall: Because of the intricacies of the policy, I cannot say that at this number, it is an absolute. Yes, I am sorry. Ms. Yukimura: Plus, it affect... Mr. Bynum: I am sorry. Ms. Yukimura: It affects trial strategy. Mr. Chock: I think Mr. Bynum still has the floor, but you will have a question after? Mr. Bynum: Is there a forum available for the Council to discuss the intricacies of that policy? Ms. Yukimura: In Executive Session. Mr. Hall: Yes. Mr. Bynum: What is that forum? Mr. Hall: If we wanted to discuss it in Executive Session, we can. Mr. Bynum: Today? Mr. Hall: Yes, because as the agenda item lists, it is also for related matters. Mr. Bynum: Thank you. Mr. Chock: Thank you. Councilmember Yukimura. Ms. Yukimura: I will pass. Thank you. Mr. Chock: Mr. Hooser. COUNCIL MEETING 53 JUNE 25, 2014 Mr. Hooser: Just to restate because there is a lot of discussion about this. We are going into Executive Session, this item is on the agenda because the County Auditor is suing the County of Kaua`i? Mr. Hall: That is correct. Mr. Hooser: Okay. Thank you. Mr. Chock: Thank you. Any further questions or discussion? There being no objections, the meeting was called back to order, and proceeded as follows: Mr. Chock: Seeing none, roll call, please. The motion to convene in Executive Session for ES-737 was then put, and carried by the following vote: FOR EXECUTIVE SESSION: Bynum, Chock, Hooser, Kagawa, Rapozo, Yukimura TOTAL— 6, AGAINST EXECUTIVE SESSION: None TOTAL — 0, EXCUSED & NOT VOTING: None TOTAL— 0, RECUSED & NOT VOTING: Furfaro TOTAL— 1. Mr. Sato: Six (6) ayes. Mr. Chock: Six (6) ayes. Thank you. We will go into Executive Session at this time. Thank you. There being no objections, the Council recessed at 11:54 a.m. to convene in Executive Session. The meeting was called back to order at 1:34 p.m., and proceeded as follows: (Council Chair Furfaro was noted as recused.) (Mr. Bynum was noted as not present.) Mr. Chock: Aloha and good afternoon. We are back from our Executive Session and lunch, and here to take on C 2014-190, if we can read that. There being no objections, C 2014-190 was taken out of order. JADE K. FOUNTAIN-TANIGAWA, Deputy County Clerk: This is on page 3. COMMUNICATIONS: C 2014-190 Communication (06/13/2014) from the Office of the County Attorney, requesting authorization to expend funds up to $200,000 for Special Counsel's continued services to represent the County Council in Ernesto G. Pasion COUNCIL MEETING 54 JUNE 25, 2014 vs. County of Kauai, et al., Civil No. 13-1-0340 (Fifth Circuit Court), and related matters. Mr. Chock: Thank you. Mr. Rapozo moved to approve C 2014-190, seconded by Ms. Yukimura. Mr. Chock: Motion and second. Anyone would like to speak on this item? There being no objections, the rules were suspended to take public testimony. There being no one to provide public testimony, the meeting proceeded as follows: Mr. Chock: Further discussion, Councilmembers? The motion to approve C 2014-190 was then put, and carried by the following vote: FOR APPROVAL: Bynum, Chock, Hooser, Kagawa, Rapozo, Yukimura TOTAL— 6*, AGAINST APPROVAL: None TOTAL — 0, EXCUSED & NOT VOTING: None TOTAL — 0, RECUSED & NOT VOTING: Furfaro TOTAL — 1. (*Pursuant to Rule No. 5(b) of the Rules of the Council of the County of Kauai, Mr. Bynum is noted as not present, but shall be recorded as an affirmative for the motion.) Ms. Fountain-Tanigawa: Five (5) ayes. Mr. Chock: Five (5) ayes. Thank you. We can call Chair Furfaro back. Did you want to read the next item? There being no objections, C 2014-185 was taken out of order. C 2014-185 Communication (04/30/2014) from Council Chair Furfaro, requesting the presence of Michael J. Belles, Esq., to provide the Council with the second Quarterly Progress Report relating to the rebuilding of the Coco Palms Hotel by Coco Palms Hui, LLC. Mr. Chock: Thank you. I need a motion here. Ms. Yukimura moved to receive C 2014-185 for the record, seconded by Mr. Rapozo. Mr. Chock: Thank you. At this time, I would like to suspend the rules and call up our guests. There being no objections, the rules were suspended. COUNCIL MEETING 55 JUNE 25, 2014 Mr. Chock: If we could just pause for a moment. I know that Chair Furfaro wanted to be a part of this discussion. He should be on his way, but thank you for being here. MICHAEL J. BELLES, ESQ.: Glad to be here. Thank you. Mr. Chock: I know there is progress being made. Ms. Yukimura: Here he is. (Council Chair Furfaro was noted as present.) Mr. Chock: Chair, we just read it and I suspended the rules for them to be here. There being no objections, Mr. Chock returned Chairmanship to Chair Furfaro. Chair Furfaro: Good afternoon. Mr. Belles: Good afternoon, Mr. Chair and members of the Council. For the record, my name is Michael Belles. Sitting to my immediate right is Tyler Greene, one of the principals of Coco Palms Hui, LLC, and to my extreme right is Dirk Soma who is with the Cultural Advisory Committee for Coco Palms. I understand that time is of the essences today, so we will try and go through this as quickly as we can and then be available to respond to any questions you may have. (Mr. Bynum was noted as present.) Mr. Belles: I would first like to take on the issue of what is the status of the permits and the entitlements. We filed on April 30th for our after-the-fact permits for the dust fence that was erected along Kuhio Highway. We have an acknowledgement from the County Planning Department on both of those items. I have copies of their correspondence that I can share with the staff and in turn, with all of you. They simply say that no shoreline setback determination is required because of the presence of Kaki Highway and the stabilization of the shoreline. So, the erection of the fence will not affect the shoreline and that they are continuing to process our Special Management Area (SMA) permit for the fence. We are hoping that will be concluded in about a thirty (30) day period of time. As to the overarching entitlements for the entire project, which would be the SMA, Project Development Use permit, and Class IV Zoning permit, we are still looking at having the application filed within forty-five (45) to ninety (90) days. There has been a slight delay on that and the reason for that is just yesterday, we had representatives from Hyatt here, both from their engineering and design teams, to take a look at the property as well as our proposed site plan. They will probably be recommending some revisions and changes to the site plan, not substantive, but clearly, that suits their operational needs. So, once we have that in hand, I would, in all likelihood, have one (1) more pre-filing meeting and consultation meeting with the Planning Director and the Deputy County Attorney to go over that, we will file it, and my original projection that I gave back to you on March 23rd, which is the last quarter of this year, is still our objective in terms of getting all of the necessary entitlements without being presumptuous from the Kauai Planning Commission. So, that concludes my report relative to the status of permits and entitlements. COUNCIL MEETING 56 JUNE 25, 2014 Then I will turn it over to Tyler to talk about the general business matters, and finally, Dirk Soma to deal with the issues of community relations, and then again, we will all be available to respond to any questions you may have. Thank you. TYLER GREENE: Thanks, Mike. Good afternoon Councilmembers. Thank you for having us today. I think the largest achievement that we have been able to lock down is our deal with the operator. As Mike had mentioned, it is Hyatt. I was on site with two (2) of the Hyatt folks this morning at the property and...can you folks hear okay? Mr. Chock: I am not sure if you had an introduction there. BC is asking for an introduction. Mr. Greene: Oh, sorry. Tyler Greene with Coco Palms Hui, LLC. So, we have been able to make that public. There was a press release that came out stating that it will be operated by Hyatt. So, the actual name of the property will be Coco Palms by Hyatt. So, we are very excited that we have been able to form that relationship with them. That being said, we have internally put together our documents for investors coming into the property. We did what is called a "Private Placement Memorandum" and so that is in the works. The kind of immediate issues, as Mike had mentioned, is we just need to finalize what is called our "property program." We are about ninety percent (90%), ninety-five percent (95%) there. Just a couple of things we need to work through with them in terms of how the resort will flow and how the rooms will connect to the lobbies and common areas, but other than that, we are moving along pretty steadily and very excited to have Hyatt onboard, officially. I will turn it over to... Chair Furfaro: May I ask you a question ask this point? Mr. Greene: Sure. Chair Furfaro: Will the management contract with Hyatt in any way shape or form, be them being a limited partner or an investor in the program, at this time? Mr. Greene: They are not...it is tied to an investment on behalf of Hyatt. So, they are coming in