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HomeMy WebLinkAbout03/27/2015 Administration's Overview 3/27/2015 DEPARTMENTAL BUDGET REVIEWS 2015-16 ADMINISTRATION'S OVERVIEW Administration's Budget Overview Honorable Mason K. Chock Honorable Gary L. Hooser Honorable KipuKai Kuali`i Honorable Mel Rapozo Honorable JoAnn A. Yukimura Honorable Arryl Kaneshiro Excused: Honorable Ross Kagawa BERNARD P. CARVALHO, JR., Mayor: Good morning Councilmembers, Council Chair, very happy to be here again. Here we go. From the delivery that we did at our State of the County, nothing has changed from that delivery. I was hoping that we can dive right into the different parts of the budget. I will do the overview supported by our team here. I just wanted you to understand that this was a tough budget. It will continue to be a tough budget. All of our team members behind of me have done an awesome job, a tremendous job in trying to find every single way to come to place it on the table and at least discuss all kinds of ways to be more efficient and to look how we can be sustainable. I will talk about what it means to be sustainability in a little while. Everyone has their own definition of sustainability as far as I am concerned. How can we really move forward? I know we had a discussion earlier as team members to be respectful and as we move forward our door has always been open to each and every one of you. You can speak to any one of our Department Heads. You have access to them 24/7, I am going to say...during the work day. We will leave it at that. I am going to through that out. During the work day. I mean that sincerely. That is why I said that. They are available and willing to talk. Should you have any questions, I want the people listening to know that we have that relationship. And that is important for more. So there should be no reason why yes, some things may not come across as soon as you may want, but the attention is being placed on whatever that particular discussion or need is. I want that to be clear that we are trying our very best to be ready, be available, and if you have any questions, so when we get to the floor we can have healthy discussion and move forward. I just want to make sure that that is clear. More importantly, how we get through this process. Again, working closely with each and every one of you and our staff working closely with your staff is a big part of this. I am happy with our budget team and the expertise there. We are trying to really look at all of the numbers and to come out with a good fiscal story, so both of us can understand and navigate through that. Should there be any need in the future, I am hoping that you can give us the chance to come to the table. Please give us a chance before you make any tough decisions, to come to the table to talk. I am telling you that our team is trying to look in depth to still provide the services to the people. How can we manage ourselves? How can we be fiscally responsible? How can we talk about today, tomorrow, and the future? It is all intertwined in the discussion. I just wanted to open with that. Our County of Kauai Fiscal Year 2015-2016 budget overview. Next slide. First slide. Do I press this? How does this work? You do that. Moving in the right direction. That is where we want to go. We want to move in the right direction. We are not going to be perfect, but we are going to be better and better every time. So in the General Fund the fund balance used to balance budgets, just an overview of the past fiscal years. Fiscal Year March 27, 2015 Administration's Budgetary Overview (ss) Page 2 2013 with eighteen million five hundred thousand dollars ($18,500,000), Fiscal Year 2014 eleven million seven hundred thousand dollars ($11,700,000), Fiscal Year 2015 three million one hundred thousand dollars ($3,100,000), and Fiscal Year 2016 zero dollars ($0). We are going to explain that. I know that some of you have questions on that, but again, the opportunity has always been there to ask your questions. The overall total fund balances used to balance the budget was six million five hundred thousand dollars ($6,500,000) less than Fiscal Year 2015. Our budget is virtually flat, increasing by only 0.6%. Revenues increased by 3.8% or six million four hundred thousand dollars ($6,400,000) million. All of this again, Councilmembers, working closely with our Department Heads to come up with these numbers. KEN M. SHIMONISHI, Director of Finance: Overall, our Operating Budget if you look at it by elements, by categories, you can see that salaries and related benefits make up 65.2% of the budget. Operations, 25.2%. Our utilities, 4%. Our debt service 5%. Then our self-insurance and open space at 0.6%. Committee Chair Kaneshiro: Sorry, can you state your name for the record? Mr. Shimonishi: Ken Shimonishi, Director of Finance. Again looking at the budget elements by Department...If you look at the salaries, operations, and so forth, you can see that the components that make up the budget, Public Works makes up the largest sector. Public Works makes up the largest sector in the General Fund, Highway Fund, Solid Waste Fund, and Sewer Fund; they are roughly 31% of the total operating budget. They are followed by Police at 18%, Fire at 15.6%, Parks and Recreation, Finance, and Transportation and twelve others at 16.9%. If we focus on the General Fund being the largest fund that we have and we look at the budget elements again by category, you can see that 82.6% of the General Fund is in fact related to salaries, benefits, and collective bargaining. 14.4% in operations and utilities of 3%. Sticking with the General Fund elements by department, our core departments, Police and Fire make up the largest components of our General Fund, roughly 48% of our General Fund budget. Public Works at 10.1%, Finance at 9.3%, followed by Parks, Transportation, Prosecuting Attorney, County Clerk, and nine other departments that make up the remaining 14%. Mayor Carvalho: Some of our savings and efficiency measures continue. We made sure we tried to continue to budget closer to actuals. Regarding positions, we eliminated 7 positions and dollar funded 13, resulting in an estimated $1.9 million in savings used to offset current bargaining increases for UPW, Unit 13, HFFA, and SHOPO and addressing all of the collective bargaining pieces. Cuts, we spread across departments resulting in $3.1 million in reductions in operating expenditures from Fiscal Year 2015. That was my point earlier when I said that our departments are looking internally at how we can really look at the cuts that needed to be made and at the same time provide the services to our people. The motor pool initiative resulting in fleet reduction of 12 vehicles, and eliminating the bulk of mileage allowance budgets. Again another way to consolidate and everybody gets to utilize one of our vehicles to do their business. It is consolidated and we look forward to continuing this effort in our motor pool program. Continuing on savings and efficiency measures, litigation team a big, big part and restructuring the whole County Attorney's Office and I am very proud of the Office and March 27, 2015 Administration's Budgetary Overview (ss) Page 3 the team members there. They are ready to go, vibrant, and looking at every which way to be efficient and to provide the services for both of us, the Administrative and Council side of the operations. They were restructured to insulate members and therefore reducing the anticipated need for special counsel. We are going to take care of business in-house, as much as we can, knowing that we have the opportunity to go outside, but we want to take care of business in-house and we are going to assemble a team in-house to address that. KPD Asset Forfeiture Fund leverage for matching portion of the anticipated grant purchase of body cams. We had that discussion before and other equipment allowances. We are looking at how we can leverage that Fund. The Open Space Fund, the proposed contribution reduction from 1.5% to 0.5% and leaves ample funding available in the Open Space Fund of four million nine hundred thousand dollars ($4,900,000) as of Fiscal Year 2015 with an additional five hundred sixty-three thousand dollars ($563,000) being contributed in the Fiscal Year 2016 budget. Again, we tried to look every which way to provide opportunities. I totally support the Open Space program, but in this particular case, we had to look in every which way. You will see what I mean as we go through the discussions. Additional needs, unknown and not budgeted. Bargaining impacts for Units 2, 3, 4, and 14, blue-collar supervisors, white-collar supervisors, and lifeguards. Again, we have to look at that, be mindful of that, and prepare for that. You will see what I mean as we move forward and navigating some of the numbers that will be forthcoming so you can understand some of the decisions that we have to make. Repair and maintenance has increased to address highways and solid waste facilities while keeping General Fund budget at five hundred seventy-five thousand dollars ($575,000). Of course, our police vehicles, leased four new patrol vehicles and allow eight new subsidized vehicles. That subsidized program has launched and we need to continue to look at that program. Equipment replacement and a wastewater 1/6" sewage pump in solid waste and we wanted to share with you where we are at with all of these additional needs. 5 roll-up bins for hauling, one tarp deployment machine to cover the landfill daily, routing software for efficient route programming and retention, and lease two additional automated refuse trucks and one hook lift truck. All of these are to support our efforts to move to automated pickup as we move to Pay-As-You-Throw. All of the programs are addressing our aggressive efforts to manage our waste and our diversion programs. All of them are tied in to this. In our Parks Department, we replaced one crew cab. This was at the top of the replacement list created by our Auto Maintenance Shop. So we are looking at our replacement and maintenance needs. For our Ocean Safety Bureau, we are replacing two trucks that are used daily for transporting equipment and jet skis. As you know, they do good work for routine and emergency response. Some of our operational improvements include the formation of our new Department of Human Resources and they are working closely and diligently with our Department Heads, with Janine Rapozo, our Director there and her team. They are providing supervisory training and I want to make sure from our Department Heads to the middle manager, everybody has the opportunity to have the tools that they need to manage and move forward our operations in county government. So we look forward to more opportunities at all levels, but mainly the management and supervisorial level. Electronic procurement for goods and services bids and anticipated rollout towards the end of the Fiscal Year. Again our Procurement Office, Ernie Barreira and his team are really looking to being more efficient and getting the whole process at a different level to be more responsive for business and opportunities. Agency restructuring, continuation of our improvements, and exploring creative ways to do more with less. Some March 27, 2015 Administration's Budgetary Overview (ss) Page 4 of the examples includes the Office of the Mayor, Boards and Commissions...we eliminated a vacant position and able to reduce the frequency of some of the board meetings and of course with the members concurrence. We did go to every board and commission meeting to present this and talk to them and include them in the discussion on the budget. We explained what we are looking at, how we are managing things, what we need to address, and how we need to make sure that we address their needs as well because of their volunteerism on the various boards and commissions. Agency on Elderly Affairs, we dollar funded one position and reassigned duties within the Agency. Working closely with Kealoha and our team there, they managed to do this internally. We have that before you. The Office.of Economic Development, we eliminated the Enforcement Specialist related to Ordinance No. 960 and the Agricultural Specialist with the OED Director taking the lead on the Agriculture sector. We shifted duties and responsibilities regarding agriculture and I feel comfortable with how we have restructured there with other staff reassignments in addition to that. In Public Works, we eliminated the Environmental Services Engineer and we upgraded our Diversion Specialist position to provide a Civil Service Engineer IV and more additional support there. Direct services. We did receive great support from this particular area and we look forward to more support there. Revenues, we created two new real property tax classes. The Residential Investor class increased revenue by nine hundred thousand dollars ($900,000). A Commercialized Home Use class resulted in a net reduction in taxes of seven hundred six thousand dollars ($706,000). Our Time Share units' assessment methodology change resulted in one million seven hundred fifty thousand dollars ($1,750,000) increase in revenue and the remaining property tax revenue increased due to improving market conditions. That is another big piece which increased assessed values combined with new construction. I too, like you, we do not want to be raising taxes or fees, but we need to look at every single way possible, and how it is going to be better to manage down the road. Therefore, you have that discussion forthcoming. Mr. Shimonishi: Looking at the revenues again on the real property and it is where we can note that the Homestead class represents 30.9% of the gross real property valuation, with generous exemptions, dedication programs, and a favorable tax rate, only 11.3% of the revenue is attributed from the Homestead Class. So if you look at the pie chart on the left, you can see that the yellow highlighted section shows you the Homestead class valuation of six billion three hundred million dollars ($6,300,000,000) or 30.9% of the total. Then we apply our exemptions, dedications, and the lower tax rate, you can see that on the chart on the right, they actually pay 11.3% of the total real property tax revenue. I think the Council and the Administration has done a good job at sheltering this population, our residents who live in our homes and we use it solely for that, primary residents, to keep the taxes as minimal as possible. Mayor Carvalho: Revenue opportunities, Vehicle Weight Tax, there was a healthy discussion Wednesday on this. First of all, I want to apologize for not being present, but at the same time, I appreciate the opportunity to be present. You know Council Chair that we have that relationship where you can give us a call and we will come over immediately. Our team members were ready and willing to come across. Interesting that on first reading, you made a decision. I personally do not think it was the right decision and that is my opinion. I was hoping that we could get that discussion on the table and the people are watching. We