HomeMy WebLinkAbout03/24/2022 Committee Chair's Budgetary Comments, Administration's Budget Overview, Mayor's Office, Human Resources COMMITTEE OF THE WHOLE
FISCAL YEAR 2022-2023 DEPARTMENTAL BUDGET REVIEWS
MINUTES
The Fiscal Year 2022-2023 Departmental Budget Reviews of the Committee of the
Whole of the Council of the County of Kaua`i, was called to order by Arryl Kaneshiro, Chair,
at the Council Chambers 4396 Rice Street, Suite 201, Lihu`e, Kaua`i, on
Thursday, March 24, 2022 at 9:01 a.m., after which the following Members answered the call
of the roll:
Honorable Bernard P. Carvalho, Jr.
Honorable Mason K. Chock
Honorable Felicia Cowden
Honorable Luke A. Evslin
Honorable Bill DeCosta
Honorable KipuKai Kuali`i
Honorable Arryl Kaneshiro
Committee Chair Kaneshiro: Today's meeting will be conducted pursuant to
Act 220, Session Laws of Hawai`i 2021 and Governor Ige's Emergency Proclamation Related
to COVID-19 (Omicron Variant) dated January 26, 2022. As a reminder, our March 28, 2022
Departmental Budget Reviews will be open to the public, so anyone wanting to provide
testimony is welcome to do so at the beginning of the meeting at 9:00 a.m. For this morning,
we do not have any registered speakers, but we will check shortly on Zoom to see if anyone
has joined.
For those testifying this morning, please note that we will go through the list of
registered speakers. We will then ask if there are any other testifiers for any of the other
agenda items who would like to provide oral testimony. Once we have completed public
testimony, it is recommended that those wanting to watch the remainder of the meeting go
to the live webcast at www.kauai.gov/webcastmeetings. You may, however, remain on the
Zoom link, though it will be audio-only following completion of public testimony. Do we have
anyone on Zoom?
There being no objections, the rules were suspended to take public testimony.
There being no one present to provide testimony, the meeting was called back to order,
and proceeded as follows:
Committee Chair Kaneshiro: Okay. We have no registered speakers and no one
waiting on Zoom. Not seeing and hearing any additional requests for testimony at this time,
the public testimony period for today is now closed.
Committee Chair's Budgetary Comments
Good morning, I would like to call the Fiscal Year 2022-2023 Departmental Budget
Reviews to order. On the schedule today, I, as the Committee of Whole Chair will go through
March 24, 2022
Fiscal Year 2022-2023 Departmental Budget Reviews
Committee Chair's Budgetary Comments, Administration's Budget Overview,
Office of the Mayor (including the Office of Boards & Commissions), Revenue Forecasting,
and Department of Human Resources & Human Resources Reports
Page 2
some ground rules for the budget proceedings. Shortly thereafter, the Mayor and the
Administration will be given time to present their Fiscal Year 2022-2023 budget submittal,
followed by the Departmental Budget Reviews for the Office of the Mayor,which also includes
the Youth Work Program and the Office of Boards & Commissions, which will be followed by
the Revenue Forecasting, and the Department of Human Resources & Human Resources
Vacancy Reports. You will notice a condensed format for our budget this year on the calendar
and this was set forth based on comments from Councilmembers and the efficiency we
experienced a few budget sessions ago. Our individual days may be a little longer, but we will
hopefully be able to review everyone in fewer days total. Each day during the budget
proceedings we will take public testimony at the beginning, 9:00 a.m., and today there was
no one wishing to testify. I would like to go over some of our ground rules and expectations
for this year's budget. You folks hear it every year. We usually have a PowerPoint, but I do
not think it is necessary. I will just go through it really quickly, so I do not bore you. As far
as our budget procedures go, nothing has changed. The following is a summary of budget
procedures and for more details, please refer to the budget expectation memorandum, which
everyone should have received dated November 1, 2021. The Departmental Budget Reviews
will follow the written schedule. If a department's review concludes before its allotted end
time, the next scheduled review will begin immediately. This minimizes scheduling Budget
Call-Backs. Although our schedule may say a department is scheduled for 1:30 p.m., if the
meeting is running early, they just have to be ready. Prior to each Departmental Budget
Review, Councilmembers, please review all materials and prepare any questions. Please
contact Council Budget Staff to send questions to the Administration in advance, especially
questions unlikely to be answered on the spot without prior notice. For example, questions
that may require research or time to compile. It makes the meeting more efficient...if you
give them a difficult question, we can give them the information ahead of time, or if you have
a difficult question, then expect to get the answer back in an E-mail. Again, we try to limit
the amount of E-mail responses we receive. The more responses we can get on the floor here
at this time, the better. Equipping Administration personnel to respond verbally during the
Departmental Budget Reviews will help limits the number of written follow-up questions,
which take time to prepare and may impact regular County operations. All questions must
directly relate to the Fiscal Year 2022-2023 Budget Proposal. The Administration has been
asked to be prepared with key personnel to answer questions. Council questioning will
commence after the respective department has finished its presentation. During all Budget
proceedings, the Council Rules will continue to be enforced, including Rule No. 6(f) regarding
Councilmembers' speaking time. Again, that is mainly referring to the end during our
Budget Decision-Making time when we discuss the cuts and adds. Our discussion time on
each item is five(5)minutes and three (3)times each person talks; as a total of three(3)times
that they can speak and no more than five (5) minutes. Decision-Making is scheduled for
Friday, May 13, 2022; Monday, May 16, 2022; and Tuesday, May 17, 2022, if necessary.
Council Budget Staff will meet with each Councilmember between April 25, 2022 through
May 9, 2022, to discuss decision-making amendments. Any proposal to add to the Budget
should identify the source used to account for the increase. It takes four (4) votes to reduce
March 24, 2022
Fiscal Year 2022-2023 Departmental Budget Reviews
Committee Chair's Budgetary Comments, Administration's Budget Overview,
Office of the Mayor (including the Office of Boards & Commissions), Revenue Forecasting,
and Department of Human Resources & Human Resources Reports
Page 3
or remove an item, and five (5) votes to increase or add an item. Decisions will be made
department-by-department. The Committee will then consider any revenue proposals
thereafter, if applicable, and the Committee will not revisit items after they have been
addressed unless deemed necessary. With that, I want to thank all the Councilmembers and
the Administration in advance for their cooperation. I look forward to a very efficient and
productive budget this year. I know that the Mayor has taken the time to speak individually
to each Councilmember to share information and that is always appreciated. This will be the
last budget session for me as I "term out" and I would like to thank everyone in advance for
always making it a productive one. It appears this year that we did see an increase in
revenue, but as you know, that does not mean our operating costs or the need to provide the
basic infrastructure for the island has decreased. We are most likely going to see cost
increased due to inflation, added needs for repair and maintenance of our existing
infrastructure, and another few rounds of collective bargaining increases for our union
employees. Thankfully,working together,we have put in place some sources of revenue, such
as the General Excise Tax (G.E.T.) and County Transient Accommodations Tax (T.A.T.) to
assist with these anticipated expenditures. We have also gratefully continued to receive
Federal funding through grants and pandemic-related resources, which has also helped our
financial situation. As always, we as a County must also try to improve upon our services
and infrastructure needs moving forward. Most importantly, addressing the deferred
maintenance for our critical assets as we pivot once again to refocus from our pandemic and
disaster relief focus of recent years. I have ask the Administration to focus their Budget
presentations on the Fiscal Year 2022-2023 Budget Proposal and to include any additional
narrative information in their written presentations, which we have all received in advance.
It is my hope that this will allow for a more efficient budget session focused primarily on their
budgets being presented to us. Moving on with our schedule, I would like to suspend the
rules and call upon the Administration to present their Fiscal Year 2022-2023 Budget
overview. Members, I ask that you please hold all your questions until the end of the
presentation. I believe there might be a video from the Mayor.
There being no objections, the rules were suspended.
Administration's Budget Overview
(Prerecorded video message from Mayor Derek S.K. Kawakami.)
DEREK S.K. KAWAKAMI, Mayor (via prerecorded video): Aloha Council Chair
Kaneshiro and Members of the Council. Mahalo for this opportunity to present to you the
County of Kaua`i's proposed Operating Budget of $260,200,000 and Capital Improvement
Budget of$48,900,000 for Fiscal Year (FY) 2023.
This submittal marks the third budget submitted by my administration during the
COVID-19 pandemic. Looking back to March 2020, I never would have imagined the long
road we faced. While we are beginning to see glimpses of life beyond COVID-19, the volatile
March 24, 2022
Fiscal Year 2022-2023 Departmental Budget Reviews
Committee Chair's Budgetary Comments, Administration's Budget Overview,
Office of the Mayor (including the Office of Boards & Commissions), Revenue Forecasting,
and Department of Human Resources & Human Resources Reports
Page 4
economic climate it caused is by no means behind us. From the most recent rockfall event in
Waimea, the growing conflict in Eastern Europe, and the rising inflationary conditions, we
know there are more challenges ahead. Our fiscal position is delicate as we face these
headwinds, but we stand ready.
During the past two (2) years, we were fiscally conservative and maintained a strict
approach to our operational spending. We deferred planned fee increases and used our
Reserve Fund to avoid personnel layoffs and furloughs. We relied on federal support, which
helped to keep both our County operations and our local businesses afloat during financially
challenging times. As we continue to navigate economic turmoil, we are again grateful to
your leadership and partnership on the Council for building an emergency Reserve Fund that
has provided us a safety net.
This year's budget outlook is unique. Our anticipated revenues come in at about 25%
over last year—all without increasing any real property tax rates. The primary contributors
to this increase come from higher real property valuations due to market conditions, the
reclassification of the Residential Investor tax class, and the full realization of the T.A.T.—
which we anticipate to bring $19,000,000 in revenue support for FY 2023.
However, while more revenue offers us flexibility with this year's budget proposal, we
know this will not be our long-term financial position—not without changing the overall tax
structure or increasing rates. This provides us a short-term opportunity to be strategic in our
actions. With FY 2023's revenue picture, we have an opportunity to make up for deferred
operational needs by investing in our associates, our infrastructure, and our community—all
without assuming additional general obligation debt or raising tax rates and fees.
To achieve these goals, we have prioritized need-to-have items over nice-to-have, with
a focus on investing in the future. Now is the time to replace aging vehicles and equipment
for our associates. Now is the time to establish or fill critical positions, while short-funding
other positions—all while avoiding layoffs and furloughs. And now is the time to address
deferred infrastructure needs.
This year's proposal continues to adhere to the principles of a "structurally balanced
budget," which does not rely on the use of General Fund, Fund Balance for any recurring
expenditures. Salaries, benefits, and collective bargaining expenses make up 62.2% of the
total budget, and 82.3% of the General Fund budget, leaving less than 20% for fulfilling our
core functions and services.
We will focus on infrastructure and repairs by tackling deferred and preventative
maintenance projects, with approximately $26,000,000 in new General Fund-CIP this year.
This approach would replace a typical bond issuance to finance these expenses, and save the
County from debt service interest costs. As our G.E.T. revenue continues to support the
repaving of our roads, this year's budget appropriates $15,600,000 in repaving expenditures,
with another $4,300,000 in CIP-related road costs.
March 24, 2022
Fiscal Year 2022-2023 Departmental Budget Reviews
Committee Chair's Budgetary Comments, Administration's Budget Overview,
Office of the Mayor (including the Office of Boards & Commissions), Revenue Forecasting,
and Department of Human Resources & Human Resources Reports
Page 5
Focusing on our wastewater infrastructure is also a top priority as we pump millions
of dollars into repairs and upgrades of our wastewater systems that are long overdue.
We remain equally committed to finding a long-term solution to manage our solid
waste program, which includes a study to site a new landfill location, and identifying more
solid waste diversion opportunities.
In addition to focusing on our basic infrastructure needs, we must invest in the health
and wellness of our community. This budget prioritizes our Parks and Recreation programs
and facilities, starting with our CIP projects for islandwide playground and playcourt repairs.
Additionally, four (4) new positions for Parks are included in this year's budget proposal,
including a new maintenance team to cover public assets in and around the Lihu`e Town Core
area, and a dedicated Park Ranger to help us manage and maintain the Bryan J. Baptiste
Sports Complex, which has become a gathering place for our keiki.
As we know, affordable housing also remains a critical priority as we utilize public
lands and leverage external funds to help us develop affordable housing.This year, we restore
the Special Projects Housing Fund back to pre-COVID levels, committing $3,000,000 toward
building more housing for our people.
