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HomeMy WebLinkAboutMIN FC 2024/06/04 (2022-2024)Committee on Finance 371" Session Hawaii County Building 25 Aupuni Street Hilo, Hawaii June 4, 2024 CALL TO The regular meeting of the Committee on Finance was called to order at ORDER: 9:03 a.m., in the Council Chambers, Hilo, by Mr. Matt Kaneali`i-Kleinfelder, Chair. ROLL CALL: Present: Mr. Matt Kaneali`i-Kleinfelder, Chair Ms. Michelle M. Galimba, Member (came in later; via videoconference from Kona) Mr. Holeka Goro Inaba, Member Ms. Jenn Kagiwada, Member Ms. Ashley L. Kierkiewicz, Member Ms. Heather L. Kimball, Member Ms. Susan L. K. Lee Loy, Member Ms. Rebecca Villegas, Member Absent & Excused: Ms. Cindy Evans, Vice Chair STATEMENTS The Chair directed the Committee to proceed to the next order of business, FROM THE Statements from the Public on Agenda Items. PUBLIC ON AGENDA ITEMS: (There were none.) COMMUNI- The Chair directed the Committee to proceed to the next order of business, CATIONS: Communications. Comm. 12.32: REPORT OF FUND TRANSFERS AUTHORIZED: APRIL 16 — 30, 2024 From Controller Kay Oshiro, dated May 15, 2024. Motion to Close File: Ms. Lee Loy moved to close file on Comm. 12.32. Seconded by Mr. Inaba. CHR. KANEALI`I-KLEINFELDER: Discussion by the Council Members, if any? Okay. We do have the departments here and as well as our Finance Director and Managing Director. Thank you. Council Member Inaba, go ahead. MR. INABA: Yeah. Director Nakagawa, regarding the Fire Operations OCE (Other Current Expenses) to Fire Auxiliary OCE, I believe there was some amendments as part of the budget process to (inaudible 9:05:52) boast some FC-37 June 4, 2024 support for some of these divisions. Can you give us a little bit of information on, you know, $100,000 having been moved from one division to another? (Note: At this time, Finance Director Diane Nakagawa came forward and addressed the members of the Committee.) MS. NAKAGAWA: Good morning. Diane Nakagawa. Finance Department. CHR. KANEALI`I-KLEINFELDER: Thank you. MS. NAKAGAWA: Council Member Inaba, hold on, let me just look for where you're referring to. Are you talking about the training? MR. INABA: Transfer Number 67. It's for uniforms or it was for uniforms. I'm just a little confused reading this summary. MS. NAKAGAWA: Okay. So, the summary, we can get more information from Fire as well. But less was needed in the uniform allowance budget and transferred to facility repairs. So, we can get additional information from Fire on exactly what facility repairs those would be used for. MR. INABA: Okay. Thanks. MS. NAKAGAWA: But yes. We did add some money in the 2025 budget, additional money for facility repairs as well. MR. INABA: And less money for uniforms? Hopefully. Okay. If we can check in on that being that there's surplus there. MS. NAKAGAWA: Yeah. Will do. MR. INABA: Okay. Thank you, Director. Chair, I yield. CHR. KANEALI`I-KLEINFELDER: Thank you. Please let the record reflect that Michelle Galimba has joined us in the Kona Chambers. Thank you, Ms. Galimba. Council Member Kierkiewicz, go ahead. MS. KIERKIEWICZ: Thank you, Chair. Just a process question. We see a flurry of these transfers between accounts, you know, closer to the end of the fiscal year, and I completely understand that folks want to make sure they're able to utilize the budget that was approved for them that particular fiscal year. Is there a way in which we are kind of learning these lessons and implementing departmental needs as we plan for the next budget? Because I'm wondering if there's certain trends where you're spotting just needs in particular areas. How are we factoring all this information to the next budgeting process? Page 2 FC-37 June 4, 2024 MS. NAKAGAWA: Sure. Council Woman, thank you for your question. So, this is a process that we go through from the beginning of our budget process with the departments in budget review. So, we do a minimum five year review of their trends for these budget items. And the departments, reviewing with their different divisions, do our best to budget for things appropriately, and that is the time when things are moved and adjusted based on the trends. Of course, there's things that are unpredictable in the year, and normally this is the time of year where there's some of those adjustments are made and a little more might be needed for costs that were unforeseen earlier in the year. But the trends that we do see and places in which needs to be adjusted is a significant discussion item when we go through the department budget reviews, you know, that we kick off in September. MS. KIERKIEWICZ: That's really helpful. Thank you for that. And if there an internal deadline in which departments can request to do these transfers? (Note: At this time, Finance Controller Kay Oshiro came forward and addressed the members of the Committee) MS. OSHIRO: Hi. Kay Oshiro. Controller for the County of Hawaii. As far as an internal deadline, the deadline we internally set is June. But you'll have noticed, transfers come in after fiscal year end as well because we're still closing the books so sometimes it's necessary at that point when we're doing closing adjustments, the departments then realize that they're short in account. So, we have a soft deadline for us to close, which is sometime in June but then we extend it as needed. MS. KIERKIEWICZ: Got it. Thank you for that, Kay. I appreciate it. Thank you, Director. Chair, I really appreciate the latitude. Thank you. CHR. KANEALI`I-KLEINFELDER: Thank you. Going to Kona. Ms. Galimba, any comments? No. Okay. We do have a motion on the floor to close file on Communication 12.32, all in favor? Vote on Comm. 12.32: The motion to close file on Comm. 12.32 was carried by Filed the following voice vote: Ayes: Committee Members Galimba, Inaba, Kagiwada, Kierkiewicz, Kimball, Lee Loy, Villegas, and Chair Kaneali`i-Kleinfelder — 8. Noes: None. Absent: Committee Member Evans —1. Excused: None. CHR. KANEALI`I-KLEINFELDER: Next order of business, please. Communication 13.34. Page 3 FC-37 June 4, 2024 Comm. 13.34: REPORT OF CHANGE ORDERS AUTHORIZED: APRIL 1-15, 2024 From Finance Director Diane Nakagawa, dated May 15, 2024, transmitting the above report pursuant to Section 2-12.3 of the Hawaii County Code. Motion to Close File: Ms. Lee Loy moved to close file on Comm. 13.34. Seconded by Mr. Inaba. CHR. KANEALI`I-KLEINFELDER: Council Members, discussion on the motion, if any? I'll check in with Kona. Council Member Galimba? MS. GALIMBA: No. Thank you. CHR. KANEALI`I-KLEINFELDER: Council Member Kimball, go ahead. MS. KIMBALL: Yeah. Thank you. I just wondered if we could have the Finance Director just share with us. A number of these are contract extensions, and just for the purpose of our own edification, what are we doing here with the extension of all these different I see they are all OHCD (Office of Housing and Community Development) contracts. So, I'm assuming they have to do with the homelessness funds or something. (Note: At this time, Finance Director Diane Nakagawa came forward and addressed the members of the Committee.) MS. NAKAGAWA: So, most of the ones, yes, we do see for Housing are no cost time extensions to get them through, most of them through May 3 Pt, which is just past. But OHCD is available to answer any questions on why they needed the time extension as well. So, most of them are short term, no cost extension. And I do want to point out that we did submit an amended change order report for this period. We had a correction on the second to the last line item that says bus stop and shelter cleaning. We did submit an amendment, those should be escrow services. So, that will be corrected. Just the title was labeled incorrectly. MS. KIMBALL: If somebody representing OHCD is available, I'd love a quick comment on the time extensions for these folks. Doesn't look like we have anyone. Chair, I'll follow up with OHCD offline. I don't need to wait for their response now. Thank you. CHR. KANEALI`I-KLEINFELDER: Okay. Thank you, Council Member. Any further discussion? Hearing and seeing none, motion is on the floor to close file on Communication 13.34. All in favor? Page 4 FC-37 Vote on Comm. 13.34: The motion to close file on Comm. 13.34 was carried by Filed the following voice vote: Ayes: Committee Members Galimba, Inaba, Kagiwada, Kierkiewicz, Kimball, Lee Loy, Villegas, and Chair Kaneali`i-Kleinfelder — 8. Noes: None. Absent: Committee Member Evans —1. Excused: None. June 4, 2024 CHR. KANEALI`I-KLEINFELDER: Moving on to our next order of business. Comm. 13.35: REPORT OF CHANGE ORDERS AUTHORIZED: APRIL 16 — 30, 2024 From Finance Director Diane Nakagawa, dated May 16, 2024, transmitting the above report pursuant to Section 2-12.3 of the Hawaii County Code. Vote on Comm. 13.35: Ms. Lee Loy moved to close file on Comm. 13.35. Filed Seconded by Ms. Kimball and carried by the following voice vote: Ayes: Committee Members Galimba, Inaba, Kagiwada, Kierkiewicz, Kimball, Lee Loy, Villegas, and Chair Kaneali`i-Kleinfelder — 8. Noes: None. Absent: Committee Member Evans —1. Excused: None. Comm. 713.1: TRANSMITS THE ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE FISCAL YEAR JULY 1, 2022 TO JUNE 30, 2023, AND A PRESENTATION PREPARED BY PLANTE & MORAN PLLC From County Auditor Tyler J. Benner, dated May 16, 2024. ;and Comm. 713.2: From Council Auditor Tyler J. Benner, dated May 23, 2024, transmitting a slide presentation. (Note: Comm. 713.3 from County Auditor, Tyler Benner, dated May 31, 2024, transmitting the Federal Awards Supplemental Information June 30, 2023 Single Audit, was circulated.) Motion to Close File: Ms. Lee Loy moved to close file on Comm. 713.1. Seconded by Mr. Inaba. CHR. KANEALI`I-KLEINFELDER: So, we have some guests joining us on Zoom. Thank you very much for being here this morning. Let's go ahead and do Page 5 FC-37 June 4, 2024 the presentation and please introduce yourself for our record and for housekeeping and go ahead with your presentation when ready. (Note: At this time, Plante & Moran Auditor Bill Brickey and Auditor Amanda Ward came forward to address the members of the Committee.) MS. WARD: Are you able to hear me? CHR. KANEALI`I-KLEINFELDER: I can. I can hear you. MS. WARD: Okay. Well, I will kick us off and Bill can maybe try to join. My name is Amanda Ward. I'm an Audit Partner with Plante Moran, and I serve as the single audit partner for the engagement. And Bill Brickey, who is also on