too do not want to raise taxes, rates, and fees, but it ties March 27, 2015 Administration's Budgetary Overview (ss) Page 5 into coming into a sustainable budget. Today, tomorrow, and in the future. So unfortunately, we have to make some tough decisions, but I am hoping that going through this, and I wanted to share this and whatever discussion we are going to have on this. We have to identify the funding mechanisms to address the hundred million dollars ($100,000,000) in road maintenance backlog. The 2014 Farm Fair Citizen Survey showed road improvements as the number one priority. We all know that. We may come to different situations on how we manage that, but I think we are there and we are moving forward. Road repairs are scheduled for procurement every other year at a meager two million four hundred thousand dollars ($2,400,000). Proposed vehicle weight tax would yield eight hundred thousand dollars ($800,000) in Fiscal Year 2016 and two million two hundred seventy-five thousand dollars ($2,275,000) in Fiscal Year 2017 and would allow a road resurfacing budget of two million two hundred thousand dollars ($2,200,000) in Fiscal Year 2016 and three million four hundred thousand dollars ($3,400,000) in Fiscal Year 2017 and each year thereafter. There has been an effort to really reach out to the community and see which is the number one priority. It is roads. We are trying to figure out what is the right way to address it. How can we really look at that? We are trying to be progressive, be sustainable, and have it set up so that it does not end. Yes, we may not have started last year and we said we were going to look at ways. We did say at the same time that we have a plan in place, we needed time to look at that, and as we move forward, the people are going to reap the benefits. Again, I am going to say, I am also a proponent of not raising taxes, fees, and all of this stuff, but if we are looking at what the needs are and how we are going to be sustainable, we have to get to the table and talk about it. That is all I am saying. Hopefully we can get through that in a healthy way. Mr. Shimonishi: Again, sticking with what was proposed as the Vehicle Weight Tax, this is the chart that was presented last year and updated. If you look at the passenger weight tax and freight weight tax, passenger identified by the dark brown bars and the freight by the olive green. You can see by county what the rates are and the average. Starting on the left, you can see Hawaii at one dollar and twenty-five cents ($1.25) per pound on the passenger. Maui proposed that is going in their budget this year is at three cents ($0.03) per pound on the passenger. It is currently at $0.0275. O`ahu at five cents ($0.05) per pound. The state average is at little over three cents ($0.03) per pound on the passenger weight tax. Kauai, we are currently at two cents ($0.02) per pound and the proposal was to go to $0.025 cents, still keeping it below the state average and well below O`ahu and Maui. The following year 2017 to go to three cents ($0.03) per pound, so again right in line with the state average. I know there were questions concerning The Garden Island article on what the cost of the Vehicle Weight Tax. As it relates to the County's weight tax piece by itself, that was, in fact, a correct number. I can say that we did not give the number to The Garden Island to put it in that manner. We told them what the weight tax fees were going to be and what we were proposing. If you look at the total vehicle weight tax, registration, et cetera, based on a 3,600 lb vehicle, similar to a Honda Accord or something like that...for Kauai, the total fees you would pay would be roughly two hundred two dollars and fifty cents ($202.50). If you took that very car and you shipped that car to Oahu and you had to register that car on Oahu, you would pay three hundred fifteen dollars and fifty cents ($315.50) or one hundred thirteen dollars ($113.00) more. That same car shipped to Maui would cost you two hundred thirty-nine dollars ($239.00) or thirty-six dollars and fifty cents ($36.50) more. The Big Island would cost you less, because they have March 27, 2015 Administration's Budgetary Overview (ss) Page 6 the Federal Highway subsidies that help augment their Highway Funds. The proposed rates for January 2016 shows Kaua`i going up to two hundred twenty dollars and fifty cents ($220.50) and still ninety-five dollars ($95.00) less than O`ahu and eighteen dollars and fifty cents ($18.50) less than Maui. Proposed for 2017, the cost would still be seventy-seven dollars ($77.00) less than O`ahu and basically in line with what Maui is proposing today. Basically there is a two year lag. When you think about it, we are still trying to shelter the public from any tax increase and trying to be mindful that yes, everybody needs funds and trying to keep that reasonable and in line. Mayor Carvalho: Some of our Fiscal Year 2015 successes. I am happy to say for Kekaha Gardens Park, after 30 years, the blessing is going to be scheduled and dedication will be scheduled within two months. I really thank our Parks and Recreation team for really moving on that. We look forward to that blessing and dedication and your presence. Affordable housing. Kolopua, our first project and most of you were there. Sorry, Kanikoo. Kolopua, our first project on the north shore with 44 rental units...coming up shortly. Kanikoo which you were there in Lihu`e with 60 rental units for our elderly. It was a really nice blessing right here behind the fire station. I am really happy with that project. Energy savings...usage is down through February, versus the same period last year. I know we have a Memorandum of Understanding (MOU) with KIUC as we continue to talk story. This partnership led into this LED street lighting program scheduled for this summer. Estimated annual savings of five hundred thousand dollars ($500,000) a year in this particular energy project. Payroll consolidation is another one. We completed consolidation into the Department of Human Resources from Finance- Accounting. We are really looking internally on where to place some of the functions and under what department. We are looking at what support they would need by moving duties and responsibilities and staff. All of that kind of reengineering is looking at how we manage ourselves fiscally and overall. Transient Vacation Rental regulation and enforcement. 65 field inspections in flood zone areas. Investigated half of the 320 properties assessed as vacation rentals but lacked TVR permits. 70 zoning compliance notices issued as we continue to move forward with that. Our TVR regulation and enforcement, 4 notices of violations, fifty-seven thousand dollars ($57,000) in fines levied, 53 illegal vacation rental operations have shut down, and 7 owners have requested closure of their TVR file. Continuing with some of our successes, our community development plans are now before Council review, which we had recently. The South Kaua`i Community Plan. The Lihu`e Community Plan. As you can see Lihu`e is transforming with all of the different upgrades and Complete Streets features. Our Important Ag Lands is another one forthcoming. Pay-As-You-Throw is critical to the 70% waste diversion goals by 2023. We are seeking Council support and input on the rollout, as we always want to get the input and work together to make sure that we come up with something that is going to be acceptable to the people that we serve. I look forward to more healthy discussion on that. It helps move us closer to curbside recycling which we did talk about. As I sit here, we are looking at a menu of opportunities on how we manage our waste, and this is one of them. Community partnerships. Government cannot do it alone. We together, County Council and our Administration working together. Working with our people. Our bus shelters, we have been assisted by the Kaua`i Filipino Community Council, we have 6 shelters up from the various parts of the island. From Ishihara Market to Matsuura Store to Hanama`ulu, Kapahi, .Kilauea, and so on. We look forward to the next series. Thank you very much, all March 27, 2015 Administration's Budgetary Overview (ss) Page 7 of us are working together on that. Of course the Kauai Filipino Community Council and others involved in this from the Lions Club and Rotary and the different clubs, mahalo to them. Our North Shore Shuttle, Princeville to Ke`e, with resorts participating. We reached out to all the leaders out in Princeville in really addressing this issue and coming up with good solid numbers and data. We are happy to say that a lot of the ridership is from local residents getting to work. We have those numbers and we look forward to continuing that program as we manage that and we look forward to Ke`e Beach and managing that whole operation with the State. The Kauai Nui Kuapapa program with the team, Na Hoku Welo, rediscovering the significance of ancient lands. We will talk about that and will continue to talk about that as we move forward in decisions we make for Kauai and Ni`ihau. Kilauea Ag Park, the stewardship agreement with the Kilauea Agricultural Committee. We started off with the Kilauea Agricultural Committee and that discussion is done. Peter Rayno Park, we had the blessing over there. Great job to our kupuna and our senior men, who took the lead and really connected and made this wonderful facility. This pavilion area that will service not only them, but it is for the children, for the kupuna, and for the community to use. They are working closely with our Parks and Recreation Department. I am very happy with the Hoolokahi grant to the Hanama'ulu Hillsiders Senior Softball Team taking the lead there. Of course the Ha`ena Beach Park reef etiquette sign and private donation, and Makaala folks down there. They are led by Hui Makaainana o Makana and our Parks and Recreation team internally. We are beginning to educate people in our various parks through signage. You will see more of this forthcoming, more of an educational component in helping them understand the different parts of our community. Mr. Shimonishi: Looking at our capital improvements program. Again, an update from prior years. Fifty-six million dollars ($56,000,000) has been spent from Fiscal Year 2012-2015. Eight million five hundred thousand dollars ($8,500,000) spent in Fiscal Year 2015 thus far, with five million dollars ($5,000,000) expected to be encumbered by the end of this Fiscal Year. The chart shows the success over the past four years and pumping more than fifty-six million dollars ($56,000,000) into our local economy. • Mayor Carvalho: I am very happy with our CIP program. Keith Suga, our Public Works team, everybody pulling together, different departments, all working together and breaking down silos and trying to work it through. These are some of the highlights and projects. Two hundred thousand dollars ($200,000) plus. There is more, but this what we wanted to focus on for today. In the moku of Halelea, the Hanalei Black Pot Parking and Comfort Station Improvements, two hundred ten thousand dollars ($210,000) starting June 2015. As you can see, the Halelea sign right there. The Hanalei Courthouse, a big one that the community got together and how they wanted to use this particular facility. Seven hundred twenty-one thousand dollars ($721,000), start date July 2015. In the moku of Koolau, the Anini Beach Park improvements, specific to the park upgrades. We have a State component with the restoration and renovation of the boat ramp area. This is for the park area specifically. To start March 2016. In the moku of Puna, the Kapa'a Urban Design Plan, three hundred thousand dollars ($300,000), start date September 2015. The Kapahi Bridge Replacement, long ongoing project. Four hundred thirty-eight thousand dollars ($438,000), start date August of this year. In the moku of Puna, the Bryan J. Baptiste Sports Complex and Kapahi Park Improvements, two hundred thousand dollars ($200,000), renovations to that particular area. I know the March 27, 2015 Administration's Budgetary Overview (ss) • Page 8 restroom facilities at Kapahi Park and the roof repairs, all of that is forthcoming by the end of this year. Our Kapa'a Soccer Field improvements, design, three hundred thousand dollars ($300,000), the 11-acre site in Kapa`a, part of the whole complex, start date 2015 of October. Our Wailua Houselots and Homesteads Park Playground and Tennis Court Lighting Improvements, three hundred fifteen thousand dollars ($315,000), start date May of this year. Moving forward to address some of the community's concerns there. The Lihu'e Baseball Stadium Field improvements, one million seven hundred thousand dollars ($1,700,000) with a start date of November of this year, with lighting and upgrades to the announcer's booth, dugouts, and the whole area. Field improvements one million seven hundred thousand dollars ($1,700,000). Lihu`e Auto Shop improvements, four hundred thousand dollars ($400,000), talking to our Auto Shop people, we will elevate and do a second deck there to help with more storage and more operations space. This particular Auto Shop improvements to start September of this year. Puhi Road Reconstruction, we talked about that. From Kaumuali`i to Kaneka, six hundred thousand dollars ($600,000) with a County match and two million seven hundred thousand dollars ($2,700,000) in Federal Highway funds to start August 2015. Puhi Road Phase II, planning and design, Kaneka to Haleukana, two hundred fifty thousand dollars ($250,000) to start in June of this year. In the moku of Kona, the Koloa Neighborhood Center parking lot, the Koloa Park basketball and tenths court resurfacing, two hundred fifty thousand dollars ($250,000), start date February of next year. We did take a team on the road, made up of various team members of Parks and Recreation, Public Works, and Transportation and visited every single park and did an upgrade assessment to look at the restrooms, what are the field conditions, what are the parking conditions, what are the fencing conditions, how are we going to look and put it into perspective so we can understand what needs to get done. Po`ipu Beach Park Phase II upgrades, east comfort station, four hundred thousand dollars ($400,000), start date January of next year. The Kalawai Park basketball and tennis court resurfacing, two hundred thousand dollars ($200,000), start date, January of next year. The Kalawai Park lighting improvements, two hundred eighty-eight thousand dollars ($288,000) this is another one that was needed and attention was needed as soon as possible. Start date of May. Hanapepe Bridge Reconstruction, I know that one was on the table for a while and I understand that. We have been working closely with the community trying to address ADA issues along what is historical, what is not historical, how we can manage it and do it in a timely manner, et cetera. Five hundred thousand dollars ($500,000), start date August 2015. Veterans' Cemetery improvements, three hundred forty-three thousand dollars ($343,000) to the existing pavilion area, the restrooms, et cetera. We