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HomeMy WebLinkAboutCOM 0290.000 2004-2006 ~<Y Os hy~_ ~~J~ CONS'I'ANCE R. KIRIU WILLIAM E. SMITH ('nimfr Clerk Depup~ CounO~ Clerk ..!M Of ~M~ County of Hawai `i Office of the County Clerk 25 4upmr: Stree~ _ l6ln, Hawaii 96720 - - - lelephonr: /X081 961-8225 l~ucsim7/e: (806) 96/-X9/2 - - v May 20, 2005 f0: Council Members FROM: WilliamSn' Deputy C'o my C erk L RE: Post-Audit Report of the County of Hawaii Fiscal Year Ended June 30, 2004 Por your review, deliberation, and acceptance, 1 am submitting the post-audit Financial Audr( Repor! of [he County o(Hawai `i jur the Fiscal Yeas' F.nded June 30, 2004, and Managemen( Letter da(ed March 23. 2005, as prepared by KPMG LLP. The Report and Management Letter satisfy the requirement of Section 10-13, Hawaii County Charter, relating to the responsibility of the County Council to conduct an annual independent audit of the accounts and other evidences of financial transactions of the Couni)~ and of every county agency and executive agency. KPMG, LLP has issued an unqualified opinion, which opined that the Financial Audil Repott is presented fairly in all material respects. ~Chis year's Manugemenl Lever contains findings and recommendations related to: • Collection of Receivables ~rhe auditors will be present at the Finance Committee meeting on July 6, 2005, to answer any questions you may have. Appropriate department head(s) or their represeo[ative(s) will also be asked to attend the meeting. In the meantime, please feel free to contact Rodney Oshiro should you require further information. Enclosures cc: Ralph Kanetoku, KPMG LLP (Note: The Post-Audit Report is on file in the Clerk's Office.) p Comm. No. ~ 10 Ref. To:---~pFG. Re#. Late. (ilFtt _ti ~ !/axrii'i Caunh~ rs an Eyna! Oppor[unHV Provider and Employer COUNTY OF HAWAII ' 9 v.......vvvti.- VV ~~v V v t wv v.~ ~ ~J A 4A U ~ a~ N Financial Audit Report for the Fiscal Year Ended June 30, 2004 S"-,_~-c5"_ _ _ R)Cp] _ .-_..o-.. iA`l R'(Y WURCII ~trw"Y CONSTANCE R. KIRIU ~ ' Cmmry Clerk ~i': County of Hawai `i Office of the County Clerk 25 Aupuni .Slreel Hilo, Hawai 1 96720 Telephone (808J 96/-8255 Facsmvile: (808,196!-89/2 Foreword This financial audit report is the result of the audit of the basic financial statements of the County of Hawaii, State of Hawaii (County), for the fiscal year ended June 30, 2004. The audit was conducted by KPMG LLP, certified public accountants. The audit was performed in accordance with auditing standards generally accepted in the United States of America adopted by the membership of the American Institute of Certified Public Accountants. In addition, the audit was governed by the "Specifications for a Financial Post- Audit and Systems and Procedures Examination of the County of Hawai`i," issued by our office. This report is divided into two sections. Section I, "Management Letter" includes the auditors' findings and recommendations based upon their consideration of the County's internal control in connection with their audit of the County's financial statements for the fiscal year ended June 30, 2004. It is our practice to request agencies to submit their comments on the auditors' findings and recommendations and to indicate what action has been or will be taken. Section II, "Comprehensive Annual Financial Report" for the fiscal year ended June 30, 2004, displays the basic financial statements and schedules of the County, the auditors' report as to the fairness of presentation of the basic financial statements and also includes statistical information. We wish to express our sincere appreciation for the cooperation and assistance extended by the management and staff of the various departments during the audit. Ceti t t~ Constance R. Kiriu County Clerk County of Hawai `i Hm+'a7'l County is an Egual Opponuniry~ Provider and Employer COUNTY OF HAWAII Financial Audit Report For the Fiscal Year ended June 30, 2004 Table of Contents Page SECTION I -MANAGEMENT LETTER Management Letter ] Current Year Findings and Recommendations 2 Status of Prior Year Findings and Recommendations 4 Comments by the Affected Agencies 5 SECTION II -COMPREHENSIVE ANNUAL FINANCIAL REPORT Introductory Section 1 Financial Section Statistical Sections 107 SECTION I MANAGEMENT LETTER COUNTY OF HAWAII STATE OF HAWAII Management Letter For the Fiscal Year ended June 30. Z00~3 Table of Contents Page Management Letter ~ CURRENT YEAR FINDINGS AND RECOMMENDATIONS Collection of Receivables ~ STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS Unauthorized User Access q .~1'L~G1~~6'' KPMG LlP Telepno~e 808 531 '2&0 PO Box 4150 Fan 808 547 93T Hono;u l;., HI 96812-4150 Internet r, w,~ Js ~p-~ ro~ ~ March 23. 200 PWVATE & CONFIDENTIAI. To the Members of the County Council of Hawai' i County of Hawai `i f Lilo, Hawaii: We have audited the basic financial statements of the County of Hawaii, State of Hawaii (the County), for the year ended June 30, 2004, and have issued our report thereon dated March 23, 2005. We have also audited the County's compliance with requirements applicable to its federal financial assistance programs and have issued our report thereon dated March 23, 2005. In planning and performing our audit of the County's basic financial statements, we considered the County's internal control over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the basic financial statements. An audit does not include examining the effectiveness of internal control and does nut provide assurance on internal control. We have not considered intemal control since [he date of our report. During our audit. we noted certain matters im~oh~ing internal control and other operational matters that are presented for your consideration. These comments and recommendations, all of which have been discussed with the appropriate members of management. arc intended to improve internal control or result in other operating efficiencies. We have also reviewed the disposition of the recommendations made in the previous year's report dated March 19, 2004. The status of prior year findings and recommendations is also presented. A number of recommendations were adopted as suggested or in modified form. Other recommendations were not implemented and those which we felt merited reconsideration have been modified where necessary and restated in the current year findings and recommendations section. Our audit procedures are designed primarily to enable us to form an opinion on the basic financial statements, and therefore may not bring to light all weaknesses in intemal control policies or procedures [hat may exist. We aim, however, to use our knowledge of the County's organization gained during our work to make comments and suggestions that we hope will be useful to you. This report is intended solely for the information and use of the County Council and the County Administration, and is not intended to be and should not be used by anyone other than these specified parties. We would like to take this opportunity to express our appreciation for the courtesy and assistance extended to us by the personnel of the County of Hawaii during the course of our audit. Should you wish to discuss any of the matters contained herein, we will be pleased to meet with you at your convenience. Very truly yours, K`Pw(G +i~ COUNTY OF H.A~VA[`I STATE OF HAWA]`I Current Year Findings and Recommendations For the Fiscal Year ended June 30, 2004 COLLECTION OF RECEIVABLES The timely collection of wastewater (sewer) and solid waste (landfill) receivables continues to be a problem for the Department of Environmental Management. To address the delinquencies in landfill receivables, new requirements for claiming residential credits and new provisions for trash removal contracts were established in the prior year, resulting in a 13°/o decrease in the over 90 days balance. For sewer receivables, a bill was recently submitted to the County Council that will add an additional 1 1 /2% charge to balances past due over 60 days. In addition, the County's recent conversion to their new computer system will help to streamline the billing process. Despite the improvements made in the current fiscal year, sewer and landfill receivables outstanding for more than 90 days still account for a significant portion of the respective receivable balance as follows: 2004 2003 Amount Percentage of Amount Percentage of outstanding total outstanding total !_andfr![ - Currenl $ 525.386 35% $ 285,822 28% 31 - 60 da}-s 330.010 22°S~ 180.054 18% 61 - 90 days 291,930 20% 178,004 I S°'o 90 ~ days 350,711 ° 23 356,348 36°~a ~ 1,498,037 100% $ 1,000,228 100% 90 + days 23°0 Cumnl Curren) 9p+da}s 2R°ro 35"% 36% 61 - 90 days 20% 31 - 60 days 61 - 90 days ~ 31 - 60 days 22°6 IS% 2 (Continued) COUNTY OF HAWAII STATE OF HAWAII Current Year Findings and Recommendations For the Fiscal Year ended June 30, 2004 2004 2003 Amount Percentage of Amounl Percentage of outstanding total outstanding total Sewer Current $ 863,376 39% $ 894,076 3~°6 31 - 60 days 129,344 6°%0 160,01 ~ 7% 61 - 90 days 79,460 4% 6Q473 3°io 90+days 1,139,556 51% 1,158,170 51% $ 2,211,736 100% $ 2,272,734 100% Current Curtem 39 %0 39" o 90 *days 90 +days Sl io 51°0 31 - 60 days l i - (,0 dais' 61 - 90 daps b~.° GI - 90 da~~ ~ ~o 4% 3°~~ Recommendation We recommend that the Department of Environmental Management continue to work with the Department of Finance to develop comprehensive policies and procedures for collecting County receivables. The policies and procedures should address all aspects pertaining to revenue generation and collection, including extension of credit when and how much interest [o charge; and when to deny service, take legal action, when to write accounts off and offer payment plans. These policies should be formally communicated to the public and be strictly enforced by the County. In addition, efforts should be made to clear the delinquent balances of specific accounts, as approximately half of the sewer receivables balance pas[ due over 90 days is related to only a few customers. 3 COUNTY OF HAWAII STATE OF HAWAII Status of Prior Year Findings and Recommendations For the Fiscal Year ended June 30. ZOOd UNAUTHORIZED USER ACCESS Observation We noted that the listing of users authorized to access the County's various information systems was not reviewed for appropriateness and updated by County department heads. Maintaining an updated list of authorized users facilitates the County's efforts to ensure that terminated and/or unauthorized users are denied access to its information databases. In addition, during our review of the County's real property tax Windows nehvork, we noted that the account lockout feature was not utilized. An account lockout setting allows administrators to control the number of unsuccessful logins that may occur before a user is denied access. By not utilizing this setting, an unauthorized user is allowed to indefinitely guess a user's password until they gain access to the Windows nehvork. Recommendation We recommended that department heads periodically review the listing of users authorized to access the County's various information systems. Department heads should work with the Department of Data Systems to ensure the integrity and accuracy of the listing. We also recommended that the County utilize the aecow~t lockout setting for its real property tax Windows nehvork. Use of this setting will allow system administrators to detect if an attack is occurring and help prevent unauthorized access into the system. The account lockout settings should be set to the s}stem until an authorized system administrator resets his/her password. Status Department heads are now required to inform the Department of Data Systems when employees are either terrinated or transferred. The Department of Data Systems will also perform an annual review of the authorized users, ensuring that the listing remains current. Additionally, a lockout feature was established on the real property tax Windows network, where the user is locked out after three mtsuccessful login attempts. Also, a 120-day password expiration was initiated for all users, ensuring that all passwords are changed on a regular basis. As efforts have been made to implement the recommendation, the comment is no longer applicable. 4 `ooNir or yew'' Harty Kim O1 ly~j Barbara Bell ;tlal'or •~O ~"°,;.~I Utrerlnr ~~ii •"~"•~Y© . t or•n•~ Nelson Ho Deputy D~relt[~ l~ r-. - Cnuunf~ of ~ttfuttii DEPARTMENT OF ENVIRONMENTAL. MANAGEMENT 25 Aupuni Stree4 Room 210 • Hilo, Hawaii 96720-1252 (806) 961-8083 • Fax (808) 961-8086 C.% MEMORANDUM ~ DATE April 19, 2005 TO Constance Kiriu, County Cler FROM Barbara Bell, Director SUB.LECT : PY2004 Preliminary'Draft Management Letter We have reviewed the FY2004 draft Management Letter concerning the Collection of Receivables and concur with the audit recommendations. We are continuing to work with the Department of Finance to develop comprehensive policies and procedures for collecting County receivables. As the auditors have noted, improvements have been made and we are continuing our efforts to further reduce the receivables outstanding for more than 90 days. Our collection of solid waste (landfill) receivables has shown significant improvement with amounts outstanding over 90 days being reduced frorn 36°/n of the total receivables for FY2003 to 23% at the end of FY2004. This is a big improvement from just two years ago when the amounts outstanding over 90 days made up 47% of the total receivables at the end of FY2002. We are continuing our efforts to tighten up the collections of our landfill tipping fees and to further reduce amounts outstanding over 90 days. To aide in the collection of sewer fees, a bill was recently passed by the County Council which will make the property owner ultimately responsible for the sewer bills. Because we are unable to discontinue sewer services for delinquent accounts, collections on those accounts pose a greater challenge. Sewer fees are currently billed to the Water Supply account holder, which is often a lessor or a renter. By making the property owner responsible, we will then be able to place a lien on the property for past due sewer charges. This new ordinance, which will take effect in Ocl:ober 2005, also provides for a 1 % per month interest charge on past due balances, this will replace the present one time penalty of ] 0%. We are currently in the process of converting to a new billing system which will help to streamline the billing process and accommodate the new procedures required to comply with the new ordinance regarding sewer fees. //n ~~m 1 Courtrl a m; rqun/ opporttmin yrorider nnrl employ er SECTION II COMPREHENSIVE ANNUAL FINANCIAL REPORT COMPREHENSIVE ANNUAL FINANCIAL REPORT Fiscal Year Ended June 30, 2004 w t~ y~ ~J Nw M~ ~ OF N COUNTY OF HAWAII Hilo, Hawaii Harry Kim Mayor Dixie Kaetsu Managing Director Prepared by The Department of Finance William Takaba Director of Finance COUNTY OF HAWAII Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2004 Table of Contents Paee INTRODUCTORY SECTION Letter of Transmittal I GFOA Certificate of Achievement ~ Organization Chart g List of Elected Officials 9 List of Principal Officials 10 FINANCIAL SECTION Independent Auditors' Report 1 l Management's Discussion and Analysis 13 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Assets 24 Statement of Activities 26 Fund Financial Statements: Balance Sheet -Governmental Funds Zg Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 29 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds 30 Reconciliation of the Change in Fund Balances of Governmental Funds to the Statement of Activities 32 Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) -General Fund 34 Statement of Net Assets -Proprietary Funds 3g Statement of Revenues, Expenditures, and Changes in Fund Net Assets - Proprietary Funds 39 Statement of Cash Flows -Proprietary Funds 40 Statement of Fiduciary Net Assets -Fiduciary Funds 4l Statement of Changes in Fiduciary Net Assets -Fiduciary Funds 42 Notes to the Basic Financial Statements 43 FINANCIAL SECTION (Continued) Paee Combining and Individual Nonmajor Fund Statements and Schedules: Combining Balance Sheet -Nonmajor Govemmental Funds 78 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances (Deficit) -Nonmajor Govemmental Funds g2 Schedules of Revenues, Expenditures, and Changes in Fund Balances (Deficit) - Budget and Actual (Budgetary Basis): Highway Fund g5 Sewer Fund g6 Solid Waste Fund g7 Cemetery Fund gg Parking Meter Fund g9 Vehicle Disposal Fund 90 Bikeway Fund 91 Workforce Investment Act Fund 92 Golf Course Fund 93 Geothermal Relocation Revolving Fund 94 Beautification Fund 95 Hawaii County Housing Agency 96 Park Dedication Fund 97 Combining Balance Sheet -Agency Funds 98 Combining Statement of Changes in Assets and Liabilities -Agency Funds 100 Combining Statement of Net Assets -Private Purpose Trusts 104 Combining Statement of Changes in Net Assets -Private Purpose Trusts 105 STATISTICAL SECTION Table 1 -Government-Wide Revenues 107 Table 2 - Govemment-Wide Expenses by Function 108 Chart 1 -General Govemmental Revenues and Expenditures Comparison 109 Table 3 -General Governmental Expenditures by Function 110 Chart 2 -General Govemmental Expenditures by Function 1 1 1 Table 4 -General Governmental Revenues by Source 112 Chart 3 -General Governmental Revenues by Source 1 13 Table 4a -General Governmental Tax Revenues by Source ] 14 Table 5 -Property Tax Levies and Collections 115 Table 6 -Assessed and Estimated Actual Value of Taxable Real Property 1 16 Table 7 -Real Property Assessed Values by Classification and Tax Rates 117 Chart 4 -Assessed Value of Real Property 121 Table 8 -Principal Taxpayers 122 Table 9 -Computation of Legal Debt Margin 123 Table 10 -Ratio of Net Bonded Deb[ [o Assessed Value and Net Bonded Debt Per Capita 124 Table 11 - Ratio of Annual Debt Service Expenditures for General Obligation Bonded Debt to Total General Govemmental Expenditures 125 Table 12 -Demographic Statistics 126 Table 13 -Property Value, Construction and Bank Deposits 127 Table 14 -Miscellaneous Statistical Data 128 INTRODUCTORY SECTION OfY O•~ Harry Kim William Takaba hfayor Drrecmr Nancy E. Crawford ' •.a,w~jJ~ Deputy Ovecror County of Hawaii Finance Department 25 Aupuni Street Room I18 • Hilo, Hawaii 96'720 (808)961-8234 Fax (808)961-8248 March 23, 2005 The Honorable Mayor and Members of the Council County of Hawaii 25 Aupuni Street Hilo, Hawaii 96720 We transmit herewith the Comprehensive Annual Financial Report for the County of Hawaii, State of Hawaii, for the fiscal year July 1, 2003 to June 30, 2004. This report was prepared by the County's Depaztment of Finance. The accuracy of the financial statements and the completeness and fairness of their presentation are the responsibility of the County government. We believe the enclosed data are complete and accurate in all material respects and are reported in a manner designed to present fairly the financial position and results of operations of the vazious funds of the County. All disclosures necessary to convey the maximum understanding of the County's financial activities have been included. Management's discussion and analysis is also included to aid users of the financial statements. This report presents the financial position of the County of Hawaii at June 30, 2004 and results of operations for the fiscal year then ended. The report is divided into three sections: • The Introductory Section includes this transmittal letter, a Certificate of Achievement for Excellence in Financial Reporting, the County of Hawai`i's organization chart and lists oY~ elected and principal officials. • The Financial Section contains management's discussion and analysis, the basic financial statements, related notes, the combining and individual fund budgetary financial statements, and the independent auditors' report. • The Statistical Section includes selected financial and demographic information, generally presented on a multi-year basis. This report includes all funds of the County of Hawaii, including its component unit, the Department of Water Supply, established by the County Charter as asemi-autonomous body of -1- the County government. This component unit is included in the County's reporting entity because of its financial relationship with the County. The County provides the full range of municipal services. These include police and fire protection; emergency medical care; public prosecutor; culture and recreation; sanitation; social services; water; planning and zoning; construction and maintenance of highways, streets and infrastructure; real property assessment and tax collection; and general administrative services. However, the County does not provide such other traditional services as public education, hospitals and courts. These services are provided by the State government. The County of Hawaii consists of the island of Hawaii, 4,028 square miles in size. It is twice as large as the combined area of all the other inhabited islands in the Hawaiian Archipelago. Since there is no other local or municipal government within the County, there aze no overlapping taxes and no overlapping debt. The County of Hawaii has an elected mayor and a nine-member council. Economic Condition and Outlook The island of Hawaii, commonly known as the Big Island, is located 214 miles from Honolulu, the state capital; 2,200 miles from the west coast of the continental United States; and 4,000 miles from Japan. The city of Hilo on the east side of the island serves as the county seat as well as the transportation and financial center for the Big Island. Hilo's infrastructure includes Hilo Hazbor, a deep-water port, and Hilo International Airport, which is capable of handling fully- loaded wide-bodied aircrafr. Kailua-Kona and South Kohala, major tourist destination areas on the west side of the Big Island, are served by flights from the United States mainland, Japan and Canada through the Kona International Airport. Scheduled freight services aze available between the islands by air and sea transport. Communities on the island aze linked by a network of State and County maintained streets and highways. The Big Island is the most diversified of the neighbor island economies. As a result it is buffered when any one industry lags. The County is currently experiencing broad-based recovery and growth. The current upswing is being led by the growth on the west side of the island. Construction of upscale residential houses and condominiums in the North Kona and South Kohala districts continues to remain strong and low interest rates have stimulated construction and real estate sales island-wide. The Big Island's economy has been on an upward trend in recent years, and has been the job growth leader in the State. Continued increasing population has contributed to a growing labor force that numbered 75,800 in April 2004. The expanding economy has matched the growth in available work force and unemployment continues to follow a downward trend, with an average 5.7 percent for 2003. Total and per capita personal income have been steadily increasing. Tourism - Tourism is the major industry on the island. In addition to the mild climate and natural beauty it shares with other areas in the state, the County features the Hawaii Volcanoes National Park. A populaz attraction, the park is the most visited site in the state, handling over 2 million visitors annually. -2- Total visitors to Hawaii remained relatively steady compazed to the prior year, with 1,208,022 arrivals in 2003. A developing source for bringing tourists to the island of Hawaii is the cruise ship industry. There were 230,465 foreign cruise ship visitors in 2003, and additional cruise ships will be coming on line in the future. Scientific Research and Development - Due largely to its unique geographic characteristics which has attracted scientists in fields of astronomy, meteorology, volcanology, and agriculture/aquaculture, Hawaii County has benefited economically by the significant investments made in scientific reseazch. The total astronomy related capital investment on Mauna Kea exceeds $600 million and combined annual budgets aze about $60 million. The Hawaiian Volcano Observatory in Hawaii Volcanoes National Pazk and the National Energy Laboratory of Hawaii Authority at Keahole, Kona aze also major contributors to international research and the local economy. Agriculture - Forestry, nut and fruit orchazds, and floral and vegetable farms have successfully replaced lands where sugar once grew. Demand for Kona coffee is improving and macadamia nut prices have been rising. Papaya remains the lazgest orchazd crop. Agriculture makes a substantial contribution to the County's economy and produces a vaziety of goods for export as well as for local consumption. • Major Initiatives For the Year During the year, the County focused on public safety, planning, and other issues affecting the quality of life in the County. Public Works -The $10.5 million Mohouli Street Extension was completed and opened during the year. Construction of intersection curb cuts and facilities upgrades to meet ADA requirements is an on-going project. Construction continued on the Puainako Street Extension and the Keaukaha Gymnasium Complex. Preliminary work on several West Hawaii road projects continued. Public Safety -Focus on the Mayor's war on ice (crystal methamphetamine) and the aggressive search for federal and state funds resulted in several new initiatives. The multi-pronged effort includes education, prevention, enforcement and treatment. The police department established special ice task forces in both east and west Hawaii to work with the communities, Prosecuting Attorney and with state and federal authorities to apprehend and convict local dealers. Simultaneously, the Hawaii County Resource Center provided Healing our Island community grants to fifty-six organizations to promote drug prevention and education. Federal and State funds were used to begin development of a residential treatment facility for juveniles so they do not have to leave the island for rehabilitation. Planning -The