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HomeMy WebLinkAboutCOM 0111.000 2010-2012William T. Takaba Managing Director William P. Kenoi Mavor Walter K.M. Lau Deputy Managing Director County of Hawaii Office of the Mayor 25 Aupuni Street, Suite 2603 • Hilo, Hawaii 96720 • (808) 961 -8211 • Fax (808) 961 -6553 KONA: 74 -5044 Ane Keohokalole Hwy., Bldg. C • Kailua -Kona, Hawaii 96740 (808) 323 -4444 • Fax(808)323 -4440 March 1, 2011 Honorable Members of the Hawaii County Council 25 Aupuni Street, County of Hawaii Hilo, HI 96720 Dear Council Members: As required by the Hawaii County Charter, submitted with this message is the proposed operating budget for the County of Hawaii for the fiscal year ending June 30, 2012. This balanced budget includes estimated revenues and appropriations of $366,128,670 and includes the operations of eleven of the County's special funds as well as the general fund. This proposed fiscal year 2011 -2012 budget is $37,076,328 or 9.2% percent less than the budget in effect when this administration took office in 2008. This budget proposal marks the third consecutive year of our program to reduce the size and cost of government in a strategic, responsible manner that maintains critical infrastructure and public services. The lingering effects of the national recession of 2007 -2009 will once again reduce county tax collections and other revenues in the year ahead. While the economic recovery appears to be gaining strength in parts of the state, our challenge today is the same as it was in the first two years of my administration: We must find ways to reduce government to make it more affordable without abandoning essential services for our children, our senior citizens and our neediest populations. We must also protect public safety, giving our police officers, firefighters and civil defense workers the tools they need to respond quickly and effectively to any threat to our communities, and to protect our families. The safety and well -being of our residents and the quality of life in our communities also depend on our ability to carefully reduce county spending in a responsible, effective manner. Our budget must fund essential services, while demonstrating fiscal discipline. This proposed budget meets those challenges without increasing property taxes. (6111 2Q) Comm. No. Ref. To: County of Hawaii is an Equal Opportunity Provider and Employer. Ref. DateR 0 1 20 Honorable Members of the Hawaii County Council March 1, 2011 Page 2 Collecting Less Taxes In the coming year, the County of Hawaii will once again collect less in property taxes than it collected when this administration began in 2008. Tax collections in 2008 -09 totaled $225.9 million, while budgeted tax collections for the coming year are $207.3 million. This continuing slide in tax collections has been coupled with years of cost increases in areas such as employee health care and retirement costs, utilities and fuel. It will cost us more to deliver the same services next year that we delivered this year, and we will have less money available next year to provide those services. This pattern creates the continuing budget shortfalls, which represent the difference between the projected cost of providing government services, and the anticipated revenue that will be available to fund those services. This administration has coped with budget shortfalls that are unprecedented in county history. We faced a $38.1 million shortfall in the 2009 -2010 fiscal year, a $44.8 million shortfall in this fiscal year, and we now contend with a $38.8 million shortfall for next year. We have dealt with those combined shortfalls of more than $121 million over three years by engaging in a three -year program to roll back government, and to make it more affordable. Reducing County Spending This budget marks the third consecutive year this administration has reduced spending. This administration dramatically reduced spending on consulting contracts by 48 percent for a savings of more than $6 million in fiscal 2010. Overtime spending was reduced by 22 percent in fiscal 2010, for an additional savings of $2.6 million. The county also eliminated the purchase of police fleet vehicles, restricted out -of -state travel, reduced golf subsidies, and halted plans to buy new equipment. The county eliminated funding for the Kahalu`u Ranger Park Program, and cut funding to the Soil and Water Conservation Districts across the county. The county discontinued funding for the police cadet program, cut funding for Hawaii Island Humane Society animal control programs and reduced the