did seek support from our legislative team and we continue to look at that as we manage and upgrade our Veterans' Cemetery. That should start in October of this year. Islandwide, the pool improvements, Kapa'a and Waimea, I know we did the upgrades to Kapa'a with the pump issues, there are some upgrades there to start January of next year. Our Materials Recovery Facility (MRF) design, three hundred two thousand dollars ($302,000) to start March of next year. Of course the Bus Shelters, Phase 2, we talked about the installation two hundred ninety-seven thousand dollars ($297,000) and an additional six hundred thousand dollars ($600,000) in appropriated State funds to start November 2015. That second wave of bus shelters is coming with the funding that we have right now. I am very happy with the information systems as we continue to bridge and connect the technology into our operations and upgrading our computers and software. Infrastructure, three hundred four thousand dollars ($304,000) to start November 2015. March 27, 2015 Administration's Budgetary Overview (ss) Page 9 The Payroll/Personnel program to start 2016 when we look at all of our time sheets, and everything online now. You do not have all of this paper all over the place. So with this new software, it will allow us to be more efficient, to be on-time, and to be timely with how we manage our internal systems of how we manage payroll and personnel. CIP requests to the legislature, the Motorola 800 MHz Upgrade Phase III, $2.1 million. With the radio system, we put into the budget an amount to fully upgrade instead of Band-Aid, if you will. You will see in our budget $1.1 million or so to get that done. Islandwide Bus Shelters, $1.5 million, this is to complete the entire amount of bus shelters for the entire island. The Anini Beach Park Improvements, we want to work closely with the State and the Rotary Club who placed the buoys so that when the boats get down in that area of`Anini, they can navigate through the little channel area to get out safely. It is in partnership with the buoy program and designing the parking lot area to make it safe so people can park and the boats can park, wash down, and do their thing. It is a very important partnership project out there. In moving ahead together, our departments will be forthcoming with their individual presentations. Our Division Chiefs as I said earlier, we are all available to answer questions and concerns. Committee Chair Kaneshiro, and answering budgetary questions on the floor. I just wanted to say that this whole process has been very lengthy and in-depth and we are trying to be sustainable. What is "sustainable?" We are taking it today, tomorrow, and the future in how we lay it out. Sometimes we have to make those decisions, but collectively, I am hoping that if we cannot, that you propose a solution. Help me find a solution. If you want to do this, then help me find a solution. We can come up with our thoughts and ideas. But whatever solutions that you have, we are more than happy to talk about it. We have a story, we have a team in place, from our budget team, to our vacancy review team, to our legal team, everybody. We are trying to work collectively and at the same time provide the service and all of the projects that we have before us, in an efficient way that can help both of us work together. That completes our overview. Committee Chair Kaneshiro: Thank you Mayor. We appreciate this overview and I appreciate your openness and offering all of your services, all of your staff to be open to getting questions from us. I do agree, it is easy to criticize and we should be solution- based. Any questions for the Administration on their budget overview? Councilmember Yukimura? Councilmember Yukimura: Good morning, Mayor. Mayor CarvalhO: Good morning. Councilmember Yukimura: And team. Mr. Shimonishi: Good morning. Councilmember Yukimura: Thank you for your presentation. As someone who has been involved with many budgets, I just really want to acknowledge your openness and spirit of collaboration. Because I have never seen a mayor offer his team for a 24/7 response. Actually that is not the feature I want to focus on, because it is more just your general spirit of allowing us and your department heads to engage in dialogue and answer questions and ask questions and all of that. It is very remarkable and really a good March 27, 2015 Administration's Budgetary Overview (ss) Page 10 foundation for turning out a good budget. I also want to say welcome to Ken and congratulations or condolences. Mr. Shimonishi: Thank you. Councilmember Yukimura: But we really are thankful that you are the Finance Director with your knowledge and experience with the county budget. So I want to apologize at least on my part that we did not give you a chance to explain the Vehicle Weight Tax. Because at minimum, we need to give each other the chance to have a dialogue before we take action, either way. We can reconsider or we can introduce a bill again, but I think it is part of a sustainable budget. Because it relates to roads, it makes sense that users would pay a portion of it. Even though it is highly subsidized by the General Fund and other capital programs. I think we have to look closely at that and as you have shown, we are not...we are lower than the other counties, except the Big Island which gets special Federal subsidies. I want to acknowledge you and your team for very significant progress in creating a sustainable budget. I am referring to slide 2, where you are showing that this year we are not using the General Fund fund balance. Councilmember Hooser, in I think our last budget really helped everybody understand about expending more than we are taking in as the real definition of a "balanced budget." Not just the yearly expenditures, but the big-picture and the long-term picture and I believe you are implementing that or moving us in that direction by the way you have handled the fund balance this year. I do not know if people recognize that, but it is very significant to me. And slide 7, can we show slide 7, please? Especially your motor pool, to me, that is a real efficiency measure. I really oppose cuts, just to cut. It really hurts our essential services. When you find real savings, which is the way to accomplish something, but at a lower cost, that is real progress. And so thank you for that. And I also want to acknowledge something that you did last year, I think...and Larry Dill was the key person, and his team. The drop in overtime in Solid Waste at a tune of six hundred thousand dollars ($600,000). That is really significant. And your energy savings through your LED lights of half a million dollars. Those are real progress in my mind. And I just want to commend you for that. So my questions now. In slide 3, you are showing that of our operating budget, 65.2% goes for salaries and related expenses. Do you know how that compares to private sector corporations? Mr. Shimonishi: I do not have that information readily available, but I think we all recognize that government employees may not necessarily get the top dollar on the salary line, but obviously on the benefits we currently have a 20.3% OPEB that we fund, other post employment benefits to fund the health insurance premiums when an employee retires is not typically seen in the private sector. The retirement benefit percentage of 17% this year of salaries, again that something that is typically not seen in the private sector, at least from my experience. Generally there is no health insurance coverage when you retire from a private company. And you basically make your own 401K contributions, which typically is based on a percentage of salary up to something, like, 3.5% of what you contribute. So it is a matching kind of deal. I think those two components are the largest that I would see differ in government than in the private sector. March 27, 2015 Administration's Budgetary Overview (ss) Page 11 Councilmember Yukimura: So you said 17% of the benefits are for health coverage? Mr. Shimonishi: No. As far as contributing towards the other post-employment benefits, the health insurance premium that is currently set at 20.3% of covered payroll or salaries. And that is where we have the actuarial firms do the computations and give us the number of what we should be contributing. That is done every two years. The 17% relates to the retirement and that is set by the State. Councilmember Yukimura: Okay. Thank you, Ken. On slide 8, our Open Space Fund. My question is what are the Open Space initiatives for the next one to five years? Such that you can say there is ample funding available? NADINE K. NAKAMURA, Managing Director: Nadine Nakamura, Managing Director. I do not say it is ample, but I think that we are saying that there are competing needs at this time. As you know the Open Space Commission prepares a report that prioritizes potential projects, either for acquisition, easement, for open space, public access agreements, to preserve natural resources, and so forth. So there is an annual...I think it is every other year now...I think it has been changed. So there is a list of priority projects that are identified in the report, and then the recommendations will come forth based on those priorities. So I know that they are pursuing several of those priorities and so it is just that the funds have been sitting there for some time ever since the Hanalei purchase. So it is just a matter of priorities and how do we position this budget so that when we go out for a bond issuance in 2017, that we show adequate fund balance. Councilmember Yukimura: So basically you are saying it is a lower priority than other priorities? Ms. Nakamura: I would say that there is a commitment to working on, really working off of the Charter Amendment, where the voters said that to use 0.5%. That was changed by subsequent ordinance by the Council. Councilmember Yukimura: I would disagree with that. I think the Charter said there is a floor, which is why you saying that you are creating a floor is not true. The floor is created by the Charter and says you can allocate not more than 0.5%, but you can allocate more, which is what the Council at least prior to this chose to do, because we wanted to show that open space is not only a top-priority, but it is a long-term priority where you have to accumulate moneys and if you lessen the amount that you put aside each year, like if you are saving for a college education, you are not going to get to the amount you need. KA'AINA S. HULL, Acting Deputy Director of Planning: What Nadine is also getting to is that given the priorities that the current Open Space Commission is looking at right now... Councilmember Yukimura: The current what? March 27, 2015 Administration's Budgetary Overview (ss) Page 12 Mr. Hull: Open Space Commission is looking at now, there is funding available for the priorities that they are looking at. Councilmember Yukimura: Can you give me a list of the priorities with the estimated acquisition costs to show me they are less than the amount we have in the Fund and we will have? And a timetable in terms of when you think the acquisitions will be done? So we will need to have those moneys by that time. And can you also make sure that, because I know we did this when we were part...when I was on the board of the Kaua`i Public Land Trust. We prioritized projects based on urgency and the potential of losing the land forever as an acquisition. You know, Po`ipu Beach Park, that issue has come up in the South Kaua`i Plan about how in that given area of park we are going to handle a growth in population and visitors over the next 20 years and I do not know the answer to that. I mean, Po`ipu Beach Park is a limited park. There was a lot next to it. The house was built on it, started to be built on it two years ago or...one or two years. If we had acted prior to that we could have had the chance to expand the park. I would like to know priorities in terms of urgency. Mr. Hull: We can get that list for you. Councilmember Yukimura: Okay, thank you. And also one more thing, you know the Charter did create this Open Space Commission, but even before the Open Space Commission, we have acquired lands. Often at the initiative of the Mayor, the Administration. So we are not bound only to whatever the Open Space Commission proposes and, in fact, I believe the Black Pot expansion, both the Hodge property and the Sheehan property came to us from the Kaua`i Public Land Trust and their cooperation as well. So I do not know that we have to limit ourselves. In fact, Kaneioulouma was not on the original list of the Open Space Commission, but that was brought to us by the citizens. So we have to be prepared for those initiatives as well. Ms. Nakamura: I think the point that you are making that is important and that is that we have to take a look at opportunities as they arise. It may not be in the report that comes from the Open Space Commission but it might be an opportunity that may not come up again. So we might have to move on it. Another point is that yes, it is an identified and limited source of funds that is sitting there,but it is also meant to leverage outside sources and I think that is what happened with Black Pot. If there are other opportunities and I know other counties are taking advantage of funds like the transient accommodations tax (TAT) to purchase Kui Ilima lands. They are looking at Legacy Land Funds through the Department of Land and Natural Resources. So there are opportunities to leverage these county funds to do more. Councilmember Yukimura: Thank you for saying that better than I would have been able to say that. You are right, that we do not have to wait for the Open Space Commission's issues to break and that money is in our Open Space Fund is very, very important to leverage other funds. I have other questions. Committee Chair Kaneshiro: I will go around. I want to emphasize, try to make the questions a little precise. I know there is some discussion going on. March 27, 2015 Administration's Budgetary Overview (ss) Page 13 Councilmember Yukimura: Excuse me, Chair, but you know, budget is the time where we are able to actually enter into dialogue about the operations of the County. It is the most important ordinance that we pass every year. And so I would like to have robust discussion and be able to have it. Committee Chair Kaneshiro: I understand and the dialogue can take place in E-mail also. There are other ways to talk about bigger issues. Councilmember Yukimura: Yes, but E-mail dialogue is not available to the public and it is important that the public be part of this conversation. Committee Chair Kaneshiro: It is not like the public is a part of the conversation on video either, but Councilmember Hooser. Councilmember Hooser: Thank you, Chair. I would like to echo what Councilmember Yukimura has said. This is my 7th budget and historically the budget time is the time to discuss the various actions of the County, and sometimes it takes time. But it is the one time when we get to go through every single one and have those discussions. And so I would