with what is called "key money" and they are actually contributing money to the property once it is opened. We are encouraged by that and we are starting to see some of the brands do that more and more in this market, but we are encouraged with them coming in and offering that up. It just shows their commitment to the deal. Chair Furfaro: But whatever the structure would be, they would still be a limited partner and you, in fact, will be the general partner? Mr. Greene: Correct. Chair Furfaro: Thank you for that clarification. Mr. Greene: Any other questions for me? Chair Furfaro: None at this time. Mr. Greene: Okay. I will pass it over to Dirk then. COUNCIL MEETING 57 JUNE 25, 2014 DIRK SOMA: Aloha, Council. Dirk Soma with the Cultural Advisory Committee. You have my brief report that we submitted to Tyler and Chad outlining our activities for the last quarter. I will go briefly, really quickly through them. Based on Chair's comments, we did revise our Guiding Principles document to include that the concepts of wahi papa and hobkipa into those principles. We have had several community meetings, one (1) involved the Kauai Native Hawaiian Chamber of Commerce where Tyler was able to share the Coco Palms' vision. From there, we went to KCC and had a luncheon with students in the hospitality program there where Tyler got to talk to them about some of the opportunities there or presented himself for them in the next couple of years. In April 26th, we had a walkthrough with the Hawai`i Island Land Trust and Friends of Coco Palms as part of their talk story with the land series. That was well attended and Tyler was able to share the vision of Coco Palms as well as visitors and participants were able to talk with Coco Palms Cultural Advisory Committee (CPCAC) members, Kamika Smith, Kimo Keawe, and Danita Aiu as well. There was a meeting on May 15th with the Daughters of Hawaii to discuss a potential collaboration of having a museum on property. So, we look forward to those continued discussions. We did categorize all of the comments that we received, over two hundred forty (240) comments, and we are looking to see how we prioritize them. We are looking at five (5) different categories. There are cultural concerns, which include `iwi kupuna; we look at community concerns, which involve traffic; we have the operational concerns (orientation, training, and hiring of staff); we have cultural programs where we talk about insuring that the history, language, and culture is perpetuated on the property; and then there was an "other" column that was out there. So, we have taken all of the comments from our previous meetings, put them into each of these categories. Lastly, we had a chance to review some of Dr. Pila Kikuchi's notes on the Coco Palms. One thing that I want to note at the April 15th meeting with the Kauai Native Hawaiian Chamber of Commerce, Val Ako was one of our attendees and he shared with us, his heartfelt story of his engagement with the property and how he had unearthed those iwi kupuna and how he stressed to Tyler the fact that we need to protect these and we need to ensure that they are not disturbed. I thought that was a really neat thing that he shared. All of his notes, he shared with Tyler. To see it come up in the article in the Garden Island on Monday, it was a really neat thing to see that we are all on the same page going forward. So, that is all that we have to share from the Cultural Advisory Committee. Chair Furfaro: Well, thank you, gentlemen. Questions from Councilmembers at this point? Councilmember Yukimura, you have the floor. Ms. Yukimura: Thank you. Good to have you all here. I guess my question begins with you, Mike. This preliminary SMA application review, it is an SMA just for dust fencing? No, but the SMA will apply to the whole development? Mr. Belles: The SMA permit, Project Development Use permit, and Class IV permit will apply for the entire redevelopment of the hotel project. All we are applying for right now is for the dust fence. Ms. Yukimura: Okay, good. On your Cultural Advisory Committee, Dirk, I just see one of the comments, "traffic, traffic, traffic," which I think, is a concern of a lot people I have been hearing out there in the community. So, I just wondered if there was any more update about an overpass. COUNCIL MEETING 58 JUNE 25, 2014 Mr. Belles: There is no update on that simply because we need to have the feedback from Hyatt before we can come up with the design and the site plan because the location of the buildings and interior circulation, will largely mandate where we are going to be proposing to punch out into Kuamo`o Road and other possible highway for a secondary access. Until we know that for sure, it would be premature for us to meet with State Highways, but that is clearly a high priority as we mentioned during the course of our last meeting. Ms. Yukimura: Okay, because the more I think about it, I do not know how you can have a successful hotel without an overpass or some kind of crossing without crossing at the highway level. I know it is a big expense, but to me, it is sort of an essential need. So, I do not know how the plans will unfold on that, but it just seems like a really critical part for your guests to access the beach, which they will want to do, and also for members of the public who want to cross, what will become a four (4) lane highway. Mr. Belles: We could not agree more. Ms. Yukimura: Great. Thank you. I am glad it is still on the table and you are working on it. Mr. Belles: Absolutely. Ms. Yukimura: Okay. Chair Furfaro: Questions? Mr. Hooser. Mr. Hooser: Yes. Nice to see you all again. Mr. Belles: Good afternoon. Mr. Hooser: I just want to reemphasize, maybe it does not need to be reemphasized, but I will emphasize it anyway, the importance of the overpass. I mean, having a successful hotel is one thing, but having a safe hotel and safe for the community is of paramount importance. So, I just encourage you to keep that as much as you can, as a priority. Thank you. Mr. Belles: Thank you. Chair Furfaro: Other questions? Any other before I recognize Councilmember Yukimura? Councilmember Bynum, did you have a question? No? Mr. Bynum: Just a really short...to me, the Seashell Restaurant, this overpass, and pedestrian safety are all linked. So, you are working on that with the State and you will have a report at some time in the future, correct? Mr. Belles: That is correct. Mr. Bynum: Thank you. Chair Furfaro: I have a question for them. In this summary here, have you been able to access the survey of the grounds there as it relates to COUNCIL MEETING 59 JUNE 25, 2014 the 1908 survey by Dr. Lydgate and Queen Kapule's grounds? Have you been able to acquire that map? Mr. Soma: To-date, we have not. Chair Furfaro: Okay. Mr. Soma: But that is something that I will look up. Chair Furfaro: And it is something that is pretty well documented with the Kaua`i Historical Society. Also, there is reference to a fishing shrine and/or koula stone for fishing. If you can give us any update on that. Mr. Soma: Sure. Chair Furfaro: Back to you, Councilmember Yukimura. Ms. Yukimura: On the issue of financing, I guess, the newspaper article mentioned some king of a section such and such that is what you are looking at for financing. Mr. Greene: We are going to do what is called "EB-5." So, we will raise a combination of equity and debt, but the debt will be raised through EB-5, which essentially is bringing in foreign investors that invest into a Federal EB-5 program and in doing so, they are allowed a visa to come into the Country. Ms. Yukimura: Is that secure money? Mr. Greene: Secure in which way? Ms. Yukimura: Reliable, you can count on it. Mr. Greene: I think a deal is never funded until it is completely funded. We have seen some good case studies of this program and one of the reasons we chose to go this route is because of the popularity of this type of program and we are starting to see this happen more and more in the hotel industry in terms of ways to finance deals. The key driving factor was the interest rate behind it and it is a much cheaper interest rate than would be going to the bank. Typically, the underwriting process is much simpler in packaging these types of deals versus going to a more institutional type finance here. Ms. Yukimura: So, would you be willing to share some of the case studies with us? Mr. Greene: I could try and get a list for you, yes, and I can get a list of different companies that funded EB-5 deals. Ms. Yukimura: Okay, that would be helpful. I guess I am concerned about having sort of people who do not have a stake in the community and I do not know how long...well, I just do not know long the commitment will be and what kind of a commitment it will be to the community. So, that is my concern. Mr. Greene: Yes, the general structure would be this, we would come in and close on the property, and we would use EB-5 money for the COUNCIL MEETING 60 JUNE 25, 2014 construction. It is typically a five (5) year term. Once the hotel is built and operating and stabilized, then we would come in with what is called a "perm loan" and that would be permanent financing that would take out the EB-5. Typically, those perm loans do not come in until a property has shown a history of economics and financials. So, that typically happens after the third year of operation. So, two (2) years to build, three (3) years to operate, and then we come in a perm loan and take out that EB-5. The EB-5 investor, when they come in, they are completely passive investors and so they do not come into a partnership. We have a group out of New York who is basically our EB-5 lender and they are the ones that assemble the funds through China, and then fund that deal. So, we do not have interaction with any of those investors from China. It is done by an intermediary that is a mainland based company. We initially reached out to the local banks here, but typically, the local banks here do not want to fund a construction loan that is over thirty million dollars ($30,000,000) or forty million dollars ($40,000,000). They typically have limits and thresholds that they have to stick to. So, EB-5, in our opinion, was the best and most viable route to go for financing. Ms. Yukimura: So, you are going to use EB-5 money for interim financing? Mr. Greene: Correct. Ms. Yukimura: And you said permanent financing comes in after three (3) year of operation? Mr. Greene: Yes. Ms. Yukimura: Do you not still have to have a permanent financing commitment, excuse my ignorance, but commitment from the start? Mr. Greene: Well, you are not going to get a commitment until the hotel is operating and has created a history of financials. So, you want to identify those possible lenders upfront, definitely, but it is hard to get a commitment on a property that is not operating. Ms. Yukimura: I see. Thank you. Chair Furfaro: So, I want to make sure we are all familiar and talking on the same terms, and I would like you to submit to something to the Council on the EB-5 program. (Mr. Kagawa was noted as not present.) Chair Furfaro: I am somewhat familiar with it as it has been used in French Polynesia as a stimulus by the French government to have investment overseas. This is pretty much the same program. They have a completely different name for it, but this is actually monitored by the Federal government during that five (5) year period, am I correct? Mr. Greene: Correct, and what it is linked to is, it is basically the Federal government's plan to create jobs. So, any project that is funded by EB-5 has a certain amount of jobs attached to it and that sets the threshold as to the amount of debt that you can raise. So, one of the first things that we did was an economist study on how many jobs would be generated through COUNCIL MEETING 61 JUNE 25, 2014 construction and the operations of the hotel. The number that we had was one thousand seven hundred (1,700). That is just construction and operations. So, what they do is they tie that in, that number, one thousand seven hundred (1,700), into the amount of debt that you can raise. It is typically about five hundred thousand dollars ($500,000) for every job. Chair Furfaro: Now, along the line that for you to qualify the Federal government on this, and I presume, I am going to put my hotel operator's hat back on here, that obviously before you gotten Hyatt to actually agree to be a limited partner or an investor or the management company, they participated in a performa and this performa is based on, I think, the same criteria that the Federal government is looking at which indicates that at some point in future time, and you are saying three (3) years, the operation of the hotel considering all things in its present status of the economy, would be somewhat profitable and therefore, leveraging permanent financing? Are there any proprietary reserves on the performa that you did with Hyatt that you could not share with us? (Mr. Kagawa was noted as present.) Mr. Greene: No, we could definitely send that performa out to the Councilmembers. Chair Furfaro: Okay. So, I am going to be requesting the performa from Hyatt along with the scope of EB-5, and again, I want to say that I know it in a different term in French Polynesia, but I am familiar with that financing package. Mr. Greene: Okay. Those two (2) are definitely very easy to do. Chair Furfaro: Okay. I will send a formal request to you, but it is going to go to all members. Mr. Greene: Okay, great. Chair Furfaro: Thank you. JoAnn, you still have the floor...oh, Tim, go ahead. Mr. Bynum: It is very interesting, all of the level of detail you are sharing with us about finance. I do not recall us going into that level of detail in the past, and I do not really think you would need to that, but it is very interesting. I appreciate that level of disclosure. Another way to look at this EB-5 is it is a government way to funnel Chinese investment money that does not necessarily capture and asset. So, it sounds like a kind of creative financing. Just like government has creative financing that we rarely take advantage here on Kaua`i, but that is a different story. A couple questions, it is not Hyatt Coco Palms. It is Coco Palms by Hyatt? Mr. Greene: Correct. We had disclosed earlier we were vacillating between Starwood and Hyatt, and the reason we chose Hyatt was because of their flexibility there. So, we have memorialized that it will be Coco Palms by Hyatt. The nice thing about this is that it is not in their typical brand box. So, it does not fit the Regency box or it does not fit the Grand Hyatt box. It is COUNCIL MEETING 62 JUNE 25, 2014 kind of in this separate box, if you will, for Hyatt. So, that gives us some flexibility as to how we operate the resort, what we do on the cultural side, and a bunch of the different program that we would like to institute. So, that ultimately, we what crafted the decision for us to go with Hyatt, was their flexibly. Mr. Bynum: You actually anticipated my next question about where it fits in their branding scheme. So, it is unique, but you still get access to their worldwide reservation kind of network? Mr. Greene: Yes, and you nailed it. It is kind of a dual sword with these National flags. At this day and age, you really need the reservation platform because their outreach throughout the world is, they drive all of the traffic. So, we could not do that on our own and Chad and I recognize that we are not hotel operators. So, we do not want to pretend to be something that we are not. So, essentially, we develop it and then we turn the keys over to Hyatt. We just need to make sure that when we do turn the keys over, that we have built in everything that we want to see happen at the hotel, so the programs whether it be the torch lighting ceremony and all of the different cultural components that we want. So, we have built that into our arrangement with Hyatt. Actually, I will take it a step further, but we are actually considering having the cultural side of the hotel being operated by a group that we would put together. So, the day-to-day operations of the cultural activities and so on and so forth would not be under the Hyatt umbrella. It would actually be a separate entity. That then gives us more autonomy to set up the different classes, lessons, and activities that we were hoping to do. Also, they like that idea because it kind of takes it off of their plate and they can just focus on filling rooms and we can on the rest. Mr. Bynum: Is this separate entity a non-profit? Mr. Greene: We are looking at that, yes. Mr. Bynum: Okay, good. Thank you for the level of detail you are providing. I guess this has been asked a lot of ways, but it is like this is a...if you are an investor...you just said, "I am not a hotel operator," you are an investor, right? Mr. Greene: Investor/developer. Mr. Bynum: Right. Is this an investment that you are building to keep or building to turn? Mr. Greene: Yes, no, this is an investment. We will have some investors that may want to exist the deal at a certain time. Me personally, this is something I would like to be in until the end of time. Mr. Bynum: And that is the other thing I am trying to understand better from a County perspective, that a lot of investment deals are build and turn, right, but when the deal gets more complex or involves several entities, they tend to be more build and keep, build and operate kind of investments. Mr. Greene: Correct. Typically, something that is going to generate cash flow over time is something you want to stay in. COUNCIL MEETING 63 JUNE 25, 2014 Mr. Bynum: So, and this will be my final question, I am almost certain. What happens, you get this three (3) year performa and nobody wants to give you the permanent loan, what happens then? Mr. Greene: We have either have to raise additional equity to make our loan to values, more attractive to lenders coming in. So, that would be one (1) scenario. We would have to renegotiate with our EB-5 folks in trying to roll that over into a new term. So, there is a couple different exist strategies. We never know what is going to happen in the economy and the market. We can do our best to plan and hope that things are going to turn out the