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HomeMy WebLinkAboutMIN GOREDC 2021/04/06 2020-2022 Committee on Governmental Operations, Relations, and Economic Development 6th Session Hawaii County Building 25 Aupuni Street Hilo, Hawai i April 6, 2021 CALL TO The regular meeting of the Committee on Governmental Operations, Relations, ORDER: and Economic Development was called to order at 10:31 a.m., in the Council Chambers, Hilo, by Ms. Heather L. Kimball, Chair. ROLL CALL: Present: Ms. Heather L. Kimball, Chair Ms. Ashley L. Kierkiewicz, Vice Chair Mr. Aaron S. Y. Chung, Member Ms. Maile Medeiros David, Member Mr. Holeka Goro Inaba, Member Mr. Matt Kaneali`i-Kleinfelder, Member Ms. Rebecca Villegas, Member Mr. Herbert M. "Tim" Richards, III, Member (came in later) Absent& Excused: Ms. Susan L. K. Lee Loy, Member STATEMENTS The Chair directed the Committee to proceed to the next order of business, FROM THE Statements from the Public on Agenda Items. PUBLIC ON AGENDA ITEMS: (There were none.) CHR. KIMBALL: We'll go ahead and close public testimony. Moving to the Order of the Day, Resolution 75-21. Mr. Clerk. COMMUNI- The Chair directed the Committee to proceed to the next order of business, CATIONS: Communications. (There were none.) GOREDC-6 April 6,2021 ORDER OF The Chair directed the Committee to proceed to the next order of business, Order RESOLUTIONS: of Resolutions. Res. 75-21: URGES THE ADMINISTRATION TO CONDUCT A STUDY TO ADDRESS THE LACK OF AVAILABLE AND AFFORDABLE PROPERTY INSURANCE FOR RESIDENTS OF LAVA ZONES 1 AND 2 Requests the Department of Finance to investigate and explore all possible mechanisms, including a captive insurance company, to provide affordable property insurance to "High Risk"properties within Lava Zones 1 and 2, and provide its findings by October 31, 2021. Reference: Comm. 178 Intr. by: Mr. Kaneali`i-Kleinfelder Motion to Approve: Mr. Kaneali`i-Kleinfelder moved to recommend adoption of Res. 75-21. Seconded by Mr. Inaba. CHR. KIMBALL: Go ahead, Council member. MR. KANEALI`I-KLEINFELDER: Thank you, Chair. Okay, as you've all had time to read Res. 75-21, I'll just sum it up real quick. March 1st, I received a letter from Tracy Kim. She's an agent at the American Mutual Group. It was submitted as a"pinkie"this morning to your documents in your pink labeled file (see Comm. 178.1). Summary of the letter basically just states that residents, mainly in the 96778 zip code, you know, after the eruption in 2018, we're seeing premiums, for just homeowners' coverage for property, that does not include hurricane insurance or anything else; for just a basic dwelling coverage of $350,000, an annual premium for insurance at about$4,500. What I'm hearing is that this may increase again. I also came to understand that only one agency, HPIA or Hawaii Property Insurance Association, is underwriting policies for Lava Zones 1 and 2. Other insurance companies have basically made the statement that almost the entire Island of Hawai`i is Lava Zone 1 or what they consider Lava Zone 1. And then another portion being Lava Zone 2. What it really comes down to is residents of Hawaii Island, specifically in Puna where we've had, you know, decades of eruptions and some pretty major catastrophic losses, are seeing extremely high rates from an insurance agency that was created by State Law to offer affordable insurance, or at least available insurance. Page 2 GOREDC-6 April 6,2021 As good social policy, it is our responsibility to at least look into or study what options we have so that we can provide, if anything, a lower form of insurance for residents there. I mean we're looking at close to $100 million in funding to recover, to rebuild in Puna. And insurance is one of those basic things that's required for homeowners in the area. And just last night, I was contacted by someone thanking me for bringing this forward because she's at a loss as to what to do. And when homeowners' insurance becomes a deciding factor whether you can or cannot live in a home that you've lived in your whole life going forward, that's a hard decision for people to be facing. And as we discuss whether or not people want to buy out or be bought out of their property, I think a major deciding factor is, can they afford insurance? Can they insure their home going forward? So to me it fits very well with the plan going forward with this voluntary buy-out program from HUD (U.S. Department of Housing and Urban Development). So I brought this forward again,just good social policy. This is what we do, and this is something that we can do. The step that needs to be taken now, which is what I'm pushing in this resolution, is to at least come to an understanding of what that looks like. If we're going to cover insurance rates; if we're to look at it as a captive insurance company? If it looked more like the Hawaii Hurricane Relief Fund? How it would work, but you know, as far as I know there's no