the line and will be joining very quickly, served as the partner in charge of the financial statements, the annual financial statements as a whole. And thank you for this opportunity to present to you this morning. CHR. KANEALI`I-KLEINFELDER: Thank you, Ms. Ward. MR. BRICKEY: Can you hear me? CHR. KANEALI`I-KLEINFELDER: I can hear you loud and clear. MS. WARD: Yes. MR. BRICKEY: Alright. Great. So, thank you very much. As Amanda mentioned, I'm Bill Brickey and, you know, assisted with the audit this year and we're here to talk about the audit for the year end of June 30, 2023. So, I had prepared a brief presentation that we'll go through today. Hopefully, that works better than my microphone did. (Note: At this time, Plante & Moran Auditor Bill Brickey and Auditor Amanda Ward came forward and provided a PowerPoint presentation to the members of the Committee. For viewing of the subject presentation, see the DVD copy of the meeting proceedings on file in the Clerk's Office. A copy of the PowerPoint presentation is made a part of the record, see Comm. 713.2.) MR. BRICKEY: So, that's the end of our prepared comments. We'd be certainly happy to answer any questions, get into any items that we didn't talk about. Again, our goal is to provide a real high-level summary, but certainly want to give you the opportunity to, you know, ask us anything that you would like. CHR. KANEALI`I-KLEINFELDER: Thank you very much, Mr. Brickey and Ms. Ward. Thank you very much for the presentation this morning. Council Page 6 FC-37 June 4, 2024 Members, any discussion or conversation regarding the audit? Checking in in Kona. MS. GALIMBA: Thanks. It's not really, I guess a question for our auditors so much as perhaps Diane, and it's about the Water Department because I'm sure they know that semiautonomous that we don't actually have a whole lot of interaction with their Finance Department. Well, this is a question, I guess, for the auditors just to clarify.. So, the change that was made in the $14 million is basically the money was already there, you just were putting it into another account to sort of update that accounting to cure it up, correct? MR. BRICKEY: Correct. So, the way I would think about it is the department had I'd day the $14 million for the entire liability that was recorded. But instead of all it being a liability meaning at some point we have to give that back to somebody, the $7 million was forfeited by the individuals or companies that put it down, and so that should have been revenue at the time it was forfeited. So, the cash was always there. It's just whether it's recorded as a liability or revenue, which then goes into their, I'll say, reserves or that position. MS. GALIMBA: Thank you. I see Mr. Uyehara is trying to —so I guess my question would just be if you've updated your processes to recognize this change? (Note: At this time, Water Supply Deputy Kawika Uyehara came forward to address the members of the Committee.) MR. UYEHARA: Yeah. Thank you for the question. Kawika Uyehara. Deputy of Department of Water Supply. So, again, thank you for allowing us to attend today and provide any other explanations or answers. So, yes, we will apply the County's over audit, and we went through our process with Plante Moran, and they did identify this, they had a finding as far as our water commitment deposits and basically, it's like what Mr. Brickey was saying, it's a deposit when folks are looking to secure water for a parcel and then if it's available, we have a deposit that they need to pay to the department. The initial period is for three years they have to use that, and if not then they would have annual, they would need to annually renew an initial deposit. So, yes, thank you for the question. And basically that weakness was found and that finding was made, and so we've adjusted now. I also have Candace Gray, who's our Water Controller, on the call. She can go into more details if I can't answer it. But we are, we have now, after review of it, we have our corrective actions that we're going to put into place on our side so we can reconcile I believe on a monthly basis now and make that when these deposits expire, we are now moving it over from a liability and then recording it as a revenue. Is -that correct, Candace? Page 7 FC-37 June 4, 2024 (Note: At this time, Water Supply Controller Candace Gray came forward to address the members of the Committee.) MS. GRAY: Yes. That is correct. Basically, I guess what was identified, you know, throughout the audit process was that our communication and workflow process related to the water commitment deposits needed to be updated. So, we've taken steps to improve the process and to ensure, you know, timely recording of the revenue based on the expiration dates and in accordance with Rule 5 of our Rules and Regulations and the terms related to water commitment. But we are actively in the process of making those changes which should be definitely in place by the end of this fiscal year. MR. UYEHARA: Thank you. Thanks, Candace. MS. GALE\4BA: Thank you. Yes. Thanks for that. I just wanted to get a little clearer on these deposits. So, when someone wants to get a meter or some other type of infrastructure, they need to put a deposit down saying that they are going to do this work, and if they do it, they get their deposit back and then if they don't do it then they forfeit it. Is that more or less what happened with these deposits? MR. UYEHARA: So, if I may, Chair. I can spend a minute or so on explaining the deposits. MS. GALIMBA: Yeah. Just a quick one. MR. UYEHARA: But like Candace mentioned, it follows Rule 5 in our Rules and Regulations. Water commitments can be made if water is available. But basically, with that, the deposit is, you know, deposited to the Department of Water and then eventually there's a facilities charge that will need to be also paid to install a meter. And typically that deposit is used against that facilities charge, so it's credited to your facilities charge usually. But like what was mentioned earlier, if someone doesn't develop and they don't renew their deposits then that dollar amount needs to be recorded somewhere else. MS. GALIMBA: Okay. Thanks very much for that. I yield. CHR. KANEALI`I-KLEINFELDER: Thank you. Council Member Kimball. MS. KEWBALL: Thank you, Chair. Thank you to our presenters and for being here today, and the whole team. I had a couple quick questions. First, to you, Director Nakagawa. The single audit finding that there were controls lacking in some of the internal tracking, what is the management's response to that and what amendments are you looking at going forward? (Note: At this time, Finance Director Diane Nakagawa came forward and addressed the members of the Committee.) Page 8 FC-37 June 4, 2024 MS. NAKAGAWA: Yeah. So, we will be actively looking at how to address these. Kay Oshiro, our Controller, is here to talk a little bit in more detail and be happy to answer any questions as well. (Note: At this time, Finance Controller Kay Oshiro came forward and addressed the members of the Committee.) MS. OSHIRO: So, the plan that we have right now is that by the end of the fiscal year, which is by the end of June, we will be conducting a County wide training to go over the CIP (Capital Improvement Projects) controls and the areas that were overlooked during this past audit. MS. KIMBALL: Can you go into some detail about some of the areas that were overlooked? Where do the visibilities appear to be? MS. OSHIRO: So, the biggest adjustment again was for the CDBG-DR (Community Development Block Grant -Disaster Recovery) purchases. And so, the biggest exception for those is the idea that we spent hundreds, you know, hundred, two hundred thousand dollars on a piece of property that basically was a lava land, which is a very unusual situation for us. So, the issue that was overlooked, we had our process and controls, as Plante Moran explained, to capitalize the asset. But then what was missing towards the end is to look at the issue of impairment, which is in a County term, but basically whether or not the asset that was purchased really had the value, the fair market value for it. And again that's the exception because County normally wouldn't purchase lands that didn't have fair value. But that was the grant, that's the purpose of the grant was to do that. And they looked at the RPT (Real Property Tax) value before the disaster happened. So again, that's an area that we need to go over again with the County because we need all of the departments not just for these assets but just in general. It's a procedural thing. MS. NAKAGAWA: So, just wanted to add and close to that. A lot of what Kay is talking about is where we will do a lot of training and education on the things that we've learned through the audit and through our internal finance team as well as the departments so, just terminology and what that means in definition so we can make sure that these are corrected in the future. So, working on getting that done as soon as possible. MS. KIMBALL: Okay. So, are there other areas beyond this very unique and specific case that you're targeting to do this training around? MS. OSHIRO: So, areas in general. It's just the idea about capitalization. So, one of the biggest ones again has to do with the $51 million adjustment, which is Page 9 FC-37 June 4, 2024 impairment. But just in general, the process that we go through at fiscal year-end so that all of the departments are .aware of what we do in accounts and between us and Property Management so that if things happen that are unusual, just like with the CDBG-DR, that they're being addressed and then we're being notified. So, things just between it being in CIP versus when the construction is done, and then depreciation should be started, things like that. And, you know, it has to do with terminology, like the Director had mentioned as well as just timing; us knowing things at the right point and time and not finding out about it later. MS. KIMBALL: Do you have any sense at this point that by adjusting the internal procedures based on the recommendations from the single audit, if that's going to have any impact, and our estimations of the assets that the County holds? I realize that this was per a subsection of —this particular case is a subsection to these properties, but do you see this as a broader issue affecting the valuation of other assets? MS. OSHIRO: I don't foresee it being a material adjustment. Adjustments may come up during as we, you know, fine-tune the processes. But it shouldn't be a material adjustment — MS. NAKAGAWA: So, one of the things I also wanted to add was mentioned earlier by the auditor and that is related to timing. So, what part of our education and training process we'll be really discussing getting better at our questions and really having a good understanding of what we mean by timing. So, Kay and I had some discussions about when talking with the departments, you know, working on improving our questions and also really clarifying what we mean to some of that were a timing issue, so part of that will be part of the training. 