HomeMy WebLinkAboutRES 164 Draft 01 2022-2024 SY os'' '
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COUNTY OF HAWAII STATE OF HAWAI I
RESOLUTION NO. 164 23
A RESOLUTION PROPOSING THE ESTABLISHMENT OF A WATER SYSTEM
IMPROVEMENT DISTRICT FOR IKI PLACE, KOHANAIKI HOMESTEADS.
WHEREAS, it has been brought to the attention of the Council of the County of Hawai`i
(the "Council")that the water distribution system for Iki Place, Kohanaiki Homesteads (the
"Subdivision"), located at Kohanaiki,North Kona, Hawai`i, is not built to County standards; and
WHEREAS, on October 5, 2016, pursuant to Section 12-10(a), Hawai`i County Code,
the Council adopted Resolution No. 634-16, directing the Manager-Chief Engineer of the
Department of Water Supply "DWS",to prepare and submit the Manager's Report on the
proposed establishment of a water system improvement district, known as the "Iki Place Water
System Improvements" and the costs of design and installation of a public water delivery system
for the Improvement District; and
WHEREAS, Communication No. 187, as issued by the Manager-Chief Engineer,
submitted for the Council's consideration the Manager's Report dated March 10, 2017,, a copy of
which is attached hereto and incorporated herein as Exhibit A; and
WHEREAS, DWS initiated an application to the United States Department of
Agriculture (the "USDA") for grant and loan funding by the USDA Rural Utilities Service
("RUS"); and
WHEREAS, DWS caused to be prepared a Preliminary Engineering Report for the Iki
Place Water System Improvements dated July 26, 2022, and prepared by Foresight Engineering
& Design, LLC., a copy of which is attached hereto and incorporated herein as Exhibit B; and
WHEREAS, a Letter of Conditions from the USDA Department of Agriculture dated
August 25, 2022, was received by DWS, a copy of which is attached hereto and incorporated
herein as Exhibit C; and
WHEREAS, the Letter of Conditions states that the Iki Place Water System
Improvements will provide significant benefits to the health, safety, and welfare of the residents
of the Subdivision and that the estimated construction, acquisition, and installation costs of the
Improvement District(collectively,the "Project Costs") are $1,100,000; and
WHEREAS, the Letter of Conditions includes verification that DWS's application for up
to $825,000 of RUS grant funds and$275,000 of RUS loan funds for the Improvement District is
being considered by the USDA, subject to the conditions specified therein; and
WHEREAS, the total amount of RUS grant and loan funds, is sufficient to pay the
estimated cost of the proposed Improvement District (as further discussed herein) and, in view of
the potential benefits of such funding, DWS is proceeding with the actions necessary to satisfy
the conditions specified in the USDA Letter of Conditions in order to obtain a firm commitment
of the RUS grant and loan funds for the Improvement District; and
WHEREAS, public meetings were held with respect to initiation of the proposed
Improvement District at Council Chambers on September 20, 2016 and October 5, 2016, which
meetings were attended by residents of the Subdivision; and
WHEREAS, upon consideration of the community interest expressed for the proposed
Iki Place Water System Improvements, the findings, conclusions, and recommendations set forth
in the Preliminary Engineering Report and the potential benefits of the available RUS grant and
loan funds,the Council has determined to proceed with further actions regarding the potential
establishment and funding of the Iki Place Water System Improvements; now,therefore,
BE IT RESOLVED BY THE COUNCIL OF THE COUNTY OF HAWAII that
pursuant to Section 12-10, Subsection(c) of the Hawai`i County Code, it proposes the making of
the improvement described herein based on the following:
1. Certain Findings and Determinations. The Council hereby ratifies and confirms
Resolution No. 634-16, and approves and adopts the findings, conclusions, and
recommendations specified in the Preliminary Engineering Report dated July 26, 2022. Without
limiting the generality of the foregoing,the Council concurs with the findings and conclusions
specified in the Preliminary Engineering Report to the effect that the establishment of the
Improvement District will provide significant benefits to the health, safety, and welfare of the
residents of the Subdivision, including:
a. The installation of underground waterlines, constructed and installed in
accordance with DWS standards, will eliminate the need for private catchment systems,
alleviate potential leakage problems associated with long overland pipes currently serving
a portion of the Subdivision, and provide residents with a reliable water supply and
regular water pressure; and
b. The installation of fire hydrants will afford a greater measure of public
safety and homeowner security in the Subdivision, and may potentially result in lower
fire insurance premiums for owners within the Subdivision.
In consideration of the foregoing, the Council further finds, in accordance with Section 12-10(i),
Hawai`i County Code, that the creation of the Improvement District encompassing the
Subdivision, and the construction, acquisition, and installation of a water system for the
Improvement District, all as contemplated in this Resolution, is in the public interest.
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2. Proposal to Establish Improvement District. The Council proposes the creation of
the Improvement District, which shall encompass the Subdivision, and the construction,
acquisition, and installation of a water system for the Improvement District, upon the terms and
conditions set forth in the Manager's Report, including the following terms and conditions:
a. Special Improvements to be Opened, Constructed, or Improved. The
special improvements shall be for the design, construction, acquisition, and installation of
a public water system for the Improvement District consistent with applicable DWS
standards, which shall be owned, operated, and maintained by DWS. The special
improvements shall include the removal of all existing meters and laterals within the
Improvement District, and the installation of meters for each currently existing
assessment unit within the Improvement District.
b. No Acquisition of Land Required; Required Easements. The construction
and installation of the water system for the Improvement District will not require the
acquisition of land. However, an easement over the privately-owned subdivision roads
will be required for maintenance and operation of the water system. In addition, an
easement or other agreement to use and occupy an area within the existing roadway right-
of-way will also be required for a portion of the water system.
c. Material to be Used. The materials to be used in the construction and
installation of the special improvements are set forth in the Preliminary Engineering
Report, and include, without limitation,the following:
i. Approximately 1,150 linear feet of 8 inch ductile iron waterline
ii. Two fire hydrants
iii. Two Type "A" laterals
iv. Eight Type "C" laterals
v. Removal of existing service laterals
vi. Pavement restoration
d. Proposed Assessment Unit; Method of Assessment; Minimum Number of
Installments.
i. Assessment Unit. "Assessment unit" for purposes of the
Improvement District shall mean a duly subdivided parcel of land or
condominium unit bearing a unique tax map key number.
ii. Method of Assessment.
(1) As used in this Resolution, "Net Project Costs"means the
Project Costs, less any amounts which reduce the actual costs of the
special improvements to the County. By way of example, assuming the
Project Costs to be $1,100,000 as set forth in the Manager's Report, and
further assuming an RUS grant of$825,000 to be applied against the
Project Costs,the Net Project Costs would be $275,000.
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(2) Each assessment unit existing as of the date that
assessments begin to accrue on assessment units within the Improvement
District(the "Commencement Date") shall be subject to an assessment
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calculated by dividing the Net Project Costs by the number of assessment
units within the Improvement District as of the Commencement Date.
iii. Minimum Number of Assessments. The minimum number of
assessments shall be five (5) annual, or sixty (60) monthly installments of
principal.
e. Maximum Term. The maximum term of the bonds to be issued to
represent unpaid installments (the"Bonds") shall be as the Director of Finance shall
determine in the Director of Finance's reasonable judgment; however, such term shall not
exceed thirty-five years (35) years following the date of issuance thereof
f. Maximum Rate of Interest. The rate of interest to be borne by the Bonds
shall be as the Director of Finance shall determine in the Director of Finance's reasonable
discretion; provided, however, that such interest shall not exceed three and twenty-five
one hundredths percent (3.25%).
g. Maximum Premium. The premium to be paid on the advance payment of
installments or the call and redemption of any Bond prior to its maturity shall be as the
Director of Finance shall determine in the Director of Finance's reasonable judgment;
provided, however, that such premium shall not exceed three percent(3%).
h. Maximum Amount of Reserve Fund. The Director of Finance may
establish a reserve fund for the Bonds;provided, however,that the amount of such
reserve fund shall not exceed the maximum annual debt service requirements on the
Bonds.
i. General Boundaries of Improvement District. The Improvement District
shall be comprised of all assessment units located within the Subdivision, comprised of
TMKs 7-3-019-002 through 020, excluding 7-3-19-11 which is the road lot, and includes
7-3-19-37, which is not part of the Subdivision.
j. Maximum Estimated Units of Assessment. The current estimated
maximum number of assessment units within the Improvement District is eighteen(18).
Assuming Net Project Costs of$275,000, the anticipated assessment per assessment unit
will be $15,278.
3. Assessed Tax Valuation. The Real Property Tax Division of the Department of
Finance has confirmed that the current assessed tax valuation of the assessment units is
$2,471,200 in total 2022-23 land value and$4,546,600 in 2022-23 building value, which is at
least twice the estimated Net Project Costs of the water system for the proposed Improvement
District. Accordingly, the proposed Improvement District meets the qualifying criteria specified
in Section 12-10(h), Hawai`i County Code.
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4. Facilities Connection Charge. Owners of assessment units who are not presently
customers of DWS shall pay the applicable facilities connection charge upon connection to the
completed special improvements. This charge will not apply to owners who already have service
from DWS or have made prior payments of the charge to DWS.
5. Future Increase in Assessment Units. In accordance with the provisions of
Section 12-30(c), Hawai`i County Code, in the event of an increase in the number of assessment
units in the Improvement District resulting from subdivision, annexation, conversion to
condominium property regime or otherwise, the Department of Finance shall reallocate the
outstanding assessments within the Improvement District among the assessment units subject to
such outstanding assessments, including the resulting new assessment units.
6. Provisions Regarding Combination Hearings.
a. The Council determines that the public hearings relating to the special
improvements and the establishment of the Improvement District provided for under
Sections 12-10 and 12-27 of the Hawai`i County Code shall be combined, as permitted
under Section 12-28 of the Hawaii County Code.
b. The Council finds that although Section 12-28 of the Hawaii County
Code contemplates that the Council, in its resolution proposing to make the
improvements shall direct the Manager-Chief Engineer to prepare documents and data as
provided in Sections 12-18, 12-19, and 12-27 of the Hawai`i County Code, and further
contemplates that the Council shall request the Manager-Chief Engineer to furnish final
detail plans and specifications for the proposed improvements as provided in Section
12-20 of the Hawai`i County Code, the Manager's Report already contains such
documents, data, and detailed plans and specifications.
c. The Council further finds that the Manager's Report,together with the
Preliminary Engineering Report dated July 26, 2022, as prepared by Foresight
Engineering & Design, LLC provide sufficient and comprehensive documentation
relating to the plans and specifications for adequate and appropriate conduits, pipes,
service laterals, fire hydrants and other appurtenances necessary for the water supply and
distribution of the proposed special improvements.
d. In light of the findings set forth in Paragraphs 6.b and 6.c above, the
Council determines that, as provided by Section 12-28 of the Hawai`i County Code:
i. The direction by the Council to the Manager-Chief Engineer for
the preparation of the documents and data as provided in Sections 12-18, 12-19,
and 12-27 of the Hawai`i County Code, and the request by the Council that the
Manager-Chief Engineer furnish detailed plans and specifications for the
proposed special improvements as provided in Section 12-20 of the Hawai`i
County Code, shall be deemed to have been made; and
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ii. The delivery of the Manager's Report shall be deemed to have
complied with such directions and fulfilled such requests.
e. The Council hereby preliminarily approves the aforementioned
documents, data, and detail plans and specifications.
f. A public hearing on the proposed improvements shall be held not more
than sixty (60) days after the adoption of this resolution and not less than fifteen(15)
days after the first publication thereof in at least one newspaper of general circulation in
the County of Hawai`i. Copies of the notice shall also be posted at a public place in the
district in which the proposed Improvement District is located at least ten(10) days prior
to the public hearing. The County Clerk shall assure that affidavits of publication and
posting of the notice shall be filed with the Council on or before the date of the hearing.
BE IT FINALLY RESOLVED that the Clerk of the County of Hawai`i shall transmit
copies of this resolution to the Honorable Mayor Mitchell D. Roth; Finance Director Deanna
Sako; Corporation Counsel Elizabeth Strance; Real Property Tax Division Tax Administrator
Lisa Miura; Department of Water Supply Manager-Chief Engineer Keith Okamoto; Water Board
Chair Dwayne Mukai; Hawai`i State Director Chris Kanazawa, USDA Rural Development;
Bond Counsel Brian T. Hirai, McCorriston Miller Mukai MacKinnon LLP; and County Clerk
Jon Henricks.
Dated at Kona , Hawai`i, this 21st day of June , 20 23 • -
INTRODUCED BY:
(fl" /iXCet'' /4eet
COUNCIL MEMBER, COUNTY OF HAWAI`I
COUNTY COUNCIL ROLL CALL VOTE
County of Hawaii AYES NOES ABS EX
Hilo, Hawai`i ' EVANS X
GALIMBA X
I hereby certify that the foregoing RESOLUTION was by INABA X
the vote indicated to the right hereof adopted by the COUNCIL of the KAGIWADA X
County of Hawaii on June 21, 2023 .
KANEALI`I-KLEINFELDER X
KIERKIEWICZ X
ATTEST: KIMBALL X
LEE LOY
X
VILLEGAS X
7 0 2 0
104J4'%.
Reference: C-271/FC -53
TY CLERK CHAIRPERSON&PRESIDING OFFICER RESOLUTION NO. 164 23
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DEPARTMENT OF WATER SUPPLY • COUNTY OF HAWAII
-_ ''• ;,43;„..a 345 KEKUANAO'A STREET, SUITE 20 • HILO, HAWAII 96720
FNAWa ;r' TELEPHONE (808) 961-8050 • FAX (808) 961 -8657
COUNTY CLERK
March 14. 2017 COUNTY OF HAWAII
RECEIVED
Time Z �155 !°"^ H
Date MAIL 1 4 Mr—
Honorable Valerie T. Poindexter. Chairperson,
and Members of the Hawai'i County Council
25 Aupuni Street
Hilo, l-lawai'i 96720
Dear Honorable Chair Poindexter and Council Members: •
Subject: Iki Street Water Improvement District
Manager-Chief Engineer's Report
Kohanaiki, North Kona, Hawaii
Attached for your review and action is the Manager-Chief Engineer's Report detailing a.project for the
installation of a water system for the properties along Iki Place, as requested by Hawai`i County
Council Resolution No. 634-16.
l'he attached report represents collaborative efforts on the part of the Department of Water Supply and
the Department of Finance.
Please do not hesitate to call-me at 961-8050 if you have any questions or if I may be of further
assistance.
Sincerely yours,
•
Keith K. Okamoto. P.
Manager-Chief Engineer
RQ:dmj
Att. Manager-Chief Engineer's Report lbr Iki Place Water System Improvement District,
Kohanaiki, North Kona. Hawaii
copy - (w/cnc.) I lonorable Harry Kim, Mayor
(w/enc.) Water Board, County ofllawai'i ��
Comm: No.
•
R ..'. Ref. To: pL .
Ref. Date_ MAR 2 2 2Bf7
. . , Water, Our!lost (Precious W esource. . . `I(a Wai.A `lane . . .
The Department of Water Supply is an Equal Opportunity provider and employer. EXHIBIT A.
IKI PLACE WATER IMPROVEMENT DISTRICT
Manager-Chief Engineer's Report
llepartment of Water Supply—County of Hawaii
March 10,2017
This report was prepared for Hawaii County Council Resolution No. 634-16. pursuant to Hawaii County Code,
Chapter 12, Article 2,Subsection 12-10(11
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Department of Water Supply-County of Hawai`i
MANAGER-CHIEF ENGINEER'S REPORT
Iki Place Water Improvement District
Kohanaiki, North Kona, Hawai
March 10, 2017
1. Introduction 3
A. Location 4
B. Purpose and Need 4
2. Character and Extent of Proposed hnprovements 4
3. Proposed Method of Assessment 5
4. Land and Easements to be Acquired 5
5. Recommended Materials 5
6. Improvement District Boundaries 5
7. Estimated Cost of the Improvement 6
8. Necessary Plans, Data, and Detail 6
EXHIBITS
Exhibit A. Location Map
Exhibit B. Proposed Improvement District Boundaries
Exhibit C. Preliminary Design of Iki Place Water Improvements
Exhibit D. Proposed Assessment Roll for Iki Place Water Improvement
Exhibit E. Detailed Project Cost Estimate
1. Introduction
This report has been prepared in response to Hawaii County Council Resolution No. 634-16,
Draft 1, adopted October 5, 2016 ("Resolution"). The Resolution directed the Manager-Chief
Engineer of the Department of Water Supply ("DWS")to prepare and submit to the Council a
report containing the information required by Hawai`i County Code Chapter 12, Article 2,
Subsection 12-10(a)as follows:
(1) Preliminary data concerning the special improvement proposed to he opened,
constructed, or improved;
(2) The general character and extent of any improvement to he proposed;
(3) The proposed assessment unit and method of assessment;
(4) Whether any new land will he necessary to he acquired, and the estimated cost
thereof and the proportion of the cost which should be borne by the County;
(5) The materials recommended to meet the conditions of the improvement;
(6) The boundaries of the proposed improvement district and any subdistricts or zones
therein as to which different portions of the cost of improvements should he charged:
(7) The estimated cost of the improvement, the portions of the cost to he borne by the
County, and the portions of the cost to be assessed against the assessment units specially
benefited with the maximum unit of assessment to he made against each assessment unit
to he assessed;and
(8)All necessary plaits and other data, details, and specifications for the unprovements-
and any other matters or details intended to apply thereto.
The proposed improvement district, initiated by the Hawaii County Council, is for the design and
installation of a water system for lki Place, located at Kohanaiki, North Kona("Project")that will
meet current State of Hawaii, Water System Standards, 2002 as amended, for the County of
Hawaii ("DWS Standards"). The DWS will own, operate, and maintain the system. The
proposed improvements consist exclusively of a water system including the incidental restoration
of roadways, meeting the definition of a"water system improvement district" under Hawaii
County Code(HCC) Chapter 12, Article 1, Subsection 12-1.
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A. Location
Iki Place is located west of Mamalahoa Highway and south of Hualalai Vista Subdivision,
within the ahupua'a of Kohanaiki, North Kona District, island and County of Hawaii
("Project Area")(see Exhibit A). The subdivision was approved in 1962 and currently
consists of 18 lots ranging from 7,632 sq. ft.to 10,089 sq. ft. The current county zoning over
the entire subdivision including the roadway is A-3a(Agriculture, 3 acre lot size minimum).
There are I5 lots with an existing dwelling and an active account for water service. The
subdivision was created prior to the enactment of the County Subdivision Code requiring
water system improvements. Therefore, each lot obtained water service from the DWS water
system from meters located at the intersection of Mamalahoa Highway and Hale Pule Road
(also known as "Church of God Road"), approximately 700 1.f. mauka from Iki Place.
B. Purpose and Need
Each of the 15 lots within the Project Area has an existing service from the existing DWS
water system on Mamalahoa Highway above the subdivision through its own individual water
meter. These lots rely on customer water lines that traverse along Hale Pule Road and along
Iki Place. As these meters do not front the lots, they are considered "Out of Bounds" where
the customer is responsible for maintaining their water line fronting and/or traversing
neighboring properties. Furthermore, there are currently no fire hydrants located along Iki
Place.
2. Character and Extent of Proposed Improvements
As the lots are "non-conforming" to the existing county zoning,the requirements of the water
improvements will be based on use and land area size, which is similar to county RS-7,5 zoning
(Residential Single, 7,500 s.f. minimum lot size).
The Project will he installed entirely within the existing private roadway, Iki Place and along
portion of Aniani Street. The proposed water system improvements would service 18 lots within
the Project Area (see Exhibit B). An easement will be required over the private roadway for
maintenance and operation of the water system improvements, which will need to be dedicated to
the Water Board of the County of Hawaii.
In order to meet current DWS Standards for the RS-7,5 zoning, installation shall include(See
Exhibit C):
a. water mains capable of delivering water at adequate pressure and volume under peak-flow and
fire-flow conditions; minimum diameter of mains shall be 8-inches from an existing 8-inch
waterline within Aniani Street extending approximately 1,125 lineal feet along Aniani Street
to the northern boundary of the southernmost lot(TMK 7-3-019:010)
b. service laterals that will accommodate 5/8-inch sized meters to each lot,
c. existing service laterals must be cut and plugged at the main, and
r)1.1• '�1..; 1!!'\ i ,>I 11 I'I !ti til l'f'll ..... I \• :,} ?: l l '•,1N.1! I 1
d. fire hydrants spaced no more than 600 feet apart and within 300 feet of the driveway or access
for each lot.
The waterline will be installed in trenches to a depth of approximately 3-ft. The roadway within
Iki Place will be restored to the existing pavement width while the roadway within Aniani Street
will be restored over an entire lane (i.e.,not limited to a patch over the trench).
The property owners will be responsible for the improvements on their private property to connect
or re-connect their plumbing to the new service.
3. Proposed Method of Assessment
The"assessment unit"as defined by HCC Chapter 12 is a subdivided parcel or condominium unit
with a unique tax key number. Each assessment unit within this improvement district will he
subject to a special assessment. There arc 18 single-family lots andno condominium p g y c ndominium units. The
unit cost per assessment unit will be determined by equally dividing the total project costs by the
18 assessment units. Each assessment unit will require one(I) unit of water, which is equivalent
to an average use of 400 gallons per day.
Currently. there are three (3) vacant lots that do not have water service, which would also be
required to pay the prevailing Facilities Charge, aside from the special assessment. This charge
however, will be the responsibility of the owner/applicant at the time water service is requested for
and is not factored in to the assessment unit. The current cost for the Facilities Charge is
$1,190.00 for each of the three(3) vacant tots.
4. Land and Easements to be Acquired
Iki Place is an existing private road,and therefore,an easement covering the entire roadway lot
will he required as all of the proposed improvements appear to be able to occur within the Iki
Place lot.
5. Recommended Materials
The recommended materials for the water system improvements shall meet the requirements of
the DWS Standards. Also, all backfill and asphalt pavement materials shall meet the requirements
of the Department of Public Works, County of Hawai`i. The roadway will be restored to the
existing pavement width (i.e., nut limited to a patch over the trench).
The property owners will be responsible for the improvements on their private property to connect
their plumbing to the new service.
6. Improvement District Boundaries
The Improvement District boundaries were determined by boundaries of the subdivision that
created the 18 lots. All of the lots in the proposed Improvement District boundaries will receive a
direct benefit of having their own individual DWS meter front their lot,eliminating the need to
maintain private customer lines within Hale Pule Road as well as along Iki Place,fronting other
•properties. Fire hydrants will behistalled within Lid Place benefitting all 18 assessed lots.(See
•Exhibit D),
7 • Estimated Cost of the Improvement
The total project cest--including planning/preliminary studies,design,t-:anstruction,and
•financing—is estimated as follows:
•iviobilization/Deirobilization $15,000
•Water Systeni $272,600
'Paving Restoration $156,395
Subtotal $443,995
Contingency( 20%)
$88,800
• rotgiconstruction cost • • $532,795
Planning/Preliminary Study/Design 80,000
Environmental Report $ 30,000
Legal.Fees/JD Formation $45,000
1Vlisc( 4r,of Construction Cost) 5,21,3p0
:11'04;t3 0'..k-t'.'74friN1ti4,f,•°,11S111' "
A more detailed breakdown ofthe construction cot is in Exhibit E.
