HomeMy WebLinkAboutMIN FC 2018/05/21 2016-2018Committee on Finance
35th Session
Hawaii County Building
25 Aupuni Street
Hilo, Hawaii
May 21, 2018
CALL TO The regular meeting of the Committee on Finance was called to order at
ORDER: 10:35 a.m., in the Council Chambers, Hilo, by Ms. Maile Medeiros David,
Chair.
ROLL CALL:
Present: Ms. Maile Medeiros David, Chair
Ms. Karen Eoff, Vice Chair
Mr. Aaron S. Y. Chung, Member
STATEMENTS
FROM THE
PT TRT .IC ON
Change Order of
Business:
Mr. Dru Mamo Kanuha, Member
Ms. Susan L. K. Lee Loy, Member (came in later)
Ms. Eileen O'Hara, Member
Ms. Valerie T. Poindexter, Member
Mr. Herbert M. "Tim" Richards, III, Member
Ms. Jennifer Ruggles, Member
The Chair directed the Committee to proceed to the next order of business,
Statements from the Public on Agenda Items.
The following individual registered to speak and came forward when called by
the Chair:
David Clark: Res. 615-18 (Comm. 939), in support.
As directed by the Chair and with no objection from the Council Members, the
following item was taken out of order:
Res. 611-18: AUTHORIZES THE PAYMENT OF FUNDS OF A LATER FISCAL YEAR
AND OF MORE THAN ONE FISCAL YEAR FOR A MULTI-YEAR LEASE
OF REAL PROPERTY FOR THE COUNTY OF HAWAII POLICE
DEPARTMENT
Authorizes the Mayor to enter into a new five-year agreement with an option
for an additional five years with Ocean View Partners LLC, to allow for the
continued occupancy of office space located at 92-1329 Prince Kuhio
Boulevard, Ocean View.
Reference: Comm. 931
Intr. by: Ms. David (B/R)
FC -35 May 21, 2018
Motion to Approve: Mr. Kanuha moved to recommend adoption of Res. 611-18.
Seconded by Ms. Eoff.
CHR. DAVID: Captain Quiocho, would you like to come up and just give us a
brief explanation of your month-to-month and what this means for the Police
Department?
(Note: At this time, Police Captain Kenneth Quiocho came forward to
address the members of the Committee.)
CHR. DAVID: Please press that button and identify yourself for the record.
MR. QUIOCHO: My name is Kenneth Quiocho, and I'm the commander of the
Ka`u district.
The lease is important for our public service to that area. There's quite a bit of calls
that we get in the Ocean View area. In order to leave officers in that area, so the
response time is quicker, it's nice to have a substation over there, of what we call a
substation. I understand there's no funding to actually build a substation, so do
what we can with what we have to work with. This is vital to our service in that
area, our response time.
We're working on infrastructure in that area, to allow officers to actually stay there
as opposed to traveling back to Na`alehu every time they have a case or a complaint
or an arrest. We'll be using the substation for small bench warrants. People that are
able to bail out right away, we can process them and let them go. And if we have to
have an extensive investigation, then we'll work out of the Na` alehu station. That
will cut down on a lot of the time involved in traveling back and forth.
CHR. DAVID: Thank you very much. I think that is such a great—although it's
not an actual substation, the presence there is really needed, so I appreciate that.
Council Members? Mr. Richards.
MR. RICHARDS: Thank you, Chair, and thanks for coming in to support this. I'm
quite familiar with the district. Do you leave someone there all the time, or kind of
in and out, depending on what's going on?
MR. QUIOCHO: We have people there all the time; not necessarily at the
substation, they're on the road. They go there to make phone calls and do quick
things. If we have a mobile device, a mobile terminal like a computer laptop, if we
have connection, they can go there and they can do some work out of there too. I
try to man that as much as possible. In fact, I even increased the minimum
manpower strength for each watch, to be able to facilitate that. So although they are
not there all of the time, they're around in the area and can respond to calls for
service, if necessary.
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May 21, 2018
MR. RICHARDS: Okay, thank you. I yield.
CHR. DAVID: Thank you, Mr. Richards. Mr. Kanuha.
MR. KANUHA: Thank you. I fully support this. Mahalo for explaining what that
space is used for. I think it's important to have that presence in that community, to
deal with a lot of the needs there and to respond as quickly as possible, so I fully
support this. Is the wish for the department to actually have that as a substation? Is
that where you wanted to be headed towards, or is it just because there's not enough
funding for that?
MR. UIOCHO: I would love to have a substation, but I also understand that
money is tight right now. So what we do is we work with what we have available
to us, and that is something that is a worthwhile keep for a lease. It's worthwhile to
invest, in putting some infrastructure in there, to allow officers to work out of
there. It's very similar to what happened when I was patrolman in Mauna Lani.
Mauna Lani became kind of like that. We're looking at Waikoloa, I think, at one
point, to have officers up in the Waikoloa area, We were looking at sharing
something with Fire but of course that never went through for whatever reason.
But to me it's important to have the officers accessible to one, is to the people; and
two, is to cut down on the amount of time it takes them to a call. I mean, I feel for
them because I've been a victim of crime myself. I had to call an officer, and
waited, and waited, and waited, and it was frustrating. So if we can do things to
eliminate that type of frustration, that's what we're looking at, with keeping a
facility like that.
MR. KANUHA: Thank you. Thank you for that, and thank you for explaining
everything that you guys do in those areas, especially in Kd'u. Very rural,
everything's spread apart pretty far. So mahalo, I support this.
CHR. DAVID: Thank you. Ms. O'Hara, go ahead.
MS. O'Hara: Yes, and thank you, officer, for being here. When you say
infrastructure improvements, is this going to include internet connection for the
buildings that we don't really have?
MR. QUIOCHO: Yes, it is. It's a networking. That's what we're working on right
now, is network.
MS. O'HARA: Excellent, because I know that area down there is a little remote
and doesn't always have the best services, and you'll need that for uploading.
I also understand, from discussion with your chiefs, the difference between a
substation and a mini station. A substation, being an unmanned facility; whereas, a
mini station, with at least one officer assigned, at least—he explained the difference
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to me. Maybe this is basically a substation, even though no one is there on a
permanent or regular basis.
MR. UIOCHO: Yeah, the concert to mini stations is more along the lines of
community policing. It allows the officer to be stationed within the community and
address community concerns, where a substation is actually an operational. It has
an operational aspect to it, where we work out of it. We can process, like I said,
people with bench warrants, take minor complaints there. And the officers have an
area to go to complete reports.
MS. O'HARA: I totally support this. We could use more of this in my District of
Puna. In fact, we're working on a resolution to bring forward for a similar kind of
situation at Pohoiki. But given the turn of events in the last two weeks, I think
we're going to have to reconsider the situation. Anyhow, I fully support this.
Thank you.
MR. QUIOCHO: Thank you.
CHR. DAVID: Thank you, Ms. O'Hara. Anyone else? Ms. Lee Loy, go ahead.
MS. LEE LOY: Thank you. Thank you, Captain, for being here. I fully
support this and the motto. I understand the motto that we have at Mauna Lani
and how that turned into a substation. But I have bigger question. Because this
is a five-year lease and we're going to putting some revenue and resources into this
facility, how is that going to pencil out over the course of the five years? I heard
you mention internet, and I just want to understand how we're enhancing this place
and penciling it out over this five-year with the option for another five. Do you
have any—
MR. QUIOCHO: So what we did was we began working with County. In fact, that
was my major—I've been in Ka`u for about a year, a little bit over a year. And
when I got there, one of the things—one of the major community concerns was the
lack of police presence number one; and number two was the response time of
police officers, especially with critical incidents. When I looked at the substation
itself, I found that there wasn't any way for the officers to do work there. The
officers constantly come back to Na` alehu.