'So, that is what we look to improve on in the near — MS. KIMBALL: Yeah. I'm just thinking, I mean, obviously the lava situation and those properties are very unique and unusual situation but, you know, there are certainly other things that are very dynamic right now that could be affecting some of the values of our assets and I just want to make sure we have a robust process for including; are we in the flood zone, are we in the tsunami zone, is there increased fire hazard risk? You know, things that could impact that and just want to make sure we're compensating for those uncertainties perhaps I would call them. MS. OSHIRO: So, some of the items that you've mentioned, Council Member, wouldn't necessarily impact the value for the asset at this point. Again, the impairment means that the asset has been impacted now, not potentially. It's impacted now, currently. But again, the items that you've mentioned that the things that should be considered, you know, again, those are things that yes, people should be keeping in mind because should something happen, as what you've mentioned, then yes, then the value needs to be impacted. But it's us fine tuning the process of us being notified that there was a fire, per say, that Page 10 FC-37 June 4, 2024 somebody knew that something happened to a piece of property. That's more of what we're talking about. MS. KIlVIBALL: Okay. I think this is a conversation for another time, but I think that there's an interesting piece here about forecasting what might happen to values under the various situations we may find ourselves in, and having some sort of accounting of that so that when we make decisions about where to invest CIP funding, we're choosing to do so understanding what potential impacts might be there in the future. But I'll save that conversation for another time. I wanted to understand, are there requirements in terms of how we balance total assets versus total liabilities? MS. OSHIRO: Sorry, could you explain? MS. YJMBALL: So, for example, the fund balance, we are supposed to have a certain amount for credit rating. Is there some sort of standard that also applies to our net asset versus net liability? For example, like if you've got a mortgage it would say, okay, you're running a business, you have a line of credit for the business. That line of credit, the banker is going to require that you have $100,000 in cash in the bank available for payroll at anytime. Is there some requirement that we have to have assets on hand to balance a percentage of our liability? MS. OSHIRO: So, requirement-1 don't — MS. KIMBALL: Managing Director, I think, has something to share. MS. OSHIRO: I just was going to comment that for our audited financials, if you look at the ACFR (Annual Comprehensive Financial Report), there's three different levels of financials. So, there's the current budgetary basis, which is the general ledger, and that's what you're referring to as the fund balance when we're talking about the budget. The second is the modified accrual basis, and that's like a governmental funds, and that's like a more current assets and liabilities. I think the one that you're referring to is the third level, which is the entity wide and that's with the long term assets and liabilities. When you talk about if there's a requirement regarding the net asset position for it, what's difficult about that is a lot of the assets or the biggest assets and liabilities has to do with what the auditors mentioned about the estimates that have to do with the OPEB (Other Post -Employment Benefits) and with the pension. So the idea that if we have the assets to balance those large liabilities, those GASBS (Governmental Accounting Standards Board Statements) statements only came within the past maybe eight years. Those assets and liabilities were not even reflected because again the idea that there's a hundred million, these numbers are in theory are not going to be paid currently. Over time is how we're funding it when we do our annual OPEB payments. So, it's a more difficult question when you talk about required. Of Page 11 FC-37 June 4, 2024 course, the idea is that we would want a positive in that position. But again, you know, there's a whole lot of things. It's more whether or not we can explain it and justify where we're at, at any point and time. But I'll let Deanna comment as well. (Note: At this time, Managing Director Deanna Sako came forward and addressed the members of the Committee.) MS. SAKO: No. Kay did a great job explaining that. All I was going to add is like, you know, if you actually look at the financial statements, our unrestricted net position is a -$742 million because of that ERS (Employees Retirement System) and OPEB and other things. But they do look at how we're doing currently and we're no different than any other government and we're actually in great shape because we actually fund our OPEB, which many other governments across the country don't do. So, you know, we're actually in good shape, which is why we have our double A -plus bond rating. MS. KIMBALL: Okay. There's no specific requirement to have that balance even with understanding that there are these estimates that have a lot of uncertainty around them. There's no requirement for that? MS. SAKO: No. The balances we talk about are at the fund level or at the budgetary level, which is why we try to keep our fund balance higher. MS. KIMBALL: Right. Okay. I had another question about the current assets that are in cash or cash equivalents. Do we invest any of that? I see that we have others that are noted specifically as investments, but with our cash, is it just sitting in the bank? MS. OSHIRO: Our treasurer does invest their certificates and deposits, money market funds, and there's some other types of investments. He's strictly regulated by HRS (Hawai`i Revised Statutes) and what he can invest in. They're more on the conservative, you know, secure side of things. The only one that we have true investments that you would think of, like on the FAT (Fixed Asset Turnover Ratio), it's more on the Shipper's Wharf. Our Shipper's Wharf fund, that has more other types of investments like stocks and things. But for the County, generally those aren't the type of investments that we're using. So, the investments are based on long-term. I think it's over three months, is what we consider an investment versus it being a cash equivalent. MS. SAKO: So, there's actually a huge spreadsheet because we have to balance it with cashflow. And so, yeah, so there's a huge spreadsheet. But we cannot invest long term, I mean, longer than a year because we have to fund our current operations. Page 12 FC-37 June 4, 2024 MS. KIMBALL: Right. Okay. Alright. I've noticed —so, we had some discussions during budget about —these are more general comments and maybe this is a question for you, Auditor Benner. There were a couple things that were requested. One was, you know, I noticed there was a very, very brief section about general economic analysis for the County. Is that something that perhaps this is the place to expand upon that? You know, Council Member Galimba, I believe it was, talked a little bit more about having a better economic perspective. Would this be a good place to expand our contract to include more of that? I'm just asking for a quick opinion from the auditor on that. MS. OSHIRO: I just wanted to comment. If you're referring to the section in the ACFR, that's my analysis. I just wanted to clarify. It's not being done by the auditors. MS. KIMBALL: Okay. Alright. So, is that something that we could potentially expand on in this area or is that something that maybe is better —general managers is waiting for further discussion. MS. SAKO: So, there's actually GASB and GF (General Fund) have actual requirements of what's included in the transmittal letter. And so, we follow that to a T, which is why we have the certificate that we have. But we do gather it from the various economic specialists in our state and I'll compile that data, which Kay's been doing for several years. But we follow it to a T, so that's probably not going to expand any more than what you're seeing now. MS. KIMBALL: Okay. Great. Thank you for that. And then, just curious about the timing of this. I realize this is a very complex process and takes a considerable amount of time from the consultants as well as internally, but relating to our conversations around the budgets and having the budget process right now be both a program review and the budget analysis, would there be any possibility of getting this sooner and using this as the program review? Because there is some information in here that I think is kind of more pertinent to that level of analysis or is this annual June 30t' timeline what we're constricted to? MS. NAKAGAWA: Council Member, thank you for the question. This was an unusual year in terms of the timing of the audit and the conclusion of the audit. We have a new auditor this past year, the timing of the RFP (Request for Proposal) and selection took a little bit longer, and the new auditor also —well, there's our resources as well. But a lot of times there's just getting acquainted with all of the things that they need to do as, you know, in comparison to an auditor that we've had. So, this is a unique circumstance in this year, in the timing, and we hope to get it done sooner. MS. KIMBALL: Okay., Great. Page 13 FC-37 June 4, 2024 MS. OSHIRO: So, just to go over the basic timeline. So, normally our requirement to finish that ACFR is by December 3 Pt, and that's in order for us to get the certificate of achievement for our bond ratings, which Deanna had referred to. But because of the timing and things that came up, which Diane just mentioned, we had to request for an