insurance experts on this Council today. But the only person who would really know this information would be an actuary. And so the wording actuarially study is to have an insurancesomeone, you know, well known or respected in the insurance field run a study to understand what that risk looks like for the County. And we live in an amazing place. And coupled with that amazingness is a high amount of risk in some areas. I wouldn't say that just Puna is prone to lava flows. We've seen lava flows come down toward Hilo. I know that parts of Maile David's district as well as recent flows coming down towards the Waikoloa area. We really are an amazing and unique island. And with that there's an inherent risk. People understand that risk and it's a part of life for us. And there are many people who still choose to live in Lava Zones 1 and 2 despite knowing those risks. And I think that going forward this is just kind of a necessary understanding that we need to have as far as what we can do as a County to help, if anything. But again, it comes down to understanding what the risk is for the County and what it looks like. What kind of funding; what kind of payments that could be? I mean just run through all the different the numbers to better understand. Page 3 GOREDC-6 April 6,2021 So that's what's in front of us today. I appreciate your thoughts and your comments on the matter. I yield for now Chair just to hear any other comments from the Council members. And then we also have Deanna Sako here who we discussed this with previously. And I look forward to hear input as well, Deanna. And I think your main concern was risk. And understood, but I think for us we also have to take care of the people of Puna as we begin to rebuild. So with that I yield. Thank you, Chair. CHR. KIMBALL: Thank you, Council member. Before I take this to discussion, I'd like to invite Director Sako to come forward and make any comments if you'd like. (Note: At this time, Finance Director Deanna Sako came forward to address the members of the Committee.) MS. SAKO: Good morning. Thank you for this opportunity. I think no one disagrees that we all care about the people of Puna and this is, you know, an important factor. But you know,the State is the one that has the insurance commissioner, and insurance actually falls under the State. I'm not sure if they've been contacted yet to see, you know, what can happen and what we can do. But you know, I did see the section that Council Member Kaneali`i-Kleinfelder pointed out that the County can create a captive insurance program, but it's really a conflict to other sections of the HRS (Hawai`i Revised Statutes)which are very limiting to what the County can invest its funds in. So I mean, obviously, we can have Corporation Counsel continue to look at that. But you know, I did talk to our Risk Manager and we're also concerned that perhaps the intention of that captive insurance company was to insure the risk of our own County properties, not necessarily the properties of others. So, you know,there's definitely some contradictions in the HRS that we want to continue to look at. But and then maybe I misunderstood the article that was in the paper, but just to clarify that none of the HUD money would be able to be used for anything like this. You know,their money cannot be used in Lava Zones 1 and 2 in any way, shape, or form. So I just wanted to clarify that. And if I misunderstood, I apologize, but I just wanted to get that all on the table. But I'm happy to answer any questions you might have. CHR. KIMBALL: Thank you, Director. Any discussion? Council Member Chung? Page 4 GOREDC-6 April 6,2021 MR. CHUNG: Yeah, you know, Deanna, you kind of hit all of the issues on the head, you know, because those were the things that I was thinking about too. But just from your perspective, what would this study look like if you did embark on conducting a study, what do you think it would look like? MS. SAKO: You know, I can't really envision. I know I heard the work actuarial study, I guess, you know,to determine the risk factors I actually would have to look at the lava, the lava history, you know. We don't know if the eruption may hit tomorrow or 25 or 30 or 60 years from now. None of us really know that, and so I'm not sure how the actuary is going to get concrete numbers. You know, everything with actuaries is the likelihood. And so I don't know how they would get comfortable with doing something like that. I'm not even sure if you could find someone. MR. CHUNG: I'll get to the actuarial aspects with my next question, but I'm just saying from your perspective, and this is of course, only urging the Finance Department to conduct a study. But if you were to do a study, do you have any idea as to how it would look or you have no idea? MS. SAKO: I have no idea right now. MR. CHUNG: Because it is kind of vague. Second question regarding the actuary. Even if we did go that route, how much