8 • Necessary Plans, Data, and Detail
Al!necessary preliminary plans and other data,and details for the improvements and any other
matters Or details intended to apply there,to are contained in the exhibits listed below and appended
to this report. The information in this report and the exhibits are in such form and contain such
information as is reasonably necessary to inform the owners of assessment units and other
interested parties at least generally of the nature and scope of the proposed water system
intprovernents,to be constructed and installed in the Improvement District,
1. Exhibit A. Location.Map
2. Exhibit 13. Proposed improventent District Boundaries
3, Exhibit C. Preliminary Design of Ild Place Water Improvements
4. Exhibit D. Proposed Assessment Roll for lki Place Water Improvement
5. Exhibit E.Detailed Project CoSt Estimate
Keith Okamoto, P.E.
lvlanager-Chief Ertginwr, Department ofWäter Supply
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EXHIBIT B
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iki Placp Improysrrient District
I(ohanaiki, North',Kona
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PROJECT AREA
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Iki Place Improvement District
Proposed Assessment Roll
Tax Map Key Owner Situs Address Mainling Address
73019002 AUREN,DEAN E 73-4518 IKI PLACE 73-4518 IKI PL
KAILUA KONA, HI 96740-8213
73019003 KORONA,JOHN E JR 110 PLACE 511 S ST ASAPH ST
ALEXANDRIA,VA 22314-4116
73019004 FITZGERALD,NANCY 73-4526 MI PLACE 74-5615 LUH1A ST#A1B
KAILUA KONA, HI 96740-3622
73019005 WILK,RICHARD R IKI PLACE 3825 S OAK RIDGE DR
BLOOMINGTON, IN 47401-8932
73019006 ANDERSON,LEIF JOHN 73-4532 IKI PLACE 73-4532 IKI PL
KAILUA KONA, Hi 96740 _
73019007 OLD,DAVID W IKI PLACE PO BOX 5306
KAILUA KONA, HI 96745-5306
73019008 HECHT,DEBORAH A 73-4540 IKI PLACE 73-4540 IKI PL
,KAILUA KONA,HI 96740
73019009 SHERMAN KIMOTHY K 73-4544 IKI PLACE 74-4910 HAO KUNI PLACE, LOT 5
KAILUA KONA, HI 96740
73019010 THERIAULT,GARY IKI PLACE P 0 BOX 5519
KAILUA KONA, HI 96745
73019011 VARIOUS OWNERS SR-ROADWAY
73019012 RUTLEDGE,DANEEN TRUST 73-4547 IKI PLACE 73-4547 HAWAII BELT HWY
KAILUA KONA, HI 96740
73019013 BEN,GERALD A 73-4543 IKI PLACE 73-4543 MAMALAHOA HWY
KAILUA KONA, HI 96740
73019014 BREHAUT,CHRLSTY ELLEN TRST 73-4539 IKI PLACE 75-5695 ALIT DR STE D
KAILUA KONA, HI 96740-3113
73019015 NANNESTAD,3EFFREY SCOTT 73-4535 IKI PLACE 73-4539 MAMALAHOA HWY
KAILUA KONA, HI 96740
73019016 RUMPEL,JOHN DAVID 73-4531 IKI PLACE 73-4531 IKI PL
KAILUA KONA, HI 96740-8212
73019017 SHORTE,KIRK 73-4529 IKI PLACE 73-4529 11(1 PL
KAILUAKONA, HI 96740-8212
73019018 TAMASHIRO,ERNEST/NAOMI TRST IKI PLACE 4250-C KANAELE RD
KAPAA, HI 96746
73019019 CALDWELL,STEPHEN WARREN 73-4521 IKI PLACE 9000 CROW CANYON RD#132
DANVILLE, CA 94506
73019020 WILSON,RICHARD A 73-4517 IKI PLACE PO BOX 2109
KAILUA KONA, HI 96745
EXHIBIT D
Iki Place Improvement District
WATER SYSTEM INSTALLATION COST ESTIMATE
TMK 7-3-19:011 & 037
ITEM QUANTITY UNITS UNIT PRICE AMOUNT
A. CONSTRUCTION COST
Project Mobilization,and Demobilization. $15,000
Not to exceed$ 15,000 Lump Sum
8"D.I. Pipe 1,125 I.f. $140 $157,500
8"90° C.I. Bend, M.J. 1 ea. $600 $600
B"x8°Ci.Tee, M.J. 1 ea. $850 $850
8"x6"C.I. Tee, M.J. 3 ea. $800 $2,400
6"x6"C.I.Tee, M.J. 1 ea. $750 $750
8"Gate Valve&Box 1 ea. $2,700 $2,700
6"Gate Valve&Box 2 ea. $2,350 $4,700
8"Solid Body Sleeve 2 ea. $700 $1,400
6"Solid Body Sleeve 2 ea. $600 $1,200 I
Fire Hydrant Type B 2 ea. $9,000 $18,000
1"Air Relief Valve Unit&Box 1 ea. $3,000 $3,000
1"Type"A"Lateral 2 ea. $4,000 $8,000
1.5"Type"C" Lateral 8 ea. $4,500 $36,000
Cut and Plug Existing Service Laterals 15 ea. $900 $13,500
Connections to existing waterline 1 ea. $7,000 $7,000
Chlorination and Testing Lump Sum $15,000
Pavement Repair:
2-inch min AC(one-lane)Aniani Street 444 sy $80 $35,520
2-inch min AG(12-ft wide road)Iki Place 967 sy $125 $120,875
CONSTRUCTION COST $443,995
Contingency(20%) 88,800
TOTAL CONSTRUCTION COST $532,795
B. OTHER COSTS
Consultant Fee* 80,000
Planning/Environmental Report 30,000
Legal Fees
45,000
Miscellaneous Costs* 21,300
TOTAL OTHER COSTS 1767300
(TOTAL ESTIMATE IMPROVEMENT DISTRICT COST $709,0951
• Percentage of total construction cost
EXHIBIT E
PRELIMINARY ENGINEERING REPORT
FOR THE
IKI PLACE WATER SYSTEM IMPROVEMENTS
Kohanaiki, North Kona
Island of Hawaii
State of Hawaii
July 26, 2022
Prepared For: Prepared By:
Department of Water Supply Foresight Engineering& Design,LLC
County of Hawaii Palani Greenwell, P.E.
345 Kekuanaoa Street, Suite 20 PO Box 4538
Hilo, Hawaii 96720 Kailua Kona, Hawaii 96745
EXHIBIT B
Table of Contents
1. GENERAL 1
2. PROJECT PLANNING 1
a. Location 1
Figure 2a.1 2
Figure 2a.2 3
b. Environmental Resources Present 3
c. Population Trends 4
d. Community Engagement 4
3. EXISTING FACILITIES 4
a. Location Map 4
Figure 3a.1 5
b. History 6
c. Condition of Facilities 6
d. Financial Status of Existing Facilities 6
e. Water Audits 6
4. NEED FOR THE PROJECT 6
a. Health, Sanitation and Safety 6
b. Aging Infrastructure 6
c. System Operation and Maintenance 6
d. Growth 7
5. ALTERNATIVES CONSIDERED 7
a. Description 7
b. Design Criteria 8
c. Map 9
Figure 5c.1 10
Figure 5c.2 11
d. Environmental Impacts 11
e. Land Requirements 11
f. Construction Problems (Alternatives 2 & 3) 12
g. Sustainability Considerations 12
h. Cost Estimates 13
6. SELECTION OF AN ALTERNATIVE 13
a. Lifecycle Cost Analysis 13
b. Non-Monetary Factors 13
7. PROPOSED PROJECT 14
a. Preliminary Project Design 14
i
b. Project Schedule 14
c. Permit Requirements 15
d. Sustainability Requirements 15
e. Total Project Costs 16
Figure 7e.1 16
f. Annual Operating Budget 16
8. CONCLUSIONS AND RECOMMENDATIONS 17
EXHIBIT A A
EXHIBIT B B
EXHIBIT C C
ii
1. GENERAL
This preliminary engineering report is in support of the proposed Iki Place Water System
Improvements (Project) within the Iki Place subdivision. The Project is intended to be funded
through the United States Department of Agriculture (USDA), Rural Development(RD), Rural
Utilities Water and Waste Disposal Loan and Grant Program. This program funds municipal
projects such as this with a combination of loan and grant monies. The loan portion of the
funding is repaid to the USDA over a specified period by the applicant - in this case the Hawaii
County Department of Water Supply (DWS) -while the grant portion of the funding does not
require repayment. The Hawaii County Council has initiated an Improvement District(ID),
which will ensure the repayment of the loaned funds. The Project is to consist of a new water
system conforming to current DWS standards and is intended to provide adequate fire protection
and reliable and safe potable water service to the residents of the subdivision.
The existing and proposed water system is served by DWS's North Kona Water System. The
sources of supply are groundwater wells and a groundwater shaft. Water is pumped from the
sources to DWS's 0.3 MG Kalaoa Tank which then feeds the system via gravity. Beginning at
the outlet of the tank, an existing 8-inch main runs down an access road and feeds a 12-inch main
in Mamalahoa Highway. This main subsequently supplies an 8-inch main in Akamai Street
which flows to the 8-inch main in Aniani Street where the proposed point of connection for the
new water system lies. A pressure reducing valve station (PRV) located at approximately
elevation 1468 in Akamai Street is set to 55 psi and will provide adequate pressure to the
proposed water system without requiring changes to the existing water system or installation of
additional PRVs.
The proposed water system improvements consist of approximately 1,150 linear feet of new 8-
inch water main, individual 5/8-inch meters for each lot, and two (2) fire hydrants located in
accordance with current DWS standards. The project will also include modifications to the
banks of meters located within the Mamalahoa Highway ROW. Work following installation of
the water system improvements will include re-paving and striping of the portions of the Aniani
Street, Iki Place and Kona Church of God Road ROWs impacted by water system installation as
necessary. Traffic control during all phases of construction will also be required.
2. PROJECT PLANNING
a. Location
The Iki Place Subdivision is a residential subdivision within the ahupuaa of Kohanaiki in the
North Kona District on the Island of Hawaii, State of Hawaii. It is more particularly located on
the makai (west) side of the Mamalahoa Highway and is on the western slope of Hualalai. The
subdivision was created in 1961 and currently consists of 18 residential lots ranging in size from
7,632 to 10,089 square feet. The subdivision is accessed via a single thirty (30) foot wide right-
of-way (ROW) designated Iki Place, which generally runs north-south and is privately owned by
the homeowners association. Elevations within the subdivision range from between 1430 feet to
1450 feet. The average slope is approximately 10%running east to west. There are currently no
water mains, or hydrants within the subdivision, however DWS is currently providing domestic
water service to fifteen(15) of the eighteen(18) lots via 5/8"water meters located along the
Mamalahoa Highway. Small diameter PVC &HDPE pipes run makai (west) down the Kona
Church of God Road ROW to service homes on these lots. The distance from the meters along
Mamalahoa Highway to the most distant homes served is approximately 1,500 feet. There are
1
three (3) vacant lots within the subdivision which are not served by a water meter but are to be
provided with service laterals and meter boxes for future use as part of the project.
The State Land Use Designation for the area is Agricultural, and the County General Plan Land
Use Pattern Allocation Guide Map (LUPAG Map) designation is Low Density Urban. All lots
within the subdivision are zoned A-3a(Agricultural—3 acre minimum), are outside of the
Special Management Area, and shown on the following Island and Location Maps.
0o
HAWAII ISLAND
UPOLU HAM
POINT' s ._
KOHALA
-WAlR°
KAWAAHAE
WAIMEA
PUAIfO. ...WA[KOLOA
HAMAKUA
IKI PLACE,SUBDIVISION MAUNA KEA PEPEEKOPOINT
(PROJECT LOCATION)
noHAY
KEAHOLE (11110 KONA HILO
POINT
MUM
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KEALMEKUA. - KAPOHO
PAHOA
HONAUHAU • VOLCANO PUNA
PACIFIC OCEAN mum LOA KALAPANA
KA'U
kllLOLI'I
WAIOHINU
PACIFIC OCEAN
SOUTH POINT
0 15 .30:
MILES-
IKI PLACE WATER SYSTEM IMPROVEMENTS PROJECT
ISLAND MAP KOHANAIKI,N.KONA DISTRICT
HAWAII ISLAND
Figure 2a.1
2
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IKI PLACE WATER SYSTEM POVENS>
LOCATION MAP KOHANAIKi,N.KONAIMRD ISTRICEMT TPROJECT
HAWAII ISLAND
Figure 2a.2
b. Environmental Resources Present
The average annual rainfall in the project area is approximately 44 inches. Ai flood insurance
rate map (FIRM)panel was not printed for this area. The entire subdivision is located in FEMA
Zone X, areas determined to be outside the 500-year flood plain. There are no wetlands within
the project area.
According to the Soil Conservation Service's 2013 Soil Survey of Island of Hawaii, State of
Hawaii, soils within the subdivision consist of both Puuikaaka and Napuu series soil types. The
Puuikaaka series consists of very cobbly highly organic medial silt loam approximately 2 to 6
inches thick underlain by pahoehoe lava bedrock. The Napuu soils consist of extremely cobbly
highly organic medial sandy loam of up to 15 inches thick underlain by pahoehoe lava bedrock.
There are nine (9) Lava Flow Hazard zones on the Island of Hawaii with Zone 1 being the most
hazardous and Zone 9 posing the least danger. The Project is located in Lava Flow Hazard
Zone4. The area is designated Zone 4 due to the region's steep slopes and the fact that lava
flows could rapidly cover the distance between potential vent sites and the coast.
Survey by a professional biologist has determined that there are no rare,threatened or
endangered (RTE)plant species present or likely to be affected in the area to be disturbed by the
project.No RTE animals were observed during surveys. Impacts to several potentially present
3
RTE animals that range widely in the Hawaiian Islands will be avoided through adoption of
construction-stage mitigation measures that are standard for projects in the State. Coordination
by the USDA with the U.S.Fish and Wildlife Service pursuant to Section 7 of the Endangered
Species Act will formalize the determination of effects to listed species and the mitigation
measures to be adopted.
c. Population Trends
According to the U.S. Census Bureau, Census 2010,the resident population of Kalaoa in the
North Kona district was 9,644 within a land area of 39.48 square miles. There is no information
available as to the number of residents within the Iki Place subdivision. The resident population
of the North Kona District in 2010 was 37,875. The Hawaii County General Plan 2005 projected
the resident population of North Kona would increase to 42,275 by the year 2020,however the
recent 2020 US Census reported an actual population of 43,313.
The population in the Iki Place subdivision is estimated at approximately 45 persons based 3
persons per home. According to the County of Hawaii Real Property Tax site there are 15
residences within the subdivision. The DWS currently provides water to 15 lots. The Project
will provide a 5/8"meter to each lot of record or a total of 18 meters. No further growth is
expected which would use the proposed water infrastructure.
d. Community Engagement
As previously discussed in Section 1 of this report, community members have requested that this
project be undertaken as an improvement district with the help of the Hawaii County Council.
The improvement district was created successfully in 2016 with the support of the local council
representative at the time and considerable support from many of the lot owners who would
directly benefit from the project's success.
3. EXISTING FACILITIES
a. Location Map
Figure 3.a.1 shows the location of the water meters along Mamalahoa Highway which currently
serve the Iki Place subdivision. There are 15 lots within the subdivision and 5 lots outside the Iki
Place subdivision that are currently being served from meters along this section of Mamalahoa
Highway, at its intersection with Kona Church of God Road. The project will involve modifying
the existing meter clusters and removing unused meter boxes once new meters have been
installed to serve the 15 lots within the subdivision. The remaining 5 meters which serve parcels
outside of the Iki Place Subdivision will remain in place.
4
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EXISTING WATER METERS AND IKI PLACE WATER SYSTEM IMPROVEMENTS,PROJECT
LOTS CURRENTLY BEING SERVED KOHANAIKI,N.KONA DISTRICT
HAWAII ISLAND
Figure 3a.1
5
b. History
There was no water service available to the Iki Place subdivision when it was developed in the
early 1960's. Water for the residences was provided by individual rainwater catchment systems.
When the water main within the Mamalahoa Highway was extended mauka of the subdivision,
5/8"meters were installed within the Mamalahoa Highway ROW to serve some of the homes.
PVC lateral lines run cross country from the highway to the residences, some of which are up to
2,000 feet from their respective meters.
c. Condition of Facilities
The existing PVC and HDPE service lines from the meters at the highway run overland to homes
via the Kona Church of God Road ROW and then through neighboring properties. These lines
are subject to leaks and potential contamination should infiltration occur due to pipe failure. It is
often difficult to locate the source of leaks due to the extraordinarily long overland routes of
these lines. Furthermore, there are no fire hydrants within the subdivision to provide fire
protection to the homes within it.
d. Financial Status of Existing Facilities
The Department of Water Supply's Financial Statements are attached as Exhibit A. There is no
site-specific operation eration and income data available.
P
e. Water Audits
In June 2016, Act 169, Session Laws of Hawaii 2016, was signed into law by the Governor.
This Act requires Hawai`i public water utilities to complete and submit validated water audits to
the State of Hawai`i, Department of Land and Natural Resources, Commission on Water
Resources Management, on an annual basis. The water audits for the North Kona Water System
has resulted in a decrease of the Infrastructure Leakage Index over the years since the initial
water audit conducted in 2017.
4. NEED FOR THE PROJECT
a. Health, Sanitation and Safety
The health and safety of the residents of the Iki Place subdivision is jeopardized by the current
sub-standard water system. Potential contamination and leakage problems exist due to reasons
described previously in Section 3c. County water system standards also call for fire hydrants
every 600 feet based on the existing lot sizes and zoning, so that no parcel is further than 300 feet
of a hydrant. No parcel within the subdivision currently falls within this distance, leaving the
homes within it particularly underserved with regard to fire protection.
b. Aging Infrastructure
The existing service lines which serve all 15 homes within the Iki Place subdivision are decades
old in most cases and prone to breakage due to degradation and impact. A visual inspection of
these lines shows many repaired breaks along their respective lengths from years of use and
exposure to the elements.
c. System Operation and Maintenance
The proposed water system will become part of the North Kona water system which consists of
wells and pumping stations. No future extension of the proposed system is anticipated and
6
additional water service to neighboring properties will be available from it. Exhibit B includes
the Operating Budget and Projected Cash Flow for the project.
d. Growth
The proposed water system improvements are intended to provide water service and fire
protection to the 15 homes and 3 vacant lots that currently exist within the Iki Place Subdivision.
All 15 of the existing homes currently have water service via water meters located along
Mamalahoa Highway as described in previous sections. These meters will be relocated to front
the lots they serve once the new water mains and service laterals are installed within Iki Place.
Water laterals for each of the 3 vacant lots will also be installed so that water service may be
easily provided to each one in the future upon request by lot owners. No further growth within
the subdivision or adjacent lots is anticipated.
5. ALTERNATIVES CONSIDERED
Alternatives considered included:
1) Take no action.
2) Construct a private water system funded and maintained by lot owners.
3) Construct a water system to be dedicated to the County of Hawaii within the existing private
Iki Place ROW.
a. Description
Alternative 1 —No Action: Taking no action, while financially and logistically the easiest
alternative available,would not offer any improvement to the current system and force residents
to continue relying on a system of water distribution which is prone to leaks and provides no fire
protection. Alternative 1 was therefore ruled out as a solution to the problem and not considered
further.
Alternative 2—Construct a private water system funded and maintained entirely by lot owners:
Some subdivisions on Hawaii Island elect to construct their own private water systems where
DWS lacks the infrastructure or resources to provide service directly. These private systems
must still be designed to the same standards as county-dedicable systems and are subject to
approval and inspection by DWS. This alternative would involve installing a water main, service
laterals and meters for each lot and two (2) fire hydrants, all of which would flow through a
master water meter tapped into the existing DWS system within Aniani Street. The upfront cost
of this alternative is high and residents of the subdivision are currently unable to finance the
improvements on their own. Furthermore, private systems require maintenance, administrative
work and coordination by the parties which own them. Splitting the cost and burden of owning
and operating a system such as this between only 18 owners is not cost-effective or feasible and
the risk of defaulting on system maintenance and repairs would be great.
Alternative 3 -Extend the existing County Department of Water Supply's system to serve the
subdivision: Alternative 3 is nearly identical from an engineering standpoint as Alternative 2
and would provide a system meeting with DWS standards within the Iki Place subdivision and
Aniani Street. This would include providing water mains within the existing roads, service
laterals to each lot and two (2) fire hydrants, with a direct connection to the existing DWS
system and no master water meter. An easement in favor of DWS would also need to be granted
over the Iki Place ROW for dedication of the water system to DWS. As this system would not
be private, it would not be the responsibility of the subdivision's homeowners to monitor or
7
maintain the system and would become part of the County's municipal system in perpetuity.
Constructing a county-dedicable water system in a small, rural subdivision such as Iki Place also
opens up funding avenues through the USDA RUS Loan and Grant Program and fulfils the intent
of the improvement district resolution established by residents and the Hawaii County Council.
b. Design Criteria
Alternatives 2 & 3 - The water system required for either Alternative 2 or Alternative 3 would
need to be designed in accordance with the County of Hawaii DWS standards found in the Water
System Standards, State of Hawaii 2002, as amended. Road repair and traffic control would also
be required in accordance with County of Hawaii Department of Public Works standards
including Standard Specifications for Public Works Construction, September 1986 as amended.
A breakdown of the water system design calculations for Alternatives 2 & 3 is shown in the steps
below:
1) Determine Design Flow Rate for Proposed System:
The water source for either alternative would be DWS's upper level groundwater wells which
would feed the proposed system by gravity. The average daily water usage per the Water System
Standards is 400 gallons per day per home and the maximum daily usage is 600 gallons per day
per home. Peak hour flow is five times the average daily flow. Flows for the 18 lot subdivision
are estimated as follows:
Average Daily Flow: 400 gpd x 18 lots= 7,200 gpd
Maximum Daily Demand: 600 gpd x 18 lots= 10,800 gpd or 7.5 gpm over a 24 hour period
Peak Hour Demand: 5 x 7,200gpd=36,000 gpd or 25 gpm(round up to 100 gpm)
Peak Hour Flow= 100 gpm at 40 psi residual pressure
Fire Flow= 1,000 gpm
Design Flow= Peak Hour Flow Plus Fire Flow= 1100 gpm at 20 psi residual pressure
Pipelines are to be sized for maximum daily flow plus fire flow with a residual pressure of 20 psi
at the critical fire hydrant and peak hour flow with a residual pressure of 40 psi.
2) Determine Static Pressure at critical points within the Proposed System:
The Water System Standards require that static pressures in domestic service lines be a minimum
of 43 psi (or 100 Ft. of head) and a maximum of 125 psi. Static pressures at critical points in the
system were determined as follows:
Elevation(Overflow) at Kalaoa Tank: 1,815 Feet
Elevation at PRV in Akamai Street: 1,468 Feet
Pressure setting of PRV in Akamai Street: 55psi
Head (Ft.)to Pressure (psi) Conversion: 2.31 Ft./psi
Elevation at point-of-connection in Aniani Street: 1,437 Feet (68 psi static pressure)
Lowest Elevation within Iki Place ROW: +/-1,410 Feet (80 psi static pressure)
Highest Elevation within Iki Place ROW: +/-1,455 Feet(61 psi static pressure)
8
Elevation of highest proposed hydrant: +/-1,450 Feet(63 psi static pressure)
3) Determine Frictional Losses and Flow Velocity for Desiffn Flow:
Using Bernoulli's Equation, frictional or `head' losses may be calculated for a given pipe size,
pipe material and flowrate. Determining head losses during peak hour and design flows was
performed as follows:
Length of 8-inch pipe from PRV to farthest proposed hydrant: +/-2100 Linear Feet(LF)
Peak hour flow head loss for 8-inch DI Pipe at 100 gpm: 0.037 Ft. HEAD/ 100 LF Pipe
Design flow head loss for 8-inch DI Pipe at 1100 gpm: 2.15 Ft. HEAD/ 100 LF Pipe
Head loss during peak hour flow= 0.037 Ft. HEAD/ 100 LF x 2100 LF pipe =0.78 Ft.HEAD
= (0.3 psi)
Head loss during design flow=2.15 Ft. HEAD/ 100 LF x 2100 LF pipe =45.15 Ft.HEAD
= (20 psi)
4) Determine Residual Pressure and Flow Velocities for Peak Hour & Desijin Flows:
Using the data above, flow velocities and estimated residual pressure in the proposed system can
be calculated for peak hour flow and design flow conditions:
Flow velocity during peak hour flow(100 gpm) = 0.83 ft/sec
Peak hour flow residual pressure =highest elevation static pressure—head loss
= 61 psi—0.3 psi (Negligible) =61 psi>40 psi
Flow velocity during design flow(1,100 gpm) =7.02 ft/sec
Design flow residual pressure = static pressure at highest proposed hydrant—head loss
= 63 psi—20 psi (Negligible) =43 psi>20 psi
Maximum velocity in distribution mains (without fire flow) is less than the maximum allowable
velocity of 6 feet per second with a residual pressure of>40 psi.
Maximum velocity in distribution mains with fire flow is less than the maximum allowable
velocity of 10 feet per second with a residual pressure of more than 20 psi.
c. Map
Alternative 2—Figure 5c.1 shows the proposed water system design for Alternative 2. The
proposed layout includes the installation of approximately 1,150 linear feet of 8-inch ductile iron
water main,two (2) fire hydrants, 10 service laterals, 18 water meter boxes and associated
appurtenances. This system would be served by a 6-inch fire service meter(master meter)
tapped into the existing 8-inch DWS main within Aniani Street. This alternative would also
require an easement in favor of the Iid Place Owner's Association within the section of the
Aniani Street ROW which contained the private water system components.
9
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WATER SCHEMATIC PLAN IKI PLACE WATER SYSTEM IMPROVEMENTS PROJECT
(ALTERNATIVE 2) / KOHANAIKI,N.KONADISTRICT
HAWAII ISLAND
Figure 5c.1
Alternative 3—Figure 5c.2 shows the proposed water system design for Alternative 3. The
proposed layout includes the installation of approximately 1,150 linear feet of 8-inch ductile iron
water main, two (2) fire hydrants, 10 service laterals, 18 water meter boxes and associated
appurtenances. This alternative would require an easement in favor of the Hawaii County DWS
within the entirety of the Iki Place ROW for system dedication.
10
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WATER SCHEMATIC PLAN IKI PLACE WATER SYSTEM IMPROVEMENTS PROJECT
(ALTERNATIVE 3) KOHANAIKI,N.KONA DISTRICT
HAWAII ISLAND
Figure 5c.2
d. Environmental Impacts
The water system for both Alternatives 2 & 3 would be constructed within existing roadways.
No environmental impacts to wetlands, floodplains, endangered species,historical or
archaeological resources or other important land resources are anticipated.
e. Land Requirements
The water system for both Alternatives 2 & 3 would be constructed within existing roadway
corridors.
Alternative 2—Tapping into the existing DWS system with a private master meter, backflow
preventer and subsequent 8-inch private water main in Aniani Street, which is county-owned and
maintained,would require the county to grant an easement in favor of the Iki Place lot owners
for maintenance and repairs to those private water system components.
Alternative 3 -The Iki Place ROW is private,therefore the property owners within the
subdivision would be required to grant an easement to the Department of Water Supply for
construction, operationand maintenance of the water system.
11
f Construction Problems (Alternatives 2 & 3)
I. Site space constraints: The Iki Place ROW is narrow at only 30 feet in width and at
several points there are steep cut or fill embankments and existing driveways within it
which will require careful location of meters to avoid the need for rock walls. The
existing pavement is also narrow and crumbling and closure of one lane of traffic will
most likely be required where trenching work is to occur. Access to existing driveways
will need to be maintained so that residents canget in and out of their properties. It is
p P
very likely that the underlying subgrade consists of lava rock which may make trenching
difficult. There are also private water service lines running beneath Iki Place serving
properties below the subdivision which will need to be avoided during construction.
II. Hazardous trees: Several large, invasive trees have been identified within the ROW or
just outside of it. The roots from these trees likely extend under the pavement of the
existing roadway and would be severed during trenching operations. This root damage
may be enough to destabilize the trees and cause a safety concern both during
construction and on into the future. Tree removal will be recommended as part of the
construction work for the project.
III. Construction logistics: Staging of materials and equipment will be particularly
challenging due to the narrow ROW width and the need to maintain access to all homes
along Iki Place during construction. A stockpile and storage area outside of the ROW
will need to be identified and made available to the contractor performing the installation
work.
IV. Overhead utility lines & poles: Several utility poles within the ROW are likely to be
close to the water main trench and may be destabilized during trenching activities.
Temporary bracing or potentially pole replacement may be necessary during
construction. In addition,utility lines suspended from these poles are quite low in several
areas and may need to be rerouted or relocated temporarily or permanently to allow
excavation equipment and trucks to freely travel and work within the ROW without
posing an electrical safety or service risk.
