COM 0734.004 2010-2012 - Laserfiche WebLink

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rpl;� +,,'. William T.Takaba ��r Managing Director William P.Kenoi Mayor --''t _ Walter K.M.Lau +••J♦. ' Deputy Managing Director County of Hawai`i 25 Aupuni Street • Hilo,Hawai`i 96720 • (808)961-8211 • Fax(808)961-6553 KONA: 74-5044 Ane Keohokalole Hwy.,Bldg.C • Kailua-Kona,Hawai`i 96740 (808)324-4444 • Fax(808)323-4440 7 July 12, 2012 -,~� Members of the County Council - ,:-7 County of Hawai`i 25 Aupuni Street Hilo, HI 96720 Re: Bill 262,Draft 2—Amending Chapter 2,Article 4,Section 2-12.4,Hawai`i County Code,Relating to Fund Balance Pursuant to Section 3-12 of the Hawai`i County Charter, I am disapproving Bill 262, Draft 2, and returning it to you. This bill adds a subsection(f)to Section 2-12.4, which requires that any Fund Balance in excess of $5 million be applied to the post employment benefits account until fifty percent of the"actuary recommended payment"has been made. After reviewing the bill, I have a number of concerns. FISCAL STABILITY AND RESPONSIBILITY The Fund Balance is an important reserve that protects the County from the financial impact of unanticipated events. It can provide funding for unanticipated expenditures that are not covered by other reserves, such as the Budget Stabilization Fund and the Disaster and Emergency Fund. The Fund Balance is a safety net that allows the County to withstand a variety of fiscal difficulties that could occur. And it is this flexibility that makes the Fund Balance so important to bond rating agencies and investors, and why the Government Finance Officers Association(GFOA) recommends that between 10%- 15%of annual operating expenses be available in the Fund Balance. The Hawai`i County Code, Section 2-220(b), states: "The council hereby establishes a policy to accumulate between five to fifteen percent of the general fund total expenditures based on a combination of the fund balance and the budget stabilization fund." This underscores the importance the County Council has placed on having adequate reserves. It is a policy consistent with the recommendations of the GFOA and bond rating agencies. A Fund Balance of$5 million represents less than 2%of our current General Fund operating expenses of $291 million. To limit the Fund Balance to less than 2% in order to make a voluntary OPEB payment threatens the County's liquidity and is fiscally irresponsible. Comm. No. 34, County of Hawaii is an Equal Opportunity Provider and Employer. Ref.To: Ref. Date I