would that cost? Do we have an appropriation for that? MS. SAKO: We do not have an appropriation for anything like that right now. And it would be, I would think quite large. You know, we participate statewide just to do actuarial studies for like our ERS (Employees Retirement System) and health plans. But that's a little different and something they do annually. This is the first time, I think, anything like this would be done. MR. CHUNG: Okay, because one of the questions I had, you know. I mean it would seem to make sense to task the Finance Department because you guys deal with money and all those other things. But I really was wondering which department would be capable of doing this, right? Mr. Kaneali`i-Kleinfelder stated that no one on the Council, you know, has that skillset. And I don't really know if anyone at the Administration has that skillset. MS. SAKO: No not specifically. Page 5 GOREDC-6 April 6,2021 MR. CHUNG: But having said that, you know, I will support the resolution. But I'm going to make a proviso, though. It's going to be a token support. This is not, no offense to anyone here, but this is not good social policy. You know, I've heard that word, Band-Aide about three times today. I don't view this resolution as being solid social policy. But it's something that should be addressed at some level, whether it's County, whomever that may be. More appropriately at the State level. I can see urging the State to take a real hard look at this, right? But I'll support it, and you guys do whatever you guys want with it. Thank you. CHR. KIMBALL: Thank you. Any further discussion? Council Member Kierkiewicz. MS. KIERKIEWICZ: Thank you, Chair. And thank you Matt for elevating this issue so we can have the dialogue at Council. I mean we saw with the 2014 and 2018 flows insurance for Lava Zones 1 and 2 skyrocketed. And so the folks that are able to afford are buying homes with cash. And we're really limiting the pool of individuals that are able to buy because there's this additional $5,000 plus cost to purchasing a home. My wondering is, you know, because of what Finance Director Sako shared and Councilman Chung, about our County not necessarily having the expertise or capacity please consider an amendment to this resolution that directs the Hawaii State Commission because they have the regulatory and policy-making function around insurance to do the study. I've taken a look at their annual reports, 2015, 2016, 2019, 2020, all mention this exact issue. And so I think it would be very appropriate for this body to send that agency a resolution directing them to do further study. I think it's beyond the capacity and ability of Finance, no offense. You guys do an excellent job for County related activities. And I know that we're in budget, and there's going to be a lot of work ahead of us to appropriate and spend the American Rescue Plan money. So I think best use of time and energy would be focused on an amendment directing the State Commissioner to do this work. Thank you, I yield. CHR. KIMBALL: Council Member Richards? MR. RICHARDS: Yeah, thank you. Thanks, Matt. I think this is an issue, and you know, we've seen this previously with earthquakes, with flooding, with hurricanes. This is problematic for our State and our County, specifically because we're the one with the volcano. Page 6 GOREDC-6 April 6,2021 That being said, though, I appreciate what Aaron just talked about, the financial side of it. And I agree with Ashley what you just said. I like the fact that we better study this. But I don't know if we're the right entity to actually study this. And so I like the fact that we need to put this on the agenda. We need to put it on the radar, but I think we need to direct the State to do this on the bigger scale, because we're not going to be able to fund this going forward, and that's my concern. And we talked about the Lava Zone. I think Matt, you made a comment about some insurance companies view this as almost Lava Zone 1. If you read the difference between Lava Zones 1, 2, 3, it's a statistical difference. You know, lava flow in 200 years or whatever the case may be. I mean I get it from a statistical standpoint, but the reality is we have higher risk areas and lower risk areas. And we have to come up with some sort of meaningful way to address that. Paradoxically, the more affordable housing is in the Lava Zone area 1 and 2. So now we're going to make it unaffordable because they can't afford the insurance. So I like the idea, but I think maybe we need to engage on a bigger level for the review. I will support it, but I think we need to engage it on a higher view because quite frankly, I think Finance is going to be a little bit taxed for, every pun intended on that by the way. Little bit taxed as far as getting our County business done, and I think this is a bigger conversation, but I like you bringing it up. Chair, I yield. CHR. KIMBALL: Thank you. Any