V. Offsite drainage: A visual inspection of the Iki Place ROW revealed an obvious
stormwater runoff issue which occurs at a low point in the roadway,mauka of parcel 004
(see Figure 5c.1). Runoff from upslope collects at this point before crossing the roadway
and continuing down into that parcel. Due to high seasonal rainfall, this drainage channel
could pose a challenge during construction and a hazard to downstream property owners
following project completion. It should be mitigated by installing a permanent drainage
inlet and seepage pit to dispose of stormwater from upstream areas by ground infiltration.
g. Sustainability Considerations
I. Water and energy are closely linked in a water distribution system. Hawaii Island is
home to some of the world's deepest fresh water wells and lifting this ground water to a
usable elevation comes with considerable energy cost. Every drop of water which leaks
out of the local system is not only wasted water but also wasted energy. Improving the
water service to the Iki Place subdivision through either Alternative 2 or 3 will help to
alleviate these inefficiencies in the current system.
II. Selecting Alternative 3 would result in the installation of wireless water meters by DWS.
These meters can be read remotely, leading to faster and more efficient system
12
management and reduced energy usage compared to the current water system. It would
also reduce or eliminate the need for physical meter reading by a DWS employee and
service vehicle.
h. Cost Estimates
Preliminary cost estimates for the project are as follows:
Alternative 2:
Construction Cost: $880,000.00
Other Costs: $105,000.00
$985,000.00
Alternative 3:
Construction Cost: $880,000.00
Other Costs: $219,000.00
$1,099,000.00
Exhibit B includes the estimated annual operations and maintenance costs for both Alternatives 2
& 3. Selecting Alternative 2 would place the burden of these operation and maintenance costs
entirely on the Iki Place homeowners.
6. SELECTION OF AN ALTERNATIVE
a. Lifecycle Cost Analysis
Repairs and maintenance to the systems required for either Alternative 2 or 3 would essentially
be the same, as both systems would require the same components laid out in the same
arrangement. However, over the lifecycle of the proposed infrastructure, a county-dedicated
system(Alternative 3)has a much lower lifecycle cost than a private system(Alternative 2) due
to the simple fact that DWS is better trained and equipped to perform repairs and routine
maintenance to underground water systems than the homeowners within the Iki Place
subdivision Alternative is'therefrre the preferred alternative from a lifecycle cost analysis
perspective.
b. Non-Monetary Factors
The only practicable approach to supplying the Iki Place subdivision with a safe and reliable
source of water is the construction of water lines, laterals, fire hydrants and appurtenances within
existing roadways. Both alternatives 2 & 3 accomplish this,however with limited funding by
homeowners for a private system and limited resources for maintenance and repairs, Alternative
2 is not feasible. Funding assistance provided by the USDA RUS Loan and Grant Program
(Alternative 3)to construct a county-dedicable water system is far more practical and repayment
of the loan portion of the funding would be assured by an existing County Council-approved
Improvement District in accordance with Chapter 12, Improvements by Assessments of the
Hawaii County Code. The creation of the improvement district also clearly demonstrates that
Alternative 3 is preferred by the community.
13
7. PROPOSED PROJECT
a. Preliminary Project Design
The proposed project consists of water lines, laterals, fire hydrants and associated appurtenances.
The system will be designed to the County of Hawaii Department of Water Supply Standards
and will be dedicated to the County upon completion. The water system will be constructed
within existing roadways. Pavement restoration will be required across an entire lane width
(minimum) in the location of the water line trench in Aniani Street and the full width of the
travelled way (+/- 14') within Iki Place. The paving improvement will likely increase the
volume of stormwater runoff generated within Iki Place and it is recommended that a drainage
inlet and seepage pit be installed at a low point within the ROW (as previously discussed in
Section 5.f.V.)to dispose of this excess runoff and protect properties downstream.
The work will generally include but not be limited to:
— Hazardous tree removal
— Utility pole bracing/replacement as necessary
— Installation of a drainage inlet and seepage pit at low point within Iki Place
— 1,150 linear feet of 8-inch ductile iron waterline
— Two fire hydrants
— Eight Type "B" service laterals
— Two Type "A" service laterals
— Miscellaneous valves and fittings
— Demolition of existing service laterals and meter boxes
— Pavement restoration
The new water system will be connected to an existing 8-inch waterline located within the
Aniani Street ROW and extend a new 8-inch line to the end of Iki Place. Water system utility
easements will be granted to the Department of Water Supply over Iki Place.
b. Project Schedule
July 22,2022 -Application, PER and ER to USDA
August 5,2022 -USDA RUS Loan/Grant obligation
November 2022 - Land and Easement Acquisition
January 2023 -Plans and Specifications, and Design Complete
March 2023 - Bid Advertisement
May 2023 - Bid Opening
November 2023 -Notice of Award—Construction Contract
January 2024 -Notice to Proceed—Construction
June 2024 - Substantial Completion
July 2024 - Final Completion
14
c. Permit Requirements
Permits for the proposed work will need to be sought from two government agencies;the State
Department of Transportation(DOT) for minor work within Mamalahoa Highway, and the
Hawaii County Department of Public Works—Engineering Division(DPW) for work within
Aniani Street and Kona Church of God Road.
The area of ground disturbance necessary to complete installation of the proposed water system
is less than one acre and is therefore too small to require a National Pollutant Discharge
Elimination System(NPDES) General Permit for Construction Activities.
No portion of the project lies within any Special Management Areas (SMAs), therefore an SMA
permit will not be required.
d. Sustainability Requirements
I. Improving the water service to the Iid Place subdivision by installing a county-dedicable
water system will help to reduce and eliminate wasted water and the energy required to
pump it from the ground to a usable elevation.
II. Installation of wireless water meters which can be read remotely will lead to faster and
more efficient system management and reduced energy usage compared to the current
water system. These meters would also reduce or eliminate the need for physical meter
reading by a DWS employee and service vehicle.
15
e. Total Project Costs
The itemized cost estimate based on the preliminary design is as follows:
Project: Iki Place Water System Improvements,
Location: North Kona;:Hawaii
Prdiminary Construction Cost Estimate
Item Estimated
Na Quantity Unit Description Unit Cost Item Cost
Water System
1 1 LS Tree removal&site prep $65;000.00 $65;000.00
2 1 LS Mobilization&demobilization $13,800;00 $13;800:00
3 1 LS Site staking&layout $3,496:00 $3,496.00
4 1 LS Probe:existing utility locations $9;329:00 $9,329,00
5 1 LS Saw`cut:exishng:AC pavement $3,450:00 $3,450:00
'6 1150 LF Trench prebreak $105.00 $120,750.00
7 1150 LF Trench excavation and 8=Inch:D.l.pipe installation: $305;00 $350,750.00
8 1 LS Tie intoexisting•8=lncti.D:I.Main(dui anddrop) $5,165.00 $5,165:00
2 EA Type A Service Lateral $2,445:00 $4,890.00
10 8; EA Type C Service'Lateral .$3,030:00 $24;240.00
11. 200 LF t5"copper pipe $33:6.4 $6,728.00
12 40 LF 1"copper $25.50 $1,020.00
13 2 EA Fire hydrant$8,305.00 $8;305.00 ,$16;610.00
1:4 1 EA Air-relief valve$3,410:00 $3,410.00 $3;410.00
15 1 EA 7''aeanout'$3,080,00' $3;080:00 $3;080.00
16 1 LS Remove and reduce existing meter banks(DWS to perform) $1.0,000:00 $10,000.00
17 1 LS System testing&chlorination $9;660`:00 $9;660;00
SUBTOTAL FOR WATER SYSTEM(PLUS 4.712%HI GE TAX) $682,070.93
Repaving and Drainage Improvements :Aniani,Street&.Ild Place:
18 1 EA 8'Drain SumpWI R-40 Cover $17;020;00 $17,020.00
19 14400 SF \_Gold plane&remove dd pavement $6;33 $91,152.00
.20 3700. SF Pavement(2" .Aniani•Street) $6.00 $22;200:00
21 10200. SF Pavement(1-1/2"-Iki;Place) .$4.50 $45,9.00:00
22 1 LS. Road striping 15,520;00 $5,520.00
23 1 LS Repair concrete driveways $7,475.00 $7;475.00
SUBTOTAL FOR REPAVING&DRAINAGE:IMPROVEMENTS(PLU54.712%HI GE TAX) $198,185.26
Other Costs
Design;Survey&Environmental Assessment $148;58300
Legal Fees $40,000.00
Miscellaneous Costs. $30,000:00
SUBTOTAL FOR OTHER'COSTS $218,583:00
TOTAL PROJECT ESTIMATED:CQSTl $1,098,839.19
Figure 7e.1
f Annual Operating Budget
Financial statements for the County of Hawaii Department of Water Supply can be found in
Exhibit A. Operations and maintenance cost estimates can be found in Exhibit B. Water rate
schedules are found in Exhibit C. Financial assistance for this project is expected to be provided
by the (USDA) United States Department of Agriculture Rural Utility Services (RUS) agency.
16
Loan repayment will be through a Hawaii County Council initiated Improvement District
process.
8. CONCLUSIONS AND RECOMMENDATIONS
The Iid Place Subdivision is currently served by a substandard water system which creates health
and safety concerns for the residents. This project will provide safe and reliable water for
consumption and fire protection. Any negative impacts will be temporary and short-term during
the construction of the system.
The residents of the Iki Place have struggled to find a way to construct the much-needed water
system improvements for nearly a decade. Funding provided by the USDA loan and grant
Y p
program will facilitate the construction of this much-needed water system improvement.
It is recommended that the County and the Department of Water Supply move forward with the
Improvement District requirements and apply to the USDA for the grant and loan.
17
EXHIBIT A
Department of Water Supply Financial Statement
A
COUNTY OF HAWAII
DEPARTMENT OF WATER SUPPLY
(A component unit of the County of Hawaii, State of Hawaii)
FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION
WITH INDEPENDENT AUDITOR'S REPORTS
Fiscal Year Ended June 30, 2021
F.4
MIR N&K CPAs, Inc.
ACC OU NTANTS I CONSULTANTS
999 BISHOP STREET,SUITE 2200 I HONOLULU,HAWAII 96813
T(808)524-2255 F(808) 523-2090 I nkcpa.com
COUNTY OF HAWAII
DEPARTMENT OF WATER SUPPLY
(A component unit of the County of Hawaii, State of Hawaii)
TABLE OF CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT 4 - 6
MANAGEMENT'S DISCUSSION AND ANALYSIS 7 - 11
FINANCIAL STATEMENTS
Statement of Net Position 12 - 13
Statement of Revenues, Expenses, and Changes in Net Position 14
Statement of Cash Flows 15 - 16
Notes to Financial Statements 17 -43
REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN
MANAGEMENT'S DISCUSSION AND ANALYSIS
Schedule of Proportionate Share of the Net Pension Liability 45
Schedule of Contributions (Pension) 46
Notes to Required Supplementary Information Required by
GASB Statement No. 68 47
Schedule of Changes in the Net OPEB Liability and Related Ratios 48
Schedule of Contributions (OPEB) 49
Notes to Required Supplementary Information Required by GASB
Statement No. 75 50 - 51
2
COUNTY OF HAWAII
DEPARTMENT OF WATER SUPPLY
(A component unit of the County of Hawaii, State of Hawaii)
TABLE OF CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING AND ON COMPLIANCE AND
OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL
STATEMENTS PERFORMED IN ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS 52 - 53
SCHEDULE OF FINDINGS AND RESPONSES 54 - 55
CORRECTIVE ACTION PLAN 57
3
999 BISHOP STREET,SUITE 2200
N&K CPAs, Inc. HONOLULU, HAWAII 96813
ACCOUNTANTS l CONSULTANTS T(808) 524-2255 F(808) 523-2090
INDEPENDENT AUDITOR'S REPORT
To the Water Board
County of Hawaii, Department of Water Supply
Report on the Financial Statements
We have audited the accompanying financial statements of the County of Hawaii,
Department of Water Supply (Department), a component unit of the County of Hawaii,
State of Hawaii, as of and for the fiscal year ended June 30, 2021, and the related notes
to the financial statements, which collectively comprise the Department's basic financial
statements as listed in the table of contents.
Management's Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with accounting principles generally accepted in the United
States of America; this includes the design, implementation, and maintenance of internal
control relevant to the preparation and fair presentation of financial statements that are
free from material misstatement, whether due to fraud or error.
Auditor's Responsibility
Our responsibility is to express an opinion 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 the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor's
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity's preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of
the entity's internal control. Accordingly, we express no such opinion. An audit also
includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
4
N&K CPAs, Inc.
ACCOUNTANTS I CONSULTANTS
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our audit opinion.
Opinion
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of the Department as of June 30, 2021, and the changes
in its financial position and its cash flows for the fiscal year then ended in accordance with
accounting principles generally accepted in the United States of America.
Emphasis of Matter
Adjustments to Prior Period Financial Statements
As discussed in Note J to the financial statements, certain errors were discovered in
relation to classification of capital asset balances as of June 30, 2020. Accordingly, the
accompanying financial statements have been restated to correct these errors. Our
opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management's discussion and analysis on pages 7 through 11 and the schedules of
proportionate share of the net pension liability, contributions (pension), changes in the net
OPEB liability and related ratios, and contributions (OPEB) on pages 45 through 51 be
presented to supplement the basic financial statements. Such information, although not
a part of the basic financial statements, is required by the Governmental Accounting
Standards Board who considers it to be an essential part of financial reporting for placing
the basic financial statements in an appropriate operational, economic, or historical
context. We have applied certain limited procedures to the required supplementary
information in accordance with auditing standards generally accepted in the United States
of America, which consisted of inquiries of management about the methods of preparing
the information and comparing the information for consistency with management's
responses to our inquiries, the basic financial statements, and other knowledge we
obtained during our audit of the basic financial statements. We do not express an opinion
or provide any assurance on the information because the limited procedures do not
provide us with sufficient evidence to express an opinion or provide any assurance.
5
N&K CPAs, Inc.
ACCOUNTANTS I CONSULTANTS
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
January 21, 2022 on our consideration of the Department'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 solely 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 effectiveness of the
Department's internal control over financial reporting or on compliance. That report is an
integral part of an audit performed in accordance with Government Auditing Standards in
considering the Department's internal control over financial reporting and compliance.
em3-,
Honolulu, Hawaii
January 21, 2022
6
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Fiscal Year Ended June 30, 2021
The Department of Water Supply, County of Hawaii (Department) operates as a semiautonomous
agency charged with the responsibility of operating and maintaining the County of Hewai`i's public
water systems. The Department is a utility enterprise and presents its financial statements using
the economic resources measurement focus and the accrual basis of accounting. This discussion
and analysis is designed to assist the reader in focusing on the significant financial issues and
activities and to identify any significant changes in financial position. Readers are encouraged to
consider the information presented here in conjunction with the financial statements taken as a
whole.
Financial Statements
The financial statements are designed to provide readers with a broad overview of the
Department's finances in a manner similar to a private sector business.
The statements of net position present information on all of the Department's assets, deferred
outflows of resources, liabilities, and deferred inflows of resources, with the residual amount
reported as net position. Over time, increases or decreases in net position may serve as a useful
indicator of whether the financial position of the Department is improving or deteriorating. Net
position increases when revenues exceed expenses. Increases in assets and deferred outflows
of resources, without a corresponding increase in liabilities and deferred inflows of resources,
result in increased net position, which indicate an improved financial position. In the case of the
Department, assets plus deferred outflows of resources exceeded liabilities plus deferred inflows
of resources by $212.1 million, at the close of the most recent fiscal year. This represents a
decrease of$3.9 million, or 1.84% less than the previous year. At June 30, 2021, $235.9 million
of the Department's net position was invested in capital assets (net of related debt), and ($23.8)
million was unrestricted.
The statements of revenues, expenses, and changes in net position present information showing
how the Department's net position changed during the fiscal year. All components of the changes
in net position are reported as soon as the underlying event occurs, regardless of the timing of
related cash flows. Thus, revenues and expenses are reported in the statements for some items
that will result in cash flows in future fiscal periods.
The statements of cash flows present changes in cash and cash equivalents (short-term
investments with original maturities of three months or less from the date of acquisition), resulting
from operating, investing, capital and related financing activities, and non-capital financing
activities.
Notes to Financial Statements
The notes to the financial statements provide additional information that is essential to a full
understanding of the data provided in the financial statements.
Other Information
In addition to the financial statements and accompanying notes, this report also presents certain
required supplementary information concerning the Department's participation in the Employees'
Retirement System of the State of Hawaii (ERS) and the Employer-Union Health Benefits Trust
Fund of the State of Hawaii (EUTF).
7
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Fiscal Year Ended June 30, 2021
Condensed Financial Information
The following are summaries from the Department's financial statements as of and for the fiscal
years ended June 31, 2021 and 2020.
STATEMENTS OF NET POSITION
2020
2021 (as restated)
Assets
Capital assets, net $ 302,506,735 $ 300,269,903
Other assets 48,572,154 52,659,064
Total assets 351,078,889 352,928,967
Deferred outflows of resources
Deferred outflows of resources 10,072,803 10,093,069
Total deferred outflows of resources 10,072,803 10,093,069
Total assets and deferred
outflows of resources $ 361,151,692 $ 363,022,036
Liabilities
Long-term debt $ 67,451,426 $ 66,433,693
Other liabilities 76,550,883 76,578,688
Total liabilities 144,002,309 143,012,381
Deferred inflows of resources
Deferred inflows of resources 5,029,788 3,911,126
Total deferred inflows of resources 5,029,788 3,911,126
Net position
Net investment in capital assets 232,086,655 230,896,241
Unrestricted (19,967,060) (14,797,712)
Total net position 212,119,595 216,098,529
Total liabilities, deferred inflows of
resources and net position $ 361,151,692 $ 363,022,036
8
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Fiscal Year Ended June 30, 2021
Condensed Financial Information (Continued)
STATEMENTS OF REVENUES, EXPENSES,AND CHANGES IN NET POSITION
2020
2021 (as restated)
Operating revenues-water sales $ 50,502,359 $ 49,052,933
Operating expenses 58,171,860 58,942,515
Operating loss (7,669,501) (9,889,582)
Nonoperating revenues 1,271,384 1,475,971
Nonoperating expenses (1,927,397) (1,877,186)
Loss before contributions (8,325,514) (10,290,797)
Contributions in aid of construction 4,346,580 3,202,379
Change in net position (3,978,934) (7,088,418)
Net position at beginning of fiscal year 216,098,529 223,929,317
Prior period adjustment -- (742,370)
Net position at beginning of fiscal year,
as restated 216,098,529 223,186,947
Net position end of fiscal year $ 212,119,595 $ 216,098,529
Financial Analysis
Capital assets, net increased by $2.2 million, or 0.74%, during the fiscal year ended June 30,
2021 (FY2021), due primarily to an increase in accumulated depreciation of$14.9 million, offset
by increases in utility plant in service of $9.5 million and construction work in progress of $6.3
million.
Other assets decreased by $4.1 million, or 7.76%, in FY2021, due primarily to decreases in
investments of$2.0 million.
Deferred outflows of resources decreased by $0.02 million, or 0.20%, in FY2021, due primarily to
a decrease in deferred outflows of resources for OPEB of $0.07 million offset by an increase in
deferred outflows of resources for pensions of$0.05 million.
Long-term debt increased by $1.0 million, or 1.53%, in FY2021, due primarily to bond and loan
repayments of $5.8 million, offset by loan proceeds of $7.2 million, and refunding bond of $4.4
million with new issue of$3.7 million.
9
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Fiscal Year Ended June 30, 2021
Financial Analysis (Continued)
Other liabilities decreased by $0.03 million, or 0.04% in FY2021, due primarily to collective
increases in accrued compensation, customers' deposits, accrued vacation, and net pension
liability totaling $3.73 million offset by collective decreases in accounts and construction contracts
payable, accrued interest payable, accrued workers' compensation, unearned revenue (non
current) and net OPEB liability totaling $3.75 million.
Deferred inflows of resources increased by $1.1 million, or 28.60%, in FY2021, due primarily to
an increase in deferred inflows of resources related to OPEB of$2.0 million offset by a decrease
in deferred inflows of resources related to pensions of$1.0 million.
•
Net investment in capital assets increased by $1.2 million, or 0.52%, in FY2021, due primarily to
an increase in net capital assets of $2.2 million, offset by an increase in long-term debt of $1.2
million.
Total net position decreased $3.9 million, or 1.84%, in FY2021, due primarily to the results of
operations of($3.9 million).
In October 2020, the Water Board approved a 13% rate increase for water consumption and
standby charges that became effective January 1, 2021. Total operating revenues increased by
$1.4 million, or 2.95% in FY2021, due primarily to an increase in water consumption charges of
$1.5 million and standby charges of $1.0 million offset by a decrease in power charges of $1.1
million.
Operating expenses decreased by $0.7 million, or 0.91%, in FY2021, due primarily to a decrease
in power and pumping of $1.4 million offset by increases in general and administrative and
transmission and distribution expenses of$1.0 million.
Nonoperating expenses increased by $0.05 million, or 2.67%, in FY2021, due primarily to a
decrease in interest on long-term debt of$0.28 million offset by an increase in losses on disposal
of property of$0.30 million.
Contributions in aid of construction (CIAC) increased by$1.14 million, or 35.73%, in FY2021, due
primarily to an increase in current year dedications of$0.16 million, the addition to CIAC of$1.60
million for Uplands Subd Ph II offset by decreases in external Federal funding of$0.11 million and
CIAC-Facilities Charge of$0.31 million.
Capital Assets and Debt Administration
As of June 30, 2021, the Department had $302.5 million invested in capital assets, and $67.4
million of long-term debt outstanding.
10
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Fiscal Year Ended June 30, 2021
During 2021, major capital asset additions included:
• $2.3 million for the Kaieie Mauka Facility Improvements.
• $0.1 million for the Kaloko Mauka#1 Booster A&B repair.
• $0.9 million for the Hualalai Deepwell Repair.
• $0.8 million for the Keauohana Deepwell B Repair.
• $0.2 million for the Parker#1 Deepwell Repair.
• $0.2 million for the Honokaa Boosters A&B.
• $0.3 million for the Kulaimano Well Repair.
• $0.4 million for the Olaa Deepwell Repair.
• $0.6 million for the Holualoa Deepwell Repair.
• $0.4 million for the Lalamilo Deepwell Repair.
• $1.0 milllion for the Keahuolu Deepwell Repair.
More detailed information about the Department's capital assets is provided in Note D to the
financial statements.
At June 30, 2021, the Department had outstanding $18.8 million in County of Hawaii general
obligation bonds for public improvements, and $47.0 million in State of Hawaii revolving fund
loans.
As of June 30, 2021, the Department, through the County of Hawaii, maintained an "AA" rating
from Standard & Poor's, an "Aa2" rating from Moody's and an "AA+" rating from Fitch for general
obligation debt.
Currently Known Facts, Decisions, or Conditions
Effective January 1, 2021, water rates increased 13% from the fiscal year ended June 30, 2020.
11
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
STATEMENT OF NET POSITION
June 30, 2021
ASSETS
Current assets
Cash and cash equivalents $ 17,119,629
Investments 18,000,000
Interest receivable 437,619
Trade receivables, less allowance for doubtful accounts of
$1,700,000 8,128,905
Intergovernmental receivables 263,386
Other receivables 245,871
Inventories of materials and supplies 1,438,500
Prepaid expenses and other 50,019
Total current assets 45,683,929
Restricted cash 888,225
Investments 2,000,000
Capital assets
Utility plant in service 538,770,419
Less accumulated depreciation (292,046,560)
246,723,859
Land and rights 5,267,919
Preliminary survey and investigation charges 5,515,581
Construction work in progress 44,999,376
Net capital assets 302,506,735
Total assets 351,078,889
DEFERRED OUTFLOWS OF RESOURCES
Deferred outflows of resources related to pensions 7,488,980
Deferred outflows of resources related to OPEB 2,583,823
Total deferred outflows of resources 10,072,803
Total assets and deferred outflows of resources $ 361,151,692
The accompanying notes are an integral part of these financial statements.
12
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
STATEMENT OF NET POSITION (Continued)
June 30, 2021
LIABILITIES
Current liabilities
Accounts and construction contracts payable,
including retainages $ 5,900,022
Long-term debt, current portion 6,214,530
Accrued compensation 1,961,911
Accrued interest payable 475,544
Accrued workers' compensation, current portion 97,888
Accrued vacation, current portion 629,515
Customers' deposits, current portion 284,487
Total current liabilities 15,563,897
Accrued workers' compensation, noncurrent portion 282,112
Accrued vacation, noncurrent portion 1,400,153
Customers' deposits, noncurrent portion 15,835,180
Net pension liability 35,290,257
Net OPEB liability 14,393,814
Long-term debt, noncurrent portion 61,236,896
Total liabilities 144,002,309
DEFERRED INFLOWS OF RESOURCES
Deferred inflows of resources related to pensions 1,774,106
Deferred inflows of resources related to OPEB 3,073,292
Unamortized gain on refunding of debt 182,390
Total deferred inflows of resources 5,029,788
NET POSITION
Net investment in capital assets 232,086,655
Unrestricted (19,967,060)
Total net position 212,119,595
Total liabilities, deferred inflows of resources
and net position $ 361,151,692
The accompanying notes are an integral part of these financial statements.
13
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
Fiscal Year ended June 30, 2021
OPERATING REVENUES
Water sales $ 50,502,359
OPERATING EXPENSES
Power and pumping 18,416,244
Depreciation 14,934,054
General and administrative 12,007,335
Transmission and distribution 7,470,735
Purification 2,296,296
Maintenance and repairs 1,682,148
Customers' accounting and collecting 1,365,048
Total operating expenses 58,171,860
Operating loss (7,669,501)
NONOPERATING REVENUES
Interest income 381,448
Other 889,936
Total nonoperating revenues 1,271,384
NONOPERATING EXPENSES
Interest expense on long-term debt (1,280,834)
Loss on disposal of capital assets (412,328)
Other (234,235)
Total nonoperating expenses (1,927,397)
Loss before contributions (8,325,514)
CONTRIBUTIONS IN AID OF CONSTRUCTION 4,346,580
Change in net position (3,978,934)
NET POSITION
Beginning of fiscal year, as previously reported 217,335,813
Prior period adjustment (1,237,284)
Beginning of fiscal year, as restated 216,098,529
Net position at end of fiscal year $ 212,119,595
The accompanying notes are an integral part of these financial statements.