proposed revised General Plan remains with the County Council for consideration. Drafr policies on development concurrency and affordable housing policies aze in progress and the South Kona-Ka'u Water Master Plan was completed. -3- Mass Transit -Island-wide transportation is an issue that affects traffic congestion, ability to work and other quality of life issues. The County has continued to expand service in remote azeas and cross-island. The agency received a $2.4 million grant to purchase additional accessible buses and to construct pazk-and-ride lots in Puna and Kona. Tecbnology -Expansion of the County's computer network continued throughout the year. The County contracted for a new comprehensive enterprise financial system to replace the legacy system running on a Wang computer. Implementation began in Januazy 2004 and the core financial operations were transferred to the new system in May 2004. Additional modules, including payroll will come on line next fiscal yeaz. For the Future Public Safety -Expansion and upgrade of Fire and Police facilities azound the island are being planned and site selection is in process. Public Works -The County is working on developing a West Hawaii Civic Center. This facility will improve access to government for the Kona residents. Additionally, the County is working on several major road projects to enhance traffic in West Hawaii. Environmental Management - As the Hilo landfill approaches full capacity, the County will be looking at solid waste technology alternatives to divert waste from the Hilo landfill to enable the County to close that facility. It is anticipated that a request for proposals will be issued in the next year. The County is also working closely with the State Department of Health to extend the life of the Hilo landfill. Real Property Taxes -The County will continue work on updating the real property tax code in an effort to ensure fairness to all taxpayers. Focus is on agricultural property and taxpayer exemptions. Several bills have been submitted to the County Council. Other Financial Information Internal Control The management of the County is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the County are protected from loss, theft or misuse and to ensure that adequate accounting data are compiled to allow for prepazation of financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the valuation of costs and benefits requires estimates and judgments by management. -4- Budgetary Control The County maintains budgetary controls to ensure that legal provisions of the annual budget are complied with and that expenditures do not exceed budgeted amounts. Activities of the general fund and special revenue funds are included in the annual appropriated operating budget. Project-length financial plans aze adopted for the capital projects fund. Budgetary control is established at the department level. Formal budgetazy integration is employed as a management control device for the general fund, special revenue funds, and the capital projects fund. Budgetazy control for the debt service fund is achieved through general obligation bond indenture provisions. The basis of accounting used for the budgets of the general and special revenue funds differs from generally accepted accounting principles. Intergovernmental revenues are recognized when awarded by the granting agency, encumbrances and unexpended allotments are treated as expenditures for purposes of determining legal compliance with the annual budget, all leases aze treated as operating leases, and accounts payable aze not accrued. The County also maintains an encumbrance accounting system as one technique of accomplishing budgetary control. Encumbrances outstanding at fiscal year end are reported as reservations of fund balances and do not constitute expenditures or liabilities because they will be honored during the following year. As demonstrated by the statements and schedules included in the financial section of this report, the County continues to meet its responsibility for sound financial management. Pension Plan All full-time employees of the County participate in the Employees' Retirement System of the State of Hawaii, acost-sharing, multiple-employer defined benefit public employee retirement system. Cash Management Cash temporarily idle during the yeaz was invested in demand deposits, certificates of deposit and repurchase agreements. The average yield on investment was 1.30%. The County's policy is to minimize credit and mazket risks while maintaining a competitive yield on its portfolio. Accordingly, with the exception of $134,121 held by bond paying agents and a rental management agent, deposits were either insured by federal depository insurance, collateralized, or secured by irrevocable letters of credit. All collateral on deposit was held for safe keeping with aCounty-designated agent in the County's name. Risk Management The County maintains insurance coverage for privately owned police vehicles as well as for other purposes. The County is substantially self-insured for its vehicles as well as for all other perils including workers' compensation and general liability. -5- Other Information Independent Audit The Hawaii County Charter requires an annual audit by independent certified public accountants. ICPMG LLP was selected by the County Council to perform the audit. Employee Union Contracts County employees aze members of seven different bazgaining units. All of the bazgaining units have contracts that run through June 30, 2005, except for the police bargaining unit that runs through June 30, 2007. Certificate of Achievement The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the County of Hawaii for its Comprehensive Annual Financial Report for the fiscal year ended June 30, 2003. This was the sixteenth consecutive year that the government has achieved this prestigious awazd. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized comprehensive annual financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current Comprehensive Annual Financial Report continues to meet the Certificate of Achievement Program's requirements, and we aze submitting it to the GFOA to determine its eligibility for another certificate. Acknowledgments The preparation of this report on a timely basis was made possible by the efficient and dedicated services of the entire staff of the Department of Finance and fiscal personnel in other departments. ] am grateful for their help in preparing this report. I also thank the Mayor and the members of the County Council for their interest and support in assuring the continuing sound financial condition of the County of Hawaii. WILLIA TAKABA Director of Finance -6- Certificate of Achievement for Excellence in Financial Reporting Presented to County of Hawaii For its Comprehensive Annual Financial Report for the Fiscal Yeaz Ended June 30, 2003 A Certificate of Achievement for Excellence in Financial Reporting is presented by [he Government Finance Officers Association of the United States and Canada [o government units and public employee retirement systems whose comprehensive annual financial reports (CAFRs) achieve the highest standards in government accounting and financial reporting. t" E ~ ~Yy ~ ~ o ~ President scat ~y+ ~w Executive Director -7- County of Hawaii Organization Chart County Electorate County Council Mayor Prosecuting Attorney County Clerk Office of Man~ement Managing Direcor Departments and agencies Agencies under Departments under under direct supervision administrative supervision commissions and of the Mayor and/or of the Mayor: administrative supervision Managing Director: of the Mayor: Corporation Counsel Gvil Defense Civi/Service Finance Ofce of Aging Police Planning Mass Transportation Liquor Control Environmental Management Housing & Community Fire Research & Development Development Water Supply Public Works (semi-autonomous) Parkr & Recreation Data Systems -8- County of Hawaii Elected Officials Administrative Officers (Term: 2000-2004) Hazry Kim Mayor Jay T. Kimura Prosecuting Attorney County Council (Term: 2002-2004) James Y. Arakaki Chair J. Curtis Tyler, III Vice Chair Aazon S.Y. Chung Member Leningrad Elarionoff Member Fred C. Holschuh, M.D. Member Bob Jacobson Member Joe Reynolds Member Gary Safarik Member Michael C. Tulang Member -9- Principal Officials June 30, 2004 County Clerk Al Konishi Legislative Auditor Connie Kiriu Managing Director Dixie Kaetsu Deputy Managing Director Peter L. Hendricks Corporation Counsel Lincoln Ashida Director of Finance William Takaba Planning Director Christopher Yuen Director of Personnel Michael R. Ben Director of Reseazch and Development Jane Testa Chief of Police Lawrence K. Mahuna Fire Chief Darryl Oliveira Director of Pubtic Works Bruce McClure Director of Environmental Management Barbara Bell Director of Pazks and Recreation Patricia Engelhard Manager, Department of Water Supply Milton Pavao Civil Defense Administrator Troy M. Kindred Director of Liquor Control Janice A. Pakele Transit Operations Administrator Thomas Brown Executive on Aging Alan Pazker Administrator, Office of Housing and Community Development Edwin S. Taira -10- FINANCIAL SECTION KPMG LLP PO Box 4150 Honolulu, HI 96812-4150 Independent Auditors' Report To the Chair and Members of the County Council County of Hawaii State of Hawaii: We have audited the accompanying financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the County of Hawaii, State of Hawaii (the County), as of and for the year ended June 30, 2004, which collectively comprise the County's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the County's management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether [he financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of [he governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of the County as of June 30, 2004, and the respective changes in financial position and cash flows, where applicable, thereof and the respective budgetary comparison for the general fund for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated March 23, 2005 on our consideration of the County's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. _ll_ KPMG LLP, a U 5 limitetl liabllrty partnersh~0, rs the US member flan of KPM6 International, a Swiss cooperative. The management's discussion and analysis on pages 13 through 22 is not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the County's basic financial statements. The introductory section, the combining and individual nonmajor fund financial statements, and the statistical section are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining and individual nonmajor fund financial statements have been subjected to the auditing procedures applied in the audit of basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory section and the statistical section have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. }~P?v(G LLP Honolulu, Hawaii March 23, 2005 _12_ MANAGEMENT'S DISCUSSION AND ANALYSIS This section of the County of Hawai`i's (the County) Comprehensive Annual Financial Report presents a narrative overview and analysis of the financial activities of the County for the fiscal year ended June 30, 2004. We encourage readers [o consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal. FINANCIAL HIGHLIGHTS • The assets of the County exceeded its liabilities at the end of the fiscal year by $364.8 million (net assets). • The government's total net assets increased by $15.4 million during the fiscal year. • As of the close of the current fiscal year, the County's governmental funds reported combined ending Fund balances of $134.2 million, an increase of $6.0 million from the prior year. Approximately 45 percent of [his total amount, $59.7 million, is available for spending at the government's discretion (unreserved fund balance). • At the end of the current fiscal year, unreserved fund balance for the general fund was $12.3 million, or eight percent of total general fund expenditures. • The County's total long-term liabilities decreased by $7.7 million (three percent) during the current fiscal year. The key factors in this decrease were the minimal new debt ($].75 million), the payoff of the 1996A bond issue ($550,000), and normal principal reduction. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the County's basic financial statements. The County's basic financial statements comprise three components: (1) Government-wide financial statements, (2) Fund financial statements, and (3) Notes to the basic financial statements. This report also contains other supplementary information in addition to the basic financial statements themselves. Government-wide Financial Statements The government-wide financial statements are designed to provide readers with a broad overview of the County's finances, in a manner similar to aprivate-sector business. The statement of net assets presents information on all of the County's assets and liabilities, with the difference between the two reported as net assets. Over time, increases or decreases in net assets may serve as a useful indicator of whether or not the financial position of the County is improving or deteriorating. The statement of activities presents information showing how the County's net assets changed during the most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods, such as revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation and sick leave. -13- Both of the government-wide financial statements distinguish functions of the County that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the County include public safety, highways and streets, health, education and welfare, culture and recreation, sanitation and general government. The business-type activities of the County include rental housing for senior citizens and families. The government-wide financial statements include not only the County itself (known as the primary government), but also the Department of Water Supply, a legally separate entity that the County is financially accountable for. Financial information for this component unit is reported separately from the fmancial information presented for the primary government itself. Fund Financial Statements The fund financial statements are designed to report information about groupings of related accounts which are used to maintain control over resources that have been segregated for specific activities or objectives. The County, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the County can be divided into the following three categories: governmental funds, proprietary funds, and fiduciary funds. ' Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements - i.e., most of the County's basic services are reported in governmental funds. These statements, however, focus on (1) how cash and other financial assets can readily be converted to available resources and (2) the balances left at year-end that are available for spending. Such information may be useful in determining what financial resources are available in the near future to finance the County's programs. Because the focus of governmental funds is narrower than that of the government-wide financial statements, i[ is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The County maintains several individual governmental funds organized according to [heir type (general, special revenue, debt service, and capital projects). Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund and capital projects fund, which are considered to be major funds. Data from the remaining governmental funds are combined into a single, aggregated presentation Individual fund data for each of the non-major governmental funds is provided in the form of combining statements elsewhere in this report. The County adopts an annual appropriated budget for its general fund and special revenue funds. A budgetary comparison statement has been provided for these funds to demonstrate compliance with this budget. The budgetary comparison statement for the general fund is -14- located in the basic financial statements, whereas the budgetary comparison statements for the special revenue funds are presented elsewhere in this report. Proprietary funds. Proprietary funds are generally used to account for services for which the County charges outside customers. Proprietary funds provide the same type of information as shown in the government-wide financial statements, only in more detail. The County maintains only one type of proprietary funds, enterprise funds. Enterprise funds are used to report the same functions presented as business-type activities in the government- wide financial statements. The County uses enterprise funds to account for the operations of the Kulaimano Elderly Housing Project and the Ouli Ekahi Affordable Housing Project. Fiduciary funds. Fiduciary funds are used to account for resources held for the benefit of parties outside the County. The Geothermal Asset Fund and the agency funds are reported under the fiduciary funds. Since the resources of these funds are not available to support the County's own programs, they are not reflected in the government-wide financial statements. The accounting used for fiduciary funds is much like that used for proprietary funds. The County assumed responsibility for a new fiduciary fund during the fiscal year. The State transferred the Shipper's Wharf Trust Fund, with assets of $2.6 million, to the care of the Hawaii County mayor. The trust is used to promote health and safety on the island of Hawaii. Notes to the Basic Financial Statements The notes to the basic financial statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Other Supplementary Information In addition to the basic financial statements and accompanying notes, this report also presents supplementary information, including the combining statements referred to earlier in connection with nonmajor governmental funds and budget comparison statements for the special revenue funds. This supplementary information is presented immediately following the notes to the basic financial statements. -15- GOVERNMENT-WIDE FINANCIAL ANALYSIS Net Assets June 30, 2004 Primary Government Governmental Activities Business-type Activities Total 2004 2003 2004 2003 2004 2003 Assets: Current and other assets $ 155,434,993 $ 160,532,791 $ 1,281,768 $ 1,22A,494 $ 156,716,761 $ 161,757,285 Capital assets 475,741,526 472,362,315 1,390,359 1,418,527 477,131,885 473.780.842 Total assets $ 631,176.519 $ 632,895.106 $ 2,672,127 $ 2,643,021 $ 633,848.646 $ 635.538.!27 Liabilities: Long-[ertn liabilities outstanding 253,439,046 261,148,974 1,065,417 1,084,667 254,504,463 262,233,641 Other liabilities 14,352,619 23,729,775 227.282 167,605 14,579,901 23,897,380 Total liabilities $267791,665 $284,878749 $1,292699 $1,252.272 $269,084.364 $286,131,021 !Vet assets: Invested in capital assets, net of related deb 336,435,768 333,571,558 324,942 333,860 336,760,710 333,905,418 Restricted 37,333,730 27,577,754 180,782 180,782 37,514,512 27,758,536 Unrestricted (de0ciq (10,384,644) (13,132,955) 873,704 876,107 (9,510,940) (12,256.848) 'total net assets $ 363.384,854 $ 348,016,357 $ 1,379,428 $ !,390,749 $ 364,764,282 $ 349,407,106 Analysis of Net Assets As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. [n the case of the County, assets exceeded liabilities by $364,764.282 at the close of the most recent fiscal year. By far the largest portion of the County's net assets (92 percent) reflects its investment in capital assets (e.g., land, buildings, infrastructure, and equipment), less any related debt used to acquire those assets that is still outstanding. The County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the County's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. An additional portion of the County's net assets (10 percent) represents resources that are subject to external restrictions on how they may be used. At the end of the current fiscal year, the County is able to report positive balances in two of three categories of net assets, both for the government as a whole, as well as for its separate governmental and business-type activities. The negative balance in unrestricted net assets of $9,510,940 results primarily from the additional long-term liabilities placed on the books to be in compliance with GASB Statement No. 34. The government's net assets increased by $15,357,176 during the current fiscal year. Approximately $ 11,000,000 of the increase is due to increases in real property tax valuations and collections. The remaining increase represents the degree to which increases in ongoing revenues have outstripped similar increases in ongoing expenses. -16- The government's other liabilities decreased by $9,317,479 due to a decrease in warrant's payable. The County converted from warrants to checks during the fiscal year. Changes in Net Assets For the Fiscal Year Ended June 30, 2004 Primary Government Governmental Activities Business-type Activities Total 2004 2003 2004 2003 2004 2003 Revenues: Program revenues: Charges for services $ 29,188,014 $ 24,767,147 $ 303,047 $ 304,671 $ 29,491,061 $ 25,071,818 Operating grants and contributions 33,327,191 31,544,494 143,769 147,997 33,470,960 31,692,491 Capital grants and contributions 9,668,981 19,064,821 - - 9,668,981 19,064.821 General revenues: Property taxes 119,864,237 109,151,524 - - 119,864,237 109,151,524 Other taxes 18,257,939 17,223,550 - - 18,257,939 17,223,550 Grants and contributions, unrestricted 15,251 443 13,931,403 - - 15,251,443 13,931,403 Investment earnings 1.729,531 1,936,635 8,006 12,084 1,737,537 1,948.719 Miscellaneous 4,825,259 4,641,884 - - 4,825.259 4,641,884 Total revenues 232,112,595 222,261,458 454,822 464,752 232,567,417 222,726,210 Gxpenses. General government 40,085,357 36,461,949 - - 40,085,357 36.461,949 Public safety 90,434,696 77,131,374 - - 90,434,696 77,131,374 Highways and streets 17,563,608 15,512,957 - - 17,563,608 15,512,957 Health, education and welfare 23,041,963 20,205,386 466,143 450,343 23,508,106 20,655,729 CulNre and recreation 15,979,854 16,430,590 - - 15,979,854 16.430,590 Sanitation 20,084,654 14,022,213 - - 20,084,654 19,022,213 Interest on long-term debt 9,553,966 8,680,999 - - 9,553.966 8,680,999 Total expenses 216,744,098 193,445,468 466,143 450,343 217,210,241 193.895,81 I Increase (decrease) in net assets 15.368,497 28,815,990 Q 1,321) 14,409 15,357,176 28,830,299 Net assets a[ beginning of year 348,016,357 319,200,367 1.390,749 1,376,340 349,407,106 320,576,707 Net assets at end of year $ 363.384,854 $ 348,016.357 $ 1,379,428 $ I,39Q749 $ 364,764,282 $ 349,407,106 Analysis of Changes in Net Assets Governmental activities. Governmental activities increased the County's net assets by $15,368,497 or primarily all of the total growth in net assets of the County. The County's property taxes increased by $10,712,713 (10 percent) during the year. Most of this increase is attributable to the increase in assessed values. Total expenses increased by $23,298,630. This increase was primarily due to an increase of $13,303,322 in expenditures related to public safety. The bulk of the increase is the result of negotiated pay raises and related benefits. Much of the increase in all areas is due to the increased cost of employee benefits, particularly employee retirement and health insurance costs. For the most part, other fluctuations in expenses closely paralleled inflation and growth in demand for services. -17- Expenses and Program Revenues • Governmental Activities Year Ended June 30, 2004 100,ooo.ogo so,oao,dod ' i . I~FSpenses I 90,000,000 OProgram revenues ~o.ooo,ooo fi0 000,000 so,ooo,ooo ao,ooa,ooo 30,000,000 , 20,000,000 r' . 