Loading...
HomeMy WebLinkAboutCOM 0533.065 2000-2002 ~ZY 06 M~ 'e Harry Kim Dixie Kaetsu Mayor Managing Director • b~. u~ 4 ,,,o ~ ~,~T~ bi<•w.'Q'a Peter T. Young Deputy Managing Director ~our~~p of ;E 25 Aupuni Street, Room 215 • Hilo, Hawaii 96720-4252 • (808) 961-8211 • Fax (808) 961-6553 KONA: 75-5706 Kuakini Highway, Suite 103 • Kailiia-Kona, Hawaii 96740 (808) 329-5226 • Fax (80~•~2~&-3663 May 24, 2002 The Honorable James Y. Arakaki, Chairman Hawaii County Council 25 Aupuni Street Hilo, Hawaii 96720 Dear Chairman Arakaki: I would like to thank the members of the County Council for their recent serious and productive discussions about the County's fiscal situation. As we work on setting a course for the future, it is critical that we work together to address the needs of the people of Hawaii and the way we will meet those needs, and I thank you for doing this. As I have stated before, after a full analysis of where the County is fiscally, and what the needs of the people are, it is with difficulty that I recommend to you an increase in the tax rates. The two largest sources of revenue for the general fund are the transient accommodations tax (TAT) and real property taxes. In 1998, our TAT revenue was $18.6 million. This year we are expecting $13 million. Real property tax revenue peaked in 1996 at $92.5 million. Last year (2001) it was $84.2 million. In spite of these revenue drops, the County's population and demand for services continue to increase. The County has been tightening its belt for the last several years, and in my opinion, any further cuts to the budget presented would be very counterproductive in the levels of service and infrastructure development to Hawaii Island. Budget Cuts Councilman Yagong has presented a plan to balance next year's budget without an increase in tax rates. I commend him for his efforts, but I would like to provide comments on some specifics of his proposal so that as you consider it, you will understand all the ramifications if this is adopted in full or part. Detailed comments appear in the Attachment 1 to this letter. Speaking generally, any reduction in personnel that would occur due to the proposed cuts would not have the impact shown. When preparing the earlier information to the Council, departments assumed that cutting a position would result in a year's worth of salary saved. In reality, any cuts involving bumping rights and layoffs are very time consuming, and involve (;omrn. ~aa P°i?e ImTa. May 24, 2002 James Y. Arakaki, Chairman Page 2 the payment of accrued leave and unemployment benefits. The actual savings to be realized would be far less. Councilman Yagong's schedule refers to accepting cuts proposed by departments. The cuts referred to were not proposed by departments in the sense that the departments recommend them. They were identified as areas that would have to be cut if an across-the-board reduction in expenditures was mandated. These cuts will have serious impacts on the delivery of services to the people of the County, and to our economic revitalization. Revenues from Land Sale There is a proposal to include estimated revenues of $2 million from the sale of some of the Hamakua lands in the budget. Councilman Yagong has been part of a Land Management Committee established by the Finance Director to plan for the disposition/use of these lands. The Committee has been very active and has identified several County-owned parcels which should be attractive to buyers and will generate needed revenue when sold. However, there is no guarantee that this land will be sold before June 30, 2003, and to use this estimated revenue to balance the budget is not prudent. Tax Increase I realize how difficult it is to support an increase in real property taxes. However, I feel it is the only way at the present time to responsibly balance the budget. Many persons have written and testified that when private businesses get into financial difficulty, they cut their expenses and work within their means. I would like to respond to that. Government is not like private businesses in many significant ways. Obviously, government does not make a "profit." Also, government is mandated to provide services to all residents. Government has to provide fire, police, parks, solid waste and other services to residents of even the remotest areas of the island, regardless of the "cost-benefit ratio" or the amount of taxes generated by that district. We cannot close down a fire station in Ka`u because we are having fiscal difficulties. A responsible government looks at the services needed and demanded by its residents and sets its tax rate at a level necessary to supply those services. There are constant requests for more police and fire protection, more parks and recreation facilities that are cleaner and open longer, faster processing of planning and building permits, and other demands for increased services. This cannot be reconciled with further cuts in expenditures when departments are already stretched so thin due to "status quo" budgets for the last several years. As I have said before, the budget as presented to you will allow us to continue the present levels of service, but further cuts will force decreases in services that the public will find unacceptable. There is a strong feeling from West Hawaii that they are not getting their fair share of revenue returned to them in services and infrastructure. North Kona