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Home My WebLink AboutCOM 0604.000 2010-2012 -'MtYOSp•' -` , \ �• William T.Takaba Managing Director William P.Kenoi .*:: ' ��'•• Mayor ,. ....46i; Walter K.M.Lau e,,.�. \� 0_,. ._.�' . Deputy Managing Director County of Hawaii Office of the Mayor 25 Aupuni Street,Suite 2603 • Hilo,Hawai`i 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, 2012 Honorable Members of the Hawai`i County Council County of Hawai`i -- `.- 25 Aupuni Street Hilo, HI 96720 N.) -- Aloha Council Members: As required by the Hawaii County Charter, submitted with this message is the proposed operating budget for the County of Hawai`i for the fiscal year (FY) ending June 30, 2013. This balanced budget includes estimated revenues and appropriations of $365,293,348 and includes the operations of eleven of the County's special funds as well as the general fund. This FY 2012-2013 budget is $37,911,650 or 9.4 percent less than the budget in effect when this administration took office in 2008. It marks the fourth consecutive year of our efforts to reduce the size and cost of government in a strategic and responsible manner that maintains critical infrastructure and public services. This proposed balanced budget does not require any increase in property taxes. County of Hawaii Operating Budget $410,000,000 $400,000,000 0101 $390,000,000 5380,000,000 II $370,000,000 U U _ $360,000,000 U U U U $350,000,000 0 U U U U $340,000,000 2008-09 2009-10 2010-11 2011-12 2012-13 (� Comm. No.��± .Q_J�------ County of Hawaii is an Equal Opportunity Provider and Employer. Ref. To; r Ref. Dote ;'"R 4 1 1112__._. Honorable Members of the Hawai`i County Council March 1,2012 Page 2 Collecting Less Taxes For the fourth straight year, the County of Hawaii will collect less in property taxes than it did when this administration began in 2008. Tax collections in FY 2008-09 totaled $225.9 million and are expected to decrease to $198.5 million during FY 2012-2013. This continuing slide in tax collections has been coupled with years of cost increases in areas such as employee health care and retirement costs and unpredictable fluctuations in utilities and fuel. In short, it will cost us more to deliver the same services next year, and there will be less money available to provide these services. Real Property Tax Revenue $230,000,000 $220,000,000 0 _ $210,000,000 $200,000,000 ■ $190,000,000 ■ ■ $180,000,000 0 _ ill $170,000,000 — , r— Z 2008-09 2009-10 2010-11 2011-12 2012-13 Actual Actual Actual Budget Budget Reducing the Size and Cost of Government This budget represents the fourth consecutive year that we are reducing spending. Consulting contracts have been cut by more than $12 million since FY 2007-2008. Overtime spending is also being reduced by 38 percent during this same time period, for an additional reduction of$5.3 million. Professional Services Contracts 518,000,000 or $16,000,000 $14,000,000 1 $12,000,000 $10,000,000 $8,000,000 56,000,000 $4,000,000 52,000,000 5 2007-08 2008-09 2009-10 2010-11 Honorable Members of the Hawai`i County Council March 1,2012 Page 3 Overtime Total- All Funds 516,000.000 -- 514,000.000 512,000,000 --- 51 0.000.000 1111 I 5- 2007-08 2008-09 2009 10 2010-11 2011-12 2012 13 Actual Actual Actual Actual Budget Budget This budget discontinues a subsidy for the West Hawai`i golf program and phases out the lava- viewing program. It restricts out-of-state travel, cancels or delays vehicle purchases and the replacement of aging computers and software, and employee training has been deferred or eliminated. Passenger Vehicle Purchases All Funds loo so L',I Lip 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 Actual Actual Actual Actual Budget Budget Further, we have cut special counsel, trial aides and law clerks for the prosecutors' office, reduced courier service, cut appraisals, environmental assessments and surveys, and reduced the workers compensation budget. Two hundred twenty-two vacant positions have been unfunded during the first three years of this administration. Although it has been very challenging, for the upcoming year, we intend to again hold 222 positions unfilled and unfunded. Leaving these vacant positions unfunded will save the county $7.1 million. The total employee count for the County of Hawaii was reduced from 2,787 on November 30, 2008 to 2,586 as of February 29, 2012. Employee Count 2850 2800 ♦� 2750 2700 2650 2600 2550 2500 2450 e e o°o, o°e �e e ono e o-,o o''' e e e 0..1. off~ e.~ ^rs~ 4, c0' ��~ �Sti o�ti 0�ti ,�ti s9" off~ °�~ ti� tip~ y�� 'V' N.V ti\� `'� �'\' N.V ~\� `'\� 0\' N.