Lastly, since day one we have emphasized the need for Information Technology (IT)
infrastructure and security. We rely on these systems in our day-to-day operation, and a
failure could result in crippling disruptions. While we have made great strides in this digital
age, we are still behind. We have proposed two (2) new IT positions to support our increasing
hardware maintenance demands and strengthen our cybersecurity.
From addressing our deferred infrastructure needs, caring for our community's health
and well-being, and providing our associates the tools to do their best job, we know we have
our work cut out for us. But we welcome the challenge.
As we reflect on the past three (3) years, we are grateful for the challenges that we
have overcome, and are confident that we will overcome the challenges that lie ahead.
Together, we can build a solid foundation for the next generation.
This is a time in history that we will never forget. I thank you, Councilmembers, for
your leadership, partnership, and continued support as we work together to build a better
Kaua`i. I look forward to your input on our budget proposal. Mahalo and aloha!
Council Chair Kaneshiro: With that, we also have Ken on. He will do a
budget overview for the County. You should have his presentation in front of you. Once Ken
completes his presentation, Councilmembers can ask questions on the presentation and the
Mayor's Budget submittal.
March 24, 2022
Fiscal Year 2022-2023 Departmental Budget Reviews
Committee Chair's Budgetary Comments, Administration's Budget Overview,
Office of the Mayor (including the Office of Boards & Commissions), Revenue Forecasting,
and Department of Human Resources & Human Resources Reports
Page 6
KEN M. SHIMONISHI, Budget Administrator (via remote technology): Aloha,
Council Chair Kaneshiro and Members of the Council. Ken Shimonishi, Budget
Administrator. Before I get started, I see the Managing Director present. Mike, is there
anything you would like to say prior to the presentation?
MICHAEL A. DAHILIG, Managing Director (via remote technology): I think the
Mayor summed it up in his address and we are ready to rock-n-roll.
Mr. Shimonishi: Looking at the Budget overview presentation
beginning on Slide 2, as the Mayor mentioned, we continue to adhere to the elements of our
Long-Term Financial Planning that we undertook several years ago. The Budget submitted
continues to conform to our Structurally Balanced Budget Resolution where recurring
expenditures should be covered by recurring revenues. The second bullet point, the Reserve
Fund and Reserve Fund Policy Resolution, for the FY just ended June 30, 2021, which I know
yesterday was the overview of the actual with the auditors, but the County basically ended
with $42,800,000 and$6,400,000 under our target of 30%,which would have put the reserves
at about$49,200,000. Keep in mind we did not have TAT revenue in that FY 2021. Also note
that in FY 2022, we passed several ordinance amendments since then, most notable the
recognition of County TAT revenue, which was effective October 1st. That should put the
County close or near to the 30% target. The last bullet point, FY 2023 Budget Proposal, we
do not propose any rate increases or the use of the General Fund, Fund Balance, other than
to reclassify$150,000 to the Self Insurance Fund, which really is just another form of keeping
the reserve in a bucket.
Slide 3, as the Mayor mentioned, our revenues increased by $57,000,000 or roughly
25%. $50,000,000 of that roughly is in the General Fund or an increase of 29.5%. Our G.E.
Tax Fund saw an increase of $6,200,000 or 31.5%. Our Liquor Fund—$121,000 or 15%.
Sewer Fund—$1,600,000 or 19.4%. Keep in mind that the FY 2022 Budget was somewhat
adjusted obviously for the economic impacts of COVID-19 and thus the entire increase is not
necessarily an apples-to-apples type of analysis. On Slide 4, a little bit more narrative of the
changes that we noted. Of the General Fund increase of$50,000,000, $30,300,000 came from
Real Property Tax revenues and $19,000,000 from TAT which was not budgeted in the prior
year. On the Highway Fund, we remain relatively flat with an increase in the Public
Franchise Tax of$233,000 and this was offset by lower that budgeted amounts and reduced
the estimates of Bus Fares of$50,000 and Interest Income reduction of $30,000. The G.E.
Tax Fund—increase of $6,225,000 or 31.5% based on current collections and projected
revenues prior to COVID-19. As we get into the revenue section of the hearing today, we will
get more into the details of how we came up with those numbers. The Liquor Fund increased
by $121,530 and this was based on projected sales. The Sewer Fund has an increase of
$1,650,000 based on current collection activity and estimates going forward.
For our overall Operating Budget elements by category, on Slide 5, the total Budget
increased by$16,800,000 or 6.9%. $13,300,000 increase in our Salaries and Related, or 8.9%.
Utilities, roughly $300,000 or 4.8%. Operations, $3,600,000 or 4.6%. Open Space relative to
March 24, 2022
Fiscal Year 2022-2023 Departmental Budget Reviews
Committee Chair's Budgetary Comments, Administration's Budget Overview,
Office of the Mayor (including the Office of Boards & Commissions), Revenue Forecasting,
and Department of Human Resources & Human Resources Reports
Page 7
the Real Property Tax revenue generated and then we saw a decrease in our Debt Service of
$463,000 or 4.4% decrease due to the refinancing that occurred in FY 2021 and amortization
schedule that was revised. Slide 6, a little bit more narrative of the table that we just went
over. Salaries & Related increased...keep in mind that we also are budgeting for our
Transportation Agency personnel returning to the County's budget whereas last year there
was a one-time use of Federal funds for the majority of the staffing for that agency. We also
have embedded collective bargaining impacts known and estimated benefit increases, as well
as additional staffing. On the Utilities, the increase of $300,000 were in the areas of
electricity $173,000; internet $76,000, and water of $35,000. As far as our Operations—the
$3,600,000 increase, we note that the insurance increased by roughly $500,000 and this is
based on the most recent renewals plus a 10% inflationary factor. Consultant Services
increased by $630,000; $420,000 in Public Works (Solid Waste and Wastewater); $100,000 in
Housing; and $56,000 in Elderly; a realignment of some appropriations that agency. Our
Special Projects increased by $447,000. There was actually a decrease in Finance in that
area. $75,000 increase in Housing and Community Development, and $400,000 in the
Housing Revolving Fund, and that relates to what the Mayor had mentioned where last year
we contributed $2,600,000 and this year we are contributing $3,000,000 to the Affordable
Housing Project from the General Fund. Supplies & Equipment increased by $737,000;
$140,000 of that is in Finance-IT; $192,000 in Parks; $130,000 in Solid Waste, and $124,000
in Sewer or Wastewater. Loans & Interest increased by roughly $600,000; $205,000 in Solid
Waste and $182,000 in Sewer, and this is related to the Clean Water State Revolving Fund
(CWSRF)funds that we incur as we move forward on these projects. $205,000 in the Housing
Revolving Fund, which is related to Lima Ola. Vehicles & Equipment increased by nearly
$700,000; $378,000 in Solid Waste, $55,000 in Highways, $244,000 in Transportation, and
$106,000 in Parks. Again our Open Space remains at the .5% contribution rate and the
decrease in Debt Service, which I mentioned, related to the refinancing.
On Slide 7, a look at our overall Operating Budget elements by category in graphical
form. You will see the pie chart on the right references Salaries & Related as a percentage
of the total Budget increased by 1%. Everything else is relatively the same. Our Debt Service,
again, slightly lower due to a reduction there, but other than that, pretty much in line.
Looking at the expenditures excluding our Debt Service and Public Access fund. The
departments that make up the budget, most notably the Public Works Department is the
largest department. In FY 2022, Public Works represented 32.4% of that appropriation in
FY 2023 30.9%. Again, note the change in Transportation, where we are going from 2.8% to
5%this year, because of the return of the use of one-time funds in the prior year and returning
to the County Budget this year. The second largest department would be Police, followed by
Fire, and then Parks.
Challenges ahead. Aging infrastructure. We know that there are significant amounts
required to fund our infrastructure repairs. The new landfill, the ongoing need to regularly
replace heavy-duty equipment and vehicles, the maintenance of our aging facilities, and
obviously collective bargaining, which is the largest expenditure that we have and continues
to put pressure on our budgetary flexibility. Just note that the budget information is
March 24, 2022
Fiscal Year 2022-2023 Departmental Budget Reviews
Committee Chair's Budgetary Comments, Administration's Budget Overview,
Office of the Mayor (including the Office of Boards & Commissions), Revenue Forecasting,
and Department of Human Resources & Human Resources Reports
Page 8
available on our website under the Financial Transparency portal. For our public, as well as
any of our in-house users...you can look at the most important reports on the budget, which
would be our annual Operating Budget Ordinance, which shows the ordinances year-by-year,
as well as the budget comparison, which would be between this year and last year's approved
budget. As far as the budget detail that was submitted to the Council, the Budget Ordinance
of Section 2 note that we have page numbers at the bottom right. This was because when we
compiled the Budget, we are inserting reports and analysis from different systems, so we
inserted those page numbers for your references. Also the .pdf file of the Budget Ordinance
should have bookmarks on the left to ease in your navigation. With that, that was the
overview. Are there any questions?
Council Chair Kaneshiro: Ken, thank you for that. Let us start with
questions on Ken's presentation first and then we can go back to the Mayor's Budget
Submittal. Ken, if any of the questions you think will be better answered with the certain
department or if we ask a revenue question that you think might be better answered later
today in our Revenue discussion, just let us know. Councilmembers, are there any questions
on the presentation by Ken? Councilmember Cowden.
Councilmember Cowden: On Slide 4, you talked about the Sewer Fund
having an increase. Is that an increase in rates or an increase in new clients? I thought our
sewer was relatively static, so I just wondered in terms of how many people are on it?Did we
raise the rate or did we get new clients?
Mr. Shimonishi: Those are not rate related increases, but rather
the department's projection on volume. Again last year we took the revenue numbers down,
so based on the most recent volume and activity, which could include new clients, that is the
estimate that the department provided. It is not related to any rates.
Councilmember Cowden: Okay. I said it yesterday, but want to say it again,
in looking at Slide 6, with lowering Debt Service. I just want to appreciate the Finance
Department for their constant effort in looking at how to maximize low interest rates, because
Debt Service on any household or organization of the County is important. Good job to
Finance.
Mr. Shimonishi: Thank you. To clarify, the sewer rate is primarily
attributable to the Commercial use.
Councilmember Cowden: Okay.
Council Chair Kaneshiro: Yes, Commercial and Industrial get charged
based on their use. I believe last year with stay-at-home orders and people working from
home, they anticipated lower revenues because less people were flushing toilets at the
industrial buildings and commercial buildings, and so this year with everyone getting back
to work, they upped the projection or they have seen an increase in the projection.
March 24, 2022
Fiscal Year 2022-2023 Departmental Budget Reviews
Committee Chair's Budgetary Comments, Administration's Budget Overview,
Office of the Mayor (including the Office of Boards & Commissions), Revenue Forecasting,
and Department of Human Resources & Human Resources Reports
Page 9
Councilmember Cowden: Okay. Thank you.
Council Chair Kaneshiro: Are there any other questions on the
presentation? Councilmember Kuali`i.
Councilmember Kuali`i: I am really happy with the presentation of the
materials thus far and I think this may be the best budget I have looked at yet. My broad
question is on Slide 6 and it may not be something you can answer now, but maybe you can
point me to the right place. On Slide 6, the second highlight is Utilities and the increase is
$289,000. When we look at all the different departments separately, it is going to be small
amounts and I will not see the big picture, but seeing the big picture here, my question
basically is where can I get...maybe it is in the Office of Economic Development, the work
that is being done on the County being more energy efficient? For example, the increase in
electricity of $173,000—how much of that increase is because of Kauai Island Utility
Cooperative (KIUC) rates, because we are expanding facilities and programs and so using
more electricity because we are providing more services to our constituents, and then the
flipside of that is what about the energy savings that we are getting because we have been
implementing programs that are actually saving us money. Ideally, the future, I hope, will
be one in which we have so much energy savings components in place that will either keep
the cost flat or start bringing it down. It is a big question and if I do not hear back on it until
the end of the budget, that is fine, because it is just a broad thing.
Mr. Shimonishi: Thank you for the question. A comprehensive
response would need time to be looked at, but I can tell you for the budget, of that
$289,000,000, $150,000 was requested from the Department of Public Works who pays the
utility bills for our facilities here and that is just directly related to cost increases as we see
fuel going up and so on. Also, the Department of Parks and Recreation came in with a request
of $54,000 higher than the prior year. The internet, primarily I believe is related to
transportation and that was roughly $72,000. That is how it is broken down by department
in terms of the $289,000,000.
Councilmember Kuali`i: Thank you.
Council Chair Kaneshiro: Councilmember Cowden.