extension. So, this year is delayed. There was delays and we've contacted GF way. The reasons why we gave for the delay are acceptable, so they've extended. So, even though our ACFR wasn't submitted by December 31st, they have notified us that we are in compliance, and they'll take it under review. So we still qualify for that certificate review. But again, the timing is normally by December, we'll have the final ACFR done. If there is delays, especially new GASBS, which the auditors mentioned. There was GASB 96. Over the past several years there's been at least one if not two major GASBS. Sorry, GASBS is the Government Accounting Standard Boards. It's a statement that comes out that we have to comply with. Each time there's a new standard, not only do I have to analyze it, but we have to develop the procedures for us to obtain the information necessary and work through the adjustment for that. So, those also require time, more time, you know, it's more complicated. The GASBS statement is more complicated, so that also can delay things. But at the latest, we usually get the ACFR done by January. We would request a one month extension. So, again, you notice the date on the ACFR, it's April. So, that's unusual for us. But we have, again, new auditors, the new GASBS, the shortages. There was just a million reasons for that. So, that's generally the timing that you would be looking at is December, January, for us to complete the audit and get the ACFR, then you're looking at getting it scheduled at the next Council meeting with the auditors for them to do their presentation as well. MS. KIMBALL: So, are you folks anticipating that 2023-2024 will be coming in more timely? MS. OSHIRO: We'll have new auditors again. So, that's why Deanna had made that comment. It's just this was a one year contract. It went out for bid again. So, we're going to have new auditors again. There's also a new GASBS statement that's going to need to be addressed as well as I still have the vacancy. One of the main accountants, we're still unable to fill that position. So, we're hopeful, but yeah, we still are facing the same difficulties. MS. NAKAGAWA: So, with the delay in this one, you know, we're right back at it and starting again, very, very soon to get back on track. So, we'll do our best, but Kay mentioned there are things that come up and we'll be sure to communicate anything that happens that could change the timing of our completion. But, you know, the goal is to get on track, but we haven't started yet, and we will shortly. But we'll be in communication if there are any delays. Page 14 FC-37 June 4, 2024 MS. K ABALL: Do you anticipate once we implement the new tracking software for Finance and budgeting that that will expedite the process at all, with the new software? MS. OSHIRO: One of the big hopes with our new software is that the financial statements, which have been done in Excel, I mentioned the three levels of financials have been done in Excel spreadsheets for three controllers, for decades. But with the new financial software, that is one of the things that I'm working through with them is to get the financial statements for all three tiers out of the system. So, yes, we're hoping that there will be major changes as well as other things that are being done manually such as CIP, our grants management, things that are all being done by departments in Excel, we're also hoping to and trying to move that into our system as well. MS. NAKAGAWA: It won't help us yet. We have to be a little patient. We're still going through the implementation for the next —yes. MS. KIMBALL: Yeah. It's amazing what we can get through with just Excel alone. But I'm looking forward to the new system. Thank you, Chair, for the time. I yield. Thank you. CHR. KANEALI`I-KLEINFELDER: Thank you. Council Members? Okay. Kona, one more time? Okay. I have follow-up questions maybe for Finance, start it off with Finance since you're here, and then for Water Department after. You know, first off, I'd like to just commend this audit in the complexity you folks took on and your coverage. I don't feel that in the past that has always been the case, so we've had an audit with findings. So, it was good to have some fresh eyes on our processes. So, thank you very much. For the Department, for Finance. There was a mention of our leases. I'm interested in that comment. Can you speak to the findings of that by the auditor? MS. OSHIRO: So, last fiscal year a new GASBS statement came up for GASB 87, and it dealt with the way that we account for our leases. Prior to that there were two types of leases. There were operating leases and capital leases. The capital leases, based on the criteria, actually resulted in an asset and a liability. Those would be the ones for our equipment, that are finance leases or our Xerox ones that we basically —we lease it because we don't want to keep it at the end of the lease. We want the maintenance and everything to be worked in, but we don't buy it. But essentially, based on what we're paying for it, it meets the criteria and how long we have that asset. So, again, there were two types of leases. After GASB 87, the criteria and the accounting for it changed. With that came the idea, again like I mentioned, once a new GASBS statement comes up, I interpret it, we come up with procedures of what we get from the departments. There were particular leases that when we were corresponding with the various divisions and departments regarding the Page 15 FC-37 June 4, 2024 accounting and the information that we needed that the accounting treatment after the information that flowed turned out that there were changes. And so, you know, after going back and forth, it turns out that some of the assumptions that we've made and some of the criteria that we used changed. So, it's specific to particular transactions and it's just, again, has to do with the flow of the information between us and the departments and the divisions. CHR. KANEALI`I-KLEINFELDER: Okay. Okay. Thank you. If we're looking. at something as a liability, like we saw for Water Department, but it's actually not and it could actually be a revenue source that actually does, it does a little —it's going to adjust things. MS. OSHIRO: So, the best particular situation in the GASB 87, what that is looking at though is not at the current level books, it's looking at forward. So, again, if we have a lease and as Plante Moran mentioned, there is assumptions that had to be done, so we have a lease maybe for five years, and it's an actual five years. But then there's option years afterwards. So, then assumptions are between us and the department. We have to determine whether or not there's an expectation that we will continue the lease and use those option years or are we saying that based on the information we have now, we will only take the five years in there. So again, that liability that we're referring to though is a future liability and its offset, not necessarily impacting expense or revenue because again it's an accounting. It's just the way that we're going to account for that. CHR. KANEALI`I-KLEINFELDER: That's helpful. Thank you. Ms. Nakagawa. MS. NAKAGAWA: Yeah. I just wanted to mention that this does also relate to some of the things we talked about once we're going through the budgeting process and our lease and our commitment. So, we have already initiated getting a better tracking and understanding of those leases so we can better provide that information here and to our departments as well. So, that effort does play in line with improving our communication and understanding of all of our commitments in this as well. Just wanted to add that. CHR. KANEALI`I-KLEINFELDER: Thank you. Okay. And then for Water Department, are you still on the call? Alright. Thank you. So, following up on Council Member Galimba's questions, when the deposits are applied to the department for future work, as the auditor found, when they're not being expended, they're actually sitting in a liability account, which is providing you actually something that isn't a liability being recorded as a liability which is actually an asset. So, that was an interesting finding. But there's different parts to that. For the deposits, are the deposits, if the funding is not applied, no work is done, the deposits are forfeited after three years? MR. UYEHARA: Kawika Uyehara. Sorry, go ahead. Page 16 FC-37 June 4, 2024 CHR. KANEALI`I-KLEINFELDER: No, no, no. Sorry. I didn't mean to cut you off. Go ahead. MR. UYEHARA: Kawika Uyehara. Department of Water Supply. So, yes. After the initial three year commitment deposit period, if it's not extended per our Rule 5 in the Rules and Regulations. It can be extended annually after that initial three years. If it's not extended, then it's forfeited. CHR. KANEALI`I-KLEINFELDER: Okay. So, the applicant would have to extend with you folks? MR. UYEHARA: Correct. CHR. KANEALI`I-KLEINFELDER: And in order for that to not be forfeited? MR. UYEHARA: Correct. CHR. KANEALI`I-KLEINFELDER: Okay. And if the deposits are not forfeited, are the water units being held for the applicant? MR. UYEHARA: So, if that initial three-year term expires and it's not renewed, then in theory it goes back. The commitments are not in effect anymore per our rules. CHR. KANEALI`I-KLEINFELDER: Okay. So, I guess my final question for you would be if we're not recognizing that as an asset, it's still being held as a liability, is that providing then that we haven't recorded as a liability, it's still floating as a deposit. Are those water units being held for the applicant in perpetuity along with funding or are they being recorded as forfeited? MR. UYEHARA: Candace, you want to explain? MS. GRAY: Candice Gray. So, according to, I guess, going back to what I initially said that our communications and processes needed to be updated. So, the water commitment deposits were being recorded as a liability and were not being converted to revenue until such time, either the development was completed or there was, I guess, a confirmed forfeiture or the development was cancelled. So, it would just sit there for a number of years. Throughout this audit, as it was identified by Plante Moran, that it should've been, some of those, actually a significant amount of those deposits should've already been recognized as revenue. And in accordance with Rule 5, regarding our water commitments, and I'm just reading this verbatim, "The initial