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Home My WebLink AboutREP FC 093 04/17/2007 2006-2008 REPORT OF THE COMMITTEE ON FINANCE DATE: April 17, 2007 Re: Comm. No. 194/Bill No. 61 PLACE: Council Chambers TIME: 10:12 a.m. Council Chair and Members Hawaii County Council Hilo, Hawaii 96720 Your Committee on Finance, to which was referred Bill No. 61, reports as follows: Bill No. 61, transmitted by Mayor Harry Kim via Communication No. 194, dated Mazch 1, 2007 submits for consideration the proposed Capital Budget for Fiscal Yeaz 2007-08, and the Six-Year Capital Improvements Program for the Fiscal Yeazs 2007-08 to 2012-13, consisting of 85 projects totaling $140,575,000, of which $80,000 are Federal Grants Receivable and $22,334,000 are County-financed through State Revolving Fund loans, bonds, or other sources (see Table 1). Debt Service: The Government Finance Officers Association's recommendation, generally followed by bond rating agencies, is that a prudent debt service limit be 15% of general expenditures. The goal that the County of Hawai`i's Administration sets as their policy is a more conservative one and that the debt service should not exceed 13% of general expenditures. The lower the interest rate and the greater the revenues, the more that can be borrowed while staying within the prudent debt service limits. The proposed operating budget for this FY 2007-08 includes debt service of approximately $1,307,000 for $25 million in bonds to be floated during the next fiscal year, as well as $115,000 debt service for new SRF loans. At this budget amount, the resulting total debt service is estimated at 10.01 % of the general expenditures. Approximately $113.9 million of the proposed capital budget may require bond funding. Of this amount, two lazge projects comprise nearly a third of the total potential bond projects: the Waikoloa Workforce Housing Parks and Community Center ($25M) and Fire Administrative Support Complex ($14.7M). To fund an additional $70 million in bonds, over and above the $25 million budgeted, to carry out the projects requiring bond funding results in a debt service estimated at 11.12% of the general expenditures. Project Selection Criteria: In selecting the projects, funding requests from the agencies were initially screened to ensure that the agency had the capacity to implement the project during the fiscal year (i.e. whether to defer or phase the project), that current requests were reconciled with previous appropriations (i.e. unused amounts from previous appropriations were sufficient to carry the project through the coming fiscal year), that the projects were not more appropriately funded through the operational budget (e.g. minor repairs), and that the projects were as equitably distributed geographically as possible while meeting the selection criteria below. FC REPORT NO. 93 Communication l94 Bill 61 Page -2- The selected projects met at least one of the following criteria (see Table 2): 1. Legal mandate -approximately $30.9 million relates to unfunded mandates such as ADA, EPA gang cesspool prohibitions, and hazazdous materials; 2. Corrects a major deficiency -approximately $52.3 million relates to meeting basic level of service goals; 3. Critical for public safety or health -approximately $14.4 million relates to protection of public safety (e.g. emergency response, flood control, crime control, traffic safety) or public health (hazazdous waste). 4. Environmental/lifestyle -approximately $6 million relates to proactive programs that relate to community planning initiatives, water quality improvements, or healthy lifestyles; 5. Improves operational efficiency or maintains/improves existing assets -approximately $36 million enhances delivery of services or maintain existing assets. Of the 85 Capital Budget projects, 27 aze new facilities or miscellaneous improvements ($69.3 million), 19 aze replacement of existing facilities ($38.8 million), 29 aze improvements to existing facilities ($30.6 million), and 10 are vazious combinations of new, existing, or replacements ($1.9 million). Approximately 47% of the budget is for public health and safety projects ($65.5 million), followed by 27% for culture/recreation ($39.5 million), followed by 13% for transportation projects ($17.9 million). Funding Sources: Capital projects aze typically