10,000,000 General Public safety Highways and Health, Culture antl Sanitation Interest on government streets education antl recreation long-term debt welfare Revenues by Source -Governmental Activities Year Ended June 30, 2004 Investment earnings Miscellaneous 1% 2% Grants and contributions not restricted to apecRC _ programs Charges (or sernces 7% 13% i0:. a,. , Other taxes_ ''f 9% _ Oparahng grants and wntributions 14% Capital grants antl wntribuaons 4% Property taxes 51% _18_ The charts above illustrate the County's governmental expenses and revenues by function, and its revenues by source. As shown, public safety is the largest function in expense (42 percent), followed by general government (18 percent) and health, education and welfare (11 percent). General revenues such as property and other taxes are not shown by program, but are effectively used to support program activities countywide. For governmental activities overall, without regard to programs, property taxes are the largest single source of funds (51 percent), followed b_v operating grants and contributions (14 percent) and charges for services (13 percent). Business-type activities. Business-type activities decreased the County's net assets by $1 1,321. Expenses for health, education and welfare account for all of the $466,142 of expenses. Charges for services were $303,047, operating grants and contributions were $143,769 and investment earnings were $8,006. FINANCIAL ANALYSIS OF THE COUNTY'S FUNDS As noted earlier, the County uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Governmental funds. The focus of the County's governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the County's financing requirements. In particular, unreserved fund balance may serve as a useful measure of a government's net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the County's governmental funds reported combined ending fund balances of $134,159,993, an increase of $5,986,427 in comparison with prior year. Approximately 45 percent of this total amount ($59,715,922) constitutes unreserved fund balance. which is available for spending at the government's discretion. The remainder of the fund balance is reserved to indicate that it is not available for new spending because it has already been committed 1) to liquidate contracts and purchase orders for last fiscal year ($28,263,526), 2) to pay debt service ($13,669,530), or 3) for a variety of other restricted purposes ($32,51 1,015). The general fund is the chief operating fund of the County. At the end of the current fiscal year, unreserved fund balance of the general fund was $12,270,870, while total fund balance reached $19,723,208. As a measure of the general fund's liquidity, it may be useful to compare both unreserved fund balance and total fund balance to total fund expenditures. Unreserved fund balance represents nine percent of total general fund expenditures, while total fund balance represents fourteen percent of that same amount. The fund balance of the County's general fund increased by $3,566,703 during the current fiscal year. Key factors in this increase are as follows: • An increase of $10,712,713 (10 percent) in property tax revenue due to increasing property values and collection efforts on past due taxes. • An increase of $2,230,633 (6 percent) in intergovernmental revenue due to an increase in transient accommodations tax proceeds from the state ($1.2 million) and increased federal grant revenue related to homeland security and many other programs. • An increase of $2,990,6] 0 (49 percent) in pension and retirement system contributions and an increase of $1,445,499 (12 percent) in employees' health insurance. Both benefit programs continue [heir upward trend. -19- • An increase of $4,640,700 (8 percent) in public safety expenditures due primarily to increases in expenditures for police ($2.3 million) and fire ($L5 million). Increases were noted in many of the grant-funded programs as well as in salaries and wages due to negotiated pay increases. The debt service funds have combined total fund balances of $13,669,530, all of which is reserved for the payment of debt service. The net increase in the combined fund balances during the current year in the debt service funds was $1,493,667 (12 percent). Proprietary funds. The County's proprietary funds provide the same type of information found in the government-wide fmancial statements, but in more detail. Unrestricted net assets of the Kulaimano Elderly Housing Project (Kulaimano) at the end of the year amounted to $883,128, and those for Ouli Ekahi Affordable Housing Project (Ouli Ekahi) amounted to ($9,424). The net assets for Kulaimano decreased by $3,577, while the net assets for Ouli Ekahi decreased by $7,744. Other factors concerning the finances of these two funds have already been addressed in the discussion of the County's business-type activities. GENERAL FUND BUDGETARY HIGHLIGHTS Differences between the original budget and the final amended.budget were relatively minor ($]2,763,573 increase in appropriations and $6,794,249 increase in transfers out) and can be briefly summarized as follows: • $5,786,388 in increases due to the appropriation of higher than expected fund balance to be used in the year's operations. • $1,500,000 in increases due to the appropriation of additional real property tax revenue. • $12,271,434 in increases due to the appropriations for capital and operating grants and contributions. Differences between the final budget and the actual (budgetary basis) resulted in $961,050 more revenues than expected and $10,323,343 less expenditures than appropriated. This is primarily due to the following factors: • $3,212,534 favorable variance in taxes and assessments revenue resulting from collections being more than expected. • $2,711,7]3 unfavorable variance in intergovernmental revenue, including $931,112 in federal grants, a $532,127 shortfall in transient accommodations tax and $1,248,474 in other state grants and funding. • $3,263,400 favorable variance in general government expenditures caused by an overall effort by each department to hold the line on expenditures. • $3,586,222 favorable variance in public safety expenditures primarily created by vacant positions in the police and fire departments as well as an increased effort to control costs during the budget year. • A combined $919,392 favorable variance for health fund and pension and retirement contributions, due primarily to vacant positions. -20- CAPITAL ASSET AND DEBT ADMINISTRATION Capital assets. The County's investment in capital assets for its governmental and business-type activities as of June 30, 2004 amounts to $477,131,885 (net of accumulated depreciation). This investment in capital assets includes land, buildings and improvements, equipment, and infrastructure assets, which consists of primarily roads and bridges. The total increase in the County's investment in capital assets for the current fiscal year was one percent. Major capital asset events during the curzent fiscal year included the following: • Construction continued on the Puainako Street extension; construction in progress as of the end of the current fiscal year had reached $33,574,499. • Construction continued on the Keaukaha Gymnasium Complex; construction in progress as of the end of the current fiscal year had reached $4,335,338. • Various sewer system additions and improvements continue to be made; construction in progress as of the end of the current fiscal year had reached $6,107,858. • In addition to construction activity, all County held school buildings were transferzed to the State, resulting in a net decrease of approximately $2.5 million. Capital Assets (net of depreciation) Primary Government Governmental Activities Business-type Activities Total 2004 2003 2004 ?003 2004 2003 Land $ 19,610,464 $ 19,311,280 $ 753.877 $ 753,877 $ 20,364,341 $ 20,065.157 InfiazvucNre azsets 150,650,636 146,767,836 - - 150,650,636 146,767,836 Ground and site improvements - - 97,616 101,370 97,616 101,370 Buildings and improvements 218,742,753 216,218,341 526,649 551,263 219,269,402 216,769,604 Bquipmen[ 26,535,175 25,536,905 12.217 12,017 26,547,392 25,548,922 Construction work in progress 60,202,498 64,527,953 - 60.202,498 64,527,953 Total $475,741,526 $472,362,315 $1,390,359 $1418,527 $477,131,885 $473,780,842 Additional information on the County's capital assets can be found in note 6 to the basic financial statements. Long-term debt. At the end of the current fiscal year, the County had total bonded debt outstanding of $157,908,300. This entire amount was comprised of general obligation bonds which are backed by the full faith and credit of the County. The County's total bond and loan debt decreased by $9,881,622 (5 percent) during the current fiscal year. The key factors in this decrease were minimal issuance of new debt and normal principal reduction. The County maintains an "A" rating from Standard & Poor's and an "A2" rating from Moody's for general obligation debt. State statutes limit the amount of general obligation debt the County may issue to 15 percent of the total assessed value of all county real property as established for tax purposes on the last tax -21- assessment rolls. The current debt limitation for the County is $1,933,701,087, which is in excess of the County's outstanding general obligation debt. Currently the County's outstanding debt represents nine percent of our debt limitation. Additional information on the County's long-term debt can be found in note 10 to the basic financial statements. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES • The unemployment rate for the County is 5.1 percent, which is down from a rate of 7.3 percent a year ago. • The number of visitors to the County for the most recent calendar year was 1,207,500, down slightly from the previous year's count of 1,243,313. Both of these factors were considered in preparing the County's budget for the 2005 fiscal year. At the end of the current fiscal year, unreserved fund balance in the general fund was $12,270,870. The County has appropriated $3,687,723 of this amount for spending in the 2005 fiscal year budget. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the County's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Director of Finance, County of Hawaii, 25 Aupuni Street, Room 118, Hilo, Hawaii 96720. -22- BASIC FINANCIAL STATEMENTS -23- COUNTY OF HAWAII Statement of Net Assets June 3Q 2004 Prima Government Governmental Business-type Component Activities Activities Total Unit Assets Current Assets: Cash and cash equivalents (notes 3 and 14) $ 108,851,063 $ 308,905 $ 109, ] 59,968 $ 9,627,440 Restricted cash and cash equivalents (note 3) 639,456 27,608 667,064 - Investments(notes3and 14) 12,465,784 700,000 13,165,784 22,148,701 Receivables, net(notes4andl4) 27,621,350 50,662 27,672,0]2 4,902,722 Internal balances (note 5) 2,700 (2,700) - _ Inventories 2,563,179 - 2,563,]79 919,977 Prepaid expenses - 1,301 L,301 180,208 Other 537,933 - 537,933 - Totalcurrentassets 152,68],465 ],085,776 153,767,241 37,779,048 Investments (note 3) 2,753,528 - x,753,528 - Restricted cash and cash equivalents (note 3) - 195,992 ~ 195,992 - Restricted investments (note 14) - - - 1 1,005,836 Loans receivable, excluding current portion (note 14) - - - 696,101 Deferred charges - - - 6,14],398 Capital assets (notes 6, 8 and 14): Utility plant in service, net - - - 144,614,502 Infrastructure assets, net 150,650,636 - 150,650,636 - Ground and site improvements, net - 97,616 97,616 - Buildings and improvements, net 218,742,753 526,649 219,269,402 - Equipment, net 26,535,175 12,217 26,547,392 - Construction work in progress 60,202,498 - 60,202,498 30,310,981 Land 19,610,464 753,877 20,364,341 787,657 Total capital assets 475,741,526 1,390,359 477,131,885 175,713,140 Total noncurrent assets 478,495,054 7,586,351 480,081,405 193,556,475 Total assets 631,176,519 2,672,127 633,848,646 231,335,523 (Continued) -24- COUNTY OF HAWAII Statement of Net Assets June 30, 2004 (Concluded) _ Primary Government Governmental Business-type Component Activities Activities Total Unit Liabilities Current Liabilities: Accounts payable and accrued liabilities $ 3,620,215 $ 224,734 $ 3,844,949 $ 2,133,914 Deferred revenue (note 7) 4,851,858 2,548 4,854,406 - Interest due on long-term debt 2,701,286 - 2,701,286 292,060 Customers' deposits for service connections - - - 699,425 Other 3,179,260 - 3,179,260 _ - Total current liabilities 14,352,619 227,282 14,579,901 _3,125,399 Noncurrent liabilities: Due within one year: Bonds and loans payable (notes 10 and 14) 12,074,895 19,965 12,094,860 1,539,000 Compensated absences (note 10) 5,424,724 - 5,424,724 1,]33,322 Claims and judgments (notes 10, 12 and 14) 4,] 13,516 - 4,113,516 61,000 Capital leases (notes 8 and 10) 1,195,249 - 1,195,249 - Landfill costs payable (notes 9 and 10) 148,272 - 148,272 - Due in more than one year: Bonds and loans payable (notes 10 and 14) 175,330,778 1,045,452 176,376,230 17,253,249 Compensated absences (note 10) 15,517,564 - 15,517,564 864,819 Claims and judgments (notes 10, 12 and 14) 15,915,484 - 15,915,484 211,000 Capital leases (notes 8 and 10) 2,35 ],836 - 2,351,836 - Landfill costs payable (notes 9 and 10) 21,366,728 - 21,366,728 - Customers' deposits payable from restricted assets - - - 11,005,836 Total noncurrent liabilities 253,439,046 1,065,417 254,504,463 32,068,226 Total liabilities 267,79],665 1,292,699 269,084,364 35,193,625 Net Assets (Deficit) Invested in capital assets, net of related debt 336,435,768 324,942 336,760,7]0 157,837,593 Restricted for: Capital projects 23,664,200 - 23,664,200 - Debtservice 13,669,530 180,782 13,850,312 - Unrestricted (10,384,644) 873,704 (9,510,940) 38,304,305 Total net assets $ 363,384,854 $ 1,379,428 $ 364,764,282 $ 196,141,898 See accompanying notes to [he basic financial statements. -25- COUNTY OF HAWAII Statement of Activities For the Fiscal Year Ended June 30, 2004 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Proerams Expenses Services Contributions Contributions Primary government: Governmental activities: General government $ 40,088,387 $ 1,947,884 $ 2,388,808 $ 2,872,718 Public safety 90,434,696 5,061,174 13,804,309 6]9,126 Highways and streets 77,563,608 6,082,544 328,125 6,162,032 Health, education and welfare 23,041,963 884,075 16,158,823 - Culture and recreation ]5,979,854 1,588,945 647,126 14,072 Sanitation 20,084,654 13,653,722 - 1,033 Interest on long-term debt 9,883,966 - _ _ Total governmental activities 216,744,098 29,188,014 33,327,191 9,668,981 Business-type activities: Health, education and welfare 466,143 303,047 143,769 - Total primary government $ 217,210,241 $ 29,491,061 $ 33,470,960 $ 9,668,981 Component unit: Water (note 14) $ 32,830,146 $ 32,246,154 $ - $ 3,326,188 General revenues: Taxes: Property taxes, levied for general purposes Public service company taxes Franchise taxes Fuel taxes Grants and contributions not restricted to specific programs Investment earnings Miscellaneous Total general revenues Change in net assets Net assets, beginning of year Net assets, end of year See accompanying notes [o the basic financial statements. -26- Net (Expense) Revenue and Changes in Net Assets Primary Government Governmental Business-type Component Activities Activities Total Unit $ (32,876,277) $ - $ (32,876,277) $ - (7Q95Q087) - (70,950,087) - (5,02Q907) - (5,020,907) - (5,999,065) - (5,999,065) - (13,729,711) - (13,729,711) - (6,429,899) - (6,429,899) - (9,553,966) - (9,553,966) - (144,559,912) - (144,559,912) - - (19,327) (19,327) - (144,559,912) (19,327) (144,579,239) - - - - 2,742,163 119,864,237 - 119,864,237 - 5,332,478 - 5,332,478 - 5,373,144 - 5,373,]44 - 7,552,317 - 7,52,317 - 15,251,443 - 15,251,443 - 1,729,531 8,006 1,737,537 345,050 4,825,259 - 4,825,259 - 159,928,409 8,006 159,936,415 345,050 15,368,497 (11,321) 15,357,176 3,087,213 348,016,357 1,390,749 349,407,106 ]93,054,655 $ 363,384,854 $ 1,379,428 $364,764,282 $196,141,898 -27- COUNTY OF HAWAII Governmental Funds Balance Sheet June 30, 2004 Other To[al Capital Governmental Governmental General Projects Funds Funds Assets Cash and cash equivalents (note 3) $ 9,131,722 $ 62,088,015 $ 37,631,326 $108,851,063 Investments (note 3) 6,209,923 5,822,013 3,187,376 15,219,312 Receivables, net (note 4) 7,801,885 2,321,350 2,790,055 12,913,290 Due from other governmental funds (note 5) 1,661,278 7],828 636,030 2.369,136 Due from other nongovernmental funds (note 5) - - 2,700 2,700 Receivables from other governments (note 4) 4,8 ] 6,023 9,059,181 832,856 14,708,060 Restricted cash with escrow (note 3) 639,456 - - 639,456 Inventories x,563,179 - - 2,563,179 Other ~ ]89,988 - 347,945 _ 537,933 Total assets $ 33.013,454 $ 79.362,387 $ 45,428,288 $157,804,129 Liabilities and Fund Balances Liabilities: Accounts payable $ 1,542,554 $ 658,835 $ 1,418,826 $ 3,620,215 Due to other governmental funds (note 5) 273,069 401,]94 1,694,873 2,369,136 Deferred revenue (note 7) 9,662,586 2,991,158 2,790,056 15,443,800 Other 1,812,037 - 398,948 _2,210,985 Total liabilities 13,290,246 4,05],187 6,302,703 23,644,136 Fund balances: Reserved for: Encumbrances 3,890,862 14,068,143 10,304,521 28,263,526 Inventories 2,563,179 - - x,563,179 Taxicab investigations 56,020 - - ~ 56,020 Liquor control 676,277 - - 676,277 Unexpended allotments - 28,949,539 - 28,949,539 UPW deferred compensation 266,000 - - 266,000 Debt service - - 13,669,530 13,669,530 Unreserved, reported in: General fund 12,270,870 - - 12,27Q870 Special revenue funds - - 15,151,534 1,151,534 Capital projects funds - 32,293,518 - 33,293,518 Total fund balances 19,723.208 75,311,200 39,125.585 134,159,993 Total liabilities and fund balances $ 33,013.454 $ 79,362,387 $ 45,428.288 $157,804,129 See accompanying notes to the basic financial statements. COUNTY OF HAWAII Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets June 30, 2004 Total fund balances -governmental funds $ 134,159,993 Amounts reported for governmental activities in the statement of net assets are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. These assets consist of: Land 19,610,464 Infrastructure assets, net 150,650,636 Buildings and improvements, net 218,742,753 Equipment, net 26,535,175 Construction work in progress 60,202,498 Total capital assets 475,741,526 Some of the County's revenues will be collected after year-end but are not available soon enough to pay for the current period's expenditures and therefore are deferred in the funds. 10,591,942 Some liabilities are not due and payable in the current period and therefore are not reported in the funds. Those liabilities consist of: Bonds and loans payable (187,405,673) Accrued interest on bonds (2,701,286) Bond premium, net (968,275) Capital leases (3,547,085) Compensated absences (20,942,288) Claims and judgments (20,029,000) Landfill closure/postclosure costs (21,515,000) Total long-term liabilities (257,108,607) Net assets of governmental activities $ 363,384,854 See accompanying notes [o the basic financial statements. -29- COUNTY OF HAWAII Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances For the Fiscal Year Ended June 30, 2004 Other Total Capital Governmental Governmental General Projects Funds Funds Revenues Property tax $ 121,868,056 $ - $ - $ 121,868,056 Public service company tax 5,332,478 - - 5,332.478 Fuel tax - - 7,552,317 7,552,317 Public utiliR~ franchise tax - - 5,373,144 x,373,144 Licenses and permits 6,320,703 - 5,519,429 11,840,132 Intergovernmental 37,434,405 6,478,704 14,645,846 58,558,955 Charges for services 3,169,023 - 11,298,320 14.467,342 Investment earnings 1,756,827 - 48,818 1,805,645 Miscellaneous 2,125,458 1,799,200 792,832 4.717,490 Total revenues 178,006,949 8,277,904 45,230,706 231.515,559 Expenditures Current: General government 23,069,562 - - 23.069,562 Public safety 65,969,823 - 3,146,819 69,116,642 Highways and streets 1,797,861 - 7,744,162 9.542,023 Sanitation 265,991 - 17,336,349 17.602,340 Health, education and welfare 5,172,810 - 13,874,408 19 047,218 Culture and recreation 12,428,925 - 739,741 13.168,666 Pension and retirement contributions (note 13) 9,150,710 - 1,930,165 11.080,876 Employees'healthinsurance 13,124,935 - 1,131,066 14256,001 Miscellaneous 5,350,891 - 1,777,136 7.128,027 Debt service: Principal 742,902 - 12,083,625 12.826,527 Interest 93,199 - 9,189,996 9283,195 Capital outlay 3,045,892 20,428,302 - 23.474,194 Total expenditures 140,213,501 20,428,302 68,953,467 229,595,270 Excess (deficiency) of revenues over expenditures 37,793,448 (12,150,398) (23,722,761) 1,920,289 (Continued) -30- COUNTY OF HAWAII Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances For the Fiscal Year Ended June 30, 2004 (Concluded) Other Total Capital Governmental Gocemmental Genera] Projects Funds Funds Other Financing Sources (Uses), including transfers Sale of assets $ 1,593,457 $ - $ - $ 1.593,457 Capital leases 960,000 - 513,529 1,473,529 Sale of bonds - 1,725,000 - 1,725,000 Transfers in (note 5) - 8,544,707 30,895,105 39,439,812 Transfers out (note 5) (36,054,354) - (3,385.458) (39,439.812) Total other financing sources (uses) (33,500,897) 10,269,707 28,023,176 _4,791,986 Net change in fund balances 4,292,551 (1,880,691) 4,30Q4li 6,7]2,275 Fund balance at beginning of year 16,156,505 77,191,891 34,825,170 128,173,566 Decrease in reserve for inventories (725.848) - - _ (725 848) Fund balance at end of year $ 19,723,208 $ 75.311,200 $ 39,125.585 $ 134,159,993 See accompanying notes to the basic financial statements. -31- COUNTY OF HAWAII Reconciliation of the Change in Fund Balances of Governmental Funds to the Statement of Activities For the Fiscal Year Ended June 30, 2004 Net change in fund balances -total governmental funds $ 6,712,275 Amounts reported for governmental activities in the statement of activities are different because: Capital outlays are reported as expenditures in governmental funds. However, in the statement of activities, the cost of capital assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are: Capital outlay 24,010,219 Depreciation expense and loss on disposals (20,631,008) Excess of capital outlay over depreciation expense 3,379,21 I Borrowings provide current financial resources to governmental funds; however, issuing debt increases long-term liabilities in the statement of net assets. In the current period, proceeds were received from: General obligation bonds (1,725,000) Capital lease obligations (1,473,529) Total debt proceeds (3,198,529) Repayment of long-term debt is reported as an expenditure in governmental funds, but the repayment reduces long-term liabilities in the statement of net assets. In the current year, these amounts consist of: Bond principal retirement 9,423,700 SRF loan repayment 2,182,922 Capital lease payments 1,219,905 Total long-term debt repayment ] 2,826,527 Because some revenues will not be collected for several months after the County's fiscal year end, they are not considered "available" revenues and are deferred in the governmental funds. Deferred revenues decreased by this amount this year. (1,436,297) (Continued) -32- COUNTY OF HAWAII Reconciliation of the Change in Fund Balances of Governmental Funds to the Statement of Activities For the Fiscal Year Ended June 30, 2004 (Concluded) Some items reported in the statement of activities do not involve current financial resources and therefore are not reported as expenditures in governmental funds. These activities are: Decrease in inventory $ (725,848) Increase in compensated absences (1,223,402) Increase in claims and judgments (1,455,669) Decrease in landfill closure/postclosure care costs 761,000 Amortization of premium from bond issuance 52,610 Net increase in accrued interest (323,381) Net additional expenditures (2,914,690) Change in net assets of governmental activities $ 15,368,497 See accompanying notes to the basic financial statements. -33- COUNTY OF HAWAII General Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2004 Variance Original Final Favorable Budget Budget Actual _ (Unfavorable) Revenues: Taxes and assessments: Real property taxes $ 117,273,000 $ 118,773,000 $ 121,868,056 $ 3,095,056 Public service company taxes 5,215,000 5,215,000 5,332,478 1 17,478 Total taxes and assessments 122,488,000 123,988,000 127,200,534 3,212,534 Licenses and permits: Nonbusinesslicenses and permits 2,839,472 2,839,472 3,829,976 990,504 Business licenses 1,115,590 1,115,590 1,022,974 (92,616) Street use 1,295,000 1,295,000 1,467,752 172,752 Total licenses and permits 5,250,062 5,250,062 6,320,703 1,070,641 Intergovernmental: Federal: Programs for the aged 1,436,837 1,476,837 1,468,403 (8,434) Community development block grants 2,797,603 2,797,603 HOME program grant 1,086,413 1,060,813 (25,600) Civil defense 118,000 118,000 136,092 18,092 Law enforcement 2,052,496 2,052,496 1,079,867 (972,629) Other 1,527,597 9,193,629 9,251,089 57,460 Total federal 5,134,930 16,724,978 15,793,867 (931,112) State: Slate General Fund -Act 185, SLH 1990 15,456,000 15,456,000 14,923,873 (532,]27) Emergency medical services 8,991,166 8,991,166 8,731,170 (259,996) Other 4,300,431 4,75],973 3,767,430 (984,543) Child support enforcement 937,510 937,510 933,575 (3,935) Total State 29,685,107 30,136,649 28,356,048 (1,780,601) Total intergovernmental revenue 34,820,037 46,861,627 44,149,914 (2,711,713) Charges for current services: General government 2,157,512 2,157,512 1,786,270 (371,242) Culture and recreation 766,650 766,650 777,749 11,099 Highways and streets 580,000 580,000 567,221 (12,779) Public safety 142,916 142,916 37,783 (105,133) Total charges for current services 3,647,078 3,647,078 3,169,023 (478,055) Fines and forfeitures 1,139,500 1,139,500 527,210 (6]2,290) Rents 44,800 44,800 39,153 (5,647) (Continued) -34- COUNTY OF HAWAII General Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2004 Variance Original Final Favorable Budget Budget Actual (Unfavorable) Revenues (continued): Interest and penalties $ 1,500,000 $ 1,500,000 $ 1,831,910 $ 331,910 Miscellaneous 4,695,141 4,924,985 5,078,657 153,672 Total revenues 173,584,618 187,356,052 188,317,102 961,050 Expenditures: Current General government: Finance 6,434,713 6,660,622 5,990,828 669,794 Automotive equipment 2,066,472 2,066,472 2,004,520 61,952 General government building 2,818,216 2,817,0]6 2,497,403 319,614 Legislative 2,862,108 2,537,108 2,188,054 349,054 Law 2,901,040 2,901,040 2,316,483 584,557 Planning and zoning 2,023,108 2,169,108 2,016,868 152,240 Research and development 1,761,751 1,921,617 1,807,384 1 14,233 Mayor'soffce ],062,238 2,588,541 2,107,957 480,584 Engineering 1,223,922 1,447,900 1,108,201 339,699 Personnel services 1,317,295 1,317,295 1,230,638 86,657 Chief engineer 749,061 665,935 645,262 20,673 Data Systems 850,988 870,988 823,223 47,765 Elections 470,880 470,880 434,300 36,580 Total general government 26,541,792 28,434,521 25,171,121 3,263,400 Public safety: Police department 36,663,831 37,370,796 35,568,419 ],802,377 Fire department 20,579,996 21,177,985 20,483,966 694,0]9 Prosecuting attorney 5,846,280 6,042,631 5,346,484 696,147 Protective inspection 1,595,465 1,596,665 1,554,599 42,066 Liquor control 1,081,590 1,193,090 911,622 28],468 Flood control 153,939 238,369 238,369 Civildefense agency 456,230 5,781,674 5,71],529 70,145 Humane Society 849,948 849,948 849,948 Total public safety 67,227,279 74,251,158 70,664,936 3,586,222 Highways and streets: Mass transit 1,577,874 1,694,874 1,694,874 (Continued) -35- COUNTY OF HAWAII General Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2004 Variance Original Final Favorable Budget Budget Actual (Unfavorable) Expenditures (continued): Current (continued): Sanitation: Environmental management $ 354,623 $ 355,763 $ 269,740 $ 86,023 Health, education and welfare: Office of Aging 1,641,703 1,641,703 1,088,878 552,825 Elderly Activities 2,769,727 2,828,011 2,649,]00 178,911 Education 55,000 55,000 52,130 2,870 Social programs 900,000 900,000 900,000 Cemeteries 248,8]6 208,016 203,038 4,978 Physical examination 102,942 102,942 ]02,942 Total health, education and welfare 5,718,188 5,735,672 4,996,088 739,584 Culture and recreation: Community music 179,993 163,993 158,022 5,971 Organized recreation: Maintenance 5,163,784 5,219,584 5,187,883 31,701 Recreation 1,992,787 1,994,987 1,934,221 60, 766 Aquatics 2,851,221 2,890,221 2,691,702 198,519 Hoolulu Park complex 713,656 713,656 674,146 39,51 I Administration 678,730 683,905 616,253 67,652 Children's zoo 492,935 492,935 479,508 13,427 Summedlntersession 368,365 366,165 307,824 58,341 Culture and arts 124,506 101,506 79,096 22,410 Elderly activities administration 608,040 603,040 