water commitments shall be valid for three years and shall automatically expire unless a request for an extension is submitted and approved." And "Extensions to water commitments Page 17 FC-37 June 4, 2024 will be no longer than one year each extension." So, like I said, we've changed or are updating our process to follow the terms of the water commitment in Rule 5, which we'll definitely present our, I guess, adjustments converting it from liability to revenue on a more timely schedule. MR. UYEHARA: And just for a little bit more background on our department, we have our Engineering Division and our Finance Division. Finance which is led by Candace. But typically, when a developer requests water commitments, it goes to our Engineering Division. So, they're handling, you know, the intake of the requests and seeing if it's available, developing what the amount for the deposit would be, and then Candace and her division will take care of receiving the funds and recording it somewhere. So, then we mentioned then what was identified by Plante Moran is that internal process that we have between our different divisions needed to be improved. So, I think when I look at it and when we look at it, this audit is being beneficial to us because it's helping us improve our process basically, from the Engineering side and like the application side over to the financial side. So, yeah, definitely it's going to help improve how we internally operate or operate. CHR. KANEALI`I-KLEINFELDER: Thank you. Yeah. I agree. I completely agree. The concern for me is whether we're holding the credits, the water, because we're not recording it any other way, or the processes have shown to be problematic. MR. UYEHARA: And that's why our Engineering Division will record and keep track of those deposits per whatever water system they're in across the island. CHR. KANEALI`I-KLEINFELDER: Okay. I think I'll follow up with you afterwards. I have some follow up questions but not really regarding the processes we're talking about today. MR. UYEHARA: Sounds good. CHR. KANEALI`I-KLEINFELDER: Okay. Thank you very much. Appreciate everyone's time on this. Well done to the Plante Moran team. Thank you, Mr. Benner, for being here this morning. Do you have any comments? Thank you. Thanks for making time to be here today. (Note: At this time, County Auditor Tyler Benner came forward and addressed the members of the Committee.) MR. BENNER: Good morning. Tyler Benner with the Office of the County Auditor. I had just prepared a quick outro on this, which is that we'd like to extend our sincere gratitude to the diligent and comprehensive audit work performed by Plante Moran for the County of Hawaii. This is a fresh perspective. It was done very rigorously and has proven to be extremely valuable. Page 18 FC-37 June 4, 2024 The audit conducted by Plante Moran has reaffirmed that the County of Hawaii does maintain solid accounting practices in most interior respects. We appreciate the thoroughness for which they've conducted the audit highlighting not only the County's strengths but also highlighting areas that require improvement, specifically the finding on material weakness of the year end closing process has provided the County with insights on how they can enhance the financial practices and its management response to County officials charged with governance acknowledging the importance of aligning accounting practices with generally accepted principles by scheduling training to address the matters. The Office of the County Auditor is also aware that the Finance Department is taking additional steps hiring key personnel to enhance the accounting capabilities and is acquiring new accounting software, which once implemented will streamline some aspects to the financial operations. We'd like to acknowledge the coordination efforts of the Finance Department who've worked closely with Plante and Moran team to facilitate the audit process. Their collaboration is essential in navigating the complexities of the years audit. So in conclusion, we'd just like to once again really thank Plante and Moran for their insightful professional audit services expertise and thoroughness that they've provided us with, as provided a clear path for to strengthen the financial processes and ensure to continue compliance with GAAP (Generally Accepted Accounting Principles) and GASBS standards. Mahalo. CHR. KANEALI`I-KLEINFELDER: Thank you, Mr. Benner. For our participants on Zoom this morning, given Mr. Benner's background, those words mean a lot. So, just wanted to pass that along. Thank you for your time this morning. Any comments for us? MR. BRICKEY: No. We just want to thank you for the opportunity. It was a pleasure, you know, working with your staff and, you know, we appreciate having you as a client. So, thank you very much. CHR. KANEALI`I-KLEINFELDER: Beautiful. Thank you very much. Okay. With that, we have a motion on the floor to close file on Communication 713.1. All in favor? Vote on Comm. 713.1: The motion to close file on Comm. 713.1 was carried by Filed the following voice vote: Ayes: Committee Members Galimba, Inaba, Kagiwada, Kierkiewicz, Kimball, Lee Loy, Villegas, and Chair Kaneali`i-Kleinfelder — 8. Noes: None. Absent: Committee Member Evans —1. Excused: None. Page 19 FC-37 June 4, 2024 Comm. 882: REAL PROPERTY ASSESSMENT CERTIFICATION FOR THE 2024-2025 TAX YEAR From Finance Director Diane Nakagawa, dated April 29, 2024, transmitting the above report pursuant to Section 19-90(d) of the Hawaii County Code, indicating a total net taxable real property value of $51,359,763,613. Motion to Close File: Ms. Lee Loy moved to close file on Comm. 882. Seconded by Mr. Inaba. CHR. KANEALI`I-KLEINFELDER: We do have Mr. Jo here this morning. Council Members, any discussion on the motion? Council Member Kierkiewicz. MS. KIERKIEWICZ: Thank you, Chair. I have some questions for Real Property Tax and Finance. Thank you. Hello, Deputy Administrator Jo. Is Lisa here? (Note: At this time, Real Property Tax Assistant Administrator Keita Jo came forward to address the members of the Committee.) MR. JO: Yes. Lisa is back at the office holding down the fort. MS. KIERKIEWICZ: Could you just provide us a high level overview? You know, I'm looking at the cover letter here and we're seeing a 7.41 percent increase in real property tax assessments coming in. Any significant changes with respect to properties seeing a notable kind of change in their valuation? MR. JO: Yeah. Keita Jo. Assistant Administrator Real Property Tax. We're continuing to see the market increase, although it's not at levels that are as robust as we were seeing post COVID (Coronavirus Disease), so 2021, 2022. So, they're starting to stabilize a little bit but we're still seeing some significant increases. This certification represents an over seven percent increase, which even of itself is significant. Prior to COVID we started seeing or we were typically seeing about two to three percent increases in market, a lot more stable growth. Things have slowed down a little bit. We're seeing less, I guess, sales occurring. We're still seeing increases in the market. We were hoping that things would stabilize a little bit with the increase with interest rates. However, that's kind of shifted your typical purchasing that's occurring. So, rather than individuals taking out mortgages, you're starting to see a little bit more cash transactions. So, people drawing some equity from their other assets to or other real estate holdings and paying cash. You know, from our perspective we always like a stable market. It's hard to chase after —I shouldn't say chase after but keep up with the increasing values because if you think about our certification and the timeline, our valuation is January I" of every year. In the past few years, things have been changing so Page 20 FC-37 June 4, 2024 quickly that even a January 11' assessment date, you know, coming here in June, you know, the market's gone up 10 percent. So, from a real property tax perspective, we like things a little bit more stable. So, we're glad to see the market starting to slow down a little bit. MS. KIERKIEWICZ: So, kind of following up on the instability or just the very rapid fluctuation, you have your current methodology of assessing, you know, in January. Are there maybe adjustments to that process we should be making throughout the year; are there any tech advancements that we might even want to consider to enhance the assessment process? MR. JO: Yeah. So, from an internal perspective, we're utilizing a lot more technology, a lot more analysis to drive a more fair and equitable process. And what that means is over the last, I'd say about five, six years, we've increased our number of analyst that we have from one upwards to we now have three analysts, which actually go in and take a statistical perspective analysis on the market to drive any adjustments to our cost tables, any adjustments to the market. So, we're starting to see a lot more equitability in our assessments, which is encouraging, and really drawing from that information. MS. KIERKIEWICZ: So, we just came out of a conversation about audits. Is there an audit or review that happens about your assessment processes to continue to ensure that the process is, as you say, fair and equitable? MR. JO: So, on an annual basis, under the recommendations from IAAO, it's the International Association of Assessing Officers, that's the national clearing house for all things real property tax from a mass appraisal perspective. We conduct a ratio study every year. And what a ratio study is, is it measures from a statistical perspective or assessments to see how equitable they are. So, we take a look at different confidence levels or level of assessment. So, by code we have to assess at 100 percent of market. Are we achieving that? You know, the code is somewhat ambiguous other than the fact that there's —it can be 20 percent incorrect, which to me is a huge margin. The IAAO standard is actually higher than that. We like to be within 10 percent of the actual market value. So, that ratio study tells us our level of assessment, whether it's meeting the standards. It also takes a look at variability between different property types. So, you know, agricultural lands versus improved residential properties, are we meeting the variability? And I'm happy to report that across the board that we've been consistent with meeting a lot of those