We tried using the MDTs (Mobile Device Terminal) that we have. The
connectivity is not the greatest, and it's frustrating when you're doing a report and
you drop connectivity and you'd start the report again. Might as well drive back to
the Na` alehu police station to do it.
So I started working with our Police County IT (Information Technology), who also
began working with the County IT, and I didn't know this but there's a grant that's
available for infrastructure. So we were approved for one of those grants in March,
and we already did a site visit on that. So not it's a matter of sending out bids for
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the equipment that we'll need to be able to put, you know, computer terminals and
have networking down there. How that would phase out over a period of time, I
don't know. But I know that having network there and having that building to work
out of is going to be key to keeping our public service in that area. So I can't attest
for what's going to happen in the future.
MS. LEE LOY: Thank you for sharing that, because one, response time of course
is incredibly frustrating to victims. I completely support this. But that multi -prong
approach, about addressing the needs of the community in a responsible manner and
the return on investment, is what I really like about this project going forward,
because then it becomes, you know, something that the community can rely on
going forward. I think that does a lot to improving people's sense of safety,
knowing that something is close by. So thank you very much. Thank you for
bringing this forward. I yield.
CHR. DAVID: Thank you, Ms. Lee Loy. Anyone else? Seeing none—well, thank
you, Captain, for being here and your patience for waiting for us to call this matter
on the agenda. So that being said, all those in favor of approving Resolution 611-18
please say "aye."
Vote on Res. 611-18: The motion to recommend adoption of Res. 611-18 was
(Approved) carried by the following voice vote:
Ayes: Committee Members Chung, Eoff, Kanuha,
Lee Loy, O'Hara, Poindexter, Richards,
and Chair David – 8.
Noes: None.
Absent: Committee Member Ruggles – 1.
Excused: None.
CHR. DAVID: Thank you very much.
MR. QUICHO: Thank you.
CHR. DAVID: Mr. Clerk, I guess we can go to the top of the agenda right now.
Return to Order The Chair directed the Committee to return to the order of business.
of Business:
COMMUNI- The Chair directed the Committee to proceed to the next order of business,
CATIONS: Communications.
Comm. 15.31: REPORT OF FUND TRANSFERS AUTHORIZED: APRIL 16 – 30, 2018
From Controller Kay Oshiro, dated May 3, 2018.
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Vote on Comm. 15.31: Ms. Eoff moved to close file on Comm. 15.31. Seconded
Filed by Ms. Poindexter and carried by the following voice vote:
Ayes: Committee Members Chung, Eoff, Kanuha,
Lee Loy, O'Hara, Poindexter, Richards, and
Chair David – 8.
Noes: None.
Absent: Committee Member Ruggles – 1.
Excused: None.
Comm. 920: AUDIT REPORT NO. 2018-01: CASH HANDLING AT COUNTY OF
HAWAI`I'S MASS TRANSIT AGENCY
From Legislative Auditor Bonnie S. Nims, dated April 30, 2018, transmitting
the above report in accordance with Hawaii County Charter Section 3-18(d)(2).
The purpose of the audit was to determine whether cash handling internal
controls at Mass Transit are adequate and effective to ensure that revenue is
properly controlled and deposits are timely and accurate.
Motion to Close File: Ms. Lee Loy moved to close file on Comm. 920. Seconded
by Mr. Richards.
CHR. DAVID: Council Members, we have in the room, we have our auditor,
Bonnie Nims, and her staff, Maxinne Pacheco and Mr. Shibata. You folks want
to come up?
(Note: At this time, Legislative Auditor Bonnie S. Nims came forward to
address the members of the Committee.
CHR. DAVID: Good morning. So I believe—we're going to ask you to do a
brief description of your report and then I'm going to open it up for questions
from the Council Members. If you can introduce yourself?
MS. NIMS: Sure, Bonnie Nims, Legislative Auditor.
CHR. DAVID: Good morning.
MS. NIMS: The audit of cash handling at Mass Transit was done in part because
of our annual audit plan, and also Resolution 218-17, which was passed last year
in June. The audit, as the County Clerk mentioned, is to look at the cash handling
internal controls over bus fare and taxi coupons, to determine if they are
safeguarded and deposited timely and intact.
Our audit took place during the Fall and Winter of 2017 and beginning of 2018.
It included interviewing staff, doing some transaction testing, walk-throughs of
the process, and we found numerous internal weaknesses. There was lack of
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safeguarding of assets; lack of monitoring; and the written policy and procedures,
while they had been implemented, weren't complete.
We also did testing and determined that cash was not being deposited timely,
which the County policy is two days, best practices recommends 24 hours. So it
still wasn't even meeting the two-day County requirement.
While we were on site, we realized that there was a bunch of money in the safe
that had not been deposited, so we did manage to do an announced cash -count,
and counted nearly $30,000 in cash that had been there, some of it since July of
2017. We did—three of us spent five days counting all the money. We did
ensure that it was deposited subsequently to our account. But it did bring forward
a lot of the internal control weaknesses.
Currently, with the internal controls the way they are, there's no way to determine
if all of the money that was paid by the bus riders was actually receipted. We
were able to determine that what was receipted was deposited, but we can't
determine the completeness of that revenue.
So based on all the internal control weaknesses, we have 30 recommendations
that we made to Mass Transit. In general, they agreed with the recommendations,
and I know they've already taken many steps to implement them.
CHR. DAVID: Thank you very much. Council Members? Ms. Lee Loy, go
ahead.
MS. LEE LOY: Thank you. We went through an exercise last budget and saw
some concerns in that department. As the Council initiated the resolution for this
audit, it was concerning. But what I'm really happy about is everything is now on
the table. We understand the internal controls, the weaknesses there, how to
improve the process, and improve those cash handling measures. We have a
Mass Transit Plan coming forward.
I actually just want to yield and hear what some of my other colleagues thought
about this audit. Because, Bonnie, it was so comprehensive and detailed, and I
cannot thank you enough. It was really my goal too use this as a tool to help the
department.
I'm going to yield I read this report probably five times. I read it so fast the first
time because there was just so much information there. But I just want to yield
right now and hear what my other colleagues have to say about this audit and how
we can use this as a tool to help the department going forward. So, thank you.
CHR. DAVID: Thank you, Ms. Lee Loy. Mr. Richards.
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MR. RICHARDS: Thank you, Chair. Thanks, Ms. Nims, for bringing this
forward.
As Council Woman Lee Loy stated, last year we had concerns about Mass
Transit, which prompted—and then coming forward. I actually agree—I haven't
read it five times, but I read it a couple of times. The volume of information here
is excellent. Thank you so much.
I hear that you said all the funds that were receipted were deposited. But as I read
through, and again, I read it several times. There were pouches or envelops or
whatever that either had trips but no money or had money but no trip sheet in
there, correct? And all of these are—yeah, how do you make sense of that
because you have nothing to tie it too, so I can fully appreciate that—which again,
highlights the concern the Council had a year ago in dealing with Mass Transit.
We need Mass Transit, without question, but we need a well-managed Mass
Transit. With that, no point in conjecture on that stuff, but are there protocols in
place that—I assume when you're bringing in cash, you're supposed to sign in.