14
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
STATEMENT OF CASH FLOWS
Fiscal Year ended June 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers $ 49,503,797
Payments to suppliers for goods and services (22,763,519)
Payments to employees for services (17,758,696)
Net cash provided by operating activities 8,981,582
CASH FLOWS FROM CAPITAL AND RELATED FINANCING
ACTIVITIES
Principal paid on long-term debt (5,833,067)
Debt proceeds 7,206,603
Interest paid on long-term debt (1,610,328)
Acquisition and construction of capital assets (15,224,953)
Cash received from contributions in aid of construction and other 1,316,044
Net cash used in capital and related financing activities (14,145,701)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments (13,000,000)
Proceeds from sale and maturities of investments 15,000,000
Interest received 620,633
Net cash provided by investing activities 2,620,633
Net decrease in cash and cash equivalents (2,543,486)
CASH AND CASH EQUIVALENTS -BEGINNING OF FISCAL YEAR 20,551,340
CASH AND CASH EQUIVALENTS -END OF FISCAL YEAR $ 18,007,854
RECONCILIATION OF CASH AND CASH EQUIVALENTS
TO THE STATEMENT OF NET POSITION
Unrestricted $ 17,119,629
Restricted 888,225
$ 18,007,854
The accompanying notes are an integral part of these financial statements.
15
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawai`i, State of Hawaii)
STATEMENT OF CASH FLOWS (Continued)
Fiscal Year ended June 30, 2021
RECONCILIATION OF OPERATING LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES
Operating loss $ (7,669,501)
Depreciation 14,934,054
Provision for doubtful accounts 202,367
Change in assets, deferred outflows of resources, liabilities
and deferred inflows of resources
Trade and other receivables (1,224,963)
Inventories of materials and supplies 98,855
Prepaid expenses and other (4,903)
Deferred outflows of resources related to pensions (47,272)
Deferred outflows of resources related to OPEB 67,538
Accounts and construction contracts payable,
including retainages (133,533)
Customers' deposits 24,034
Other accrued liabilities 160,709
Net pension liability 3,261,009
Net OPEB liability (1,685,933)
Deferred inflows of resources related to pensions (980,539)
Deferred inflows of resources related to OPEB 1,979,660
Net cash provided by operating activities $ 8,981,582
SUPPLEMENTAL DISCLOSURE OF NONCASH CAPITAL
AND RELATED FINANCING ACTIVITIES
Contributions in aid of construction $ 3,263,419
Amortization of unamortized gain on refunding of debt $ 17,004
Amortization of bond premium $ 242,352
Public improvement bonds were issued to refund debt issued in 2010. The $4,448,051
proceeds were used for the current refunding of $4,403,750 of outstanding public
improvement bonds.
The accompanying notes are an integral part of these financial statements.
16
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE A -NATURE OF ACTIVITIES
The Department of Water Supply, County of Hawai'i (Department) is administered by the
Water Board, which consists of nine members who serve staggered terms of five years in
length. Board members are appointed by the Mayor of the County of Hawaii, State of Hawaii
(County) and are confirmed by the County Council, as required by the County Charter.
NOTE B -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(1) Financial Statement Presentation-The Department is a component unit of the County
(primary government). The accompanying financial statements present only the financial
position and activities of the Department and do not purport to, and do not present the
financial position of the County, the changes in its financial position, or, where
applicable, its cash flows.
(2) Measurement Focus and Basis of Accounting - The Department's financial
statements are prepared using the economic resources measurement focus and the
accrual basis of accounting. Under this method, revenues are recorded when earned
and expenses are recorded at the time liabilities are incurred.
(3) Cash and Cash Equivalents - For purposes of the statement of cash flows, the
Department considers all highly liquid investments with a maturity of three months or
less or money market funds with a weighted average maturity of three months or less
when purchased to be cash equivalents.
(4) Investments - Investments in time certificates of deposits are carried at cost, which
approximates fair value.
(5) Trade Receivables-Trade receivables are recorded at the invoiced amount and do not
bear interest. The allowance for doubtful accounts is the Department's best estimate of
the amount of probable credit losses in the Department's existing trade receivables. The
Department determines the allowance based on historical write-off experience. The
Department reviews its allowance for doubtful accounts monthly. Past-due balances
over 90 days and over a specified amount are reviewed individually for collectability.
Account balances are charged off against the allowance after all means of collection
have been exhausted and the potential for recovery is considered remote.
(6) Inventories of Materials and Supplies - Materials and supplies are stated at cost on
an average cost basis.
(7) Restricted Assets - Unspent bond proceeds that are restricted for purchases of water
system improvements are recorded as restricted assets.
17
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE B -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(8) Capital Assets - Capital assets in service as of January 1, 1950, date of inception of
the Department, were recorded at the cost of the assets acquired by the County for its
water system from January 1, 1924 to December 31, 1949, less accumulated
depreciation to December 31, 1949, as determined by the Department. Assets
purchased prior to 1924 and property acquired by gift or grant prior to 1950 are not
included in capital assets. Additions to capital assets since January 1, 1950 are stated
at cost and include contributions by governmental agencies, private subdividers, and
customers at their cost or estimated cost. The capitalization threshold of assets is $400
with estimated useful lives greater than one year. Construction costs include amounts
for contract work, engineering supervision, and other direct costs and overhead costs.
Preliminary survey and investigation charges represent expenditures incurred to determine
the feasibility of potential water system sites for future development.
Maintenance and repairs and minor replacements are charged to operations. Major
replacements, renewals, and betterments are capitalized to capital asset accounts.
Depreciation is computed using the straight-line method over the following estimated
useful lives:
Distribution mains and accessories 40 years
Structures and improvements 40 to 50 years
Electric and hydraulic pumping equipment 10 years
Services 25 years
Transmission mains and accessories,
hydrants and purification system 40 years
Meters 10 years
Transportation, communication, tools
and office equipment and furniture 5 years
Other equipment 5 to 10 years
Other fire protection plant 25 years
Annual depreciation rates are applied to costs of the various classes of depreciable
assets on the group basis or, as to transportation equipment, to the cost of individual
units of property.
Gains or losses resulting from the sale, retirement, or disposal of capital assets in service
are charged or credited to operations in the year realized.
18
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE B -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(9) Compensated Absences - Employees earn vacation credits at the rate of one and
three-quarter working days for each month of service. Up to 90 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. Both compensatory
time off and vacation credits are converted to pay upon termination of employment.
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, 2021 amounted to
approximately $6,300,000.
(10) Pensions - For purposes of measuring the net pension liability, deferred outflows of
resources and deferred inflows of resources related to pensions, and pension expense,
information about the fiduciary net position of the Employees' Retirement System of the
State of Hawaii (ERS) and additions to/deductions from the ERS's fiduciary net position
have been determined on the same basis as they are reported by the ERS. For this
purpose, employer and member contributions are recognized in the period in which the
contributions are legally due and benefit payments (including refunds of employee
contributions) are recognized when due and payable in accordance with benefit terms.
Investments are reported at fair value.
(11) Postemployment Benefits Other Than Pensions (OPEB) - For the purposes of
measuring the net OPEB liability, deferred outflows of resources and deferred inflows of
resources related to OPEB, and OPEB expense, information about the fiduciary net
position of the Hawaii Employer-Union Health Benefits Trust Fund (EUTF) and additions
to/deductions from EUTF's fiduciary net position have been determined on the same
basis as they are reported by EUTF. For this purpose, EUTF recognizes benefit
payments when due and payable in accordance with the benefit terms. Investments are
reported at fair value, except for investments in commingled and money market funds,
which are reported at net asset value (NAV). The NAV is based on the fair value of the
underlying assets held by the respective fund less its liabilities.
(12) Net Position - Net position represents the difference between assets and deferred
outflows of resources less liabilities and deferred inflows of resources. Net position is
classified in the following components: net investment in capital assets and unrestricted
net position. Net investment in capital assets consists of capital assets, net of
accumulated depreciation, reduced by outstanding debt related to the acquisition or
construction of those assets, less unspent bond proceeds. Unrestricted net position
consists of all other net position not categorized as net investment in capital assets.
When both restricted and unrestricted resources are available for use, generally, it is
management's policy to use restricted resources first, then unrestricted resources, as
they are needed.
19
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE B -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(13) Operating Revenues and Expenses - Revenues and expenses are distinguished
between operating and nonoperating items. Operating revenues generally result from
providing services in connection with the Department's principal ongoing operations.
The principal operating revenues of the Department are fees charged to customers for
providing water services. Operating expenses include the costs associated with
providing water services, administrative expenses and depreciation on capital assets.
All revenues and expenses not meeting these definitions are reported as nonoperating
revenues and expenses.
(14) Contributions in Aid of Construction - Contributions in aid of construction represent
cash or capital assets received by the Department to aid in the construction of
infrastructure assets. It also includes the forgiveness of principal due on state revolving
fund loans that were used to finance the costs of infrastructure needed to maintain the
water system. Contributions in aid of construction are recognized when they are
accepted by the Water Board and when all applicable eligibility requirements have been
met.
(15) Deferred Outflows of Resources and Deferred Inflows of Resources - Deferred
outflows of resources represent a consumption of net position that applies to a future
period and will not be recognized as an outflow of resources (expense) until that time.
Deferred inflows of resources represent an acquisition of net position that applies to a
future period and will not be recognized as an inflow of resources (revenue) until that
time.
(16) Use of Estimates - The preparation of the financial statements in accordance with
accounting principles generally accepted in the United States of America requires
management to make a number of estimates and assumptions that affect the reported
amounts of assets, deferred outflows of resources, liabilities, deferred inflows of
resources and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reporting
period. Significant items subject to such estimates and assumptions include the carrying
amount of capital assets, valuation allowances for trade receivables, valuation of
noncash contributions in aid of construction, accrued workers' compensation, pensions
and postretirement healthcare and life insurance benefits.Actual results could differ from
those estimates.
20
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE B -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(17) New Accounting Pronouncements- The Governmental Accounting Standards Board
(GASB) issued Statement No. 87, Leases. This Statement requires the recognition of
certain lease assets and liabilities for leases that previously were classified as operating
leases and recognized as inflows of resources or outflows of resources based on the
payment provisions of the contract. It establishes a single model for lease accounting
based on the foundational principle that leases are financings of the right to use an
underlying asset. Under this Statement, a lessee is required to recognize a lease liability
and an intangible right-to-use lease asset, and a lessor is required to recognize a lease
receivable and a deferred inflow of resources. The requirements of this Statement are
effective for reporting periods beginning after June 15, 2021. Management has not yet
determined the effect this Statement will have on the Department's financial statements.
The GASB issued Statement No. 91, Conduit Debt Obligations. The primary objectives
of this Statement are to provide a single method of reporting conduit debt obligations by
issuers and eliminate diversity in practice associated with (1) commitments extended by.
issuers, (2) arrangements associated with conduit debt obligations, and (3) related note
disclosures.This Statement achieves those objectives by clarifying the existing definition
of a conduit debt obligation; establishing that a conduit debt obligation is not a liability of
the issuer; establishing standards for accounting and financial reporting of additional
commitments and voluntary commitments extended by issuers and arrangements
associated with conduit debt obligations; and improving required note disclosures. The
requirements of this Statement are effective for reporting periods beginning after
December 15, 2021. Management has not yet determined the effect this Statement will
have on the Department's financial statements.
The GASB issued Statement No. 92, Omnibus 2020. This Statement establishes
accounting and financial reporting requirements for specific issues related to leases,
intra-entity transfers of assets, postemployment benefits, government acquisitions, risk
financing and insurance-related activities of public entity risk pools, fair value
measurements, and derivative instruments. The requirements in paragraphs 6 and 7 of
this Statement are effective for fiscal years beginning after June 15, 2021, while the
requirements in paragraphs 8, 9, and 12 of this Statement are effective for reporting
periods beginning after June 15, 2021. Management has not yet determined the effect
this Statement will have on the Department's financial statements.
21
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE B -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The GASB issued Statement No. 94, Public-Private and Public-Public Partnerships and
Availability Payment Arrangements. The primary objective of this Statement is to
improve financial reporting by addressing issues related to public-private and public
partnership arrangements (PPPs). As used in this Statement, a PPP is an arrangement
in which a government (the transferor) contracts with an operator (a governmental or
nongovernmental entity) to provide public services by conveying control of the right to
operate or use a nonfinancial asset, such as infrastructure or other capital asset (the
underlying PPP asset), for a period of time in an exchange or exchange-like transaction.
This Statement also provides guidance for accounting and financial reporting for
availability payment arrangements (APAs). As defined in this Statement, an APA is an
arrangement in which a government compensates an operator for services that may
include designing, constructing, financing, maintaining, or operating an underlying
nonfinancial asset for a period of time in an exchange or exchange-like transaction. The
requirements of_ this Statement are effective for reporting periods beginning after
June 15, 2022. Management has not yet determined the effect this Statement will have
on the Department's financial statements.
The GASB issued Statement No. 96, Subscription-Based Information Technology
Arrangements. This Statement provides guidance on the accounting and financial
reporting for subscription-based information technology arrangements (SBITA) for
government end users. This Statement(1) defines a SBITA; (2)establishes that a SBITA
results in a right-to-use subscription asset - an intangible asset - and a corresponding
subscription liability; (3) provides the capitalization criteria for outlays other than
subscription payments, including implementation costs of a SBITA; and (4) requires note
disclosures regarding a SBITA. The requirements of this Statement are effective for
reporting periods beginning after June 15, 2022. Management has not yet determined
the effect this Statement will have on the Department's financial statements.
NOTE C - DEPOSITS AND INVESTMENTS
At June 30, 2021, the carrying amount of deposits (cash, time certificates of deposit, and
money market funds) was $38,007,854, with a corresponding bank balance of$38,971,017.
These amounts were fully insured or collateralized with securities held by the County's agent
in the County's name.
22
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE C -DEPOSITS AND INVESTMENTS (Continued)
The Hawaii Revised Statutes (HRS) authorizes the County Director of Finance to invest
Department moneys that are in excess of the amounts necessary for meeting immediate
requirements. The primary objective of the County's investment policy is to safeguard the
principal. The secondary objective is to meet the liquidity needs of the Department. The third
objective is to return an acceptable yield. In accordance with the HRS, the County's
investment policy permits investments in obligations of or guaranteed by the U.S. government,
obligations of the State of Hawaii, federally insured savings and checking accounts, time
certificates of deposit, and repurchase agreements with federally insured financial institutions.
Investments in time certificates of deposits totaled $20,000,000 at June 30, 2021.
Custodial Credit Risk- Custodial credit risk for deposits is the risk that, in the event of the
failure of a depository financial institution, the Department will not be able to recover deposits
or will not be able to recover collateral securities that are in possession of an outside party.
The Department's policy requires deposits to be maintained at financial institutions that are
members of the Federal Deposit Insurance Corporation and for deposits in excess of insured
amounts to be collateralized with securities in accordance with the HRS.
Custodial credit risk for investments is the risk that, in the event of the failure of the
counterparty (e.g., broker-dealer) to a transaction, the Department will not be able to recover
the value of its investment or collateral securities that are in the possession of another party.
The Department's policy provides a list of authorized counterparties as well as minimum
requirements that counterparties must demonstrate in order to be utilized by the Department.
Interest Rate Risk- Interest rate risk is the risk that changes in interest rates will adversely
affect the fair value of an investment. Generally, the longer the maturity of an investment, the
greater the sensitivity of its fair value to changes in market interest rates. One of the ways that
the Department manages its exposure to interest rate risk is by purchasing a combination of
short-term and mid-term investments and by timing cash flows from maturities so that a portion
of the portfolio is maturing or nearing maturity evenly over time as necessary to provide the
cash flow and liquidity needed for operations. The Department monitors the interest rate risk
inherent in its portfolio by measuring the weighted average maturity of its portfolio.
Credit Risk and Concentration of Credit Risk - Credit risk is the risk that an issuer of an
investment will not fulfill its obligation to the holder of the investment. Concentration of credit
risk is the risk of loss attributed to the magnitude of a government's investment in a single
issuer. The Department's policy limits investment options to those authorized in the HRS and
requires the diversification of assets as to issuer.
23
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE D -CAPITAL ASSETS
The following summarizes the Department's capital assets at June 30, 2021:
Amount
Utility plant in service
Structures and improvements $ 201,177,444
Distribution mains and accessories 146,414,763
Electric and hydraulic pumping equipment 73,403,352
Transmission mains and accessories 36,614,323
Services 32,792,603
Purification system 13,384,414
Meters 11,402,561
Hydrants 9,760,517
Transportation equipment 4,583,687
Communication equipment 3,182,341
Office equipment and furniture 2,752,811
Tools and work equipment 1,640,771
Other equipment 1,641,245
Other fire protection plant 19,587
Total utility plant in service 538,770,419
Less accumulated depreciation (292,046,560)
246,723,859
Land and rights 5,267,919
Preliminary survey and investigation charges 5,515,581
Construction work in progress 44,999,376
Net capital assets $ 302,506,735
The following is a summary of changes in capital assets during the fiscal year ended
June 30, 2021:
Balance
July 1, 2020 Retirements/ Balance
(restated) Additions Transfers June 30,2021
Utility plant in service $ 529,212,470 $ 10,636,869 $ (1,078,920) $ 538,770,419
Less accumulated depreciation (277,778,573) (14,934,054) 666,067 (292,046,560)
251,433,897 (4,297,185) (412,853) 246,723,859
Land and rights 5,261,319 6,600 -- 5,267,919
Preliminary survey and
investigation charges 4,926,822 822,977 (234,218) 5,515,581
Construction work in progress 38,647,865 16,639,120 (10,287,609) 44,999,376
$ 300,269,903 $ 13,171,512 $ (10,934,680) $ 302,506,735
24
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE E - LONG-TERM OBLIGATIONS
At June 30, 2021, long-term debt consisted of the following:
Amount
Public improvement refunding bonds ($13,497,500 issued), 2016 Series B,
payable to the County, interest at 3%to 5%, due in semiannual
installments through 2026 $ 8,830,000
Public improvement refunding bonds($6,353,750 issued),2016 Series E,
payable to the County, interest at 2%to 5%, due in semiannual
installments through 2029 5,838,750
Public improvement refunding bonds($3,751,250 issued), 2020 Series C&D,
payable to the County, interest at 5%,due in semiannual
installments through 2029 3,405,000
Public improvement refunding bonds($5,752,612issued), 2007 Series C,
payable to the County, interest at 4%to 5%,due in semiannual
installments through 2021 639,952
Public improvement bonds($147,000 issued),2008 Series A,payable to
the County, interest at 4.125%,due in semiannual installments
through 2043 117,541
State Revolving Fund loans ($73,624,812 loaned) payable to the State
of Hawaii, interest up to 1.37%,due in semiannual
installments through 2040 46,997,951
Total long-term debt 65,829,194
Add: Unamortized premium 1,622,232
67,451,426
Less: Current portion (6,214,530)
Noncurrent portion $ 61,236,896
The public improvement bonds consist of long-term obligations to the County that reflect the
Department's proportionate share of general obligation bonds that were issued by the County,
in part, for the purpose of improving the public water system. The County's general obligation
bonds are an absolute and unconditional general obligation of the County for which its full
faith and credit are pledged. The principal and interest payments on the bonds are a first
charge on the general fund of the County.
The Department's State Revolving Fund Loans are direct borrowings of the Department
for which it pledges either its full faith and credit or gross revenues of the Department.
25
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE E - LONG-TERM OBLIGATIONS (Continued)
The following is a summary of changes in long-term debt during the fiscal year ended
June 30, 2021:
Balance Balance Due Within
July 1,2020 Additions Decreases June 30,2021 One Year
State Revolving Fund Loans $ 42,909,525 $ 7,206,603 $ (3,118,177) $ 46,997,951 $ 3,417,443
22198 633 (3,367,390) 18 831 243 2,797,087
Public Improvement Bonds
P
65108158 7,206,603 (6,485,567) 65,829,194 6,214,530
Total $ , , $ $ $ $
At June 30, 2021, future principal and interest payments for long-term debt are scheduled as
follows:
Public
Year Ending State Revolving Fund Loans Improvement Bonds Total
June 30, Principal Interest Principal Interest Principal Interest
2022 $ 3,417,443 $ 726,119 $ 2,797,087 $ 751,032 $ 6,214,530 $ 1,477,151
2023 2,933,881 659,020 2,267,275 624,456 5,201,156 1,283,476
2024 2,968,161 607,556 2,384,921 508,185 5,353,082 1,115,741
2025 3,002,936 555,540 2,496,322 393,728 5,499,258 949,268
2026 3,038,178 503,001 2,603,980 288,195 5,642,158 791,196
2027-2031 14,615,768 1,769,103 6,205,000 370,421 20,820,768 2,139,524
2032-2036 12,280,555 752,069 27,539 13,631 12,308,094 765,700
2037-2041 4,741,029 119,132 33,708 7,462 4,774,737 126,594
2042-2046 -- -- 15,411 958 15,411 958
$ 46,997,951 $ 5,691,540 $ 18,831,243 $ 2,958,068 $ 65,829,194 $ 8,649,608
In November 2020, the County issued $15,005,000 in refunding bonds as the 2020 Series
C&D general obligation bond issue. The refunding bonds have a true interest cost of 0.86%
and were issued to refund $17,615,000 of the total callable bonds outstanding of the 2010
Series B general obligation bond issue. The bonds refunded bore interest at a rate of 5.0%.
The Department has a 25% proportionate share of the 2010 Series B and 2020 Series C&D
general obligation bond issues. The par amount of $3,751,250 plus a premium of $719,895
minus $23,094 in underwriting fees, insurance, and other issuance costs resulted in the
Department's share of net proceeds of$4,448,051.
The Department's total debt service requirements decreased by $585,931 as a result of the
refunding, and the net economic gain (difference between the present values on the old and
new debt) after taking into account all allocable costs of issuance of the bonds was$511,467.
26
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE E - LONG-TERM OBLIGATIONS (Continued)
In prior years, the County defeased certain general obligation bonds by placing the proceeds
of new bonds in irrevocable trusts to provide for all future debt service payments on the old
bonds. Accordingly, the assets of the irrevocable trust and the liability of the defeased bonds
are not included for the Department's proportionate share on the Department's financial
statements. As of June 30, 2021, the Department's proportionate share of the outstanding
balance of the unpaid defeased bonds amounted to $15,822,500.
NOTE F -OTHER LONG-TERM OBLIGATIONS
The following is a summary of other long-term obligations transactions for the fiscal year
ended June 30, 2021:
Balance Deductions Balance Due Within
July 1,2020 Additions and Payments June 30,2021 One Year
Accrued workers'
compensation $ 660,000 $ -- $ (280,000) $ 380,000 $ 97,888
Accrued vacation 1,809,892 897,318 (677,542) 2,029,668 629,515
Customers'deposits 16,095,633 896,631 (872,597) 16,119,667 284,487
Total $ 18,565,525 $ 1,793,949 $ (1,830,139) $ 18,529,335 $ 1,011,890
NOTE G - EMPLOYEE BENEFITS
Pension Plan
Plan Description - Generally, all full-time employees of the State and counties are required
to be members of the ERS, a cost-sharing multiple-employer defined benefit pension plan that
administers the State's pension benefits program. Benefits, eligibility, and contribution
requirements are governed by HRS Chapter 88 and can be amended through legislation. The
ERS issues publicly available annual financial reports that can be obtained at ERS' website:
htts://ers.ehawaii. o
v.
P 9
Benefits Provided - The ERS Pension Trust is comprised of three pension classes for
membership purposes and considered to be a single plan for accounting purposes since all
assets of the ERS may legally be used to pay the benefits of any of the ERS members or
beneficiaries. The ERS provides retirement, disability and death benefits with three
membership classes known as the noncontributory, contributory and hybrid retirement
classes. The three classes provide a monthly retirement allowance equal to the benefit
multiplier (generally 1.25% or 2%) multiplied by the average final compensation multiplied by
years of credited service. Average final compensation for members hired prior to July 1, 2012
is an average of the highest salaries during any three years of credited service, excluding any
salary paid in lieu of vacation for members hired January 1, 1971 or later and the average of
27
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE G - EMPLOYEE BENEFITS (Continued)
the highest salaries during any five years of credited service including any salary paid in lieu
of vacation for members hired prior to January 1, 1971. For members hired after June 30,
2012, average final compensation is an average of the highest salaries during any five years
of credited service excluding any salary paid in lieu of vacation.
Each retiree's original retirement allowance is increased on each July 1 beginning the
calendar year after retirement. Retirees first hired as members prior to July 1, 2012 receive a
2.5% increase each year of their original retirement allowance without a ceiling (2.5% of the
original retirement allowance the first year, 5.0% the second year, 7.5% the third year, etc.).
Retirees first hired as members after June 30, 2012 receive a 1.5% increase each year of
their original retirement allowance without a ceiling (1.5% of the original retirement allowance
the first year, 3.0% the second year, 4.5% the third year, etc.).
The following summarizes the provisions relevant to the largest employee groups of the
respective membership class. Retirement benefits for certain groups, such as police officers,
firefighters, some investigators, sewer workers, judges, and elected officials, vary from
general employees.
Noncontributory Class
Retirement Benefits - General employees' retirement benefits are determined as 1.25%
of average final compensation multiplied by the years of credited service. Employees with
ten years of credited service are eligible to retire at age 62. Employees with 30 years of
credited service are eligible to retire at age 55.
Disability Benefits- Members are eligible for service-related disability benefits regardless
of length of service and receive a lifetime pension of 35% of their average final
compensation. Ten years of credited service is required for ordinary disability. Ordinary
disability benefits are determined in the same manner as retirement benefits but are
payable immediately, without an actuarial reduction, and at a minimum of 12.5% of
average final compensation.
Death Benefits - For service-connected deaths, the surviving spouse/reciprocal
beneficiary receives a monthly benefit of 30% of the average final compensation until
remarriage or re-entry into a new reciprocal beneficiary relationship. Additional benefits
are payable to surviving dependent children up to age 18. If there is no spouse/reciprocal
beneficiary or dependent children, no benefit is payable.