550,377 52,663 Total culture and recreation 13,174,017 13,229,992 12,679,033 550,959 Pension and retirement contributions ]0,061,386 10,061,386 9,707,042 354,343 Health fund 13,549,534 13,549,534 12,984,485 565,049 Miscellaneous 5,329,000 4,909,856 3,757,693 1,152,163 Total current 143,533,693 152,222,756 141,925,012 10,297,743 Capital Outlay: Community Development Block grants (HUD): CDBG2003 132,125 132,125 CDBG 2004 2,797,603 2,797,603 Total Community Development Block Grants (HUD) 2,929,728 2,929,728 (Continued) -36- COUNTY OF HAWAII General Fund Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2004 (Concluded) Variance Original Final Favorable _ Budget Budget Actual (Unfavorable) Expenditures (continued): Capital Outlay (continued): HOME Program $ $ 1,]44,782 $ 1,119,182 $ 25,600 Total capital outlay 4,074,510 4,048,910 25,600 Total expenditures 143,533,693 156,297,266 145,973,923 10,323,343 Excess of revenues over expenditures 30,050,925 31,058,786 42,343,180 1 1,284,394 Other financing uses: Transfers out: Capital Projects Fund (5,159,249) (5,159,249) Solid Waste Fund (7,896,387) (8,531,387) (8,531,387) Golf Course Fund (143,804) (143,804) (143,804) Selflnsurance Fund (1,000,000) (1,000,000) Debt Service Fund (23,589,685) (23,589,685) (23,589,685) Total transfers out (31,629,876) (38,424,125) (38,424,125) Total other financing uses (31,629,876) (38,424,125) (38,424,125) - Excess (deficiency) of revenues and other sources over expenditures and other uses (1,578,951) (7,365,339) 3,919,055 1],284,394 Fund balance at beginning of year 16,156,505 16,156,505 16,156,505 Fund balance at end of year $ 14,577,554 $ 8,791,166 $ 20,075,560 $ 1 1,284,394 See accompanying notes to the basic financial statements. -37- COUNTY OF HAWAII Proprietary Fuuds Statement of Net Assets June 3Q 2004 Business-type Activities- Enterprise Funds Kulaimano Ouli Ekahi Elderly Affordable Housing Housing Project Project Totals _ Assets Current assets: Cash and cash equivalents (note 3) $ 178,074 $ 130,681 $ 308,755 Restricted cash and cash equivalents (note 3) 8,683 18,925 27,608 Investments (note 3) 700,000 - 700,000 Imprest fund (note 3) 50 100 150 Receivables (note 4) 7,300 43,362 50,662 Prepaid expenses 1,301 - 1,301 Total current assets 895,408 193,068 ],088,476_ Noncurrent assets: Restricted cash and cash equivalents (note 3) 181,418 14,574 195,992 Capital assets (note 6): Land and site improvements 511,000 503,877 1,014,877 Buildings and equipment 1,226,632 - 1,226,632 Less accumulated depreciation (851,15C) - (851,150) Total capital assets 886,482 503,877 1,390,359 Total noncurrent assets 1,067,900 518,451 1,586,351 Total assets 1,963,308 711,519 2,674,827_ Liabilities Current liabilities: Accounts payable 962 189,824 190,786 Internal balances (note 5) 2,700 - 2,700 Due to developer - 7,729 7,729 Security deposits payable from restricted assets 8,683 17,536 26,219 Deferred revenue (note 7) 571 1,977 2,548 Notes payable, current portion (note ]0) 19,965 - 19,965 Total current liabilities 32,881 217,066 249,947 Noncurrent liabilities: Notes payable (note 10) 1,045,452 - 1,045,452 Total liabilities 1,078,333 217,066 1,295,399 Ne[ Assets Invested in capital assets, net of related debt (178,935) 503,877 324,942 Restricted for debt service 180,782 - 180,782 Unrestricted 883,128 (9,424) 873,704 Total net assets $ 884,975 $ 494,453 $ 1,379,428 See accompanying notes to the basic financial statements. -38- COUNTY OF HAWAII Proprietary Funds Statement of Revenues, Expenses, and Changes in Fund Net Assets For the Fiscal Year Ended June 30, 2004 Business-type Activities- Enterprise Funds Kulaimano Ouli Ekahi Elderly Affordable Housing Housing Project Project Totals _ Operating revenues: Rental receipts from tenants $ 92,830 $ 205,331 $ 298,161 Rental subsidy from federal government -HUD ] 43,769 - 143,769 Laundry receipts 2,106 - 2,106 Miscellaneous - 2,780 2,780 Total operating revenues 238,705 208,111 446,816 Operating expenses: Utilities 30,678 22,440 53,118 General and administration 69,223 90,105 159,328 Maintenance and repairs 41,766 27,141 68,907 Lease expense - 76,226 76,226 Depreciation (note 6) 33,903 - 33,903 Total operating expenses 175,570 215,912 391,482 Operatingincome(loss) 63,135 (7,801) 55,334 Nonoperating revenues (expenses): Investment income 7,949 57 8,006 Interest expense (74,661) - (74,661) Totalnonoperatingrevenue(expenses) (66,712) 57 (66,655) Change in net assets (3,577) (7,744) (11,321) Total net assets -beginning 888,552 502,197 1,390,749 Total net assets -ending $ 884,975 $ 494,453 $ 1,379,428 See accompanying notes to the basic financial statements. -39- COUNTY OF HAWAII Proprietary Funds Statement of Cash Flows For the Fiscal Year Ended June 30, 2004 Business-type Activities - Enterprise Funds Kulaimano Ouli Ekahi Elderly Affordable Housing Housing Project Project Totals Cash Flows from Operating Activities Receipts from tenants $ 90,092 $ 210,028 $ 300,120 Receipts from federal government -HUD 143,769 - 143,769 Payments to suppliers for goods and services (157,200) (139,686) 2( 96,886) Net cash provided by operating activities 76,661 70,342 147,003 Cash Flows from Capital and Related Financing Activities Principal paid on notes payable (19,250) - (]9,250) Interest paid on notes payable (74,661) - (74,661) Purchase of capital assets (5,735) - _(5,735) Net cash used in capital and related financing activities (99,646) - (99,646) Cash Flows from Investing Activities Purchase of investments (1,400,000) - (1,400,000) Proceeds from maturities of investments 1,400,000 - 1,400,000 Interest on investments 7,919 51 7,970 Net cash provided by investing activities 7,919 51 7,970 Net increase (decrease)in cash and cash equivalents (15,066) 70,393 55,327 Cash and cash equivalents at beginning of year 383,291 93,887 477,178 Cash and cash equivalents at end of year $ 368,225 $ 164,280 $ 532,505 Reconciliation of operating income (loss) to net cash provided by operating activities Operatingincome(loss) $ 63,135 $ (7,801) $ 55,334 Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation expense 33,903 - 33,903 Change in assets and liabilities: Receivables (3,269) 1,386 (1,883) Prepaid expenses (28) - (28) Accounts and other payables (16,420) 76,226 59,806 Unearned income (660) 531 (]29) Net cash provided by operating activities $ 76,661 $ 70,342 $ 147,003 See accompanying notes to [he basic financial statements. -40- COUNTY OF HAWAII Fiduciary Funds Statement of Fiduciary Net Assets June 30, 2004 Private- Purpose Agency Trusts Funds Assets Cash and cash equivalents (note 3) $ 3,046,396 $ 2,551,050 Investments (note 3) 996,725 - Receivables: Due from other agency funds - 798 Other receivables - 21,588 Total receivables - 22,386 Restricted cash and cash equivalents (note 3) - 637,000 Total assets 4,043,121 3,210,436 Liabilities Warrants payable - 50 Due to other agency funds - 798 Accrued liabilities 9,939 ],283,754 Advances payable - 166,732 Assets held for benefit of improvement districts - 1,759,102 Total liabilities 9,939 3,210,436 Net Assets Held in trust for other parties 4,033.182 - Total net assets $ 4,033,182 $ - See accompanying notes to the basic financial statements. -41- COUNTY OF HAWAII Fiduciary Funds Statement of Changes in Fiduciary Net Assets For the Fiscal Year Ended June 3Q 2004 Private- Purpose Trusts Additions Contributions: Puna Geothermal Venture $ 50,000 Transfer from State 2,492,51 1 Investment earnings: Net increase in fair value of investments 86,312 Dividends 25,45 I 1 nterest 18,979 Total additions 2,673,253 Deductions Grants awarded 44,118 Change in net assets 2,629,135 Net assets -beginning of year 1,404,047 Net assets -end of year $ 4,033,182 See accompanying notes to the basic financial statements. -42- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 The accounting policies of the County of Hawaii (the County) conform to generally accepted accounting principles (GAAP) as applicable to local governmental units. The following notes to the basic financial statements are an integral part of the County's Comprehensive Annual Financial Report. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Financial Reporting Entity The County has implemented Governmental Accounting Standards Board Statement No. 14. The Financial Reporting Entity, (GASB Statement No. 14). No organizations, activities or functions that meet the criteria in GASB Statement No. 14 for inclusion in the reporting entity are excluded from the County's basic financial statements. Primary Government The County operates under the Mayor-Council form of government under a charter that became effective on January 2, 1969, and was amended in 1979, 1982, 1990 and 2000. The County's operations are organized by the following functions: general government; public safety; highways and streets; sanitation; health, education and welfare; culture and recreation; pension and retirement contributions; health fund; miscellaneous; capital outlay; and debt service. The State of Hawaii (State) assumes full responsibility for several major functions usually performed by local governments, including education, welfare, health and judicial functions. There are no separate city, county or township governments nor any school districts, special districts, authorities or public corporations with overlapping authority. GASB Statement No. 14 defines component units as legally separate organizations for which the elected officials of the primary government are financially accountable. "Financial accountability" is [he level of accountability that exists if a primary government appoints a voting majority of an organization's governing board and is either able to impose its will on that organization or there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. A primary government has the ability to impose its will on an organization if it can significantly influence the programs, projects, activities or level of services performed or provided by the organization. An organization has a financial benefit or burden relationship with the primary government if any one of three conditions exist: (1) The primary government is legally entitled to or can otherwise access the organization's resources, (2) The primary government is legally obligated or has otherwise assumed the obligation to finance the deficits of, or provide financial support to, the organization; or (3) The primary government is obligated in some manner for the debt of the organization. -43- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 As required by GAAP as set forth in GASB Statement No. 14, these basic financial statements present the County of Hawaii (the primary government) and its component unit, the Department of Water Supply. This component unit is included in the County's reporting entity because of its financial relationship with the County. Discretely Presented Component Unit The component unit column in the basic financial statements includes the financial data of the Department of Water Supply (Department), a legally independent agency of the County that is accounted for as an enterprise fund. It is reported in a separate column to emphasize that it is legally separate from the County. The members of the Water Commission, the governing body of the Department, are appointed by the Mayor of the County and confirmed by the County Council. The Department is granted corporate powers by state statute and the County Charter. Although the County does not have the authority to approve or modify the Department's operational and capital budgets, the County has issued bonds on the Department's behalf that are general obligations of the County. Because the County is obligated to repay these bonds in the event of default by the Department, the County is financially accountable for the debts of the Department. See Note 14 for required component unit disclosures for the Department. Complete financial statements of the Department can be obtained from the Department of Water Supply, 345 Kekuanaoa Street, Suite 20, Hilo, Hawaii 96720. Basic Financial Statements The basic financial statements include both government-wide (based on the County as a whole) and fund financial statements. Both the government-wide and fund financial statements (within the basic financial statements) categorize primary activities as either governmental or business-type. In the government-wide Statement of Net Assets, both the governmental and business-type activities columns (a) are presented on a consolidated basis by column, (b) and are reflected, on a full accrual, economic resource basis, which incorporates long-term assets and receivables as well as long-term debt and obligations. The government-wide Statement of Activities reflects both the gross and net costs per functional category (general government, public safety, highways and streets, etc.) which are otherwise being supported by general government revenues (property [axes, certain intergovernmental revenues, etc.). The Statement of Activities reduces gross expenses (including depreciation) by related program revenues, operating and capital grants. The program revenues must be directly associated with the function (general government, public safety, highways and streets, etc.) or abusiness-type activity. The operating grants include operating-specific and discretionary (either operating or capital) grants while the capital grants column reflects capital-specific grants. The net cost (by function or business-type activity) is normally covered by general revenues. The government-wide focus is more on the sustainability of the County as an entity and the change in aggregate financial position resulting from the activities of the fiscal period. -44- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 The fund financial statements' emphasis is on the major funds in either the governmental or business-type categories. Nonmajor funds (by category) are summarized into a single column. The governmental funds in the fund financial statements are presented on a current financial resource and modified accrual basis of accounting. This is the manner in which these funds are normally budgeted. This presentation is deemed most appropriate to (a) demonstrate legal and covenant compliance, (b) demonstrate the source and use of liquid resources, and (c) demonstrate how the County's actual experience conforms to the budget fiscal plan. Since the governmental fund statements aze presented on a different measurement focus and basis of accounting than the government-wide statements' governmental column, a reconciliation is presented on the page following each statement, which briefly explains the adjustments necessary to transform the fund based financial statements into the governmental column of the government-wide presentation. The County's fiduciary funds are presented in the fund financial statements by type (private purpose and agency). Since by definition these assets are being held for the benefit of a third party (private parties, state government, etc.) and cannot by used to address activities or obligations of the government, these funds are not incorporated into the government-wide statements. Government-wide and fund frnancia! statements -The government-wide financial statements (i.e., the statement of net assets and the statement of changes in net assets) report information on all of the nonfiduciary activities of the primary government and its component unit. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support. Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include (a) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and (b) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. Separate financial statements are provided for govemmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial -45- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Activities in funds -The financial transactions of the County are recorded in individual funds. Each fund is accounted for by providing a separate set of self-balancing accounts that comprises its assets, liabilities, reserves, fund equity, revenues and expenditures/ expenses. The various funds are reported by generic classification within the financial statements. GASB Statement No. 34 sets forth minimum criteria (percentage of the assets, liabilities, revenues or expenditures/expenses of either fund category or the governmental and enterprise combined) for the determination of major funds. The nonmajor funds are combined in a column in the fund financial statements and detailed in the combining section. The County reports the following major governmental funds: General Fund -The general fund is the general operating fund of the County. It is used to account for all activities of the general government, except those required to be accounted for in other funds. Capital Projects Fund -Used to account for the costs of constructing County capital improvements financed with general obligation bond proceeds, federal and state grants, and general and special revenue fund revenues. The capital projects fund is used to account for financial resources to be used for the acquisition or construction of major general government capital facilities and infrastructure (other than [hose financed by proprietary funds and trust funds) when separate project centers are needed to control costs. The County reports the following major proprietary funds: Xulaimano Elderly Housing Project -Used [o account for the operation of a rental housing project for low-income senior citi2ens located north of Hilo. Ouli Ekahi Affordable Housing Project -Used [o account for the operation of a 33- unit single-family affordable rental housing project located in Waimea. The County reports the following fiduciary funds: Private purpose Trust Fund -Used to account for funds received from geothermal developers to mitigate the effects of geothermal energy development. Also used to account for investment income on funds received from import businesses at the port of Hilo and the related expenditures to promote health and safety on the Island of Hawaii. -46- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 Agency Funds -Used to account for assets held by the County for other governmental units and individuals. The agency funds are custodial in nature and do not involve measurement of results of operations. The County has the following agency funds: • State Weight Tax Fund • Improvement District No. 17 • Improvement District Revolving Fund • Improvement District Bond and Interest Redemption Fund • Performance and Refundable Deposits Fund • Payroll Clearance Fund • Flexible Spending Account • Lapsed Warrants Fund • Non-Profit License Plates Fund • Organ and Tissue Education Fund Basis of Accounting Basis of accounting refers to the period in which revenues and expenditures (or expenses) are recognized in the accounts and reported in the basic financial statements. Basis of accounting relates to the timing of the measurements made, regardless of the measurement focus applied. The Government-wide Financial Statements and the Proprietary, Fiduciary and Component Unit Fund Financial Statements are presented on an accrual basis of accounting. The Governmental Funds in the Fund Financial Statements are presented on a modified accrual basis. Accrual Basis -Revenues are recognized when earned and expenses are recognized when the related obligation is incurred. Modified Accrual Basis -Revenues are recorded when susceptible to accrual (that is, both measurable and available). "Measurable" means the amounts are determinable. "Available" means the amounts are collectible within the current period or soon enough thereafrer (within 60 days) to be used to pay liabilities of the current period. Licenses and permits, charges for current services, fines and forfeitures, penalties and miscellaneous revenues are recorded as revenues when received in cash because [hey are generally not measurable until actually received. State Revolving Fund loan proceeds are considered available when collected. -47- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 In applying the susceptible to accrual concept to intergovernmental revenues, the legal and contractual requirements of the numerous individual programs are used as guidance. There are essentially two types of these revenues. In one, monies must be expended on the specific purpose or project before any amounts will be paid to the County; therefore, revenues are recognized based upon the expenditures recorded. Most construction grants and many operating grants fall into this category. In the other, moneys are virtually unrestricted as to purpose of expenditure and are usually revocable only for failure to comply with prescribed compliance requirements. These resources are reflected as revenues at the time of receipt or earlier if the susceptible to accrual criteria are met. The County reports deferred revenue in its fund financial statements (see Note 7). Deferred revenues arise when potential revenue does not meet both the "measurable" and "available" criteria for recognition in the curcent period. In subsequent periods, when both revenue recognition criteria are met, the liability for deferred revenue is removed from the combined balance sheet and revenue is recognized. Expenditures are recognized under the modified accrual basis of accounting in the accounting period in which the fund liability is incurred. Exceptions to this general rule include: (a) accumulated compensated absences and claims and judgments which are recognized as expenditures when paid; (b) liabilities related to municipal solid waste landfill closure and pos[closure care costs; and (c) principal and interest on general long-term debt which are recognized as expenditures when due. [n accordance with GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities That Use Proprietary Fund Accounting, the County applies all applicable GASB pronouncements as well as the following pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements; Financial Accounting Standards Board statements and interpretations, Accounting Principles Board opinions, and Accounting Research Bulletins of the Committee on Accounting Procedures. Encumbrances The general, special revenue, and capital projects follow encumbrance accounting under which purchase orders, contracts and other commitments are recorded as a reserve of fund balance and provide authority for the carryover of appropriations to the subsequent year in order to complete these transactions. Encumbrances outstanding at year end are reported as reservations of fund balances and do not constitute expenditures or liabilities because the commitments will be honored during the subsequent year. -48- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 Unexpended Allotments Allotment accounting is employed in the general and capital projects funds to reserve appropriations to complete capital projects that were funded during a given fiscal period. Unexpended allotments represent reserves of capital projects appropriations that are available to complete such projects in future fiscal periods. Cash and Investments Cash and cash equivalents include cash on hand, amounts in demand deposits and short- term investments with a maturity date of three months or less from the date acquired by the County. Investments consist of time certificates of deposit at financial institutions and bank repurchase agreements with original maturities exceeding three months. Included are participating interest-earning investment contracts (repurchase agreements) that have remaining maturities at the time of purchase of one year or less, as well as nonparticipating interest-earning investment contracts (time certificates of deposit and repurchase agreements). Both categories of investments are stated at amortized cost (see Note 3). Investments also consist of equity securities in the fiduciary fund financial statements. These investments are stated at fair value. Real Property Taxes The County's real property taxes are levied July 1 each year on assessed valuation as of January 1. The taxes become a lien on the property assessed as of the levy date. Taxes are due and payable in two equal annual installments on August 20 and February 20. Accordingly, real property taxes receivable as of June 30 are delinquent. Each delinquent installment bears interest at 1 % per month and penalties of up to 10% of the amount due. Assessments are based on 100% of estimated fair market values. Inventories Inventories consist of materials and supplies and are reported as expenditures at the time of purchase (purchase method). Police and fire department inventories are stated using the first in, first out (FIFO) method. Other inventories are stated at average cost. Liquor Control Section 281 of the Hawaii Revised Statutes requires that liquor license revenues collected be used only for costs and expenses directly relating to operational and administrative costs actually incurred by the liquor commission collecting such fees. The unexpended fees at June 30, 2004 of $67G,277 are reflected as a reserve of general fund balance. -49- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 Capital Assets Capital assets, which include property, plant, equipment, and infrastructure assets (e.g., roads, bridges, curbs and gutters, streets and sidewalks, drainage systems, lighting systems, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $1,000 and an estimated useful life in excess of two years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at estimated fair market value at the date of donation. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend the life of the asset are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business- type activities is included as part of the capitalized value of the assets constructed. Capital assets of the primary government is depreciated using the straight line method over the following estimated useful lives of the assets: Assets Years Infrastructure 20 to 100 years Buildings and improvements 50 to ] 00 years Equipment 5 to 40 years Depreciation is recorded in one enterprise fund, the Kulaimano Elderly Housing Project. It is computed using the straight-line method over the following estimated useful lives of the assets: Buildings 50 years Furnishings and equipment 5 to ] 0 years Ground and site improvements 20 to 50 years Long-term Obligations The County reports Tong-term debt of governmental funds at face value on the government- wide statement of net assets. Certain other governmental fund obligations not expected to be financed with current available resources are also reported on the government-wide statement of net assets. Long-term debt and other obligations financed by the proprietary funds are reported as liabilities in those funds. -50- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 Compensated Absences Employees hired on or before July 1, 2001 earn vacation credit at the rate of one and three- quarter working days for each month of service. Employees hired after July 1, 2001 or later, earn vacation credit at a graduated scale depending on their years of service. Up to ninety days of vacation leave credits can be accumulated per employee. In addition, employees who work overtime can elect to take compensatory time off instead of overtime pay. The time off is earned at the rate of one and a half hours for each hour of overtime worked. There is no statutory limit to the amount of compensatory time off an employee can accumulate. Both compensatory time off and vacation credits are converted to pay upon termination of employment. The amounts expected to be liquidated with expendable available resources are accrued in the appropriate funds and the amounts payable from future resources are recorded in the government-wide statement of net assets along with the estimated liability for FICA taxes and employers' retirement contributions on those amounts. All accumulated unpaid vacation and compensatory time off at June 30, 2004 are expected to be liquidated with future expendable resources. In prior years, the following funds have been used to liquidate this liability for compensated absences: General Fund, Highway Fund, Sewer Fund, Solid Waste Fund, Vehicle Disposal Fund, Golf Course Fund and the Housing Agency. Sick leave accumulates without limit. Sick leave can be taken only in the event of illness and is not convertible to pay upon termination of employment. Accumulated sick leave at June 30, 2004 totaled $49,723,000 for the primary government. Leases Leases transferring substantially all of the risks and benefits of ownership are recorded as capital leases; other leases are operating leases (see Note 8). Capital leases are recorded as capital asset additions at their estimated fair market value at the inception of the lease and the related present value of the future minimum lease obligations is recorded as long-term debt. Operating lease expenditures and expenses are recognized when the lease obligation is paid. Retirement Plan Contributions The County's contribution to the Employees' Retirement System of the Stale of Hawaii is based upon an actuarial computation and includes the normal cost plus the level annual payment required to amortize the unfunded actuarial accrued liability over a remaining period of twenty-six years from July 1, 2003. The County's policy is to fund its actuarially determined required contribution annually (see note 13). -51- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 Operating Revenues and Expenses Revenues and expenses are distinguished between operating and nonoperating items for the proprietary funds. Operating revenues generally result from providing services in connection with the proprietary funds' principal ongoing operations. The principal operating revenues of the proprietary funds are fees charged to residents for rent and rental subsidies received from the federal government. Operating expenses include the costs associated with providing housing for tenants, such as utilities, lease rent, and maintenance and repairs; administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting these definitions are reported as nonoperating revenues and expenses. Use of Estimates The preparation of the basic financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues, expenditures, and other financing sources and uses during the reporting period. Actual results could differ from those estimates. 2. STEWARDSHH', COMPLIANCE AND ACCOUNTABILITY Annual Budget The County follows these procedures in establishing its operating and capital budgets: • On or before March 1, the Mayor submits to the County Council proposed operating and capital projects budgets for the fiscal year commencing the following July 1. The operating budget includes proposed expenditures for the general fund and special revenue funds, and the means of financing them. Aproject-length budget is submitted to the County Council for the capital projects fund. • The Mayor submits to the County Council amendments to the proposed operating and capital budgets within ten working days after the close of the state legislature, but not later than May 5. • The County Council conducts public hearings on the proposed operating and capital budgets after March 1 but prior to the first reading on the budget bills, which must be after May 5. • On or before June 30, [he County Council adopts the budgets. The legal level of budgetary control is the department level because the Mayor can transfer funds from -52- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 any unencumbered appropriation to another within a department or agency without Council approval. During the year, the budget may be amended by action of the Council, except for appropriations required by law and appropriations for debt service, which may not be decreased or deleted. Supplemental appropriations were made during the 2003-2004 fiscal year to recognize revenue from sources not anticipated at the time of the original budget and to establish the authorization for such funds to be expended. Such supplemental appropriations totaled $19.6 million in the general fund and $5.1 million in the special revenue funds. • Appropriations for the operating budget lapse at the end of the fiscal year to the extent that they have not been expended or encumbered. Appropriations for capital expenditures that are not encumbered lapse at the end of two fiscal years following the fiscal year that the appropriation was made. • Formal budgetary integration is employed as a management control device during the year for the general fund, special revenue funds, and capital projects fund. Formal budgetary integration is not employed for debt service funds because effective budgetary control is alternatively achieved through general obligation bond indenture provisions. • The accompanying statement of revenues, expenditures and changes in fund balances - budget and actual (budgetary basis) -general fund presents a comparison of the legally adopted budget with actual data on a budgetary basis. Accounting principles applied for purposes of developing data on a budgetary basis differ significantly from those used to present financial statements in conformity with GAAP. On the budgetary basis, intergovernmental revenues are recognized when awarded by the granting agency, encumbrances and unexpended allotments are treated as expenditures, accounts payable are not accrued, and all leases are treated as operating leases. In preparing the financial statements on a GAAP basis, accounts payable are accrued and treated as a reduction of encumbrances for balance sheet presentation. Budget to GAAP Reconciliation The following is a summary of the adjustments necessary to convert fund balances of the County's general fund from a GAAP basis to a budgetary basis at June 30, 2004: Ending fund balance -GAAP basis $19,723,208 Encumbrance adjustments: Beginning encumbrances and unexpended allotments 2,980,286 Ending encumbrances and unexpended allotments (3,890,862) Other adjustments 1.262,928 Ending fund balance -Non-GAAP budgetary basis $20.075 560 -53- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 3. CASH AND INVESTMENTS Bank time certificates of deposit (TCDs), repurchase agreements (repos) and money market funds with original maturities of three months or less are considered cash and cash equivalents for purposes of balance sheet classification, while TCDs, repos and money market funds with original maturities exceeding three months are considered investments. However, for purposes of the disclosures required by GASB Statement No. 3, Deposits with Financial Institutions, Investments (including Repurchase Agreements), and Reverse Repurchase Agreements, (GASB Statement No. 3) all bank TCDs are considered deposits and all repos and money market funds are considered investments. Cash and cash equivalents of $110,023,024 and investments of $15,919,312 are included in the accompanying government-wide financial statements at June 30, 2004. The fiduciary funds financial statements include cash and cash equivalents of $6,234,446 and investments in equity securities of $996,725 (which approximates fair value) at June 30, 2004. The following table summarizes cash and cash equivalents and investments according to statement of net assets captions, and indicates how these amounts are distributed between deposits and investments for GASB StatementNo. 3 disclosure purposes. GASB Statement No. 3 Statement of net assets cannon: Total De osits Investments Cash and cash equivalents $114,733,469 $6],891,404 $52,842,065 Imprest and change funds 23.945 Total unrestricted cash and cash equivalents 114,757,414 Restricted assets: Cash and cash equivalents -current 1,304,064 1,304,064 Cash and cash equivalents-noncurtent 195.992 195,992 "total cash and cash equivalents 116,257,470 Investments-current 13,165,784 10.097,299 3,068,485 Investments -noncurrent 2.753.528 2.753 528 Total cash, cash equivalents and investments 132,176,782 Less imprest and change funds (23.945) Classifications per GASB Statement No. 3 $132.152.837 $73 488.759 58.664.07 Government- Fiduciary Funds Statement of net assets cao[ion~ Total Wide Statements Statements Cash and cash equivalents $114,733,469 $109,136,023 $5,597,446 Imprest and change funds 23.945 23,945 Total unrestricted cash and cash equivalents 114,757,414 109,159,968 5,597,446 Restricted assets: Cash and cash equivalents-current 1,304,064 667,064 637,000 Cash and cash equivalents- noncurent 195.992 195.992 Total cash and cash equivalents 116,257,470 110,023,024 6,234,446 Investments-current 14,162,509 13,165,784 996,725 Investments-noncurrent 2.753.528 2.753.528 'total cash, cash equivalents and investments 133,173,507 125,942,336 7,231,171 Less: Equity securities (996,725) (996,725) Imprest and change funds (23.9451 (23.945) Classifications per basic financial statements ] 1 R37 $125.918.391 $ -54- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 The County maintains a cash and investment pool that is used by the general fund, all special revenue funds except the Housing Agency and Park Dedication Fund, the capital projects fund, the payroll clearance fund, and three other agency funds. The following summarizes this pool at June 30, 2004: General fund $ 13,857,909 Special revenue funds 21,149,494 Capital projects fund 67,910,028 Fiduciary funds 973.964 Total pooled cash and investments $103.891.395 Interest earned is credited to the general fund unless otherwise designated by statute. Deposits At June 30, 2004, the carrying amount of the County's deposits was $73,488,759 (including $1.500,056 reported in restricted assets) and the bank balance was $81,008,914. Of the bank balance, $200,000 was covered by federal depository insurance; $80,674,793 was covered by collateral held by the County's agent in the County's name, in accordance with State statutes; and $134,121 held by a management agent was uncollateralized. Investments The Hawaii Revised Statutes authorize the County to invest in obligations of the U.S. Treasury, agencies and instrumentalities, time certificates of deposit, bank repurchase agreements and bonds of any improvement district of any county of the State, provided the investments are due to mature not more than three years from the date of investment. Investments are classified into three categories of custodial credit risk: (1) insured or registered, or securities held by the County or its agent in the County's name; or (2) uninsured and unregistered, with securities held by the counterparty's trust department or agent in the County's name; or (3) uninsured and unregistered, with securities held by the counterparty in the County's name, or by the counterparty's trust department or agent but not in the County's name. At June 30, 2004, investments reported as $58,664,078 (which approximates fair value) held for the County at banks and trust companies were classified as category 1. These investments are comprised of bank repurchase agreements and money market funds. A repurchase agreement is an agreement in which a governmental entity transfers cash to a broker-dealer or financial institution; the broker-dealer or the financial institution transfers securities [o the entity and promises to repay the cash plus interest in exchange for the same securities. -55- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 Restricted Cash and Cash Equivalents and Investments Cash and cash equivalents and investments classified as restricted assets amounted to $1,500,056 at June 30, 2004 consist of the following: The County entered into a capital lease to purchase a new financial accounting computer system. Upon execution of the lease documents, the leasing company deposited into an escrow account in the County's name the full lease proceeds. As progress billings are received for the new system, the County will authorize withdrawals from this escrow account to pay the bills. The balance in this account at June 30, 2004 was $639,456. Tenant security deposits received by the County for the Kulaimano Elderly Housing Project and the Ouli Ekahi Affordable Housing Project are recorded as restricted assets. Such funds amounted to $8,683 and $18,925, respectively, at June 30, 2004. Restricted amounts set aside by the Kulaimano Elderly Housing Project under its loan agreement with the Farmers Home Administration totaled $181,418 at June 30, 2004. This amount is restricted for debt service, or for other purposes with prior approval from the Farmers Home Administration. An operating reserve fund was established by the Ouli Ekahi Affordable Housing Project pursuant to an agreement with the developer of the project. This restricted reserve amounted to $14,574 at June 30, 2004. The Improvement District No. 17 Fund has restricted $637,000 as a bond reserve at June 30, 2004 to comply with the requirements of its Kaloko Subdivision bond issuance. -56- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 4. RECEIVABLES Receivables as of June 3Q 2004, for the County's individual major funds and nonmajor funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: Governmental activities: Capital Nonmajor General Projects Governmental Fund Fund Funds Total Receivables: Real property taxes $7,801,885 $ $ $ 7,801,885 Accounts receivable: Sewer 2,763,414 2,763,414 Solid waste 1,486,318 ],486,318 Capital Projects 2,321,350 2,321,350 Intergovernmental 4,816.023 9.059.181 832.856 14.708,060 Gross receivables 12,617,908 11,380,531 5,082,588 29,081,027 Less: allowance for uncollectibles 1459677 (1,459,6771 Net total receivables $12.612908 1 1380 531 3.622.911 27.621350 Business-type activities: Enterprise Funds Receivables: Accounts receivable: Rent $47,934 Other 2.728 Gross receivables 50,662 Less: allowance for uncollectibles Net total receivables -57- COUNTY OF HAWAII Notes to the Basic Financial Statements June 3Q 2004 5. INTERFUND RECEIVABLES AND PAYABLES Interfund receivables and payables consist of the following at June 30, 2004: Receivable Fund Payable Fund Amount General fund Capital projects fund $ 91,644 Other governmental funds 1,569,634 1.661,278 Capital projects fund General 71,g2g Other governmental funds General 273,069 Capital projects fund 309,550 Other governmental funds 53,41 1 636,030 Total $69.136 Other governmental funds Enterprise funds ZO The above Interfund balances result from the time ]ag between the dates that Interfund goods and services are provided or reimbursable expenditures occur, transactions are recorded, and payment between funds are made. Transfers for the fiscal year ended June 30, 2004 consisted of the following: Transfers out: Capital Nonmajor General Projects Governmental Fund Fund Funds Total Transfers in: Capital projects fund $ 5,159,249 $ $3,385,458 $ 8,544,707 Non major governmental funds 30,895,105 30,895,105 $36.054.354 $ $3-385.458 $39.439.812 The Interfund transfers noted above include transfers from the general fund to provide support for various County programs and to provide resources for the payment of debt services. In addition, some of the nonmajor governmental funds have made transfers to the capital projects fund for the construction of various projects. -58- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 6. CAPITAL ASSETS Capital asset activity for the year ended June 30, 2004 for the County was as follows: Balance Balance June 30, June 30, 2003 Additions Retirements 2004 Governmental activities: Capital assets not being depreciated: Land $ 19,311,280 $ 299,184 $ $ 19,6]0,464 Construction in progress 64.527,953 13.948,754 (18,274,2091 60.202.498 Total capital assets not being depreciated 83.839.233 14.247.938 ]18,274,2091 79.812,962 Capital assets being depreciated: Buildings and improvements 257,299,823 8,861,349 (8,758,621) 257,402,551 Machinery and equipment 6I,37Q,016 5,983,056 (2,085,279) 65,267,793 Infrastructure 220,127,673 ]3,192.085 233.319,758 Total capital assets being depreciated 538.797.512 28,036.490 (10.843 900) 555,990.102 Less accumulated depreciation for: Buildings and improvements (41,081,482) (3,489,919) 5,911,603 (38,659,798) Machinery and equipment (35,833,1]1) (4,359,403) 1,459,896 (38,732,618) Infrastrucmre (73,359.8371 (9,309.2851 (82,669 122) Total accumulated depreciation Q50.274.4301 (17,158.6071 7.371,499 X160,061.538) Total capital assets, being depreciated, net 388,523 082 10.877,883 (3.472.401) 395.928.564 Governmental activities capital assets, net 47 .362 3 (5 $25.125.821 $21.746.6101 $47~ 741 526 -59- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 Balance Balance June 3Q June 3Q 2003 Additions Retirements 2004 Business-type activities: Capital assets not being depreciated: Land 753 877 $ $ $ 753,877 Capital assets being depreciated: Buildings 1,136,008 1,136,008 Ground and site improvements 261,000 261,000 Furnishings and equipment 89 385 5,735 4 496 90 624 Total capital assets being depreciated 1,486,393 5.735 4 496 1,487.632 Less accumulated depreciation for: Buildings (584,745) (24,614) (609,359) Ground and site improvements (159,630) (3,754) (163,384) Furnishings and equipment 77 368 5 535 4,496 (78,407) Total accumulated depreciation (821.743) 3( 3,903) 4,496 (851.150) Total capital assets, being depreciated, net 664,650 2_ { 8.168) 636,482 Business-type activities capital assets, net 1.418.527 ($2_ 8 $ _Q ~S~Q -60- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities: General government $ 1,424,873 Public safety 1,538,261 Highways and streets 10,142,262 Sanitation 2,880,958 Health, education and welfare 173,537 Culture and recreation 998,716 Total depreciation expense -governmental activities 17.158.607 Business-type activities: Kulaimano Elderly Housing Projec[ 33 903 Total depreciation expense -business-Type activities 7. DEFERRED REVENUE Deferred revenue consists of the following at June 30, 2004: Capital Other Total General Projects Governmental Governmental Enterprise Fund Fund Funds Funds Funds Real property taxes $8,000,763 $ $ $ 8,000,763 $ Liquor control revenue 174,600 174,600 Sewer revenue 1,741,359 1,741,359 Solid waste revenue 1,048,697 1,048,697 Intergovernmental 1,487,223 2,991,158 4,478,381 Unearned rental income 2,548 Tota] presented in fund financial statements 9,662,586 2,99],158 2,790,056 15,443,800 2,548 Less adjustments for accrual of revenues (7,801.886) (2,790,OS6) S10,S91.942) Total government- wide financial statements 1.860.700 2.991.158 $ $ 4.SS1.858 $ -61- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 8. LEASES The County leases machinery and equipment under noncancellable leases expiring at various dates through November 2009 which meet the criteria for capitalization. These capital leases are financed from general fund resources. The estimated value of the leased machinery and equipment at the inception of the capital leases and accumulated depreciation, amounting to $6,925,917 and $2,112,838, respectively, and the related present value of the remaining obligations under the capital leases amounting to $3,547,085 at June 30, 2004 are included in capital assets and long-term debt, respectively. The County also leases land, office facilities and other equipment under noncancellable operating leases expiring through July 2020. Expenditures for such operating leases were $491,709 for the fiscal year ended June 30, 2004. The future minimum obligations under capital and operating leases at June 30, 2004 are as follows: Governmental Activities - Capital Operating Leases Leases Year Ending June 30: 2005 $1,314,732 $611,558 2006 939,470 208,796 2007 760,623 108,457 2008 633,296 51,405 2009 134,540 361 2010 - 2014 24,053 1,804 2015 - 2019 1,800 2020 360 Total minimum lease payments 3,806,715 4 4 Less amount representing interest (259.630) Obligations under capital leases $3.547.085 9. SOLID WASTE LANDFILL CLOSURE AND POSTCLOSURE CARE COSTS Hilo Landfill The County owns and operates a landfill located in the city of Hilo. State and federal laws require the County to place covers on certain landfill sites and to monitor and maintain the sites for thirty years after the facility is closed. Although the closure and -62- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 postclosure care costs will be paid near and afrer the date that the landfill stops accepting waste, the County recognizes a portion of the closure and postclosure care costs in each operating period. The liability for these costs is included in the government-wide statement of net assets. The amount recognized each year is based on the landfill capacity used as of the balance sheet date. At June 30, 2004, the County recognized a liability of $12,878,000, based on the use of 94% of the estimated capacity of the landfill. During the fiscal year ended June 30, 2004, $45,000 was spent on closure of the landfill. The remaining $867,666 in estimated cost of closure and postclosure care will be recognized as the remaining estimated capacity is used. These amounts are based on what it would cost to perform the required closure and postclosure care in 2004. Actual costs at that time may be higher due [o inflation, changes in technology, or changes in regulations. The County's permit to operate the landfill expired October 9, 1998. The County filed for an extension which was approved by the state until permitted capacity is reached. In accordance with state statute, the County is allowed to continue operations provided that the County acts consistently with the permit previously granted and the extension application, plans, specifications and all other information contained therein. Kealakehe In October 1993, the County closed its Kealakehe landfill in Kona. Under state and federal requirements, the County would have to monitor and maintain this site for ten years from the closure date. However, the County anticipates monitoring and maintaining the site for thirty years because there is presently a subterranean fire which requires active management. The estimated cost of closure and postclosure is $15,250,000, based on what it would cost to perform the required closure and postclosure care in 2004. Actual costs may be higher due to inflation, changes in technology, or changes in regulations. Through June 30, 2004, $6,612,705 was spent on closure and postclosure care of the landfill. The remaining estimated liability of $8,637,000 is included in the government-wide statement of net assets. During the year ended June 30, 2004, a total of $105,320 was spent on this landfill. This amount was for the management of the subtertanean fire. The County is providing financial assurance for postclosure care and remediation through self insurance as explained below. Pu'uanahulu In May 1993, the County contracted with a private company to construct and operate a new landfill on County land at Pu'uanahulu in West Hawaii. The present contract calls for County employees to perform the daily operations of the landfill, and for the private company to retain the overall management as well as perform all construction work on the landfill cells. Under the terms of the contract, the County has no responsibility for remediation, closure or postclosure care. Accordingly, no liability for this landfill is included in the County's financial statements. Financial Assurance For fiscal year 2004, the County has provided for financial resources that will be available to provide for closure, postclosure care and remediation or containment of environmental hazards at the above landfills. The Environmental Protection -63- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 Agency's financial assurance rules include a local government financial test consisting of a financial component, a public notice component, and a recordkeeping component. Local goverments are required to satisfy each of the three components to pass the annual test. Management believes that the County has satisfied each of the components of the local government financial assurance requirements. 10. LONG-TERM DEBT General Obligation Bonds The County issues general obligation bonds to provide funds for the acquisition and construction of major capital facilities. These bonds have been issued by the County for both primary govemment and component unit activities (see Note 14). The following is a summary of general obligation bond transactions reported in the govemment-wide statement of net assets for the County for the fiscal year ended June 30, 2004: Bonds Issue Bond Balance Bond Balance Due within Authorized Amount June 30. 