other comments? Council Member David. MS. DAVID: Thank you, Chair Kimball. And thank you, Deanna, for clarifying that because I think I have to agree that this should be under the jurisdiction of the State. And the only reason I'm saying that is, before the 2018 eruption and more so, in South Kona where I live, I'm about a mile from the edge of Lava Zone 2. And because of that, my insurance rate is just the same as Lava Zone 1. And I had a hard time finding an insurance company that would insure for a reasonable amount. After the eruption it went sky high. I believe the State is the one, according to my insurance adjuster, that they have to abide by the designation, whoever designates the zones, which has not been touched in years. And so, realistically, my question is South Kona in Lava Zone 2? That's so far from the active volcano, but if you look at what Mr. Richards says, this whole island, you know. But I think we are the rural areas of South Kona and Puna are being unfairly assessed as far as getting insurance. So this needs to be addressed on the State level, and whether they actually revisit the designation, or more realistic designation of these zones according to what's happened in the last 40, 50 years, maybe, I'm not sure how that's done. But it's all a State level jurisdiction matter. Page 7 GOREDC-6 April 6,2021 So I agree that something needs to be done and maybe Mr. Kaneali`i-Kleinfelder, given our discussion today will entertain some of the suggestions that we're making, because it really needs to go to the people who have authority on this matter. So thank you, I yield. CHR. KIMBALL: Thank you. Council Member Chung. MR. CHUNG: Yeah, thank you. You know,just listening to everybody it's very apparent that this is a very important issue to many affected people. But the importance of getting all of these concerns on the record is so that if we come back in October, and Administration really has nothing, at least we understand why. Because there's no specific guidelines as to why the Finance Department is tasked with this. And second, what we're looking for, you know. I just don't want you guys being the fall people. But it is important, and whatever we can do to work towards getting this resolved favorably, that's something we need to do. We've got to put our heads together, of course. And I think Ms. Kierkiewicz was right, we should direct this, all of our efforts towards the State, because they are primarily responsible for that area, you know, insurance specifically. Thank you. CHR. KIMBALL: Thank you, Council member. Any further comments? Go ahead. MR. KANEALI`I-KLEINFELDER: Thank you, Council, for your comments. Deanna, I mean by Code, by HRS we can create a captive insurance company. That's clear. And we also have the ability to make funds and do what we so choose. Another option of this and the point of me bringing this up was to discuss something like a Hawaii Hurricane Relief Fund, which basically achieves the same goal. But more so than anything is asking the Department of Finance, I think, not so much as it's being stated today, as to do the study but to find someone to do the study. We can't do anything until we understand what's going on. If the State can take that on for free, well then beautiful. But the point being residents right now cannot afford to buy a home or insure their home in Puna because they can't afford an extra $400 a month as an insurance rate. And understandably there is a risk involved in living in Puna, we understand that. But if that is their choice, that is their choice. Page 8 GOREDC-6 April 6,2021 And if we look at providing people the opportunity to rebuild or to have a voluntary buyout of their property, one thing they have to understand is what's it going to cost to live in their home going forward. If they don't know because insurance rates as provided by the State, which is HPIA (Hawai`i Property Insurance Association), is fluctuating or can go up to $6, $7, $8,000 a year. That's just a huge cost and Puna is low income already. We were severely impacted by Hurricane Iselle, by the eruption. Going forward, these are the kind of things that people need to know. You need to know what your bill looks like going forward. And also if you're going to be bought out, what that looks like. It's just an integral piece of information. My point of asking the Finance Department—and I wouldn't ask Parks and Rec., I wouldn't ask Public Works. You guys understand the financial capability of our County. And the actuary would be the one doing the study. The reason why, because they understand what the market looks like. They understand what the risk factor is; what it would cost, what it looks like. Is it a complete devastation of Puna again in 20 years? Nobody knows. But we can't do anything and we cannot proceed. We can push on the State until we know what the numbers look like. If we don't know the numbers then we're just blind. And