It's kind of like a till for a grocery store; you clock in, clock out. Are those
procedures, were they in place or are they in place now?
MS. NIMS: They were not in place at the time of our audit. They are—at least
Mass Transit asserts that they are in place now. We have not gone back out to
confirm their assertion, and we will do a follow-up on it. But they have asserted
that they have corrected those.
MR. RICHARDS: And then, what you just stated there, a follow-up audit, is that
a standard portion of auditing or is this something that's going to ask for a bit
more auditing?
MS. NIMS: It depends. The answer is yes, it is pretty standard. We will not
know until we get out there if additional auditing is necessary.
MR. RICHARDS: Okay, yeah. I just—again like I stated, we do need Mass
Transit. But the amount of funds and amount of cash is very unsettling for me.
At this point, I'm going to yield as well because I want to hear the other Council
Members.
CHR. DAVID: Thank you, Mr. Richards. Ms. Eoff, go ahead.
MS. EOFF: Thank you, Madam Chair. I was actually thinking along the same
lines as Mr. Richards, about the follow-up. I mean, it would really be helpful
to know, like what improvements have made in a month later and two months
later. I don't know how we can—either request that or if you can just give us a
follow-up on your behalf, or is there a need to be some kind of formal request?
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Because it would really help us going forward to know steps being taken to
correct the suggestions.
MS. NIMS: As far as like a monthly follow-up, that would be pretty time
consuming for my staff. I'm happy to work with Mass Transit to find out the
status. Maybe less frequently than monthly, I'm happy to submit a status report
of where we're at on this.
MS. EOFF: I don't know how often. I just think what we need is to know that
there are improvements being made on a regular basis to get to our goal.
MS. NIMS: Yeah, that might be something that Mass Transit could provide.
MS. EOFF: Okay, thank you. Thank you for your work on this. I know it was
time consuming, and you did a really good job.
CHR. DAVID: Thank you, Ms. Eoff. Any other Council Members, first round?
Ms. O'Hara, go ahead.
MS. O'HARA: Thank you, Ms. Nims, for this report. It's very eye-opening for
everyone including the department. We learn best from our mistakes, as they say.
So hopefully this will be a good learning experience for the department. We do
have a new personnel there, and she really can't own this particular audit since it
wasn't during her tenure.
But it does point to some serious management issues in terms of the cash
handling. Not only that, but being able to correlate the data from our revenues
with the number of rides provided so that we have some kind of metric as to who
we're providing rides to and how long those rides are, et cetera. So there's a lot
of work that needs to be done. I really appreciate the way you've laid out the
recommendations, and one of which is training. So I hope that all of the
recommendations get considered by the department as we move forward with this.
Because as we all know our current bus system is far, far, far from adequate. And
so we want to be able to provide for the citizens on this island.
I wish I was better prepared and had read it five times like Ms. Lee Loy, but the
last two weeks had been a little busy in my district, so I wasn't able to do that. I
am absorbing the information and it is of concern. But I think the department will
be able to use this information effectively and productively in terms of moving
forward from here. Thank you.
CHR. DAVID: Thank you, Ms. O'Hara. Ms. Ruggles, go ahead.
MS. RUGGLES: Thank you. I appreciate the detail that this audit that you have
here. I just have one question about one of the things in here, in particular, it says
that there's a net overage. It's on page 15, a net overage of $1,682, more money
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was deposited than the calculated revenue for ridership. Is that just for December
or is that for the entire year?
MS. NIMS: That is just for December.
MS. RUGGLES: Okay. And how often was there an overage?
MS. NIMS: Every bus—every—let's see—every cash bag may contain several
bus runs or routes. We calculated based on cash bag and calculated the ridership
based on the tally sheets that were included with that cash. So to answer your
question, it would happen—on multiple cash bags—the ma j ority of cash bags did
have an overage. A lot of people might say, "Great it's an overage." Well, that's
just as concerning to an auditor as an underage because that means that the
records aren't accurate.
MS. RUGGLES: Right. Alright, yeah, I get that. That's all the questions I have
for now. Thank you.
CHR. DAVID: Thank you, Ms. Ruggles. Mr. Chung, go ahead.
MR. CHUNG: Thank you, Bonnie and Maxinne, for your good work. You
know, I'd like to call up our current and maybe former Mass Transit directors,
you know, just for those thoughts and comments, if I could?
(Note: At this time, Mass Transit Administrator Maria "Sole" Aranguiz
and Program Manager Tiffany Kai came forward to address the members
of the Committee.)
CHR. DAVID: Good morning, Director. Could you just pull your mic closer to
you and then identify yourself for the record? And then go ahead, Mr. Chung.
MR. CHUNG: What are your thoughts after having read the audit?
MS. ARANGUIZ: Good morning. Okay, Sole Aranguiz, Mass Transit Agency
Administrator. Yes, it's been an eye-opening, really looking at this document
prepared by the Legislative Auditor's office. We certainly appreciate this
opportunity to understand where the inefficiencies in being inadequate handling
of the cash -handling has taken place, and we are very serious and we are
prioritizing this on a daily basis. This is one of the items that you will see, if you
go to the conference room, as to one of the main items, their cash handling.
There are variety of recommendations as well, over 30. They are dealing
basically with segregation of duties, the processes, the policies, and how to
maintain the physical safeguard of our assets. So we have taken this into full
account. Make sure that staff understands the policies, how it works. And to
make sure, the amount of real work actually we are doing this, including myself,
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it's a learning experience, to maintain the number of people that is required, to
have adequate QC (Quality Control) process, to make sure that we are taking full
account of the monies that are being collected, and to make sure where they
contract. As I say, you are big part of this effort as well because we need for you
to count with the money every day or develop a mechanism, and have complete
trip sheets because that's an issue as well. If you don't have complete trip sheets,
it will be very hard to maintain the level of accuracy with the money that is being
collected, so you wouldn't be able to, really, to understand. You know, there will
be discrepancies as mentioned by Ms. Nims.
But this is a serious matter. We are taking it very seriously. This is a priority for
the Mass Transit Agency. We understand how critical it is because it's not only
for internal control purposes but as well for us to show how accountable we are
for these public funds. That we have a mechanism in place. That we are fully
accountable of course. And that each one of the members in my agency is aware
of how important it is for us to maintain accurate records. I mean, without this,
the whole system collapses in a way. So this is a main issue for us and we are
addressing as recommended.
Obviously, right now we are doing within the extent of our resources. We have
created plans in case something happens in the agency, you know, there's certain
comments there. Now we make sure, regardless there is a schedule, so we always
have two people to count the money regardless of what's taking place. That's one
example.
And then, obviously if at some point the resources are available to us, most of
these issues will go away if we are able to have automated for collection system.
So the technology is there, it's being used nationwide. It's not tremendously
expensive. Hopefully we'll be able to do something in the next fiscal year, to
secure a system, probably from the Federal Transit Administration, and go with
our consultants on how we can combine this. Technology with a GPS (Global
Positioning System) so we could provide additional services as well to our public,
our riders. It would be a streamline process for them to pay for us to maintain
accurate records and for them, as well, to get information for trip planning
purposes as well.
MR. CHUNG: Okay. You know, you use the phrase or term, you know, relating,
you know, within the context of your resources, right? So let me ask you and
former Director Kai, I mean, are there any constraints that would prevent or
hamper your ability to follow the recommendations of the auditor? You know,
you guys are right there on the ground level, and I just would like to know what
your perspective are.