way that we hope or expect them to. We believe in this project and we are confident that there will be permanent financing there based upon not only just Coco Palms and what it was, but what we believe it will be. Mr. Bynum: But this financing that you are taking about is secured? Mr. Greene: The permanent financing is not. Mr. Bynum: No, no, the EB-5. Mr. Greene: The EB-5 financing is not finished. It is a process where we will go and raise that money through China. Mr. Bynum: Because if that were secured, it would mean that the hotel was going to be rebuilt and operated at least for a three (3) to five (5) year period? Mr. Greene: Correct. We have a term sheet on that and the group out of New York would not issue a term sheet if they did not believe that they would be able to secure the money. Mr. Bynum: Right. Mr. Greene: But it is a process that, and we will send you this. We will send you some links on the EB-5 process, but they have to approve the deal and it is through United States Citizenship and Immigration Services (USCIS), so Customs and Immigrations. So, they not only have to approve the deal, they have to approve us as an entity. The group itself has to become a regional center here in Hawaii. So, there is a lot of steps towards raising all of this money. Mr. Bynum: Thank you. Thank you very much. Chair Furfaro: I just want to make sure, which we talked about the brand drives the reservation platform which actually ends up driving the guest experience and the expectations of the brand, and going with a higher end brand, obviously, you are feeling you are driving the ADR or the Average Daily Rate. I want to caution that you have an experience for the guests operated by an entity other than the hotel operator, okay? I just want to make sure you understand. I am feeling you are covering a pretty thin line there because the brand marketing and the guest experience, once on property, has to be coordinated well between the brand marketing and the expectation of the guests. So, your plans have not changed as far as the ownership having a say as to the selection of the Operating Officer or the General Manager for the property? COUNCIL MEETING 64 JUNE 25, 2014 Mr. Greene: Correct. Chair Furfaro: It is still part of your management concept with Hyatt? Mr. Greene: Absolutely. Chair Furfaro: The New York principal you are talking about here, is this the role that Prudential had before? Where is Prudential in this whole thing? Mr. Greene: So, Prudential is the seller of the property. Chair Furfaro: Well, they are the current owner as well. Mr. Greene: Yes, current owner, yes. Chair Furfaro: So, where are we at with Prudential? Mr. Greene: So, they came in as a debt and equity partner initially on this deal, and then the development group that they provided the capital for stepped aside. So, our deal is direct now with Prudential. Chair Furfaro: Understood. Mr. Greene: So, they are sitting tight and waiting for us to get through the permit process. Then our deal with them is we will close on the property thirty (30) days after permit approvals. Chair Furfaro: Thank you for clarifying that. Mr. Hooser, you have the floor, and then JoAnn. Mr. Hooser: Just a brief question. We talked before about the possibilities of timeshare. So, are you discussing...is that involved in any of your discussions with Hyatt of with any of your funders? Mr. Greene: Yes, there will not be any timeshares at Coco Palms. Mr. Hooser: Okay. So, you are not discussing that with the Hyatt and no one is asking for it? Mr. Greene: No. So, once we memorialized our deal, we went and had a kickoff meeting with them in Chicago, started to plan for the resort we flew our designers and architects out there, and so on and so forth, but we are actually looking at possibly decreasing the rooms again. We think that it will be three hundred forty (340) to maybe three hundred fifty (350) hotel keys and timeshare is not going to be a component. Mr. Hooser: Thank you. Mr. Greene: They know our stance on timeshares. They might be doing that on some other properties or other island or whatever the case COUNCIL MEETING 65 JUNE 25, 2014 may be, but they do not believe that this project, internally, they do not believe it lends itself to timeshare. Mr. Hooser: Thank you. Chair Furfaro: JoAnn, you have the floor. Ms. Yukimura: Of the one thousand seven hundred (1,700) jobs that your economic study says will be created, how many are temporary jobs, construction jobs, and how many are permanent jobs? Mr. Greene: Good question. I am happy to share the economist report with you all as well, but they are saying that one thousand one hundred fifty (1,150) jobs would be created through construction and five hundred fifty (550) jobs would be created through the operations of the hotel. Ms. Yukimura: Okay. Thank you. Mr. Greene: It is a little rich maybe. If we have three hundred forty (340) keys, five hundred fifty (550) jobs, but that is going to be everything from top to bottom and include the Seashell Restaurant and any other periphery jobs that are created there. Ms. Yukimura: But they will be jobs that will be...I mean, they are direct jobs, they are not indirect jobs? Mr. Greene: They are direct, yes. So, all of those jobs to qualify for the EB-5 have to be, even the construction jobs, have to be intact for no less than two (2) years. So, we have to actually submit payroll and we have an audit process during the two (2) years of construction to show that we have been keeping those jobs intact and then the hotel jobs move forward in perpetuity. Ms. Yukimura: Okay. So, what is your projected cost? I guess your performa will show that, but the projected total cost for developing this resort? Mr. Greene: We are getting closer to that number, but I think as a safe placeholder, I think you could put one hundred twenty-five million dollars ($125,000,000). That is going to include...we are looking at the possibility of doing a solar field out there. So, that is about twelve million dollars ($12,000,000) or fifteen million dollars ($15,000,000) of that, but our actual with the land purchase and construction cost excluding the solar would be about one hundred fifteen million dollars ($115,000,000). The way that will kind of unfold is that now that we have our program almost fully defined, we then can draw up our plans based upon that, and then our plans can be given to our contactor to really dive into what is going to happen there and what they are going to build to give us a more firm number. Ms. Yukimura: Okay. Mr. Greene: So, we are probably two (2) to three (3) weeks away form really have a solid number for you. Ms. Yukimura: Alright. Thank you very much. COUNCIL MEETING 66 JUNE 25, 2014 Chair Furfaro: Mr. Kagawa, you have the floor. Mr. Kagawa: Thank you for your presentation. I sense you folks are really giving it your all. So, I appreciate that. You mentioned downsize maybe to three hundred forty (340) to three hundred fifty (350) keys. So, what was the original? Mr. Greene: It has kind of jumped a little bit. It started at three hundred sixty-three (363) and then went to three hundred fifty-nine (359) and three hundred fifty (350). It has always been, give or take, three hundred fifty (350). Mr. Kagawa: Oh, okay. Alright. Thank you. Mr. Greene: And the reason for that is we would just replace some rooms with where we are just kind of changing the flow and the suite count. Mr. Kagawa: Okay. Thank you. (Mr. Hooser was noted as not present.) Chair Furfaro: So, let me ask you this, at one hundred twenty-five million thousand dollars ($125,000,000), is that what we are talking about here? Mr. Greene: Give or take, yes. Chair Furfaro: Okay. Mr. Greene: And like I said, it includes fifteen million dollars ($15,000,000) for the solar. Chair Furfaro: Now, does that include, in your estimates, the one hundred twenty-five million thousand dollars ($125,000,000) will include all of the Furniture, Fixtures, & Equipment (FF&E) associated with the new design? Mr. Greene: Correct. Chair Furfaro: And all of the preopening expenses? Mr. Greene: Correct. Chair Furfaro: Okay. Mr. Greene: So, we call it "soup to nuts." Chair Furfaro: Okay, well, I am going to reference it as a cost per unit. So, we are somewhere in about the three hundred fifty-eight thousand dollars ($358,000) per key. Mr. Greene: Per key, correct, and that includes our land purchase as well. COUNCIL MEETING 67 JUNE 25, 2014 Chair Furfaro: That includes land? Mr. Greene: Yes. Chair Furfaro: Land, FF&E, design fees, energy saving programs, and the preopening operating costs? Mr. Greene: Correct. Chair Furfaro: Okay, three hundred fifty-eight thousand dollars ($358,000) per key. Good. Other questions anyone? No? Well, I would like to say, I think, on behalf of the Council, we really appreciate your openness and sharing. We are looking for some internal information about the performa that was provided, especially your long-term financing as tied to that five (5) year plan, and a little bit of a caption on what we are referencing as the EB-5 plan as it relates to recruiting investors. Clearly, we are now