2003 Issues Retirements June 30.2004 one vear 1977 Series A $ 500,000 $ 222,000 $ $ 20,000 $ 202,000 $ 21,000 1993 Ref & PI 86,770,000 47,205,000 3,680,000 43,525,000 3,870,000 1996 Series A 30.000,000 24,025,000 1,375,000 22,650,000 1,440,000 1996 Series B 787,500 586,000 586,000 1997 Senes A 4,000,000 3,169,000 163,000 3,006,000 171,000 1999 Series A 30,000,000 28,875,000 1,175,000 27,700,000 1,240,000 1999 Refunding 18,940,000 10,140,000 2,365,000 7,775,000 2,475,000 2001 Series A 23,000,000 15,000,000 15,000,000 Stq,348 2001 Series A PI 1,800,000 75,000 1,725,000 59,700 1,740,300 62,600 2003 Series A 36.310 000 36 310 000 36310.000 $232 107 500 $165.607 000 $1 Z. 2.40 Q Q $157.908 300 $9 $ General obligation bonds payable reported on the govemment-wide statement of net assets at June 30, 2004 are comprised of the following individual issues: Public improvement and/or refunding bonds: 1977 Series A at 5.0%, due through 2012 $ 202,000 1993 Refunding & PI at 5.3% to 5.6%, due through 2013 43,525,000 1996 Series A at 4.5% to 5.2%, due through 2016 22,650,000 1997 Series A at 4.875%, due through 20 ] 7 3,006,000 1999 Series A at 4.7% to 6.0%, due through 2019 27,700,000 1999 Refunding at 4.7% to 4.875%, due through 2007 7,775,000 2001 Series A at 4.0% to 5.5%, due through 2021 15,000,000 2001 Series A Public Impr at 4.875%, due through 2021 1,740,300 2003 Series A at 2.0% to 5.125%, due through 2024 36,310,000 Total general obligation bonds payable $157.908.300 -64- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 Annual debt service requirements to maturity for the above general obligation bonds are as follows: Governmental Activities Fiscal year ending June 30: Principal Interest 2005 $ 9,833,948 $ 7,985,204 2006 10,326,013 7,505,613 2007 12,266,539 6,966,810 2008 10,017,526 6,376,847 2009 10,509,352 5,883,409 2010 - 2014 54,761,526 20,773,639 2015 - 2019 33,032,518 8,839,972 2020-2024 17,160,878 2,031.726 Total $157.908.300 $66.363.220 Bonds Authorized and Unissued The County Council has authorized the issuance of $40 million in general obligation bonds to finance specified capital improvement projects. At June 30, 2004, these authorized bonds were not yet issued. Of the $40 million authorized, $30 million was issued in August 2004. Subsequent Evenls On August 17, 2004, the County issued $30,000,000 in general obligation bonds (2004 Series A), $19,545,000 in general obligation refunding bonds (2004 Series B) and $5,475,000 in general obligation public improvement refunding bonds (2004 Series C). The interest rates on the 2004 Series A range from 3.00% to 5.25%, on the 2004 Series B from 3.50% to 5.00% and the 2004 Series C from 2.00% to 3.70%. The 2004 Series B bonds were used to refund the 1996 A bonds. The 2004 Series C bonds were used to refund all outstanding public improvement bonds. On October 4, 2004, the County issued $2,776,400 a[ 4.75% in public improvement general obligation bonds (2004 PI Series A), $920,000 at 4.375% in public improvement general obligation bonds (2004 P[ Series B) and $191,093 at 3.00% in public improvement general obligation bonds (2004 PI Series C). These public improvement bonds were issued to construct water lines for improvement district 18. The payments on these bonds will be reimbursed to the County by the participants in the improvement district. These bonds were authorized in August 2004. On October 20, 2004, the County issued $259,200 at 4.5% in public improvement general obligation bonds (2004 PI Series D) to support the building of a water system by the Department of Water Supply. These bonds were authorized in July 2002 and [he County will be fully reimbursed by the County's Component Unit, the Department of Water Supply, for all payments. -65- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 The 2004 PI Series A, B and D were all issued to the United States Department of Agriculture under its Federal Consolidated Farm and Rural Development Act loan program. The 2004 PI Series C was issued to the County's Component Unit, the Department of Water Supply. State Revolving Fund Loans The County has obtained loans to assist in financing mandated wastewater projects from the State Water Pollution Control Revolving Fund (SRF). The purpose of this revolving fund is to provide low-interest, Tong-term loans and other financial assistance to the four counties in the state to finance construction of wastewater projects. The County has fourteen projects approved for funding with these loans. The schedule below shows the County's SRF transactions for the fiscal year ended June 30, 2004: Loans Approved Loan Balance Loan Balance Due within Authorized Amount June 30 2003 Additions Retirements June 30.2004 one vear Hilo WWTP $12,724,311 $ 7,229,463 $ 645,293) $ 6,584,170 $ 661,425 Waiakea Mill 1,300.000 799,704 (64,061) 735,643 65,663 Waiakea HSlts 459,321 262,033 (23,389) 238,644 23,973 Waiakea Hsltr ll 5,024,266 4,418,460 (225,829) 4,192,631 231,730 Ainako A&B 2,239,174 1,417,864 (110,446) !,307,418 112,733 K°lanianaole 1,499,944 1,072,761 (71,919) 1,000,842 74,108 Alii Drive A&B 3,210,243 2,030,249 (158,615) 1,871,634 164,599 Ahi Drive C&D 3,780,000 2,594,913 (184,107) 2.410,806 187,919 Alii Drive E&F 2,112,654 1,604,888 (102,362) 1,502,526 105,476 Waiahe Bay 3,697,893 2,594,313 (176,180) 2,418,133 181,112 Kealakehe 1,300,071 798,247 (63,944) 734,303 65,54.3 Holualoa Bay 3,080,000 2,343,051 (142,921) 2,200,130 147,270 Paukaa CCS 2,143,448 1,854,502 (96,384) 1,758,118 98,857 Pahoehoe 2.817 760 2.659.847 (117.472) 2.542 375 120.539 $45 389 085 $31 680 295 $ ($2.182 9221 29.497 7 g2 2g0.9g7 The loans bear interest at 2.06% to 3.02%, exclusive of a 1.00% loan fee, and require payments through fiscal year 2021. Debt service to maturity for disbursements to date on these projects are as follows: Governmental Activities Fiscal year ending June 30: Principal Interest 2005 $ 2,240,947 $1,037,901 2006 2,298,779 975,528 2007 2,358,175 911,476 2008 2,419,075 845,800 2009 2,481,702 778,274 2010-2014 12,551,296 2,733,778 2015-2019 4,786,788 585,130 2020 - 2021 360,61 1 16,368 Total $29-497-373 7.884-255 -66- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 Other General Long-term Obligations The following is a summary of other general long-term obligations transactions for the fiscal year ended June 30, 2004: Balance Deductions Balance Due within June 30. 2003 Additions & Payments June 30. 2004 one near Governmental activities: Compensated absences $19,718,886 $ 8,322,010 7,098,608) $20,942,288 $ 5,424,724 Claims and judgments (see Note 12) 18,573,331 7,554,522 (6,098,853) 20,029,000 4,113,516 Capital lease obligations (see Note 8) 3,293,462 1,473,528 (1,219,905) 3,547,085 1,195,249 Landfill closure costs (see Note 9) 22,276,000 (761,000) 21,515,000 148.272 Total $63.861.679 $17350.060 ($15.178.3661 $66033.373 $JSI.$8 Fund Balances -Debt Service Funds The fund balance in the debt service funds at June 30, 2004 includes $13,628,408 which is available for principal payments on general obligation bonds and $41,122 which is reserved for the payment of interest on the bonds. Enterprise Fund Notes Payable The Kulaimano Elderly Housing Project is indebted to the U.S. Department of Agriculture, Farmers Home Administration on two notes payable with balances aggregating $1,065,417 at June 30, 2004. The notes, which mature in September 2029, are repayable in monthly installments of $7,826 including interest and are collateralized by substantially all of the project's property and equipment. Although the stated annual rate of interest on the notes is 9%, such rate is reduced to 7% for as long as the Project has a U.S. Department of Housing and Urban Development Section 8 Housing Assistance Payment contract in effect for all or part of the units within the Project. The following is a summary of enterprise fund notes payable transactions for the fiscal year ended June 30, 2004: Balance at June 30, 2003 $1,084,667 Deductions (19,2501 Balance at June 30, 2004 1,065,417 Less current portion (19,965) Note payable, net of current portion 1.0$ 45.45 -67- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 The following is a summary of the annual maturities for the enterprise fund notes payable: Business-type Activities Fiscal year ending June 30: principal Interest 2005 $ 19,965 $ 73,947 2006 21,409 - 72.503 2007 22,956 70,956 2008 24,616 69,296 2009 26,395 67,517 2010 - 2014 163,510 306,050 2015 - 2019 231,796 237,764 2020 - 2024 328,600 140,960 2025 - 2027 226.170 22.245 Total 1061 Special Assessment Bonds The County has outstanding special assessment bonds for one improvement district. In 1991, the County issued $14 million of special assessment bonds for Improvement District No. 17, Kaloko Subdivision, to finance a roadway and water system. In 2001, the County refunded the remaining bonds outstanding of $6,370,000. The bonds mature annually through 2011 and bear interest at 7.375%. Total special assessment bonds payable were $5,610,000 at June 30, 2004. These are not general obligation bonds and the County is not obligated in any manner for the repayment of these bonds. The bonds are secured by a first lien on the land benefited by the improvements, and are to be repaid from the annual assessments levied against the owners of the land. The County acts as an agent for the property owners within the improvement districts to collect assessments receivable, forward payments to bond-paying agents at appropriate dates and, if required, administer foreclosure proceedings. Accordingly, these bonds are not reflected on the County's government-wide statement of net assets. The following is a summary of special assessment bond transactions for Improvement District No. 17, Kaloko Subdivision, for the fiscal year ended June 30, 2004: Balance at June 30, 2003 $6,115,000 Deductions (505.000) Balance at June 30, 2004 $5.610_000 -68- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 The following is a summary of the annual maturities for the special assessment bonds: Year ending June 30: Principal Interest 2005 $ 540,000 $ 413,738 2006 580,000 373,912 2007 620,000 331,138 2008 670,000 285,412 2009 715,000 236,000 2010-2012 2,485,000 375,387 Tota( 5.610.000 $2.015.587 11. COMMITMENTS AND CONTINGENCIES Contractual commitments - Contractual commitments for capital projects, expenses, and supplies at June 30, 2004, except in the enterprise funds, aze reflected in the balance sheets as fund balance reserved for encumbrances. Contractual commitments for the enterprise funds were immaterial. Intergovernmental revenues - The County has received federal and state grants for specific purposes that are subject to review and audit by grantor agencies. Such audits could lead to requests for reimbursement to the grantor agency for expenditures disallowed under terms of the grant. In the opinion of management of the County, disallowed costs, if any, would not be material. Claims - Numerous claims and lawsuits have been filed against the County in the normal course of its operations. A liability for probable losses is included on the government-wide statement of net assets (see No[e 12). Although the outcome of the various claims and lawsuits is not presently determinable, in the opinion of the County's attorneys, the resolution of such matters will not have a material adverse affect on the financial condition of the County. ADA compliance -The County has entered into two stipulated agreements approved by the federal court to implement provisions of the Americans with Disabilities Act. With respect to the first stipulated agreement relating to curb cuts, the County, with the help of a consultant, surveyed 669 intersections, then ranked them in order of priority. A transition plan, along with a funding commitment, was approved by the County Council. The total cost of all curb cuts was estimated to be $6.2 million. The cost of the first phase of the plan was $3 million, to be used in high priority areas such as government facilities, schools, and hospitals. The remaining cost will cover curb cuts at parks and in low-density single family residential areas. All corcective action was to be completed by July 2005, with an estimated 682 ramps to be completed. Funding allocated so far for this effort is $4.4 million. Since -69- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 the proposed timetable proved to be too ambitious, the parties amended the agreement to require contracting by July 2005, rather than completion by that date. The second stipulated agreement relates to the Department of Parks and Recreation (the Parks Department). The agreement required the Parks Department to establish practices, policies and procedures regarding its programs, and prepare a transition plan by the middle of the year 2000. The self-evaluation and transition plan for programs, practices and procedures has been completed and approved by the County Council. The cost impact of implementation is not material because the necessary modifications are primarily procedural. This is an ongoing effort. The second part of this stipulated agreement is the reevaluation of all County facilities, which was completed and accepted by the County Council on June 30, 2000. Approximately 240 County facilities were surveyed as part of this effort. The tentative completion date of all necessary repairs and renovations is 12 years from the date the County Council accepted the self-evaluation. The original estimated cost of the facilities repairs was $14.8 million, which will be spent over the 12 year period. Funding allocated so far for facilities repairs is $7.2 million, with another $4 million of federal funding anticipated through community development block grants over the next 4 years. 12. RISK MANAGEMENT The County is exposed to various risks of losses related to torts; thefr of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The County maintains fire and commercial multiple peril insurance on County facilities, flood insurance on selected structures, medical malpractice insurance for emergency medical technicians, general liability insurance for water safety officers, aviation liability for helicopter operations, automobile coverage on transit buses, and no-fault insurance coverage for privately owned police vehicles. There was no reduction in insurance coverage during the year from coverage in the prior year. During the past three fiscal years, the amount of settlements in cases covered by insurance have not exceeded the insurance coverage. The County is substantially self-insured for its vehicles as well as for all other perils including workers' compensation and general liability. Liabilities are reported when it is probable that a loss has occurred and the amount of that loss can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported (IBNR). Claim liabilities, including 1BNR, are based on the estimated ultimate cost of settling the claims, and include incremental costs for the hiring of special counsel and expert witnesses. Claims liabilities are estimated by a case-by-case review of all claims and the application of historical experience to outstanding claims. Estimates of IBNR are based on historical experience. The liability for claims and judgments is reported on the government-wide statement of net assets. At June 30, 2004, the amount of this liability was $20,029,000. This is the County's best estimate based on -70- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 available information. Changes in the reported liability since June 30, 2002 are given below. General Workers' Total Liabili Compensation Liabili Balance at June 30, 2002 $6,701,676 $12,009,876 $18,711,552 Incurred claims (including IBNR)* 1,204,921 3,56Q41 l 4,765,332 Claim payments (1,236,0861 (3,667,467) (4,903,SS3) Balance at June 30, 2003 $6,670,511 $11,902,820 $18,573,331 Incurred claims (including IBNR)* 2,759,512 4,795,010 7,554,522 Claim payments (2,591,639) (3,507,214) (6,098,853) Balance at June 30, 2004 6.838_,._$4 $13.190.616 21.029.004 *Net of new claims liability and old claims resolved at less than previous estimate. 13. EMPLOYEE BENEFIT PLANS Pension Plan Plan description All full-time employees of the County participate in the Employees' Retirement System of the State of Hawaii (System), acost-sharing multiple-employer defined benefit pension plan. The System was established by Chapter 88 of the Hawaii Revised Statutes (HRS) and is governed by a Board of Trustees. All contributions, benefits and eligibility requirements are established by Chapter 88, HRS, and can be amended by legislative action. The System regards the County, including its component unit, as one employer. Therefore, separate information for [he primary government and its component unit is not available. All information given below on the pension plan is for the reporting entity as a whole, including both the primary government and its component unit. All of the County's full-time employees are eligible to participate in the System. The System consists of a contributory retirement plan and a noncontributory retirement plan. Eligible employees, in service and a member of the existing contributory plan on June 30, 1984, were given an option to remain in the existing plan orjoin the noncontributory plan, effective January 1, 1985. All new eligible employees hired after June 30, 1984 generally become members of the noncontributory plan. Both plans provide death and disability benefits and a cost of living adjustment. In the contributory plan, employees generally may elect normal retirement at age 55 with 5 or 10 years of credited service or elect early retirement at any age with 25 years of credited service. Such employees are generally entitled to retirement benefits, payable monthly for life, of 2% or 2'/z % of their average final salary, as defined, for each year of credited service with certain limitations. Benefits fully vest on reaching five years of service; retirement benefits are -71- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 reduced for early retirement. In the noncontributory plan, employees may elect normal retirement at age 62 with 10 years of credited service or at age 55 with 30 years of credited service, or elect early retirement at age 55 with 20 years of credited service. Such employees are entitled to retirement benefits, payable monthly For life, of ] .25% of their average final salary, as defined, for each year of credited service. Benefits fully vest on reaching ten years of service; retirement benefits are reduced for early retirement. The System issues a Comprehensive Annual Financial Report that may be obtained by writing to the Employees' Retirement System of the State of Hawaii, 201 Merchant Street, Suite 1400, Honolulu, Hawaii 96813. Funding policy All funding requirements are established by Chapter 88, HRS, and can be amended by the state legislature. Covered contributory plan employees are required to contribute 7.8% or 12.2% of their salary to the plan; the County is required to contribute the remaining amounts necessary to pay contributory plan benefits when due. The County is also required to contribute all amounts necessary to pay noncontributory benefits when due. The County's contribution requirements are actuarially determined based on actuarial assumptions established by Chapter 88, HRS. The County's contributions to the System for the fiscal years ended June 30, 2002, 2003 and 2004 were $7,434,500, $4,212,000 and $7,394,683, respectively, equal to the required contributions for each year. Post-Retirement Benefits In addition to providing the pension benefits described above, the County is required by state statute to contribute to the Hawaii Public Employees Health Fund (Health Fund), a statewide program which provides health and group life insurance for all retired and active County employees, their dependents and their beneficiaries. The state and other counties also participate in the fund. For employees hired prior to July I, 1996 who retire with at least ten years of credited service, the County is required to pay 100% of the premiums of the medical, adult dental, prescription drug, vision, and group life insurance plans elected by the retiree. For employees hired prior to July 1, 1996 who retire with less than ten years of credited service, the County is required to pay half of the monthly premium cost of the above plans. For employees hired July 1, 1996 or after, the amount of the premium cost the County is required to pay varies depending on the employee's years of service at the time of retirement. Currently, the County has 1,055 former employees who have retired with at least ten years of credited service and are receiving the full benefit. One additional employee has retired with less than ten years of service and has half of his medical premiums paid by the County. For each retiree and retiree's spouse eligible for Medicare, the County also pays $66.60 per month as reimbursement of their Medicare premiums. _72_ COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 The County's contribution is recorded as an expenditure when paid. The amount of the contribution is limited by state statute to the actual cost of benefit coverage. During the fiscal yeaz ended June 30, 2004, the County's contribution to the Health Fund for retired employees totaled $6.3 million. Deferred Compensation Plan County employees are permitted to participate in a deferred compensation plan of the State of Hawaii, adopted pursuant to Internal Revenue Code (IRC) section 457. The plan permits eligible employees to defer a portion of their salary until future years by contributing to a fund managed by a plan administrator. The deferred compensation amounts aze not available to employees until termination, retirement, death, or unforeseeable emergency. All plan assets are held in a trust fund to protect them from claims of general creditors and from diversion to any uses other than paying benefits to participants and beneficiaries. The County has no responsibility for loss due to the investment or failure of investment of funds and assets in the plans, but does have the duty of due care that would be required of an ordinary prudent investor. Therefore, in accordance with GASB Statement No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, deferred compensation plan assets are not reported in the accompanying basic financial statements. 