hours at solid waste transfer stations. Our agencies cancelled or delayed vehicle purchases, cut mileage payments and delayed replacement of aging computers. Agencies cut advertising budgets for the mass transit system and other public education campaigns, delayed purchases of computer software, and deferred or eliminated employee training. The Department of Environmental Management suspended the amnesty program for abandoned vehicles, deferred equipment leases, and reduced the use of security guards at recycling and transfer stations. At the Corporation Counsel, the budgets for law clerks' salaries and expert witnesses and depositions were cut. The Fire Department deferred purchases of new fire trucks. Honorable Members of the Hawaii County Council March 1, 2011 Page 3 The Department of Parks & Recreation cut funding for roof and gutter repairs, playground resurfacing projects and building fumigation. The Department of Information Technology deferred computer server upgrades, and the Office of Housing and Community Development delayed repairs and maintenance. These are just a few examples of cuts and deferred spending in county government over this three -year period. Reducing the Size of Government Tight restrictions on hiring and reductions in staffing have saved the county many millions of dollars. We now have 141 fewer people working for the county than at the beginning of my administration because we have steadily, carefully cut the size of government by attrition. Many county employees who retired or left their jobs during this administration have not been replaced, which has reduced the number of employees on the county payroll today. Each time the county delays hiring a worker or eliminates funding for a vacant position, the county saves the money that would have been paid out as the salary or wages for that position. This has proven to be another effective way to reduce county spending, although it pressures county departments to continually accomplish more work with smaller staffs. Cutting funding for vacant positions must be done in a thoughtful, strategic way to ensure adequate staff is in place to provide essential services. Some positions such as sewer treatment plant operators or police recruits must be filled to protect public health and safety. Others, such as clerical staff, laborers or maintenance workers, must be unfunded. These are unavoidable sacrifices that are necessary in this difficult period to reduce spending and shrink the size of county government. In 2009 -10, we cut funding for 55 vacant positions, and in 2010 -11 we unfunded an additional 70 positions. This budget proposes to cut funding for an additional 100 vacancies, for an unprecedented three -year total of 225 vacant positions that have been unfunded since the start of this administration in 2008. Unfunding these vacant positions is saving the county $7.1 million over three years. Furloughs We began the furlough program with my staff and myself in the Office of the Mayor, the first furloughs in the history of our county government. I have asked all county employees to do more with less, and it is entirely appropriate that my own office demonstrate that same willingness to cut spending and sacrifice in this challenging time. Those first furloughs in 2009 were the beginning of a larger, three -year effort to reduce spending in the Mayor's Office. We have successfully cut spending in the Office of the Mayor from $2,207,824 when I took office in 2008 -09 to $1,393,811 in the budget for the coming year. Honorable Members of the Hawaii County Council March 1, 2011 Page 4 This year, public worker furloughs were expanded and imposed across state and county governments, including twice -a -month furloughs for most county employees. Those furloughs will save the county an estimated $7 million. Furloughs will end on June 30 for all county employees. However, my executive staff in the Office of the Mayor will once again take employee furloughs in the coming fiscal year as part of our continuing effort to reduce the size of the executive budget. This will mark the third consecutive year my staff and I have been furloughed to do our part to reduce spending in our office and in county government as a whole. Growing the Economy, Maintaining Services It isn't enough to reduce spending. We must make the County of Hawaii a better place to live, work, play and do business. We must use the resources we have and our partnerships in the community to grow our economy and steer it toward the bright future we know is ahead. We must use the county's borrowing power and