understanding that it will be the Coco Palms Resort operated by Hyatt Hotels? Mr. Greene: Correct. Chair Furfaro: And they will be an investor, but more like a limited partner? Mr. Greene: Correct. Chair Furfaro: Okay. Thank you for all of the information. Questions? Mr. Belles: Thank you, Mr. Chair. I would really like to say in a backhanded way, this proves with the quarterly reports helps to keep us focused and helps us to keep in line and be accountable as well. So, it is working, I think, for everyone. Thank you very much. Mr. Greene: Yes, I would like to shadow that as well. We enjoy coming here and seeing you all, and we are always happy to report, but thank you. It does keep us focused and it is great because we have got our internal goals, but we want to be accountable to not only ourselves, but to you all and the community we go through this process. Chair Furfaro: Well, again, on behalf of the Council, thank you for sharing so openly with us, we look forward to the next quarterly update, we look forward to the two (2) requests that I made of material and information prior to that, of course, and we are all available should you have any queries as well going forward. Mr. Greene: Great, thank you. We really appreciate it. Chair Furfaro: Thank you very much. I am going to need to...you took no public testimony? I am going to take some public testimony now, if there is any. Is there any public testimony? There being no one to provide public testimony, the meeting was called back to order, and proceeded as follows: COUNCIL MEETING 68 JUNE 25, 2014 Chair Furfaro: Discussion members? Mr. Kagawa. Mr. Kagawa: First of all, I would like to thank again, the developers for doing their presentation. It is going to be a long battle still. You can see it, but I want to make sure that the Council keeps its focus as well and does not require things that may hamper the development from going forward such as demanding an overpass be built. An overpass would be nice, however, I think it would possibly put out of the question whether Coco Palms can be rebuilt. I mean, it is such a tough thing to accomplish and I think the cost associated with it and the timetables to get it approve would just, I think, hamper the project from even moving forward. I do have an idea that I believe that a current crosswalk can work as long it is planned properly. For the people that live up that Wailua Homesteads, they know when that green light goes on, you need a lot of time for the cars to clear that left turn. That is adequate time to have people cross the main highway, I believe. So, we can make sure that we have no crosswalk on the Kapa'a end of the Wailua Homesteads road, but just using that Lihu`e side, I believe it can be accomplished. I think right turns can be accomplished just by having an additional lane and they can go when they are clear because most of the cars will tend to stay in the middle lane. So, I definitely feel it can be worked out presently. I do not think an overpass is a deal breaker and I certainly look at that as a luxury and I do not want to put that in front of the project. That is where I stand at least. Thank you. Chair Furfaro: Thank you. Other comments at this point? JoAnn. Ms. Yukimura: Yes, Mr. Chair. I talked recently to someone who personally saw three (3) people get hit trying to cross that road and that was before there were four (4) lanes because there still are not four (4) lanes. So, I think it is essential that there be a safe passageway and what I do not want is that the resort be allowed to be permitted and allowed to proceed, then we realize that it is a major problem, and then the public has to pay for something like that. So, it is a decision that the Council will not make, the Planning Commission, I believe, is going to make it, but I see it as a major issue in terms of it being a viable and safe resort. Chair Furfaro: Any further discussion? Mr. Bynum. Mr. Bynum: Just to chime in a little bit. So many changes and discussions have happened. I do not know where the status of the State Highways plans to underground utilities, for instance, in that area is, their four (4) lane project, and what their safety. So, I think there are some many things in flux that having these updates maybe will be helpful in terms of keeping us focused on this traffic issue because Councilmember Yukimura is absolutely correct. I lived in the Houselots for thirteen (13) years, I live in the Homesteads now. The State Highway plan is to eliminate the left turn into the Houselots. There is a lot of changes that reopening this resort, under these circumstances with this business plan, and a key to this discussion to me, is the Seashell Restaurant. If the Seashell Restaurant is part of the business plan and operation, then it complicates these transportation safety issues tremendously, I believe. The previous solution was an overpass. So, all of these discussions are good, but they are really complex. I assume that there is traffic engineers. The State, the County, and the Planning Department all have to come together on these issues. Anyway, thank you. COUNCIL MEETING 69 JUNE 25, 2014 Chair Furfaro: Any more discussion? First of all, I would just like to say this was a very good update. We have a clear understanding of where they are at with their financing, we have an understanding on a cost per unit turn key to open the facility, they have a quality operator, and the fact of the matter is the resort in the final stages, looks like it will employ about one and two-thirds (1 2/3) full-time equivalence (FTE) for employees. So, that is a number of jobs on a permanent basis. So, I look forward to the next update and we will see that in three (3) months. I want to thank the owners for being so honest with us and we look forward to some of those performas so we can digest it even further. Now we know what it is per key and we know what kind of average rate they have to draw to make it successful. So, on that note, do I have a motion to receive this update? Ms. Fountain-Tanigawa: Yes, you do. You have a motion and a second, Chair. Chair Furfaro: I have a motion and a second. The motion to receive C 2014-185 for the record was then put, and unanimously carried (Mr. Hooser is noted as not present.) Chair Furfaro: On that note, thank you again, Mike. Now, we need to move forward on the rest of our agenda? Ms. Fountain-Tanigawa: Yes, you do. C 2014-186 Communication (05/19/2014) from the Chief of Police, requesting Council approval to accept and utilize a donation from Donald H. Wilson, Retired Secret Service Agent, of an unfired Remington 40-XS Tactical Rifle, bolt action, 300 win Magnum caliber, Serial No. S 6654 983, valued at approximately $3,600, which will be assigned to and in the exclusive control of the Kaua`i Police Department's Special Services Team: Mr. Kagawa moved to approve C 2014-186 with thank—you letter to follow, seconded by Mr. Rapozo. (Mr. Hooser was noted as present.) Chair Furfaro: There is public comment once we actually receive the item. So, we have to wait for the motions. We have a motion and a second. Is there any public testimony? Is there any public testimony? There being no objections, the rules were suspended to take public testimony. FELICIA COWDEN: I am Felicia Cowden and the best I can tell, this money is a full on grant not to be...I do not have enough information about this, but something I am concerned about is that our police seems so heavily armed. I do not understand why we need so many guns and so much equipment. I just ask that whenever these things are brought forward, that there is actually a pretty close look at the grant requirements for how they are... Chair Furfaro: Felicia, I am going to clarify. It is not a grant. This is a single gift. Ms. Cowden: It is a gift? COUNCIL MEETING 70 JUNE 25, 2014 Chair Furfaro: Yes. Ms. Cowden: Okay. Chair Furfaro: Which requires Council approval. It is not a grant. Ms. Cowden: Okay, alright. Can I just say what my worry is? Chair Furfaro: Yes, go ahead. Ms. Cowden: When I see these grants, and the grants are measured in arrest and convictions, and I see that we have got all of these enormous military level equipment in a place where you make the paper for stealing a pack of cigarettes, I just get worried when I see one thousand percent (1,000%) in our incarceration rate in the past thirty (30) years. So, anytime...I was not expecting that, but anytime I hear stronger equipment coming up, I am always just saying, "Okay, better not be matched by having to arrest somebody to have that." So, it is just a gift. So, that is better and we have to use this armament responsibly. That is my request. Thank you. Chair Furfaro: Thank you. Anyone else wanting to offer testimony? There being on further testimony, the meeting was called back to order, and proceeded as follows: Chair Furfaro: Members, anyone want to have further discussion? Mr. Hooser. Mr. Hooser: When I first saw the item on the agenda, I did not...it is a gift, it is a brand new gun, apparently, a very big gun, tactical rifle, and it kind of begged the question to me, what