Councilmember Cowden: I want to make another comment. I just want to
thank both the Department of Finance and the IT Division for the good online budgetary
tools. I appreciate the hard copies and then the online and how people can be going in and
looking at it from the community. I did not want to pass that by. Thank you for the graphs
and everything else.
Council Chair Kaneshiro: Are there any other questions from the Members
on Ken's presentation? If not, thank you for the presentation. It was presented very well
March 24, 2022
Fiscal Year 2022-2023 Departmental Budget Reviews
Committee Chair's Budgetary Comments, Administration's Budget Overview,
Office of the Mayor (including the Office of Boards & Commissions), Revenue Forecasting,
and Department of Human Resources & Human Resources Reports
Page 10
and very clear. Do we have any questions on the Mayor's video or his budget submittal?
Mike is available to answer any questions. Councilmember Cowden.
Councilmember Cowden: I did note when he was speaking, I appreciated
how he laid out how much is being spent in which areas and I believe he made the comment
that, "Less than 20% of the budget is for core functions," but when I am looking at Ken's, it
looks like it is 31%. What is that difference?
Mr. Dahilig: It is a reference to the different funds, so when you
look at General Fund support, less than 20% of that expenditure is actually for non-salary
related items. That is what that reference was meant to refer to.
Councilmember Cowden: In Ken's presentation when we are seeing the
bigger number, I was happy to see the bigger number there, 31%goes to Operations. So those
Operations might include salaries in there, is that what we are seeing with that? We have
salaries separated from operations.
Mr. Dahilig: The big amounts, when you look at the
breakdowns by fund...
Councilmember Cowden: I am looking at page 7.
Mr. Dahilig: ...that G.E.T. expenditure on road repaving is not
considered a salary item. That is not necessarily an operational expense as considered part
of the overall non-salary repaving program.
Councilmember Cowden: Okay. Thank you.
Council Chair Kaneshiro: Councilmember Kuali`i.
Councilmember Kuali`i: One is on the written submittal from the Mayor,
under Revenues. It talks about the new TAT program and $19,000,000. I think I saw
someplace where it took our Department of Finance some time and extra effort to put a
system in place to be able to get this going, which of course is important to replace the TAT
revenue that the State took. Now that we have this program in place and we are collecting
our own TAT moneys, what are the additional costs of operations. Are there additional
positions in place to take care of this and will we see it in the Department of Finance budget?
Mr. Dahilig: Yes, Councilmember Kuali`i. The Council
authorized three (3)positions as part of the portion of TAT that was collected for this current
Fiscal Year. When we came to you to make that adjustment, there were positions in there.
They are currently either going through recruitment or at the cusp of hiring. Director if
Finance Matsuyama can go over the statuses of those collections during her presentation.
There are still ramp-up efforts going on to fully operationalize the collection of that tax. She
March 24, 2022
Fiscal Year 2022-2023 Departmental Budget Reviews
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will happily remind everyone that she is also processing TAT collections herself. That is kind
of where we are at at this point to fully have a ramping of operations to have a TAT shop
going.
Councilmember Kuali`i: Just as you are telling me all of that, I am now
remembering that. I think it is good for people to know, too. Then the last point on the
written submittal on page 5, the return of Federal earmarks. That is related to the return of
Congressional spending, is that correct?
Mr. Dahilig: That is correct.
Councilmember Kuali`i: It says that we "anticipate moneys" for the second
phase of Lima Ola at $9,800,000 and for the Level 3 electrical vehicle chargers in the amount
of$900,000. By using the word"anticipate" have we already received some kind of award?
Mr. Dahilig: A lot can change in nine (9) days, Councilmember.
When we wrote this back on March 15th, the House and the President had not fully moved on
having this be enacted into legislation. We know that the Bill has passed. We are actually
working on a transmittal to the Council to receive and expend these moneys as part of the
earmarks. We are still trying to sort out what avenues these moneys are going to be brought
through us regarding which Federal department. Typically with earmarks in the past, a lot
of things came through the Secretary of the Navy. In this case, because of the tighter controls
and the discretionary choices that Members of Congress are able to make in terms of
allocation, we may see it align with different departments. For example, with the Level 3
chargers it may come from the United States(U.S.)Department of Energy. We may see Lima
Ola moneys come from the Department of Housing and Urban Development. We are still
trying to sort that out. We have calls with the Congressional offices next week Wednesday
to get briefed on what they know as the avenues for the plans for distribution, but we will be
coming to the Council for receipt and expenditure authorization on these two (2) items.
Councilmember Kuali`i: I guess I thought of one last question. On the
Sewer Fund, the language is somewhat vague. It is basically telling us that we had a General
Fund transfer of $3,700,000 to help subsidize the Sewer Fund. Then it talks about safety,
infrastructure aging, and the increased maintenance effort. It talks about without fee
adjustments, it would have to be a further demand or a greater General Fund subsidy.
Basically, that is spread out amongst the entire tax base. A lot of the moneys, which is
servicing the sewer system is particularly benefitting the sewer users. Is the County looking
at the balance of how much of it should be subsidized by all of the taxpayers and how much
more if even just a little bit more should be paid for by the users themselves?
Mr. Dahilig: In response, Councilmember, that is exactly the
policy balancing question. Before COVID-19, if you recall, we actually had a rate increase
proposed to the Council. That was back in 2020. It tried to align that balance of what is an
appropriate burden for the overall tax base to carry for an island that predominantly is not
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serviced by a County sewer system. That is where we felt going into the pandemic it was not
appropriate at that time to then push a whole fee increase onto anyone on the island for any
reason or any type of activity. It is a question that as we move forward, still needs to be
addressed. The budget does not include a fee increase for sewer, however, it is something
that as we progressed into the larger CIP development, that when we actually get to
construction of deferred maintenance repairs and those types of things that the question of
who bears the burden of the debt service is ultimately going to have to be balanced with what
is an appropriate rate to reflect that increase in construction activity. At least for this
particular budget what we are doing as mentioned in the Mayor's address is focusing on the
expenditures that cannot be covered by external types of debt service like our CWSRF
program with the State of Hawai`i. We are earmarking County funds for this type of activity
in the proposal. However, looking forward, that increase in debt assumption through the
Federal subsidized programs, through the SRF program may lead to a discussion about as
that debt service grows, what is that reflective increase in the rates that may need to cover
that as time goes on. I think that as we get through the presentations on Monday with the
Department of Public Works staff, they can give you a clue as to what projects they are
earmarking as necessary for health and safety issues. Ultimately, that CIP portion of the
Sewer budget is marginally going to start driving that downstream conversation on
proportionality in overall tax base versus services in terms of fees, and whether or not the
projects moving forward meet the veracity of need based on the Council's shared powers of
appropriation. I think that is a relevant conversation for Monday.
Councilmember Kuali`i: Thank you. Thank you very much.
Committee Chair Kaneshiro: Council Vice Chair Chock.
Councilmember Chock: I have a follow-up. Thank you, Mike. The rate
study was funded and are we in a holding pattern? Is that what I am hearing? Are we
waiting so that we can look at the bigger picture and then complete that?
Mr. Dahilig: The rate study that was completed prior to the
pandemic is no longer valid to meet the State requirements for enacting a utility fee. There
are a whole level of things that need to be done. We are in the process of evaluating it, but
at the same time, it cannot be complete without understanding what the CIP program for
deferred maintenance construction is then going to carry as the inputs to calculate an actual
fee. That is where the conversation with this budget will start dictating some of the
completion of that analysis for that potential sewer fee increase scenario. At this point, it
varies based on what the CIP program looks like. There is nothing at this point that we can
with actuality could actually say could be the increase.
Councilmember Chock: Okay.
Committee Chair Kaneshiro: Are there any other questions from the Members
on the Mayor's budget submittal? If not, we can go directly into the budgets if you are ready.
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Office of the Mayor (including the Office of Boards & Commissions)
Committee Chair Kaneshiro: Next on the schedule is the Departmental Budget
Review for the Office of the Mayor, which includes the Youth Work Program and the Office
of Boards & Commissions. I will turn the floor back to Mike. We received your written
narrative for your budget, if there is anything you would like to share on that. We can then
open it up for questions specific to the Office of the Mayor budget.
Mr. Dahilig: Specifically with the 101 account, we are pretty
much proposing a flat budget. You will see the normal increases due to either salary costs or
Other Post Employment Benefits (OPEB) are predominantly the cause of increases of
approximately$110,000. That is pretty much it for at least the 101 items. If you move to the
next item, that is just the typical Kaua`i Economic Development Board(KEDB) summer work
program that we do to support our keiki to get work experience over the summer breaks.
Sorry, am I moving too fast or should I hold off on each?
Committee Chair Kaneshiro: We can hold off on that and then we can have
Ellen do the Office of Boards & Commissions section. Now we are in the actual Office of the
Mayor's budget. Do we have any questions from the Members? I noticed that you made a
change to a Communications Officer, and changed the name from Public Information Officer.
Mr. Dahilig: Yes. Right.
Committee Chair Kaneshiro: What is the justification for that?
Mr. Dahilig: It is reflective of a restructuring in our Office to
handle communications and our additional audio visual work items.
Committee Chair Kaneshiro: Okay. Are there any other questions from the
Members? I saw our Lobbyist fee went up, but I know that when we were in D.C. in speaking
with Senator Schatz, he said that us having that D.C. Lobbyist is actually a huge benefit to
the County of Kaua`i. Our information and grants or whatever we are applying for comes in
a lot cleaner than the other counties. It is a good service that we have and it is beneficial to
our County specifically. I am okay with that small increase. Councilmember Cowden.
Councilmember Cowden: Just to follow up on that, I am okay with that
increase as well. When we lost Senators Inouye and Akaka and that was a very big change
to our ability to just access a lot of funds as a small state. I think it was an important and
necessary step that happened in Mayor Carvalho's time. I was relieved that it happened and
I am relieved to see that it continues. We have really done a great job at getting a lot of these
Federal grants. I am really appreciative of our standing in terms of being lendable. We have
talked about this Employees' Retirement System (ERS) increase. Just to help me through
the whole conversation, can you give me again the details of how our ERS increase happened?
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Why did we experience this large increase? I think it has been explained, but it has been a
while since we heard from the ERS people.
Mr. Dahilig: I am not an expert or even fully knowledgeable in
both how OPEB or the retirement system sends down a bill to us to say, "this is how much
you have to pay this year." I would probably suggest, Councilmember, that when Annette
and her team come up during that Human Resources period, that would probably be a better
question answered by them instead of by me. I will say though that at this point it is pretty
common knowledge that healthcare costs continue to increase at a pretty fast clip. That
OPEB amount for retirement, as they are putting moneys away for what could be the
downstream financial liability to the healthcare insurance system for government employees,
is why you are also seeing that start to increase. There are State laws that are requiring full
funding at some point in the future as mentioned in the Mayor's overall budget message. We
are not deferring any of those payments. We are being responsible by paying 100% of what
we believe is our responsibility. Like anything, these are actuarial types of projections that
I probably could not explain.
Councilmember Cowden: When we look at these operational challenges
from 2022, there are hopefully going to be a significant difference in the last year to next year
as we reopen to the public. I know some areas in our government were actually able to work
a lot more efficiently in some ways in terms of getting permits, et cetera. Do we see an
increase in the workload and the staffing needs or not in the Office of the Mayor?
Mr. Dahilig: At this juncture, I would say that at least in our
Office, we made a couple tweaks in terms of repositioning administrative support staff to
more communications staff. That was something that we had to make a pivot to in the past
year and a half or so with the pandemic and it seems to actually be working as a better
structure within our Office. For the most part, the dozen or so people who are here work
tirelessly. We have been very blessed to have who we have in the office and we have been
able to meet at least the public-facing demands on communication, servicing questions, and
those types of things. I would also like to add, Councilmember Cowden, another thing to
consider with the ERS cost and the increase in the OPEB costs is that we sent to the Council
at least the first collective bargaining reopener settlement with the United Public
Workers (UPW). It reflects an increase for their salaries of a little under 4%. Going forward
it would be 5% and 5%, right? It is almost a 14% increase for the four-year period starting
from last year. That also contributes to the increase in the OPEB and retirement
contributions. Knowing that we have a three-year target of approximately 14-15% with at
least one bargaining unit, that is something that when we go through the discussions with
that particularly Bill in approving the increase in settlement from UPW, you will see that
probably spread across all of the departments...
Councilmember Cowden: Does that include our Ocean Safety Bureau?