and South Kohala have grown rapidly since 1970, and admittedly infrastructure and services in these areas have not May 24, 2002 James Y. Arakaki, Chairman Page 3 kept pace with needs as the population increased. That is something we are aware of, and working very hard to address, as shown in Attachment 2. Districts in East Hawaii also voice concerns of inequity in services and infrastructure levels. This is especially true of the fastest growing district of the last ten years, Puna. To address this we are working to establish levels of service for all our basic services, and intend to utilize that in future budgets to plan for expansion where necessary so that all districts of the island are treated fairly. I recognize that simply raising tax rates does not address many of the issues with the overall real property tax system. Finance Director William Takaba has been working very actively over the last year with a task force to propose sweeping changes that will result in a better tax system. Proposed changes will include: ¦ Resubmission of bill to increase minimum tax to $100 for property in the homeowners class. (This has already been done) ¦ Agricultural tax program changes. (July 2002) ¦ Study impact of changing appraisal method from cost to market approach on buildings. (August 2002) ¦ Review of homeowners' exemption program. (October 2002) It is my intent and hope that by this time next year, we can look together at our real property tax system and agree that it is fair and equitable for all. Conclusion In conclusion, thank you for your work, and for working together with us on this very difficult task of addressing the budget. Al ha, / S Harry Kim MAYOR Attachments Attachment 1 Impact of Proposed Budget Cuts Iaesearch and Development Agriculture Water Plan (010-161-5161.22-115) $25,000 This proposed water plan will assess agricultural water needs throughout the island and establish a plan to address these needs. This is directly tied to economic support of agriculture, and is badly needed. Continuing drought in parts of the island, as well as the recent problems with the Hamakua Ditch, reinforce the importance of supporting efforts to develop dependable water sources for agricultural activities. Tourism Promotion (010-161-5161.60-115) $225,000 While Hawaii County is fortunate because we depend less on tourism than the other counties, it is still a vital sector of our economy. To cut funding that supports advertising and marketing of the Big Island can lead to a loss of market share, with dire consequences for our tourism-related businesses. The County's contribution works with other visitor industry funds to "sell" Hawaii Island to the world, and this is a small investment for the benefits received. Data Systems Salaries and Wages (010-118-5118.01-011) $42,126 The bulk of this reduction is funding the vacant director's position for only six months. An individual has been selected for this position, and is planning to start at the end of August. The name will be submitted to the Council for confirmation in July. This is a critically needed position, and this funding should not be cut. OCE and Equipment (Various accounts) $23,335 These small proposed cuts will all take a toll on operations. For example, a reduction in the number of anti-virus licenses that can be acquired will either leave PCs vulnerable to virus infection or force departments to purchase more expensive stand-alone virus protection software. Cuts in training funds impact the overall efficiency of operations, since as we move towards increased efficiency through networking and elimination of paper, a crucial component is training employees in how to use computers to the fullest. Finance Cutting 11 positions removes one person each from Purchasing, Accounts, Treasury and Administration/Budget, and seven people from Real Property Tax. This will affect the ability to service other departments as well as taxpayers. Specific impacts are: ¦ Necessity to institute some type of payroll lag, as there would be a delay in issuing paychecks and filing tax returns. -1- ¦ Accounts payable checks issued only twice a month instead of weekly. This would be a hardship to vendors dealing with the County. ¦ Financial reports may be delayed. ¦ Loss of positions in Accounts and Treasury would impact internal controls, which may result in comments from external auditors. ¦ Certification of contracts would be delayed. ¦ Purchasing would either cut storeroom stock or reduce purchasing activities, either of which cause departments to do individual purchasing, and are counter- productive in economic terms because of the loss of economies of scale. ¦ Real property tax assessments would be less accurate because of delayed adjustments to valuations, and changes to property such as ownership or exemptions may not be timely posted. Reduced revenue would be he ultimate effect of reducing staff or eliminating other operating expenditures. ¦ The turn-around time for processing motor vehicle registrations would increase, and one result would be a greater incidence of non-registered vehicles receiving tickets. In addition, the ability of the division to manage the daily cash transactions for the County would be hampered. Corporation Counsel Salaries and Wages (010-131-5131.01-011) $152,868 Elimination of two attorneys and one support staff will result in longer response time on requests from departments for