MS. ARANGUIZ: Just briefly, from my experience I can tell you that in order
meet the requirements, sometimes I'm there when my team getting the boxes as
well as counting the money during the weekend. We have gotten to that level,
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because if I don't have a commitment for overtime after the hours, we get busses
arrive after 5:00, 5:30 p.m., we stay there. And we are able to go—you know, I
will have one of the mechanics or another member to come with me; so we can
get the money, go in the safe vault and just secure the funds, and log all the
information. The same thing, if I don't have enough—like on Friday, I didn't
have enough staff members available, I will be counting the money with them as
well, which teaches you about the process and that is not really as simple as
people may think. So it's a lengthy process. To me, (inaudible) as well for the
process that is—actually it's not two days. It's two business days, just to clarify
that point. So we try to keep consistent with all of the recommendations that we
have received in this document.
So we'll go to that level, just to maintain that we are responding, you know, that
we are trying the best we can to address these recommendations.
MR. CHUNG: I mean, are systems currently in place to safeguard the integrity of
your cash handling process right now, and if not, how long will it take?
MS. ARANGUIZ: Well, right now, briefly what I can tell you is that as the
money comes in, it is taken from busses. It's put in a safe place. It's always two
people participating in this process, not just one like in the past. The money—
MR. CHUNG: Well, that system was in place, though, for—
MS. ARANGUIZ: Yeah, the counting of the money, you know, so that's step
number one. Once the money is taken from there, to our counting cash handling
room you can probably call it. That room is monitored. We have video
surveillance there, so I can monitor the activities from another area and see what's
taking place. There's always two individuals counting the money, two in the
same room. If there's a need for them to assist with a bus that had come, they will
leave the room and they will lock the room. So if money is there, it's secured and
we have the video surveillance at the same time. There's a limited access in terms
of the keys, because the entire facility was rekeyed. So it's limited; I am the only
person with another County employee that have access to the lock room for the
monies. So when they need access, they will have to call this third person to
open. It's not like that they have the—they are counting the money and leaving
the money in a safe area at the same time.
MR. CHUNG: You know, what about the depositing of the money?
MS. ARANGUIZ: The depositing is taking place as required.
MR. CHUNG: Okay.
MS. ARANGUIZ: So we'll make sure that when the person that comes to get the
money from us, around 2:15 p.m., we need to be done with all the money that we
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have been counting during that day. So that's kind of like the way we are,
addressing that comment—that recommendation, as well.
MR. CHUNG: Okay, thank you. Tiffany, you got any comments?
MS. KAI: Yes. So I wanted to mention that—you know, I take full responsibility
at the time that this audit occurred. Thank you to Council Member Lee Loy for
making the recommendation of getting this audit done, because you never know
what you're doing wrong until somebody points it out.
The document is very well-written, very detailed. And I'm glad that, you know,
they just didn't do the audit and say, "Here, this is it." You know, they came with
a lot of good recommendations on how we can move forward to improve our cash
handling procedures. And as Director Aranguiz had mentioned, we have done a
lot of improvements already that has taken place.
One of the recommendations that the auditors had suggested was the smart cards.
I believe if we do—of course funding is always the issue, but that's one of the
ways we can reduce the amount of cash we're taking in.
MR. CHUNG: Okay, thank you.
CHR. DAVID: Thank you, Mr. Chung. Mr. Kanuha.
MR. KANUHA: Thank you, Madam Chair. And again, thank you, Ms. Lee Loy,
for starting this process off. Mahalo, Bonnie and her team, for producing this.
I'm glad to see that a lot these measures are being taken care of. I didn't even
know where to start with all these recommendations because there's so many.
You know, we use audits as a good thing, to make sure that we're handling things
right. This one is kind of—it's hard because you're dealing with cash. So
hopefully—I just want to get the confidence from the department that these
recommendations are going to be fulfilled. That's what I want to get from you
guys. It's hard because over the course of the last several months there's been all
these problems with Mass Transit. This is just another thing that we're having to
deal with. Not with myself, the community needs to have the confidence from
you guys that these things are going to be taken care of, so I'll have to wait and
see.
But I did want to thank Bonnie and you guys for putting together this thing. You
know, it's hard to see that a lot of these controls weren't happening. We should
have controls and how to deal with cash handling. We should have all these
controls about all this type of stuff. I know, Tiffany, you said you didn't really
know—you thought you were handling it right. But certain things, like just
making sure that the money is secure, that's one of the first things that we need
to—that for cash it's almost—so I don't know. I'm just trying to make sure that
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we can get the confidence that everything's going to be okay. You know, when
you're asking for money to help develop the Mass Transit system, and then we
see $30,000 being not put in, it's kind of hard, you know.
But this is a good thing. This audit is a good thing on how to move forward. I
just want to make sure that it's handled correctly and the department really steps
up and does it right. So that's all I'll say. Thank you.
CHR. DAVID: Thank you, Mr. Kanuha. Ms. Ruggles, go ahead.
MS. RUGGLES: Thank you.
CHR. DAVID: Oh, I'm sorry. Could I take Ms. Poindexter, on the first round?
MS. RUGGLES: Yes, sure.
CHR. DAVID: Go ahead, Ms. Poindexter.
MS. POINDEXTER: Thank you. I actually have a question for Ms. Nims, if we
could get her back to the table? Thank you.
(Note: At this time, Legislative Auditor Bonnie S. Nims came forward to
address the members of the Committee.)
MS. POINDEXTER: Hi. Thanks. So when was the last time Mass Transit was
audited?
MS. NIMS: I'm not—I don't believe our office has ever performed an audit on it.
MS. POINDEXTER: Okay, that concerns me because that's where we as
government failed. So not necessarily—I know part of the burden is on the
department themselves, but a lot of—the percentage of degree, if everybody
wants to point fingers or fault, is our own as well. You look at any organization,
medical facilities, anyplace, cash handling, you know, income and expenses, and
especially something like Mass Transit, everybody normally has an annual audit
because that helps the company, organization, or even the CEO (Chief Executive
Officer), Executive Director, to make sure that things are flowing the way it
should be.
I want to say that we're part of the problem, because we need to put those kinds of
practices in place, where we have a high volume of cash coming in that we should
make it a priority to have an annual audit because it helps the department. It
doesn't say, "Hey, you, the department—you guys were doing so wrong all this
time and blah, blah, blah, blah." You know we've got to do right by the
departments as a County government. So I feel we should have annual audits.
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I didn't see in here, anywhere, where we talk about staggering employee hours.
know that it was mentioned about busses coming in late, so you're going to have
to have stay in late, or some people coming in weekends counting hours. I know
that takes a lot of time working with unions because of what is set in the union
contract. But it's not impossible because we did that at Hamdkua Health Center
as well, when we looked at where some of lost revenue was. We could adjust
them; we worked with the union to amend the contract. So, whatever it takes.
So thank you so much for doing the audit because it now starts to develop a better
process. I'd like to see annual audits happen, especially where there's heavy
volume, of a lot of cash being handled in and out. I think they—I don't know
what other department besides DMV (Department of Motor Vehicle), but I know
Mass Transit. But I would definitely, again, you know, recommend that we put
some type of system in place for those departments, to help them better manage
themselves.
I feel kind of bad for Tiffany Kai, who came in to the position and just got
slammed with all of this now. God bless her for taking the bullet on this. But this
is an ongoing for many years now. And this is, I think, we as government need to
take responsibility for that as well. Thank you.