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Mr. Dahilig: ...for that cost responsibility. That is why we
mentioned in the overall budget message that our biggest collective bargaining costs have
not at this point come into full play yet, because of the full realization of the collective
bargaining agreement is not going to be realized until later on in subsequent fiscal years.
That is why that window of trying to push things towards deferred maintenance is becoming
apparent at least with this Fiscal Year's budget. Ken raised his hand earlier, so he may have
a little bit more insight on the ERS item if that would help, Councilmember.
Mr. Shimonishi: Aloha, Councilmember Cowden. As Managing
Director Dahilig mentioned, you will see this pattern across the other departments as well.
We have embedded a collective bargaining allowance in addition to what we already know.
If the Council would like to see further details on that, we could transmit that via confidential
cover. Obviously, we expect to continue the arbitration process, so we would want to be
careful on what we are disclosing.
Councilmember Cowden: Thank you for that important piece of
information. Thank you.
Council Chair Kaneshiro: Are there any further questions on the Office of
the Mayor's Budget from the Members? If not, we can move on. Does anyone have questions
on the Youth Work Program? The budget stayed flat at $10,000. Are there any questions
from the Members on that? Councilmember DeCosta.
Councilmember DeCosta: Is that the one that provides agricultural
internships with the students from agriculture partners in Kilauea. Is that part of that,
Mike?
Mr. Dahilig: I believe it is, but I have to double-check with our
staff. I believe that is one of the items that gets some subsidy from this program. Ultimately,
I think Kaua`i Economic Development Board (KEDB) makes it available to a number of
different sectors, so that could be, but let me get a confirmation on that, Councilmember
DeCosta.
Councilmember DeCosta: Thank you, Mike.
Council Chair Kaneshiro: Are there any other questions? If not, we will
move on to Boards & Commissions on page 9. Are there any questions for Boards &
Commissions? Councilmember Kuali`i.
Councilmember Kuali`i: On Boards & Commissions, the line item that says
advertising went up and I see the explanation about publications to Charter Amendments
and digital public information campaign. Is that something new that is now under Boards &
Commissions? Why is that now and has not happened in the last couple of years?
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ELLEN CHING, Boards & Commissions Administrator (via remote technology):
Thank you for the question. I want to start off with saying how proud I am of the
Charter Review Commission for the innovation and outreach to the public. This line item is
to replicate a digital public information campaign that was conducted in 2020 on the ballot
questions. What happened was digital advertisements were created. There are three (3)
types that have been used: Facebook, Instagram, Google search, and Google banner
advertisements, and there are nineteen (19) different advertisements created. I believe this
is the first time in the State that a campaign like this was conducted and the campaign ran
for about a month. So when these advertisements came out and they were targeted to
registered voters, if people clicked on the link in the advertisement, they were taken to a
landing page that had all of the information on the ballot questions. I believe that this was
a very successful campaign. The results of this were that all six (6) ballot questions were
adopted. The only other time that happened was in 2014, 2004, and 1986; however, those
years, 2014 had three (3) questions, 2004 and 1986 only had one (1) question each. The blank
votes on the ballot questions were cut down by a third, which is really significant and all of
the comments that were on the Facebook advertisements were very positive from individuals
saying this is the easiest that they have found to get information and they were very happy
about the outreach on providing information to voters.
Councilmember Kuali`i: Thank you. I am glad to hear all of that.
Council Chair Kaneshiro: Councilmember Cowden, follow-up question.
Councilmember Cowden: I have a follow-up. On these Facebook, social
media, or digital advertisements, are they giving both sides of the debate equal balance? We
have had prior, to your term, when it goes into the press it biases towards the passing of the
Charter Amendments, so I think it is important that we give both sides and they are given
equal emphasis on this digital information.
Ms. Ching: Thank you for the question. All of the
advertisements had a tagline that this was from the Charter Review Commission, so any
information provided regarding the ballot questions mimic the exact...one of the things in
the Charter that we are required to provide via the Charter Review Commission is a
publication where the full text, the ballot question, the purpose, and the background on each
ballot question, so these advertisements and the landing page basically provided that same
information.
Councilmember Cowden: Okay. I just want to say what has a lot of value in
that is that it is very expensive to put all of that in the newspaper, so this would be every
day. Anytime someone wants to go. I want to say that having participated in Charter Review
Commission meetings over the prior years, is very often the question is framed so people will
say "yes" the information is selected. I have not observed it to be a balanced output, so
sometimes that is a little concerning. I agree that putting it out this way is probably the
most effective use of getting information available, because it would be very expensive in the
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newspapers and most people do not get the physical paper, so they would not even see it. I
support this expense. I need to write to the Charter Review Commission to encourage them
to consider giving equal representation of both sides. I am not suggesting they are not this
year, but they do not always. I think that is important.
Council Chair Kaneshiro: Are there any other questions from the Members?
Councilmember DeCosta.
Councilmember DeCosta: Hi, Ellen, how are you?
Ms. Ching: Good morning.
Councilmember DeCosta: I wanted to ask if you could help me understand,
what do you mean by"other small equipment"? Is that copy machines, printing machines, or
computers?
Ms. Ching: No. It might be plexiglass holders for notices.
Very small things, not anything major.
Council Chair Kaneshiro: The description says "replacement equip,
recorders, foot pedals, microphones, stands, chairs, etc."
Councilmember DeCosta: Okay.
Council Chair Kaneshiro: Are there any other questions for Boards &
Commissions? Councilmember Kuali`i.
Councilmember Kuali`i: I do not have a question, but I want to say thank
you, Ellen, for that explanation of the $30,000 and that, in fact, when I asked my question I
had missed seeing the 2021 column, so knowing that it is a replication, I probably would not
have asked the question, but it was interesting to hear about all the details. Thank you.
Ms. Ching: Chair, may I make a statement?
Council Chair Kaneshiro: Yes.
Ms. Ching: I wanted to also reassure the Councilmembers
that when we do the publication in the paper, as some of the Councilmembers have stated,
not everyone sees the paper, and not everyone gets the paper, but we also publish an insert
into the paper, and we publish additional inserts, so that we give one hundred twenty (120)
copies to the Council Services Division and to the Office of the Mayor. So, if anyone wants a
copy and we have some copies here, they can contact us, or if they are at the Office of the
Mayor or at the Council Services Division, they can actually get a copy and take it home. I
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just want to reassure you that we really do try to make our best efforts to get that information
out there.
Council Chair Kaneshiro: Thank you. Are there any further questions?
Councilmember Evslin.
Councilmember Evslin: Chair, can I go back to the Youth Work Program?
Council Chair Kaneshiro: We will go back this once; we are not going to go
back in the future.
Councilmember Evslin: I do not know if it was explained, but is this the
program that hires the youth interns? I know Councilmember DeCosta asked about the
farming program. I know in the past there was a program that hired interns to work in the
County, is this that program? It was put on hold last year, is it now in full force?
Mr. Dahilig: We anticipate so.
Councilmember Evslin: Awesome. It is such a great program. Glad to see
it ongoing here.
Council Chair Kaneshiro: Councilmember Cowden.
Councilmember Cowden: I have a follow-up. $10,000 does not seem like
enough for it. I helped at Kapa'a High School this week. Great kids there. Unbelievable in
that industrial technology and engineering class. I gave them the County's name so many of
them are good for internship that I think would be great. I wanted all of them or half of them
to come help us. I hope that we do get some of our beautiful emerging generation to come
help at the County this summer. IT that means you too, and the Roads Division.
Council Chair Kaneshiro: Councilmember DeCosta.
Councilmember DeCosta: I have a follow-up for Councilmember Cowden.
Half of those are my students...
Councilmember Cowden: Amazing kids.
Councilmember DeCosta: ...in the IT program that I teach. Thank you for
recognizing. They are great future community leaders.
Council Chair Kaneshiro: Are there any further questions for the Office of
Boards & Commissions?
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Revenue Forecasting (including Real Property Taxes & Other Fees
Committee Chair Kaneshiro: If not, we are going to move on. We will proceed
to Revenue Forecasting. There have been no Real Property Tax rate increases or revenue
enhancement measures proposed by the Administration. During this time, we will usually
review the schedule of charges and fees, which has been no changes. This is a presentation,
so I will leave it up to whoever is doing the presentation on the revenue overview.
Mr. Shimonishi: This is a brief presentation. I guess the first
slides, page 2, recaps the revenue that we went over on the overview. Then the subsequent
slides will cover the Real Property Taxes, our biggest source of revenue. I believe Director
Matsuyama or Real Property Tax Manager Mike Hubbard will speak to those. I am not sure
if you want to stop at that point and follow up with questions, but then we have a few more
slides going over the larger pieces of revenue, then after that the detailed worksheets, which
I do not intend to do a screen share because of the detail involved on those. With that, I will
turn it over to Director Matsuyama or Mr. Hubbard on the Real Property Taxes starting on
Slide 3.
Council Chair Kaneshiro: Let us go through the whole presentation now,
then we will ask questions after.
REIKO MATSUYAMA, Director of Finance (via remote technology): We are going
to start on Slide 3, talking about Real Property Taxes. Of the $250,000,000 of General Fund
revenue that we budgeted in Fiscal Year 2023 that Ken just showed on Slide 1,
approximately, $188,000,000 of that is from Real Property Taxes, so a good chunk of our
general fund revenue is derived from the Real Property Tax Assessment Office. The last
couple of years have had a drastic increase in assessed values. Credit to our appraisers who
are the ones who are tasked with keeping up with market trends and then defending our
values on the real property values. The appraisers found nearly$30,000,000,000 in assessed
value for Fiscal Year 2023, which is $3,400,000,000 or 12.8% more than the prior year.
Overall, the parcel count on Kaua`i remained about the same with our big swaying from
Residential to Residential Investor, that is due to the reducing the threshold from $2,000,000
to $1,300,000, so this also reduced the average property value if you look to the far right, for
Residential Investor from $4,600,000 to $3,000,000, but that would have been the only
decrease that we saw an average property value throughout
all tax classifications.
Moving to Slide 4. Slide 4 is the summary of our appeals. You will see a reduction in
overall appeals of about 17% mainly due to a decrease from our Hotel and Resort tax
classification. They were hit hard during COVID-19, so we reduced some of their assessed
values during that time, but now they are back up. That decrease was offset by an increase
in appeals in the Agriculture tax classifications. Basically, we have one (1) person file one
hundred (100) appeals, so that is skewing the number a little. Despite the reduction in the
number of appeals, more values at stake. If we look on the right side of the table, values in
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dispute went from $323,000,000 to $426,000,000 so an increase of 31% and that is due to a
few large Commercial appeals with high value amounts.
Slide 5 dives into actual revenue and that is broken down by tax classification. The
overall Real Property Tax revenue is up 19%, which is over $30,000,000. If you look at the
two (2) columns that equal 100%, the percentage of revenue brought in by each tax class is
relatively consistent year-over-year, except as it relates to the change in the definition of
Residential Investor, as we talked about earlier. Outside of that tax class, you see double
digit percentage increases in all the tax classes except for the owner-occupied tax classes, and
those are the ones that are protected by the 3% cap.
Moving to Slide 6. Slide 6 is side-by-side charts of assessed value percentage versus
tax revenue percentage. The blue bars represent what percentage of total assessed value
that each tax class makes up, and the red dots represent the percentage of revenue that each
tax class brings in. For example, if you look at the Homestead tax class where the blue bar
is the highest in both Fiscal Year 2022 and 2023, for Fiscal Year 2023 the Homestead or
owner-occupied tax class makes up 27.1% of the total assessed value for the County. It only
brought in 9.4% of the total Real Property Tax revenue. On the flip side, Vacation Rental,
Hotel and Resort, and Residential Investor—our three (3) highest tax rates—make up a
higher percentage of our tax revenue than they do of their assessed value.
Slide 7 looks similar to Slide 6, but showing very different information. This is market
value versus taxable value. The blue bars represent market value, which is always higher
than the red dots, which represent taxable value. The taxable value is what we use to
calculate a person's actual tax liability. Taxable value times tax rate equals what you pay.