excellent credit rating to help stimulate the economy by building important public works projects now. Interest rates are at extraordinarily low levels, and construction companies are competing aggressively for business. Building county projects now means the taxpayers will pay less. Pressing ahead with county construction projects now will also create badly needed construction jobs to help our working families. We must also look for ways to help our partners such as the University of Hawaii at Hilo as they seek to grow. Growing the university offers new educational opportunities to our young people, while also creating jobs and injecting new dollars into our economy. Projects such as the planned Kapiolani Extension will generate still more economic activity because they will help the university to open up lands for student housing, retailing and other uses. Through our partnerships with Hawaii Tourism Authority, Big Island Visitors Bureau and others we have encouraged the private sector to add airlift to our island, including direct flights from San Jose, Oakland, Portland and Seattle to Kona, and from Los Angeles and San Francisco to Hilo. Hawaii Tourism Authority now reports total visitor arrivals to this island were up 6.1 percent in 2010, while total visitor expenditures increased by 17.6 percent last year. Despite county budget reductions, we are continuing our initiatives to promote alternative energy, and to encourage growth in the agricultural sector by developing the 1,739 -acre county agricultural park at Kapulena. Agriculture and alternative energy are key to our future. At the same time, we are preserving funding for public safety and essential core services. We are protecting and funding nutrition, recreation and other services for seniors. We have preserved programs for our children and youth, and we are maintaining county funding to non -profit organizations. Honorable Members of the Hawaii County Council March 1, 2011 Page 5 OPERATING BUDGET BY FUND The following table describes the budgeted expenditures for FY 2010 -11 and the proposed budget for FY 2011 -12 for each fund. OPERATING BUDGET BY FUND (Amounts in thousands) Percent FY 10 -11 FY 11 -12 Increase Increase FUND Budget Proposed (Decrease) (Decrease) General Fund $290,985 $276,973 ($14,012) (4.8 %) Highway Fund 25,912 29,653 3,741 14.4% Sewer Fund 9,461 9,138 (323) (3.4 %) Cemetery Fund 10 10 0 0.0% Bikeway Fund 171 171 0 0.0% Beautification Fund 240 154 (86) (35.8 %) Vehicle Disposal Fund 2,968 2,606 (362) (12.2 %) Solid Waste Fund 26,743 27,611 868 3.2% Golf Course Fund 1,129 1,137 8 0.7% Geothermal Royalty Fund 550 575 25 4.5% Housing Fund 17,689 18,050 361 2.0% Geothermal Asset Fund 50 50 0 0.0% $375,908 $366,128 ($9,780) (2.6 %) Honorable Members of the Hawaii County Council March 1, 2011 Page 6 REVENUES BY SOURCE The following table presents a summary of projected FY 2011 -12 revenues from various sources and the changes from the current budget: REVENUES BY SOURCE (Amounts in thousands) Source Real Property Tax Public Service Company Tax Fuel Tax Public Utilities Franchise Tax Licenses and Permits Revenues and Use of Money & Property Intergovernmental Revenues Charges for Services Other Revenues Fund Balance Carryover REVENUE CHANGES Increase (Decrease) Percent From Percent Of FY 2010 -11 Increase Amount Total Amount (Decrease) $207,300 56.6% ($9,707) (4.5 %) 9,000 2.5% 270 3.1% 6 1.8% (856) (11.3 %) 9,325 2.6% 325 3.6% 15,477 4.2% 51 0.3% 1,185 0.3% (727) (38.0 %) 65,797 18.0% 3,288 5.3% 21,633 5.9% 659 3.1% 8,310 2.3% 84 1.0% 21,410 5.8% (3,167) (12.9 %) $366,128 100.0% ($9,780) (2.6 %) The major changes in projected revenues are as follows: Real Property Tax. Real property tax revenues are expected to decrease by 4.5 %, or $9.7 million, due to an estimated 4.0% decline in taxable values. Fuel Tax. Fuel tax revenue is expected to decrease by 11.3 %, or $0.9 million, due to a projected reduction in fuel consumption. Revenue from Use of Money and Property. Interest earnings are expected to continue to decrease for next fiscal year by $0.8 million, due to the low yield on investments, which is still reflective of the current economy. Intergovernmental Revenues. The $3.3 million, or 5.3% increase in intergovernmental revenues includes an EMS grant increase and Wireless E -911 grant revenue increase. Bus Fares. A new fare plan would charge a fee of $1 per ride for the bus system. However, our proposal includes special discounts to reduce fares for elderly bus riders, students and persons with disabilities. The new fare is expected to raise $740,000 to