HomeMy WebLinkAboutCOM 1039.073 2006-2008
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Harry Kim .y William Takaba
Mayor Director
Nancy E. Crawford
Deputy Director
County of Hawaii
Finance Department
25 Aupuni Street, Room 118 • Hilo, Hawaii 96720
(808) 961-8234 • Fax(808)961-8248
June 2, 2008
The Honorable Chairman Pete Hoffmann
and Members of the County Council
County of Hawaii
Hilo, HI 96720
Dear Chairman Hoffmann and Council Members:
On May 20, 2008, I appeared before you to discuss the fund balance projection included in the
Mayor's proposed FY 2008-09 operating budget. We expressed concern that the Council's
proposed amendments to the budget, if approved, would increase the estimated fund balance by
an unrealistic $10.1 million. I then explained the consequences of not reaching this new
projection.
The $16.1 million fund balance that our Budget division estimated is based on an analysis of
each account in the current year's budget. We continue to believe that this projection is
reasonable based on our most recent revenue and expenditure information. This is as accurate as
such projections can be, and is not felt to be conservative. In short, we do not believe the actual
fund balance will be any higher than this. The Council's fund balance revenue in the draft
budget is now approximately $5.2 million over the administration's estimate. Due to our
projections that the fund balance will be in the neighborhood of $16 million, one can see how
any estimate over this can be very problematic. As was pointed out to you in my May 20 letter, a
shortfall did occur in the FY 2001-02 operating budget because the projected $7.8 million fund
balance carryover was not met, creating a budget shortfall of $2.4 million. This resulted in
midyear amendments to the budget to reflect the shortfall in revenues. Certain programs,
positions, and equipment had to be eliminated due to this shortfall.
The budget overall reflects the best information we have on revenues and expenditures. The
administration's budget proposal is based on what departments have projected they need for
operations and their priority projects, and reflects the goals of the departments and
administration. The amounts proposed by administration for transfer to the Disaster and
Emergency ($1 million) and the "Rainy Day" ($1 million) funds are there as money set aside for
unanticipated emergencies and to provide an unencumbered source of funds in the event that
projected revenues are short. In times like we face today, these reserves are more important than
ever.
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Hawaii County is an equal opportunity provider and employer.
. Honorable Pete Hoffmann, Chair
Page 2
June 2, 2008
The State of the Economy
There are various indicators that reinforce the need to be conservative in anticipation of revenues
and expenditures:
¦ Decreases in the number of building permits issued and in real estate sales will have a
negative impact on property assessments, and therefore, property taxes;
¦ Decrease in hotel occupancy rates that will affect revenues from transient
accommodations taxes (TAT); quarterly TAT projections by the Council on Revenues
have dropped every quarter since May 21, 2007. TAT revenues represent 5% of our
operating budget;
¦ Decrease in the number of available airline seats to the island coupled with the removal
of two out of three weekly cruise ship visits will affect our island businesses;
¦ Ever increasing cost of fuel that will inevitably decrease the spending power of residents;
¦ Reports of a decrease in real estate transactions, construction slow-down, and slumping
retail sales are all indications that caution is needed in government revenues and
spending.
Overall, the seriousness of the economic situation mandates that the County's balanced budget
stay within what we project to be our realistic revenues. This also emphasizes the importance of
setting aside funds in the Disaster and Emergency and the "Rainy Day" funds.
Your understanding and support is requested to work with us to pass a budget that is realistic and
fiscally responsible. This administration cannot support a budget that will exceed reasonably
anticipated revenues.
Thank you for the opportunity to comment.
Aloha,
pilliam T aba
Director
cc: Harry Kim, Mayor