The gap between the red dots and the top of the blue bars represents our tax relief programs
that the Real Property Tax office works really hard to provide. You will see relatively small
differences like the gaps between the red dots and the top of the blue bars, you will see small
differences between most of the tax classes, being that we do not offer too many tax relief
programs for those tax classes. The value that they pay on taxes is almost equal to their
market value. The largest differences that you see are in the owner-occupied tax classes, so
Homestead and Commercialized Home Use. In Fiscal Year 2023 market value was over
$10,000,000,000 in the Homestead tax class, but taxable value that we use to calculate the
amount paid was only $5,800,000,000, a difference of$4,200,000,000, so you will see a lot of
tax savings. Similarly for Commercialized Home Use, market value is nearly$2,100,000,000,
but the taxable value was less than $1,300,000,000. These two (2) classes are the ones that
enjoy the 3% assessment cap where their taxable value cannot exceed a 3% swing year-over-
year. While market values are soaring in this increasing market, all owner-occupants are
protected by the cap. It is evident even further when you look at the charts year-over-year,
where you see market value in the Homestead tax class went from $8,800,000,000 to
$10,000,000,000, but the taxable value only increased by less than $300,000,000. The other
tax class that generates a decent gap between the red dot and the top of the blue line is
Agriculture. That is where most of the properties participate in the Agricultural Dedication
program reside. In Fiscal Year 2023, the market value for those properties was
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$2,400,000,000, but assessed value was under $1,300,000,000, so it makes that tax class
nearly half of what it would have been without that program. You can see that these tax
relief programs are very important for the residents of our island. With that, I am going to
hand it back to Ken to talk about our gaping.
Mr. Shimonishi: On Slide 8, I think part of the challenge when you
think about our budget and the revenues over the past couple of years is, how do we try to
estimate the impacts of COVID-19 and now that we appear to be coming back to hopefully
near normal or somewhat normal conditions and try to budget for that. TAT, the chart that
I am showing on page 8 is what is the tax base, or the total revenue being generated, not the
3%, but the 3% would be based off of this number. As you look at this linear chart, it looks
all over the place, but it is surprisingly consistent when you look at it year-over-year. You
can see how we fell off when the pandemic hit and restrictions were placed, as far as visitors
and so on, that drop off in April of 2020. It is based off of a calendar year because that is how
the State reports it, then how we recover beginning June 2021 through December. Page 8
shows that from January 2018 through December 2021, if you look at Slide 9, this layers the
same data except year-over-year. With the orange, you see Calendar Year (CY) 2018 what
the revenues were coming in at the tax base, so to speak. The green line with the revenues
coming in month-over-month and it is very similar when you look at the pattern here, in
terms of our seasonality of visitors. The green line CY 21, you can see how it basically fell off
and the blue line CY 2021, how it picked up and over the last six (6) months have done better
than the prior two (2) years to COVID-19. The red dashed line with blue dot, that is our
budget basis. If you look at that compared to the prior years,we are not budgeting excessively
higher or at the highest levels that we were seeing most recent, but somewhat in between
those lines and try to keep an even keel, so to speak. If you look at the table on the top right
totals, again, in CY 2018, $636,000,000 in TAT tax based and our budget this year is based
on$633,300,000. Again,just to point out the reasonableness, I feel is presented in our budget.
On Slide 10, are fuel tax collections. This is our actual collections. You can see the
drop off in May 2020, typically a one-month lag. The same type of analysis on page 11. Again,
this is a year-over-year type of look and what did we base the budget on the red dash line
with the blue dots keeping relatively in line with what we did over the prior years before
COVID-19, so a budget of$5,400,000 in fuel tax.
On Slide 12, the G.E.T. surcharge. This is what we have been doing in County
collections. It started in January 2019, but there were not many collections, because there
was a one-year lag of when they pay it, but our collections started to show in February 2019,
so you can see how it drops off in May and how we have picked up in July through December
of the last year.
Slide 13 presents the same type of year-over-year analysis. In this case, the yellow
dashed line will be the basis for our budget of$26,150,000 in this year's proposal, so not quite
going over what we did the last six (6) months adjusting for the front end of where we saw
the dip in last year, but try to keep within reason on our projections. That is the main budget
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revenue items we have in the budget and if you would like to go over the detailed worksheets,
I will follow along with you, Chair.
Council Chair Kaneshiro: I do not think it is necessary to go over the
worksheets. If there are Councilmembers that want to or have questions, we have a lot more
detailed worksheet on the revenues, but we have heard three (3) or four (4) times why there
were increases. The information that we have had so far are good. We have gone
line-by-line on this one, I do not think it is necessary without any changes to any fees, so Ken,
if there are any questions that you need to refer to the more broken-down worksheet, then
we will do that, but we will take general questions right now on the presentation.
Councilmember Evslin, then Councilmember Cowden.
Councilmember Evslin: Thank you, Chair. Ken and Reiko, thank you for
the presentation. For the Vacation Rentals, the increase in parcel counts looks like one
hundred thirty-three (133). This might be a question for Mike, but do you folks have data on
what those one hundred thirty-three (133) were previously? Are these Homestead or
Residential transitioning out of that to a Vacation Rental?
MIKE HUBBARD, Real Property Tax Manager(via remote technology):
Mike Hubbard, Tax Manager. Councilmember Evslin, we have data that we can provide.
Out of all tax classes there is about forty-seven(47) different changes that has happened over
last year to this year from brand new parcels to parcels moving from Residential to Vacation
Rental from Vacation Rental to Residential Investor. If you want a detailed analysis of all
forty-seven (47) of those or if you want to just limit it to Vacation Rentals, we can.
Councilmember Evslin: It depends on the workload. My main interest is
Vacation Rental and I would not want to have you folks go through a bunch of data analysis
for others unnecessarily. But if it was possible to provide that as a follow-up where the
changes are coming from and also historical data too, on the trend, if we are seeing one
hundred thirty-three every year, or are we seeing a spike now?
Mr. Hubbard: Some of it is a rebound from COVID-19, as I would
estimate, but we could look from historical trends as well.
Councilmember Evslin: I guess you could lump that all into one, just your
take on where these are coming from and potential cause COVID-19, et cetera, it does not
need to be detailed. One other question was on the forecast for the TAT. Just from looking
at it, it looks conservative forecasted that much lower than 2021 was. Is that based on
tourism projections that are showing less tourism next year, or is it maybe an effort to better
under project than to over project and then we are short-funded? I guess that is a question
for Ken or Reiko.
Mr. Shimonishi: I think it is leaning more towards conservative
look until we get the collections a solid history of what is happening and you can always come
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up with reasons why it should be this way or that way, how does the economy affect tourism
to Kaua`i and whatnot, but just trying to get a ballpark of where should we be and what is
reasonable was the approach that we took to put together the budget.
Councilmember Evslin: Thank you. That is not a slam on the projections,
I recognize it is impossible to project. I remember hearing a bunch of economists in May 2020
that it is going to take us six (6) years to recover tourism-wise and it took us two (2) months.
I know it is an impossible task here. Thank you, Ken.
Council Chair Kaneshiro: Councilmember Cowden.
Councilmember Cowden: I want to look at the Residential Investor numbers
on Slides 3 and 5. When we look at Slide 5, that is where we had this gain of almost
$17,000,000 out of a total of additional eight hundred twenty-two (822)households for a total
of one thousand two hundred thirty-nine (1,239) households. $17,000,000 is a lot of money
to come out of few properties. I know some of them are extraordinarily expensive homes and
I think that is what we intended to target. In 2021, I believe there was two hundred
fifty-six (256) houses in that area that fell under this class. We are actually charging these
people than the resorts, because we have almost $30,000,000 in the Hotel and Resort tax
revenue and $33,500,000 in the Residential Investor. If I am looking correctly on page 5...
Director Matsuyama you shook your head, did I get that wrong?
Ms. Matsuyama: I was not following where you are going with that.
The Hotel and Resort tax rate is much higher than the Residential Investor rate.
Councilmember Cowden: Correct, but the total tax, we had almost
$8,000,000 out of all the resorts. The vacation rentals was another $44,400,000, so together
those two (2) visitor industries is a lot, but when we look at the resorts, thinking about how
many people go through there and then when we have one thousand two hundred thirty-nine
(1,239) houses that contributed as much as all, in fact more than the estimated TAT. That
an extraordinaryincrease. When I brought upyesterdaythat I am concerned about and
isg
why I am going to be looking at it later, I understand that this went into the budget now, but
for many people this is just a second home in their family that they are long-term renting.
They might have long-term rented for a long time and they do not make a new document
every year. They could not hit the requirements. Some of them might not know if they have
the bank. I want us to look carefully,
tax increase is goingto oto
a loan, because that g
because when we are getting as much out of one thousand two hundred (1,200) homes as we
are getting out of visitors in the TAT, that means every room we are getting...we added eight
hundred twenty-two (822) homes, but we are getting an incredible amount of money out of a
small portion of people, and by the way of not necessarily giving them fire flow to their houses.
Some of those people have the money to pay, they do not mind paying, they do want service,
but there are many other people who do not have the money to pay and we are pushing them
out. I want us to be looking carefully, I am trying to call attention. Almost $17,000,000 out
of one thousand two hundred(1,200) houses is extraordinary and when we look at a decrease
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from Residential to Residential Investor, we lose seven hundred thirty-six (736) houses out
of Residential. Maybe some of those turned into Vacation Rental, they could have changed
in a different way, but I see we lost seven hundred thirty-six (736) from that protected class
that is Residential and move them into Residential Investor, probably a good number of them,
just the main trigger point, was the cost of inflationary rate on the value of their house, then
we have this disproportionate burden. I am not trying to change it for this year, but I am
highlighting it as strongly as I can that many of those houses are going to be forced into sale,
and when they have this kind of increase on the house...you have seen some of these things.
All of us should have seen it. Where people are getting $27,000 increases, $14,500, it is
completely unexpected, and they are not abusing the intention of their home. We are forcing
those into sales, and do we really want to do that? I think we need to be careful with what is
happening there. We need to have some sort of equitable type of charging, so I am just
highlighting this problem, and we should all notice that if a thousand houses are paying as
much as TAT or more than the hotels and resorts are even when they are charged at a much
higher rate. We have something disproportionate going on. Thank you. You might have a
comment. I stated that, but I want to hear if you are noticing and "red flagging" that or
saying"that is great," because next year when we continue to have more inflation there will
probably be more houses that end up into that area, I think we need to raise that number to
something like $3,000,000 not keep it at $1,300,000, so we keep some of our people in our
houses. What is your reaction to that?
Mr. Dahilig: Councilmember Cowden, just as a response, and I
know that this also came up in the conversation at Council yesterday concerning some of your
perspectives on the tax rate and the structure and who is bearing the burden of the overall
revenue picture. As you have mentioned, there is movement in the overall property
classifications as you are seeing things shift from Residential to Residential Investor, and as
that movement has happened, the policy as I understand it was to bring into line this concern
that either homes are being used as second homes or they were staying vacant. I would like
to point out that when you look at Honolulu's policy, which is $1,000,000 as a threshold, so
we provide quite a different buffer on that bright line that you would see in the City and
County of Honolulu. Just an off the back of the envelope kind of analysis, when you look at
the affordable housing threshold numbers for a 3-bedroom house to qualify for a Homestead
rate for a rental home, that debt service, if you were to use all of the rental income at that
threshold for affordability, it would only hit a home value of about $450,000. This idea that
bringing down the level would affect our affordable housing-type of stock, there is quite a big
difference with what rents would be able to carry as debt service for a mortgage of about
$450,000 versus what we are seeing at$1,300,000 as the bright line threshold for residential
units for either be in Residential or Residential Investor. We look at the policy of second
homes and are not "Homesteading" as something that needs to be delineated. This is just
the net effect of that policy. There can be reasonable disagreement as to whether or not this
is the intended picture. We will continue to monitor and look at how the revenue contributors
to the overall revenue picture look like. If it is something that requires adjustment based off
of as you mentioned, inequitable distribution of the tax burden, those are conversations we
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certainly can have, because the Tax Code can change. This effect that you are characterizing
is a net effect of a change that is very recent and we will continue to monitor it.
Councilmember Cowden: Okay. I just want to follow up that these are not
all empty second homes. That is the thing. They are not all empty second homes. A number
of these are rentals and they are just regular people renting to someone for many years. They
do not know how and they were not aware to put the paperwork in. We are catching more
fish in the net than were intended. If I use that metaphor, the eye of the net is too small. We
are catching the manini when we are trying to get the big fish. We are moving out people
who are basically residents or people who are renters. We need to doctor up that element.
We need to open that eye on the net, so that we do not continue to lose affordable housing.
The threshold that is affordable housing...if you live in these high-rent areas, you cannot
even pay your normal tax and insurance for the rent that is an affordable rental. If you have
an affordable rental, you are operating at a loss even if you own your house outright. We
have such significant differences. Just as we look at these elements like the graphs, thank
you so much...the Vacation Rental information with our G.E.T. on page 8, the normal trend
with these spikes and dips, that is what our normal trend is. When we have things like
parking permits, it is only going to make money on those high points and it will lose money
on those low points. We have to look more carefully. Please expect and I hope I get some
support from my colleagues, to look at these definitions. When we talk about keeping local
people on the island and I care about all people that live here. These are cousins and
grandkids that are in some of these houses.