standards. MS. KIERKIEWICZ: That's great to hear. Thank you. 233 appeals were filed this year? MR. JO: Yes. Page 21 FC-37 June 4, 2024 MS. KIERKIEWICZ: Compared to 372 last year. Last year the total amount was about $93 million. This year it's $171 million. So, less disputes but a lot more potential money on the line. Can you kind of speak to the process of, you know, if a property owner is feeling like there's a discrepancy in what they've been assessed, what is the process to appeal and how quickly are these issues resolved? MR. JO: Okay. So, we have a tax board of review. It's made up of five members of the community. We do have a vacancy, so we're looking for those individuals who want to just pay it forward and, you know, assist us in our process. But assessment notices are issued March 15t' of every year. An individual has until April 9t', if they feel aggrieved by that assessment or if they feel like they're not getting an exemption that they're entitled to, they can file an appeal. We always recommend prior to filing that appeal that individuals reach out to our office. We make ourselves exceptionally available to try to hammer out or iron out any concerns that an individual might have. In particular, a lot of times, you know, with the timing of exemptions, a lot of individuals don't realize that there is a little bit of a lag in terms of receiving an exemption or we can walk them through data that we utilized to set their values. So, a lot of disagreements are resolved before an appeal is even necessary. So, that's why you see that low number this year in comparison to last year. Our staff spent an exceptional amount of time walking everybody through their values or exemptions to help minimize the actual number of appeals that come through, and the reason for that was the appeal fee this year is the first year that the $50 appeal fee was nonrefundable. In the past, it was refundable. So, our staff, our office, took extra care to ensure that any appeal wasn't filed that we couldn't resolve ahead of time. You know, sometimes a house has a lot more differed maintenance than we're aware of. There's over 140,000 parcels. We can't inspect them all every year. So, we rely on the feedback from individuals to let us know, you know, "Hey, there might be a circumstance or an issue with my home or my property that you might not be aware of." But if the division and the individual taxpayer can't agree, and that appeal was filed, our board of review meets beginning in July and typically those issues, if they do go to hearing, are resolved at hearing. So, the taxpayer will get a determination at the time of their hearing whether the board of review, who is an independent body, sides in favor of the individual taxpayer or the division, they'll know right then and there, which is something to be very proud of, in Hawaii County, our hearings are open. And usually those are resolved by, you know, this year with the number of appeals, it'll probably get resolved by September at the latest. MS. KIERKIEWICZ: Okay. That's incredibly helpful. And then if you could maybe just reflect on the last few years with these disputes, you know, what percentage of the time is it resolved in favor of the property owner? Page 22 FC-37 June 4, 2024 MR. JO: Usually, if I were to throw out a number, I would say between 50 and 60 percent of the time there's a settlement in favor of the taxpayer. That's usually because the taxpayer provides us additional information, we just weren't aware of. And then there's probably another 20 percent on top of that:where individuals withdraw their appeal. So, through the conversation they realize, okay, maybe the division is accurate in terms of their assessment and then they withdraw their appeal. So, about 20 percent of appeals that are filed are actually upheld by the board of review. MS. KIERKIEWICZ: Great. Thank you for all of that really helpful information. Chair, I yield. MR. JO: You're welcome. CHR. KANEALI`I-KLEINFELDER: Thank you. Council Member Kagiwada, go ahead. MS. KAGIWADA: Thank you. I'm just wondering, in the residential class, you don't break it out into tier one and tier two, I've noticed in these. And I'm just wondering, is that information that you could get us? I'm just really interested to see kind of how some of these things breakdown between tier one and tier two. MR. JO: Yeah, absolutely. So, the way that the language in the Code is written, because the residential tier two is still part of the residential class, we don't split it up at certification. But we do a calculation to split it up because obviously we need to validate and ensure that the taxes are calculated appropriately and correctly. So, out of a net taxable value of, I'll round it, $16.4 billion, the residential tier two —so, this is a value above $2 million, is about $6.6 billion. The rest, which is about $9.8 billion, is any value that's less than $2 million. MS. KAGIWADA: Okay. Thank you. Okay. And then, the amount of dispute column in appeals, is that something that's still being worked on, is that what that means for appeals? MR. JO: Yeah. So, the amount in dispute, by Code, we have to pull out 50 percent of the amount in dispute. And the reason for that is obviously you're going to be utilizing the assessments in order to establish the tax rates and revenue coming in. We don't want to overestimate the revenue that's coming in so, 50 percent is withheld from the actual certified values to ensure that we're not over budgeting. MS. KAGIWADA: I see. Okay. That makes sense. Thank you. I had one more question. I can't remember now, I'm sorry. But thank you for that. And thank you, Chair. I yield. Page 23 FC-37 June 4, 2024 CHR. KANEALI`I-KLEINFELDER: Thank you. I believe we are transitioning to the conference room in Kona. They're having some technical issues there. Scott and Council Member Galimba, can you hear us okay? MR. RUEDY: Loud and clear. CHR. KANEALI`I-KLEINFELDER: Okay. Michelle, did you want to speak on anything for this communication? MS. GALB4BA: Not at this time. Maybe later. CHR. KANEALI`I-KLEINFELDER: Mr. Jo, seeing no further discussion right now, the one thing I always like seeing is the breakdown of taxes because you're giving us the valuations, but the breakdown of taxes associated with the valuations and then as well —I've seen these beautiful reports you do of the taxes being brought in per district. So, not just the valuations per district, but the taxes brought in by, that's not in this report, yes? MR. JO: No. So, the silo of the Real Property Tax Division is in is with respect to valuations. And that's very much intentional. We want to remain independent from the revenue piece that's coming in. We need to be fair, equitable, transparent, and so we typically don't get involved in revenue coming in until it's kind of like on the backend because we do handle collections at real property tax so, we are aware that. Typically if we were to take a look at the existing tax rates, the split, the biggest question is always east versus west Hawaii. There's a 25n5 split this year as far as revenue coming in between east and west Hawaii. CHR. KANEALI`I-KLEINFELDER: 25n5? MR. JO: 75 West Hawaii. CHR. KANEALI`I-KLEINFELDER: Wow. MR. JO: And that's largely driven by the hotels, resorts, the values of some of the resort nodes that are out there. So, it's a big value. CHR. KANEALI`I-KLEENFELDER: That's huge. That's huge. Is that a normal figure or is that like a this year figure? MR. JO: It's typical for what we see year to year. CHR. KANEALI`I-KLEINFELDER: Okay. MR. JO: So, when it comes to specific districts in Puna, the revenue isn't too significant just by virtue of value, property values and exemptions and things like that. Page 24 FC-37 June 4, 2024 CHR. KANEALI`I-KLEINFELDER: Thank you. Questions on this —I see there's one dispute for hotel and resort tax class. What caught my eye is that it is for $48 million, which is a huge dispute for one property. MR. JO: Yeah. So, we did have a particular resort appeal this year with regards to the valuation, and so we're going to be working through that through the appeal process. CHR. KANEALI`I-KLEINFELDER: Okay. That's big. MR. JO: Yeah. CHR. KANEALI`I-KLEINFELDER: And then my second question, where it begins with the zone summaries, are the zones related to our Council Districts? MR. JO: Zones are related to the historical zoning, so not Council District. CHR. KANEALI`I-KLEINFELDER: Okay. MR. JO: We do provide a separate report within the certification that's broken down by Council District. CHR. KANEALI`I-KLEINFELDER: Yeah. We have nine districts. I was wondering if the zones are the same, same. But they're not. MR. JO: Yeah. Different. CHR. KANEALI`I-KLEINFELDER: Okay. Well, I appreciate the report. Thank you very much. It's always interesting seeing the balance and how things play out on our island, what sides do what, the valuation of, so appreciate it. Thank you. I know Lisa is in Kona. Ms. Miura, do you have anything to add? Or you're maybe on Zoom, or not. Okay. Coming back to you Council Member Galimba. I know you're moving between two rooms. Do you have any questions at this point? MS. GALRvIBA: Can you hear me? CHR. KANEALI`I-KLEINFELDER: Yes, I can. MS. GALIMBA: I guess I'm just on then. Yeah. I don't really have any questions, but I did want to know if that was —when I look at our affordable rental category, just the valuation part of it, is .11 percent of the total valuation of our County and especially on the west side a number of units are just very, very small. For instance, Council District 7, there's 22 affordable rental properties in that district. So, I guess, just highlighting, I think there's some work to do on that affordable rental program in order to help our folks on affordable rentals. So, just Page 25 FC-37 June 4, 2024 wanted to highlight that part of this report. And just thanks, Real Property, for this amazing report. There's just so much in it. CHR. KANEALI`I-KLEINFELDER: Thank you, Council Member Galimba. Appreciate it. Okay, Mr. Jo, thank you for your time this morning. Good report. And Ms. Miura, if you're watching, mahalo for your time as well. Council Members, we do have a motion on the floor to close file on Communication 882. All in favor? Vote on Comm. 882: The motion to close file on Comm. 882 was carried by Filed the following voice vote: Ayes: Committee Members Galimba, Inaba, Kagiwada, Kierkiewicz, Kimball, Lee