\3 ~\~ I Honorable Members of the Hawai`i County Council March 1, 2012 Page 4 OPERATING BUDGET BY FUND The following table describes the budgeted expenditures for FY 2011-12 and the proposed budget for FY 2012-13 for each fund. OPERATING BUDGET BY FUND (Amounts in thousands) Percent FY 11-12 FY 12-13 Increase Increase FUND Budget Proposed (Decrease) (Decrease) General Fund $278,120 $274,594 ($3,526) (1.3%) Highway Fund 29,267 32,773 3,506 12.0% Sewer Fund 9,085 9,321 236 2.6% Cemetery Fund 10 10 0 0.0% Bikeway Fund 171 171 0 0.0% Beautification Fund 154 158 4 2.6% Vehicle Disposal Fund 2,599 2,588 (11) (0.4%) Solid Waste Fund 28,255 25,406 (2,849) (10.1%) Golf Course Fund 1,120 1,139 19 1.7% Geothermal Royalty Fund 575 600 25 4.3% Housing Fund 17,888 18,483 595 3.3% Geothermal Asset Fund 50 50 0 0.0% $367,294 $365,293 ($2,001) (0.5%) REVENUES BY SOURCE The following table presents a summary of projected FY 2012-13 revenues from various sources and the changes from the current budget: REVENUES BY SOURCE (Amounts in thousands) Increase (Decrease) Percent From Percent Of FY 2011-12 Increase Source Amount Total Amount (Decrease) Real Property Tax $198,500 54.3% ($8,800) (4.2%) Public Service Company Tax 9,520 2.6% 420 4.6% Fuel Tax 7,660 2.1% 969 14.5% Public Utilities Franchise Tax 10,560 2.9% 1,235 13.2% Licenses and Permits 15,859 4.4% 346 2.2% Revenues and Use of Money&Property 675 0.2% (510) (43.0%) Intergovernmental Revenues 62,554 17.1% (951) (1.5%) Charges for Services 21,670 5.9% 44 0.2% Other Revenues 8,315 2.3% (34) (0.4%) Fund Balance Carryover 29,980 8.2% 5,280 21.4% $365,293 100.0% ($2,001) (0.5%) Honorable Members of the Hawai`i County Council March 1, 2012 Page 5 REVENUE CHANGES The major changes in projected revenues are as follows: Real Property Tax. Real property tax revenues are expected to decrease by 4.2%, or $8.8 million, due to an estimated 4.0% decline in taxable values. Fuel Tax. Fuel tax revenue is expected to increase by 14.5% to $7.7 million, as fuel consumption has increased over anticipated levels. Public Utilities Franchise Tax. Increased public utility revenues are expected to result in an increase of$1.2 million, or 13.2% in franchise tax revenue. Revenue from Use of Money and Property. Interest earnings are expected to continue to decrease for next fiscal year by $0.5 million, due to the low yield on investments, which is still reflective of the current economy. Fund Balance Carryover. The higher projection of carryover savings is attributed to the cumulative effect of successful cost cutting measures for the past several years and additional spending restrictions in the current year. EXPENDITURES BY FUNCTION The following table presents a summary of projected FY 2012-13 expenditures from various sources and the changes from the current budget: EXPENDITURES BY FUNCTION (Amounts in thousands) Increase (Decrease) Percent From Percent Of FY 2011-12 Increase Expenditures Amount Total Amount (Decrease) General Government $41,459 11.3% ($1,750) (4.1%) Public Safety 112,658 30.8% 776 0.7% Highways& Streets 22,151 6.1% 1,500 7.3% Health, Education, &Welfare 25,456 7.0% (396) (1.5%) Culture and Recreation 17,228 4.7% (1,066) (5.8%) Sanitation&Waste Removal 33,799 9.3% (2,654) (7.3%) Debt Service 35,250 9.6% (5,965) (14.5%) Pension&Retirement 32,275 8.8% 1,412 4.6% Health Fund 29,803 8.2% 978 3.4% Miscellaneous 15,214 4.2% 5,164 51.4% $365,293 100.0% ($2,001) (0.5%) Honorable Members of the Hawai`i County Council March 1, 2012 Page 6 EXPENDITURE CHANGES Major changes in projected expenditures are as follows: General Government • General savings in the proposed budget were achieved through many sacrifices across all administrative departments, from further reduction of travel, training and contracted services to reductions in supplies and continued postponement of equipment purchases. Fuel and utility costs continue to fluctuate, and the oil market will be monitored and budget items adjusted if necessary prior to the May submittal. Corporation Counsel's special counsel account was significantly reduced, as was funding for Property Management land acquisition related services. Research and Development was able to eliminate some costs from the current year budget for APEC-related activities. The reductions in General Government expenditures touched all departments in this classification. Highways and Streets • Highways. The Department of Public Works is earmarking an additional $500,000 for work on roads-in-limbo, increasing the budget from $1.5 million to $2.0 million. Additionally, Highway Maintenance division is budgeting approximately $1.0 million for new and replacement equipment for road maintenance and resurfacing. 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 fiscal year 2012-13. 