Committee Chair Kaneshiro: Councilmember Cowden, do you have a question?
Councilmember Cowden: Yes, I do have a question. I will say it again and
the Managing Director answered it to some degree. I am really asking as we look at this
budget, do we flag an area where it is a big wind fall for money, but are we flagging that as
an area that is disproportionate? You said that to some degree, but you gave the $1,000,000
price on O`ahu. I do not care what it is on O`ahu. What I care about is our people here. If
we are taking people out of their homes, do we have any intention to make that correction?
That is my question. Do you support a correction that would keep people in long-term rentals,
even if they are paying $2,500 a month?
Mr. Dahilig: That certainly is a good question, Councilmember.
Like anything with policy, it always warrants revisiting and also warrants monitoring as it
gets implemented. Nothing is ever perfect and when we bring proposals or when proposals
are brought from the Council for implementation, we can project, analyze, and anticipate,
but until there are real market conditions or real implementation conditions, do we actually
see what the net effect of these things are? As we have taken it, the shift in the definition
was not necessarily a means to target revenue generation rather than look at equitable
distribution of what we believe should be the burden to be borne by those who are
"Homesteading" and full-time residents of this County, versus those that are looking at trying
to have properties that will appreciate based off of our current market conditions. While
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there may be individuals or certain households that are renting,we look at the overall picture
in terms of long-term affordable tenant-occupied rental program as kind of the basis for how
we anticipate that bright line threshold of what is keeping people in affordable housing units
versus what is not an affordable rental. There are very many different definition differences
of opinion in what the definition of affordable is, but ours right now is established by
ordinance related to the overall tax program for the County. That is what we look at as
affordable. If you look at something that you mentioned that is $2,500, what is considered
affordable within the County is something that is a 4-bedroom house with no utilities.
Whether or not that type of revenue is meant to sustain the debt service cost of a mortgage
for someone who is trying to take a home that is over $1,300,000 and pay down the debt for
that, that would not necessarily pencil out. That is why we do not look at the Affordable
Housing Program as something that would conflict with a $1,300,000 Residential Investor
home. Anybody that is in a $1,300,000 home who wants to rent to local folks are more than
welcome to bring their rents within the thresholds established by the Council for the
Long-Term Affordable Rental Program or tenant-occupied rental program. They can apply
and they can adjust their rates to bring it down to that Homestead tax class. Ultimately,
that is a policy call that can be adjusted. None of these things are set in stone or sacrosanct,
but they can be changed year-by-year. As I mentioned in my previous response to your
question, Councilmember, we will continue to monitor. This is really a new change that we
are continuing to see how it impacts both the numbers, counts, and revenues. If adjustments
that need to be warranted to recalibrate what was anticipated to be an equitable
redistribution of the tax burden, we can certainly have those conversations and those are
welcome.
Councilmember Cowden: Okay, thank you so much. I thank you that you
helped to clarify for my colleagues that this is statute and ordinance information. People who
own these houses debt-free, outright, and with no mortgage, the insurance and the taxes are
beyond that amount that is set for affordable housing. It is not possible in expensive
communities to have affordable rentals, based on our statutes.
Committee Chair Kaneshiro: I have a question. I heard a lot of information. I
heard a lot about homeowners losing their homes. Reiko, can you briefly go over again...my
understanding is that anyone in the Residential or Residential Investor tax class are not
living in their home. That is not their primary home. They might be renting it to someone,
but it is their second home. They are living somewhere else, so these are not people who are
losing their home. They are losing their second home. Once you get to a second home, it is a
business decision whether they want to keep it as a rental, keep it empty, et cetera. Based
on their decision, they could do a lot of things. They could long-term rent it at a lower rate
to locals and they will get the Homestead rate, that will save them on taxes. They can
long-term rent at whatever rate they want and they can get the Residential tax rate. If they
do not do that and they do not want to long-term rent or they want to short-term rent, then
they get taxed at the Residential Investor rate. They are not living in the house. If they were
living in the house, they would get the Homestead tax rate. Reiko, can you clarify that
information? I heard a lot about people losing their homes.
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Councilmember Cowden: The tenant.
Committee Chair Kaneshiro: It is not the home that they are in.
Councilmember Cowden: The tenants are losing their homes. The people
who are living in it. The cousins that live as the tenant in the home are losing their homes.
Committee Chair Kaneshiro: I am asking Reiko for the definition.
Councilmember Cowden: You are morphing what I am saying.
Councilmember DeCosta: I do not think he is morphing what you are saying.
I have to jump in here. It seems like you have someone or some personal friends who are
losing this. It seems like that.
Councilmember Cowden: Plenty.
Committee Chair Kaneshiro: Again, let me direct the question to Reiko or Mike
if you want to again clarify. I do not want to have misinformation out there. If you are living
in your house you get certain tax rates. You are the protected class if you are living in your
house fulltime. If you are not living in your house full-time, it is a second home and you are
renting it, you are not in that protected class, but there are options that you can take to
reduce your tax burden. That is just one part of the business decisions that you have to make
when you have a second home.
Ms. Matsuyama: Just to clarify, the definition of the Residential
Investor tax class is a property that is, again, a second or third home, or more, of someone
who does not live on the property and the property sits vacant, so it does not have a
long-term lessee in there. As Council Chair stated, yes, you can rent it affordably and get it
in the Homestead tax class. You could rent it at market rates or whatever you want and you
could remain in the $6.05 Residential tax rate. We did a significant amount of outreach to
taxpayers that maybe fell from $1,000,000 and up, that did not have a Home Exemption to
let them know that if their property is valued at $1,300,000, they needed to come in and file
a long-term lease agreement with us at Real Property Assessment. We did take in a lot of
long-term leases and those homes remained at the $6.05 Residential tax rate.
Councilmember, when you say that the tenants are needing to move out, they must have
missed the window or they must have not filed with the Real Property Assessment Office,
but I assure you that we did a lot of outreach. We encouraged everyone to come in and file
their leases. As Managing Director Dahilig said, this was not a revenue-generating intent
when we did that. We did not have the intent to generate revenue. More so, we wanted to
try and create more housing so that these vacant homes would make a business decision as
Council Chair alluded to, to instead of leaving them vacant, to contribute to the housing
inventory and rent these homes. Since that is not what we have seen, maybe we do monitor
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more. As long as they are filing their lease agreements by September 30th of each year, then
there should not be a problem.
Councilmember Cowden: I just want to say one thing. Can I?
Committee Chair Kaneshiro: No. I have Council Vice Chair Chock with a
follow-up question, Councilmember DeCosta with a question, and Councilmember Evslin
with a question. Council Vice Chair Chock.
Councilmember Chock: Just to follow up on your response, Reiko. You
said that we received a lot of...can you be more specific...how many more did we receive
because of this change?
Ms. Matsuyama: Mike, do you know? I would have to have the Real
Property Assessment Office do some homework.
Councilmember Chock: Okay, thank you.
Mr. Hubbard: Councilmember Chock, I can take that question
down and provide you with an answer.
Councilmember Chock: Thank you.
Committee Chair Kaneshiro: Councilmember DeCosta.
Councilmember DeCosta: Thank you, Reiko, for all that you do. I am in the
Residential Investor tax class. I have a second and third home. I have long-term leases with
the County. I could make a lot more money if I was doing vacation rentals or renting it at
the market rate. I do not. If you have a second or third home, you must be doing pretty good
in life. Pay your taxes. The thing that I am going to ask Reiko is...I think we have a
misconception here about "tenants" being kicked out of their houses and "tenants" needing
to file paperwork. It is not the tenant who files the paperwork, it is the owner of the home
who has to file the paperwork. If they do not file the paperwork and their taxes go up, then
the homeowner will either have to put their tenant out, or file the late paperwork with Reiko
folks or make sure that paperwork is in on-time, so they can have that long-term County
affordable lease. It is pretty cut and dried. I do it every year. I think it is every two (2) or
three (3) years now. Is that right, Reiko?
Ms. Matsuyama: Yes, for the Long-Term Affordable Rental
Program, if you have a three-year lease, you can do it every three (3)years. For this program
though,it would have to be every year. You have to come in and file a market value long-term
lease. And yes, it is the owner that is responsible.
Committee Chair Kaneshiro: Councilmember Evslin.
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Councilmember Evslin: Could I make a comment? I can make it into a
question. Mike, Councilmember Cowden said that a homeowner at the Long-Term Affordable
Rental rate would not be able to afford toY a their taxes from
the rent from the unit. For a
topay
home that is at $1,300,000...
Councilmember Cowden: And insurance.
Councilmember Evslin: ...and insurance. I do not know what the
insurance is going to be. For a home that is assessed at $1,300,000, say a 5-bedroom home
would be their property tax burden and at
with a Long-Term Affordable Rental rate, what p p y
that 5-bedroom rate, how much would they be bringing in?
Committee Chair Kaneshiro: This maywe might have to follow
be a question g up
on. I see Mike starting to calculate now, but I would rather you take your time to run a few
scenarios. You can get back to us in a written E-mail form.
Councilmember Evslin: You can correct me in the follow up question. It is
going to be around $4,000 in taxes and $28,000 in rent. They are not even close. You can
certainly pay your taxes based on the rent. It is a mischaracterization to say that you cannot.
Again, you do not have to do the Affordable Rental Program. As they have said so many
times, you can turn in a lease agreement at market rates and I think it is on all of us. We
passed this Bill unanimously. It does not just fall on the Department of Finance here. It is
on all of us to help inform people that they can turn in a lease agreement to stay at the
Residential rate. Instead of trying to jump in circles to possibly rework this ordinance, it is
on us to help people to turn in that lease agreement and help them save money to let Real
Property Tax know that the home is occupied. Lastly, as far as saying that it is pushing
people out of their homes, there is clear evidence from around the country and in foreign
countries, they can see tax surcharges work to increase rental stock. When you have a
negative incentive to not leave the house unoccupied, it encourages people to put someone in
the house. I am not sure how much data we have here, but they work. This is acting in the
same manner. Sorry, that was not a question.
Councilmember Cowden: I have a question.
Committee Chair Kaneshiro: I have Councilmember Kuali`i, followed by
Councilmember Cowden, then Council Vice Chair Chock.
Councilmember Kuali`i: I have a simple question that has to do with the
numbers. You have given us this chart with the numbers, so the Residential class went down
736 and the Residential Investor went up 822. We are looking at the numbers and making
an assumption that was the only thing that happened. Other things could have happened as
well, right? For starters, how many of those actually went that way? Since then, Reiko, you
told us about all of our outreach, so on the flip side, how many did not go because your
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outreach reached them and they did the necessary paperwork and it was okay? These other
people did not do the necessary paperwork, missed it for whatever reason, and since that
time, I know how it works because I have helped my parents over the years with their
exemptions, and you have to get your paperwork in because they are projection out a year
and a half later. There are deadlines so that you can do your job. Of the people who then
missed it and maybe are in that boat, probably since then some of them have learned of it
and have come to you and now have the paperwork and will probably be submitting it by the
next deadline of September 20th. I think probably our system is working. There is no reason
to fix what is not broken.
Committee Chair Kaneshiro: Councilmember Cowden.
Councilmember Cowden: These questions are intended to try to help on how
we can educate people. How many people who came in did not file and did not have a lease
on people because they are family members or employees maybe lived in that house maybe
nine (9), ten (10), or twenty (20) years? Did you have many people who came in that had
simply never filed a lease agreement because it was essentially a month-to-month agreement
for many years? Is there any way that anyone can prove that someone lived in that house
for ten (10) years that can be corrected at the Board of Review?
Mr. Hubbard: Yes, if someone came in and did not have a written
lease, we would ask them to please have an agreement written up. It can be a very simple
agreement and we would process that and enter it into our system.
Councilmember Cowden: If they had, let us just say, for example, a $14,500
tax increase that they needed to do, but they can show that, do they still have to pay that
$14,500 or pay penalties in interest until the Board of Review determines that it is resolved?