Loy, Villegas, and Chair Kaneali`i-Kleinfelder — 8. Noes: None. Absent: Committee Member Evans —1. Excused: None. CHR. KANEALI`I-KLEINFELDER: Resolution 536-24, please. ORDER OF The Chair directed the Committee to proceed to the next order of business, RESOLUTIONS: Order of Resolutions. Res. 536-24: AMENDS SALARY ORDINANCE NO.24-28 BY AMENDING SECTION 3(B) TO ADD ADDITIONAL STEPS TO PAY GRADES CA-1 AND CLA-1 Reference: Comm.901 Intr. by: Ms. Kimball Motion to Approve: Ms. Kimball moved to recommend adoption of Res. 536-24. Seconded by Ms. Kagiwada. CHR. KANEALI`I-KLEINFELDER: Council Member Kimball, take us away, please. MS. KIMBALL: Yes. So, as you may recall we did pass our salary ordinance, which takes effect January 1", beginning of the fiscal year. Earlier this year, I take full responsibility for failing to recognize that, that time that we needed to make some additional adjustments in the CA-1, CLA-1 steps in order to provide some room for professional growth is what I'll say, for that. So, just looking for my colleagues support to add these additional steps. And apologies for having to come back in at this late time and make the adjustments. But appreciate your support now. Thank you. Page 26 FC-37 June 4, 2024 CHR. KANEALI`I-KLEINFELDER: Thank you. Council Member Kagiwada. MS. KAGIWADA: Thank you. I just want to thank Council Member Kimball for putting this forward. You know, my staff, like all of our staff, they work so hard. They're in the office with me every day, five days a week, you know, working with constituents, working on legislation with me, and I could not do this job without them. I've already seen, you know, a lot of growth over this short time that I've been working with them, and really appreciate the opportunity to get them something closer to a living wage and reward them for all their hard work. So, thank you so much. I really appreciate this. And, yeah, I'll be supporting. CHR. KANEALI`I-KLEE%FELDER: Thank you. Council Member Galimba. MS. GALIMBA: Thanks. Just also want to thank Chair Kimball for getting these additional grades in there. CHR. KANEALI`I-KLEINFELDER: Thank you. I would share those compliments to the maker. Thank you. Seeing no further discussion, motion is on the floor to forward Resolution 536-24 to the Council with a favorable recommendation. All in favor? Vote on Res. 536-24: The motion to recommend adoption of Res. 536-24 was (Approved) carried by the following voice vote: Ayes: Committee Members Galimba, Inaba, Kagiwada, Kierkiewicz, Kimball, Lee Loy, Villegas, and Chair Kaneali`i-Kleinfelder — 8. Noes: None. Absent: Committee Member Evans —1. Excused: None. CHR. KANEALI`I-KLEINFELDER: And then before we go to Bill 161, as it's my bill, I need to relinquish the Chair. I am short Council Member Evans today, who's my co-chair for Finance. Can I ask one of you two folks to Chair for me? MR. INABA: Let the record reflect that I've assumed the Chair at 10:38 a.m. Bill 161, please. Relinquish Chair: At this time, the Chair relinquished the Chair to Mr. Inaba. BILLS FOR The Chair directed the Committee to proceed to the next order of business, ORDINANCES: Bills for Ordinances. Page 27 FC-37 June 4, 2024 Bill 161: AMENDS CHAPTER 19, ARTICLE 11, SECTION 19-90 OF THE HAWAI`I COUNTY CODE 1983 (2016 EDITION, AS AMENDED), RELATING TO REAL PROPERTY TAXES Expands permitted uses of Residential Tier Two Property tax revenue to include the funding of County -sponsored programs designed to address mental health. Reference: Comm.858 Intr. by: Mr. Kaneali`i-Kleinfelder Postponed: May 14, 2024 (Note: There is a motion by Ms. Villegas, seconded by Mr. Inaba, to recommend passage of Bill 161, on first reading.) (Note: Comm 858.1, from Council Member Kaneali`i-Kleinfelder, dated May 28, 2024, transmitting a proposed amendment to Bill 161 was circulated.) ACTING CHR. INABA: Thank you. Mr. Kaneali`i-Kleinfelder. MR. KANEALI`I-KLEINFELDER: Thank you very much, Chair. Motion to forward Bill 161 to the Council with a favorable recommendation. ACTING CHR. INABA: There's a motion on the floor. So, we can begin discussion. MR. K.ANEALI`I-KLEINFELDER: Sorry. Beautiful. Thank you, Sir. So, this bill came up as a way of having us have a conversation, and I've had spent many times, sorry, much time with our department in discussion of how we move something like this forward, and its effects on current programs. And positive conversations. We had a good discussion last time you were all here. Ms. Susan Kunz, if you could come up? Thank you for making time this morning. I also appreciate you inviting some of our partners in our community who are providing services already to the meeting as well. She had to leave, Ms. (Brandee) Menino. So, if you could, let's just do a quick summary of where we stand today from your departments lens? (Note: At this time, Office of Housing Administrator Susan Kunz came forward to address the members of the Committee.) MS. KUNZ: Good morning. My name is Susan Kunz. I'm the Housing Administrator for the Office of Housing. So, I've had a chance to look at this intently compared to the work that we're currently doing under this ordinance, and I am really not in support of adding this language to the tax code. When you look at the work of the State Department of Health, which is where I went because this is the state agency that's responsible for this work. There is very strong language that describes the mission of the department and the divisions Page 28 FC-37 June 4, 2024 specifically, the Behavioral Health Division, that lens, I think, to the concern that you are trying to address. The Adult Mental Health Division, which is a part of the Behavioral Health administration of the Department of.Health, and I want to read this very short — It says, "The Adult Mental Health Division seeks to improve the mental health of Hawai`i's people by reducing the prevalence of emotional disorders and mental illness. Services include mental health education, treatment, and rehabilitation through community -based mental health centers and inpatient state hospital facilities for the mentally ill, including those referred through courts and criminal justice systems." Because I really believe that mental health is a huge piece to address homelessness, but it's also a huge piece of addressing the health concerns of this community for housed, folks who are housed. And I want to remind the Council that this particular pot of money was meant to address homelessness. I think that if we really wanted to focus on the mental health issue, even that is related to homelessness, I think that we need to focus on the state agency that's responsible to do this. I worry that putting mental health language into a tax code only dilutes the focus that we should be putting on this really, really critical issue. The other thing that I came upon in remembering our path, how we got to this point. And the discussions that happened at this Council, when this ordinance was put into place to focus on identifying a pot of money to address homelessness. And the Council Member who authored this bill reminded us to not stray too far from the purpose of addressing homelessness, whether if it be housing or police support, I think were some of things that were at the table at the time. While I don't want to assume what he meant except to refer us back to the actual language of that meeting in February. And I really take that to heart, is us not straying from the focus of what we're supposed to be doing with this money. I do want to assure the Council Members that the strategic roadmap that we have in place allows us to focus on these areas, not just mental health, which is a huge piece, but other areas that are important to addressing homelessness. It does that. So, thank you. Thank you for giving me an opportunity to share that. MR. KANEALI`I-KLEINFELDER: Thank you. Before I begin, you had a presentation today, correct, that was going to provide us a little bit more insight into? MS. KUNZ: Yes. Later this afternoon. MR. KANEALI`I-KLEINFELDER: Okay. I think that information will be crucial before we finish hearing this bill. I just wanted to quickly respond to this because I do vividly remember those conversations, we had around the initial formation of this bill in being very specific to addressing homelessness in our community. I would also really highlight how much mental health is playing a role in homelessness in our community. I hear you loud and clear. So, thank you Page 29 FC-37 June 4, 2024 for bringing those up. I did have an amendment ready to go today that would really clarify in my eyes how we're addressing the different things that this fund is being administered by the department to do, which is housing and homelessness. But to clarify it down so that we're making sure that we are addressing housing as related to homelessness because that, I don't feel is covered today or currently in the bill. So, I want to do two things. I going to ask Corporation Counsel, briefly, a question, and then I'm probably going to ask for a recessing of this Committee, with this body's approval, so we can hear your presentation and then come back to this measure at the end of the day. Ms. Strance, if you could? You don't have it in front of you but hopefully you've got it memorized. (Note: At this time, Corporation Counsel Elizabeth Strance came forward to address the members of the Committee.) MS. STRANCE: I do. MR. KANEALI`I-KLEINFELDER: Okay. So originally, Bill 161, in its current reading, without being amended, original form, I'm just going to paraphrase, shall be appropriated each fiscal year, two County sponsored programs designed to address housing and homelessness. That was the original reading of the bill. In your eyes, does the housing in that reading in the bill have to be tied to homelessness, or can that housing just be any housing across the County? MS. STRANCE: Good morning. Elizabeth Strance. Corporation Counsel. Before answering that, I'd prefer to go back and look at the legislative history of the bill as to what was intended because my memory is that there were a couple of different bills at different times to address different aspects of housing and homelessness and then it got compounded with a couple of emergency proclamations by the Governor. So, my memory of what was intended when is a little vague and I think I would prefer to take a look and give an opinion. Yeah. MR. KANEALI`I-KLEINFELDER: Okay. Just really