kind of weaponry does already exist in the Police Department and do they need more rifles? If it is going to get it off the streets, then I definitely support it, but I am concerned about just accepting another 300 magnum caliber. That is a pretty big gun, I guess, right, and what it will be used for, do we really need it, et cetera. So, I would like to put a request to the Police Department to find out an inventory of their weaponry to see what they have for starters. Thank you. Chair Furfaro: Mr. Kagawa. Mr. Kagawa: Just in reading this, it looks like it is a sniper rifle and like Councilmember Hooser said, it seems like it is pretty powerful. It is three thousand six hundred dollars ($3,600) value. So, it is some type of high caliber, good rifle, but I think every rifle or gun has its purpose and in a situation of danger, I think, it is good to have the proper equipment if it means keeping our public safe. Like Councilmember Hooser, I would be interested to see our inventory, what we do have. Thank you. Chair Furfaro: So, would the Clerk's Office please make a note that for a future agenda item first, we would like to have a report from the COUNCIL MEETING 71 JUNE 25, 2014 Police Department on the status of our weapons and an inventory of such, and we will put it on as a future agenda item. Acceptable, Mr. Hooser? Mr. Hooser: Yes. Chair Furfaro: Mr. Kagawa, future item? Okay. Further discussion? The motion to approve C 2014-186 with thank—you letter to follow was then put, and carried by a vote of 6:1:0 (Mr. Hooser voting no). Chair Furfaro: Next item. C 2014-187 Communication (06/03/2014) from the Acting Director of Personnel Services, requesting Council approval to dispose of Civil Service Recruitment and Examination records to include employment applications, resumes, transcripts, copies of driver's licenses, and other attachments; examination materials (used and unused test booklets and answer sheets) for Fiscal Years 2002-2007, pursuant to Section 46-43, Hawai`i Revised Statutes and Resolution No. 49-86 (1986) as amended, for the following reasons: 1. Kept for over seven (7) years and are no longer of use or value. 2. Kept for over two (2) years and original verified to be on file with NEOGOV (Recruitment Computerized System). 3. Originals scanned and attached, stored electronically. Mr. Kagawa moved to approve C 2014-187, seconded by Mr. Rapozo. (Mr. Kagawa was noted as not present.) Chair Furfaro: There is a motion to approve and a second. Members, would you mind if I suspend the rules? I want to ask the County Attorney a question. So, County Attorney, please. There being no objections, the rules were suspended. ALFRED B. CASTILLO, JR., County Attorney: Good afternoon Council Chair and Councilmembers. County Attorney, Al Castillo. Chair Furfaro: Mr. Castillo, just some clarification for myself, up to seven (7) years, these records are required to be kept. Anything disposed of prior to seven (7) years requires County Council approval? Anything after the seven (7) years, at what point is it the Administration's decision without going to the Council? Mr. Castillo: Well, that is a... Chair Furfaro: I can send it over as question. Mr. Castillo: Yes, no, no. COUNCIL MEETING 72 JUNE 25, 2014 Chair Furfaro: If it could be researched, I would really like to know. Mr. Castillo: No, it is a question that has different compartments to my answer because I guess the way that you phrased it is at what point in time does it become a Council question and what point in time is it not a Council questions. Chair Furfaro: Yes. Mr. Castillo: I think what confuses the matter is the fact that in 2008 there was a Resolution and the Resolution basically called for a change from a Committee to a body of three (3) people, I believe the County Council, the County Attorney, and the Finance Director. As we looked at the Resolution, the question becomes whether or not the Resolution is binding on the administrative Departments. The way that I am looking at it is the Departments can be guided by the applicable law regarding destruction of documents. So, whether or not it is required by the Council, if we were to recognize the Resolution, there is the requirements of the Resolution, but under the law, it is not necessary. Chair Furfaro: I think the law basically requires the seven (7) years. Mr. Castillo: Yes. Chair Furfaro: I think after that, it does not matter. Mr. Castillo: Yes, but Council Chair, the question is whether or not the current law requires that the Council weigh in on whether or not these particular records can be destroyed. We could do a legal opinion, but right now, what I am saying is that the nature of these documents, the way that I legally analyze it is whether or not there is a legal requirement, these records are over seven (7) years, the statue of limitations have already passed, these documents are basically submittals for employment, and we do not necessarily need to keep them. Chair Furfaro: Understood. Mr. Castillo: I am sorry. Chair Furfaro: No, understood. For employment and for recruitment for the last seven (7) years? Mr. Castillo: Yes. Chair Furfaro: Fine. Thank you. You have answered my question. I will send over a communication over though. Thank you, Al. Mr. Castillo: You are welcome. Chair Furfaro: Is there anyone in the audience that wishes to testify on this item? There being no one to provide testimony, the meeting was called back to order, and proceeded as follows: COUNCIL MEETING 73 JUNE 25, 2014 Chair Furfaro: Members, what would be your pleasure? I have a motion to approve. Ready for the question? The motion to approve C 2014-187 was then put, and unanimously carried (Mr. Kagawa is noted as not present.) Chair Furfaro: 7:0, please. C 2014-188 Communication (06/05/2014) from the Committee on the Status of Women Chair, requesting Council approval to seek funding in the amount of $10,000 from the Hawai`i State Commission on the Status of Women, to support their ongoing advocacy and work towards ensuring equality for women and girls by acting as a catalyst for positive change through advocacy, education, collaboration, and program development: Ms. Yukimura moved to approve C 2014-188, seconded by Mr. Bynum. Chair Furfaro: There is a motion to approve and a second. Is there anyone here that wishes to speak on this item? There being no objections, the rules were suspended. (Mr. Kagawa was noted as present.) Chair Furfaro: Ladies, welcome. If I could have each of you introduce yourself, and Regina, we will start with you. REGINA CARVALHO, Committee on the Status of Women Chair: Good afternoon Honorable Chair Furfaro and Councilmembers. I am going to go ahead and discuss what we are here for and then I will introduce them. Is that okay with you, Chair Furfaro? Chair Furfaro: That is fine, but you have to introduce yourself one more time since the microphone was off. Ms. Carvalho: Alright. Again, I am Regina Carvalho and I am the Chair of the Kaua`i Committee on the Status of Women. The County of Kauai Committee on the Status of Women is humbly seeking your approval to request funding from the Hawai`i State Commission on the Status of Women to support our ongoing work towards equality for women and girls by acting as a catalyst for positive change through advocacy, education, collaboration, and program development. The Committee has actively supported, volunteered, and committed to many projects, events, and activities in the past. We are ambitiously planning to do more events in this Fiscal Year 2014-2015. Our efforts are outlined in the attached request for funding, which will provide the Committee with additional money to give more opportunities to women and girls of Kauai. On behalf of the Committee members, I would like to extend my greatest appreciation for your time and consideration for this request. I have here with me, this is Lisa Ellen Smith. She is our Kauai Status of Women ex-officio and she represents us at the State level on the Hawaii Committee on the Status of Women, and next to here is Edie Ignacio-Neumiller. She is our Vice Chair for our Kaua`i Status of Women Chair. So, we are here today just to hope you would support us on this and if you have any questions, if you can take a look at the things that we provided you, and go ahead. COUNCIL MEETING 74 JUNE 25, 2014 Chair Furfaro: Thank you for being here ladies. The rules are suspended. Are there members that have questions on this application for this ten thousand dollars ($10,000) grant? JoAnn, would you like to have the floor? Councilmember Yukimura, you have the floor. Ms. Yukimura: Yes, thank you. Thank you, Regina, Lisa, and Edie. I really appreciate the work you have done to extend the reach of the Committee. You seem to be doing so many more things now and I have been able to attend some of them and have been very impressed. So, I see that this is a grant that you would be seeking. Ms. Carvalho: Yes. Ms. Yukimura: And so you are asking for our approval to go for that grant. You have here, Rise of the Wahine documentary film speakers. They came once to anticipate the film that they will be developing, but