in some of our previous discussions with Doug Le and our Lava Recovery Team, they don't know what the insurance market looks like. They're asking me, where did you get this information? You know, who's saying what? What I'm getting right now is that HPIA is the only one providing insurance unless you were grandfathered in. And more so, any insurance provider can actually walk away from the market if they so choose. There's a lot of State codes that I came to learn that require companies to provide or not drop more than five percent of their renewals. There's a lot of things to protect the people of Puna, but one thing I'm not seeing is affordable and available insurance. And so I mean if we're going to strive and succeed, and we're going to rebuild Puna and we're realistic about that, insurance is a major piece of information that we need to know. So we can choose to push it off to the State. We can choose to say it's not our deal, but at the same time, if we don't understand just the basic numbers of what's going on, then we're blind. And you can't make a decision based on no information. So I would hope that this body can see that what we need to do, which is what it sounds like, people understand there's a reason for this and it's a good policy. But more so, we need the information so we can make a decision. If it's bad, if we cannot handle, if there's too much risk involved, okay. If it looks good and there's something that we can do Page 9 GOREDC-6 April 6,2021 CHR. KIMBALL: Please summarize Matt, thank you. MR. KANEALI`I-KLEINFELDER: Then we can go from there. So,previous discussion, thank you for your time. Just before I wrap it up, is there anything that holds us back that you found so far? I mean you mentioned some things, the State Code and in County Code. MS. SAKO: Right, so I mean we can continue to have Corporation Counsel look at that. But you know, money is what it's going to come down to and how much are we willing to spend. MR. KANEALI`I-KLEINFELDER: Okay. Thank you. CHR. KIMBALL: Thank you, Council member. Thank you, Director. I think it's been made pretty clear by the full body that we all see genuinely the need to support our neighbors in Puna. And I can't imagine having to deal with that insurance bill every month. You know, I'm thankful to Council Member David and Council Member Richards for bringing up a little bit of the question about the zones and how those are specified. You know, that's obviously something that needs to be looked into and considered with all of this. I share my colleagues' opinions that this is probably best handled at the State through the Insurance Commissioner. And also to take into consideration the concern that there is a monopoly in any kind of insurance. Whether it's homeowner's insurance, or business insurance, or any number of areas where we have specified insurance, we do have very limited options. And that is of great concern because those costs can get inflated. So that would be another component of this that I think needs to be considered. I think it's something that we actually, as much I think that the Finance Department does a wonderful job on so many things. You are going to be very limited, not only with our own budget process but also with the next round of Federal funding and potentially the whole infrastructure package coming in addition to that. This is the kind of thing that could have in my mind a lot of unintended consequences if not done well. And even just in the reporting of information. And so I would really encourage, as some of my other colleagues have, an amendment to this that would be request at the State level to folks that are actually tasked with this responsibility. With that, any further comments or follow-up? Alright thank you, we'll go ahead and move to the vote. All of those in favor of moving this resolution to the full Council with a favorable recommendation please say "aye." Page 10 GOREDC-6 April 6,2021 Vote on Res. 75-21: The motion to recommend adoption of Res. 75-21 was (Approved) carried by the following voice vote: Ayes: Committee Members Chung, David, Inaba, Kaneali`i-Kleinfelder, Kierkiewicz, Richards, Villegas, and Chair Kimball— 8. Noes: None. Absent: Committee Member Lee Loy— 1. Excused: None. BILLS FOR The Chair directed the Committee to proceed to the next order of business, ORDINANCES: Bills for Ordinances. (There were none.) ADJOURN- There being no further business, at 10:59 a.m., Mr. Richards moved to adjourn MENT: the meeting. Seconded by Ms. Villegas and carried by the following voice vote: Ayes: Committee Members Chung, David, Inaba, Kaneali`i-Kleinfelder, Kierkiewicz, Richards, Villegas, and Chair Kimball— 8. Noes: None. Absent: Committee Member Lee Loy— 1. Excused: None. CHR. KIMBALL: Everybody enjoy lunch. Mahalo. Approved: , IIA5(to I lo'bi JAUltt s. eather L. Kimb 1, Chair ( ate) ernment Operations, Relations, and Economic Development Committee HK/dt Page 11