urge you to allow robust discussion and I believe that is the public is watching and benefits from this discussion. So they better understand our decision-making process. E-mail is important, and to be specific, Councilmembers' E-mail to the Administration I am not benefiting from that or a part of that either. Committee Chair Kaneshiro: Discussion is healthy. I think if we get down the road of debating an issue, that is where we should stop it, but a healthy discussion is okay. Let us try to keep it at that. Councilmember Hooser: Good morning Mayor. Mayor Carvalho: Good morning. Councilmember Hooser: Congratulations Mr. Shimonishi and congratulations on your appointment. Good morning Mr. Barreira. This process is not only for us to critique or to massage the budget, but also to put the stamp of the Council as the policy-making body, to exert our independent voice and our values on the budget as it moves forward for the entire County. I think that is important for us to remember also. That values and priorities of the Administration hopefully we all align, but in some areas we will not and this is our opportunity to try to massage that to align more with the Council's values. So I just wanted to preface that. My comments and questions do not come in a particular order. I apologize for that. It is just some with the presentation and some with my brain, if you would, going through the process. It is my understanding from the presentation that the one position that the County had to support agriculture has been deleted. Is that correct? So the position itself has been deleted or dollar funded? Mayor Carvalho: It has been eliminated: March 27, 2015 Administration's Budgetary Overview (ss) Page 14 ERNEST W. BARREIRA, Assistant Chief Procurement Officer/Budget Chief: Excuse me, Ernie Barreira, Budget and Purchasing Chief. Councilmember Hooser: I will leave it that I am concerned about that and I would hope that the County would be increasing support for agriculture, not decreasing support for agriculture as we move forward and we can have a further discussion in the Office of Economic Development to see where the priorities are? Mayor Carvalho: Even in our Mayor's portion, we will go over that as well. Councilmember Hooser: Okay. Could you tell me, please, the total net increase of property taxes for the County in this budget? Mr. Shimonishi: That was approximately five million three hundred thousand dollars ($5,300,000). Councilmember Hooser: Five million three hundred thousand ($5,300,000). I think it is important that citizens know their taxes are going up by five million three hundred thousand dollars ($5,300,000) next year. Do you know approximately how many property owners are impacted? 90%? 80%? 50%? 100%? Mr. Shimonishi: It is not 100%, but I think if we want to get into the details of real property taxes and who is affected, it is probably best to have Steve Hunt, our Property Tax Manager address that...and the former Director of Finance. Councilmember Hooser: Thank you. STEVEN A. HUNT, Tax Manager: Steve Hunt, Tax Manager, for the record. It is somewhat of a loaded question to be honest because you are focusing on citizens, not necessarily all property owners. We have taxpayers in the Hotel class. We have taxpayers in the Vacation Rental class. We have two new classes that were created this year. So if we are looking line item by line item, I cannot tell you a percentage or how many are paying more taxes currently than last year. Councilmember Hooser: So is it safe to say that a majority of properties' assessments went up? Values of their property? Mr. Hunt: Values in totality, yes. A lot of that actually has to do with new construction. So if you had vacant land last year with a house this year, that added value is not just depreciation, it is adding the tax base. Properties that were subdivided, movement between classes of taxation...lots of variables. So it is very difficult to make a general policy statement saying a certain percentage increase or majority increase. I would say if there was an increase, a modest increase taking out the growth factor, but I do not have an exact number. It is very difficult to compare unless you do it on all 34,000 parcels on a parcel by parcel basis, what their taxes were last year to this year and what their class was last year versus this year. March 27, 2015 Administration's Budgetary Overview (ss) Page 15 Councilmember Hooser: You will be back later is that correct? Mr. Hunt: Correct. Councilmember Hooser: Perhaps you could prepare a report. I am specifically interested in owner-occupied homes and if you could prepare additional information on average increases...I know in the past years you have been very detailed in being able to tell us exactly whose taxes are going up and whose are not? So the net increase is $5.3 million to all property taxpayers, including hotels, homeowners, farmers, everybody. Mr. Hunt: Correct. Councilmember Hooser: Okay. While you are up there, I will jump to my other tax question. The Mayor had mentioned he wanted us to offer solutions, and there was at least two solutions offered by prior discussions we have had. One is the agronomics increase; so I am wondering if the Tax Department is evaluating creating another class similar to this? We created the Residential Investor tax because we saw a need. These were high-end properties that were not owner-occupied and we felt they deserved to pay more money. In the Agronomics class we have similarly a class, a different class, one could argue that can afford it and we could charge a little more money. Have you explored that option of increasing revenues as we did for the Residential Investor class? Mr. Hunt: I believe it was explored here at the Council and voted-down. Has it been re-explored? Not to my knowledge. Councilmember Hooser: During that discussion you spoke that we did not need Council action necessarily as we have different diversified agriculture, pasture, and other ways to raise revenue. So I guess the better question is does the Administration intend like you did the Residential Investor proposal, to pursue that avenue for increased revenue? You asked for solutions. Mayor Carvalho: Within our discussion right now, no. But we will entertain the information and look at that, but I know it was discussed already. Councilmember Hooser: Right. I think with the Administration's support of these measures it would make a huge difference in the Council's support also. My other question is we have had a robust discussion, a public discussion about the possibility of unpaid real property taxes by again major landowners in our community. There has been a lot of discussion on that. And it is my understanding there is potentially lots of money and possibly in the millions of dollars that are unpaid; so is the Administration pursuing that or do you intend to pursue that? Mr. Hunt: I believe that is working its way through Council in Executive Session on some of those decisions. March 27, 2015 Administration's Budgetary Overview (ss) Page 16 Councilmember Hooser: Can you anticipate when a decision by the Administration might be made on that? Mayor Carvalho: Not right now. We are looking at that and will work closely with you on that. Ms. Nakamura: There are several phases of the investigation that are going on. The first phase we will be responding to the Council in Executive Session per your agreement with the County Attorney's Office that was agreed upon. The second phase as we discussed is taking place. Peter Morimoto is representing the Council on the phase 2 investigation that looks at a number of other parcels. We will be then using that information to come up with a list and a very definitive guidance on how much there might be in potential unpaid taxes or fines and fees. That is something that we are in the process of compiling on both the agricultural dedication side and on the grading and grubbing side. There are two sides to the investigation. Once we have that information, we will be sitting down with the Council. There will be portions of it discussed in open session that revolve around the.process. Then portions that will be discussed in Executive Session that are related to very specific parcels. I think we need to keep it that way to make sure that we protect the County's interests. So we are working very hard to get that information and Larry Dill is taking the lead on the grading and grubbing ordinance and Steve Hunt is taking the lead on the agricultural dedication portion and we are working very closely with the team at the County Attorney's Office to get us where we need to be. Councilmember Hooser: Thank you very much. I appreciate the response. Again the Mayor is asking us for solutions at the same time we are asking for five million three hundred thousand dollars ($5,300,000) from taxpayers...so I think this needs to be part of the discussion. Mayor Carvalho: Councilmember, we are showing you that we are working on a lot of the stuff that you are asking. It is moving. It takes time to unfold and even with the bigger picture, looking at the different properties, the small, large, and medium size properties, we are moving in the right direction and giving you the information accordingly. Councilmember Hooser: I appreciate it, I really do. Thank you very much. I will ask one or two more and then let others go. Back to the 24/7 access to the Department Heads... Mayor Carvalho: Figure of speech. Councilmember Hooser: To be clear, does that mean that I can contact Department Heads directly and ask them questions about the budget? Or do I need to go through the Mayor in writing and get to the Council Chair and all of that stuff? Committee Chair Kaneshiro: I will answer that one. It does need to go through Council Services. March 27, 2015 Administration's Budgetary Overview (ss) Page 17 Councilmember Hooser: Yes. I mean...I do not know...I am a Councilmember and I would think that I could at least talk to the Mayor without going through anybody. The question is do I need to go through you to talk to any Director? Just to be clear. You said we had 24/7 access. Mayor Carvalho: We have a rule in place that can you talk directly to your Committee, Chair and you have that access to that. If not, you need to go through your Chair. We have a process. So let us just keep it flowing. That is what I meant. Any time you want to crossover, no problem, we will talk about that...but there is a process in place. Councilmember Hooser: I am not trying to cause trouble, I am just trying to be clear. The public may think that we have 24 hour access and I may have access to anyone. The reality is that the Charter does not allow me to just call anybody. It allows me to go through the Mayor. I just wanted the public to understand that. I will hold off for now and let others ask questions. Committee Chair Kaneshiro: Councilmember Kuali`i. Councilmember Kuali`i: Thank you, Chair. So I want to start by saying thank you to you, Mayor, and the entire Administration. It is obvious that you have all worked very hard on this budget. I can see that so many of our top-level managers who actually did the work with you are here in the gallery. So thank you to each of you. It is clear to me that it is not the same old budgeting, no more budgeting as usual. I am excited that we are off to a good start and for you, Mayor, I hope this is one year of the next four years that will keep moving us in that direction. Because I think that our citizens deserve all that we are accomplishing in this year's budget and more. I totally appreciate all that you have done for finding those efficiencies. To making those tough choices and to putting this forward to us now, to work on. I can promise you that I will do my best to help find even more efficiencies to send your way. I only have a couple of really specific questions, just particularly on this presentation. And I see it as the first presentation. So the big- wide view. I know we will have more opportunities as we hone in on each of the different departments and divisions. But on slide number 5 when you show that the General Fund budget, elements by category. So you have shown which we all know the biggest expense of this County is salaries. That is how we deliver our services and serve the public. But the 82.6% represents what in dollar figures? Mr. Shimonishi: Approximately ninety-eight million five hundred thousand dollars ($98,500,000). Councilmember Kuali`i: Ninety-eight thousand five hundred thousand ($98,500,000). Okay. On slide 7, the savings and efficiency measures. To me right there, bullet number 2 "positions." that is clearly how you are starting to make the impact of reducing the budget, the expenditures, and trying to find efficiencies on how we deliver to our constituents with less bodies, if you will. Elimination of 7 positions and dollar funding of 13 positions. The value there is one million nine hundred thousand dollars ($1,900,000). So one million nine hundred thousand dollars ($1,900,000) represents I guess, because it is March 27, 2015 Administration's Budgetary Overview (ss) Page 18 close to 100, nearly 2%. I know you were talking about a goal in the cost-reduction workshops about 6.9%. I know it is hard to eliminate positions when you are trying to deliver services. But that 2% is a good start is I guess what I am getting at and I wanted to have a basic understanding for the public why a position would be dollar funded versus eliminated? Is a dollar-funded position explained as we do not intend to fill this position in the coming year for the entire year? So we are not putting any money there to pay for that position? But we may need it next year? How do you...what distinguishes between the seven positions that you eliminated and the 13 positions that you dollar-funded? Mr. Barreira: That is a very good question, Councilmember and thank you for asking us. I think the dollar funding is absolutely correct, there is no intention to utilize that position in the upcoming fiscal year in terms of expenditures and we will be leveraging other resources within our departments in order to meet those services. But it does as you note keep the possibility that in the future depending on changes known or unknown from outside forces or other obligations that might have to be attended to, we still have the flexibility to seek funding of those positions, which is slightly less cumbersome than establishing a new position through the legislative process. And also when we go through the vacancy review process and vet the positions and if we recommend an elimination to Mayor Carvalho, we are fairly certain that the elimination is to be absorbed and not likely seek refunding of the position in the future. Councilmember Kuali`i: Thank you. That is what I thought. But I wanted the public to understand that, too. To show that we are making a start as far as consolidating how we provide those services. I would just ask further that knowing that salaries is the biggest part of our budget and our biggest responsibility, that outside at some later date I be provided with details on what happened for each of those 