CHR. DAVID: Thank you, Ms. Poindexter. Ms. Ruggles, go ahead.
MS. RUGGLES: Thank you. I just wanted to mention, just for the public, that
certainly this audit is—the result of this audit is very disappointing, it's very
discouraging. It's clear that our cash handling system is ineffective. But with
that, we have this detailed, very good suggestions that the auditor's office gave us,
and we need to do what we can to move forward.
So moving forward, the first recommendation is that we update our cash handling
systems with an electronic fare box to collect the fares and track the ridership. I
was wondering, Administrator, if you could share with us what the cost of this
would be and what the timeline is?
MS. ARANGUIZ: In order to implement something like that, you know, it would
have to start—the best way is like a pilot. To understand really, how it would it
work for us, because it will be something that is new to our riders, so they will
have to get used to it in order to implement it system wide.
Now, the cost, there are various companies. I have my research here; I thought
people may ask for that. But there are various companies. They go from the
large, like GM Fare, a company very well-known in the transit industry, to very
small system. So it could vary for something that you go $500,000 and beyond,
or it could be something that if you implement a scalable of type of approach. So
that means you can grow into that and make it more complex, you can have
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May 21, 2018
something probably around $150,000 to $200,000. What I'm saying is that will
give us the opportunity to see how it works, you know.
MS. RUGGLES: Okay. Let me just ask—I should have asked this first, I'm
sorry. Have you identified an electronic fare system?
MS. ARANGUIZ: Yes, I have. I have looked, like I said GM fare. They have
various type of devices that allow you to pay. Various formats; you can use a car,
you can use your credit card, you can use your phone, you can use your watch.
You know, I mean, it varies. Now, as the more complexed technology or the
more user-friendly, sometimes the more expensive it is.
MS. RUGGLES: Okay, I'm getting that you've explored options with a certain
provider or company?
MS. ARANGUIZ: That's correct.
MS. RUGGLES: But you haven't chose which one we're going to go with yet?
MS. ARANGUIZ: That's correct.
MS. RUGGLES: Okay, do you know what the timeline is? Does Mass Transit
have a timeline in installing?
MS. ARANGUIZ: There is in a Mass Transit. Obviously, one of the many
items there that identify this is a plus for us, of course. But we haven't really
gone into the more detailed information as to the specific company cost and all
that because that takes—I mean, I can start that discussion to have more
information, if that's desire. But at this point, it's been more about the technology
and how it can be implemented to a system that is much smaller than the one that
they're used to regularly. Because we have just, you know, like 25 vehicles. We
expect to have 55. How will that work in our environment. Because obviously
like Council Woman Lee Loy is concerned about our return on investment. So
we want to make sure that the benefits are something that deserve this type of,
you know—
MS. RUGGLES: My question was, is whether or not there was actually a—is
there a time that Mass Transit will have these electronic fare systems?
MS. ARANGUIZ: I cannot give you a concrete date, but I can tell you that this
will be priority for the next fiscal year, to explore the opportunities because I
already discussed with the Federal Transit Administration about getting some
funds used for that specific purpose.
MS. RUGGLES: Okay, but it would be great to be updated on the progress of
that. Go ahead, Ms. Nims.
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May 21, 2018
MS. NIMS: Sorry. Bonnie Nims. And just to clarify, that's a process that would
have to go out for RFP (Request for Proposal.)
MS. RUGGLES: Okay, great. That's all I have. Thank you.
CHR. DAVID: Thank you, Ms. Ruggles. Ms. Lee Loy.
MS. LEE LOY: Thank you. First of all, I want to tell Ms. Kai thank you. It
takes a lot to own some shortcomings. I really appreciate that.
There are 30 recommendations in this audit. One thing that I kind of want try and
get to, using this with everybody in the room right here, right now, is something
that Ms. Eoff touched upon, is how do we ensure that these recommendations are
being met in a timely manner; which then touches upon something Mr. Kanuha
just mentioned, which is gaining back the confidences in this department; and
then touching upon what Ms. Poindexter talked about, is we have a role in this
too. Us, as Council Members, we have a duty to ensure that the monies that we're
providing to this agency is being spent in an efficient way.
I'm just going to throw it out there, and maybe this is something that Ms. Ruggles
can take on as the Chair of the Public Works Committee and Mass Transit, is to
begin interfacing with this agency and providing status reports through your
committee, to indicate to the Council Members that these recommendations are
being met. And show us that improvement, that's what the leadership should be
doing, both at the agency level and at our committee level. I think it would go a
long way for all of us, as colleagues, to understand what's going on and how we
can best help, and provide that guidance and provide that leadership.
I really started this process as a way to help, and the only way we could figure out
how to help is to understand where our shortcomings were. That's my thoughts,
Ms. Ruggles, if that's something you can consider as a committee Chair for this
agency, and provide that kind of, maybe, status reports, working with Ms. Nims.
But keeping this department on task to meet these 30 recommendations, I think,
would go a long way. Both ways, from the Council to support this agency and for
this agency to gain back the confidences, not only with us but the public at -large.
I'm going to yield at this time. Thank you.
CHR. DAVID: Thank you, Ms. Lee Loy. Mr. Richards.
MR. RICHARDS: Thank you, Chair. I will touch on a few things that
Council Member Kanuha and Council Woman Lee Loy had said. But, Ms. Kai,
I'd like to ask you a question, please? Thanks for coming up. I do have to agree
with Council Woman Lee Loy, accepting responsibility. I'm deeply bothered by
the cash handling and that obviously has gone on for a long time. How long has
that been handled that way? You've been at the agency for quite some time.
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May 21, 2018
MS. KAI: Well, I've been with the agency for a little over 20 years. Over the
years, we have made improvements but it hasn't been up to par as, you know,
until the audit had come out. We realize all the ineffectiveness and how
inadequate we were in the cash handling. Again, as I mentioned, as we moved
forward, we did make some improvements prior to the audit coming out.
MR. RICHARDS: What bothers me is the $30,000 sitting on the lunchroom
table. That's obviously a glaring red flag. That's been standard practice for years
then, is that what I'm hearing?
MS. KAI: I wouldn't say that would be standard practice for years. We didn't
have $30,000 sitting on the lunchroom table. We do have safe that it was in. I'm
sorry, I can't answer your question.
(Note: At this time, Finance Director Deanna Sako came forward to
address the members of the Committee.)
MS. SAKO: I think I can help. Deanna Sako, Director of Finance. Before
everybody—you know, one of the things is that bus fares were free for a really
long time, so it's actually no cash coming in. I mean, I don't want people to get
that the whole 20 years Tiffany's work for Transit that these errors have been
happening. That's not correct. So since we started collecting fares again, it's
voluminous.
Only recently has this department added staff. They had a very small staff. I
think it was like six at one time or something like that. So it really was—we took
the fares. They went to the bank, the bank counted it, and that's what we
deposited. So they really have taken actions to try and improve the system, and
they did. But we didn't give them enough staff to make sure that system worked
and that's a big part of it. I just didn't want everybody to think it's been going on
for 20 years. It hasn't.