Mr. Hubbard: Thank you for that question, Councilmember
Cowden. For the Board of Review question, yes, we do have several Residential Investor
appeals that came in this year that is on Slide 4, Residential Investor appeals for this year
were fifty-two (52), and in Fiscal Year 2022 there were twenty (20) appeals—a lot of those
had to do with the tax class, meaning they found out about the change in tax classification
when they read their assessment notice on December 1st. Many of those have come in and
many of them have provided leases to show us that they had a long-term tenant in the house
at the time of our data value, which is October 1st. We have since made stipulations to the
Board of Review and we will be continuing to be doing that this year. The Board of Review
has not rejected any of those proposed stipulations and we expect to be able to resolve all of
those as long as the taxpayer can provide the necessary documentation in the form of a lease
agreement.
Councilmember Cowden: Thank you. Help me with the word"stipulation."
What does stipulation mean?
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Mr. Hubbard: Stipulation is a compromise between the County
of Kaua`i Real Property Assessment Office and the taxpayer. That means we are agreeing
that they should not be Residential Investor and they should be Residential.
Councilmember Cowden: So they would not have to pay that $14,000 this
year. They would maybe after the Board of Review made the determination rather than
ahead of it.
Mr. Hubbard: That is a good question, because we are doing
assessed values far ahead of the tax bill and that is what you folks are here to determine
throughout the budget process is to agree or approve to the Mayor's projected tax rates of no
increase. The first bill will be due August 20th. If we can get everything resolved for these
fifty-two (52) residential investors in front of the Board of Review prior to about July 20th and
if everything is resolved, they will not have a large tax bill based off of Residential Investor
and we will be able to essentially bill them correctly at Residential. If for some reason we
cannot have the hearing, yes, they will receive a bill for the Residential Investor rate and
then they will receive a correction once the stipulation has been processed.
Councilmember Cowden: I could say so much more, but thank you.
Council Chair Kaneshiro: Councilmember Carvalho.
Councilmember Carvalho: After hearing all the discussion, I just wanted to
explain my point of view overall. I totally understand what is being discussed, but on a
personal note, even for my family, we have rentals and we encourage...there is a process in
place and we encourage people to get in there and understand the process and we are hearing
you. There is a process in place, you get in there, you can hold on to your rental and make
sure that everything is pono, if you know what I mean, and at the same time, coming and
understanding what it means and having it myself as a family. I think this is a good
discussion for our opening for more healthy discussions and I thank Finance for hanging in
there and having a process in place that can really help our people to understand the need
and to secure their homes overall, for everyone. I just wanted to mention that on my side to
add on to what is happening and understand right here and what is before us, and there is a
process in place that is critical.
Council Chair Kaneshiro: Are there any further questions on revenue?
Councilmember Cowden.
Councilmember Cowden: On this, do you have an estimate on how many of
these homeowners of rental properties are—not picking on seniors, but maybe in their
seventies, eighties, or nineties—people who have their strength that help them to have these
houses and the time before there were so much online time and ability and strength, maybe
they are not operating in their strength of the paperwork. Do you have special assistance for
that community and are you seeing many of them, because I know that there are predatory
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buyers out there that are ready to snatch up those houses? People struggle—how do you help
the people who do not have the technical capacity to easily understand how to jump through
these hoops, especially in COVID-19?
Council Chair Kaneshiro: Are you talking about someone who lives in their
home full-time?
Councilmember Cowden: No, I am talking about the owner of the home of
the rental, because these are not...I am not trying to protect...I know I am being told that I
am trying to protect wealthy people from somewhere else, but who I am trying to protect is
less sophisticated homeowners that have different family members or employees in their
houses and I wonder how the Department of Finance, not that it should be your job, but how
do you deal with these people who are the kupuna in their family and they do not seem to
know how to this? They cannot even read anymore.
Ms. Matsuyama: I would just say, Councilmember, I would
encourage everyone to call the Office, because we have excellent staff, essentially many of
them act as tax advisors. We are talking about tax relief measures here, but the assessment
office is the main generator of revenue, so we have to make sure that we do not lose sight of
that. Many of our staff really work as tax consultants, so they are excellent in guiding people,
and they will work with someone. For example, if someone brings in a monthly lease and
that is unacceptable for our parameters, we will work with them to make sure right. "Here
is a template, this is what we need, this is what dates it needs to cover," because I know a lot
of people have relatives living in the homes and they have been there for years, and they do
not necessarily have documented leases, so we work with them to make sure they get in what
they need. That is what I would say on that.
Councilmember Cowden: Thank you. That is the community that has most
of my attention.
Council Chair Kaneshiro: Are there any further questions on revenue? If
not, we need to take a caption break. If there are no further questions on revenue, then I will
tell Reiko that they are good, and we are going to move on to Human Resources when we
come back from the caption break. Are there any further questions from the Members? We
will take a ten-minute caption break.
There being no objections, the meeting recessed at 11:04 a.m.
The meeting reconvened at 11:18 a.m., and proceeded as follows:
Department of Human Resources and Human Resources Reports
Committee Chair Kaneshiro: Welcome back. Lastly, we have the Department
of Human Resources (HR) and any questions regarding their Vacancy Reports. I would like
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to call upon the Director of Human Resources, Annette L. Anderson and her team to take us
through the Department of Human Resources budget. Councilmembers, we are on Master
Page 76 for HR.
ANNETTE L. ANDERSON, Director of Human Resources (via remote technology):
Good morning, Council Chair, Council Vice Chair, and Councilmembers. It is a pleasure to
be here this morning. I want to make this as simple as I can. In a nutshell, the HR budget,
what we are seeking is an increase to our account under repair and maintenance (R&M) for
computers. We want to increase that by$353,000. "Why," do you ask? That would represent
the annual subscription and maintenance fee for our new Human Resources Management
System (HRMS). Just like when we have computer software like Microsoft Office 365, the
software needs to be maintained on an annual basis. It must be updated in order for the
system to function properly. That is what we are seeking. That is really solely all we are
seeking in our operational budget. When you go through the worksheet, there are a lot of
increases here, decreases, and flatlines;we have all of that covered. We just basically decided
to go through our budget and make it a little more accurate picture of what we truly spend.
will have increases or decreases throughout the line items on the worksheets.
That is why you g
How did we do that? We were able to dollar-fund one of our other accounts, which is the
unemployment insurance account. It used to be $50,000. We dollar-funded it. We took the
remaining $49,999 and we distributed it throughout the rest of the operational items. Again,
I know it could be a little confusing when you see the ups and downs throughout the
worksheet, but I tried to explain it in my synopsis on page 2. The attention I think that you
should focus on is page 79 under the R&M Computers, you will see HRMS Annual
Subscription and Maintenance. That is $353,000. Thank you. I will try to answer any
questions that Councilmembers may have. I also have Janine and Jill on the meeting, both
of whom are heavily involved in the HRMS project. I should also say that I invited Del
Sherman, our IT Manager to participate, but he had an unexpected family matter and I
believe he is on an airplane right now. I think I can address any questions that would be
more IT-related. If not, we certainly will get back to you once Del returns.
Committee Chair Kaneshiro: For me, I will ask a question regarding the HRMS
line item. Can you explain what the HRMS is, where we are on implementing it, the benefits
of having that system, and how it is going to help the County?
Ms. Anderson: Yes. As we may have presented to the Council
before the system that we have procured is called "Workday." It is a well-known system and
in fact, the County of Maui uses it. I understand that other counties in Hawai`i are also
looking at using it. We, unfortunately, have been using an old and outdated system; we are
in the paper and pencil era, which is just ridiculous. When you have paper and-you then
have to enter personnel transactions into a computer system that is not the current system,
that just causes error. It causes undue time. This new system will eliminate that and
hopefully eliminate the human errors that can happen with paper transactions. It will speed
up things tremendously and will allow staff to work on other critical projects rather than
spending their time doing these transactions. It will also allow individual employees to have
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greater access to their personnel information in this system. They can access it. They can
put in their own timesheets. They can make changes to their personal data and information.
It is a benefit for every single employee, as well as the people who work in the personnel
transactions. It helps to ensure that transfers occur properly and accurately, pay increases
are done accurately, et cetera. There is just a tremendous amount of value and that is why
obviously we were able to go forward and procure this system. I know that you mentioned
implementation. It is a long, drawn-out process before you can go live. I am not the expert
on it, but I have the benefit of kind of talking in layman's language rather than the technical
IT-world language. Basically, you buy a system and then it needs to look like Kaua`i. Even
though we are similar to Maui, we are not identical. What we have been doing over this past
year with our vendor is making the necessary adjustments so that it looks like what we want
it to be for Kaua`i. That also entails making sure that we have the correct business processes
in place to be able to do what we need to do. Then, as this is being built out, they have to go
through different stages of testing. We had a first stage of testing. Then they repeated that
testing to work out the kinks. They are now in the phase of another testing and they have to
build out another system to incorporate what they learned from the tests. Then there will be
the final testing that will be coming up in the next couple of months. It is just critical. It will
show that either the system is as close to 100% accurate as we can go so that when we do go
live, the payroll checks will be accurate. That is our number one concern. We want to make
sure we have accuracy in the payroll checks. We really do not have a hard date yet on when
we will implement and go live. As I just mentioned, we have to continue the testing process.
I should also mention that once we know that we have an accurate system that appears to be
working properly, we have to make sure that the employees who will be using this system—
that is every employee, supervisor, et cetera—that they are trained and understand how to
use it so there is the least impact on making the change. We know change is difficult and
there is a learning curve, but we want to make it as easy as possible. We have to factor that
into the timeline as well. Hopefully that answered your question.
Committee Chair Kaneshiro: Yes, that answered my question. Are there any
other questions from the Members? Councilmember DeCosta.
Councilmember DeCosta: Is this a one-time fee of the $353,000? Or will we
have to pay that every year?
Ms. Anderson: No. The bad news is that it is every year. As I
mentioned in my opening remarks, that is to be expected with any kind of software system.
It will be an annual fee. The good news is that it has been built into the contract that we
have with the vendor so that we know what each year will cost over the next 10 years. I
think it goes up some, but at least we have factored into the contract the annual fees over a
period of 10 years so we will not be totally surprised. We will know how to budget for that.
Councilmember DeCosta: May I ask a question about the competitiveness of
this vendor? Did we try and seek other vendors that might have a more competitive price, or
was this just a vendor that had no other competitor that could give us a better rate?
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$300,000+ a year sounds like quite a bit. It kind of sounds better if we had our own IT person
running those programs.
Ms. Anderson: The answer is that we went through the formal
procurement process. There were a number of companies that bid. We went through the
normal procurement process of analyzing the proposals, asking questions, and making a
determination of which vendor was not only the best in price, but best in terms of what we
needed. We are confident that we selected the best vendor out there and certainly price is a
factor. Again, I am not the IT expert, but I think that you could not do in-house with
individual IT people what we are buying with this system. It is kind of like Microsoft 365
and all the things that that provides to you. You could not have individual people do that.
You have to buy the computer software system itself.
Councilmember DeCosta: I just have a hard time grasping that the initial
cost would be the same as the yearly maintenance costs. Usually when you buy something,
the initial cost is expensive, but then the maintenance cost per year is not quite as expensive.
It is kind of like a vehicle. You buy the vehicle and then you pay for an insurance premium
that is not as expensive as the vehicle. I was just trying to grasp why the price is the same
for the next 10 years.
Ms. Anderson: This is the maintenance fee and subscription fee.
The cost to buy this product was a lot. I think I will have to rely on Jill if she knows the exact
amount. We are talking millions. It was a lot to buy it and now we are maintaining and
having the annual fee. Here is Jill.
JILL NIITANI, Human Resources Manager III (via remote technology): Good
morning. Just to clarify, we purchased Workday and we went through the procurement
process as Annette mentioned. The initial price, or what we have already paid the vendor,
was in the hundreds of thousands of dollars. The maintenance fees and the subscription fees
are to be able to help us maintain the system and to be able to provide us enhancements as
we go along. We want this system to be able to carry us forward for many more years to come.
We want to be able to move with the times so that we do not have to necessarily do this
process again to find another vendor that can provide us bigger and better services. We want
to be able to move with the times which is why we selected this vendor. They seemed to be
able to want to enhance the system and get better and better. That is what attracted us to
them in the first place. Obviously, we like that the County of Maui already went through
that curve with procurement and selected them. We are relying a lot on Maui. We are talking
with them a lot and getting their support in getting us through this implementation. As
Annette mentioned, with the initial purchase, we are going through the implementation
process. We have an implementor assisting us with that. They will drop off once we go live.