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. Culture and Recreation • Parks and Recreation. The Lava Viewing program at Kalapana is being phased out, resulting in a savings of $300,000. Discontinuation of the West Hawai`i Golf Subsidy program will provide a budget reduction of$500,000. Sanitation and Waste Removal • Solid Waste Fund. Some repairs to facilities projects will be transferred to the Capital Projects fund, reducing operating expenses by over $800,000. Equipment lease expenses were reduced by approximately $600,000 as some financing leases were completed. Solid Waste and Recycling contracts for services were also reduced by a combined amount of over $800,000. Debt Service • Transfer to Debt Service. The County will make its final payment on bonds issued in 1993, which will result in a reduction in the required transfer to the debt service fund for the budgeted fiscal year. Future transfers to the debt service fund will be higher as the County begins principal payments on bonds issued in 2010. Honorable Members of the Hawai`i County Council March 1, 2012 Page 7 Health Fund • Health Benefits. This item represents the purchase of health coverage for active and retired employees. It 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 $29.8 million to provide coverage to active employees and retirees, which will continue the current level of health coverage for all. Miscellaneous • Provision for Payroll Lag. This item from the current year budget was a one-time provision to reflect the adjustment of pay days to fall on the day after a pay period ends, rather than on the last day of the pay period. The elimination of this item results in an increase to miscellaneous expenditures of approximately $6.0 million. • Provision for Compensation Adjustment. For the FY 2011-12 budget there was an expectation that County employees represented by HGEA would be taking a one-day per month furlough, however there was no final agreement, so a provisional account was established to reflect the expected savings. For the FY 2012-13 budget the savings are reflected in each department's salaries and wages accounts. The elimination of this item results in an increase to miscellaneous expenditures of approximately $3.0 million. • Transfer to Self-Insurance. Due to current fiscal challenges and the fact that the balance in the fund is now at $1.2 million, no transfer is included in the proposed budget from the general fund to the county's self-insurance fund, resulting in a $1.0 million reduction in this item. However, the administration is concerned about the possibility of new potential claims against the county and will re-evaluate the status when preparing the amended budget submittal for May to determine if a transfer is needed to cover potential or existing claims against the county. • Transfer to Solid Waste Fund. This budget reduces the general fund subsidy of the solid waste fund by $2.3 million. Total transfers from the general fund to the Solid Waste Fund to subsidize the solid waste management in the County of Hawai`i will be $15.9 million in the year ahead. Honorable Members of the Hawai`i County Council March 1,2012 Page 8 Conclusion I am deeply appreciative of the support and dedication of our hardworking county employees for their sustained commitment to reduce both the size and cost of government, and their willingness to do more with less. This spirit of cooperation and determination has enabled us to establish a balanced budget without having to raise property taxes. We are especially indebted to the fiscal discipline and sound advice of our Finance Team. They have provided consistent and strategic direction throughout this very challenging, but rewarding process. The proposed budget I am submitting is the result of many months of cooperation and collaboration between all of our department heads and county employees. In the months ahead, we will continue to work closely with our State Legislators to maintain the County of Hawai`i's share of the Transient Accommodations Tax, which is vitally important to maintain our balanced budget. We will also continue to work with our Congressional delegation to secure federal resources as we expand our transportation infrastructure and build important capital improvement projects. We are cautiously optimistic that we will see an improved economy through growth in the hospitality, construction, and agricultural industries. Continued investment in the renewable energy, higher education, transportation, and science and technology sectors will, hopefully, lead to a thriving and vibrant Big Island economy and an improved financial outlook for the County of Hawai`i. We look forward to working with the County Council as we seek to maintain a balanced and responsible budget. Aloha, William P. Kenoi MAYOR Attachment