MR. RICHARDS: Okay, and thanks for that, Deanna. I appreciate that
clarification. Where I'm going with the questioning, Council Member Kanuha
raised it, we have a constituency, a community that doesn't trust, and for very
valid reasons. Last year the request for Mass Transit was $4.7 million. This year
it's $14.7, $15.1, or thereabouts. Last year I was against the additional $1 million
for busses because just adding busses doesn't fix the problem, and adding more
money doesn't fix the problem. We have to have the structure in place, and that's
what I'm concerned about. We have a budget challenge ahead of us right now,
and trying to figure out the best way to handle that, unless we have the
confidence, we're not able to get forward. And so that's where these questions
are coming from. I'll yield at this point.
CHR. DAVID: Thank you, Mr. Richards. Anyone else? No? Okay, then I just
have one question, and maybe this could be for Director Aranguiz. I'm talking
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about the vendors. I know we've been talking mostly about how do we fix the
internal controls. Now, according to the report, I think Mass Transit works with
about 23 vendors, is that correct? So those are people that we hire to drive the
busses? On page 18, taxi coupons, bus tickets, and passes that were sold, and
there were seven vendors that owed Mass Transit a total of $29,809 for tickets
that were advanced by Mass Transit. In this entire audit plan, I was just
wondering what would be the department's plan to address the vendors' situation?
MS. SAKO: They have been in discussion with Corporation Counsel to improve
their system. I'm not sure we're ready to share all of that quite yet.
CHR. DAVID: Okay.
MS. SAKO: But they are working on ways to improve that area. That's kind of a
separate area, with selling the passes and the taxi coupons.
CHR. DAVID: Right.
MS. SAKO: And some of that had to do with contractual issue in the past.
CHR. DAVID: Right, I read that.
MS. SAKO: Yeah.
CHR. DAVID: And I'm just wondering, moving forward, given all the
input from the Council Members, I was just wondering whether that would
be something that—whether we provide training for the vendors or—you
know, whatever you guys implement, I think because—your department works
with outside, you know, vendors. What would be the plan for training in the
new—and I hope there is an interaction between the vendors that we work with,
because they deal with money also, right? I just wanted to that would be my
only note—question.
MS. SAKO: Yeah, and just to clarify, there's two separate sets. So one is the
vendors that provide drivers.
CHR. DAVID: Right.
MS. SAKO: And I believe they are working with those particular group. And
this other group that also sells passes and whatnot, is what they're working with
Corporation Counsel to work out a better system.
CHR. DAVID: Right. Okay, thank you very much. And I think—other than
that, I really want to thank Legislative Auditor Bonnie Nims and her staff, Lane
and Max. You guys did an excellent job. I think, like someone said, Ms. Lee Loy
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said or Ms. Eoff said, that if this was done on a systematic basis, I don't think
we'd be here today, or this would be not bad, but concerning.
So, I want to thank everyone. Director, thank you for coming. Given that,
Council Members, all those in favor of filing Communication 920 please say
"aye."
Vote on Comm. 920: The motion to close file on Comm. 920 was carried by the
Filed following voice vote:
Ayes: Committee Members Chung, Eoff, Kanuha,
Lee Loy, O'Hara, Poindexter, Richards, Ruggles,
and Chair David — 9.
Noes: None.
Absent: None.
Excused: None.
CHR. DAVID: Thank you very much. Council Members, do we need to take a
break? Yes, we do. Alright, we're going to be in recess for seven minutes.
Recess: At 11:36 a.m., the Chair called for a recess.
Reconvene: The meeting reconvened at 11:48 a.m.
CHR. DAVID: Alright, Council Members, I'm calling this meeting out of recess.
Mr. Clerk, could you please Communication 921 ?
Comm. 921: REAL PROPERTY ASSESSMENT CERTIFICATION REPORT FOR TAX
YEAR 2018-2019
From Finance Director Deanna Sako, dated April 27, 2018, transmitting the
above report pursuant to Chapter 19, Section 19-90(d) of the Hawaii County
Code. The total value of net taxable real property is $32,025,991,419.
Motion to Close File: Ms. Poindexter moved to close file on Comm. 921. Seconded
by Ms. Lee Loy.
CHR. DAVID: Council Members, discussion. We have Ms. Sako here and
Lisa Miura. Would you like to come forward for questions?
(Note: At this time, Finance Director Deanna Sako and Real Property Tax
Administrator Lisa Miura came forward to address the members of the
Committee.)
MS. SAKO: Can I say one thing really fast?
CHR. DAVID: Sure.
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May 21, 2018
MS. SAKO: I just wanted to introduce Lisa Miura next to me, who is no longer
Acting Real Property Tax Administrator but is our permanent Real Property Tax
Administrator.
CHR. DAVID: Awesome, awesome. Congratulations, Lisa. Alright, awesome.
Okay, Mr. Richards, you may go ahead.
MR. RICHARDS: Okay, thank you, Chair, and thank you, Director and formerly
acting and now—Lisa, we had a conversation in your appointment paper about
the reduction in real property value, and I know that this document doesn't reflect
that, but I'm concerned about that going forward because that will impact our
revenue side, which will impact our budget discussion we're having tomorrow.
So between these two women at the table who have all the answers for us, a little
mana` o, please, as far as—what's your projections? And I understand that—one
of the concerns is not just for fiscal year 2018-2019 but it's the real property
collections coming up that we'll probably see a correction in.
MS. SAKO: Correct. Yeah, I just wanted to clarify that the certification that was
submitted was as of January 1St, and I'll let Lisa speak to how we see those values
changing in the coming years. Because some certain subdivisions have
specifically been impacted, the Mayor will be adding language to the disaster
proclamation, to allow real property tax to reassess certain areas as well. That's
in addition to what's already in our County code. We already have provisions for
disasters; like if your house is damaged fire or in this case lava, there's already
provisions in our code to help those specific homeowners and property owners.
MR. RICHARDS: I appreciate that. So the question is, we have $32 billion in
change listed here for 2018-19. Best guess, there's a reduction of $1.2 million,
which was an estimate, and I realize it's an early estimate, where do we think
that's headed?
MS. MIURA: Lisa Miura, Administrator, Real Property Tax office. You know,
three weeks ago, we would never have anticipated losing $1 million in revenue,
just from one area in Puna. Friday, I wouldn't have estimated that area would
have grown so much just over the weekend.
MR. RICHARDS: Right.
MS. MIURA: So I'd have to say, to start with, we're looking at least $1 million
in loss of revenue so far and counting. It's looking more like $1.2 million is
where we're at right now. This doesn't even include the agricultural farms that
are taking a huge impact. We started looking at this, just from the Leilani Estates,
Lani Puna Gardens, in that immediate area. You know, last week we would've
thought that was a pretty good area, and clearly knowing what we know today,
it's definitely not near enough. The area has lost value. If you're asking what the
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total loss could be, not including the business impact but just the real property
values, it could go up to $6.2 million, if it's for the whole area beyond Pahoa, the
intersection. We're obviously hoping it doesn't get to that. But I think we're just
starting and I'd be super hesitant to say that we're even close to coming to the
end. Just hearing, like I said on Friday, from different agricultural farmers, we're
seeing much greater impacts to people that are not even in the lava zone area,
including the ranchers.
MS. SAKO: I'd like to mention the impact that the visitor industry is also, you
know, taking as well.
MR. RICHARDS: And I appreciate that. Obviously, you touched on the
agricultural standpoint. Long-term ramifications, these guys are typically
going to be smaller producers, with not a real big balance sheet, something to
look at as survival. If they lose it now, they're going to lose a year's—maybe
two years worth of production. So we as a Council are going to have to be in
part, trying to figure out how we can help keep those guys in business. Not
necessarily in production, it's going to take time to recover from that. But
because of that, we are going to have to be able to look at what areas that we
can help mitigate their expenses going forward. We've already started talking
about his. Some of the other state and federal legislators. I am told estimates,
anywhere from $10 up to $30 or $40 million worth of loss production on the
agricultural side, let along—so, I appreciate. I'll yield at this point.