Ordinary death benefits are available to employees who were active at time of death with
at least ten years of credited service. The surviving spouse/reciprocal beneficiary (until
remarriage/re-entry into a new reciprocal beneficiary relationship) and dependent children
(up to age 18) receive a benefit equal to a percentage of the member's accrued maximum
allowance unreduced for age or, if the member was eligible for retirement at the time of
death, the surviving spouse/reciprocal beneficiary receives 100% joint and survivor
lifetime pension and the dependent children receive a percentage of the member's
accrued maximum allowance unreduced for age.
28
County of Hawaii
Department of Water Supply •
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE G - EMPLOYEE BENEFITS (Continued)
Contributory Class for Employees Hired prior to July 1, 2012
Retirement Benefits - General employees' retirement benefits are determined as 2% of
average final compensation multiplied by the years of credited service. General
employees with five years of credited service are eligible to retire at age 55.
Police officers and firefighters' retirement benefits are determined using the benefit
multiplier of 2.5% for qualified service, up to a maximum of 80% of average final
compensation. Police officers and firefighters with five years of credited service are eligible
to retire at age 55. Police officers and firefighters with 25 years of credited service are
eligible to retire at any age, provided the last five years is service credited in these
occupations.
Disability Benefits - Members are eligible for service-related disability benefits regardless
of length of service and receive a one-time payment of the member's contributions and
accrued interest plus a lifetime pension of 50% of their average final compensation. Ten
years of credited service is required for ordinary disability. Ordinary disability benefits are
determined as 1.75% of average final compensation multiplied by the years of credited
service but are payable immediately, without an actuarial reduction, and at a minimum of
30% of average final compensation.
Death Benefits - For service-connected deaths, the surviving spouse/reciprocal
beneficiary receives a lump sum payment of the member's contributions and accrued
interest plus a monthly benefit of 50% of the average final compensation until remarriage
or re-entry into a new reciprocal beneficiary relationship. If there is no surviving
spouse/reciprocal beneficiary, surviving children (up to age 18) or dependent parents are
eligible for the monthly benefit. If there is no spouse/reciprocal beneficiary or dependent
children/parents, the ordinary death benefit is payable to the designated beneficiary.
Ordinary death benefits are available to employees who were active at time of death with
at least one year of service. Ordinary death benefits consist of a lump sum payment of the
member's contributions and accrued interest plus a percentage of the salary earned in the
12 months preceding death, or 50%joint and survivor lifetime pension if the member was
not eligible for retirement at the time of death but was credited with at least ten years of
service and'designated one beneficiary, or 100%joint and survivor lifetime pension if the
member was eligible for retirement at the time of death and designated one beneficiary.
Contributory Class for Employees Hired After June 30, 2012
Retirement Benefits - General employees' retirement benefits are determined as 1.75%
of average final compensation multiplied by the years of credited service. General
employees with ten years of credited service are eligible to retire at age 60.
29
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE G - EMPLOYEE BENEFITS (Continued)
Police officers and firefighters' retirement benefits are determined using the benefit
multiplier of 2.25% for qualified service, up to a maximum of 80% of average final
compensation. Police officers and firefighters with ten years of credited service are eligible
to retire at age 60. Police officers and firefighters with 25 years of credited service are
eligible to retire at age 55, provided the last five years is service credited in these
occupations.
Disability and Death Benefits- Members are eligible for service-related disability benefits
regardless of length of service and receive a lifetime pension of 50% of their average final
compensation plus refund of contributions and accrued interest. Ten years of credited
service is required for ordinary disability.
For police officers and firefighters, ordinary disability benefits are 1.75% of average final
compensation for each year of service and are payable immediately, without an actuarial
reduction, at a minimum of 30% of average final compensation.
Death benefits for contributory members hired after June 30, 2012 are generally the same
as those for contributory members hired June 30, 2012 and prior.
Hybrid Class for Employees Hired Prior to July 1, 2012
Retirement Benefits - General employees' retirement benefits are determined as 2% of
average final compensation multiplied by the years of credited service. General
employees with five years of credited service are eligible to retire at age 62. General
employees with 30 years of credited service are eligible to retire at age 55.
Disability Benefits - Members are eligible for service-related disability benefits regardless
of length of service and receive a lifetime pension of 35% of their average final
compensation plus refund of their contributions and accrued interest.Ten years of credited
service is required for ordinary disability. Ordinary disability benefits are determined in the
same manner as retirement benefits but are payable immediately, without an actuarial
reduction, and at a minimum of 25% of average final compensation.
Death Benefits - For service-connected deaths, the surviving spouse/reciprocal
beneficiary receives a lump sum payment of the member's contributions and accrued
interest plus a monthly benefit of 50% of the average final compensation until remarriage
or re-entry into a new reciprocal beneficiary relationship. If there is no surviving
spouse/reciprocal beneficiary, surviving dependent children (up to age 18) or dependent
parents are eligible for the monthly benefit. If there is no spouse/reciprocal beneficiary or
dependent children/parents, the ordinary death benefit is payable to the designated
beneficiary.
30
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE G - EMPLOYEE BENEFITS (Continued)
Ordinary death benefits are available to employees who were active at time of death with
at least five years of service. Ordinary death benefits consist of a lump sum payment of
the member's contributions and accrued interest plus a percentage multiplied by 150%,
or 50%joint and survivor lifetime pension if the member was not eligible for retirement at
the time of death but was credited with at least ten years of service and designated one
beneficiary, or 100% joint and survivor lifetime pension if the member was eligible for
retirement at the time of death and designated one beneficiary.
Hybrid Class for Employees Hired After June 30, 2012
Retirement Benefits - General employees' retirement benefits are determined as 1.75%
of average final compensation multiplied by the years of credited service. General
employees with ten years of credited service are eligible to retire at age 65. Employees
with 30 years of credited service are eligible to retire at age 60.
Disability and Death Benefits-Provisions for disability and death benefits generally remain
the same except for ordinary death benefits. Ordinary death benefits are available to
employees who were active at time of death with at least ten years of service. Ordinary
death benefits consist of a lump sum payment of the member's contributions and accrued
interest, plus a percentage multiplied by 50% joint and survivor lifetime pension if the
member was not eligible for retirement at the time of death but was credited with at least
ten years of service and designated one beneficiary, or 100% joint and survivor lifetime
pension if the member was eligible for retirement at the time of death and designated one
beneficiary.
Contributions - Contributions are governed by HRS Chapter 88 and may be amended
through legislation. The employer rate is set by statute based on the recommendations of the
ERS actuary resulting from an experience study conducted every five years. Since
July 1, 2005, the employer contribution rate is a fixed percentage of compensation, including
the normal cost plus amounts required to pay for the unfunded actuarial accrued liabilities.
Contributions to the pension plan from the Department were $2,579,631 for the fiscal year
ended June 30, 2021.
Per Act 17 (SLH 2017), employer contributions from the State and counties increased over
four years beginning July 1, 2017. The rate for police officers and firefighters increases to
31.00% on July 1, 2018; 36.00% on July 1, 2019; and 41.00% on July 1, 2020 and the rate
for all other employees' increases to 19.00% on July 1, 2018; 22.00% on July 1, 2019; and
24.00% on July 1, 2020.
The employer is required to make all contributions for noncontributory members. Contributory
members hired prior to July 1, 2012 are required to contribute 7.8% of their salary, except for
police officers and firefighters who are required to contribute 12.2% of their salary.
Contributory members hired after June 30, 2012 are required to contribute 9.8% of their salary,
except for police officers and firefighters who are required to contribute 14.2% of their salary.
Hybrid members hired prior to July 1, 2012 are required to contribute 6.0% of their salary.
Hybrid members hired after June 30, 2012 are required to contribute 8.0% of their salary.
31
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE G -EMPLOYEE BENEFITS (Continued)
Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and
Deferred Inflows of Resources Related to Pensions - At June 30, 2021, the Department
reported a liability of $35,290,257 for its proportionate share of the net pension liability. The
net pension liability was measured as of June 30, 2020, and the total pension liability used to
calculate the net pension liability was determined by an actuarial valuation as of that date.
The Department's proportion of the net pension liability was based on a proportion of the
Department's contributions to the pension plan relative to the contributions of all participating
employers. At June 30, 2020, the Department's proportion was 0.23%, a decrease of 0.01%
from its proportion measured as of June 30, 2019.
The actuarial assumptions used in the June 30, 2020 actuarial valuation are the same as
those used in the prior valuation. There were no changes between the measurement date,
June 30, 2020, and the reporting date, June 30, 2021 that are expected to have a significant
effect on the proportionate share of the net pension liability.
For the fiscal years ended June 30, 2021, the Department recognized pension expense of
$5,052,444. At June 30, 2021, the Department reported deferred outflows of resources and
deferred inflows of resources related to pensions from the following sources:
Deferred Deferred
Outflows of Inflows of
Resources Resources
Differences between expected and actual experience $ 394,865 $ --
Changes in assumptions 993,272 --
Net difference between projected and actual earnings
on pension plan investments 1,233,871 --
Changes in proportion and differences between
Department contributions and proportionate share
of contributions 2,287,341 (1,774,106)
Department contributions subsequent to the
measurement date 2,579,631 --
Total $ 7,488,980 $ (1,774,106)
32
County of Hawai`i
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE G - EMPLOYEE BENEFITS (Continued)
At June 30, 2021, the Department reported $2,579,631 of deferred outflows of resources
related to pensions resulting from the Department's contributions subsequent to the
measurement date, which will be recognized as a reduction of the net pension liability in the
fiscal year ended June 30, 2022. Other amounts reported as deferred outflows of resources
and deferred inflows of resources related to pensions at June 30, 2021 will be recognized in
pension expense as follows:
Net Deferred
Fiscal Year Ending June 30, Outflows (Inflows)
2022 $ 1,432,140
2023 837,447
2024 449,810
2025 384,809
2026 31,037
$ 3,135,243
Actuarial Assumptions - The total pension liability in the June 30, 2020 actuarial valuation
was determined using the following actuarial assumptions, applied to all periods included in
the measurement:
Inflation 2.50%
Investment rate of return, including inflation 7.00%
Salary increases, including inflation
Police and fire employees 5.00% to 7.00%
General employees 3.50% to 6.50%
Teachers 3.75% to 5.75%
Mortality rates used in the actuarial valuation as of June 30, 2020 were based on the following:
Active members - Multiples of the Pub-2010 mortality table for active employees based on
the occupation of the member.
Healthy retirees-The 2019 Public Retirees of Hawaii mortality table, generational projection
using the BB projection table from the year 2019 and with multipliers based on plan and
group experience.
Disabled retirees - Base Table for healthy retirees' occupation, set forward five years,
generational projection using the BB projection table from the year 2019. Minimum mortality
rate of 3.5% for males and 2.5% for females.
The actuarial assumptions used in the actuarial valuation as of June 30, 2020 were based on
the results of an actuarial experience study as of June 30, 2018, with most of the assumptions
based on the period from July 1, 2013 through June 30, 2018.
33
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawai`i, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE G - EMPLOYEE BENEFITS (Continued)
The long-term expected rate of return on pension plan investments was determined using a
"top down approach" of the Client-Constrained Simulation-based Optimization Model (a
statistical technique known as "re-sampling with replacement" that directly keys in on specific
plan-level risk factors as stipulated by the ERS Board) in which best-estimate ranges of
expected future real rates of return (expected returns, net of pension plan investment expense
and inflation) are developed for each major asset class. These ranges are then combined to
produce the long-term expected rate of return by weighting the expected future nominal rates
of return (real returns + inflation) by the target asset allocation percentage. The target
allocation and best estimates of geometric real rates of return for each major asset class as
of June 30, 2020 are summarized in the following table:
Long-Term Long-Term
Strategic Allocation Target Expected Expected Real
(Risk-Based Classes) Allocation Rate of Return Rate of Return*
Broad Growth 63.00% 7.90% 5.70%
Diversifying Strategies 37.00% 3.70% 1.50%
100.00%
*Uses an expected inflation of 2.20%
Discount Rate-The discount rate used to measure the net pension liability at June 30, 2021
was 7.00%. The projection of cash flows used to determine the discount rate assumed that
employee contributions will be made at the current contribution rate and that contributions
from the Department will be made at statutorily required rates, actuarially
determined. Based on those assumptions, the pension plan's fiduciary net position was
projected to be available to make all projected future benefit payments of current active and
inactive employees. Therefore, the long-term expected rate of return on pension plan
investments was applied to all periods of projected benefit payments to determine the total
pension liability.
Sensitivity of the Department's Proportionate Share of the Net Pension Liability to
Changes in the Discount Rate - The following presents the Department's proportionate
share of the net pension liability as of June 30, 2021, calculated using the discount rate of
7.00%, as well as what the Department's proportionate share of the net pension liability would
be if it were calculated using a discount rate that is one percentage point lower(6.00%) or one
percentage point higher(8.00%) than the current rate:
1% Decrease Discount Rate 1%Increase
(6.00%) (7.00%) (8.00%)
Department's proportionate share of
the net pension liability $ 45,321,338 $ 35,290,257 $ 27,020,579
34
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE G - EMPLOYEE BENEFITS (Continued)
Pension Plan Fiduciary Net Position - Detailed information about the pension plan's
fiduciary net position is available in the separately issued ERS financial report. ERS' complete
financial statements are available at: https://ers.ehawaii.gov/resources/financials.
Payables to the Pension Plan - At June 30, 2021, the amount payable to the ERS was
$321,571, which consists of statutorily required employer contributions for the month of June
and an accrual for excess pension costs attributed to the fiscal year, as required by the HRS.
Postemployment Benefits Other Than Pensions (OPEB)
General Information about the OPEB Plan
Plan description. Chapter 87A of the Hawaii Revised Statutes (HRS) established the EUTF,
an agent multiple-employer defined benefit plan, which provides a single delivery system of
health and other benefits for state and county workers, retirees and their eligible dependents.
The EUTF issues a stand-alone financial report that is available to the public on its website at
https://eutf.hawaii.gov/reports.
Benefits provided. Chapter 87A of the HRS grants the authority to establish and amend the
benefit terms to the board of trustees of the EUTF. The EUTF currently provides medical,
prescription drug, dental, vision, chiropractic, supplemental medical and prescription drug,.
and group life insurance benefits for retirees and their dependents. The following table
provides a summary of the number of employees covered by the benefits terms as of
July 1, 2020:
Inactive employees or beneficiaries currently receiving benefits 101
Inactive employees entitled but not yet receiving benefit payments 13
Active employees 160
274
Contributions- The Department's contribution levels are established by Chapter 87A of the
HRS. For the fiscal year ended June 30, 2021, the Department was not required to contribute
100% of the annual required contribution (ARC), as determined by an actuary retained by the
board of trustees of the EUTF. The ARC represents a level of funding that is sufficient to cover
1) the normal cost, which is the cost of the other postemployment benefits attributable to the
current year of service; and 2) an amortization payment, which is a catch-up payment for past
service costs to fund the unfunded actuarial accrued liability over the next thirty years. For the
fiscal year ended June 30, 2021, contributions to the OPEB plan from the Department totaled
$1,210,523 which resulted in an average contribution rate of approximately 10.45% of
covered-employee payroll.
35
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE G - EMPLOYEE BENEFITS (Continued)
For employees hired before July 1, 1996, the Department pays the entire base monthly
contribution for employees retiring with 10 or more years of credited service, and 50% of the
base monthly contribution for employees retiring with fewer than 10 years of credited service.
A retiree can elect a family plan to cover dependents. The Department's contribution is based
on the plan selected by the retiree (single, two-party, or family plans).
For employees hired after June 30, 1996, but before July 1, 2001, and who retire with fewer
than 10 years of service, the Department makes no contributions. For those retiring with at
least 10 years of service but fewer than 15 years of service, the Department pays 50% of the
base monthly contribution. For employees retiring with at least 15 years of service but fewer
than 25 years of service, the Department pays 75% of the base monthly contribution. For
employees retiring with at least 25 years of service, the Department pays 100% of the base
monthly contribution. The Department's contribution is based on the plan selected by the
retiree (single, two-party, or family plans).
For employees hired on or after July 1, 2001, and who retire with less than 10 years of service,
the Department makes no contributions. For those retiring with at least 10 years but fewer
than 15 years of service, the Department pays 50% of the base monthly contribution. For
those retiring with at least 15 years but fewer than 25 years of service, the Department pays
75% of the base monthly contribution. For those employees retiring with at least 25 years of
service, the Department pays 100% of the base monthly contribution. Only single plan
coverage is provided for retirees in this category. The Department's contribution is based on
the single plan base monthly contribution. Retirees can elect family coverage but must pay
the difference.
Net OPEB Liability
The Department's net OPEB liability as of June 30, 2021 was measured as of
July 1, 2020, and the total OPEB liability used to calculate the net OPEB liability was
determined by an actuarial valuation as of that date.
Actuarial assumptions. The total OPEB liability in the July 1, 2020 actuarial valuation was
determined using the following actuarial assumptions, applied to all periods included in the
measurement, unless otherwise specified:
Actuarial cost method Entry age normal
Discount rate 7.00%
Inflation 2.50%
Salary increases 3.50% to 7.00% including inflation
36
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE G - EMPLOYEE BENEFITS (Continued)
Demographic assumptions Based on the experience study covering the five
year period ending June 30, 2018 as conducted by
the ERS
Mortality System-specific mortality tables utilizing scale BB
to project generational mortality improvement
Participation rates 98% healthcare participation assumption for
retirees that cover 100% of the base monthly
contribution. Healthcare participation rates of 25%,
65%, and 90% for retirees that receive 0%, 50%,
or 75% of the base monthly contribution,
respectively. 100% for life insurance and 98% for
Medicare Part B
Healthcare cost trend rates
PPO* Initial rate of 7.50%; declining to a rate of
4.70% after 13 years
HMO* Initial rate of 7.50%; declining to a rate of
4.70% after 13 years
Part B & base monthly contribution Initial rate of 5.00%, declining to a rate of
4.70% after 10 years
Dental Initial rate of 5.00% for first year, followed by
4.00% for all future years
Vision Initial rate of 0.00% for first year, followed by
2.50% for all future years
Life insurance 0.00%
* Blended rates for medical and prescription drug
37
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE G -EMPLOYEE BENEFITS (Continued)
The long-term expected rate of return on OPEB plan investments was determined using a
building-block method in which best-estimate ranges of expected future real rates of return
(expected returns, net of OPEB plan investment expense and inflation) are developed for each
major asset class. These ranges are combined to produce the long-term expected rate of
return by weighting the expected future real rates of return by the target asset allocation
percentage and by adding expected inflation. The target allocation and best estimates of
arithmetic real rates of return for each major asset class as of July 1, 2020 are summarized
in the following table:
Long-Term
Target Expected Real
Asset Class Allocation Rate of Return
Non-U.S. equity 16.00% 7.72%
U.S. equity 14.00% 6.23%
Private equity 10.00% 9.66%
Core real estate 10.00% 5.98%
Trend following 8.00% 2.12%
U.S. microcap 6.00% 7.85%
Global options 6.00% 4.65%
Private credit 6.00% 5.50%
Long treasuries 6.00% 0.86%
Alternative risk premium 5.00% 1.56%
TIPS 5.00% 0.11%
Reinsurance 5.00% 4.34%
Core bonds 3.00% 0.08%
100.00%
Discount Rate-The discount rate used to measure the total OPEB liability at June 30, 2021
was 7.00%. The discount rate was based on the expected rate of return on OPEB plan
investments of 7.00%.
The Department's funding policy is to pay the recommended actuarially determined
contribution, which is based on layered, closed amortization periods. Based on those
assumptions, the OPEB plan's fiduciary net position was projected to be available to make all
projected future benefit payments for current plan members. Therefore, the long-term
expected rate of return on OPEB plan investments was applied to all periods of projected
benefit payments to determine the total OPEB liability.
38
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE G - EMPLOYEE BENEFITS (Continued)
Changes in the Net OPEB Liability
The following schedules presents the changes in the net OPEB liability for the fiscal year
ending June 30, 2021:
Increase(Decrease)
Total OPEB Plan Fiduciary Net OPEB
Liability Net Position Liability
(a) (b) (a)-(b)
Balance at June 30,2020 $ 35,611,034 $ 19,531,287 $ 16,079,747
Changes for the fiscal year:
Service cost 773,607 -- 773,607
Interest on the total OPEB liability 2,483,573 -- 2,483,573
Difference between expected and
actual experience (2,403,748) -- (2,403,748)
Change of assumptions (190,921) -- (190,921)
Contributions-employer -- 1,977,000 (1,977,000)
Net investment income -- 376,721 (376,721)
Benefit payments (1,036,438) (1,036,438) --
Administrative expense -- (3,013) 3,013
Other _ -- (2,264) 2,264
Net changes (373,927) 1,312,006 (1,685,933)
Balance at June 30, 2021 $ 35,237,107 $ 20,843,293 $ 14,393,814
The healthcare trend assumption was updated in the July 1, 2020 actuarial valuation to reflect
the repeal of the "Cadillac Tax" on high-cost employer health plans, which resulted in a
decrease to the total OPEB liability as of June 30, 2021.
Sensitivity of the Net OPEB Liability to Changes in the Discount Rate - The following
presents the net OPEB liability of the Department, as well as what the Department's net OPEB
liability would be if it were calculated using a discount rate that is one percentage point lower
or one percentage point higher than the current discount rate:
1% Decrease Discount Rate 1% Increase
(6.00%) (7.00%) (8.00%)
Net OPEB Liability $ 19,857,974 $ 14,393,814 $ 10,046,035
39
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE G - EMPLOYEE BENEFITS (Continued)
Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates -
The following presents the net OPEB liability of the Department, as well as what the
Department's net OPEB liability would be if it were calculated using healthcare cost trend
rates that are one percentage point lower or one percentage point higher than the current
healthcare cost trend rates:
Current
Healthcare
Cost Trend
1% Decrease Rates 1% Increase
Net OPEB Liability $ 9,809,296 $ 14,393,814 $ 20,268,633
OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources
Related to OPEB
For the fiscal year ended June 30, 2021, the Department recognized OPEB expense of
$1,571,788. At June 30, 2021, the Department reported deferred outflows of resources and
deferred inflows of resources related to OPEB from the following sources:
Deferred Deferred
Outflows of Inflows of
Resources Resources
Difference between expected and actual experience $ -- $ (2,910,951)
Changes of assumptions 332,234 (162,341)
Net difference between projected and actual earnings
on OPEB plan investments 1,041,066 --
Employer contributions subsequent to the
measurement date 1,210,523 --
$ 2,583,823 $ (3,073,292)
40
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawai:`i)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE G - EMPLOYEE BENEFITS (Continued)
At June 30, 2021, the Department reported $1,210,523 as deferred outflows of resources
related to OPEB resulting from Department contributions subsequent to the measurement
date, which will be recognized as a reduction of the net OPEB liability in the fiscal year ended
June 30, 2022. Other amounts reported as deferred outflows of resources and deferred
inflows of resources at June 30, 2021 will be recognized in OPEB expense as follows:
Fiscal Year Net Deferred
Ended June 30: Inflows
2022 $ (290,667)
2023 (230,950)
2024 (228,519)
2025 (281,885)
2026 (403,738)
Thereafter (264,233)
$ (1,699,992)
Deferred Compensation Plan
The Department participates in a deferred compensation plan established by the State of
Hawaii in accordance with Internal Revenue Code Section 457. The plan is available to all
the Department employees, and permits employees to defer a portion of their salary until
future years. The deferred compensation is 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
Department 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.
NOTE H -COMMITMENTS AND CONTINGENT LIABILITIES
Risk Management- The Department is exposed to various risks of loss from torts; theft of,
damage to, and destruction of assets; employee injuries and illnesses; and natural disasters.
The Department maintains property, auto liability, and general liability insurance policies. The
Department remains self-insured for workers' compensation liability.
Liabilities are recorded when it is probable that a loss has occurred and the amount of that
loss can be reasonably estimated. Claim liabilities 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.
41
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE H -COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
Construction Contracts - The Department is obligated under construction contracts for the
utility plant and other projects. Such commitments totaled $34,022,885 at June 30, 2021.
Litigation - The Department is involved in various legal proceedings arising in the ordinary
course of business. The Department provides for losses that, in the opinion of management,
are both probable of being incurred and that can be reasonably estimated. In management's
opinion, losses, if any,would not materially affect the Department's financial position or results
of operations.
NOTE I - RELATED PARTY TRANSACTIONS
Long-term Debt- As discussed in Note E, the County has issued general obligation bonds
on the Department's behalf for improvements to the water system. The Department is liable
to the County for its proportionate share of the debt service requirements. In connection with
these general obligation bond issues, long-term debt payable to the County totaled
$18,831,243 at June 30, 2021. Accrued interest payable to the County totaled $340,850 at
June 30, 2021.
Operating Lease - The Department leases office space in its Hilo office to the County. The
term of the lease is for ten years, starting on October 1, 2013, with an option to extend for an
additional ten years. The County is also obligated to pay for common area maintenance
expense. Thereafter and for the duration of the lease term, annual lease rent from the County,
including common area maintenance will be approximately $236,000, subject to annual
adjustments to the monthly common area maintenance charge. Payments received from the
County in connection with this lease totaled approximately $236,000 during the fiscal year
ended June 30, 2021.
As of June 30, 2021, future minimum lease rental income was as follows:
Fiscal Year
Ending June 30, Amount
2022 $ 236,000
2023 236,000
2024 59,000
$ 531,000
42
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO FINANCIAL STATEMENTS
June 30, 2021
NOTE I - RELATED PARTY TRANSACTIONS (Continued)
Other-Amounts due to the County totaled approximately $225,000 as of June 30, 2021.
The County provides the Department with various administrative services including treasury,
legal, audit, and workers' compensation administration. The cost for these services are
generally invoiced and reimbursed on an annual basis.
NOTE J - PRIOR PERIOD ADJUSTMENT
The financial statements for the fiscal year ended June 30, 2020 contained an error related to
construction work in progress and preliminary survey and investigation charges that should
have been placed in service and classified as utility plant in service as of June 30, 2018.