funded by debt (bonds, SRF loans), revenue sources (fuel tax, other special revenues), State grants, and vazious federal grant or loan sources. The Capital Budget presented includes capital projects that aze intended to be funded in whole or part by bonds or special revenues, fair share contributions, or SRF loans. The Capital Budget also includes appropriations to receive specified Federal and State grants. The State Revolving Fund, being a low interest loan program for wastewater projects, is the proposed source for five (5) projects that totals $22.3 million is to upgrade the Kealakehe W WTP, install effluent reuse lines within Queen Kaahumanu Highway as part of the road widening project, and replace large capacity cesspools with sewer systems. There is only one project requiring County matching funds to leverage funds from federal or State sources: Bridge Inspection & Appraisals of County bridges (match for FHWA funds). Federal CDBG funding is anticipated to supplement capital appropriations for ADA Facilities Improvements for pazk projects ($1.5 million). Because CDBG projects aze appropriated in the Operational Budget, the funding is not included in the Capital Budget. The Highway Fund is funded by special revenues generated by vehicle registration and fuel taxes. Although projects funded solely by fuel tax are approved in a sepazate ordinance, the CIP includes several projects intended to be funded by the Highway Fund ($3.4 million) that will not be duplicated in the fuel tax budget ordinance. FC REPORT NO. 93 Communication ]94 Bi1161 Page -3- Pending Projects vs. New Projects: About $7.5 million consists of pending projects that had to be reappropriated because funds lasped and could not be encumbered by June 30t1i. If a lapsing project required an amount different from its existing appropriation, the project was treated as a new appropriation rather than a reappropriation. Geographic Distribution of Projects: The geographic distribution of FY2007-08 capital projects among council districts are shown below as reflected on Table 5: KOhila ~ District 1: $11.7M District 2: $]0.7M NOHOk88 District 3: $ 0.8M Kawaihae Waimea District 4: $7.3M Waikoba 1 District 5: $4.2M 8 ~ N~iu 4 District 6: $1.9M R KOaaY District 7: $ 9.1M K#ilua- O Kana District 8: $24.1M ~Pt ~ Pahoa ~OOk Valtae0 ~ District 9: $ 27.8M v 6 District 1-5: $1.95M Pehele District 6-8: $2.OM NOTE: Approximately HOVE NaalehY $37.1M is for projects located throughout the island and have varying benefits [o each Soutlt Plitt Council district. Impact on Operational Budget: New facilities generally have the greatest impact on the operational budget. These facilities may increase the operational budget by adding new staff, incurring new utility/maintenance expenses, and/or require new equipment or furnishings (e.g. Kalaoa Fire Station, Pahoa Fire Station, Waikoloa Workforce Housing Parks & Community Center). FC REPORT NO. 93 Communication 194 Bill No. 61 Page -4- Capital Program: Major capital program projects listed for the next six years, subject to ongoing evaluation, include: • Mid-Level Road in Kona $57M • Waikoloa Workforce Housing Parks and Community Center $40M • ADA Compliance for pazk facilities $24M • Police 800 (or 700) Mhz Communication System $21M • Keaau Civic Center $17.SM • West Hawaii Regional Park $15M Fair Share Contribution: A detailed report of the Fair Share contributions will be submitted to the County Council in the May 5~' CIP amendment transmittal with appropriations identified as applicable to the capital budget projects. Your Committee originally reviewed the Capital Budget in conjunction with departmental program reviews on Mazch 28 through March 30, 2007. Pursuant to Section 10-4, Hawaii County Charter, the Council also conducted public heazings on the proposed FY2007-08 Operating and Capital Budgets in Kona on Mazch 19, 2006, and in Hilo on March 21, 2007. Upon review of the Mayor's amended budget submittal in May 5, 2007, the Council may propose amendments as necessary. Your Committee on Finance is in accord with the purpose and intent of Bill No. 61 and recommends it pass first reading. la AYES NOES A&E EX Respectfully submitted, FORD X HIGA X COMMITTEE ON FINANCE HOFFMANN X IKEDA X JACOBSON X ,~~\\\J\ NAEOLE X PILAGO x DOMINIC YAGO R YAGONG X FC RE T 93 YOSHIMOTO X ADOPT A B 207