this line item then is for the actual film... Ms. Carvalho: Finished, yes. Ms. Yukimura: Finished film to be shown here on Kaua`i? Ms. Carvalho: Yes. Ms. Yukimura: Would you explain a little bit about what this film is about? LISA ELLEN SMITH, Kaua`i Representative to the State Commission: This film does focus on Raise of the Wahine, the University of Hawai`i (UH) Volleyball Team and Title XI in gender equality and some of the issues that they have faced and will face. There was a recent Resolution and I can read it from my list, that was submitted by the House of Representatives and submitted in its final form to help support Title XI at UH. So, this is kind of us trying to continue that support here as well as the money will be for flying the filmmakers here, for their stay, and the facilities we will be using. Ms. Yukimura: Well, it is a story that needs to be told. Ms. Carvalho: Yes, it is. Ms. Yukimura: It is a really amazing story about the Women's Volleyball Team at UH. I am very excited to see it when it comes. So, thank you for creating that opportunity for all of the people of Kaua`i to come see it. Chair Furfaro: Further questions? Well, I think you have demonstrated to us, with your presence here, how important this is and obviously, there is a motion here for us to approve the application. So, on that note, I will see if there is anyone else that would like to testify before I call for the vote. Thank you. Ms. Carvalho: Great. Chair Furfaro: Yes, go right ahead. COUNCIL MEETING 75 JUNE 25, 2014 Ms. Carvalho: Chair Furfaro, I just wanted to, in case we do not come back up here, I just wanted to let people know that are watching that we do have a meeting. Our Women's meeting is every Wednesday, I mean, the third Wednesday of every month at 5:00 p.m. and we welcome volunteers and people to come and contact the Boards and Commissions if they have any ideas or things that they would like to share with us. We want to continue to do outreach. Chair Furfaro: Okay, and is this the number here where they do...is this the telephone number? Ms. Carvalho: It should be the Boards and Commission Office there listed. Chair Furfaro: Yes, 241-4920? Ms. Carvalho: Yes, that is correct. Chair Furfaro: Okay. I will repeat that one (1) more time. 241-4920, and may I ask you, you gave us the dates and the times for the meeting, and the meetings are where? Ms. Carvalho: It is often in Conference Rooms...the ones... Chair Furfaro: Please, go ahead. You have this time. Ms. Carvalho: I know where it is, but I do not know exactly what it is called. Ms. Ellen Smith: I apologize. It is in the Mokihana Building. No. The Pi`ikoi Building. Chair Furfaro: The Mohikea Building. Ms. Ellen Smith: The Mohikea Building. Chair Furfaro: The legendary voyaging King of Kauai. Ms. Ellen Smith: Yes, at 5:00 p.m. on the third Wednesday of the month. Chair Furfaro: Thank you. Ms. Ellen Smith: And it usually goes about an hour, but we are always welcoming anyone that would like to come speak at the event. Ms. Carvalho: Thank you. Ms. Yukimura: Further clarification. Chair Furfaro: Further clarification. You have the floor, Councilmember Yukimura. COUNCIL MEETING 76 JUNE 25, 2014 Ms. Yukimura: So, it is actually an open meeting where people can come and just observe too, right? They do not have to be on the agenda, but they can just come and watch? Ms. Carvalho: They can come and just observe and our agenda is posted ten (10) days before the meeting like all of the other Boards and Commissions, but we are a Committee. Ms. Yukimura: Especially interested women then? Ms. Carvalho: Yes. Ms. Yukimura: Very good. Ms. Carvalho: Those that are passionate and dedicated to this kind of thinking. Thank you. Ms. Yukimura: Very good. Thank you. Ms. Ellen Smith: Lisa Ellen Smith speaking, real quick. I wish to extend our apologies. I found out today that we did receive the funding and we will be given the money from the State Commission. Our proper procedure is to, and we were educated in our previous meeting about this, to ask permission first and we will always do so in the future. I do apologize. Chair Furfaro: We accept your apology. We are thrilled you received the money. Vice Chair Chock. No? Mr. Chock: Just you are approved to apply for it and congratulations that you got it. Chair Furfaro: Yes. So, I will repeat that again. The meeting location at the Mohikea Building meeting rooms 2A and 2B, it is the third Wednesday of each month, and contact information, 241-4920. Did you wish to add anything else Councilmember Yukimura? Thank you very much. Is there anyone in the audience that wishes to give testimony? There being no one to provide testimony, the meeting was called back to order, and proceeded as follows: Chair Furfaro: There is a motion to approve, accept and deposit, I guess at this point. The motion to approve C 2014-188 was then put, and unanimously carried. Chair Furfaro: Congratulations again, ladies. Thank you for coming. We will move to the next item. C 2014-189 Communication (06/10/2014) from the Prosecuting Attorney, requesting Council approval to apply for, receive, and expend the Edward J. Byrne Memorial Justice Assistance Grant (JAG) Program Fiscal Year (FY) 2014 Local Solicitation Grant in the amount of $43,381, to continue employment of the 1.0 Full-Time Equivalent (FTE) Process Server to conduct process serving for the Office of the Prosecuting Attorney, purchase office supplies, and allow the Kauai Police COUNCIL MEETING 77 JUNE 25, 2014 Department Officers the ability to attend training: Mr. Kagawa moved to approve C 2014-189, seconded by Ms. Yukimura. Chair Furfaro: I have a motion to approve from Mr. Kagawa and a second. Any further discussion? Anyone willing to testify on this item? There being no objections, the rules were suspended to take public testimony. There being no one to provide testimony, the meeting was called back to order, and proceeded as follows: The motion to approved C 2014-189 was then put, and unanimously carried. Chair Furfaro: 7:0. Let us go to the next item, please. Ms. Fountain-Tanigawa: This is on page 4, Claims. CLAIMS: C 2014-192 Communication (05/29/2014) from the Deputy County Clerk, transmitting a claim filed against the County of Kaua`i by Torao Nakamura, for medical bills and personal injury, pursuant to Section 23.06, Charter of the County of Kaua`i: Mr. Kagawa moved to refer C 2014-192 to the County Attorney's Office for disposition and/or report back to the Council, seconded by Ms. Yukimura. C 2014-193 Communication (06/02/2014) from the Deputy County Clerk, transmitting a claim filed against the County of Kaua`i by Charles H. Lass, for damage to his vehicle, pursuant to Section 23.06, Charter of the County of Kaua`i: Mr. Kagawa moved to refer C 2014-193 to the County Attorney's Office for disposition and/or report back to the Council, seconded by Ms. Yukimura. C 2014-194 Communication (06/03/2014) from the Deputy County Clerk, transmitting a claim filed against the County of Kaua`i by Dominador Gorospe, for damage to his vehicle, pursuant to Section 23.06, Charter of the County of Kaua`i: Mr. Kagawa moved to refer C 2014-194 to the County Attorney's Office for disposition and/or report back to the Council, seconded by Ms. Yukimura. C 2014-195 Communication (06/10/2014) from the Deputy County Clerk, transmitting a claim filed against the County of Kauai by Ronald J. Horoshko for Cloroshko LLC., dba, Birdie's Cafe and Pub, for loss of revenue and compensation for perishable foods, pursuant to Section 23.06, Charter of the County of Kaua`i: Mr. Kagawa moved to refer C 2014-195 to the County Attorney's Office for disposition and/or report back to the Council, seconded by Ms. Yukimura. Chair Furfaro: Thank you. I have a motion by Mr. Kagawa, a second by Councilmember Yukimura. Mr. Rapozo: Mr. Chair, I just have a... Chair Furfaro: Mr. Rapozo, you have the floor. Mr. Rapozo: Yes, I have concerns with C 2014-195, as the claimant is the spouse of one of the Deputy County Attorneys. I guess my question, COUNCIL MEETING 78 JUNE 25, 2014 we can send over in writing, we do not have to do it on the floor, is whether or not that office should be conflicted out. Chair Furfaro: Oh, okay. Mr. Rapozo: Because it is the spouse of a Deputy County Attorney. So, it just does not seem appropriate for that office to be looking at that claim. So, if I could, maybe if we would do C 2014-192, C 2014-193, and C 2014-194 separately; and then if we could defer C 2014-195 until we get a response from the County Attorney as far as the conflict. Chair Furfaro: So, we will be sending a correspondence over requesting information on the conflict and for this time, may I ask for a deferral on C 2014-195? Mr. Rapozo moved to defer C 2014-195, seconded by Mr. Chock, and unanimously carried. Chair Furfaro: Thank you. May I now have a motion on C 2014-192, C 2014-193, and C 2014-194? Mr. Kagawa moved to refer C 2014-192, C 2014-193, and C 2014-194 to the County Attorney's Office for disposition and/or report back to the Council, seconded by Mr. Rapozo, and unanimously carried. Chair Furfaro: Thank you. We will send