20 positions? So I am sure the Vacancy Review Committee and the managers involved have all made those decisions with justification of why. So for me as a Councilmember, I think I should know, because it is a big part of our operations going forward. So within this budget process, no real hurry necessarily, to know what is the justification for each of those decisions? Seven positions eliminated and 13 positions dollar-funded. I really want the Vacancy Review Committee obviously to remain in place and to continue doing its work year after year. But I want the Vacancy Review Commission to be not just about vacant positions, but about all positions. And I think Human Resources you do the work of reallocating and reconfiguring positions and what have you and I think with recommendations from the Vacancy Review Committee, I see this as a start, but the Vacancy Review Committee should be vacant and all positions. I think...I am not sure if it is part of it to look at not only the specific positions, but at work units. So whether it is divisions or departments. I think in the long run and maybe if it is not accomplished with this Mayor, it might be with the next, you know, as far as the direction that the people may want us to go in. As far as efficiencies and maximizing the way we serve the public. In my opinion, the County looks a little top-heavy and that happens because we keep breaking down. Yes, there are Charter Amendments that say we want this to become a department instead of a division. And when that happens, now you have smaller entities with their own budgets, with their own directors that are making high-level salaries. And what is under them may not be a large department. It may just be 10-20 people, but the directors are making large salaries. So it is that top-heavy thing. I think at some point we need to March 27, 2015 Administration's Budgetary Overview (ss) Page 19 start moving in the opposite direction, instead of breaking it down and spending more money, to bring some of that back together and I guess that would be called "consolidation." So the Vacancy Review Committee could look at vacancies and all positions and the last piece is that they work with the Cost Control Commission because I think the Cost Control Commission has a big job to help in that way. That is it for now. I will say that I echo Councilmember Yukimura's comments about the Vehicle Weight Tax and why I voted the way I did. I know we still have to look at everything. I mean, there is cutting, but then there are efficiencies and responsibilities that we have to deliver to the people. And roads and traffic, is always coming forward from the people. But I will close here with thank you again. Mayor Carvalho: The intent of the Committee, which has done a great job in working closely with departments, but also providing tools for the departments to see how and what positions can float here or not or what duties and responsibilities? The reengineering again, term, if will you. Internally and also looking at a menu of ways to look at vacancies and how that works within the department. Sometimes some duties or responsibilities has to shift here or that position might be better suited here instead of there and because of the team concept that you have in front of you to make it more efficient. So those are some of the tools that they talk about in seeing how they should manage better. That kind of ties everything in. Mr. Barreira: One more clarification, if I may, Budget Chair? When we conduct the business of Vacancy Review Committee, actually Councilmember Kuali`i, we are forced to do exactly what you said, not only look at the work group, but look at the individual positions outside of that other position. Because in order to make a recommendation for an elimination, we have to achieve a level of comfort that with the resources that are valuable available in the work group, there is adequate manpower and skill set to continue to carry out the duties and responsibilities. While we are not targeting to meet and review all 1,100 or so County positions, when a position comes up for review and is vacant as a result of attrition, we do look at all of the functionalities related to the position within the division and within the department and in some circumstances even outside of the department in terms of other leveraging opportunities. Thank you for your suggestion, sir. Councilmember Kuali`i: Thank you. Committee Chair Kaneshiro: Councilmember Chock. Councilmember Chock: Thank you, Chair. I wanted to echo some of what Councilmember Yukimura said and congratulate our Administration and thank the Mayor and all of you in the room for what you have submitted. I am very happy all together with the budget as presented. And I think we are moving in the right direction. So I applaud all of the real in-depth...I know it takes a lot of hours to get to where you folks have submitted what you have. I also wanted to mention that I think that it certainly is this collaborative approach that I think gets us to where...based on last year...we did some raising of taxes that has helped us as well in moving to get to a sustainable budget. And I think the Mayor is pretty accessible. Whenever I need to meet with him, he has actually March 27, 2015 Administration's Budgetary Overview (ss) Page 20 called me and said where are you? We are supposed to be meeting now. So the 24/7, while there is a process, is attainable. And in that conversation, that we had last week, I think... we talked about one of the items, which came up was the Vehicle Weight Tax. I said I like it all, but I think this one will be hard for the Council. The reason I think is because of what we have done in the year's past. It is pretty uncharacteristic of me to move in the direction of not having a conversation, but I think it is a temperature gage with this Council saying that this is the last thing we want to look at and we are going to look at some cuts and other revenue sources. This is getting to a question. One of the things that was brought up last year was really about needing to look at this from a long-range perspective. Where are we going to go? How are we going to get there? From my perspective it is about incremental change. Especially asking for tax increases. So my questions are really what does that look like? I still would like more about, for instance we are talking about what is the goal for us to reach the limits or the threshold of the reserve that we want to get to? Because I am fully supportive of us getting the proper bond rating and you presented us with a budget that moves us in that direction. What is that growth index for us? Because like I said, I think the community needs to know, we need to know, so we can move in that direction together. What is that growth index that we can expect that we can expect to move towards over the next two years? What is that goal for us to be at? To say that we have this reserve in the bank? And are a healthy county? Mr. Barreira: Councilmember Chock, thank you for your question. We have acknowledged and if there is one issue that we (the Council and the Administration) have agreed on unanimously is the long-range financial plan which is currently underway and we will begin work on our long-range strategic plan in May of this year. We are seeking professional consultant assistance because this is a very, very critical area and I think Council Chair has risen on occasion that the expertise may not be readily available in our immediate pool of resources. We are contracting with them because they are the experts nationwide in providing that level of assistance to the government. What I can tell you right now is that generally speaking in the guidance that they provided is that they recommend strongly that every county government and state government establish a functional reserve the value of two months of operating expenses. In our case, we are looking at $18-20 million. If you look at what we are trying to achieve with this budget that we have proposed to you, we are about 71% there. Now keep in mind as the Mayor had reported, there are obligations yet to come in terms of collective bargaining that we are going to have to address once the settlements are in place. Generally speaking, that is the general guidance and the particulars that you are making reference to, will be much more qualified and accurately able to speak to those issues as we continue with the consulting process with our consultant that is coming on very shortly. Ms. Nakamura: I just wanted to add to Ernie's comments that the GFOA consultants we arranged it to happen immediately after the budget is approved. Because we know during this process, it is pretty time-intensive for everyone. But that we also built into the contract, time with the Council. So the consultants will be coming to present their approach to the budget and to get your feedback as well. The beginning portion of the contract will be focused on best management practices. They want to make sure before we start doing the planning that we are actually meeting all of these GFOA best management practices. They are going to be reviewing our policies, our procedures, and March 27, 2015 Administration's Budgetary Overview (ss) Page 21 once they feel that there is a solid base there, then they will be working with us. The goal is that you will...that we will incorporate the plan into the next budget. Thank you. Committee Chair Kaneshiro: Council Chair Rapozo? Council Chair Rapozo: Thank you, Chair and thank you for being here, Mayor. We have had some discussions throughout the last few months and I appreciate obviously the work that has been put into this. Let me just...we talked about the private sector. I know one of the questions was the private sector versus the public sector, government sector. And granted our benefits package typically and I know there was a study done and I wish I had it with me. There was a study done on federal government versus private sector and it was pretty extreme the difference on how much it costs the federal government to pay their employees, compared to the civilian jobs that...and I would bet that county and the state is probably the same way. Because I do not think anyone can dispute the fact that the staffing numbers in government outweigh the staffing numbers in a private company. You guys disagree? Really, be honest, everybody knows that. The public knows that. They all work in the private industry and they know when you go to a private corporation and you look at an office, there is a lot less people running that office than in a similar office in government. That is just wait the way it is. So I think we have to take that into consideration, that our pay, salary, and benefits packages are huge, a big chunk that is just historically the way it is and we have to keep that in mind. I know you are doing a GFOA study / consultant. One thing that I have talked about for many years is why not do staffing audits? I am going to be proposing that on our side, that we go in and actually take a look...as Mr. Chock asked, and I think probably the best question so far, with many good ones, what is the 3-5-year plan? This sustains us to next year, but what happens after that? I am not saying doing a staffing audit and firing everybody, but we need to have someone take a look and say, that function of government requires six versus nine employees. Because right now we are tied to collective bargaining, we are tied to contracts, and we just cannot let people go without being sued. But we need to know, at some point, that that function requires "x" amount of people. That is starting point. Now you can plan your 3-, 5-, 7-year, 10-year plan, because I think we all agree, we cannot sustain that, with collective bargaining the way it is. So obviously the goal is to reduce the size of government by keeping the standard services at a great standard. So that is something that I am going to be proposing to this Council and hopefully we can get some support. The other thing is history reminds me that dollar-funded positions and do not take this in the wrong way. I mean no disrespect and do not take this in the wrong way, but this Council has time and time again, from all of the Mayors that I have ever worked with, these dollar-funded position morph right after the budget. You know, we have a surplus or whatever, a reserve. We have available funds. So what happens is a month, two months down the road, a department all of a sudden needs another position and today as we discuss the budget, we say we might not need it. Again, history repeats itself every single year. Those vacant positions, those dollar-funded positions become filled and we either find the money in the departments or come for a money bill. Mr. Kuali`i years ago introduced some provisos that would require Council approval for any deviation from budget as it related to salaries or positions. In other words, if you had a position for whatever it was, caretaker. We have the ability to take that position number and convert it to anything we want without Council approval, without public knowledge, without the March 27, 2015 Administration's Budgetary Overview (ss) Page 22 public participating in that discussion. That happens. Maybe it is convenient, maybe it is flexibility, but at the end of the day for me, that is not what we approved. It is not what the people had a chance to testify on. So I am not sure...we put it to the County Attorney and we were told we cannot do it because of the separation of powers. I disagree. We approve the budget. We will see it and give it another shot with the new County Attorney, but I just believe if the budget calls for a specific position, that if there should be any deviation from that, that we should have the discussion here. I know you disagree because that puts a damper, but what I am trying to do... Mayor Carvalho: We disagree? Council Chair Rapozo: I would bet any mayor would disagree with that because they would want to have the flexibility to run the County the way they want to. Mayor Carvalho: The positions that are dollar-funded will be dollar-funded. Council Chair Rapozo: Right. Mayor Carvalho: Period, that is it. Council Chair Rapozo: What I am saying, Mayor, three months from now... Mayor Carvalho: I am telling you that the dollar-funded positions will be dollar-funded. Council Chair Rapozo: And they will not be...? Mayor Carvalho: No. Council Chair Rapozo: Okay, so you will not oppose a proviso to that effect? Mr. Barreira: Council Chair. Council Chair Rapozo: I am going to introduce a proviso anyway. Mayor Carvalho: I am telling you here, we do not need a proviso. We came here with a budget. I want to follow through on our commitment. We have said what we are going do. We want to keep an open dialogue and that is what I am saying. So whatever positions you have in there, we have got to get to that place. I am trying to say... Council Chair Rapozo: I appreciate, that Mayor. I really do, as I said that history has shown that never has happened. The position gets changed, positions get reallocated, and we are back again, come