Therefore, an adjustment was made to increase utility plant in service by $13,163,292,
decrease construction work in progress by$11,672,265, and decrease preliminary survey and
investigation charges by $1,491,027 for the fiscal year ended June 30, 2020. The effect for
the fiscal year ended June 30, 2020 was an increase in depreciation expense of $494,914
and a decrease in beginning net position of$742,370 in relation to depreciation expense for
the fiscal years ended June 30, 2019 and 2018.
NOTE K- NOVEL CORONAVIRUS DISEASE
On March 11, 2020,the World Health Organization declared the outbreak of novel coronavirus
disease (COVID-19) as a pandemic,which has led to an economic downturn on a global scale
that has created significant uncertainty, volatility, and disruption across economies and
financial markets. The pandemic has also resulted in federal, state, and local governments
and private entities mandating various restrictions, including travel and business restrictions,
temporary closures of nonessential businesses, and wide-sweeping quarantines and stay-at-
home orders. While the disruption caused by COVID-19 is expected to be temporary, there is
uncertainty around the duration and severity of the pandemic. The related financial impact on
the Department's financial statements cannot be reasonably determined at this time.
43
REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN
MANAGEMENT'S DISCUSSION AND ANALYSIS
44
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
SCHEDULE OF PROPORTIONATE
SHARE OF THE NET PENSION LIABILITY
Last Ten Fiscal Years*
Proportionate Plan
Share of the Fiduciary
Net Pension Net Position
Proportion Proportionate Liability as a %age
Measurement of the Share of the as a%age of the Total
Period Net Pension Net Pension Covered of Covered Pension
Ended Liability(%) Liability($) Payroll Payroll Liability
June 30, 2020 0.23% $ 35,290,257 $ 10,439,473 338.0% 53.18%
June 30, 2019 0.23% $ 32,029,248 $ 10,318,136 310.4% 54.87%
June 30, 2018 0.25% $ 33,522,053 $ 9,742,400 344.1% 55.48%
June 30, 2017 0.22% $ 28,365,453 $ 9,358,187 303.1% 54.80%
June 30, 2016 0.22% $ 29,247,607 $ 9,046,930 323.3% 51.28%
June 30, 2015 0.22% $ 18,940,065 $ 9,012,196 210.2% 62.42%
June 30, 2014 0.26% $ 20,526,993 $ 8,272,307 248.1% 63.92%
June 30, 2013 0.21% $ 18,469,400 $ 7,640,477 241.7% 57.96%
* This schedule is intended to present information for 10 years, as of the measurement date of
the collective net pension liability for each respective fiscal year. Additional years will be built
prospectively as information becomes available.
See accompanying notes to required supplementary information.
45
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
SCHEDULE OF CONTRIBUTIONS (PENSION)
Last Ten Fiscal Years
Actual Contributions
Department as a%age
Fiscal Statutorily Statutorily Contribution of
Year Required Required Deficiency Covered Covered
Ended Contribution Contributions (Excess) Payroll Payroll
June 30, 2021 $ 2,579,631 $ 2,579,631 $ -- $ 11,016,038 ` 23.42%
June 30, 2020 $ 2,258,593 $ 2,258,593 $ -- $ 10,439,473 21.64%
June 30, 2019 $ 1,950,328 $ 1,950,328 $ -- $ 10,318,136 18.90%
June 30, 2018 $ 1,757,461 $ 1,757,461 $ -- $ 9,742,400 18.04%
June 30, 2017 $ 1,603,278 $ 1,603,278 $ -- $ 9,358,187 17.13%
June 30, 2016 $ 1,553,128 $ 1,553,128 $ -- $ 9,046,930 17.17%
June 30, 2015 $ 1,520,994 $ 1,520,994 $ -- $ 9,012,196 16.88%
June 30, 2014 $ 1,664,580 $ 1,664,580 $ -- $ 8,272,307 20.12%
June 30, 2013 $ 1,214,933 $ 1,214,933 $ -- $ 7,640,477 15.90%
June 30, 2012 $ 1,210,106 $ 1,210,106 $ -- $ 7,849,473 15.42%
See accompanying notes to required supplementary information.
46
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
REQUIRED BY GASB STATEMENT NO. 68
Fiscal Year Ended June 30, 2021
NOTE A -CHANGES OF ASSUMPTIONS
There were no changes of assumptions or other inputs that significantly affected the
measurement of the total pension liability since the measurement period ended June 30, 2016.
Amounts reported in the schedule of the proportionate share of the net pension liability as of the
measurement period ended June 30, 2016 (fiscal year ended June 30, 2017) were significantly
impacted by the following changes of actuarial assumptions:
o The investment return assumption decreased from 7.65% to 7.00%
o Mortality assumptions were modified to assume longer life expectancies as well as
to reflect continuous mortality improvement
Prior to the measurement period ended June 30, 2016 (fiscal year ended June 30, 2017), there
were no other factors, including the use of different assumptions that significantly affect trends
reported in these schedules.
47
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY
AND RELATED RATIOS
Last Ten Fiscal Years *
2021 2020 2019 2018
Total OPEB liability
Service cost $ 773,607 $ 746,672 $ 698,126 $ 687,414
Interest on the total OPEB liability 2,483,573 2,349,959 2,264,524 2,135,490
Difference between expected and actual
experience of the total OPEB liability (2,403,748) (314,598) (1,184,347) --
Changes of assumptions (190,921) 137,542 432,233 --
Benefit payments (1,036,438) (1,012,084) (1,016,548) (953,288)
Net change in total OPEB liability (373,927) 1,907,491 1,193,988 1,869,616
Total OPEB liability-Beginning 35,611,034 33,703,543 32,509,555 30,639,939
Total OPEB liability-Ending $ 35,237,107 $ 35,611,034 $ 33,703,543 $ 32,509,555
Plan fiduciary net position
Contributions-employer $ 1,977,000 $ 1,990,000 $ 1,936,548 $ 1,867,788
Net investment income 376,721 764,696 1,111,306 1,245,946
Benefit payments (1,036,438) (1,012,084) (1,016,548) (953,288)
Administrative expense (3,013) (5,493) (3,336) (2,782)
Other (2,264) 522,371 -- 16,370
Net change in plan fiduciary net position 1,312,006 2,259,490 2,027,970 2,174,034
Plan fiduciary net position-Beginning 19,531,287 17,271,797 15,243,827 13,069,793
Plan fiduciary net position-Ending $ 20,843,293 $ 19,531,287 $ 17,271,797 $ 15,243,827
NetOPEBliability $ 14,393,814 $ 16,079,747 $ 16,431,746 $ 17,265,728
Plan fiduciary net position as a percentage
of the total OPEB liability 59.15% 54.85% 51.25% 46.89%
Covered-employee payroll $ 10,266,331 $ 10,264,425 $ 10,212,595 $ 9,791,132
Net OPEB Liability as a Percentage of
Covered-employee Payroll 140.20% 156.66% 160.90% 176.34%
*This schedule is intended to present information for ten years for each respective fiscal year.Additional
years will be built prospectively as information becomes available.
See accompanying notes to required supplementary information.
48
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
SCHEDULE OF CONTRIBUTIONS (OPEB)
Last Ten Fiscal Years
Contributions Contributions
in Relation to as a %age
Fiscal Actuarially the Actuarially Contribution Covered- of Covered-
Year Determined Determined Deficiency Employee Employee
Ended Contribution Contribution (Excess) Payroll Payroll
June 30, 2021 $ 2,046,000 $ 1,210,523 $ 835,477 $ 11,587,764 10.45%
June 30, 2020 $ 1,977,000 $ 1,977,000 $ -- $ 10,266,331 19.26%
June 30, 2019 $ 1,990,000 $ 1,990,000 $ -- $ 10,264,425 19.39%
June 30, 2018 $ 1,933,000 $ 1,936,548 $ (3,548) $ 10,212,595 18.96%
June 30, 2017 $ 1,867,000 $ 1,867,788 $ (788) $ 9,791,132 19.08%
June 30, 2016 $ 1,914,000 $ 1,913,204 $ 796 $ 9,464,649 20.21%
T
June 30, 2015 $ 1,850,000 $ 1,848,389 $ 1,611 $ 9,426,509 19.61%
June 30, 2014 $ 1,899,000 $ 1,900,758 $ (1,758) $ 8,635,402 22.01%
June 30, 2013 $ 1,834,000 $ 1,833,733 $ 267 $ 7,966,529 23.02%
June 30, 2012 $ 2,400,000 $ 2,401,487 $ (1,487) $ 8,182,968 29.35%
See accompanying notes to required supplementary information.
49
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawai`i)
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
REQUIRED BY GASB STATEMENT NO. 75
Fiscal Year Ended June 30, 2021
NOTE A -SIGNIFICANT METHODS AND ASSUMPTIONS
The actuarially determined annual required contributions ("ARC") for the fiscal year ending
June 30, 2021 was developed in the July 1, 2018 valuation. The following summarizes the
significant methods and assumptions used to determine the actuarially determined
contribution for the fiscal year ended June 30, 2021:
Actuarial valuation date July 1, 2018
Actuarial cost method Entry Age Normal
Amortization method Level percent, closed
Equivalent single amortization period 16.9 as of June 30, 2021
Asset valuation method 4-year smoothed market
Inflation rate 2.50%
Investment rate of return 7.00%
Payroll growth 3.50%
Salary increases 3.50% to 7.00% including inflation
Demographic assumptions Based on the experience study covering the five year
period ending June 30, 2015 as conducted for the
Hawaii Employees' Retirement System (ERS)
Mortality System-specific mortality tables utilizing scale BB to
project generational mortality improvement
Participation rates 98% healthcare participation assumption for retirees
that receive 100% of the Base Monthly Contribution.
Healthcare participation rates of 25%, 65%, and 90%
for retirees that receive 0%, 50%, or 75% of the base
monthly contribution, respectively. 100%for life
insurance and 98%for Medicare Part B
Healthcare cost trend rates
PPO Initial rate of 10%, declining to a rate of 4.86%
after 13 years
HMO Initial rate of 10%, declining to a rate of 4.86%
after 13 years
Part B Initial rates of 4% and 5%; declining to a rate of
4.7% after 12 years
Dental 5%for the first 3 years; then 4%for all future years
Vision 0%for the first 3 years; then 2.5%for all future years
Life Insurance 0.00%
50
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
REQUIRED BY GASB STATEMENT NO. 75
Fiscal Year Ended June 30, 2021
NOTE A -SIGNIFICANT METHODS AND ASSUMPTIONS (Continued)
There were no other factors that significantly affected trends in the amounts reported in the
schedule of changes in the net OPEB liability and related ratios or the schedule of
contributions (OPEB).
51
n999 BISHOP STREET,SUITE 2200
N&K CPAs, Inc. HONOLULU, HAWAII 96813
ACCOUNTANTS I CONSULTANTS T(808) 524-2255 F(808) 523-2090
INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Water Board
County of Hawaii, Department of Water Supply
We have audited, 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,
the financial statements of the County of Hawaii, Department of Water Supply
(Department),a component unit of the County of Hawaii, State of Hawaii, as of and for
the fiscal year ended June 30, 2021, and the related notes to the financial statements,
and have issued our report thereon dated January 21, 2022.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the
Department's internal control over financial reporting (internal control) as a basis for.
designing audit procedures that are appropriate in the circumstances for the purpose of
expressing our opinion on the financial statements, but not for the purpose of expressing
an opinion on the effectiveness of the Department's internal control. Accordingly, we do
not express an opinion on the effectiveness of the Department's internal control.
A deficiency in internal control exists when the design or operation of a control does not
allow management or employees, in the normal course of performing their assigned
functions, to prevent, or detect and correct, misstatements on a timely basis. A material
weakness is a deficiency, or a combination of deficiencies, in internal control, such that
there is a reasonable possibility that a material misstatement of the entity's financial
statements will not be prevented, or detected and corrected, on a timely basis. A
significant deficiency is a deficiency, or a combination of deficiencies, in internal control
that is less severe than a material weakness yet important enough to merit attention by
those charged with governance.
52
N&K CPAs, Inc.
ACCOUNTANTS I CONSULTANTS
Our consideration of internal control was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal
control that might be material weaknesses or significant deficiencies and therefore,
material weaknesses or significant deficiencies may exist that have not been identified.
We did identify certain deficiencies in internal control, described in the accompanying
schedule of findings and responses as items 2021-001 and 2021-002 that we consider to
be material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Department's financial
statements are free from material misstatement, we performed tests of its compliance
with certain provisions of laws, regulations, contracts, and grant agreements,
noncompliance with which could have a direct and material effect on the financial
statements. However, providing an opinion on compliance with those provisions was not
an objective of our audit, and accordingly, we do not express such an opinion. The results
of our tests disclosed no instances of noncompliance or other matters that are required
to be reported under Government Auditing Standards.
Department's Response to Findings
The Department's response to the findings identified in our audit is described in the
accompanying schedule of findings and responses. The Department's response was not
subjected to the auditing procedures applied in the audit of the financial statements and,
accordingly, we express no opinion on it.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control
and compliance and the results of that testing, and not to provide an opinion on the
effectiveness of the entity's internal control or on compliance. This report is an integral
part of an audit performed in accordance with Government Auditing Standards in
considering the entity's internal control and compliance. Accordingly, this communication
is not suitable for any other purpose.
ear, 2Nc.
Honolulu, Hawaii
January 21, 2022
53
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
SCHEDULE OF FINDINGS AND RESPONSES
Fiscal Year Ended June 30, 2021
Ref. No. Description
2021-001 Improve Internal Controls Over Accounting for Constructed Capital Assets
Criteria:
Once constructed capital assets are completed and placed into operations, they
should be depreciated over their estimated useful lives.
Condition:
During our testing of construction work in progress, we noted the Department had
placed several projects into operations. However, these projects were not accounted
for as completed projects and were not being depreciated over their estimated useful
lives.
Cause:
Management transfers constructed capital assets from construction work in progress
to utility plant in service once the project is fully closed and all outstanding items are
resolved. However, management does not have a system in place to track whether
these projects are placed into operations prior to that.
Effect:
The following adjustments were necessary:
• Increase utility plant in service and decrease construction work in progress by
$1,583,953 as of June 30, 2021.
• Increase utility plant in service by $13,163,292, decrease construction work in
progress by $11,672,265, and decrease preliminary survey and investigation
charges by $1,491,027 as of July 1, 2020.
• Increase depreciation expense by $247,457, increase accumulated
depreciation by $1,484,741, and decrease beginning net position by
$1,237,284 as of and for the fiscal year ended June 30, 2021.
Recommendation:
Management should monitor construction work in progress to ensure constructed
capital assets placed into operations are being accounted for properly.
Views of Responsible Officials and Planned Corrective Action:
The Department agrees with the finding and recommendation. See Corrective Action
Plan.
54
County of Hawaii
Department of Water Supply
(A component unit of the County of Hawaii, State of Hawaii)
SCHEDULE OF FINDINGS AND RESPONSES (Continued)
Fiscal Year Ended June 30, 2021
Ref. No. Description
2021-002 Improve Internal Controls Over Accounting for Significant Nonroutine Transactions
Criteria:
Accounting for nonroutine transactions, including issuance of debt, may require the
application of accounting principles that an entity's personnel may not be familiar with.
Issuance of debt should be recorded on the closing date.
Condition:
During our testing of grant awards, we noted the Department recorded debt related to
an intergovernmental grant award not in accordance with GAAP.
Cause:
Although a grant award was executed, management presumed that accounting
treatment applicable to other grant awards would apply to this specific grant award.
Long-term debt was recorded prior to a closing date or debt proceeds received.
Effect:
An adjustment was necessary to decrease intergovernmental receivables and long-
term debt by $2,640,961 as of June 30, 2021.
Recommendation:
Management should identify significant, nonroutine accounting transactions and
ensure that a process is established whereby management-level fiscal personnel are
actively involved in both the determination of the proper accounting treatment and the
timely review of the transactions posted to the Department's accounting system.
Views of Responsible Officials and Planned Corrective Action:
The Department agrees with the finding and recommendation. See Corrective Action
Plan.
55
CORRECTIVE ACTION PLAN
56
qy WATER,
04
;18 X94
`" DEPARTMENT OF WATER SUPPLY • COUNTY OF HAWAI`I
345 KEKUO'
ANAA STREET,SUITE 20 • I-IILO,HAWAII')96720
%n�wra!,rTELEPHONE(808)961-8050 • FAX(808)961-8657
January 21,2022
Mr.Chad K.Funasaki;CPA,CDMA
N&K CPAs,Inc.
999 Bishop Street Suite.2200
Honolulu,HI 96813
Dear Mr Funasaki:
.. .. . . ... ..... . . ..
Subject: N&K CPAs'Independent Auditor's Report,Schedule of Findings and
Responses,Fiscal Year Ended,June 30,2021
N&K CPAs'Independent Auditor's Report of the Department of Water Supply(DWS)has been reviewed.
The findings included in your report will be addressed in accordance with your recommendations as
follows:
2021-001 Improve Internal Controls Over Accounting for Constructed Capital Assets_
Management's Response:
The Department intends to implement the auditor's recommendation. Management will.review the current
accounting system and workflow for construction work in progress and implement necessary coordination
and improvements to ensure timely shifting of assets to fixed asset account(s)once they are placed in
service.
2021-002 Improve Internal Controls Over Accounting for Significant Non-Routine Transactions
Management's Response:
The Department intends to implement the auditor's recommendation to ensure proper accounting treatment
of non-routine transactions..
We appreciate your review and recommendations. If you have any questions,please do not hesitate to
contact us at(808)961-8050.
Sincerely yours,
it/IAMAN*)
Keith=Okamoto,P.E.
Manager-Chief Engineer
CGdmj'
. ... Water, Our Most ftedous Resource Kg WaiA ane. .
The Department of Water Supply is an Equal Opportunity provider and employer,
57
EXHIBIT B
Department of Water Supply Operation&Maintenance Cost Estimate
B
USDA-RD Position 3 Form Approved
Form RD 442-7 OMB No.0575-0015
(Rev.3-02) OPERATING BUDGET
Schedule 1
Name Address
COUNTY OF HAWAII - DEPT. OF WATER SUPPLY 345 KEKUANAOA ST., HILO
Applicant Fiscal Year County State(Including ZIP Code)
From 07-21 To 06/22 HAWAII HAWAII 96720
20 21 20 21 20 22 20 22 First Full Year
OPERATING INCOME (1) (2) (3) (4) (5)
1, USER FEES $13,814,953.00 $13,093,544.00 $15,111,774.00 $13,347,762.00 $55,368,033.00
2.
3.
4.
5.Miscellaneous
6.Less:Allowances and Deductions ( ) ( )( ) ( ) ( )
7.Total Operating Income
(Add Lines 1through 6) $13,814,953.00 $13,093,544.00 $15,111,774.00 $13,347,762.00 $55,368,033.00
OPERATING EXPENSES .
8. POWER & PUMPING $4,212,938.00 $5,287,769.00 $6,437,383.00 $7,325,715.00 $23,263,805.00
9. GENERAL ADMINISTRATION $2,241,268.00 $2,382,648.00 $2,437,611.00 $2,432,974.00 $9,494,501.00
10.MAINTENANCE & REPAIRS $384,619.00 $415,280.00 $415,667.00 $448,483.00 $1,664,049.00
II. CUSTOMER ACCOUNTING $275,704.00 $386,617.00 $297,674.00 $305,504.00 $1,265,499.00
12. PURIFICATION $401,168.00 $511,500.00 $415,942.00 $751,884.00 $2,080,494.00
11TRANSMISSION & DISTRIBU $1,402,267.00 $1,737,743.00 $1,518,668.00 $1,529,026.00 $6,187,704.00
14. OTHER - WOP EXPENSES $54,368.00 $39,146.00 $63,353.00 $51,287.00 $208,154.00
15.Interest(RD)
$304,037.00 $338,791.00 $273,952.00 $268,384.00 $1,185,164.00
16.Depreciation $3,750,000.00 $3,750,000.00 $3,750,000.00 $3,750,000.00 $15,000,000.00
17.Total Operating Expense $13,026,369.00 $14,849,494.00 $15,610,250.00 $16,863,257.00 $60,349,370.00
(Add lines 8 through 16)
18.NET OPERATING INCOME $788,584.00 ($1,755,950.00) ($498,476.00) ($3,515,495.00) ($4,981,337.00)
(LOSS) (Line 7 less 17)
NONOPERATING INCOME
19. INTEREST $24,530.00 $22,719.00 $62,736.00 $657.00 $110,642.00
20, 0THER $328,938.00 $200,893.00 $214,158.00 $334,141.00 $1,078,130.00
21.Total Nonoperating Income
(A.dd Lines 19 and 20) $353,468.00 $223,612.00 $276,894.00 $334,798.00 $1,188,772.00
22.NET INCOME(LOSS)
(Add Lines 18 and 21) (Transfer
to Line A Schedule 2) $1,142,052.00 ($1,532,338.00) ($221,582.00) ($3,180,697.00) ($3,792,565.00)
Budget and Projected Cash Flow Approved by Governing Body
Attest:
Secretary Date
Appropriate Official Date
According to the Paperwork Reduction Act of 1995,an agency may not conduct or.sponser,and a person is not required to respond to a collection of information unless it displays a valid OMB control
number.The valid OMB control number for this information collection is 0575-0015.The time required to complete this information collection is estimated to average 5 hours per response,including the
time for reviewing instructions,searching existing data sources,gathering and maintaining the data needed,and completing and reviewing the collection of information.
Schedule 2
PROJECTED CASH FLOW
First
20 21 20 21 20 22 20 22 Full Year
A.Line 22 from Schedule 1 Income(Loss) $1,142,052 ($1,532,338 ($221,582) ($3,180,697 ($3,792,565
Add
B.Items in Operations not Requiring Cash:
1.Depreciation (Line 16 Schedule l) $3,750,000 $3,750,000 $3,750,000 $3,750,000 $15,000,000
2.Others:
C.Cash Provided from:
1.Proceeds from RD loan/grant
2.Proceeds from others
3.Increase (Decrease) in Accounts Payable,
Accruals and other Current Liabilities
4.Decrease(Increase)in Accounts Receivable,
inventories and Other Current Assets (Exclude Cash)
5.Other:
6.
D.Total all A,B and C Items $4,892,052 $2,217,662 $3,528,418 $569,303 $11,207,435
E.Less:Cash Expended for:
1.All Construction,Equipment and New Capital Items
(Loan and grant funds) $2,777,453 $2,524,666 $2,126,912 $4,882,548 $12,311,579
2.Replacement and Additions to Existing Property,Plant and
Equipment
3.Principal Payment RD Loan
4.Principal Payment Other Loans $3,328,557 $1,193,531 $1,042,270 $646,787 $6,211,145
5.Other:
6.Total E 1 through 5 $6,106,010 $3,718,197 $3,169,182 $5,529,335 $18,522,724
Add
F.Beginning Cash Balances $12,396,188$10,762,627 $8,768,154 $9,805,724 $12,396,188
G.Ending Cash Balances (Total of minus E 6 plus F) $11,182,230 $9,262,092 $9,127,390 $4,845,692 $5,080,899
Item G Cash Balances Composed of:
Construction Account _
Revenue Account
Debt Payment Account
O&M Account
Reserve Account
Funded Depreciation Account
Others:
Total-Agrees with Item G $o $o $o $o $o
EXHIBIT C
Department of Water Supply Rate Schedule
C
A. MONTHLY STANDBY CHARGES* C AGRICULTURALUSE RATES(per 1,000 gallons)
All meter connections shall.be subject,to a monthly In addition to standby,power cost,.and.energy CIP'cha':ges,a cons-limp
Lon charge will be applied to all agricultural use C1.1t0.1"Tlel:S as follows:
standby charge.as follows:
Meter Effective: Effective
Size Effective Effective lainuttry'1,-2021
$211:.240744 Tuly'1,2022
. .
(inches) January 1,2021 july 1,2022 1st Block '$1.14
2283 $ 25.00 2nd Block 2.49
16 48.59 53.21 3rd Block 1.58
1-W' 90.40 98.99 AGRICULTURAL BLOCK THRESHOLDS(gallons per month)
2" 141.25 154.67
258.77 283.35 1st 2,4 '3ril
Meter Size Block Block Block
4" 426.01 466.48. All Sizes 000 5,001-15,000 >15,090
6" 844.11 924.30
8" 1,346:96 0,474.92 Tn orderto,qualify,for agricultural rates,applicants shall file,annually With
10" 1?9,43:60the Department;a written aPPlicadoil and furnish upon request,satisfac-.
Z128.24
tory proof(as determined by the Depaitn.en9,of engagement in'agricule.
3,390.00 3,712.05 tare,stock tai.ding or dairy farming-on a commercial basis,and that water
used in addition to theabove is limited to one'dwelling The Depattrnent
*Standby charge is a minimum monthly charge. reserves the right to limit or restrict water flow to agricultural users in the
event of watertshortage or in theeventwater servide,to domestic users id
disruptedorlcrwered because of agric.i.g.tural water use.e...Applicants shall
B. 'GENERAL USE.RATES (per 1000 gallons) install backflow preventers which sharbeinspected and approved by the
Department before water service is-granted:Agricultural'rates are not
In addition to standby,power cost,and energy'CIP charges, applicable ro canneries,mills markets cr other establisiiments erigsaed
,
a consumption charge will be applied.to allgeneral use cus- in the conversion or treatment,or packaging of agricultural products
tourers as follow :
„
Effective Effective D. FIRE PROTECTION-
, .
January 1,2021 July 1,2022 MONTHLY STANDBY cHARGEs*
, .
ieBlock' $ 1.04 $ 1.14 Fbr each connection of autoniatid:fire.ap•rinklere dr,other priVate,ftre
-2'dBlock 2.2:7 2:49 protectiOn,there.shall be a staridby•cliargeper month,in addition to
3rd Block, .9..9 437 6onsumptiot-4,power cost,and energy CIF Charged based.orr the size of.
the connection ae,follows:,.
4"Block 5.30 5.80,
Effective
2022
. . . . . . .. , .. . Size rvi eo4)
SeTan. Effective
,:
i.
BLOCK THRESHOLDS (gallons per month) (i nch
2" $ 20.34 3 .22.2T •
.