help balance the general fund budget. Honorable Members of the Hawaii County Council March 1, 2011 Page 7 Fund Balance Carryover. A lower projection of carryover savings is attributed to leaner FY2010 -11 departmental budgets. EXPENDITURES BY FUNCTION The following table presents a summary of projected FY 2011 -12 expenditures from various sources and the changes from the current budget: EXPENDITURES BY FUNCTION (Amounts in thousands) Expenditures General Government Public Safety Highways & Streets Health, Education, & Welfare Culture and Recreation Sanitation & Waste Removal Debt Service Pension & Retirement Health Fund Miscellaneous EXPENDITURE CHANGES Increase (Decrease) Percent From Percent Of FY 2010 -11 Increase Amount Total Amount (Decrease) $ 42,442 11.6% $1,014 2.4% 112,829 30.8% 1,864 1.7% 21,054 5.8% 2,441 13.1% 25,448 6.9% 644 2.6% 17,866 4.9% 349 2.0% 35,912 9.8% 233 0.7% 41,215 11.3% 385 0.9% 30,870 8.4% 429 1.4% 28,800 7.9% (15,710) (35.3 %) 9,692 2.6% (1,429) (12.8 %) $366,128 100.0% ($9,780) (2.6 %) County -wide furloughs created a 9.23% salary reduction, and the end of furloughs means the salaries of county workers will generally return to the salary levels in fiscal 2009 -10 before furloughs were imposed. That will result in an increase in spending on public worker salaries next year as compared with this year. However, it is important to note that this year- over -year increase in salaries reflects a return to the pay levels that were in place in fiscal 2009 -10, before this year's furloughs were imposed. Other major changes in projected expenditures are as follows: General Government • Information Technology. The majority of the county telephone charges are now included within this department's budget. Honorable Members of the Hawaii County Council March 1, 2011 Page 8 • Public Works. Increase in estimates for fuel expenses contributed to a net increase in budget. Public Safety • Fire. The department expects a $1.4 million increase in their EMS contract with the State of Hawai `i. • Police. The Wireless E -911 grant funds available for use increased by $1.2 million over the current year. Highways and Streets Mass Transit The estimated increase in fuel cost is due to fuel price increases and expansion of services. • Highway Fund This budget includes the use of $3.2 million of the Highway Fund excess fund balance to help finance operations of the Mass Transit Agency. This reduces General Fund expenditures, and represents an increase in the use of Highway Fund revenues to finance the Mass Transit network. • Highways The Department of Public Works is earmarking an additional $500,000 for work on roads -in- limbo. Health, Education and Welfare Social Services. Despite declining revenues and reductions in spending, the county's budget for non - profit agencies will remain at $1.5 million in 2011 -12. We have protected this funding despite three years of budget cuts because of our commitment to the non -profit organizations that support the most vulnerable in our community. Debt Service • Deferred Debt Payments This budget will shift a portion of funding for principal payments of debt service from fiscal year 2011 -12 to fiscal year 2012 -13 to create a one -time savings of $3 million in fiscal year 2011 -12. This shifting of the transfer by several months will not incur any additional interest or other costs to the county. Health Fund Health Benefits. In recent years, the County of Hawaii has made two separate payments related to public worker health care. The first payment is used to directly purchase health coverage for active and retired employees. This payment is a binding obligation on the part of each of the counties and the state, and will continue uninterrupted next year and into the future to ensure that all public workers and retirees receive all of the health benefits to which they are entitled. This proposed budget includes $28.8 million to provide coverage to active employees and retirees, which will continue the current level of health coverage for all. The County of Hawaii has also made a second health - related payment for the past three years that is designed to pre -fund future obligations the county has incurred to fund retirement health care in the future. This payment, generally known as the Government Honorable Members of the Hawaii County Council March 1, 2011 Page 9 Accounting Standards Board (GASB) Statement No. 45 payment, is a voluntary payment that some government entities in Hawaii have elected to pay at this time. The State of Hawaii has declined to make GASB 45 payments, while each of the