We may establish some relationship with them, but not to the level we are right now. We
will just go with Workday and they again, will be able to support us as we move through the
years. Definitely, there are a lot of parts within their system which require a lot of
maintenance and support. Throughout the year there will be tax updates, enhancements
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with different modules within their system, et cetera. They are actively working on that and
what we are paying for. Unfortunately, Del is not on the line, but he would be able to explain
our current system and the support that we require from them just to maintain our existing
system that does not necessarily provide us the support that we need now moving into trying
to become more supportive the departments in reports. This will provide us different
functionality and different benefits from the system that we do not currently have. That
maintenance fee will unfortunately continue as we expect the Workday software to grow and
enhance with us. I am not sure if that supports that, but we do, as Annette said, have to pay
for maintenance and support just like how we currently are with our current personnel and
payroll system that we have now.
Committee Chair Kaneshiro: Council Vice Chair Chock.
Councilmember Chock: Thank you, Annette and Jill. I appreciate this.
We have been looking at how to build capacity for many years. Seeing this move forward is
really good and I appreciate the work that you have done on it. I wanted to ask a question
about your training budget. I have been supportive and active in your development of that
over the years. I see an increase in that line item. I just wanted to ask if you could provide
a little more detail in terms of what we have invested in and where we are going with it in
terms of service or support of our department heads and supervisory training.
Ms. Anderson: I will defer to Jill. She leads our training section.
I just want to highlight that, yes, our line item budget for training has gone up, but we have
got it covered. We are not asking for additional moneys. As I mentioned earlier, just
Y
we J
moved the money around. We are very pleased that we are able to focus more on training,
now that we are kind of getting back to normal. Obviously during the first two years of
COVID-19 that was not happening. I will let Jill explain our vision for the next year on how
we think we are going to enhance our training.
Ms. Niitani: Like Annette mentioned, with COVID-19 there
was limited opportunity to get together to meet. We anticipate that, actually in a day, to
provide us with lesser restrictions. We will be able to meet, gather, have in-person trainings,
which do cost a lot more than virtual trainings. We want to try to get back to normal with
regards to providing supervisory and management training. I am not sure if you have seen,
but we hired a Safety Officer for the County and that falls within our Department. We would
like to be able to get better and have more opportunities for safety-related trainings for
employees. We are actively working the departments and our new Safety Officer started
about a month ago. We envision pushing out some of those moneys towards that. Again,
some of the departments have been asking for that, but now we can support them a little bit
more and to be able to get that kind of training out there. We want to get back to providing
supervisory trainings whether it be some things that we want to maintain ourselves, but we
also want to bring in real instructors. I know a lot of people are familiar with Glenn Furuya.
We have had Alt Kagesa come down. They are really experts in their fields and in leadership.
We want to be able to get more of that out there for our managers and supervisors. That is
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what is coming up in this next year. Definitely, we are actively working with our HR
Specialists as well as our Safety Officer to be able to get more regular trainings out there for
our employees.
Councilmember Chock: Thank you.
Committee Chair Kaneshiro: Councilmember Cowden.
Councilmember Cowden: I have a follow-up question to Councilmember
DeCosta's question. With our subscription, does that include software updates? There will
probably be more than annual updates, correct?
Ms. Anderson: Correct.
Councilmember Cowden: That is a big part of what we are purchasing with
that. It is not a one-time...software is very different than hardware, even though with
hardware, we need that updated too. How many staff positions do we have? I know that it
fluctuates by how many people are hired. I know we are a little light. How many people do
we have employed by the County right now? Is it around 1,200?
Ms. Anderson: I think it is 1,325 as of March 15.
Councilmember Cowden: Okay. As someone who has bought software
programs for my business a lot, and have worked in the industry, I look at this as less than
$270 per employee to be managing their payroll and all of that, per year. As a percentage of
what it costs, I can justify that pretty easily in my mind. Will this help us in any way...this
does not help us hire new people, right? This is a new question. Our percentage of openings,
is it roughly 10%? I think we talked about this.
Ms. Anderson: On the Vacancy Report, it is 13%, but I think as
you and I have discussed, there are various reasons for the vacancies. It is not all in the
hopper or in the recruitment pool. They may be undergoing restructuring, reorganization,
reallocating of departments, and they are determining how best to use that vacant position
so it is not actively being recruited right this moment. There are other reasons for the
vacancies, including when promotions happen. That causes vacancies. As I mentioned to
you, I am not concerned with the percentage that we have. I think it is well within normal
limits.
Councilmember Cowden: Okay, thank you so much.
Committee Chair Kaneshiro: Councilmember Carvalho, then Councilmember
Evslin.
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Councilmember Carvalho: Thank you for the presentation. I just had one
comment first. I remember not too long ago when everything was paper. We had paper
timesheets and all of that and we transitioned into technology with computers. That is a
great thing. The other part that I heard, which is good, is partnering or learning with the
team from the County of Maui. There is a connection and everything learning together. That
is a positive thing that I see. We are working together and understanding each other's
challenges and successes. Are you working together well in trying to rebuff some of the things
that you can continue to look at overall to help the system?
Ms. Anderson: Most definitely. We know the people and the HR
Director on Maui really well. He actually has an IT background. He was helpful in the very
beginning stages to help us to understand what we really would need. Janine and I can text
him anytime to ask questions. We also developed a relationship with the County of Maui,
between our payroll sections. Payroll on Maui is outside of HR, it falls under the Department
of Finance. We have been able to connect our HR person with their head payroll person and
they are able to really get into the weeds of issues regarding payroll. There are all these
different kinds of differentials or payments that have to happen. It is very complicated as
you can imagine. It is very helpful that the payroll people are able to compare notes and find
out how you do this or that, or what is the challenge. Maui is also continuing to work with
the vendor Workday. They are actually getting updates for their needs from Workday. They
then share that with us. We do the same for them. We have found things that we do or will
be doing, and Maui wants to possibly do the same. It is great.
Councilmember Carvalho: Okay, thank you.
Committee Chair Kaneshiro: Councilmember Evslin.
Councilmember Evslin: Thank you for the presentation. For the HRMS,
do you expect with the efficiencies gained from that, do you expect any savings from salaries
down the line or any other potential fiscal savings because of the program?
Ms. Anderson: We are looking at that. Certainly, if there are
vacant positions, we would take a real close look. I do not anticipate having to say we do not
need certain employees anymore. We are not doing that. What we would be doing is if
employee A, B, and C are now doing a lot of these paper transactional work or spending a
whole lot of time on payroll things, their duties may shift to more important projects to
improve the overall system. We are going to look at it, especially if the vacancies come about,
but we do not anticipate any reduction. I think that is a fear that often happens when
technology comes onboard. Does that mean we are not going to need employees to do the
work?
Mr. Dahilig: Councilmember Evslin, just as an added benefit,
from a management standpoint, a lot of the tools that are going to be coming out of Workday
will allow us to better track metrics with performance, as well as scheduling. While we
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cannot necessarily give specific numbers as to the cost savings or realization would be, it will
help us take a look at over-accruals of overtime types of situations, better management of
resource staff time, or a lot of the other things that some of our other departments have done
literally with a pencil and then put into Excel. That data-mining element really helps us give
us that real-time feedback on performance and whether we need to make adjustments as to
human resource time being better utilized or better managed.
Councilmember Evslin: Okay, thank you.
Committee Chair Kaneshiro: Councilmember DeCosta.
Councilmember DeCosta: I have a question for Annette. I was just looking
at our pay scale here. It jumped out to me that one of the EM-5 positions, we have a person
there earning quite a bit of money over the other EM-5 person. Is that due to years of service
or do we have a wide range in that EM-5 schedule of payroll?
Ms. Anderson: It is because of years of service. They have a lot of
years of service.
Councilmember DeCosta: Okay. I just noticed that person makes quite a bit
of money. Thank you.
Committee Chair Kaneshiro: Are there any further questions on the HR
budget? Councilmember Kuali`i.
Councilmember Kuali`i: My question in on the two (2) vacant positions.
Position Number 1877, Payroll Technician, vacant, and it says, "selection made" with the
earliest hire date of 04-01-2022. What is the likely hire date or the latest hire date?
Ms. Anderson: Actually, I am pleased to announce that we have
selected two (2) people for the vacancies, and they have accepted the offer of employment.
They will both beginning on April 16th.
Councilmember Kuali`i: Thank you. My other question is about vacant
positions in general and the entire report. When I go through each department—and maybe
I will follow-up with them—HR obviously does the recruitments for all the departments, so
we received this report from you. The regular vacancy report shows the basic information,
and the supplemental report gives more details on the recruitment status. On several
positions across the County, in the recruitment status report under the comments column,
the comment is "no request to recruit." When it says that, it sounds like the position is just
going to sit vacant. I wanted to have a sense from HR about what is going to happen with
those positions. If they request to recruit from tomorrow, what is the shortest, average, and
longest timeframe to go through the recruitment process and get those positions filled?
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Ms. Anderson: I am going to answer a portion of your questions
and then I will turn it over to Janine, who heads the recruitment division and as you know,
she is also the author of the reports that you can see the recruitment status. As to your
question about how quick a department could recruit and get someone after we go through
the posting, interview process, offering, and having the person accept the offer—and we hire
on the Pt and the 16th—the quickest we could do it is one (1) month. The average and the
longest, and the explanation on the recruitment status of"no request to recruit," I will turn
it over to Janine for that. Thank you.
Councilmember Kuali`i: Just for clarification on what you just said...
JANINE M.Z. RAPOZO, Human Resources Manager III:II. Hi, good morning.
Councilmember Kuali`i: Wait, Janine. Did you say then, on these that say
"no request to recruit" if you got the request to recruit, from that day forward, it would take
a month to go through the recruitment process, which is the fastest?
Ms. Anderson: Yes.
Councilmember Kuali`i: Okay. Go ahead, Janine.
Committee Chair Kaneshiro: What were your questions Councilmember
Kuali`i?
Councilmember Kuali`i: She said Janine was going to explain the other
part about what it the shortest, average, and longest, as well how I can make use of the
comment "no request to recruit."
Ms. Rapozo: Good morning, Janine Rapozo, HR Manager. The
Vacancy Report is a snapshot in time as far as where our vacancies are at. Yes, you could
have a "no request to recruit" and tomorrow, you might get a request. As Annette said, it
could be as quickly as a month. It all depends on a lot of factors as far as whether we have
qualified applicants for the job and how quickly the department interviews for the position.
The quickest would be a month, because we put out the civil services positions for a 10-day
recruitment posting. That is the first thing that would happen—it must go out for ten (10)
days—then our recruitment staff looks over all the applications, it could be no one applies
and so we re-recruit. Some of them are on continuous recruitment because they are hard to
fill. We did look at all of the positions as part of the Budget Team, and I believe we
short-funded about thirty-two (32) positions because we did look at things like that, such as
how quickly would these people be able to fill those positions. We felt that there were some
that would not be able to fill in the first quarter of the next fiscal year, and that is why those
were short-funded to 9-month funding. There are some others where, for example a
firefighter, they will not recruit every time there is an opening. They are going to wait to
create a class. Again, a lot of different things and rather than just going ahead and
March 24, 2022
Fiscal Year 2022-2023 Departmental Budget Reviews
Committee Chair's Budgetary Comments, Administration's Budget Overview,
Office of the Mayor (including the Office of Boards & Commissions), Revenue Forecasting,
and Department of Human Resources & Human Resources Reports
Page 41
immediately filling a position, departments sometimes will look at it and not wanting to add
to the burden of the budget, they will redescribe a position to something that is more of their
current need. Those are some of the factors that go into why something may be sitting; they
may be looking at different things, they may have to promote from within first. There is a
domino effect that if it is an equipment operator, you are going to have a Tractor/Mower
Operator move up to an Equipment Operator, then a Laborer move up to a Tractor Operator,
and then we finally fill the bottom position. That all takes the month. It all goes through all
of those processes, so those are some of the civil service rules that we have to follow.
Unfortunately, it takes us some time, but kudos to the recruitment staff here. My staff has
been pushing forward as much as possible in getting those eligible lists to our departments
as quickly as they can. It has been a challenge for certain positions as far as getting eligible
people to qualify. We have seen a little bit more success recently with getting a little bit more
applicants for some of our hard-to-fill positions.
Councilmember Kuali`i: Thank you so much.
Ms. Rapozo: You are welcome.
Committee Chair Kaneshiro: Are there any other questions from the Members
either on the budget or the Vacancy Report that we received? If not, we are done. Thank
you, everyone, for a very productive day today. Thank you to HR, Office of the Mayor, and
Finance for all their presentations. At this time, I would like to recess the Departmental
Budget Reviews. We will reconvene at 9:00 a.m. on Monday, March 28th, where we will hear
from the Department of Public Works on their Operating and CIP budgets.
There being no objections, the Committee recessed at 12:30 p.m.