The:threshold for the rate blocks.wry with the size of the 3" 39.55 43.30
4" 54.24 59.39,
watermeter as-follows:
6" 134.47 147.24
Meter. 8" 204,53 991,96
,.ixe 1st 2nd .3rd 4th
'(inches) Block Block Block Block
5/8' 5,000 5,001- 15,000 '15,001 - 40,000. > .40,000 E. FIRE I4NE OR FIRE SERVICE METERS-
V' 5,000 5,001- 100,000 :100,001 - 300,000 > 300,000 IVIONTHLY.STANDBY.CHARGES*
1-'..<.'' 5,900 5,001- 400;000 400,001 - 1,000;000 > i,o00000
Vol each conneetion of:combined fire&dbmestic services,'there
. ,
2 .5,000 .5,001- 900,000 900,001 - 2,000,000 > .2,000,000 shall be a standby charge per nionth„.in addition to tonsumption,
3"' 5i600 '5,001- .21000,900 2I:100.001. - 5.,010,0(4 ›"' 5,P000°° 'connection
Cdstand energy C]]?charges based orl,the larger sire of.the
4" 5,000 5,000- 4;700,000 ,44.700,001 - 10,000,000 > 10,000,000 connection as,follows.:
6" 5,000 '5,00'!- 10,000;000 00,000,00,1-.. 25,000;000->25;000,000
8" 5,000 5,001, 20,000,000 20,000,001- 50,000;000 >50,000,000 Size 0
Service Effective Effective
10" 9,000 5,061- 40,000,000 40,000,001- 100,000,000 >100,000,000 (inches) January 1,2021 Joh/1,.2022
12" 5,600 5,001- 60000 000 60,000,001', 150,000,00 >150,040,000 3" $ 233.91 $.256.13'
,
4" 384.20 420.70
Q
. ,762.75
835.21.
86 1,218.14 1,333.86
1.0" '1,752.63 1,919.13'
F. SERVICE LATERAL:INSTALLATION L. STANDPIPE CHARGES
CHARGES Newcustome±s obtainifigVater ger-Vied:front Deltartnient.Of
Installatibn charge.for service.lateral contleCticin•with a5/8-inch Viatet:$upply standpipe facilities.shall be charged an initial
meter: payment and alirepOrtional-edst.of•the stanstandpipe facility
on a monthly basis.These,:oharges•are as follows and,are in
Effective Effective acktitiOn to cdsi§iiiriptiOn,standby;power cost,anct energy CIP
JPIY.1,7416 January!,2021. chai„, ,.
Sante Side Cross Road Sante:Side Cross,Road "'"
COutit-k
Right-of.Way $3,000.00 $ 4;000.00. .1 3;000.00 $ 6;000:00 Effective Effective
State January 1.2021 July].2022
,1d6t.of-Wq 12,000.00 17;000:00 17,000.00 21,000;00 InitialPayment
Meter..Size
CONDITIONS: 5/5" .$206.79 I 226.44
1) For special conditions eliCh as concrete.eidewilks;: 1" 416:97 456.58
compaction,teets,.large cut or fill areas where additional 1.-y.” 51.9.80 69.18
work is
require.cki additional t,c,harges,:ae deterain.ed:by.,he Aitt'sotao.-lr,lt'Aztieon• .
622,63 :681.78
Department,ahall beacidetotherristallation chargeslisted. Tid
•
,
abOri.e. cosi-Morithlj,
Meter Size..
.2)l7)educ:t telQ if no meter:istequireci. 5/8"• $ 11.30 i 1237,
1,, 22.60 '24.75
1.-112"' 28.25 30:93.
G. FACILITIES,CHARGES. 2!'
32.77 35:88:
A facilities charge trill:be.applicable to all riet:7 service connections
based oh-the rnalimum size of the:rgetez•encl.ype:of pervilcethe
service lateral cah,sirppott:or by the:dumber of lots,dv,:rellitig'irite
or equivaleht units in th4 dpvelopment,Whicheyes coels•:larger..The J. POWER COST CHARGES(per..1,000 ga1lori0
iiinit. bst in determinatiOncif the-facilitie§charges shall be16,095.00 Allwatex use shall be'subjeCt to the imposition of a Power
for each additional lot dwelling,unitor equivalent unit The facif- Cost Charge*addition•to consuinpion,standby,and energy
.ities charge is in addition to theserViee,latkal installation charge.
GIP cliarg-es.The DeplOtaiptit shall.calculate the rate based
The schedule of facilities charges is as:follows:.
oil actual power.costs and consumption every two months or
Meter. Effective, Effective for the period§iiiCe.thelaSt revision to the power cost charge:
Size July'I,. January.1., Ctittdittand.14,storit power cost•tharges.are as follows:.
, .
(inches)i 2010: . 2021 • ,
5/8" 'First Connection $: 1,190.00:. $' 1.i31.9'.00
Effective Date 'Power,CCit:Charit.,es
Additional conneCtion_ •-5„ 00:00 .6 095.00
1" Each Connection 13,750:00 15,237.00 July1,2022
, ..
1,HY2.-',', E.4c.n.Corinection .73(54.74 00 .11.ilay 1,202Z
. .
2" Each Connection '.44: ..006C)00.000- 49,759.00 .March 1,2022 $2.02.
3" Each Connection 82,500.00 92,518.00 November 1;2021 , $2.15.
4" Each Connection 137,500:00 152,372.00 Jr.rn,e 1,./0,21...
'6" Each Connection 275,000;00 304744:130
8" Each Connection 495;000.00 .487;591.00 l'
iVs tad-cc-lout-led:ion 797,500.00 1,279;927.00
1.2'''' Each Cord-let:Lion' 2 1 18I,61. 146.010
, , .500.00 K. ENERGY CIP CHARGES (per 1,000 gallons)
,.. , , ,
.4..:viter use shall.be subject.to.theinposition of anEnergy
.. ., ... _ . . . CIP Charge in addition to consumption Standby,and power
H. TEMPORARY SERVICE-ON FIYDRANT
..., ,. .. . . cost charges.The c:rate Shaine aquStecIannitally in order to
CHARGES fuhaproject.'.de§igried to irtiprOve••the Department's energy
. . i .
Each applicant for a temporary connection of a meter to afire ,efficiency.The current energy charge as as follows:
hydrant shall lie,eharged an'irtitialpayitient.„to be set periodically ,
by the.Depaittnentittadditioti to'consumption,standby,power. Effective Date Energy CIP Charge.
co,$t„;kid effery cip.,,+ irge.s.Serviee,shall belirniterl:tO a petioa
Jt.11-'7,1,2016 : $0.05:
:not lonzerAltan 180 Icalen.dat.tlays.TheDepartntent reserves the
,rik4t.to deny atty.a.pplication or:reinove.-any,tenaporary gonnection
at attytititC:,
•
USDA
United States Department of Agriculture
August 25, 2022
Mr. Keith Okamoto, Manager-Chief Engineer _
Department of Water Supply
County of Hawai`i
345 Kekuanaoa Street, Suite 20
Hilo, Hawaii 96720
SUBJECT: Letter of Conditions
County of Hawai`i
Project Name: Iki Place Water System Improvements
CFDA NUMBER— 10.760
RUS Loan: $275,000
RUS Grant: $825,000 •
Dear Mr. Okamoto:
This letter establishes conditions which must be understood and agreed to by you before further
consideration may be given to your application. The loan and grant will be administered on
behalf of the Rural Utilities Service (RUS) by the State staff of USDA Rural Development(RD),
both of which are referredto throughout this letter as the Agency. Any changes in project cost,
source of funds, scope of project, or any other significant changes in'the project or applicant
must be reported to and concurred with by the Agency by written amendment to this letter. This
includes any significant changes in the Applicant's fmancial condition, operation, organizational
structure or executive leadership. Any changes made without Agency concurrence shall be cause
for discontinuing processing of the application.
This letter does not constitute loan and grant approval,nor does it ensure that funds are or will be
available for the project. The funding is being processed on the basis of a loan not to exceed
$275,000 and a grant not to exceed$825,000 The loan and grant will be considered approved on
the date Form RD 1940-1, "Request for Obligation of Funds" is signed by the Agency approval
official.
The applicant will ensure projects are completed in a timely, efficient, and economical manner.
You must meet all conditions set forth under Section III—Requirements Prior to Advertising for
Bids within 1 year of this letter.
If you do not meet the conditions of this letter, the Agency reserves the right to withdraw Agency
funding.
Rural Development
154 Waianuenue Avenue, Rm 311, Hilo,Hawaii 96720
Voice(808)933-8380•Fax 1-855-878-2460
USDA is an equal opportunity provider, employer, and lender.
If you wish to file a Civil Rights program complaint of discrimination,complete the USDA Program Discrimination Complaint Form(PDF),found online at
http://www.ascr.usda.gov/complaint_filing_cust.html, or at any USDA office, or call (866) 632-9992 to request the form.You may also write a letter
containing all of the information requested in the form.Send your completed complaint form or letter to us by mail at U.S. Department of Agriculture,
Director, Office of Adjudication, 1400 Independence Avenue, S.W., Washington, D.C. 20250-9410, by fax (202) 690-7442 or email at
programintake@usda.gov.
gov.
EXHIBIT C
2
If you agree to meet the conditions set forth in this letter and desire further consideration be
given to your application,please complete and return the following forms within 3 days:
Form RD 1942-46, "Letter of Intent to Meet Conditions"
Form RD 1940-1,-"Request for Obligation of Funds"
All parties may access information and regulations referenced in this letter at our website located
at https://www.rd.usda.gov/programs-services/water-environmental-programs/water-waste-
disposal-loan-grant-program.
The conditions are as follows:
SECTION I -PROJECT SCOPE
1. Project Description—Funds will be used for water system improvements to include all work
involved to extend potable water and fire protection service to the residential lots along Iki Place
in Kohanaiki,North Kona on Hawai`i Island.
Facilities will be designed and constructed in accordance with sound engineering practices and
must meet the requirements of Federal, State, and local agencies. The proposed facility design
must be based on the Preliminary Engineering Report (PER),prepared by Foresight Engineering
&Design, LLC. dated July 26, 2022, as concurred with by the Agency.
2. Project Funding—The Agency is offering the following funding for your project:
RUS Loan- $ 275,000
RUS Grant- $ 825,000
TOTAL PROJECT COST - $ 1,100,000
Any changes in funding sources following obligation of Agency funds must be reported to the
processing official. Prior to loan closing, any increase in non-Agency funding will be applied
first as a reduction to Agency grant funds, up to the total amount of the grant, and then as a
reduction to Agency loan funds.
The applicant must certify that they have exhausted all other funding avenues and have no
pending funding considerations from any other sources. Further, the applicant must certify that
they do not intend to apply anywhere else for funding for this project. If, after obligation of
Agency funds, other funding becomes available,the Agency reserves the right to deobligate any
and all funding for this project and to re-underwrite. This may result in the offering of a
different funding package to for this project.
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Prior to advertisement for construction bids,you must provide evidence of applicant
contributions and other funding sources. This evidence should include a copy of the commitment
letter. Agency funds will not be used to pre-finance funds committed to the project from other
sources.
3. Project Budget—Funding from all sources has been budgeted for the estimated expenditures
as follows:
Project Costs: Total Budgeted:
Construction $ 881,500
Contingency $ 30,000
Engineering Fees $ 148,500
Includes:
Preliminary Engineering Report $ 16,000
Environmental Report $ 32,400
Design $ 89,500
Construction Support $ 10,600
Legal Fees $ 40,000
TOTAL $1,100,000
Project feasibility and funding will be reassessed if there is a significant change in project costs
after bids are received. Obligated loan and/or grant funds not needed to complete the proposed
project will be deobligated. Any reduction will be applied to Agency grant funds first. If actual
project costs exceed the project cost estimates, an additional contribution by the Owner may be
necessary. An"Amended Letter of Conditions" will be issued for any changes to the total
project budget.
4. Project Timeline—To ensure that the project proceeds in a timely manner, key processing
milestones have been established in accordance with the PER or other Agency approved
documentation. Projects should be completed, and Agency funds fully disbursed within
three years of obligation. By agreeing to the terms herein,you agree to comply with the
milestones identified below. If, for any reason, one or more of the milestones cannot be met, you
must notify the Agency in writing at least 30 days prior to the referenced date. Should your final
completion date become more than three years after obligation the written request will follow the
procedures outlined in Section VI of this letter, including the submission of not less than 90 days
prior to the benchmark. The correspondence must contain a valid explanation as to why the
milestone cannot be met and include a proposed revised project completion schedule. If the
Agency agrees to the modification, a written confirmation will be issued. The Agency reserves
the right to de-obligate loan and/or grant funds, or take other appropriate action, if the
established or amended deadlines are not met.
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Milestone Date
Land&Easement Acquisition November 2022
Plans & Specifications, and Design Complete January 2023
Initial Advertisement for Bids March 2023
Award Contract(s)/Initiate Construction January 2024
Substantial Completion June 2024
Final Completion July 2024
SECTION II—RATES & TERMS
5. Interest Rates and Loan Terms—The interest rate will be the lower of the rate in effect at
the time of loan approval or the.time of loan closing unless you request otherwise. Should the
interest rate be reduced, the payment will be recalculated to the lower amount. The payment due
date will be established as the day that the loan closes.
Your loan will be scheduled for repayment over a period of 35 years. Payments will be equal
annual amortized installments, beginning one month after closing. For planning purposes, use a
2.00% interest which provides for an annual payment of$11,003.00 The precise payment
amount will be based on the interest rate at which the loan is closed and may be different than
the one above.
6. Security—The loan will be secured by a General Obligation bond with first lien position in
the amount of$275,000. The bond will'be fully registered as to both principal and interest in the
name of the "United States of America, Acting through the United States Department of
Agriculture." Bond Counsel will be utilized in preparation of these documents.
The bond and any ordinance or resolution relating thereto must not contain any provision in
conflict with the Agency Loan Resolution, applicable regulations, or associated laws. There
must be no defeasance or refinancing clause in conflict with the graduation requirements of 7
U.S.C. 1983.
Additional security requirements are contained in RUS Bulletin 1780-27, "Loan Resolution"
(Public Bodies) and RUS Bulletin 1780-12, "Water and Waste System Grant Agreement". A
draft of all security instruments, including draft bond resolution, must be reviewed and concurred
in by the Agency prior to advertising for bids. Bond/loan resolutions must be duly adopted and
executed prior to loan closing.
The Grant Agreement will be executed prior to the first disbursement of grant funds. The
grantee understands that any property acquired or improved with Federal grant funds may have
use and disposition conditions which apply to the property as provided by 2 CFR part 200 in
effect at this time and as may be subsequently modified. The grantee understands that any sale
or transfer of property is subject to the interest of the United States Government in the market
value in proportion to its participation the project.
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7. Reserves—Reserves must be properly budgeted and set aside to maintain the financial
viability and sustainability of any operation. Reserves are important to fund unanticipated
emergency repairs,to assist with debt service should the need arise, and for the replacement of
assets which have a useful life less than the repayment period of the loan.
SECTION III—REQUIREMENTS PRIOR TO ADVERTISING FOR BIDS
8. Organization—The Bond Counsel transcripts of proceedings must show that your
organization is a duly incorporated public body and has continued legal existence. Your
organization must have the authority to own, construct, operate, and maintain the proposed
facility, as well as for borrowing money,pledging security and raising revenues.
9. Suspension and Debarment Screening—Agency staff must conduct screening for
suspension and debarment of the entity through the Do Not Pay Portal.
10. Environmental Requirements—At the conclusion of the proposal's environmental review
process, specific action(s)were determined necessary to avoid or minimize adverse
environmental impacts. As outlined in the Environmental Report (ER) dated July 2022,the
following actions are required for successful completion of the project and must be adhered to
during project design and construction:
In the unlikely event that lava tube caves, archaeological resources or human remains are
encountered during future development activities within the affected area,work in the
immediate area of discovery will be halted arid the State Historic Preservation Division
(SHPD) contacted as outlined in Hawai`i Administrative Rules 13§13-275-12.
To minimize potential impacts to Hawaiian hoary bats:
• Do not disturb,remove or trim woody plants taller than 15 feet during the bat birthing
and pup rearing season(June 1 through September 15).
• Do not use barbed wire for fencing
To avoid and minimize potential project impacts to seabirds:
• Fully shield all permanent outdoor lights so the bulb can only be seen from below
bulb height and only use when necessary. Any permanent fixtures would use only
energy efficient outdoor lamps with warmer colors (less blue light) and would install
lighting only where and when it is needed for safety purposes, with automatic motion
sensors for appropriate fixtures
• Avoid nighttime construction altogether during seabird fledging period, September 15
through December 15.
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To avoid and minimize potential project impacts to Blackburn's sphinx moth:
• A biologist familiar with Blackburn's sphinx moth shall survey areas of proposed
activities for Blackburn's sphinx moth and its larval host plants prior to work
initiation.
o Surveys shall be conducted during the wettest portion of the year(November-
April) if possible, but in any case, within 4-6 weeks prior to construction.
o Surveys shall include searches for eggs, larvae, and signs of larval feeding
(chewed stems, frass, or leaf damage).
o If moths or the native aiea or tree tobacco over 3 feet tall are found during the
survey, inform the Agency for coordination with USFWS for additional guidance
to avoid take.
• If no Blackburn's sphinx moth, `thea, or tree tobacco are found during surveys,
measures shall be taken to avoid attraction of Blackburn's sphinx moth to the project
location and prohibit tree tobacco from entering the site. Ensure there are trained
personnel who will:
o Remove any tree tobacco less than 3 feet tall.
o Monitor the site every 4-6 weeks for new tree tobacco growth before, during and
after the proposed ground-disturbing activity.
To minimize potential impacts to Hawaiian hawks, ensure that if heavy construction to
include excavation and large tree or major tree trimming is scheduled to begin during the
breeding season for Hawaiian hawks (March 1 to September 30), arrange for a hawk nest
search to be conducted by a qualified biologist according to accepted protocol. If hawk nests
are present in or near the project site, all land clearing activity will cease until the expiration
of the breeding season.
To avoid and minimize potential project impacts to the Hawaiian goose, incorporate the
following measures into the project conditions:
• Do not approach, feed, or disturb the Hawaiian goose
• If Hawaiian geese are observed loafing or foraging within the project area during the
breeding season(September through April), have a biologist familiar with Hawaiian
goose nesting behavior survey for nests in and around the project area prior to the
resumption of any work. Repeat surveys after any subsequent delay of work of 3 or
more days (during which the birds may attempt to nest).
• Cease all work immediately and contact the USFWS for further guidance if a nest is
discovered within a radius of 150 feet of the proposed project, or a previously
undiscovered nest is found within the 150-foot radius after work begins.
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• In areas where the Hawaiian goose are known to be present,post and implement
reduced speed limits, and inform project personnel and contractors about the presence
of federally listed species on-site.
Apply biosecurity protocols including cleaning and inspection of construction equipment for
invasive species including fire ants, frogs,rats, and mice during.construction.
The project, as proposed, has been evaluated to be consistent with the National Environmental
Policy Act. Other Federal, State, tribal, and local laws, regulations and/or permits may apply or
be required. If the project or any project element deviates from or is modified from the originally
approved project, additional environmental-review may be required.
11. Engineering Services—You have been required to complete an Agreement for Engineering
Services, which should,consist of the Engineers Joint Contract Documents Committee (EJCDC)
documents as indicated in RUS Bulletin 1780-26, "Guidance for the Use of EJCDC Documents
on Water and Waste Projects with RUS Financial Assistance," or other approved form of
agreement. The Agency will provide concurrence prior to advertising for bids and must approve
any modifications to this agreement.
12. Contract Documents, Final Plans, and Specifications-All development will be completed
by contract in accordance with applicable provisions of RUS Instruction 1780, Subpart C—
Planning, Designing, Bidding, Contracting, Constructing and Inspections, (copy available upon
request), and in compliance with all statutory requirements. You are responsible to share this
with your engineer before pre-design.
a. The plans and specifications and all proposals required by law must be approved by the
respective State and local regulatory bodies for water systems.
b. In preparing final design and providing service to the planned project area,you and your
engineer will comply with all zoning and planning requirements of the appropriate
governing bodies where service is to be provided.
c. The Agency will need to concur in the plans and specifications prior to advertising for
bids. The Agency may require an updated cost estimate if a significant amount of time
has elapsed between the original project cost estimate and advertising for bids.
d. The use of any procurement method other than competitive sealed bids must be requested
in writing and approved by the Agency.
e. The contract documents must consist of the EJCDC construction contract documents as
indicated in RUS Bulletin 1780-26 or other Agency-approved forms of agreement.
f. American Iron and Steel Requirements. Section 746 of Title VII of the Consolidated
Appropriations Act of 2017 (Division A -Agriculture, Rural Development, Food and
Drug Administration, and Related Agencies Appropriations Act, 2017) and subsequent
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statutes mandating domestic preference applies the American Iron and Steel (AIS)
requirement to obligations made after May 5, 2017:
(1)No Federal funds made available for this fiscal year for the rural water, wastewater,
waste disposal, and solid waste management p programs authorized bythe
g p g.
Consolidated Farm and Rural Development Act(7 U.S.C. 1926 et seq.) shall be used
for a project for the construction, alteration,maintenance, or repair of a public water
or wastewater system unless all of the iron and steel products used in the project are
produced in the United States.
(2) The term"iron and steel products"means the following products made primarily of
iron or steel: lined or unlined pipes and fittings, manhole covers and other municipal
castings, hydrants, tanks, flanges,pipe clamps and restraints,valves, structural steel,
reinforced precast concrete, and construction materials.
(3) The requirement shall not apply in any case or category of cases in which the
Secretary of Agriculture (in this section referred to as the "Secretary") or the designee
of the Secretary finds that—
(a) applying the requirement would be inconsistent with the public interest;
(b) iron and steel products are not produced in the United States in sufficient and
reasonably available quantities or of a satisfactory quality; or
(c) inclusion of iron and steel products produced in the United States will increase the
cost of the overall project by more than 25 percent.
(4) Owners are ultimately responsible for compliance with MS requirements (as defined
in RUS Bulletin 1780-35).
(a)Sign loan resolutions, grant agreements andletters of intent to meet conditions
which include AIS language, accepting AISrequirements in those documents and
in the letter of conditions.
(b)Sign agreements for engineering services, executed construction contracts and all
other appropriate and necessary documents which include MS language.
Change Orders and Partial Payment Estimates:Acknowledge responsibility for
compliance with MS requirements by signing change orders (EJCDC C-941) and
partial payment estimates (EJCDC C-620).
(c) Substantial completion of project: Obtain the certification letters from the
consulting engineer and maintain this documentation for the life of the loan.
(d)Special Cases
i. Where Owner provides their own engineering,the Owner's responsibilities will
include items listed in Section 5 of RUS Bulletin 1780-35.
ii. Where Owner performs their own construction,the Owner's responsibilities
will include items listed in Section 6 of RUS Bulletin 1780-35.
iii. Where Owner directly procures MS products, Owner must utilize EJCDC
Procurement Series standard contract documents following RUS Bulletin 1780-26
Exhibit D and obtain manufacturers' certifications and provide copies to Engineer
and Contractor.
13. Legal Services–A legal services agreement is required with your attorney and bond counsel,
if applicable, for any legal work needed in connection with this project. The agreement should
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stipulate an hourly rate for the work, with a"not to exceed" amount for the services, including
reimbursable expenses. RUS Bulletin 1780-7, "Legal Services Agreement," or similar format
may be used. The Agency will provide concurrence prior to advertising for bids. Any changes
to the fees or services spelled out in the original agreement must be reflected in an amendment to
the agreement and have prior Agency concurrence.
14. Property Rights - Prior to advertising for bids,you and your legal counsel must furnish
satisfactory evidence that you have adequate continuous and valid control over the lands and
rights-of-way needed for the project. Acquisitions of necessary land and rights must be
accomplished in accordance with the Uniform Relocation Assistance and Real Property
Acquisition Policies Act. Such control over the lands and rights will be evidenced by the
following:
a. Right-of-Way Map—Your engineer will provide a map clearly showing the location of
all lands and rights-of-way needed for the project. The map must designate public and
private lands and rights and the appropriate legal ownership thereof.
b. Form RD 442-20, "Right-of-Way Easement"—This form, or similar format,may be
used to obtain any necessaryeasements for the proposed project.
c. Form RD 442-21, "Right-of-Way Certificate"—You will provide a certification on this
form that all right-of-way requirements have been obtained for the proposed project.
d. Form RD 442-22, "Opinion of Counsel Relative to Rights-of-Way"—Your attorney
will provide a certification and legal opinion on this form addressing rights-of-way,
easements, and title.
The approving official may waive title defects or restrictions, such as utility easements, that do
not adversely affect the suitability, successful operation, security value, or transferability of the
facility. Anysuch waivers must beprovided bythe approving official in writing prior to closing
tY pp g
or the start of construction, whichever occurs first.
You are responsible for the acquisition of all property rights necessary for the project and for
determining that prices paid are reasonable and fair. The Agency may require an appraisal by an
independent appraiser or Agency employee in order to validate the price to be paid.
15. System Policies, Procedures, Contracts, and Agreements—The facility must be operated
on a sound business plan which involves adopting policies,procedures, and/or ordinances
outlining the conditions of service and use of the proposed system. Mandatory connection
policies should be used where enforceable. The policies,procedures, and/or ordinances must
contain an effective collection policy for accounts not paid in full within a specified number of
days after the date of billing. They should include appropriate late fees, specified timeframes for
disconnection of service, and reconnection fees. A draft of these policies,procedures, and/or
ordinances must be submitted for Agency review and concurrence, along with the documents
below,before closing instructions may be issued unless otherwise stated.
a. Contracts for Other Services/Lease Agreement—Drafts of any contracts or other
forms of agreements for other services, including audit, management, operation, and
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maintenance, or lease agreements covering real property essential to the successful
operation of the facility,must be submitted to the Agency for review and concurrence
prior to advertising for bids.
Fully executed copies of any policies,procedures, ordinances, contracts, or agreements above
must be submitted prior to loan closing.
16. Closing Instructions—The Agency will prepare closing instructions as soon as the
requirements of the previous paragraphs are complete, as well as a draft of the security
instrument(s). Both your bond and legal counsel must comply with these instructions when
closing the Agency loan/grant.
17. System Users—This letter of conditions is based upon your indication at application that
there will be at least 15 residential users on the proposed system when construction is completed.