next year. What was the net gain or net loss in positions? As of today, Mayor, yes, this is...two months from now, three months from now, March 27, 2015 Administration's Budgetary Overview (ss) Page 23 the places that were dollar-funded will be screaming at your door and saying Mayor we need that position back, we need that position back, and like that it gets put back with no discussion. Mr. Barreira: Council Chair, your concerns are noted and there is a big difference now. Even for that type of scenario, that requires the vacancy review process to vet that request. If that request was made from a department head, they would not go to the Mayor. They would come to the Vacancy Review Committee and we would vet that as we have already done so. It is not a matter of simply reassigning funds as it was in past. So there is an additional layer of review to ensure that there is a qualification being conducted. Our intention as noted in the budget is not to seek filling of those position or positions...of course we never know what events occur in the year, but our intent is that those positions remain dollar-funded through Fiscal Year 2016. In term of a proviso, our obligations are to follow the law and if the County Attorney opines that is an inappropriate reach or violation of separation of powers doctrine we would support that and whatever guidance is provided. The intention as the Mayor noted is to leave those vacant and they will be reviewed very carefully to ensure any additional expenditures would have to be truly justified and not only recommended by the Committee, but adopted by the Mayor. Council Chair Rapozo: Again, with no oversight of the legislative body. Mr. Barreira: Yes, sir. Council Chair Rapozo: Who approved the budget to begin with? That is just again a philosophical difference, maybe, I do not know. Like I said, history has taught me that we need to have a tighter grip on those things because what is said today and what is passed sometimes is a much different budget than what we end up with as far as positions, as far as personnel. That is my concern and I think the concern of others. They just may not say it. And again, much has been said about the Vehicle Weight Tax and we will get into the discussion of revenues later. We will get into the discussion of the budget, your budget actually later. So I think we have heard us anyway, from me, heard from enough people in the community that enough is enough. I understand there was an opportunity to seek additional revenues, but I think my comments were clear on why I did not support it. But we can find other ways to generate some revenue. And we have got to look at innovative ways and hopefully, we can...working with the State, generate more revenues in other ways. That is pretty much all I have right now. Committee Chair Kaneshiro: Councilmember Yukimura? Councilmember Yukimura: Thank you. Your payroll project. What page is that? Mayor Carvalho: 19. Councilmember Yukimura: Thank you. This is really great news, and in addition to all the benefits that you mentioned, Mayor, is this not going to allow us to have more accuracy in our pay? That was a major audit concern and it was actually stronger March 27, 2015 Administration's Budgetary Overview (ss) Page 24 than that, I think. We were violating employee rights as well as County budgetary issues because of the lack of accuracy, as you recall. This is going to address that problem, will it not? Mayor Carvalho: Yes. Councilmember Yukimura: Okay. I just wanted to make clear, because this is a real progress step. For years it was an issue in our budget and I wish Councilmember Kagawa were here, because he was very concerned about it. And again, our employees were losing out sometimes because they were not getting enough credit for their pay, and other times they were getting more credit than they should have and the County was losing out in having to pay something that was not owed. So thank you for moving ahead on that. It is really great progress. On your budget message, page 3, you talked about the energy savings. And I just wanted to be clear whether the reduction was in usage or in costs? Because with the lower price of oil, sometimes it is not that we are lessening our energy usage, but just that we are being charged less. I just wanted to make sure it is an actual drop in usage. Mr. Shimonishi: I think if you look at the message it says in the first sentence that the energy usage for the County facilities is down by 4.6%. So that tells me it is usage and not an actual drop in the fuel costs. But we do go on to say that due to the favorable energy prices that we experienced savings there. So I think it is a combination of both. I do not have the split on that, but that is how I read the message to be. Councilmember Yukimura: Okay. And that is why I asked the question, because often in the past we have confused the two. And so I just wanted confirmation that it is actually usage and perhaps you could just confirm that, unless you are absolutely sure? Mayor Carvalho: Usage. Councilmember Yukimura: Okay. GEORGE K. COSTA, Director of Economic Development: Aloha, for the record, George Costa, Director for the Office of Economic Development. I want to confirm, and I met with Ben Sullivan, and we had both reduction in usage and costs. Again the cost was due to the lower fuel prices, but there was a lot of effort made in the last year to work with the departments to reduce the usage. Councilmember Yukimura: Thank you. The usage is really what we want to celebrate. Because if it is the cost of energy, it is going to go up when the price of oil goes up. So we might have a temporary relief, but if it is actually usage, then we are making progress. Mr. Costa: Right. March 27, 2015 Administration's Budgetary Overview (ss) Page 25 Councilmember Yukimura: Could you as a follow-up, let us know how much...if you can...how much of the drop in cost was due to usage and how much was due to price reduction? Mr. Costa: Okay. Will do. Councilmember Yukimura: Thank you. Going on to...or going back to actually the issue of reserve. I think Councilmember Chock asked about what would be our target reserve for best practices budget? You have said that based on government standards it would be $18 to $21 million or two months' expenditures. Now I have sent an inquiry to the Administration about this because I believe when SHOPO was before the arbitrator, they pointed to our reserves as a reason why we could increase...we can pay for increased salaries and it seems to me if it's a government practice, that a reserve should be a certain amount that should not technically be available for argument in collective bargaining. Or else every time we achieve our reserve, it means to justify actions that are going to lower our reserve and put us in bad shape. So it seems to me like, a household, we would say if we are saving for college, when we get the paycheck, we put that money first in that savings. And then we budget for the rest of our monthly needs; if that is a very high- priority and I think that is what government practice is about. So what I am working towards is making sure that the collective bargaining system reflects good budgeting practices and allows counties to exercise good budgeting practice. So I am not asking you to do anything, but I am just asking that we look at the rules that govern collective bargaining over time. Because that is set; it is not set in stone. It is what should be best for the operations of government. And I am just raising the question. I do not know if that is, in fact, the law, but I have asked it, and I look forward to an answer. I think we asked that of HR. MAUNA KEA TRASK, County Attorney: For the record, Mauna Kea Trask, County Attorney. We are working with Human Resources to respond to your request. Just for the Council's and public's edification under HRS 89-11(F) states and this is when a situation arises when the parties cannot come to a mutual agreement without arbitration and a panel is convened and usually that happens with these matters, financial matters. It is difficult for the employer and union to agree because they both have to advocate for positions. The arbitration panel in reaching its decision shall give way to the following factors and shall include in the written report or decision an explanation of how these factors were taken into account. The law states 10 factors and in pertinent part HRS 89- 11(F)(4) the financial ability of the employer to meet these costs; provided that the employer's ability to fund cost items shall not be predicated on the premise that the employer may increase or impose new taxes fees or charges or develop other sources of revenues. So there are limitations built within the law, but that is further clarified in the HARs and to lay it out now. Councilmember Yukimura: Thank you, but that section you just read does not address reserves. Mr. Trask: I am not an accountant, so that is why we are working with HR. March 27, 2015 Administration's Budgetary Overview (ss) Page 26 Councilmember Yukimura: Okay. I look forward to the answer, thank you very much. Council Chair Rapozo: Can we have a clarifying question on that. Councilmember Yukimura, would you mind? Councilmember Yukimura: Sure. Council Chair Rapozo: Mauna Kea, I do not know if you read the arbitration award from last year's negotiations. I do not know if you read the order, the arbitration award from last year's negotiations. I do not know if you had the opportunity Mayor, but I did. You know what the County's response to the negotiators for the unions about county's abilities to pay were? Mr. Trask: In regards to SHOPO, no. Council Chair Rapozo: Yes. They had no response. So I guess my question, Mayor, is can we consider hiring, like the unions do, and I support labor, but I also support fair negotiations. And we are getting dusted every time we go. So I think we need to put our efforts in a negotiator or a negotiating team. I understand that Honolulu basically takes the lead and the counties sit back and let O`ahu negotiate for us and we need to go to the table with the right rules and we do not have that. Mr. Trask: That is correct and I think the discussion should be had on how to best coordinate our efforts and as you know and I am sure the public is aware, these are statewide contracts, depending upon the union and bargaining unit, State is involved as are the respective county jurisdictions and usually the State has a block of vote of which they really need only one county to go along with. There are other processes, your ability to refuse cost items, et cetera. It should, because collective bargaining is very important in the public sector, but all sides need to be effectively heard and maybe it is coming down to a communication issue that is better handed by one unified voice. Council Chair Rapozo: If we get to the point with a good negotiator, we could come to an agreement without going to the lengths of binding arbitration, I guess is what I am trying to say. I think it is like the NFL playing Pop Warner, and we just get licked every time and to be fair and, in fact the arbitrator has the opportunity...because obviously we did not have the opportunity, Kaua`i. But we are bound by that contract. So anyway, just a thought as we go forward and we are not expecting to have expertise in every part of government and that is one that I think we should look at. Thank you. Councilmember Yukimura: I totally agree with Council Chair Rapozo. Council Chair Rapozo: Mark the date and time. Councilmember Yukimura: Yes, that is a very powerful position when we both agree. That we need very high-level expertise in our negotiations. I read the SHOPO March 27, 2015 Administration's Budgetary Overview (ss) Page 27 arbitration and they answered that they had answered those questions in the first-round and I think we did, "we" as the counties. So there was a lot that was going on in that arbitration. But the main thing is that whether the rules of collective bargaining support good budgeting? That is the question. Thank you. Moving on I want to look at your capital improvement program on slide 24. What you are showing here is our budgets are going down because we are expending and implementing the projects. And those moneys are being spent in the communities for contractors and all of that work. And that is a really beautiful line. And just want to give kudos to Keith Suga, and rest of the team for doing this really important work. I have said before to you, Mayor, that if you get good managers, you can fly. And I think this is an example of really good outcome and results from very excellent work. And the main thing is the beneficiaries are the public, who can experience the benefits of the project. On the next page, 25, where you have the Kapa`a Urban Design Plan. I am just wondering what the intention of this plan is, especially since we do not have the community plan yet before us? And also, because we do not have a traffic component, a transportation component to the Kapa`a-Wailua land use plan. MICHAEL A. DAHILIG, Director of Planning: Good morning Councilmembers, Mike Dahilig for the record. Councilmember Yukimura just as a clarification for that particular proposal, you will be receiving shortly...once it is introduced at the Planning Commission, the draft version of the East Kauai Community Plan. Now as you are aware of the two plans that are before the Council right now, the Lihu'e and South Kaua`i Plan, both plans have form-based code elements that are integrated into the plan. More robust in South Kaua`i than what you will see in the Lihu`e Plan. There was a contract that was actually instituted well before these contracts were put in. So what is meant to supplement that particular East Kauai Plan is the form-based code elements that are not folded into that particular community plan. So the project that is before consideration in the CIP budget is to back fill the elements to make sure it is in line with the other two community plans that are being proposed. Councilmember Yukimura: So what about the transportation component of the Kapa`a-Wailua land use plan? Mr. Dahilig: Part of the urban design plan looks at the multi- modal capabilities of the urban area. In talking about things that transcend and go beyond just the areas that are meant to be coded, that would not be covered under that proposal given what we are showing at this point. I believe there are other efforts by the Administration and I can probably elaborate further between the Transportation Agency, ourselves, and Public Works, concerning things related to mobility and multi-modal plans at this point. But this particular proposal would not include...I guess...a zone-wide or East Kaua`i-wide transportation study. This is meant to do the back fill portion that South Kaua`i and Lihu'e did not have, but East Kauai does have. Councilmember Yukimura: I do not know if Lihu'e really does have a transportation circulation plan. I believe that South Kaua`i does. So I am concerned about both Lihu`e and Kapa`a-Wailua in terms of the traffic circulation plan. So are these