legal information. It may no longer be possible for an attorney to attend each board and commission meeting. Currently, the department is providing clerical support to the Fire Commission, Cost of Government Commission, and the Board of Ethics, and this would have to be reevaluated. Planning Filling one Planner IV and one Zoning Code Inspector I positions would be deferred, the Planner IV for a year and the Zoning Code Inspector I for six month. This would impact the ability of the department engage in long-range planning and work on community development plans. The Zoning Code Inspector I would be assigned to the Kona office, and delaying that hire would result in longer delays in responding to complaints. Other cuts would result in longer time to process applications/permits; fewer copies of the General Plan printed; the cost of hearing officers in contested case hearings being borne by the parties, which would discourage people from filing for a contested case. Civil Service The largest cuts would impact the Workers' Compensation program by limiting the use of a third party administrator. Using a third party administrator is designed to catch up on the processing and reduce the number of outstanding claims, while allowing the -2- County to begin investigating and settling old claims. There will be a direct financial benefit to the County as these old claims are eliminated. Other cuts may impact the hiring process by requiring that examinations be given during regular working hours, which delays other recruitment activities and will make it difficult for some applicants to take the exams. Public Works Proposed cuts include seven positions and other miscellaneous costs. Impact on Maintenance and Repairs to Facilities Building Division would cut fire insurance and repairs. Facility repairs are already way behind the maintenance schedule. Additional delays result in the loss of use of facilities and increased costs when the work is finally performed. Impact on Operational Efficiency Cuts to Administration will impact contracting for projects and requests for federal reimbursement, as well as the general operations of payroll, personnel and accounts payable. Impact on Maintenance and Repairs to Equipment Automotive will have to ration fuel, pull vehicles out of service and there would be a backlog of repairs. This action will impact vehicles used for road repair, solid waste management, property assessments, etc. Impact on Permitting, Inspection, and Mapping The cuts to Engineering's positions will impact permitting, inspection and mapping. Inability to manage construction projects could result in loss of federal funds. Parks and Recreation Cuts to the P&R budget would remove programs that benefit those who can least afford recreational activities. Wealthier county residents can purchase entertainment and travel to other locations for recreation, while those less fortunate cannot. ¦ The County bands are a tremendous resource enjoyed by many residents and visitors alike. ¦ Maintaining Alae as a County cemetery is necessary to provide reasonably priced burial plots for residents with limited resources, and is an important government service. ¦ The zoo is the only place where Hawai`i's children can go to see animals they would otherwise only know of in books. ¦ Reducing swimming instructors and the hours that 25 meter pools are open will only result in complaints from the many members of the public who utilize these services. -3- ¦ Equipment purchases have been deferred for many years, and continued deferral contributes to poorly maintained parks and facilities. This impacts not only on quality of life for residents, but also our desirability as a tourist destination. Prosecuting Attorney A cut in five positions would result in reduced effectiveness of prosecutions and discontinuance of special prosecution units for domestic violence, family court and violence against children. It is counterproductive to make major cuts to the prosecuting attorney's office while supporting the police department, because ineffective prosecution results in increased crime which affects everyone and overburdens the police. Solid Waste The proposed cuts to equipment, security service and recycling programs will have several impacts. Greater equipment breakdowns will be seen, and may result in Department of Health citations and fines, as recently occurred with the dozers at the Hilo Landfill. Increased abuse of transfer stations will result from a lack of security. This is a costly problem due to damages caused by vandalism and problems related to inappropriate items being disposed of in the transfer stations. The loss of recycling programs will speed the closure of the Hilo landfill. Workers Compensation and Settlement of Claims These accounts require an estimate for contingencies. A cut of $400,000 in the amount budgeted for workers' compensation may hamper the department as it works on closing out old claims. There is a concentrated effort to clean up and "wash" old claims, which will benefit the County financially in the future. However, the resources must be available to clean these up now to save money in the future. It is always difficult to predict what will be required during the year to settle lawsuits and claims against the County. We anticipate some lawsuits to be filed in the next few months regarding the flooding of November 1, 2000. There are a number of other