briefly, when it says housing and homelessness, in my eyes, there's no requirements of either on either one. It's the language of the bill. There's no state directive within this bill for this tax class. MS. STRANCE: I agree with that. You know, there are rules of statutory construction, one of which is you give words that are plain and ordinary meaning. It must do so would lead to an absurd result. Sometimes you look contextually at the language, especially when there's a list. So, a quick response would be generally yes, if it's just this or that, unless there's some other context to suggest otherwise. But like I said, I'd like to take real quick look at the legislative history. There were some pretty robust discussions around this bill, so the legislative history is really good. And so, if there's a plain meeting reading, it usually will Page 30 FC-37 June 4, 2024 trump the legislative history. But if there's legislative history to clarify something that's not otherwise clear, then we look to it. So, kind of, I agree with you. MR. KANEALI`I-KLEINFELDER: That's a very fair assessment, I think. And I want you to look into it so we can have a better understanding. MS. STRANCE: No. Like I said, I know you folks had a couple of different bills and there was a lot of discussion around that time, and I just want to take a quick look back to see if it all got into one bill or it got separated out into a couple. MR. KANEALI`I-KLEINFELDER: Please do, please do. That would be very helpful. So, to the body, my request at this point is going to be that we either recess the meeting to the end of the day at least until the moment we can hear Administrator Kunz's information that she's going to provide us later, and then we can take this measure back up after having a more robust conversation and a better understanding of where we stand at this point. I'm going to yield, Chair. Look forward for the discussion. ACTING CHR. INABA: Thank you. Council Member Kagiwada. MS. KAGIWADA: Thank you, Chair. To the maker, we've heard from our Housing Administrator that mental health services related to homelessness can already be funded through this fund as it's written. So, my question is, what actual change in behavior and results do you want to see by changing this language? ACTING CHR. INABA: Go ahead. MR. KANEALI`I-KLEINFELDER: Good question. So, very much understood that we are addressing already mental health challenges as related to homelessness. What I've realized in my time on this Council is it is important to make things extremely clear with our wording and also to ensure that if our seats or our administration changes, that we continue to address these and that it's not a methodology being employed by the current department, current Council, current administration, as a priority but more so one that can be addressed in perpetuity for the length that this fund exists, which would and has the potential to outlast all of us right now on this Council. And then two-part, the Housing portion of this right now, as I've come to realize, is not directed to be associated to homelessness. And with Ms. Kunz's opening statement, I really do feel like it's important to clarify that as this bill, in my eyes, in listening to the conversations that created it, was designed to encompass homelessness and to solve one of the bigger issues we have in this County that the housing piece be tied to homelessness. So, I think there are some very important clarifications that could happen within this bill that we should look at addressing. Page 31 FC-37 June 4, 2024 MS. KAGIWADA: Okay. Thank you for clarifying that. At this point, I do not support the bill as written. I do not think that we should start listing all the things that contribute to homelessness. I think it doesn't make any sense to me to put mental health in here and not, you know, addiction. Those are two very similar things. They both contribute widely to homelessness, and I don't want to start changing what I think this body intended. This is only to last through 2027. I think it should stay as it is through 2027, and at that time, can be looked at for adjustments if they need to be made. I'd be happy to hear your thoughts. If it's just a clarification of what's already in the bill, for instance, clarifying around housing associated with homelessness. But adding additional pieces like mental health in here I don't think are helpful to us at this point. And that's just where I am. Thank you. ACTING CHR. INABA: Thank you, Council Member Kagiwada. Anyone else? Council Member Kierkiewicz. MS. KIERKIEWICZ: Thank you, Chair. Administrator Kunz, are you unclear about what your mandate is in relation to this particular fund? Because my recollection is during this time, the Council created two funds, homelessness and housing fund, and it's very clear given the extensive presentations you've given to this body for several years. It's also on your website. That fund is designed to support individuals experiencing homelessness or housing insecurity. Is that clear to you and your team? MS. KUNZ: It's absolutely clear. MS. KIERKIEWICZ: And that is separate from the Affordable Housing Production fund, which is housing in general for local families who need housing. Very clear, right? MS. KUNZ: Absolutely. Very clear. MS. KIERKIEWICZ: Okay. I don't support any adjustments to this section of the code only because we've had robust discussion at that time about what this funding was to support. And leaning off of some of the comments my colleague Council Member Kagiwada made, I'm going through this impact report that you have published on your website, there are so many things that are worthy of being funded and being funded including substance abuse treatment. I also see reunification; I see mobile hygiene and engagement, engaging individuals who are homeless but also with special needs. And so, I hesitate to list every single one of those details. I appreciate the thought around clarifying but it seems very clear to me that you and your team know how to administer this program, and it's been a few years now that you've been administering it. MS. KUNZ: Yes. Page 32 FC-37 June 4, 2024 MS. KIERKIEWICZ: So, no change is really needed? MS. KUNZ: No. I would also like to comment that, you know, I've reviewed very intently, the minutes of that meeting on February 23, 2022, where, in fact, it was Bill 111, Draft 2, where that very robust conversation happened about defining housing related to homelessness and why this group decided to allow that to be added. And Council Member Chung's concern, right, about us staying focused. After that, this group asked the Office of Housing to engage in a process to develop a roadmap and we agreed. We felt it was very important to get input from the community and our service providers, and our businesses who are impacted by this; the community as a whole, to help us devise priorities on how we're going to address homelessness. That's what the roadmap is. And we will continue to update that because I think that is critical. That's how we drive the priorities of this fund. I would like to point out that in the first round of funding, we awarded 52 percent of the funds went this type of activity. In the second round, we've awarded about 26 percent of the funds go to mental health and mental behavior activities. We're still negotiating with two service providers who we're actively in an RFP process with right now. So, that 26 percent, I'm anticipating to increase. But, you know, that's a good portion of the fund that is zeroing in on exactly what you're trying to make sure that we're addressing. ACTING CHR. INABA: Alright. Administrator Kunz, I'm going to reel us in here. MS. KUNZ: Okay. ACTING CHR. INABA: We're at a point here where the maker is asking for a recess. That's not up for a vote but we're taking in opinions on that, and if not, we can vote to forward it or you can make a motion to postpone, but I do want to move us along. We're running behind. MS. KIERKIEWICZ: Thank you, Chair. I appreciate your presence here today and for clarifying. I am looking at the homelessness and housing roadmap that this body adopted. There are a number of priorities that you folks are utilizing the funding for including mental health. I don't think this bill is necessary and therefore, I will not be supporting a recess of this meeting, and I can't support moving it to forward to Council. Thank you, Chair. ACTING CHR. INABA: Thank you. Council Member Lee Loy. MS. LEE LOY: Thanks for reeling us in, Acting Chair Inaba. You know, for all the reasons stated, I think you're looking for direction on whether we recess, but what I'm hearing is I'd just like to call for the question. The motion is on the table and under our parliamentary procedures, I can call for the question. Page 33 FC-37 June 4, 2024 ACTING CHR. INABA: Thank you, Council Member Lee Loy. Just wanted to confirm, do we need to take a vote on the call for the question, Mr. Clerk? MR. ARACELEY: So, per parliamentary procedure, the call for the question is moved by Council Member Lee Loy. I believe we need a second and then at that point, a two-thirds vote would have to be affirmed by the body for us to move back to the vote of the Bill 161. ACTING CHR. INABA: Alright. Vote on Motion to Call Ms. Lee Loy moved the call for the question. Seconded for the Question: by Ms. Kierkiewicz and was carried by the following (Approved) voice vote: Ayes: Committee Members Galimba, Kagiwada, Kierkiewicz, Kimball, Lee Loy, Villegas, and Acting Chair Inaba— 7. Noes: Committee Member Kaneali`i-Kleinfelder — 1. Absent: Committee Member Evans — 1. Excused: None. ACTING CHR. INABA: With that, we will take the vote on the motion of the floor which is to forward Bill 161 to Council with a favorable recommendation. Roll call vote, please. Vote on Bill 161: The motion to recommend passage of Bill 161 on first (Approved) reading was carried by the following roll call vote: Ayes: Committee Member Kaneali`i-Kleinfelder — 1. Noes: Committee Members Galimba, Kagiwada, Kierkiewicz, Kimball, Lee Loy, Villegas, and Acting Chair Inaba — 7. Absent: Committee Member Evans —1. Excused: None. Page 34 FC-37 June 4, 2024 ADJOURN- There being no further business on our agenda today, Acting Chair Inaba MENT: adjourned the meeting at 11:01 a.m. Thank you very much. ACTING CHR. INABA: Mahalo. Approved: 6/rBZr Mr. Matt t-it eali`i-Kleder, Chair (Da ) Finance C'ttee MK/tk Page 35