other efforts you are referring to, are they going to be adequate as a traffic circulation plan for Kapa'a-Wailua? March 27, 2015 Administration's Budgetary Overview (ss) Page 28 Mr. Dahilig: I think right now what we are looking at is a scoping element. As you know there were funds appropriated in the last budget concerning a North Shore and Po`ipu Transportation Circulation Plan. Those things are also being folded in with moneys that we received via the Transportation Agency to actually broaden the scope beyond just South Kaua`i, Po`ipu, and the North Shore. Councilmember Yukimura: Well, then I am even more concerned, because I have a hard time seeing how that is going to...I mean how much money is being set aside for this that is actually going to result in what we know we need as a traffic circulation plan for each of our community planned areas? Mr. Dahilig: I would say in response to that statement, Councilmember Yukimura, it is not to say that such a plan is not needed. If that is coming from a priority standpoint that needs to be adjusted in the budget and that is a prerogative of the Council. Simply going back to the question regarding the intent of the proposal in the CIP budget. That was simply meant to back fill the difference in coding that was there in the South Kauai and Lihu`e Plans that is not present in the East Kaua`i Plan. That is not to say that cannot be entertained as an additional study as a CIP amendment or adjustment to the budget. If going back to the question, what was the intent between the proposal? That was meant to take care of the form-based elements that are not there. Councilmember Yukimura: I guess, Mike is it Planning's position that best practice would be to have a land use and transportation plan, like we have in South Kaua`i for all of our area plans? Mr. Dahilig: It does differ. I cannot say with a certainty that each area should or should not have what you are proposing. Is it helpful to have it? Yes, it is helpful to have it. Go back to the intent of the line item, the line item was meant to address the form-based code elements. Councilmember Yukimura: So we have a terrible traffic problem in Kapa`a- Wailua and the reason we do is we have a land use plan that does not have a correlated transportation plan that would accommodate the traffic generated from the land uses that we have included in our plan. So how can we go forward and do these community plans without a transportation component that assures us that the land uses that we are projecting are going to be supported by transportation? Otherwise, we are going to end up with just continuous traffic problems. Mr. Dahilig: Again it is not to say that I agree or disagree with your statement, Councilmember. I think when you look at the broad body of work that has been done not only with our agency, but with the Transportation Agency, as well as the State Department of Transportation. There are many hands that have to go into the pot of helping find solutions for the problems that you are addressing and stating on the floor. Within, again, our universe is not to say those issues are not important. But with respect to clarifying the specific line item in front of the Council with respect to the Kapa`a Urban Design Plan, that was not the intention and as I said previously the intention was to bring March 27, 2015 Administration's Budgetary Overview (ss) Page 29 that particular area up to par with the other two areas that are currently having some type of form-based code analysis down in terms of plans in front of the Council right now. Councilmember Yukimura: Maybe we can have further discussion in CIP when we discuss the Planning budget and CIP. Mr. Dahilig: Yes. Councilmember Yukimura: I am asking for a basic philosophical framework for how we are doing our plans. So that is for the future then. Thank you. Committee Chair Kaneshiro: Councilmember Yukimura, we are going to have to take a caption break. How much time do you need? 10 minutes. Recess. There being no objections, the Committee recessed at 10:59 a.m. The Committee reconvened at 11:13 a.m., and proceeded as follows: Committee Chair Kaneshiro: We are back from our caption break, Councilmember Yukimura. Councilmember Yukimura: I have a question about another source of revenue, but before that I want to express my disappointment, actually, about the renaming of the Rice Camp housing project which you have on slide 18. The project itself is beautiful and the Hawaiian name is beautiful too, but by removing Rice Camp, you are removing history, you know? And I am expressing this on behalf of some members of the community. And my last question is about another source of revenue. I know you are aware Mayor that Senate Bill 19 is moving through the Legislature and it has the option of a half percent excise tax for public transportation but the definition of "public transportation" includes roads, sidewalks, bikeways, and transit. So I am wondering if it is the Administration's position that we would like to have that option? And see that bill pass? Mayor Carvalho: We did submit testimony. Councilmember Yukimura: In favor? • Mayor Carvalho: Yes. And of course, looking at what our Councilmembers...working with our Councilmembers and ensuring that the Council is at the forefront, but we did submit testimony. Councilmember Yukimura: I know there were at least two Councilmembers who supported the 1% tax for any purpose, and that is not something I supported, but the common ground with all of us is that...I mean those of us who supported the 0.5% and 1% that we support some form of increase that would tax our visitors, as well as ourselves in order to fund transportation, which will enable us to free up some General Fund and Highway Fund moneys. And also provide the expanded transit services that our people March 27, 2015 Administration's Budgetary Overview (ss) Page 30 need. I think if you look at the position of the Council in that respect, there should be a majority in favor of that. Anyway, that is something that would give us seven million dollars ($7,000,000) for public transportation a year. And again, it is roads, bikes, sidewalks, and transit. So it gives us flexibility and it helps us...and it frees up General Fund money and Highway Fund money for other things, although I am hoping that we will free up Highway Fund money for roads. Thank you. Committee Chair Kaneshiro: Councilmember Hooser. Councilmember Hooser: Thank you. Back to the five million three hundred thousand dollars ($5,300,000) increase of taxes, property taxes. At a subsequent meeting if we could have a breakdown by category, "x" million for hotels, "x" million for the various categories, that would be very important. And if we could have along with that a percentage increase, last year was this and this year it will be that. That would be helpful. Did you get that...staff has the question also in case we need to put it in writing. The Open Space Fund, I also have some concerns about taking those funds and using them to balance the budget. Just wanted to point out that this is the only expenditure in the entire budget classification that is in perpetuity that is an investment for the future. Everything else, virtually everything else will be gone in 30 years or so, whether it is a road or highway or parks or people. This is an investment for the future and so I would encourage the Administration,as well as this Council to consider that. And ask again why has the money not been spent? Mayor Carvalho: I think it was priorities... Mr. Dahilig: For the record, Mike Dahilig for the Planning Department. I think it is an issue that all of us are aware of...why the money has not been spent. There are proposals that the Open Space Commission has been floating concerning certain parcels. They have actually recommended one, which through a due diligence process, we have some concerns about, after that proposal. At the end of the day, the proposals that come up do have to pass mustard of this body and if the proposal does not seem...like the value matches the proposal, we have to take a serious look at what that is. So there are things in the hopper that the Commission is working on. We are going to have a presentation from the Hawaiian Islands Land Trust concerning a proposal that we have in Waipa. Just like anything as we move forward, we have to keep in mind a number of things such as whether the acquisition going to be adversarial, does that add to the cost or what does that do in terms of placing this body in a condemnation resolution type of situation, what is the value that we are getting out of it, does it meet the open space standards, et cetera. There are checks and due diligence elements that we have to run through before we package it into an appropriation proposal. So we are working on things. Councilmember Hooser: Thank you. I would just remind everyone that real estate values are starting to go up, but we could be in a whole different environment if we wait too long and this is an asset that will last a long time. Mr. Dahilig: To dovetail on that comment, it is why we are looking at things beyond pure acquisition and fee acquisition, but other things like March 27, 2015 Administration's Budgetary Overview (ss) Page 31 conservation easements and those types of things to try to be mindful how far can we stretch the dollar? Councilmember Hooser: Thank you and a related question with the budget surplus and recommended $18-20 million, are our capital assets like land considered in that process or is just cash in the bank when they are looking at best practices? Mr. Shimonishi: I think first of all, Councilmember Hooser, we should be consistent with the terminology that we use. Councilmember Hooser: Yes. Mr. Shimonishi: When we say the word "surplus" I would not necessarily use the same definition. We have an unassigned fund balance of thirteen million seven hundred thousand dollars ($13,700,000) and the reason we have this unassigned fund balance is because last year's budget process was very arduous and tough decisions were made. We really only have three million dollars ($3,000,000) to use to balance the budget. That is all we used. So it sets us up better this year in terms of our fund balance being available. Overall, if you look at the fund balance that we ended up in Fiscal Year 2014 vs. Fiscal Year 2013, we actually still went down by $1.5+ million. We did not come up with a surplus. We just have the money, I guess you could say in a different category and the analogy that I used was that you may have more money in your checking account now, but when you compare your total of your bank accounts this year to last year, you still have less. So we need to keep that in mind. So again, not a surplus, but an unassigned fund balance that is available. Again, we have not budgeted for any anticipated bargaining impacts that will come down the line. So as far as CIP, no, we do not consider that. Councilmember Hooser: So, the best practices as we mentioned and the bond rating companies look at the amount we are supposed to have in our unassigned fund balance which is $18-20 million is what you said, right? Mr. Shimonishi: I think it is actually a little higher than that...closer to twenty-one million dollars ($21,000,000). Again, what is the basis that we are using to determine our reserve? So, if you look at the Council Resolution that was passed back in 2011, it called for 20-25% of the most recent CAFR's General Fund expenditures, encumbrances, and transfers out. So that was the basis of what we were trying to establish the reserve at. Between 20-25% of that. That was...if you look at the 2014 CAFR, it is like one hundred twenty-seven million dollars ($127,000,000) for the base. 20-25% would be twenty-five million dollars ($25,000,000) to thirty-one million dollars ($31,000,000). Using the one hundred twenty-seven million dollars ($127,000,000) basis, at two months, annualizing that number into two months, you come up to a number that is probably closer to twenty-one million dollars ($21,000,000) in reserves. So we would have the committed portion of the fund balance that is related to disasters some $3.9 million, I believe...we would have thirteen million seven hundred thousand dollars ($13,700,000) that we just said is unassigned in the fund balance, roughly seventeen million dollars ($17,000,000) compared to the goal of twenty-one million dollars ($21,000,000). Before any March 27, 2015 Administration's Budgetary Overview (ss) Page 32 other bargaining hits our table or before any other money bills that are put forth to carry us through the fiscal year. In the current fiscal year, we have already put forward about $5 million in money bills when it comes to the real property tax relief, purchase of some software, re-establishing the OPEB funding, six hundred fifty thousand dollars ($650,000) in special counsel, two hundred twenty-five thousand dollars ($225,000) that is coming forward for the audit contract...so it does add up pretty quick when we start processing the bills going forward. Councilmember Hooser: Thank you. I appreciate the clarity on the words that we are using and the different funds. So just to be clear, the thirteen million dollars ($13,000,000) that we all keep talking about is part of the unassigned fund balance? It is not part of the reserves? Mr. Shimonishi: That is in fact the reserve. That is what you have. There is no additional money of reserve. Councilmember Hooser: Okay. Mr. Shimonishi: Again, looking at the CAFR, if you look at the management discussion and analysis, the notes basically to the CAFR, at the bottom, it will lay out the fund balance and it will say what is the unassigned fund balance. This is basically the reserve. Councilmember Hooser: Okay. Thank you. So when bond rating companies look at us, do they take into consideration land assets that we have when they are looking at rating us? Mr. Shimonishi: I think they are looking in total. Total assets of the County, which would include all of our holdings. They also look at our ability to balance our budget moving forward. And I think if you look at the most recent...I think it was the Fitch rating, I think we have a AA rating and the condition was stable, but the outlook was negative. We were in the budget process of not having a structurally sound budget...I guess I should say. The budget is always in balance, but whether or not we have a structurally sound budget is a different story... Councilmember Hooser: Got it. Another question, regarding collective bargaining, at what point do we know what that is going to be...what is the date? Mr. Barreira: Councilmember Hooser, there is no definitive date of course because the process has to go through the due process that has to be exercised. Is it likely we will have that number before the supplemental submission? I cannot even tell you that for certain. I think last year it went beyond that and I am not sure we had the numbers by that time. There is really nothing definitive at this point. Perhaps there could be updates provided in the later budget presentations related to Human Resources. Councilmember Hooser: But it is within the next few months? March 27, 2015 Administration's Budgetary Overview (ss) Page 33 Mr. Barreira: I can say it will definitely be within the fiscal year. I can tell you that much, yes. Councilmember Hooser: It impacts the entire fiscal year coming into the budget? Mr. Barreira: For the remaining units that were mentioned by the Director of Finance, yes. Councilmember Hooser: And I know that we will not know how much that is, but if you look at history, could you give us a range or a starting point? The lowest it has ever been is it 2%? 