Before the Agency can agree to the project being advertised for construction bids,you must
certify that the number of users indicated at application are currently using the system or signed
up to use the system once it is operational.
If the actual number of existing and/or proposed users that have signed up for service is less than
the number indicated at the time of application,you must provide the Agency with a written plan
on how you will obtain the necessary revenue to adequately cash flow the expected operation,
maintenance, debt service, and reserve requirements of the proposed project(e.g., increase user
rates, sign up an adequate number of other users, reduce project scope, etc.). Similar action is
required if there is cause to modify the anticipated flows or volumes presented following
approval.
18. Construction Account—A separate construction account is not required for project funds.
However,the recipient must be able to separately identify, report and account for all Federal
funds, including the receipt, obligation and expenditure of funds, in accordance with 2 CFR
200.305. These funds must be deposited in a bank with Federal Deposit Insurance Corporation
(FDIC) insurance coverage. If the balances at the financial institution where federal funds
will be deposited exceeds the FDIC insurance coverage, the excess amount must be
collaterally secured up to 100 percent of the highest amount of funds expected to be
deposited in the account at any one time, per the Department of Treasury regulations and
requirements.
19. Interim Financing—The Agency's policy is to utilize interim financing for all loans
exceeding $500,000. Prepayment penalties,on interim financing are not allowed. Borrowers are
required to seek interim financing initially from private or cooperative lenders if funds can be
borrowed at reasonable interest rates on an interim basis from those sources for the construction
period. Thefact that a commercial lender's rates are higher than current Agency interest rates
does not necessarily mean that the commercial rate is not reasonable.
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20. Proposed Operating Budget—You must establish and/or maintain a rate schedule that
provides adequate income to meet the minimum requirements for operation and maintenance (0
and M), debt service, and reserves. Prior to advertising for bids,you must submit a proposed
annual operating budget to the Agency, as well as your proposed rate schedule. The operating
budget should be based on a typical year cash flow after completion of the construction phase
and should be signed by the appropriate official of your organization. Form RD 442-7,
"Operating Budget," or similar format may be utilized for this purpose. It is expected that 0 and
M expenses will change over each successive year and user rates will need to be adjusted on a
regular basis.
Technical assistance is available at no cost to help you evaluate and complete a rate analysis on
your system. This assistance is available free to your organization. If you are interested,please
contact our office for information.
21. Permits—The owner or responsible party will be required to obtain all applicable permits for
the project,prior to advertising for bids. The consulting engineer must submit written evidence
that all applicable permits required prior to construction have been obtained with submission to
the Agency of the final plans, specifications, and bid documents.
22. Risk and Resilience Assessment/Emergency Response Plan (RRA/ERP)—The Agency
requires all financed water and wastewater systems to have an RRA/ERP in place. New water or
wastewater systems must provide a certification that an ERP is complete prior to the start of
operation, and a certification that an RRA is complete must be submitted within one year of the
start of operation. Borrowers with existing systems must provide a certification that an
RRA/ERP has been completed prior to advertising for bids. Technical assistance is available in
preparing these documents at no cost to you.
Before funds are drawn, you should have in place a cybersecurity plan, a supply chain plan, and
a plan to comply with cybersecurity requirements of the National Institute of Science and
Technology and the Cybersecurity and Infrastructure Security Administration. These items
should be addressed in the RRA/ERP.
The RRA/ERP documents themselves are not submitted to the Agency. The RRA/ERP must
address potential impacts from natural disasters and other emergency events. It should include
plans to address impacts of flash flooding in areas where severe drought or wildfires occur. The
documents should be reviewed and updated every five years at a minimum.
23. Bid Authorization - Once all the conditions outlined in Section III of this letter have been
met,the Agency will authorize you to advertise the project for construction bids. Such
advertisement must be in accordance with applicable State statutes.
SECTION IV-REQUIREMENTS PRIOR TO.START OF CONSTRUCTION
24. Disbursement of Agency Funds -Agency funds will be disbursed electronically into the
construction account as they are needed. SF 3881, "ACH Vendor/Miscellaneous Payment
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Enrollment Form,"must be completed and submitted to the Agency prior to commencement of
construction.
The order of disbursement is as follows: 1) Applicant contribution, 2) other funding sources, 3)
interim financing or Agency loan funds, and 4)Agency grant funds. Interim financing or
Agency loan funds will be expended after all other funding sources unless a written agreement is
reached with all other funding sources on how funds are to be disbursed prior the first
disbursement. Interim financing funds or Agency loan funds must be used prior to the use of
Agency grant funds. Agency Grant funds must not be disbursed prior to loan funds except as
authorized in 7 CFR 1780.45(d).
Grant funds are to be deposited in an interest-bearing account (exception provided below) in
accordance with 2 CFR Part 200 and interest in excess of$500 per year remitted to the Agency.
The funds should be disbursed by the recipient immediately upon receipt, and there should be
little interest accrual on the Federal funds. Recipients shall maintain advances of Federal funds
in interest-bearing accounts, unless:
• The recipient receives less than$120,000 in Federal awards per year.
• The best reasonably available interest-bearing account would not be expected to earn
interest in excess of$500 per year on Federal cash balances.
• The depository would require an average or minimum balance so high that it would
not be feasible within the expected Federal and non-Federal cash resources.
• A foreign government or banking system prohibits or precludes interest-bearing
accounts.
25. Bid Tabulation—Immediately after bid opening,you must provide the Agency with the bid
tabulation and your engineer's evaluation of bids and recommendations for contract awards. If
the Agency agrees that the construction bids received are acceptable, adequate funds are
available to cover the total project costs, and all the requirements of Section III of this letter have
been satisfied,the Agency will authorize you to issue the Notice of Award.
a. Cost Overruns—If bids are higher than expected, or if unexpected construction
problems are encountered,you must utilize all options to reduce cost overruns.
Negotiations, redesign, use of bidding alternatives, rebidding or other means will be
considered prior to commitment of subsequent funding by the Agency. Any requests for
subsequent funding to cover cost overruns will be contingent on the availability of funds.
Cost overruns exceeding 20 percent of the development cost at time of loan or grant
approval or where the scope of the original purpose has changed will compete for funds
with all other applications on hand as of that date.
b. Excess Funds -If bids are lower than anticipated at time of obligation, excess funds must
be deobligated prior to start of construction except in the cases addressed in this
paragraph. In cases where the original PER for the project included items that were not
bid, or were bid as an alternate, the State Office official may modify the project to fully
utilize obligated funds for those items. Amendments to the PER, ER, and Letter of
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Conditions may be needed for any work not included in the original project scope. In all
cases,prior to start of construction, excess funds will be deobligated,with grant funds
being deobligated first. Excess funds do not include contingency funds as described in
this letter.
26. Suspension and Debarment Screening=In accordance with 2 CFR Part 180, Subpart C, as
a condition of the transaction and the responsibilities to persons at the next lower tier with whom
you enter into transactions,you must conduct screening for suspension and debarment of lower
• tier recipients (e.g.,vendors, contractors, etc.).
27. Contract Review—Your attorney will certify that the executed contract documents,
including performance and payment bonds, if required, are adequate and that the persons
executing these documents have been properly authorized to do so in accordance with 7 CFR
1780.61(b).
Once your attorney has certified that they are acceptable, the contract documents will be
submitted to the Agency for concurrence. Construction cannot commence until the Agency has
concurred in the construction contracts.
28. Final Rights of Way—Your attorney or title company must furnish a separate final title
opinion or Title Insurance Policy on all real property related to the facility,now owned and to be
acquired for this project, as of the day of loan closing or start of construction, whichever occurs
first. Form RD 1927-10, "Final Title Opinion"may be used.
If any of the right-of-way forms listed previously in this letter contain exceptions that do not
adversely affect the suitability, successful operation, security value, or transferability of the
facility, the approving official must provide a written waiver prior to the issuance of the Notice
to Proceed.
29. Insurance and Bonding Requirements -Prior to the start of construction or loan closing,
whicheveroccurs first,you must acquire and submit to the Agency proof of the types of
insurance and bond coverage for the borrower shown below. The use of deductibles may be
allowed,providing you have the financial resources to,cover potential claims requiring payment
of the deductible. The.Agency strongly recommends that you have your engineer, attorney, and
insurance provider(s) review proposed types and amounts of coverage, including any exclusions
and deductible provisions. It is your responsibility and not that of the Agency to assure that
adequate insurance and fidelity bond coverage is maintained.
a. General Liability Insurance—Include vehicular coverage.
b. Workers' Compensation—In accordance with appropriate State laws.
c. Guaranty or Fidelity Insurance—Coverage for all persons who have access to funds,
including persons working under a contract or management agreement. Coverage may be
provided either for all individual positions or persons, or through"blanket" coverage
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providing protection for all appropriate employees. Each position is to be insured in an
amount equal to the maximum amount of funds expected to be under the control of that
position at any one time. The minimum coverage allowed will be an amount equal to the
total annual debt service payment on the Agency loans. The coverage may be increased
during construction based on the anticipated monthly advances.
d. National Flood Insurance -If the project involves acquisition or construction in a
designated special flood area,the community in which the acquisition or construction is
situated must be currently participating in the national flood insurance program.
Additionally, if the project involves acquisition or constriction in designated special flood
or mudslide prone areas, a flood insurance policy must be in place at the time of loan
closing.
e. Real Property Insurance—Fire"and extended coverage will normally be maintained on
all structures except reservoirs,pipelines and other structures if such structures are not
normally insured, and subsurface lift stations except for the value of electrical and
pumping equipment. The Agency will be listed as mortgagee on the policy when the
Agency has a lien on the property. Prior to the acceptance of the facility from the
contractor(s),you must obtain real property insurance (fire and extended coverage) on all
facilities identified above.
The Agency is to be listed as"Other Insured" so as to receive notifications on all insurance,
regardless of security. Insurance types described above are required to be continued throughout
the life of the loan. See Section VII.
30. Initial Civil Rights Compliance Review—The Agency will conduct an initial civil rights
compliance review of the borrower prior to loan closing or start of construction, whichever
occurs first, in accordance with 7 CFR 1901, Subpart E. You are expected to comply with the
completion of the review, including the furnishing of any documents, records, or other applicable
material.
SECTION V—REQUIREMENTS PRIOR TO CLOSING
31. Multiple Advance. Multiple advances of Agency funds will be used. Loan closing will
occur prior to when the funds are needed. All items detailed in the sections above, as well as the
applicable items listed in this section, must be completed prior to closing.
32. Electronic Payments—Payments will be made through an electronic preauthorized debit
system. You will be required to complete Form RD 3550-28, "Authorization Agreement for
Preauthorized Payments," for all new and existing indebtedness to the Agency prior to loan
closing.
33. Other Requirements—All requirements contained in the Agency's closing instructions, as
well as any requirements of your bond counsel and/or attorney, must be met prior to loan closing.
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a. System for Award Management. You will be required to maintain a Unique Entity ID
(UEI) and maintain an active registration in the System for Award Management(SAM)
database. Renewal can be completed online at: http://sam.gov. This registration must be
renewed and revalidated every 12 months for as long as there is an active loan, grant, or
guaranteed loan with the Agency.
To ensure,the information is current, accurate and complete, and to prevent the SAM
account expiration, the review and updates must be performed within 365 days of the
activation date, commonly referred to as the expiration date. The registration process
may take up to 10 business days. (See 2 CFR Part 25 and the"Help" section at
http://sam.gov).
b. Litigation. You are required to notify the Agency within 30 days of receiving
notification of being involved in any type of litigation prior to loan closing or start of
construction,whichever occurs first. Additional documentation regarding the situation
and litigation may be requested by the Agency.
c. Certified Operator. Evidence must be provided that your system has or will have a
certified operator, as defined by applicable State or Federal requirements, available prior
to the system becoming operational, or that a suitable supervisory agreement with a
certified operator is in effect.
SECTION VI—REQUIREMENTS DURING CONSTRUCTION AND POST
CONSTRUCTION
34. Construction Completion Timeframe—Following the benchmarks established in Section I,
Item 4, Project Timeline, all projects should be completed, and Agency funds fully disbursed
within three years of the date of obligation. If funds are not disbursed within three years of
obligation and,you have not already done so per Section I, Item 4,you must submit a written
request for extension of time to the Agency with adequate justification of the circumstances,
including any beyond your control. The request must be submitted at least 90 days prior to the
end of the three-year timeframe and include a revised estimated date of completion. The Agency
will typically only allow one extension. Subsequent requests for waivers beyond the initial
extension or requests that exceed five years from the initial date of obligation will be submitted
to the RUS, Water and Environmental Programs for consideration. The Agency retains the right
to de-obligate any loan and/or grant monies, or take other appropriate action,related to
unliquidated funds that exceed the timeframes above and are not under an active extension.
35. Resident Inspector(s)—Full-time inspection is required unless you request an exception.
Such requests must be made in writing and the Agency must provide written concurrence.
Inspection services are to be provided by the consulting engineer unless other arrangements are
requested in writing and concurred with by the Agency. A resume of qualifications of any
resident inspector(s)will be submitted to the owner and Agency for review and concurrence
prior to the pre-construction conference. The resident inspector(s) must attend the
preconstruction conference.
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36. Preconstruction Conference—A preconstruction conference will be held prior to the
issuance of the Notice to Proceed. The consulting engineer will review the planned development
with the Agency, owner,resident inspector, attorney, contractor, other funders, and other
interested parties, and will provide minutes of this meeting to the owner and Agency.
37. Inspections - The Agency requires a preconstruction conference,pre-final, final, and
warranty inspections. Your engineer will schedule a warranty inspection with the contractor and
the Agency before the end of the [one-year] warranty period to address and/or resolve any
outstanding warranty.issues. The Agency will conduct an inspection with you of your records
management system at the same time and will continue to inspect the facility and your records
system every three years for the life of the loan. See Section VII of this letter.
38. Change Orders—A Change Order must be submitted for all modifications to the approved
scope of work, including existing contracts. This includes non-physical modifications such as
any time extension requests. Prior written Agency concurrence is required for all Change
Orders.
39. Payments—Prior Agency concurrence is required for all invoices and requests for payment
before Agency funds will be released. Requests for payment related to a contract or service
agreement will be signed by the owner, project engineer, and contractor or service provider prior
to Agency concurrence. Invoices not related to a construction contract or service agreement will
include the owner's written concurrence.
40. Use of Remaining Funds—As stated above, applicant contribution and connection or tap
fees will be the first funds expended in the project. Funds remaining after all costs incident to
the basic project have been paid or provided will be handled as follows:
a. Funds remaining after the applicant contribution and connection fees may be considered
in direct proportion to the amounts of funding obtained from each source. The use of
Agency funding will be limited to eligible loan and grant purposes,provided the use will
not result in major changes to the original scope of work and the purpose of the loan and
grant remains the same.
b. Any reductions in the Agency funding will be first applied to the grant funds.
c. Grant funds not expended for authorized purposes will be cancelled(de-obligated) within
60 days of final completion of project. Prior to actual cancellation,you,.your attorney
and engineer will be notified of the Agency's intent to cancel the remaining funds and
given appropriate appeal rights.
d. Under no circumstances is it appropriate to use remaining funds as contributions to a new
project outside the scope of the funded project.
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e. Loan funds that are not needed will be applied as an extra payment on the Agency
indebtedness unless other disposition is required by the bond ordinance, resolution, or
State statute.
41. Technical,Managerial and Financial Capacity - It is required that members of the Board
of Directors, City Council members, trustees, commissioners and other governing members
possess the necessary technical, managerial, and financial capacity skills to consistently comply
with pertinent Federal and State laws and requirements. It is recommended members receive
training within one year of appointment or election to the governing board, and a refresher
training for all governing members on a routine basis. The content and amount of training should
be tailored to the needs of the individual and the utility system. Technical assistance providers
• are available to provide this training for your organization, often at no cost. Contact the Agency
for additional information.
42.Reporting Requirements Related to Expenditure of Funds--An annual audit under 2
CFR 200 is required if you expend $750,000 or more in Federal financial assistance per fiscal
year. The total Federal funds expended from all sources shall be used to determine Federal
financial assistance expended. Expenditures of interim financing are considered Federal
expenditures.
All audits are to be performed in accordance with 2 CFR Part 200, as adopted by USDA through
2 CFR Part 400. Further guidance on preparing an acceptable audit can be obtained from the
Agency. The audit must be prepared by an independent licensed Certified Public Accountant, or
a State or Federal auditor if allowed by State law and must be submitted within 9 months of your
fiscal year end. Both the audit and accompanying management report must be submitted for
review.
If an audit is required,you must enter into a written agreement with the auditor and submit a
copy of that agreement to the Agency prior to the advertisement of construction bids. The audit
agreement may include terms and conditions that the borrower and auditor deem appropriate;
however, the agreement should include the type of audit to be completed,the time frame in
which the audit will be completed, and how irregularities will be reported.
SECTION VII—SERVICING REQUIREMENTS DURING THE TERM OF THE LOAN
43. Prepayment and Extra Payments -Prepayments of scheduled installments, or any portion
thereof, may be made at any time at the option of borrower,with no penalty.
Security instruments, including bonding documents, must contain the following language
regarding extra payments, unless prohibited by State statute:
Prepayments of scheduled installments, or any portion thereof may be made at any time
at the option of borrower. Refunds, extra payments and loan proceeds obtained from
outside sources for the purpose of paying down the Agency debt, shall, after payment of
interest, be applied to the installments last to become due under this note and shall not
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affect the obligation of borrower to paythe remaining installments as scheduled in your
security instruments.
44.Annual Financial Reporting/Audit Requirements—You are required to submit an annual
financial report at the end of each fiscal year. The annual report will be certified by the
appropriate organization official, and will consist of financial information, a current rate
schedule, and listing of board members with their terms. Financial statements must be prepared
on an accrual basis of accounting in accordance with generally accepted accounting principles
(GAAP). The annual report will include separate reporting for each water and waste disposal
facility, and itemized cash accounts by type (debt service, short-lived assets, etc.)under each
facility. All records,books and supporting material are to be retained for three years after the
issuance of the annual report. Technical assistance is available, at no cost, with preparing
financial reports.
The type of financial information that must be submitted is specified below:
a. Audits—An audit under the Single Audit Act is required if you expend $750,000 or more
in Federal financial assistance per fiscal year. The total Federal funds expended from all
sources shall be used to determine Federal financial assistance expended. Expenditures
of interim financing are considered Federal expenditures.
See Section VI for additional information regarding audits.
b. Financial Statements—If you expend less than$750,000 in Federal financial assistance
per fiscal year,you may submit financial statements in lieu of an audit which include, at a
minimum, a balance sheet and an income and expense statement. You may use Form RD
442-2, "Statement of Budget, Income and Equity," and 442-3, "Balance Sheet," or
similar format to provide the financial information. The financial statements must be
signed by the appropriate borrower official and submitted within 60 days of your fiscal
year end. ,
45. Annual Budget and Projected Cash Flow-Thirty days prior to the beginning of each fiscal
year, you will be required to submit an annual budget and projected cash flow to this office. The
budget must be signed by the appropriate borrower official. Form RD 442-2, "Statement of
Budget, Income and Equity," or similar format may be used.
Technical assistance is available at no cost to help you evaluate and complete a rate analysis on
your system, as well as completing the annual budget.
46. Graduation -By accepting this loan,you are also agreeing to refinance (graduate) the
unpaid loan balance in whole, or in part,upon request of the Government. If at any time the
Agency determines you can obtain a loan for such purposes from responsible cooperative or
private sources at reasonable rates and terms, you will be requested to refinance. Your ability to
refinance will be assessed every other year for those loans that are five years old or older.
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47. Security/Operational Inspections—The Agency will inspect the facility and conduct a
review of your operations and records management system and conflict of interest policy every
three years for the life of the loan. You must participate in these inspections and provide the
required information.
48. System for Award Management. You will be required to maintain a Unique Entity ID ,
(UEI) and maintain an active registration in the System for,Award Management(SAM) database.
Further information can be found at paragraph 33 of this letter.
49.Risk and Resiliency Assessment/Emergency Response Plan (RRA/ERP)—The RRA/ERP
is further outlined under Section III of this letter. You will be required to submit a certification
to the servicing office every five years that the RRA/ERP is current and covers all sites related to
the facility. The-RRA/ERP documents themselves are not submitted to the Agency. The
RRA/ERP must address potential impacts from natural disasters and other emergency events. It
should include plans to address impacts of flash flooding in areas where severe drought or
wildfires occur. Technical assistance is available in preparing these documents at no cost to you.
50. Insurance. —Insurance requirements are further outlined in Section IV of this letter. You
will be required to maintain insurance on the facility and employees as previously described in
this letter for the life of the loan.
51. Statutory and National Policy Requirements—As a recipient of Federal funding,you are
required to comply with U.S. statutory and public policy requirements, including but not limited
to:
a. Section 504 of the Rehabilitation Act of 1973—Under Section 504 of the Rehabilitation
Act of 1973, as amended (29 U.S.C. 794),no handicapped individual in the United States
shall, solely by reason of their handicap, be excluded from participation in, be denied the
benefits of, or be subjected to discrimination under any program or activity receiving
Agency financial assistance.
b. Civil Rights Act of 1964—All borrowers are subject to, and facilities must be operated
in accordance with, Title VI of the Civil Rights Act of 1964 (42 U.S.C. 2000d et seq.)
and 7 CFR 1901, Subpart E,particularly as it relates to conducting and reporting of
compliance reviews. Instruments of conveyance for loans and/or grants subject to the
Act must contain the covenant required by Paragraph 1901.202(e) of this Title.
c. The Americans with Disabilities Act(ADA) of 1990—This Act(42 U.S.C. 12101 et
seq.)prohibits discrimination on the basis of disability in employment, State and local
government services,public transportation,public accommodations, facilities, and
telecommunications.
d. Age Discrimination Act of 1975—This Act(42 U.S.C. 6101 et seq.)provides that no
person in the United States shall on the basis of age, be excluded from participation in, be
denied the benefits of, or be subjected to discrimination under any program or activity
receiving Federal fmancial assistance.
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e. Limited English Proficiency (LEP) under Executive Order 13166 -LEP statutes and
authorities prohibit exclusion from participation in, denial of benefits of, and
discrimination under Federally assisted and/or conducted programs on the ground of race,
color, or national origin. Title VI of the Civil Rights Act of 1964 covers program access
for LEP persons. LEP persons are individuals who do not speak English as their primary
language and who have a limited ability to read, speak, write, or understand English.
These individuals may be entitled to language assistance, free of charge. You must take
reasonable steps to ensure that LEP persons receive the language assistance necessary to
have meaningful access to USDA programs, services, and information your organization
provides. These protections are pursuant to Executive Order 13166 entitled, "Improving
Access to Services by Persons with Limited English Proficiency" and further affirmed in
the USDA Departmental Regulation 4330-005, "Prohibition Against National Origin
Discrimination Affecting Persons with Limited English Proficiency in Programs and
Activities Conducted by USDA."
f. Controlled Substances Act-Even though state law may allow some activities, as a
recipient of Federal funding,you are subject to the Controlled Substances Act. Specific
questions about the Controlled Substances Act should be directed to the Servicing
Official who will contact the Office of General Counsel, as appropriate.
52. Compliance Reviews and Data Collection—Agency financial programs must be extended
without regard to race, color, religion, sex, national origin, marital status, age, or physical or
mental handicap. You must display posters (provided by the Agency) informing users of these
requirements, and the Agency will monitor your compliance with these requirements during
regular compliance reviews.
The Agency will conduct regular compliance reviews of the borrower and its operation in
accordance with 7 CFR Part 1901, Subpart E, and 36 CFR 1191, Americans with Disabilities Act
(ADA)Accessibility Guidelines for Buildings and Facilities; Architectural'Barriers Act(ABA)
Accessibility Guidelines. Compliance reviews will typically be conducted in conjunction with
the security inspections described in this letter.
If beneficiaries (users) are required to complete an application or screening for the use of the
facility or service that you provide,you must request and collect data by race (American Indian
or Alaska Native, Asian, Black or African American, White); ethnicity (Hispanic or Latino,Not
Hispanic or Latino); and by sex. The Agency will utilize this data as part of the required
compliance review.
SECTION VIII—REMEDIES FOR NON-COMPLIANCE
Non-compliance with the conditions in this letter or requirements of your security documents
will be addressed under the provisions of Agency regulations, statutes, and other applicable
policies.
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We look forward to working with you to complete this project. If you have any questions, please
contact me by email at Lennie.Okano-Kendrick@usda.gov or by telephone at(808) 933-8304.
Sincerely,
Digitally signed by LENNIE
LENNIE OKANV ` OKANO-KENDRICK
KENDRICK ate:,2022.08.25 12:33:00
LENNIE OKANO-KENDRICK, P.E.
State Engineer/Environmental Coordinator
Attachments
cc: Mr. Alton Kimura, Community Programs Director
Ms. Deanna Sako, County of Hawai`i, Finance Director
Ms.Kerri Bandics, OGC Counsel
FORMS and BULLETINS:
Form RD 442-2, "Statement of Budget, Income and Equity"—Items 45
Form RD 442-3, "Balance Sheet"—Item 45
Form RD 442-7, "Operating Budget"—Item 20
Form RD 442-20, "Right-of-Way Easement"—Item 14
Form RD 442-21, "Right-of-Way Certificate"—Item 14
Form RD 442-22, "Opinion of Counsel Relative to Rights-of-Way"—Item 14
Form RD 1927-10, "Final Title Opinion"—Item 28
Form RD 1940-1, "Request for Obligation of Funds"—Page 2
Form RD 1942-46, "Letter of Intent to Meet Conditions"—Page 2
Form RD 3550-28, "Authorization Agreement for Preauthorized Payments"—Item 32
SF 3881, "ACH Vendor/Miscellaneous Payment Enrollment Form"—Item 24
RUS Bulletin 1780-7, "Legal Services Agreement"—Item 13
RUS Bulletin 1780-12, "Water and Waste System Grant Agreement"-Item 6
RUS Bulletin 1780-26, "Guidance for the Use of EJCDC Documents on Water and Waste
Projects with RUS Financial Assistance"—Items 11 and 12
RUS Bulletin 1780-27,8 ResolutionBodies)"
7 0 7, "L a o n (Public —Item 6