suits still pending, and others going to trial soon. We recommend that the requested amount be untouched. Any amounts unused at the end of the year in either account lapse back into fund balance. Self Insurance Fund A transfer of funds from this fund to the general fund is not advisable for several reasons. First, this account will be tapped over the next few years to pay the Morita settlement that was approved by the Council this year. Additionally, funds were transferred to this account several years ago in anticipation of the final settlement of the Silva case. It is prudent to leave the balance as is. -4- Attachment 2 West Havvai`i Initiatives Infrastructure Kahalui-Keauhou Parkway (formerly Ali`i Highway) -The southern phase of this project is slated for FHWA funding in the upcoming fiscal year. The federal funds will be released October 1, 2002, at the beginning of the federal fiscal year. The total cost of this phase is $40 million, of which 20% or $8 million is the required County match. The proposed budget includes debt service on a general obligation bond issue the Council will be asked to approve to cover this cost. Kuakini Highevay Improvements (Palani to Hualalai) -This federal aid project is also slated for FHWA funding next year beginning October 1. The total cost is $8 million, with the County's share 20% or $1.6 million, which will also be covered by County bonds. Lako Street Extension - $3 million from the County's 1999A bonds was set aside for this project, which is in the final stage of route selection. Public Works is working closely with the community on the selection of the route, and as soon as this has been done, bidding and construction will begin. (Nancy Pisicchio) Palani Road Safety Improvements - $1.85 million from the 1999A bonds was set aside for this project. This will improve the intersection of Palani Road and Kealakaa Street. This has been identified by DPW and Kona Traffic Safety Committee as the highest priority for safety improvements along the Palani Road right-of--way. At the present time, County is working with DHHL to obtain aright-of-entry, and also working on environmental study of the project. Construction expected to begin late this calendar year. (Curtis Tyler) Mamalahoa Highe ay (Honalo to Captain Cook) -The Department of Public Works is working on improvements to traffic flow. The first planned project is creation of a left turn lane at the Kona Hospital intersection. Public Works is now finalizing the design and getting input from the community and property owners. Construction will commence this calendar year. Kalaoa Fire Station -Funds totaling $1,691,000 have been set aside from the 1999A bond issue to fund the construction of this fire station. A site has been selected, and construction is in the planning stage. Under consideration now is whether to go with a turnkey package or a construction contract. When that decision has been made, work will commence. (Curtis Tyler) Nest Ila~vai`i Civic Center -The County has acquired seven acres of land along the Kealakehe Parkway for a future West Hawaii Civic Center. This acquisition from the State by Executive Order allows the County to start planning to consolidate the various County agencies in West Hawaii for the convenience of the public and to save the cost of renting space. North Kona Golf Course -County attorneys are working on canceling the prior agreement from the early 1990s for a private developer to build asemi-municipal golf course in Kona. When the prior agreement is terminated, the County will seek another developer to build the course, which will also provide a use for the effluent from the Kealakehe sewage treatment plant. Pedestrian/>~ikeway - A pedestrian pathway and bikeway between Kealakehe Intermediate and Kealakehe High School has been opened up to the public. This was accomplished by the County agreeing to assume liability for the pathway. We realize that this is of very little consequence in itself, but it is a recognition that there is a traffic problem because of the lack of planning of a mauka-makai connector. Especially since the opening of the new high school, the County realizes this must be done. While there is no County funding at this time for the project, the County has included it as a top priority in CIP requests to the State Legislature, as a first step in addressing the problem. Services Keahole to 1~Ionaunau Regional Circulation Plan - A federal grant of $80,000 is funding the development of a regional circulation plan for the fast-growing and congested region encompassing Keahole to Honaunau. This plan will identify future County arterial and collector road corridors to mitigate present deficiencies and to serve future regional land transportation demand needs. County is providing its match with in-kind services. Police - In the current budget (FY02), funding was included for five new police officers in West Hawaii. Planning -Two positions have been transferred to the Kona office. One has been filled, and we are in the process of trying to fill the other one. State Le~gslature Of the five CIP requests made to the state legislature this year, three were for Kona projects: • Multi-purpose senior center in Kailua-Kona • Kealakaa Extension/Proposed Kealakehe Parkway Extension • Mamalahoa Highway Improvements While none of these projects were funded by the state this year, they remain top priorities for the County.