1%? I know you do not want to give away the store to the negotiators, but obviously, historically it has been "x" percentage or money? Is it three million dollars ($3,000,000)? Is it five million dollars ($5,000,000)? Is it seven million dollars ($7,000,000)? Mr. Barreira: We do not mean to be deliberately evasive, but it has been our practice not to do guesstimates in terms of the money that we feel might be in play, because it is a process that is not yet resolved. Councilmember Hooser: Even though we have not budgeted for it, it would come out of the unassigned fund balance? Mr. Barreira: Yes. Councilmember Hooser: And you have your internal numbers, I am sure, in terms of a range? Mr. Barreira: The budget is a projection of course and what you see in the budget is what we know definitely for the collective bargaining units that have reached agreement and for which contracts are in place. Councilmember Hooser: On the CIP, I had a few questions on the CIP. If you could provide a breakdown between essentially traditional infrastructure and parks, sports fields and those kinds of things. There seemed like there was a lot of parks / sports fields as opposed to bridges, roads, sewer, that kind of thing. At coming meetings when we have that briefing, just to know whether it is 50/50 and incumbent on that amount, too. It is talking about highways for example. I understand that we cannot pave roads out of CIP, but we could do major refurbishment out of CIP. Mr. Barreira: Yes. Councilmember Hooser: I am just wondering, in times of tight budgets whether or not increased emphasis should be on traditional infrastructure, if we were going to rearrange things. March 27, 2015 Administration's Budgetary Overview (ss) Page 34 Mr. Barreira: Councilmember, would you be comfortable and agreeable to having that discussion during scheduled CIP? Councilmember Hooser: I would and you could provide something in writing prior to that. Mr. Barreira: Very good, sir. Thank you. Councilmember Hooser: Along the same lines I noticed that you had information systems in the CIP, CIP is capital improvements and my understanding it is dependent on a certain life, like a 30-year life and I do not imagine software would qualify for that. But you have that listed in the CIP budget is that correct? Mr. Barreira: Yes, sir. Councilmember Hooser: Are we borrowing money to buy software? I hope not? Mr. Barreira: It is not limited to that. It is much more extensive than simply that. Councilmember Hooser: So we will want more information on that, too. Mr. Barreira: We can have a full discussion on that issue during CIP. Councilmember looser: And there will be a breakdown on the CIP when you come back on what is Bond Fund, what is General Fund? Can you do that too? Mr. Barreira: The CIP I believe this year is completely Bond Fund within our capital improvement budget. Councilmember Hooser: So then we would use Bond Funds to fund the information systems/programs that you have listed? Mr. Barreira: If it is identified in the CIP, yes, sir. Councilmember Hooser: Right that would be my question, are those 30- year...appropriate for bond funding? Because they are not going to last...hopefully they last ten years, but with new technology it is highly unlikely. I am almost done, I think. I those are most of my questions for this moment. Thank you all for your hard work. It is a difficult process and takes a lot of time and everyone's patience in being here. Thank you all. Thank you, Chair. Committee Chair Kaneshiro: Councilmember Kuali`i? March 27, 2015 Administration's Budgetary Overview (ss) Page 35 Councilmember Kuali`i: Thank you. Just really quickly, I do want to say that I appreciate the Council Chair's comments about positions, budgeting there, and dollar-funded positions and provisos and his goal that he articulated reducing the size of government while maintaining the level of service is my goal as well. So I will be working on that. The one other thing that I wanted to point out is that you know on slide 6 we have the breakdown of General Fund by department. And that represents a total of $119.2 million. I think it would also be interesting to see that same breakdown by departments of the salary piece, because that is our biggest expense. We have $98.5 million and if you do a pie chart of salaries by departments, the same way you have done this one as far as the full budget? And the thing I would also say about that is yes, of course, we are spending the most money there. But that is also the County's most valuable asset. So our biggest asset is our employees from the low-paid to the top providing the services and providing services. I had questions along the lines of what Councilmember Hooser was asking with the unknown in regards to collective bargaining. And the understanding that there is current ongoing negotiations. But I think there are also things in place as you have an idea of at least what the base is going forward? These contracted step increases that will take place based on people's anniversary dates and what you have. So there is some information that you have already as far as what it will cost? So I hope you have forecasted and budgeted for that to a certain extent. The only other thing is as far as what you can tell us, maybe you cannot tell it to us publicly, but there are other ways for us to get information from you in this time. So that we are not waiting until after the fact, if you will. And then the last thing is when I was looking at the breakdown of line items and the budget, I see that in some departments there is a line item for "collective bargaining." Some of them are increasing. Some of them are decreasing. Some of them are so tiny and I am not sure why they are there. So I am curious if you have done an allocation formula to assign the cost of collective bargaining to the different divisions and departments, is that what that is? You do not have to tell it today, but to know what the formula is? I am assuming it is based on the number of workers and employees assigned to each unit, and in each work unit, bargaining unit and where they work in the County? Mr. Barreira: Yes, Councilmember, those numbers in the budget are not relative to salary or fringe benefits. It is usually requirements that we have to meet in terms of uniform payments, for example. Or other safety equipment items that are incumbent on the collective bargaining agreement. So it is not something that will be reflective of salary or other expenses. Councilmember Kuali`i: So it is not reflective of salaries and it is also not reflective of the cost of doing negotiations? That is all under "personnel" probably somewhere, in the Mayor's Office. Mr. Shimonishi: Collective bargaining budgets are actually done at the department level. Finance there is no collective bargaining requirements that we need to be budgeting for; we do not have reimbursement of shoes... Councilmember Kuali`i: It is just the terminology you used for that line item. It is not to do with negotiations or salaries? March 27, 2015 Administration's Budgetary Overview (ss) Page 36 Mr. Shimonishi: No. Councilmember Kuali`i: It has to do with additional benefits like uniforms that you have to provide and have a budget for? Mr. Shimonishi: Correct. Councilmember Kuali`i: Okay. That is all I have, thank you. Committee Chair Kaneshiro: Council Chair Rapozo? Council Chair Rapozo: Thank you. I know I had asked and I am not sure, because I have not looked at all the department budgets, but the grant funding. I do not see it and when I got the budget, I realized maybe I did not articulate it well enough, but is there a way to get the grant funding in budget? I guess the AS400 does this. I am not sure, but is there any way to get the grant-funded positions, because that is not in here, correct? Mr. Shimonishi: Correct. I think as of right now, I am not aware of that and we probably have to research that with the vendor. Council Chair Rapozo: Okay. Because I think it is very, very, very important to see the accurate picture of the departments and staffing that we also have that grant funding positions as well. Because if you look at some of the departments that are funded a lot by grants, we are not getting the whole picture here as far as the number of employees and the costs? And I am not sure if the grants require us to pay something, I am not sure. I assume some of the grants require us to pay a portion or benefits...not sure. And there is no way of me knowing with this budget. So I am not sure in the supplemental or if you can provide to us in a separate communication, maybe just a spreadsheet for each department, what is the grant-funded programs or service or positions, employees? Mr. Shimonishi: We will look into that. Thank you. Council Chair Rapozo: Look into it? Can you get it for us? I do not know...I mean we need it, I guess. Let us just say that. Mr. Shimonishi: Right. Council Chair Rapozo: Thank you. Committee Chair Kaneshiro: Any other questions? Again, I just want to thank you for coming and I want to thank the staff for being here also. You brought all of the resources to answer all of the questions that we have. I had a few quick questions. When is the next bond issuance or bond rating coming up? March 27, 2015 Administration's Budgetary Overview (ss) Page 37 Mr. Shimonishi: I am currently unaware of when that would be. I know we get inquiries from the companies, I believe on an annual basis. So we will have to follow-up on that for you. Committee Chair Kaneshiro: We are trying to save up on reserves to meet the certain threshold and I wanted to know how much time do we have to get up to that threshold before we have to go back and reevaluate our bond rating? Mr. Barreira: We will check with the County Treasurer. Committee Chair Kaneshiro: One other quick question and I do not know if it is the right spot whether it is HR or Fire, but with the dollar funding...one other position that was dollar-funded was the Deputy Fire Chief, it was dollar-funded. Is it not our intention to fill the Deputy Fire Chief position? Mr. Barreira: That is correct. With our consultation with Chief Westerman that position has been identified to be dollar-funded for the fiscal year. Committee Chair Kaneshiro: Okay. As far as questions go, any other questions from the members? Councilmember Kuali`i? Councilmember Kuali`i: I missed one last question on the collective bargaining. Because I think in one of our answers Ernie to Councilmember Hooser you said remaining units, so as far as that bullet point about unknown and not budgeting, you listed bargaining impacts four and you said units 2, 3, 4, and 14. So those four units are remaining? Mr. Barreira: Yes, sir. Councilmember Kuali`i: That represents SHOPO and HGEA? Mr. Barreira: That is all HGEA, sir. Councilmember Kuali`i: All HGEA? Mr. Barreira: Yes. Councilmember Kuali`i: Okay. And so can you say what the others were that are completed and what that totals? Mr. Barreira: That is all reflected within the budget worksheets relative to salary. Councilmember Kuali`i: Through each department? Mr. Barreira: Yes. March 27, 2015 Administration's Budgetary Overview (ss) Page 38 Councilmember Kuali`i: Salary increases? Mr. Barreira: Yes, salaries reflected for unit 13 for example. And EM classifications are contained within the budget we submitted to you. Councilmember Kuali`i: Thank you. Committee Chair Kaneshiro: Councilmember Hooser. Councilmember Hooser: Just a brief follow-up. How many County employees, active employees would be impacted by this? Mr. Barreira: I knew you were going to ask that question. I wish I had the answer. I am going to have to ask our HR Department. I am sure that number can be determined. Councilmember Hooser: We can do our own back of the envelope math and come up with our own back of the envelope estimates. Committee Chair Kaneshiro: Council Chair Rapozo? Council Chair Rapozo: As a follow-up, if it has to be confidential, it has to be confidential, but at 3%, 4%, 5%, 6%, with the spreadsheet what we are looking at based on the numbers that we currently have. And I am assuming we can do that relatively easily because we know already what employees we have in those units. One more question and it is a policy question. But more specifically brought up with the Fire Department. Let us say a Deputy Fire Chief or any other Deputy is dollar-funded, do we put somebody in that position as a temporary assignment? So when we move up someone else from the lower ranks to fill the Deputy? And then have to take another position and fill them up and pay it all the way up? Have we done an analysis of what is cheaper? Mr. Barreira: I do not know for certain, Council Chair, if that is the intention of Chief Westerman. Council Chair Rapozo: I am just speaking in general, not just the Fire Department, I would assume that you have to have a Deputy and the Charter even requires it... Mayor Carvalho: I do not think the Charter does, but looking internally at the operational part with the Fire Department specifically, looking at some of the other Battalion Chiefs in place now and looking at the positions until we can get it filled. Council Chair Rapozo: I am just wondering if we were doing the analysis to see if it is cost effective or not. March 27, 2015 Administration's Budgetary Overview (ss) Page 39 Mr. Barreira: To answer your question in general terms, Chair if there is a vacancy, and lower-level employee is temporarily assigned to that vacancy, there are salary implications and I cannot say for certain if that is the intention of the Chief. Council Chair Rapozo: In the case of especially Police and Fire, the lower ranks are paid higher than the higher ranks. Your Assistant Chiefs or Battalion Chiefs are paid more than the Deputies. Mayor Carvalho: The structure. Mr. Barreira: Inversion. Council Chair Rapozo: Maybe just get rid of the Deputy position? It is a thought. Thank you. Committee Chair Kaneshiro: Any other questions from the members? Again I want to thank everyone who came out and I think now we can move on to the Mayor's budget. Mayor Carvalho: I want to say thank you to the Chair and Council Chair and all of the men and women in back of me for their hard work and dedication to work to come up with something that is effective moving forward. We look forward to the next round of departments coming up one by one. Thank you. Council Chair Rapozo: Can we take a short recess because is everyone staying? Committee Chair Kaneshiro: Let us take a five-minute recess. There being no objections, the Committee recessed at 11:43 a.m.