CHR. DAVID: Thank you, Mr. Richards. Ms. O'Hara, go ahead.
MS. O'HARA: Just to jump in on what Mr. Richards was discussing. I know
you've kind of—Lisa said $6.2 million but you're looking just at the Puna region
there. But what he brings up is very important because that extends well beyond
the Puna region, the crop, the damage. Not that that's Real Property's kuleana,
but it affects the value of the agriculture land. Yeah, there's going to have to be
numerous adjustments here, and it's not just Puna, it's going to wrap around the
island because of the impact of this lava.
MS. SAKO: So one of the things that Real Property Tax has already discussed
inhouse is that, you know, we do have certain rules in place for ag dedication and
nondedicated programs. This will not constitute a breach or whatever it's called.
I mean, you know, we do understand what they're going through, and they can,
you know, maybe maintain the plans that they had, and so we are going to be
understanding about that part, at least not to cause additional hardship. It's
probably too early to tell if our area would qualify for any kind of, like USDA
(United States Department of Agriculture), rural development type of assistance.
It feels like this has been going on for a long time but its really only a few weeks.
I'm not trying to make light of that; it's scary. I can't believe how much has
happened, but Lisa's right, it's going to continue to go on. So because it's fairly
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May 21, 2018
early, we don't know all the impacts yet. We don't know all the impacts on our
budget. We don't know all the impacts on our revenue yet. We do have some
tools to help us, but that's for the County's budget. We are all worried about the
farmers, the homeowners, and all of that. Some of those programs and federal
and state assistance we'll be getting are maybe not laid out yet either.
MS. O'HARA: Okay, I just got word there's going to be a meeting this evening
at Pdhoa High School cafeteria regarding that, and the Deputy Director of our
Department of Agriculture will be there. But you're right, funding like that for
crop damage and stuff usually comes out of, what, the FSA, which is the Farm
Service Agency, I believe, out of the USDA (United States Department of
Agriculture). We're not sure where all that's going to go.
But one thing I would ask as this continues is to try and be able to—have a system
where we can locate or identify as soon as possible the properties that are taken
by lava, via map, so that we can confirm that to the owners. I have many owners
in the Pohoiki region who probably lost their homes last Thursday, Friday, but it's
not being confirmed, and so then they cannot deal with their insurance company,
and they only have two weeks of lodging.
MS. SAKO: So Housing is in charge of damage assessments, but Real Property
Tax has been putting in a lot of extra hours, both with the imagery and the
flyovers and everything to confirm that, providing it to Housing. I believe
Housing is making the final declaration. But they made a lot of progress on that
last week. Some of the homes that we believe were taken over the weekend, the
imagery, they haven't been able to do the flyovers yet because of the weather. As
well as when some of the certain helicopters are flying, the drones can't go up;
but within a day or two, they should be able to go up again. We have provided a
lot of information. Yes, I agree, maybe we can update it faster, but everybody's
working as quickly as they can with information they have.
MS. O'HARA: Okay, yeah, if we can speed that up because that's been a big
point of stress for the residents. And I know we lost a lot of farmland between
Pohoiki Road and Opihikao Road, so that all needs to get documented.
MS. SAKO: Yeah, we fully agree. As of Friday, we were caught up on
determining and verifying the damaged homes but then more things happened
over the weekend.
MS. O'HARA: Thank you.
CHR. DAVID: Thank you, Ms. O'Hara. Anyone else? Council Members? No?
Well, thank you very much. Oh, go ahead. I'm sorry.
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May 21, 2018
MS. EOFF: So had there not been a lava disaster, we would have an increase in
our real property income that we would have seen in the second half of the fiscal
year, correct?
MS. MIURA: Assuming the tax rate stayed the same, you would have seen an
increase, yes.
MS. SAKO: That was taken account into both the March and May budgets that
we submitted. You know, they're not done. When we do the March budget, so it
was an estimate, but we have kind of anticipated a slight increase, And then we
always have to wait for the appeals to be filed so that we know exactly what it is.
And then that's what is submitted with the May budget submittal but taking into
account the same rates as last year.
MS. EOFF: Okay, so we have some time between now and the next deposit of
income, property tax, to try and figure out how to overcome the deficit we're
going to see?
MS. SAKO: We have—the rates have to be set by statute by June 20th. We
prefer that the rates are adopted at the same time, the second reading of the budget
is, so that they coincide. So there's a lot we need to get done in the next couple
weeks.
We do have some provisions, like the Budget Stabilization Fund. So if our
estimate is wrong, in terms of what our revenue would drop, that's what that fund
is there for. But, you know, we have no way of knowing island -wide yet what the
true impact will be, but we do have some estimates.
MS. EOFF: Okay, thank you.
CHR. DAVID: Thank you, Ms. Eoff. Ms. Lee Loy, go ahead.
MS. LEE LOY: Thank you. Yeah, I think we're having a whole different
conversation today, and tomorrow might be a whole different conversation again.
I was more curious about the appeals. It's highlighted right on the front
coverletter that it picked up a little bit and it was kind of a sizable amount.
Could you share why, or what's that forecast looking like?
MS. SAKO: I'll let Lisa explain that part, but let me put it into perspective for
those of you that might be a little newer. This is really awesome compared to the
days when we had 1,800 appeals, and many, many, more millions and billions of
dollars. So just putting it in perspective, that's all. But yes, we did have slight
uptake and Lisa can speak to that.
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MS. MIURA: Yeah, we went from 170 appeals to 203, but it's still extremely
low considering our large parcel count for our island. Statewide, it was a little bit
lower. We had 44 parcels appeal in one subdivision alone, so that really added to
the number, and they're appealing more on their classification and not the value
because they're taxed at the highest class and they want to be at a lower tax rate.
MS. LEE LOY: Is that the trend? It seems like they're more aware of the
different classifications now and how they're being taxed. Is that the trend now?
MS. MIURA: It is. It became more of a trend to see it on this last appeal season
because of how the tax rates went up last time, with the homeowners and the
affordable rentals staying lower, and then seeing the apartment class so much
higher. People in the apartment class were looking very closely at their values,
but more closely at why they're in that apartment classification.
MS. LEE LOY: And that's reflected on that valuation on appeal, which is the
$24 million. It's on page three of your—
MS. MIURA: Sorry, we have several reports that you guys get.
MS. LEE LOY: Yeah.
MS. MIURA: One is done specifically by Council district.
MS. LEE LOY: Oh, okay. So there's a --on this one, I'm looking at page three,
at the very top. It says, Summary of Taxable Properties by Land Class Total,
2 Apartment, and then you have nine items, exemptions, taxable valuation, and
then on item 4, Valuation on Appeal.
MS. MIURA: Correct.
MS. LEE LOY: There was a $24 million total. Am I reading that correctly?
MS. MIURA: Can you tell me the report number on the top right, or are you just
reading the letter?
MS. LEE LOY: AB 1031-1I.
MS. MIURA: Okay, so AB 103HI, page three, by Council District 1, yeah, you
might just be looking at Council District 1 only, yeah. So the aggregate total
might be the easier one to look at for that.