14. COMPONENT UNIT DISCLOSURES Cash and Investments For purposes of the financial statements, the Department of Water Supply (the Department) considers all highly liquid investments with original maturities of three months or less to be cash equivalents. However, for the required GASB Statement No. 3 disclosures, all bank TCDs are considered deposits, while all money market funds are considered investments. The amount of $9,627,440 shown on the government-wide statement of net assets as cash and cash equivalents consists of the balance in checking accounts of $1,580,985, money market funds of $973,259 and time certificates of deposits of $7,073,]96. Deposits and Investments At June 30, 2004, the carrying amount of the Department's deposits was $41,808,718 and the bank balance was $42,636,753. The entire bank balance was covered by collateral held by the County's agent in the County's name in accordance with state statutes. At June 30, 2004, money market funds of $973,259 (which approximates fair value) held for the Department by the County at a trust company were insured or registered, or were collateralized by securities held by the County or its agent in the County's name. The deposits and investments include cash received by the Department that is refundable or restricted as to use, and is recorded as a restricted asset. Such funds amounted to $I 1,005,836 at June 30, 2004. - 73 - COUNTY OF HAWAII Notes to the Basic Financial Statements June 3Q 2004 At June 30, 2004, investments reported as $33,154,537 (which approximates fair value) held for the County at banks and trust companies were classified as category 1. These investments are comprised of bank repurchase agreements and money market funds. A repurchase agreement is an agreement in which a governmental entity transfers cash to a broker-dealer or financial institution; the broker-dealer or the financial institution transfers securities to the entity and promises to repay the cash plus interest in exchange for the same securities. Loans Receivable At June 30, 2004, loans receivable from various community associations for water system improvements were as follows: Paauilo Camp Community Association $300,000 Paauhau Village Community Association 303,129 Ookala Community Association 106,504 Total $709.633 Capital Assets The Department began operations as of January 1, 1950. At that date, the utility plant in service was transferred to the Department from the County at the cost of the utility plant assets acquired by the County for its water system from January 1, 1924 to December 31, 1949, less accumulated depreciation. Acquisitions prior to 1924 and acquisitions by gifr or grant prior to 1950 are not included in utility plant. Additions to utility plant since January 1, 1950 are stated at original cost and include contributions by governmental agencies, private subdividers and customers at their cost or estimated cost. Construction costs include amounts for contract work, engineering supervision and other direct and indirect costs. Construction period interest is capitalized on utility plan constructed with tax-exempt debt. Depreciation on the Department utility plant assets in service is computed using the straight- line method over the estimated useful lives of the assets as follows: Structures and improvements 40 to 50 years Machinery and equipment 5 to 20 years Water systems 10 to 40 years 74 COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 The capital assets of the Department at June 30, 2004 were as follows: Utility plant in service $259,220,175 Less: accumulated depreciation (114,605.6731 144,614,502 Land and rights 787,657 Construction in progress 30,310,981 Net capital assets $175 7 14 Long-term Debt The County has issued general obligation bonds on behalf of the Department. The Department is responsible for the payment of the debt service on these bonds, but the County remains liable because they are general obligations of the County. The Department has recorded a liability for these general obligation bonds, which amounted to $15,737,700 at June 30, 2004. General obligation bonds payable issued on behalf of the Department and other long-term debt at June 30, 2004 are comprised of the following: Public improvement bonds: 1981 Series A at 5.0%, due through 2016 $ 411,000 1993 Series A at 5.05% to 5.6%, due through 2013 6,115,000 1998 Series A at 4.5%, due through 2033 711,700 2001 Series A at 4.0% to 5.5%, due through 2021 8,000.000 Total public improvement bonds 15,237,700 Public improvement refunding bonds: 1989 Series at 6.8% to 6.95%, due through 2005 500,000 State revolving fund loan, interest at 1.01% to 1.37%, due through 2022 3,054,549 Total 18.792.249 -75- COUNTY OF HAWAII Notes to the Basic Financial Statements June 30, 2004 At June 30, 2004, future principal payments for long-term debt are scheduled as follows: Fiscal year ending June 30: 2005 $ 1,539,000 2006 1,077,000 2007 1,129,000 2008 1,182,000 2009 1,228,000 2010 - 2014 6,194,000 2015 - 2019 3,673,000 2020 - 2024 2,449,000 2025 - 2029 163,000 2030 - 2033 158.249 Total $18.792.249 Contributions in Aid of Construction Effective July 1, 2000, the Department adopted GASB Statement No. 33, which requires the Department to recognize contributions in aid of construction as nonoperating revenues. Contributions in aid of construction were previously recognized as contributed capital. The Department recognized $3,326,155 of contributions in aid of construction as nonoperating revenues for the fiscal year ended June 30, 2004. Commitments and Contingent Liabilities Claims and judgments - The Department is self-insured for workers' compensation and other perils. The liability at June 30, 2004 for workers' compensation claims of $272,000 was estimated based on a combination of case-by-case review and the application of historical experience to outstanding claims. Construction contracts -The Department is obligated under construction contracts for the utility plant and other projects. Such commitments approximated $17,957,000 at June 30, 2004. -76- NONMAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS HIGHWAY FUND -Used to account for the costs of maintaining the County's highways and streets. Financing is provided primarily by fuel, motor vehicle weight and public utility franchise taxes. SEWER FUND -Used to account for costs of operating the County's various sewerage systems. Financing is provided by charges to users for sewer services. SOLlD WASTE FUND -Used to accumulate moneys for the operation, maintenance, and administration of the County's solid waste management, collection and disposal systems. Financing is provided by tipping fees at the landfills and by disposal permit fees. CEMETERY FUND -Used [o accumulate moneys to guarantee the future maintenance of County cemetery sites. Financing is provided from the sale of burial lots in County cemeteries. PARK/NG METER FUND -Used to account for the costs of maintaining County on-street and off-street parking areas. Financing is provided by the proceeds from parking meters. VEH/CLE DISPOSAL FUND -Used to accumulate moneys for the towing, removal, disposal and recycling of abandoned or discarded automobiles and automobile parts. Financing is provided by annual fees collected with motor vehicle registrations. BIKEWAY FUND -Used to accumulate moneys for the construction of bikeways within the County. Financing is provided by bicycle license fees. WORKFOR('E /NVESTMENT ACT FUND -Used to account for employment and training services provided [o economically disadvantaged adults, dislocated workers and youth. Financing is provided by federal grants. GOLF COURSE FUND -Used to account for the cost of operating the Hilo Municipal Golf Course. Funding is provided from green fees and payments from restaurant and pro shop concessionaires. CEOTHERtifAL RELOCAT/ON REVOLV/NG FUND -Used to account for the County's share of geothermal resource royalties received from the operator of a geothermal power plant located in the County. The funds are earmarked for a geothermal relocation program. BEAUT/FIC.AT/ON FUND -Used to accumulate moneys for the beautification of highways and disposal of abandoned vehicles within the County. Financing is provided by assessments on vehicle registrations. HAWAH COUNTY HOUSING AGENCY- Used to account for Federal and County moneys used to provide public housing assistance within the County. PARK DEDICAT/ON FUND -Used to account for moneys deposited with the County by subdividers to provide land for parks and playgrounds in subdivisions. DEBT SERVICE FUNDS /NTEREST FUND -Used to accumulate moneys for payment of interest on general obligation bonds. Moneys required to service interest maturities are transferred annually from the General Fund. BOND REDEMPTION FUND -Used to accumulate moneys for [he payment of general obligation bonds. Moneys required to retire the bonds are transferred from the General Fund one year in advance of maturity. This page intentionally left blank. -77- COUNTY OF HAWAII Nonmajor Governmental Funds Combining Balance Sheet June 30, 2004 Special Revenue Funds Solid Parking Highway Sewer Waste Cemetery Meter Fund Fund _ Fund Fund Fund Assets Cash and cash equivalents $8,400,206 $7,710,096 $1,839,494 $ 42,325 $88,644 Investments - _ _ _ _ Imprest fund - 100 250 - - Receivables: Due from State of Hawaii 282,561 - 308,629 - - Due from federal government - - 22,244 - - Due from other governmental funds 128,275 316,014 12,607 - - Due from other nongovernmental funds - 2,700 - - _ Trade, net of allowance for doubtful accounts - 1,741,358 1,048,697 - - Other 40 117,506 111,841 - - 410,876 2,177,578 1,504,018 - - Total assets $8,811,082 $9,887,774 $3,343,762 $ 42,325 $88,644 Liabilities and Fund Balances Liabilities: Accounts payable $ 241,325 $ 57,977 $1,045,371 $ - $ - Due to other governmental funds 480,699 375,714 392,178 - - Deferred revenue - 1,741,359 1,048,697 - - Accrued liabilities - 25,244 51 - - Totalliabilities 722,024 2,200,294_ 2,486,297 - - Fund balances: Reserved for: Encumbrances 1,816,806 2,474,199 193,063 - - Debt service - _ _ _ _ Unreserved: 6,272,252 5,213,281 664,402 42,325 88,644 Total fund balances 8,089,058 7,687,480 857,465 42,325 88,644 Total liabilities and fund balances $8,811,082 $9,887,774 $3,343,762 $ 42,325 $88,644 _78_ Special Revenue Funds Vehicle Workforce Golf Geothermal Beauti- Park Disposal Bikeway Investment Course Relocation fication Housing Dedication Fund Fund Act Fund Fund Rev. Fund Fund Agency Fund $897,430 $330,153 $ - $ 132,127 $1,201,363 $ 507,656 $ 2,392,620 $ 73,820 - - - - - - 3,187,376 - - - - 2,000 - - ]00 - - - 219,422 - - - - _ - - - - - - 179,134 - - - 38,994 888 - - 78,676 - - - 258,416 888 - - 257,8]0 - $897,430 $ 330,153 $ 258,416 $ 135,015 $1,201,363 $ 507,656 $ 5,837,906 $ 73,820 $ 55,357 $ - $ - $ 2,583 $ - $ - $ 16,2]3 $ - 23,795 - 258,416 40,207 - 3,800 120,064 - - - - - - - 30,241 - 79,152 - 258,416 42,790 - 3,800 166,518 158,572 - - 42,536 1,190,416 11,977 4,416,952 - 659,706 330,153 - 49,689 10,947 49],879 1,254,436 73,820 818,278 330,153 - 92,225 1,201,363 503,856 5,671,388 73,820 $897,430 $ 330,153 $ 258,416 $ 135,015 $1,201,363 $ 507,656 $ 5,837,906 $ 73,820 (Continued) -79- COUNTY OF HAWAII Nonmajor Governmental Funds Combining Balance Sheet June 30, 2004 (Concluded) Debt Service Funds Total Bond Nonmajor Interest Redemption Governmental Fund Fund Funds Assets Cash and cash equivalents $ 114,534 $ 13,898,408 $ 37,628,876 Investments - - 3,187,376 Impress fund - - 2,450 Receivables: Due from State of Hawaii - - 591,190 Due from federal government - - 241,666 Due from other governmental funds - - 636,030 Due from other nongovernmental funds - - 2,700 Trade, net of allowance for doubtful accounts - - 2,790,055 Other - - 347,945 - - 4,609,586 Total assets $ 114,534 $ 13,898,408 $ 45,428,288 Liabilities and Fund Balances Liabilities: Accounts payable $ - $ - $ 1,418,826 Due to other governmental funds - - 1,694,873 Deferred revenue - - 2,790,056 Accrued liabilities 73,412 270,000 398,948 Total liabilities 73,412 270,000 6,302,703 Fund balances: Reserved for: Encumbrances - - 10,304,521 Debt service 41,]22 13,628,408 13,669,530 Unreserved: - - 15,151,534 Total fund balances 41,122 ]3,628,408 39,125,585 Total liabilities and fund balances $ 114,534 $ 13,898,408 $ 45,428,288 See accompanying independent auditors' report. -80- This page intentionally lefr blank. -81- COUNTY OF HAWAII Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Fiscal Year Ended June 30, 2004 Special Revenue Funds Solid Parking Highway Sewer Waste Cemetery Meter Fund Fund Fund Fund Fund Revenues Fuel tax $ 7,552,317 $ - $ - $ _ g _ Public utility franchise tax 5,373,144 - _ _ _ Licenses and permits 3,505,006 - - _ _ Intergovernmental 328,125 - 630,573 - - Charges for services - 5,882,837 4,593,755 - 11,061 Investment earnings - _ _ _ _ Miscellaneous 323,266 8,579 11,702 10,750 255 Total revenues 17,081,859 5,891,416 5,236,030 10,750 11,316 Expenditures Current: Public safety 3,146,819 - _ _ _ Highways and streets 7,540,562 - - - _ Sanitation - 3,859,993 12,044,666 - - Health, education and welfare - - - - _ Culture and recreation - - _ _ _ Pension and retirement contributions 828,661 303,522 317,377 - - Employees' health insurance 599,693 189,203 265,232 - - Miscellaneous 582,618 916,506 258,079 - - Debt service: Principal - - 477,004 - - Interest - - 70,370 - - Total expenditures 12,698,353 5,269,224 13,432,728 - - Excess (deficiency) of revenues over expenditures 4,383,506 622,192 8, 1( 96,698) 10,750 11,316 Other Financing Sources (Uses) Transfers in - - 8,531,387 - - Increase in capital leases - - 513,529 - - Transfers out (3,385,458) - - _ _ Total other financing sources (uses) (3,385,458) - 9,044,916 - - Net change in fund balances 998,047 622,192 848,218 10,750 11,316 Fund balances at beginning of year 7,091,011 7,065,288 9,247 31,575 77,328 Fund balances at end of year $ 8,089,058 $7,687,480 $ 857,465 $ 42,325 $ 88,644 _g2_ Special Revenue Funds Vehicle Workforce Golf Geothermal Beauti- Park Disposal Bikeway Investment Course Relocation fication Housing Dedication Fund Fund Act Fund Fund Rev. Fund Fund Agency Fund $ - $ - $ - $ - $ - $ - $ _ g _ 1,836,440 24,925 - - - 153,058 - - - - 2,904,065 - - - 10,783,083 - - - - 810,667 - - _ _ - - - - - - 48,289 529 - - - - 88,255 - 350,025 - 1,836,440 24,925 2,904,065 810,667 88,255 153,058 11,181,397 529 - 2,619 - - - 200,981 - _ 1.431,690 - - - - _ _ _ - - 2,904,065 - - - 10,970,343 - - - - 739,741 - - _ _ 6,947 - - 86,171 - - 387,487 - 5,780 - - 71,158 - - - _ - - - 2,106 17,827 - _ _ 1,444,417 2,619 2,904,065 899,176 17,827 200,981 11,357,830 - 392,023 22,306 - 8( 8,509) 70,428 4( 7,923) 176,433) 529 - - - 143,804 - - _ _ - - - 143,804 - - _ _ 392,023 22,306 - 55,295 70,428 (47,923) (176,433) 529 426,255 307,847 - 36,930 1,130,935 551,779 5,847,821 73,291 $ 818,278 $330,153 $ - $ 92,225 $ 1,201,363 $503,856 $5,671,388 $ 73,820 (Continued) -83- COUNTY OF HAWAII Nonmajor Governmental Funds Combining Statement of Revenues, Expenditures, and Changes in Fund Balances For the Fiscal Year Ended June 30, 2004 (Concluded) Debt Service Funds Total Bond Nonmajor Interest Redemption Governmental Fund Fund _ Funds Revenues Fuel [ax $ - $ - $ 7,552,317 Public utility franchise tax - - 5,373,144 Licenses and permits - - 5,519,429 Intergovernmental - - 14,645,846 Charges for services - - 11,298,320 Inves[mentearnings - - 48,818 Miscellaneous - - _ 792,832 Total revenues - - 45,230,706 Expenditures Current: Public safety - - 3,146,819 Highways and streets - - 7,744,162 Sanitation - - 17,336,349 Health, education and welfare - - 13,874,408 Culture and recreation - - 739,741 Pension and retirement contributions - - 1,930,165 Employees' health insurance - - 1,131,066 Miscellaneous - - 1,777,136 Debt service: Principal - 1],606,621 ]2,083,625 Interest 9,119,626 - 9,189,996 Total expenditures 9,119,626 11,606,621 68,953,467 Excess (deficiency) of revenues over expenditures (9,1]9,626) (11,606,621) (23,722,761) Other Financing Sources (Uses) Transfers in 9,083,982 13,135,932 30,895,105 Increase in capital leases - - 513,529 Transfers out - - (3,385,458) Total other financing sources (uses) 9,083,982 13,135,932 28,023,176 Net change in fund balances (35,644) ],529,311 4,300,415 Fund balances at beginning of year 76,766 12,099,097 34,825,170 Fund balances at end of year $ 41,122 $ 13,628,408 $ 39,125,585 See accompanying independent auditors' report. -84- COUNTY OF HAWAII Highway Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2004 Variance Original Final Favorable Badeet Budeet Actual (Unfavorable) Revenues: Taxes: Fuel tax $6,835,652 $6,835,652 $7,552,317 $ 716,665 Public utility franchise tax 4,990,000 4,990,000 5,373,144 383,144 Total taxes 11,825,652 11,825,652 12,925,461 1,099,809 Licenses and permits -motor vehicle weight taxes 3,000,000 3,000,000 3,505,006 505,006 Intergovernmental 326,173 326,173 328,125 1,952 Charges for current services 120,000 120,000 173,251 53,251 Miscellaneous 44,273 44,273 150,015 105,742 Total revenues 15,316,098 ]5,316,098 17,081,859 1,765,761 Expenditures: Public safety -traffic engineering 3,406,549 3,406,549 3,168,808 237,74 ] Highways and streets 8,201,706 8,201,706 6,933,859 1,267,847 Pension and retirement contributions 1,071,550 1,071,550 828,661 242,889 Health fund 600,000 600,000 599,693 307 Miscellaneous 1,311,440 1,311,440 564,398 747,042 Total expenditures 14,591,245 14,591,245 12,095,419 2,495,826 Excess of revenues over expenditures 724,853 724,853 4,986,440 4,261,587 Other financing uses -transfers out - Capital Projects Fund (3,000,000) (3,385,458) (3,385,458) - Excess (deficiency) of revenues over expenditures and other uses (2,275,147) (2,660,605) 1,600,981 4,261,587 Fund balance at beginning of year 7,091,01 I 7,091,01 1 7,091,01 1 - Fund balance at end of year $ 4,815,864 $ 4,430,406 $ 8,691,992 $ 4,261,587 See accompanying independent auditors' report. -85- COUNTY OF HAWAII Sewer Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2004 Variance Original Final Favorable Budget Budeet Actual (Unfavorable) Revenues: Charges for current services -sewer fees $ 6,120,904 $ 6,120,904 $ 5,882,837 $ (238,067) Miscellaneous 100 100 8,579 8,479 Total revenues 6,121,004 6,121,004 5,89],416 (229,588) Expenditures: Sanitation 4,719,710 4,583,256 3,466,669 1,116,587 Pension and retirement contributions 296,587 ~ 334,741 303,522 31,219 Health fund 316,863 278,709 189,203 89,506 Miscellaneous 2,562,745 2,699,199 2,650,720 48,479 Total expenditures 7,895,905 7,895,905 6,610,114 1,285,791 Deficiency of revenues over expenditures (1,774,901) (],774,901) (718,698) 1,056,203 Fund balance at beginning of year 7,065,288 7,065,288 7,065,288 - Fund balance at end of year $ 5,290,387 $ 5,290,387 $ 6,346,590 $ 1,056,203 See accompanying independent auditors' report. -86- COUNTY OF HAWAII Solid Waste Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For [he Fiscal Year Ended June 30, 2004 Variance Original Final Favorable Bud¢et Budeet Actual (Unfavorable) Revenues: Intergovernmental $ 738,000 $ 759,205 $ 599,563 $ (159,643) Charges for services -tipping fees 3,991,645 3,991,645 4,593,755 602,1 10 Miscellaneous - - 11,702 11,702 Total revenues 4,729,645 4,750,850 5,205,0]9 454,169 Expenditures: Sanitation 11,747,032 12,736,452 12,535,695 200,757 Pension and retirement contributions 391,000 324,000 317,377 6,623 Health fund 258,000 267,000 265,232 1,768 Miscellaneous 230,000 267,000 266,166 834 Total expenditures 12,626,032 13,594,452 13,384,471 209,981 Deficiency of revenues over expenditures (7,896,387) (8,843,602) (8,179,451) 664,151 Other financing sources -transfers in - General Fund 7,896,387 8,531,387 8,531,387 - Excess (deficiency) of revenues and other sources over expenditures - (312,215) 35L,936 664,151 Fund balance at beginning of year 9,247 9,247 9,247 - Fund balance (deficit) at end of year $ 9,247 $ (302,968) $ 361,183 $ 664,151 See accompanying independent auditors' report. _g7_ COUNTY OF HAWAII Cemetery Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2004 Original Variance and Final Favorable Budeet Actual (Unfavorable) Revenues -miscellaneous -sale of cemetery plots $ 16,000 $ 10,750 $ (5,250) Expenditures -health, education and welfare 16,000 - 16,000 Excess of revenues over expenditures - 10,750 10,750 Fund balance at beginning of year 31,575 31,575 - Fund balance at end of year $ 31,575 $ 42,325 $ 10,750 See accompanying independent auditors' report. _gg_ COUNTY OF HAWAII Parking Meter Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2004 Original Variance and Final Favorable Budeet Actual {Unfavorable) Revenues: Charges for current services -highways and streets $ - $ 11,061 $ 1 1,061 Miscellaneous-disp of fixed assets - 255 255 Total revenues - 11,316 1 1,316 Fund balance at beginning of year 77,328 77,328 - Fund balance at end of year $ 77,328 $ 88,644 $ 1 1,316 See accompanying independent auditors' report. -89- COUNTY OF HAWAII Vehicle Disposal Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2004 Variance Original Final Favorable Budeet Budeet Actual (Unfavorable) Revenues: Licenses and permits- vehicle disposal fee $ 1,680,000 $ 1,680,000 $ 1,836,440 $ 156,440 Charges for services -towing charges 100 100 - (100) Miscellaneous 100 100 - (100) Total revenues 1,680,200 1,680,200 1,836,440 156,240 Expenditures: Sanitation 1,667,600 1,978,546 1,475,954 502,592 Pension and retirement contributions 7,600 7,600 6,947 653 Health fund 5,000 6,000 5,780 220 Total expenditures 1,680,200 1,992,146 1,488,681 503,465 Excess(deficiency) of revenues over expenditures - (311,946) 347,759 659,705 Fund balance at beginning of year 426,255 426,255 426,255 - Fund balance at end of year $ 426,255 $ 114,309 $ 774,014 $ 659,705 See accompanying independent auditors' report. . 90 - COUNTY OF HAWAII Bikeway Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2004 Original Variance and Final Favorable Budeet Actual (Unfavorable) Revenues -licenses and permits - bicycletax $ 50,000 $ 24,925 ($25,075) Expenditures -highways and streets ] 81,000 1,263 179,737 Excess(deficiency)ofrevenues over expenditures (131,000) 23,662 154,662 Fund balance at beginning of year 307,847 307,847 - Fund balance at end of year $176,847 $331,509 $154,662 See accompanying independent auditors' report. -91- COUNTY OF HAWAII Workforce Investment Act Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2004 Variance Original Final Favorable Budeet Budeet Actual (Unfavorable) Revenues -intergovernmental -federal grants $ - $ 2,126,913 $ 2,087,919 $ (38,994) Expenditures -health, education & welfare - 2,126,913 2,126,913 - Deficiency of revenues over expenditures - - (38,994) (38,994) Fund balance at beginning of year - _ _ _ Fund balance (deficit) at end of year $ - $ - $ (38,994) $ (38,994) See accompanying independent auditors' report. -92- COUNTY OF HAWAII Golf Course Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2004 Variance Original Final Favorable Budeet Bua~et Actual (Unfavorable) Revenues: Charges for services $ 863,982 $ 863,982 $ 810,667 $ (53,315) Total revenues 863,982 863,982 810,667 (53,315) Expenditures: Culture and recreation 800,575 800,575 784,059 16,516 Pension and retirement contributions 101,211 101,211 86,171 15,040 Health fund 90,000 90,000 71,158 18,842 Miscellaneous 16,000 16,000 1,743 14,257 Total expenditures 1,007,786 1,007,786 943,131 64,655 Deficiency of revenues over expenditures (143,804) (143,804) (132,464) 11,340 Other financing sources: Transfers in-General Fund 143,804 143,804 143,804 - Excess of revenues and other sources over expenditures - - 11,340 11,340 Fund balance at beginning of year 36,930 36,930 36,930 - Fund balance at end of year $ 36,930 $ 36,930 $ 48,270 $ 1 ],340 See accompanying independent auditors' report. -93- COUNTY OF HAWAII Geothermal Relocation Revolving Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2004 Original Variance and Final Favorable Bud¢et Actual (Unfavorable) Revenues -miscellaneous -geothermal royalties $ 150,000 $ 88,255 $ (61,745) Expenditures -general government 150,000 150,000 - Deficiency of revenues over expenditures - (61,745) (61,740 Fund balance at beginning of year 1,130,935 1,130,935 - Fund balance at end of year $ 1,130,935 $ 1,069,190 $ (61,745) See accompanying independent auditors' report. -94- COUNTY OF HAWAII Beautification Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2004 Variance Original Final Favorable Budeet Budeet Actual IUnfavorablel Revenues -licenses and permits -highway beautification $ ] 25,000 $125,000 $ 153,058 $ 28,058 Expenditures -highways and streets 200,000 200,000 75,662 124,338 Excess (deficiency) of revenues over expenditures (75,000) (75,000) 77,396 152,396 Fund balance at beginning of year 551,779 551,779 551,779 - Fund balance at end of year $476,779 $476,779 $ 629,175 $ 152,396 See accompanying independent auditors' report. -95- COUNTY OF HAWAII Hawaii County Housing Agency Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2004 Variance Original Final Favorable Budeet Budeet Actual (Unfavorable) Revenues: Intergovernmental -Federal grants - HUD -Voucher program $ 10,791,900 $ 11,791,900 $ 10,783,083 $ (1,008,817) Interest earned 15,740 15,740 48,289 32,549 Resale of property - - 350,000 350,000 Other - - 25 25 Total revenues 10,807,640 11,807,640 11,181,397 (626,243) Expenditures: Health, education & welfare 10,668,145 ] 1,944,257 11,938,625 5,632 Pension and retirement contributions 336,700 336,700 268,536 68,164 Health Fund 127,600 127,600 118,951 8,649 Total expenditures 11,132,445 12,408,557 12,326,112 82,445 Deficiency of revenues over expenditures (324,805) (600,917) (1,144,715) (543,798) Fund balance at beginning of year 5,847,821 5,847,821 5,847,821 - Fund balance atend of year $ 5,523,016 $ 5246,904 $ 4,703,106 $ (543,798) See accompanying independent auditors' repon. -96- COUNTY OF HAWAII Park Dedication Fund Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual (Budgetary Basis) For the Fiscal Year Ended June 30, 2004 Variance Original Final Favorable Budeet Budeet Actual (Unfavorable) Revenues-interest $ - $ - $ 529 $ 529 Expenditures -culture and recreation - - - - Excess of revenues over expenditures - - 529 529 Fund balance at beginning of year 73,291 73,291 73,291 - Fund balance at end of year $73,291 $73,291 $73,820 $529 See accompanying independent auditors' report. -97- COUNTY OF HAWAII Ageucy Fuuds Combining Balance Sheet June 30, 2004 Performance State Improvement Improvement and Weight District District Refundable Payroll Tax No. l7 Revolving Deposits Clearance Assets Cash and cash equivalents $ - $ 779,250 $ 342,852 $ 153,881 $ 973,964 Due from other agency funds - - - - - Otherreceivables - - - 14,736 2 Restricted assets - cash and cash equivalents - 637,000 - - - Total assets $ - $ 1,416,250 $ 342,852 $ 168,6]7 $ 973,966 Liabilities Warrants payable $ - $ - $ - $ 50 $ - Due to other agency funds - - - - 798 Accrued liabilities - - - 1,835 973,168 Customer advances and deposits - - - 166,732 - Assets held for the benefit of improvement districts - 1,416,250 342,852 - - Total liabilities $ - $ 1,416,250 $ 342,852 $ 168,617 $ 973,966 See accompanying independent auditors' report. -98- Non-Profit Flexible Lapsed License Organ & Spending Warrants Plates Tissue Educ. Account Fund Fund Fund Totals $256,113 $ 44,990 $ - $ - $ 2,551,050 - 798 - - 798 - 6,850 - - 21,588 - - - - 637,000 $ 256,113 $ 52,638 $ - $ - $ 3,210,436 $ - $ - $ - $ - $ 50 - - - - 798 256,113 52,638 - - 1,283,754 - - - - 166,732 - - - - 1,759,102 $ 256,113 $ 52,638 $ - $ - $ 3,210,436 -99- COUNTY OF HAWAII Agency Fuuds Combining Statement of Changes in Assets and Liabilities For the Fiscal Year Ended June 30, 2004 Balance Balance July 1, June 30, 2003 Additions Deductions 2004 State Weight Tax Fund Assets Cash and cash equivalents $ 634,083 $ 8,013,342 $ 8,647,425 $ - Otherreceivables 31,339 - 3],339 - $ 665,422 $ 8,013,342 $ 8,678,764 $ - Liabilities Vouchers payable $ - $ 2,130,130 $ 2,130,130 $ - Warrants payable 665,422 - 665,422 - Accrued liabilities -due to State of Hawaii - 7,982,003 7,982,003 - Totalliabilities $ 665,422 $ 10,112,133 $10,777,555 $ - Improvement District No. 17 Assets Cash and cash equivalents $ 693,883 $ 1,023,991 $ 938,624 $ 779,250 Restricted assets -cash and cash equiv. 