that letter over, Mr. Rapozo. Mr. Rapozo: Thank you. COMMITTEE REPORT: COMMITTEE OF THE WHOLE: A report (No. CR-COW 2014-10) submitted by the Committee of the Whole, recommending that the following be Received for the Record: "Bill No. 2497, Draft 1 — 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 approval of the report, seconded by Mr. Rapozo. Chair Furfaro: Discussion? Anyone wanting to testify? There being no objections, the rules were suspended to take public testimony. There being no one to provide testimony, the meeting was called back to order, and proceeded as follows: The motion for approval of the report was then put, and unanimously carried. Chair Furfaro: 7:0. Next item. COUNCIL MEETING 79 JUNE 25, 2014 RESOLUTION: Resolution No. 2014-37 — RESOLUTION PROPOSING A CHARTER . AMENDMENT RELATING TO THE PUBLIC ACCESS, OPEN SPACE, AND NATURAL RESOURCES PRESERVATION FUND: Mr. Rapozo moved to schedule public hearing for July 9, 2014, then referred to the July 23, 2014 Council Meeting, seconded by Ms. Yukimura. Chair Furfaro: So, that was a moving to schedule a public hearing on July 9th. Am I correct, Mr. Rapozo? Mr. Rapozo: Correct. Chair Furfaro: Thank you. I have a motion and a second. The motion to schedule public hearing for July 9, 2014, then referred to the July 23, 2014 Council Meeting was then put, and carried by the following vote: AYES: Bynum, Chock, Hooser, Kagawa, Rapozo, Yukimura, Furfaro TOTAL— 7, NOES: None TOTAL— 0, EXCUSED & NOT VOTING: None TOTAL — 0, RECUSED & NOT VOTING: None TOTAL— 0. Chair Furfaro: Next. BILL FOR FIRST READING: Proposed Draft Bill (No. 2547) —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. Kagawa moved for passage of Proposed Draft Bill (No. 2547) on first reading, that it be ordered to print, that a public hearing thereon be scheduled for July 23, 2014, and that it thereafter be referred to the Committee of the Whole, seconded by Ms. Yukimura. Chair Furfaro: Thank you, Mr. Kagawa, seconded by Councilmember Yukimura. Discussion? This is a voice vote? No, this is money. This will be a roll call. The motion for passage of Proposed Draft Bill (No. 2547) on first reading, that it be ordered to print, that a public hearing thereon be scheduled for July 23, 2014, and that it thereafter be referred to the Committee of the Whole, was then put, and carried by the following vote: FOR PASSAGE: Bynum, Chock, Hooser, Kagawa, Rapozo, Yukimura, Furfaro TOTAL— 7, AGAINST PASSAGE: None TOTAL— 0, EXCUSED & NOT VOTING: None TOTAL— 0, COUNCIL MEETING 80 JUNE 25, 2014 RECUSED & NOT VOTING: None TOTAL — 0. Ms. Fountian-Tanigawa: Seven (7) ayes. Chair Furfaro: Seven (7) ayes. Thank you. Okay, we will go to "L" then, Bill for Second Reading. BILLS FOR SECOND READING: Bill No. 2497, Draft 1 — 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 Ms. Fountain-Tanigawa: The Committee of the Whole recommended that Bill No. 2497, Draft 1 be Received for the Record. Mr. Hooser moved to Receive Bill No. 2497, Draft 1 for the Record on second and final reading, seconded by Mr. Rapozo. Chair Furfaro: I have a motion to receive and a second. Further discussion? If not, roll call, please. The motion to Receive Bill No. 2497, Draft 1 for the Record on second and final reading was then put, and carried by the following vote: FOR RECEIPT: Bynum, Chock, Hooser, Kagawa, Rapozo, Yukimura, Furfaro TOTAL— 7, AGAINST RECEIPT: None TOTAL— 0, EXCUSED & NOT VOTING: None TOTAL— 0, RECUSED & NOT VOTING: None TOTAL— 0. Ms. Fountain-Tanigawa: Seven (7) ayes to receive. Chair Furfaro: Seven (7) ayes. Now, we have Executive Sessions on our list and all other business is complete. Let us look at other business that we did not complete first. Ms. Fountain-Tanigawa: So, Chair, on page 2, we have C 2014-125, which is a companion to ES-722 and we have ES-736 and ES-738. Chair Furfaro: We are going to go into Executive Session on these items. Can I have the County Attorney up? BC, you okay on tape there? I got a five (5) minutes note here. So, Al, two (2) minutes here before the tape runs out. There being no objections, the rules were suspended. Mr. Castillo: Council Chair, Councilmembers, Al Castillo, County Attorney. Council Chair, I am going to read ES-722, ES-736, and ES-738. (Mr. Bynum was noted as not present.) COUNCIL MEETING 81 JUNE 25, 2014 EXECUTIVE SESSIONS: ES-722 Pursuant to Hawaii 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 concerning the coverage provided by the County's insurance policy with Everest National Insurance company for attorneys' fees arising in connection with the lawsuit Tim Bynum vs. County of Kauai, et al., Civil No. CV12-00523 JMS-RLP (United States District 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. ES-736 Pursuant to Hawaii Revised Statutes (HRS) Sections 92-4 and 92-5(a)(4), and Kauai County Charter Section 3.07(e), the Office of the County Attorney requests an Executive Session with the Council to provide the Council with a briefing on Michael Guard Sheehan's Mediation Proposal Regarding Intermediate Court of Appeals CAAP 11-0000601; Fifth Circuit Court Civil No. 11-1-0098 (Condemnation); U.S. District Court Civil No. CV12-00195 HG BMK; and Fifth Circuit Court Civil No. 11-1-0206, 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. ES-738 Pursuant to Hawaii Revised Statutes (HRS) Sections 92-4 and 92-5(a)(4), and (8) and Kauai County Charter Section 3.07(e), the Office of the County Attorney requests an Executive Session with the Council to provide the Council with a briefing on the proposed pre-litigation settlement offer involving the potential lawsuit in Federal District Court entitled Carl Ragasa v. Kauai County et al., 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. There being no objections, the meeting was called back to order, and proceeded as follows. Mr. Kagawa moved to convene in Executive Session for ES-722, ES-736, and ES-738, seconded by Ms. Yukimura. Chair Furfaro: I would like to do a roll call vote. It has been my practice since I have been Chair. We have a motion to go into Executive Session and a second. The motion to convene in Executive Session for ES-722 was then put, and carried by the following vote: FOR EXECUTIVE SESSION: Chock, Hooser, Kagawa, Rapozo, Yukimura, Furfaro TOTAL — 6, AGAINST EXECUTIVE SESSION: None TOTAL— 0, EXCUSED & NOT VOTING: None TOTAL — 0, RECUSED & NOT VOTING: Bynum TOTAL— 1. Mr. Kagawa moved to convene in Executive Session for ES-736 and ES-738, seconded by Ms. Yukimura. COUNCIL MEETING 82 JUNE 25, 2014 The motion to convene in Executive Session for ES-736 and ES-738 was then put, and carried by the following vote: FOR EXECUTIVE SESSION: Bynum, Chock, Hooser, Kagawa, Rapozo, Yukimura, Furfaro TOTAL— 7, AGAINST EXECUTIVE SESSION: None TOTAL— 0, EXCUSED & NOT VOTING: None TOTAL— 0, RECUSED & NOT VOTING: None TOTAL— 0. (Mr. Bynum was noted as not present.) Ms. Fountain-Tanigawa: Seven (7) ayes. Chair Furfaro: Thank you. Now, let me ask you, are any of these items requiring us to come back? Ms. Fountain-Tanigawa: C 2014-125, the Special Counsel request for the Bynum issue and... Chair Furfaro: So, I will tell BC to wait for us to come back out. BC, okay? We have the votes to go into Executive Session and we will be back. Thank you. There being no objections, the Council recessed at 2:46 p.m. to convene in Executive Session. The meeting was called back to order at 3:57 p.m., and proceeded as follows: (Mr. Bynum was noted as not present.) Chair Furfaro: We are back from our Executive Session. We have one (1) piece of business to take care of. Ms. Fountain-Tanigawa: Yes. Chair Furfaro: Can I ask the Clerk to please read the item? Ms. Fountain-Tanigawa: This is on page 2, the last item of the day. COMMUNICATION: C 2014-125 Communication (04/17/2014) from the County Attorney, requesting authorization to expend funds up to $15,000 to retain Special Counsel to advise the Council concerning coverage under the County's insurance policy with Everest National Insurance Company, in connection with the lawsuit Tim Bynum vs. County of Kaua`i, et al., Civil No. CV12-00523 JMS-RLP (United States District Court), and related matters: Ms. Yukimura moved to approve C 2014-125, seconded by Mr. Rapozo. Chair Furfaro: I have a motion to approve and a second. Further discussion? If not, we will do a roll call on this, please. COUNCIL MEETING 83 JUNE 25, 2014 The motion to approve C 2014-125 was then put, and carried by the following vote: FOR APPROVAL: Chock, Hooser, Kagawa, Rapozo, Yukimura, Furfaro TOTAL— 6*, AGAINST APPROVAL: None TOTAL— 0, EXCUSED & NOT VOTING: None TOTAL— 0, RECUSED & NOT VOTING: Bynum TOTAL — 1. (*Pursuant to Rule No. 5(b) of the Rules of the Council of the County of Kaua`i, Mr. Kagawa is noted as voting silent, but shall be recorded as an affirmative for the motion.) Chair Furfaro: Thank you very much. I think this concludes our business for today. Am I correct? To BC, we are now adjourned for the day. Thank you, everyone. ADJOURNMENT. There being no further business, the Council Meeting adjourned at 3:58 p.m. •espect• submitted, i/ .'.s+' J• � � : . TAIN-TANIGAWA Deput unty Clerk :aa