four counties has made at least partial GASB 45 payments. For the past three years, the County of Hawaii has made full payment under GASB 45, making payments of $13.61 million in fiscal 2008; of $14.95 million in fiscal 2009; and $15.7 million in fiscal year 2010. This budget defers the scheduled fiscal year 2011 -12 GASB 45 payment, for a savings of $20.1 million. This deferral of payment will in no way affect present or future health benefits of our employees or retirees, and our plan is to resume the GASB 45 payments as the county's financial position improves. Miscellaneous • Payroll Lag. This budget for the first time implements a "payroll lag" for the County of Hawai `i, a step that has already been adopted by the state and each of the other counties. This plan will save the county $6 million in fiscal year 2011 -12. The county currently makes salary payments to public workers on the 15 and at the end of each month. Delaying each payment by a day or several days allows the county to push one payment from fiscal year 2011 -12 into fiscal year 2012 -13 for a one -time savings. Other Adjustments • PONC Payments. Fiscal year 2011 -12 marks the resumption of transfers equal to 2 percent of county real property revenues from the general fund to the Public Access, Open Space and Natural Resources Preservation Fund (PONC). Resuming the PONC transfers to fund the continuing acquisition of open space and coastal areas will result in a shift of $4.1 million out of the general fund and into the PONC fund in the year ahead. • Self - Insurance. Also included in this proposed budget is a transfer of $1 million from the general fund to the county's self - insurance fund to cover potential or existing claims against the county. The county did not transfer monies to replenish the fund in this fiscal year or last year, and the self - insurance fund has now been nearly depleted. • Solid Waste Fund. This budget increases the general fund subsidy of the solid waste fund by $4 million, a step necessary to adequately finance the continuing recycling and green waste programs as well as operation of landfills and solid waste transfer and recycling stations across the county. Total transfers from the general fund to the Solid Waste Fund to subsidize the solid waste management in the County of Hawaii will total $17.5 million in the year ahead. Honorable Members of the Hawaii County Council March 1, 2011 Page 10 CONCLUSION Our island community is growing, and has maintained the values that make the County of Hawaii the special place that we call home. Ours is a community where neighbors look out for one another, and where people pitch in to work together on park improvements and community clean -up projects. In good times and in difficult times such as these, we recognize our connection to one another, and our obligation to reach out to help one another. This budget reflects those values. This budget protects services for our elderly and youth, and preserves funding for the non -profit organizations that touch the most needy residents of our island. It also properly funds the essential public safety services that keep our families and communities safe. This is the third consecutive year that we have increased the share of the county budget that is devoted to public safety, even while we cut the budget as a whole. This budget demands more of our county employees because it once again cuts county spending and reduces staffing. We recognize that this three -year period of declining budgets has been difficult for our public workers, requiring that they make do with limited resources, and become more efficient. In this recession more than any other, our county workforce has shared the sacrifice, and I thank them for their efforts. We are seeing signs of an economic recovery, and we know our long -term economic outlook is excellent. We are ready to use our borrowing power and our excellent credit rating to advance public works projects to stimulate our island economy. We will work tirelessly with our partners to encourage economic growth that will benefit our families, and will provide meaningful jobs and educational opportunities for our children. This budget plans for the recovery that we know is coming, and lays a foundation for the community that we want to become. It also assures that we will live within our means until a complete recovery arrives. My staff and I welcome the opportunity to discuss this budget in further detail with you and to answer any concerns that you may have. Thank you for your consideration. Aloha, William P. Kenoi MAYOR Attachment