637,000 - - 637,000 Total assets $ 1,330,883 $ 1,023,991 $ 938,624 $ 1.416,250 Liabilities Vouchers payable $ - $ 830 $ 830 $ - Warrants payable 410 - 410 - Assets held for the benefit of improvement districts 1,330,473 1,024,821 939,044 1,416,250 Total liabilities $ 1,330,883 $ 1,025,651 $ 940,284 $ 1,416,250 Improvement District Revolving Fund Assets Cash and cash equivalents $ - $ 342,852 $ - $ 342,852 Investments 340,107 - 340,107 - Total assets $ 340,107 $ 342,852 $ 340,107 $ 342,852 Liabilities Assets held for the benefit of improvement districts $ 340,107 $ 342,852 $ 340,107 $ 342,852 - 100 - COUNTY OF HAWAII Agency Funds Combining Statement of Changes in Assets and Liabilities For the Fiscal Year Ended June 30, 2004 Balance Balance July 1, June 30, 2003 Additions Deductions 2004 Performance and Refundable Deposits Fund Assets Cash and cash equivalents $ 154,782 $ 1,917,967 $ 1,918,868 $ 153,881 Other Receivables - 14,736 - 14,736 Total assets $ 154,782 $ 1,932,703 $ 1,918,868 $ 168,617 Liabilities Vouchers payable $ - $ 73,566 $ 73,566 $ - Warrants payable 20,457 - 20,407 SO Due to other funds 1,400 11,774 13,174 - Accrued liabilities 7,412 - S,S77 1,835 Customer advances and deposits 12S,S13 1,922,764 1,881,S4S 166,732 Total liabilities $ 154,782 $ 2,008,104 $ 1,994,269 $ 168,617 Payroll Clearance Fund Assets Cash and cash equivalents $ 1,979,943 $ 24,611,854 $25,617,833 $ 973,964 Due from other funds - 23,246,726 23,246,726 - Other receivables - S43 541 2 Total assets $ 1,979,943 $ 47,859,123 $48,865,100 $ 973,966 Liabilities Warrants payable $ 1,022,284 $ 28S $ 1,022,569 $ - Payrollrefunds payable - 8,472 8,472 - Due to other funds 10,712 7,247 17,161 798 Accrued liabilities 946,947 2,994,663 2,968,442 973,168 Total liabilities $ 1,979,943 $ 3,010,667 $ 4,016,644 $ 973,966 -101- COUNTY OF HAWAII Agency Funds Combining Statement of Changes in Assets and Liabilities For the Fiscal Year Ended June 30, 2004 Balance Balance July 1, June 30, 2003 Additions Deductions 2004 Flexible Spending Account Assets Cash and cash equivalents $ 219,106 $ 439,067 $ 402,060 $ 256,113 Liabilities Accrued liabilities $ 219,106 $ 439,067 $ 402,060 $ 256,113 Lapsed Warrants Fund Assets Cash and cash equivalents $ 25,706 $ 19,968 $ 684 $ 44,990 Due from other funds 12,112 798 12,112 798 Other receivables 7,856 6,850 7,856 6,850 Total assets $ 45,674 $ 27,616 $ 20,652 $ 52,638 Liabilities Warrants payable $ - $ 7,579 $ 7,579 $ - Due to other funds - _ _ Accrued liabilities 45,674 6,964 - 52,638 Total liabilities $ 45,674 $ 14,543 $ 7,579 $ 52,638 Non-Profit License Plates Fund Assets Cash and cash equivalents $ 550 $ 2,750 $ 3,300 $ - Liabilities Vouchers payable $ - $ 825 $ 825 $ - Warrants payable 550 - 550 - Due to non-profit agency - 2,750 2,750 - Totalliabilities $ 550 $ 3,575 $ 4,125 $ - - 102 - COUNTY OF HAWAII Agency Funds Combining Statement of Changes in Assets and Liabilities For the Fiscal Year Ended June 30, 2004 Balance Balance July 1, June 30, 2003 Additions Deductions 2004 Organ and Tissue Education Fund Assets Cash and cash equivalents $ 335 $ 1,316 $ 1,651 $ - Other receivables 7 - 7 _ Total assets $ 342 $ 1,316 $ 1,658 $ - Liabilities Warrants payable $ 342 $ - $ 342 $ - Accrued liabilities -due to State of Hawaii - 1,309 1,309 - Totalliabilities $ 342 $ 1,309 $ 1,651 $ - Total -All Agency Funds Assets Cash and cash equivalents $ 3,708,388 $ 36,373,107 $37,530,445 $ 2.551,050 Investments 340,107 - 340,107 - Due from other funds 12,112 23,247,524 23,258,838 798 Other receivables 39,202 22,129 39,743 21,588 Restricted assets- cash and cash equiv. 637,000 - - 637,000 Total assets $4,736,809 $ 59,642,760 $61,169,133 $ 3,210,436 Liabilities Vouchers payable $ - $ 2,205,351 $ 2,205,35] $ - Warrants payable 1,709,465 7,864 1,717,279 50 Payroll refunds payable - 8,472 8,472 - Due to other funds 12,1 12 19,021 30,335 798 Due to non-profit agency - 2,750 2,750 - Accrued liabilities 1,219,139 3,440,694 3,376,079 1,283,754 Accrued liabilities -due to Stale of Hawaii - 7,983,312 7,983,312 - Customeradvances and deposits 125,513 1,922,764 1,881,545 166,732 Assets held for the benefit of improvement districts 1,670,580 1,367,673 1,279,151 1,759,102 Total liabilities $ 4,736,809 $ 16,957,90] $ 18,484,274 $ 3,210,436 See accompanying independent auditors' report. -103- COUNTY OF HAWAII Private Purpose Trusts Combining Statement of Private Purpose Trust Net Assets June 30, 2004 Shippers' Total Geothermal Wharf Private- Asset Trust Purpose Assets Fund Fund Trusts Cash and cash equivalents $ 1,465,533 $ 1,580,863 $ 3,046,396 Investments - _ 996,725 996,725 Total assets 1,465,533 2,577,588 4,043,121 Liabilities Accrued liabilities $ - $ 9,939 $ 9,939 Total liabilities - 9,939 9,939 Net Assets Held in trust for other parties 1,465,533 2,567,649 4,033,182 Total net assets $ 1,465,533 $ 2,567,649 $ 4,033,182 See accompanying independent auditors' report. - 104 - COUNTY OF HAWAII Private Purpose Trusts Combining Statement of Changes in Private Purpose Trust Net Assets For the Fiscal Year Ended June 30, 2004 Shippers' Total Geothermal Wharf Private- Asset Trust Purpose Fund Fund Trusts Additions Contributions: Puna Geothermal Venture $ 50,000 $ - $ 50,000 Transfer from State - 2,492,511 2,492,5 ] I Investment earnings: Net increase in fair value of investments - 86,312 86,312 Dividends - 25,451 25,451 Interest 11,486 7,493 18,979 Total additions 61,486 2,611,767 2,673,253 Deductions Grants awarded - 44,118 44,118 Change in net assets 61,486 2,567,649 2,629,135 Net assets -beginning of year 1,404,047 - 1,404,047 Net assets -end of year $ 1,465,533 $ 2,567,649 $ 4,033,182 See accompanying independent auditors' report. -105- This page intentionally lefr blank. -106- STATISTICAL SECTION (UNAUDITED) Fable I COUNTY OF HAWAII Government-Wide Revenues Last Three Fiscal Years (Values in Thousands) Operating Capital Non specific Interest and Fiscal Charges for Grants and Grants and Grants and Investment Year Services Contributions Contributions Taxes Contributions Income Other Total 2002 $24,005 $27,346 $27,871 $110,720 $13,502 $3,587 $1,583 $208,614 2003 25,072 31,692 19,065 126,375 13,931 1,949 4,642 222,726 2004 29,491 33,471 9,669 138,122 15,251 1,738 4,825 232,567 Unaudited -see accompanying accountant's report. - 107 - Table 2 COUNTY OF HAWAII Government-Wide Expenses by Function Las[ Three Fiscal Years (Values in Thousands) 2004 2003 2002 Governmental activities: General government $ 40,085 $ 36,462 $ 37,796 Public safety 90,435 77,]32 75,710 Highways and streets 17,563 15,513 22,627 Health, education and welfaze 23,042 20,205 17,854 Culture and recreation 15,980 16,431 14,904 Sanitation 20,085 ]9,022 18,642 Interest on long-term debt 9,554 8,681 8,769 Business-type activities: Health, education and welfare 466 450 456 Total $ 217,210 $ 193,896 $ 196,758 Unaudited -see accompanying accountant's report. -108- Chart I COUNTY OF HAWAII General Governmental Revenues and Expenditures Comparison Last Ten Fiscal Years (In Thousands) $250,000 , 0 Revenues D Expend'Rure~ $200,000 ` \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ 4 \ \ \ \ \ \ \ \ \ \ \ $150,000 \ \ \ \ \ \ \ \ \ \ \ \ \ \ 4 \ l \ \ \ \ • \ \ \ \ .t \ \ \ k \ \ l $100,000 - \ \ ~ ~ \ \ \ \ - \ \ \ \ \ \ \ \ t \ 'y \ \ y~ \ ~ \ \ \ \ \ \ \ yY \ \ \ \ \ \ \ $50,000 \ \ \ \ \ \ - \ \ \ \ \ \ \ \ \ \ \ \ \ \ \ \9~g0 \99090 \9c'09~ \°~~'190 ^9'009 \99900 00000 O~^O'1, O~~o'' O~~'OG 'L 'L 1 'V Note: In fiscal year 2002, the Housing Agency and the Park Dedication Fund became special revenue funds. Unaudited -see accompanying accountants' report. - 109 - M - ~ O b M N ~ - N r ~ M N N r 0 op r~ N ~O ~ Y 00 N V M r 0 0- ~D A F- FO M ov ~ h v'Oi ~ ~ ~ c° N M 7 Vl 00 N Vl M ^ 0` L h vt vi N o0 N - Q` O O ~ ~D O m N 7 ~O m O N N N~ M 7 ~/i ~O r o0 O N y N N 00 O O ~ Q, 7 vi in ~n M y y r ~O 00 - ao - N N C t ~ gyp" ~p r" oo ao ri v ~ o O - - N M M~ y C 4. L' r D\ D\ M ao 00 N N ~ ~O d C i r 7 vi O v1 V~ N~ 7 G w m oo r v ~o ~ r r o 00 o y V U O ^ V h M N M V M M C 3 U L C N 0~0 N~ V W V~~ N 00 Q. m O ,Q? E O M N O r ~D ~O O Q\ O v L ? itl .d O M ~ Q 01 vt M ~ ~ E v A e' ~ ~ ~ CC ~ ~ ~ y ~ FF 4. x ~ u 0 ~ ~ V 0 7 000 M vNi O N O O d ~ r O N E N O ~ W ~ ~ w F ~ U ~ v ~ , > o ~ vi oNO m vii o0 0~o N o ,D ~ 0 ~ r V r O N o0 V r ~O lO ? Y U L P O N N N rn V ~O r ~ 0`O. d ~ ~ V] V L ~C ` N C v~ V M W N 7 0 D\ ~ r V ~ O O R O C N O N Ow b O~ M~ v~ ~ T O. ~ t G ~ op iG ~O ~O oo" a0 0v 00 00 ~ O p ~ ri pq ~ Q N H Y z ~ ~ ¢ C ro A 00 - O M Vt vt - O r r N ~ N O r~ M~ O M~ oro ~ N O u O O H vi b W Oi - V T ~ Z O 7 tE h ~n ~n ~n vi vi ~n ~O ~O ~O 0p 0. V] CC L G N T ~ N O 00 oo N r N M N r 0 p• ~ O. H ~ N~ H~ V O~ M O ~ N C O O` O O- N O N M ` A N N N N N N N G 7. ~ N ~ y V o N 'Q ` ~ u ro a a rn rn rn °0 0 0 0 0 Q` U D\ D` D\ O N O N O = ~ di O C z ~ - 110 - Chart 2 COUNTY OF HAWAII General Governmental Expenditures by Function Last Ten Fiscal Years (In Thousands) ~ V _ _._r__._~. ~ _ $250,000 _ 00ther I ~ Debt service ? Capital outlay ¦ Pensions and retirement m Culture and recreation ®Sanitation ®Highways and streets $200,000 ®Public safety ®General government ':ir, • y ,~t ii''. $150,000 ;yi. . ~h3 $100, 000 $so,ooo $o r~. ~ . 19~c6 19996 199691 099106 1996 g9 19~p6 2996A1 2~~1 p2 20p2A~ 2~6AA Note: In fiscal year 2002, the Housing Agency and Park Dedication Fund became special revenue funds. Unaudited -see accompanying accountants' report. _ Ill - Table 4 COUNTY OF HAWAII General Governmental Revenues by Source* Last Ten Fiscal Years (Values in Thousands) Licenses Charges Interest Fiscal Taxes and and Inter- for and Year Assessments Permits Governmental Services Penalties Other Total 1995 100,028 5,788 31,684 5,439 4,205 1,588 148,732 1996 101,755 5,836 33,656 8,032 4,692 2,500 156,471 1997 96,124 6,124 36,016 7,796 5,859 2,009 153,928 1998 97,332 6,351 38,893 8,885 5,881 1,756 159,098 1999 94,645 6,952 35,075 ]0,148 5,545 3,440 155,805 2000 93,324 7,261 32,572 11,215 5,282 1,883 151,537 2001 95,467 7,412 39,489 12,056 6,409 1,854 162,687 2002 110,235 7,780 44,915 11,689 3,801 2,757 181,177 2003 127,215 9,261 50,181 13,481 2,066 2,920 205,124 2004 140,126 11,840 52,080 14,467 1,806 2,919 223,238 * Includes General, Special Revenue and Debt Service Funds. Note: In fiscal year 2002, the Housing Agency and the Park Dedication Fund became special revenue funds. Unaudited -see accompanying accountant's report. - 112 - Chart 3 COUNTY OF HAWAII General Governmental Revenues by Source Last Ten Fiscal Years (In Thousands) $250,000 - g Other Olnterest and penalties DCharges for services ? Intergovernmental , ®Licenses and permits ~ Taxes i $200,000 $150,000 $too,ooo $so,ooo i 19~g5 1g9y 96 ~g969~ 1o'g19g 1~~g0 1g99OO 2~~~~1 'f.~~1A2 20p0"A3 'L~~~oA Note: In fiscal year 2002, the Housing Agency and Park Dedication Fund became special revenue funds. Unaudited -see accompanying accountants' report. - 113 - Table 4a COUNTY OF HAWAII General Governmental Tax Revenues by Source* Last Ten Fiscal Yeazs (Values in Thousands) Public Real Service Fiscal Property Company Fuel Franchise Year Tax Tax Tax Tax Total 1995 91,200 - 5,613 3,215 100,028 1996 92,512 - 5,820 3,423 101,755 1997 86,490 - 5,783 3,851 96,124 1998 87,420 - 5,832 4,080 97,332 1999 84,792 - 5,900 3,953 94,645 2000 83,271 - 6,103 3,950 93,324 2001 84,240 - 6,450 4,777 95,467 2002 93,7]2 5,108 6,422 4,993 110,235 2003 109,991 5,064 7,343 4,817 ]27,215 2004 12],868 5,332 7,552 5,373 140,125 ' Includes General, Special Revenue and Debt Service Funds. Note: The Public Service Company Tax began in fiscal year 2002. Unaudited -see accompanying accountant's report. - 114 - ~ w C C y 0 U A v C= y C a O O O O O O O O O O ~ ~ C iUf cU.~ C M N N C~ ~D N E- O 0 H a ~ U G C r 0 ~C W~~~~ N 0~0 d y M T M 00 00 M h ~T M 00 C U A C A h~ O r b~~ OMO v~1 O m F v_ o0 o v ~a a, m t r o0 O ~ M M O O P 00 b r 0 A 4.r O v .0 C~ 0 0 0 o e e o 0 o c O U v P 0 0 0 0 0 0 0 0 ~ F- = `v C ~j a. U C O Y N M Vl V1 ~ f+'1 b N M C O~ U G O ^ ~p M 00 M Y1 OO 00 _ 0~ O Y X O N T O N O~ O o0 O. Q ~ U~ u O o0 N O~ ~n D, O b W V F-' ~ N h 7 V 1~ ~ a0 O N C~ T W 0^O o~0 0~0 0~0 OMi O^ ~ ~ } U A ~y h ~ - ~o ~n rn v~ c N ~ w o ~ C vl vl N T ~ 00 M Q ~y C O O ~n I~ 7 7 lp vi o0 C~ ^ K 01 ~D N~ W 7 N m" m vi F I~ F C F"' ~ W W M M M h M V' T ya a+ ~ ~ ~D V R ~D vi ~ M V lp op F ~ U v ~ e v o o 0 0 o e e c m o rn o, rn rn v, rn s a o+ o, o L 6. p G a ~ 00 M O o0 '7 1~ 7 ~ O 00 C C T ~O O~ 00 M V 1~ n D1 r ~ O U K O vi ~O V M ~D ~O 7 V C ~d v o0 00 U O 1~ ~ N O r r ~ ~ F o ~o ~n v N M~ h M o ~J C h r ~ O~ O Q` M~ U V 00 00 00 00 t~ W 00 00 O ^ td C ~ V V oM0 vi r N 0 vi ~ ~y 00 V ~D M ~ O ~D N M C. ~ I-~ .U_1 M ~ O O n M ~O lD l~ N ~ U ~ M~ b h N N M ~D l~ ~ O~ O~ 00 00 Op 00 00 O~ O ^ L L y A ~/1 ~D 1~ 00 ~ O N M V « U N Q. O~ O. O. ~ O O O O O } O~ O~ O~ C~ O~ O O O O O C - 115 - Table 6 COUNTY OF HAWAII Assessed and Estimated Actual Value of Taxable Real Property Last Ten Fiscal Years (Values in Thousands) Ratio of Real Property Total Assessed to Fiscal Assessed Estimated Total Estimated Year Value Actual Value Actual Value 1995 10,618,892 10,618,892 100% 1996 10,611,589 10,611,589 100% 1997 10,279,240 10,279,240 100% 1998 10,156,903 10,156,903 100% 1999 9,929,443 9,929,443 100% 2000 9,882,111 9,882,111 100% 2001 10,083,384 10,083,384 100% 2002 11,071,326 11,071,326 100% 2003 11,690,371 11,690,371 100% 2004 12,891,340 12,891,340 100% Notes: There is no personal property tax in Hawaii. Assessment ratios are uniform statewide. Unaudited -see accompanying accountant's report. - 116 - r ~ 00 vi Q vi vi D\ O~ N N 7 N N M- 00 r r- vi N M O r o0 N~ M N~ G\ V M r~ h r D` r V o0 ~ ~ ~ d - O~ ^ ^ O N `O I~ 00 00 O Q M ~/1 00 N N M M Vl A ~ ~ O O r M M 00 Vl l0 N 00 M CT lp ~O 00 - C ~O ~/1 - ^ M M R O T l~ O O O ~O t~ N O D\ F. p+ 00 V Yl Q\ r M M h ~O 00 R 'S 00 1~ 7 1~ M 00 ~O 7 Z L Vi N ^ ~ fi3 N 69 C'i ~ O 0 0 0 0 0 0 0 0 v1 0 0 0 0 0 0 0 0 C N ~ vi O O O O O O O V h 0 0 0 0 0 0 0 7 H J X Vf oo O O O O O O O V o0 0 0 0 0 0 0 0 7 .r Fn. .r^ R a F '7 ~ - oo ^ v-, ~O M o v-, v M - o ~ oo ^ o m ^ o ~c G W~ b N V h M V M 1~ N^ b D\ 7 ~/1 ^ 00 Q` M R R O N E ~D Q W vi ~O vl O M N O o0 t~ ~ 00 h h 0\ H N k C' N o0 h vi M 1~ 00 a0 7 ~D T N vi 00 l~ b b h O ~ O~~ h O vi N V O O O. er R l~ M M R O D\ O~ 1~ T O ;y F" ~ ~ h V M N^ N O ~n ^ M h 7 M N O N O V CQ > ~ 69 N ^ ~ y9 N ^ 6~9 u Z 3 ~ m; Q ~ y, ~ C ~ Oo 00000000 ~ 0 0000000 ~ V m G or sv o0 00 00 00 00 00 00 0o v o0 00 00 00 0o ao 00 0o v O ~ F m ~ ~ es sv F a ~ v F- ~ F a+ z ~ > Q O O V P D\ N O~ ~ 00 a\ M N v1 vi O o0 a\ b CT y ,p l~ 00 M O a0 ^ O V1 - 1~ 00 V N M V O O 00 ^ M U h O~ C_ ~ N r M 7 ~O ~O vi ~O o0 M v1 00 M V r h cr O Y ~ ~ 'D ~ N ~ ~ ~ ~ ~ ~ n W ~ M O 000 OM1 O~ ~ M N y iC F' ~ D\ 7 M l0 ~p O ~O O~ 7 M ~D 1~ Q ~ N m ~ W ~ 6~9 L V d O` N id ~ A ~ m ~ W C .p C C ~ O d 'Q m ~ O N ~ R: ~ yz y tia ° U i d d ~ ro A `v r1 a~i 0.~' is ~ ,o `v '`o ~ A v ~ ~ o °v o aCi ~ ~ .A ~ ~ o ~ v c U A U T m O Q U C ~r 0 U - 117 - N D` V O N r N ~O 0\ O h M D` O b oO ^ 7 t~ M - O~ ~ t~ O Q. ~ M ~n M W ~ N O R ~D - 1~ 00 ~ 00 O n h b M C M O O V N b V 7 vi N ~D V y 0~ N R 7~ 00 M N V 7 N lD M l~ r1 W h h O ~O ~ W N O~ O op vi T ~D M R m m vi D` R t~ N ri ~D O~ R O 00 O N ~O O~ h ~O ~O P r O. N W O a0 O O~ F' Y X~ M M h U V 00 D\ vl r Q\ N r b 00 M O~ N ~/1 00 O\ N M O Q\ T 00 O N ~ p„ a0 M N o0 1~ M h N T N l~ M N P 00 M M N O^ ~D N N O 00 M N O T ~ ~ ~ N O~ N N O ~ N N ~ z~ ~ A°o 00000000 ~ o00ooooov, o000oooo~n viooooo0o v ~nooooooov, v~ooooooov ~~ca o00oooooc v o000ooooov o00000000~ Fa ~....rr rr ~.r rrr ~rrrr_.r ~ 00 00 O O N ~n D\ b V1 M vi 1~ 00 r V N o0 M vt T O O N O 1~ U O o0 1~ O~ ~ a` 7 M 00 V N vi ~D O vi O ~D P N O Q\ C O N a\ h C l~ ~ V N D\ M ~y ,O N r- Or v) ~O M M 1~ W N V N 1~ M N r P 0\ a r vi R vi T 00 ~O N X C O~ r r vt 7 vi M M ~O O N r V V N N h 7 O~ 00 O~ O~ N vi r 1~ N O ~ A N O a0 V vi O ~O h N h 00 D` 00 b D\ O N N M 1~ ~ a0 O~ ~ O P r h h ~p F~ r M M 7 M N 00 N O O N M 7 M N ~D N 00 P N M C M N V N O V1 69 _ 69 6~9 69 ~ ^ ~ ~ ~ O C O Q 0 0 0 0 0 0 0 0 ~n 0 0 0 0 0 0 0 0 ~n 0 0 0 0 0 0 0 0 ~n ~ r vl vl vl vl vl vl Yl Vl C V1 V1 Vl V1 V'1 V1 Vt V1 O ~/1 Vl ~ h h h h Vt ~ ^ fA 00 00 00 00 00 00 OO 00 7 00 00 00 OO 00 00 00 00 K 00 00 GO 00 00 OO 00 00 V m F 4 sv vj ss ^ ~O O N D\ r W O C 1~ O~ M N ~O M N V a N r M O V M h iD ~ r r ~p pp y~ r pp N N M M O~ r M 1~ M R ~D a\ N M O b b a0 7 h 0 O id C M N D\ N r a0 r h V U O M r ~p O N 1~ W D\ a N W vi M D\ T a0 ~O M v X T O~ 7 1~ Q\ N~ O N N tai o0 l~ ~ 00 C 1~ ~ b O O O b 7 O~ O t~ D\ S O N 1~ h o0 00 O N M O ^ N M T^ 00 ^ O^ N V V^ 00 ~ V l~ ~p F '7 r 00 V M h 00 N 1~ 00 7 7 l~ O\ N^ I~ W V1 7 ^ l0 0\ M 7 L 07 ~ ~ Gi ~ ~ 6~9 Z N id ~C ~ W A ~ t0 ~ 4. 'C ~ 'G, ~ 'G, 'O O v y ~ u m ~ N ~ N Y •O N ~O .~L// •O L f0 O N ~y Oy N ~ ~ ~ N N_ C v v C H v v C U d CC ~ CC ~a m .0 v Q' ~ O' ,ia A .4 v 2' ~ G' is % v o a~ " E u Z o o a~ 1O E Z o ~ ar E q u~ °v m a.E A P: E ~'C c E n.•~ ro E ~'C e E $.E ro E o. c E a E~ Q 2 U S Q U x ~'J Q S U S Q U Y E'J Q S U S Q U S x m c m N_ ~ rn rn rn E 0 V - 118- r b h m W V M O r 0 a0 r v~ N D\ N Q\ O N C r 0 N N a\ O N M ~O v ~D a0 ~O o0 r M vi M r ~O O O 00 vi r O o0 r M~ O~ N V O ~n N ~ N r M Q O 7 M 0\ ~ a0 cr N N r h O M 00 vi ~D Q vi V- vi M ~ N M N V V O N ^ ^ N O~ N V O O M ~ v~ C O. h r v ~ A O` N a N W O oo M ep N a0 ~D o0 O v~ M O O~ h o0 M O v1 M O~ 00 D\ H r n1 F p„ ~O N M O op M O N O a0 ~n N V^ 00 V N O O ~O M r M 00 M N N N O ~ ~ ~ ~ N N ~ ~ ^ N N O ~ ^ N N ,z a 69 69 y O O 0 0 0 0 0 0 0 0 ~n 0 0 0 0 0 0 0 0 vi 0 0 0 0 0 0 0 0 v1 F O^ h O O O O O O O C vi O O O O O O O C vi O O O O O O O V ~ 69 op O O O C C O O V o0 0 0 0 0 0 0 0 7 00 O O O O O O O Q F a ~ ^ 69 ui ^ ^ W r M ~O C O~ O. V r O O• R o0 O. O~ O ~n V V O M N O o0 0o N M V1 O M ^ ~ r v~ O~ 00 h O~ N V~ N O a\ N O V r N N N N o0 ep ~O P 00 O N h O O ny ~ V ~n M r 0 vi O 00 O^ r r vi ~D ~D 7 0 O~ O h h O ~O M b b~ h O N~ N X O~ O~ V r R M r vi 7 N 00 7 `D O O~ O N O~ ~D r v v O~ vi O o0 O A~ V b N o0 O vt r v1 ^ 00 vi r M O r Q 0 N ~O O r O^ ~O 00 N ~D ip f-' ~ N 7 7 7 N M N O V 00 N V ~n 7 N C N 0 h O~ N ~D ~O 7 N ~n N O ~~o c boo 0000oooo~n o000oooo~n o000oooo~n ;E ~ h ri h vi h ~ vi ~ v vi ~n v~ ~n ~n vi vi ~n v, ~n vi ~n vi vi vi vi vi c s9 00 00 00 00 00 00 00 0o v o0 00 00 00 00 00 00 0o v o0 00 00 00 00 00 00 0o v E ~ c5 ss Fa 0] F- G O~ N N V ~n V ~O O O N C Q. ~ M O r vi ~p N v'i O M V O ~O vi N O vi ~ 00 M N a0 N r O V o0 r ~p r D\ V M M 7 00 ~O O~ M ~O D\ N vt V N O id C N ~D P L O o0 M h M vi r vi 00 ~O N vi 7 00 r V D\ 00 Q` D\ O M R v X~ N vi N 00 O~ 7 ~O ~D 00 M V ~D M O~ O N V 00 P 7 ut M N O ro- 00 N O T N r r^ ~D ~O r N N N 00 O^ O o0 O M O r M r N M O m ~D P T V ~O 0\ ~ b D` ~ V r o h r ~O V r O 7 v C7 ~ 7 Vi 7 ~ - - vi Z vi va ss A ~ A m? ro c m e c c:°_ c c c:? v v v G ~ d o v m o p v v~ v c E v 9 v c ~ v~ v U a a v rG ~ n g v a' v n< ro m .o v a v nL ro m .4 v ~ O d ~ ~ « 3 v ` d ~ ~ ,m 3 v ~ v « ~ ,n « m g E N u a~i v o~~~ E h u d v p E N v~~ ~ n, m E c 'C c E a m P c 'G c E i;, m E c 'C c E a E~¢ 2 U U S « a Q s U~¢ U T E~¢ 'S U~ Q U 'S x v a v u ~ °0 0 0 ~ 0 0 0 0 V - 119 - ~ V V 7 vi 7 00 M o0 N^ O N D` M~ h M O N ~ vl vl ~ O~ ~D a0 M O t~ vt r 01 N 1~ r N R ~ D A N O^ N o0 V M M t~ M On N V N ~n N^ M M A co O~ D\ m r O O m O vi h N r n oo ^ O N N D\ V N~ r~ N~ b 00 D\ M ~D V M M M Q1 ~ F. 6. h M D\ V 00 M N N 7 ~O OO N 00 7 M M ~O M h 00 ~ N N~ N N ^ N N z ~ 69 fA y O ~ ~ O v) vl h vl vl vl v1 vt O vt vl vt v1 V1 v1 V1 vt G, O ~ W W 00 00 0o a0 0o h - 00 00 00 op o0 00 00 vt ~~ss co~o~o~o: a; v; o: vi ono: o: ova: o: o: a;~ F i d a0 V1 a O~ N ~n T ul aA Dv vi t~ D1 N O M o0 N w D a 00 a r 00 N ~O O M 1~ O ^ ~O v1 ~O N N O ~p ,Q O N N M N h N 0^ M ^ O h 00 vi N vi D\ r~ v X C N D\ N N O t~ vt vi vi vi 1~ ~ r N h ~O a0 7 'R ~ ~ iE o0 D\ D` V ~D o0 O M t~ N N N h O o0 vi ~p F' ~ P N~ r V N vi N M O h V N ~n M 00 M N h z N ~ L" A ~ ~ h h h~~ h h h h~ h h h ^ 07 CO ~ O7 W ~ % Vl 07 O7 ~ ~ ~ CO G7 Vl - ~ 69 P 0\ ~ T Q\ ~ O~ O~ vi 0` D\ O~ ~ T O. D\ O~ vi m ~ ~ V3 69 ~O O. h O ~ N ^ 00 D1 b M N vt v~ O v1 N vi 00 O ~ v1 ~p ~O N N 1~ O M ~D h 1~ ~ v1 vi N D\ u ~C C D` 00 O~ v1 00 ^ 1~ P O r b ~ b N r N ~ r ~ L~ 'O h h W W D\ ~ r~~ h ~ b M N r O 00 M ~D j ? C N D\ T ^ 00 ~D M 00 N O 1~ O of 00 N wl M ~ iy F' ~j N b 7 ^ 1~ N M 00 V1 V' N OO l~ ~ ^ y O 7 ~ OJ 69 ~ 69 ~ N ~ E C 4~ C O O C U w ~ N A N y ttl O C C .D ~ OD H c ~ d o o. E O T p N a N C ~ C~ 00 ~ U n. CC v a; is m ,Q `v K a~i d io A `v y ~ o v is ~ ro 3 ~ o w p~~~ m 3 m E c E E N y~ a° o E A E y ~ a'~i °u d a.~ A P: E c' c E o..E A-°.3 E c' ~ E ~ c c a o o '9 m o o c a o o o`u o o A d H ~ o o F :o o o ~ ~ c - I2~- Chart 4 COUNTY OF HAWAII Assessed Value of Real Property Last Ten Years (In Thousands) $14,000,000- ?Land ~ B Buildings $12, 000, 000 $10, 000, 000 $8, 000, 000 $6,000,000-~ $4,000,000 i i i i i. $2,000,000 j i $0 ~ 'x,. ",g~' y~,r : ~ a i 6 :gig: H~~.,- A: 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Unaudited -see accompanying accountants' report. 'I2~- Table 8 COUNTY OF HAWAII Principal Taxpayers June 30, 2004 Percentage 2003 of Total Assessed Assessed Taxpayer Business Valuation Valuation BP Bishop Estate Trustees Land trust $428,030,800 2.7°.6 Mauna Kea Development Corp. Hotels/Dev. 238,141,700 I.5% WB Kukio Resorts LLC Developer 190,704,200 1.2% Global Resort Partners Hotel 156,732,600 1.0% Liliuokalani Trust Estate Land trust 143,313,700 0.9% FHR (ML) Hotel Holdings LLC Hotel 128,678,600 0.8% Mauna Lani Resort Inc. Ho[els/Dev. 102,923,900 0.7% 1250 Oceanside Partners Developer 78,528,600 0.5% Kaupulehu Makai Venture Ho[els/Dev. 74,396,800 0.5°ro RWH Ina Hotel 54,723,400 0.4% $1,596,174,300 10.2% Note: Gross valuation at January 1, 2003: $15,605,696,000 Unaudited -see accompanying accountant's report. -122- Table 9 COUNTY OF HAWAII Computation of Legal Debt Margin June 30, 2004 Total assessed value $12,891,340,580 Limitation as set by the Constitution of the State of Hawaii (A) 1,933,701,087 Amount of debt applicable to debt limit: (B) County general obligation bonds $173,646,000 State Revolving Fund loans 29,497,373 Other debt 1,065,417 204,208,790 Less: Bonds maturing in current fiscal year 11,213,000 SRF loan principal maturing in current fiscal year 2,240,947 Bonds reimbursable by DWS 14,358,648 27,812,595 Total amount of debt applicable to debt limit 176,396,195 Legal debt margin $1,757,304,892 (A) The bonded debt limitation of the County of Hawaii is established at 15% of the total assessed value of all county real property as established for tax purposes on the last tax assessment rolls. (B) The Constitution of the State of Hawaii, as amended in 1978, states that the debt limitation is not applicable to indebtedness incurred under revenue bond statutes; or by a public enterprise when the only security for such indebtedness is the revenues of such enterprise; or of indebtedness incurred under special improvement statutes when the security for such indebtedness is the properties benefited or improved or the assessments thereon; or, under certain conditions, to certain types of general obligation bonds issued by the County or State of Hawaii. Unaudited -see accompanying accountant's report. -123- G l0 ~ D\ M ~ ~ OM 7 00 ¢ v d a m r c a rn rn o 0 0- Z F Z m ~ A 0 U v N A W ~ d ~ 'O y z~ a w° v o e e v o o e v o ~ O~ y~ O M V M M ~O ~O wl b R ~ ~ C: m ~ N G 0.~ c ~ r+ _ ~ O 6i ~ r r N O a ON yrj ran CT n' C '9 r r r M N 7 N ~O a0 ~ ~ 'fl ~ ~ d vi ~D 7 7 M ~ M ~ ~ D\ > 'D ~ 7-+ O Q~ N O- ~D b r ~D M M M L' m O M 7 M N ~D h ~O o0 ~ ~ o .D Y Q y V A ~ ~ ~ ~ 3 ~ y N L ~ ~ i i ~ ~ ~ ~ i i ~ T~ N ~ ro ~ 4. ~ y a~i o c- N v o o r o. ~n ~ h y~ V r l~ r M N 7 N ~O 00 N ~ N y ro O 'O ~ N R_ M b b O~~ E C¢ Q Q ~ V O d N O~ b b h~ M M M a ,`O.. Op U y m A O M V N b vii ~O Q E p v v+ O ~ p O Q h ~O v~pi r V b O O 000 ~ .D ~ a`ai _ C C ~ Y~ ~N 00 V1 N T~ M M M~ N d V C ~ ¢ ~ ~D ~O N ~ 0~0 O O ~ 00 ~ 00 ~ D O O W 0 0 0 0 a` D\ O N ~ A D U ~ R A z ~ i'a a c ~ C r ~o 00 ~n o r M v M ~ c u~ ~ C o M N 7~ a` r oo rn N¢ o u y c n. ~ m ~ a M ri ~ ~ o ego" z ~ ~o ~ o a ~ u m a° ¢ w S R vi ~D r o0 a\ O N M V v m N D` P D` a D\ O O O O O rn o` rn rn a` 0 0 0 0 0 ¢ m U a ~ry, r1" N N N N N ro C - 124 - Table 1 I COUNTY OF HAWAII Ratio of Annual Debt Service Expenditures For General Obligation Bonded Debt To Total General Governmental Expenditures Last Ten Fiscal Years Ratio of Debt Total To[al Service to General Fiscal Debt General Governmental Year Principal Interest Service Expenditures Expenditures 1995 5,335,443 6,245,235 11,580,678 139,831,035 8.3% 1996 5,327,414 6,067,082 11,394,496 140,225,931 8.1% 1997 5,984,439 7,597,939 13,582,378 153,420,338 8.9% 199A 6,422,996 7,724,699 14,147,695 158,376,171 8.9% 1999 7,793,319 7,481,465 15,274,784 156,703,788 9.7% 200(1 8,688,267 7,693,992 16,382,259 156,081,429 10.5% 2001 8,903,342 8,259,317 17,162,659 165,47Q,877 10.4% 2002 9,390,749 8,311,406 17,702,155 185,140,709 9.6% 2003 10,976,887 8,332,183 19,309,070 194,621,907 9.9% 2004 11,606,621 9,119,626 20,726,247 209,166,968 9.9% Unaudited -see accompanying accountant's report. -125- Table l2 COUNTY OF HAWAII Demographic Statistics Last Ten Fiscal Years Fiscal Per Capita School lJnemployment Year Population Income Enrollment Rate A 1994 136,284 17,710 30,164 10.8% 1995 138,537 18,521 28,188** 10.2% 1996 139,726 18,842 30,497** 9.9% 1997 141,848 18,650 30,599 10.2% 1998 143,135 19,648 30,715 9.6% 1999 142,390 20,324 30,926 8.7% 2000 148,677 * 21,409 30,193 6.7% 2001 152,083 22,431 29,792 6.8% 2002 154,794 23,547 29,785 5.7% 2003 158,423 N/A 29,483 6.3% (A) Calendar year. Sources: * 2000 Census (all other population figures as estimated by U.S. Census Bureau, Federal-State Cooperative Program for Population Estimates). Public school enrollment only. Other data from County Department of Research and Development. Unaudited -see accompanying accountant's report. - 126 - M L. - 0 ~ Q` V M V1 00 r N vl ~ 00 v N r O vt N M~ N h M ~ ~ O 00 O N ~D oo M lD ~p t~ M F ~ = or+ o- v a~ rn° v O N N N M vi V > ~y ~ R 00 e0 00 ~O vi N o0 N 1~ ~ ~p ~ O ~ ONO ~ 00. ~ ~ V v"i V Y 't0 a z - - - - - N E ~ T w o w o °o 0o v ~n o o vi v ~o v ~o ° c - ~O m D\ M h ~p vi N v1 0 00 u ° o- ~n ~n a, v r o ~ o °o V C 2 ~ o v° v o~ oho Q N - _ c ro ~ ~ O U ~ o a Q w A N ~ ° N H ` a~?F' O N Q U } E p, N-~ O N T N N ~O ~D ~ Q A O O O ~/1 M M M N M M M M O C w C = V z m i° O ~ ii r c ` c H A F. ~ v rn v o, G o v a, a, rn N ~ y (d ~ Q\ O 00 ~O M op ~p O ~n p, v NN 00 00 ~ O\ ~O M N O b N O: W R 00 ~ 00 M Y1 h O ~D Vl N O G O~ C O N~ M M- O N ~ ~0., LLLL6 O~ O ~ N N - - c~j r- ~ y m d O 'z ~ ~ y C C O A L v P r O O o0 a\ M O h oo C p, ~ C ~ 3 ro N N M o0 ~ Q\ b O~ O v T O ~ O M V H V L~ N- M M ~y O U ~ :o v ~ °a o~ o ~ ~ n ~ ~ E ~o ~ y 00 Dv OO ~O M N N OA Pl Q O C Oq ~ N 00 00 OO 00 Op 00 00 00 O~ X 4. O C L.~ A N A ~T y U O E- N v id O. ro N N O h O v1 00 O ~D ~D ~ G. r V a\ - N~ 7 N~ ~O ~ ~D N j O N M T V M M N V1 Vt O V O ~ U E o~ ~o e m °o v°`i o N a ~ ro v ° M M M M M M~ V M M ~y U U N L ~ y V cCi ~ A N ~ y a~~ a U O°~. O O O O } O~ D` D\ d\ P D\ O O O N O N C « ~ -I2~- Table 14 COUNTY OF HAWAII Miscellaneous Statistical Data June 30, 2004 Date first charter adopted June 1968 Form of government Mayor/Council Area in square miles 4,028 Miles of streets (County only) 903 Number of street lights 8,949 Fire protection: Number of stations 19 Number of fire fighters and officers (exclusive of volunteer fire fighters) 315 Police protection: Number of stations g Number of substations 3 Number of police officers 374 County water service: Number of consumers 38,016 Average consumption in gallons per day 25,467,243 Miles of water lines 1,899 Miles of sanitary sewers (County only) 53 Number of building permits issued: Building permits 4,418 Electrical permits 3,896 Plumbing permits 1,907 Sign permits 46 Recreation and culture: Number of parks 119 Number of gyms and recreation centers 38 Unaudited -see accompanying accountant's report. - 128 -