MS. LEE LOY: Yeah, I'm going to yield at this time. But I am a little concerned
about how this is really going to impact our ability to collect a revenue, not only
this fiscal year but the following fiscal year. Is there a way for you guys to
provide a summary or like milestone checks so that we can get our arms around a
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May 21, 2018
little bit more what the revenue loss might be like, and maybe begin to plot maybe
a percentage, you know, based on the event? Is there—I know we don't have a
crystal ball, but I'm just wondering if there's some indicators throughs these
things that we can maybe come up with a percentage. Is that something possible?
MS. MIURA: Well, we're definitely working with Civil Defense, Housing, on a
daily basis to track where the damage is. We've been working with the realtor
association, as well. Because typically in the past, you will be able to have a
slow-moving lava flow coming. You could track it, you knew where it was
going, sort of, but this is really different. The realtors have not been putting
things on the market, which has been really nice to see that people aren't taking
advantage at this time and trying to trick people into buying homes and dropping
values. But at the same token, the damage like you said, the extent is a lot
greater. And so we can definitely do ranges because we need that for our own
internal purposes as well. We're tracking it closely with the Finance Department
because they go to the EOC (Emergency Operation Center) on a daily basis.
But we're not just worried about—for our office, the budget itself, it's just how
it's affecting everybody. It depends on the classification they're in; it depends on
a lot of different factors. But just because you weren't inundated, it doesn't mean
that your value didn't drop. Now I know the newspaper said I said the values
plummeted, I didn't actually use that word. There's a big concern for the values
in the area and the marketability of our lower Puna region at this moment.
So the percentage, I wish I could tell it was going to be only maximum 50 percent
or 20 percent. That would have made my life a lot easier. But everyday we do
run the numbers, and at this point I can just say we're at $1.2 million loss right
now. I'd be happy to help track and provide it to Deanna so that they can verify if
they think we're on the right track.
MS. SAKO: So this is definitely an unprecedented evented that it's happening
this way. You know, in the past, even a long time ago, you know, it took years
for the whole subdivision, you know, to be overrun with lava. Now, we have
several homes damaged. We also have people, as Lisa was mentioning, that can't
access their homes. It's cut off by lava.
We have people in all ranges, so we're taking it kind of day-by-day. We'll try to
have a range tomorrow to talk about, but nothing set in stone. This is
unprecedented for any of us.
MS. LEE LOY: Yeah, I would appreciate that. Again, we don't have a crystal
ball. A range, so maybe we can even begin to forecast a little bit, I think would
be ideal. I said it from the beginning, "Good information helps us make good
decisions." I know one's hard, though. But a range would be helpful to that
conversation. Thank you. I yield.
Page 26
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CHR. DAVID: Thank you, Ms. Lee Loy. Any other Council Members? No?
Very well, thank you, ladies. All those in favor of filing Communication 921
please say "aye."
Vote on Comm. 921: The motion to close file on Comm. 921 was carried by the
Filed following voice vote:
Ayes: Committee Members Chung, Eoff, Kanuha,
Lee Loy, O'Hara, Poindexter, Richards, Ruggles,
and Chair David — 9.
Noes: None.
Absent: None.
Excused: None.
CHR. DAVID: Mr. Clerk, Communication 922, please?
Comm. 922: COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR FISCAL YEAR
ENDING JUNE 30, 2017
From Legislative Auditor Bonnie S. Nims, dated May 1, 2018, transmitting the
above report prepared by the Department of Finance.
; and
Comm. 922.1: SINGLE AUDIT OF FEDERAL FINANCIAL ASSISTANCE PROGRAMS
FOR FISCAL YEAR ENDED JUNE 30, 2017
From Legislative Auditor Bonnie S. Nims, dated May 1, 2018, transmitting
the above report prepared by external auditor N&K CPAs, Inc., pursuant to
Hawaii County Charter, Section 10-13.
; and
Comm. 922.2: From Legislative Auditor Bonnie S. Nims, dated May 1, 2018, transmitting
PowerPoint presentation materials to be displayed by N&K CPAs, Inc.
(Note: At this time, Legislative Auditor Bonnie S. Nims came forward to
address the members of the Committee.)
Vote on Comm. 922: Ms. Lee Loy moved to close file on Comm. 922. Seconded
Filed by Ms. O'Hara and carried by the following voice vote:
Ayes: Committee Members Chung, Eoff, Kanuha,
Lee Loy, O'Hara, Poindexter, Richards, Ruggles,
and Chair David — 9.
Noes: None.
Absent: None.
Excused: None.
Page 27
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Vote on Comm. 922.1: Ms. Lee Loy moved to close file on Comm. 922.1. Seconded
Filed by Mr. Richards and carried by the following voice vote:
Ayes: Committee Members Chung, Eoff, Kanuha,
Lee Loy, O'Hara, Poindexter, Richards, Ruggles,
and Chair David — 9.
Noes: None.
Absent: None.
Excused: None.
Vote on Comm. 922.2: Ms. Eoff moved to close file on Comm. 922.2. Seconded
Filed by Mr. Richards and carried by the following voice vote:
Ayes: Committee Members Chung, Eoff, Kanuha,
Lee Loy, O'Hara, Poindexter, Richards, Ruggles,
and Chair David — 9.
Noes: None.
Absent: None.
Excused: None.
CHR. DAVID: Mr. Clerk, move on to Resolution 615-18, please.
MR. MAEDA: Was there a PowerPoint that was going to be presented?
CHR. DAVID: Oh, I'm sorry.
MR. RICHARDS: Yeah, motion to reconsider?
Vote on Motion: Mr. Richards moved to reconsider the vote on
to Reconsider: Comm. 922.2. Seconded by
(Approved Ms. O'Hara and carried by the following voice vote:
Ayes: Committee Members Chung, Eoff, Kanuha,
Lee Loy, O'Hara, Poindexter, Richards, Ruggles,
and Chair David — 9.
Noes: None.
Absent: None.
Excused: None.
CHR. DAVID: Okay, go ahead.
MS. NIMS: Okay, Bonnie Nims, Legislative Auditor. I'm just going to turn it
over to our CPA (Certified Public Accountant) firm, who does our annual
financial statement and Single Audit, and then can go over the results. This was
their final, here in our contract, but they have been renewed for the next five-year
contract, so you'll be seeing their smiling faces for awhile.
Page 28
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May 21, 2018
CHR. DAVID: Thank you very much. And I'm very sorry we moved through
that communication in a hurry. Welcome, gentlemen. Can you please come
forward and introduce yourselves?
MR. FUNASAKI: Chad Funasaki, N&K CPAs.
CHR. DAVID: Aloha.
MR. IWANE: Ryan Iwane, N&K CPAs.
CHR. DAVID: Thank you. So proceed whenever you're ready.
(Note: At this time, Senior Manager Ryan Iwane and Audit Principal
Chad Funasaki, representing N&K CPAs, Inc., came forward and
provided a PowerPoint presentation regarding the results of the County
of Hawaii 2017 Audit. For viewing of the subject presentation, please
see the DVD copy of the meeting proceedings on file in the Clerk's
Office. Hard copies of the presentation are made a part of the record, see
Comms. 922.1 and 922.2.)
CHR. DAVID: Council Members, any other questions? No? Unless you have
something to say before you close?
MR. IWANE: I'd just like to thank Bonnie and the Legislative Auditor's office.
I thought they did a great job on that particular report also. I'd like to thank Kay
and Deanna, Finance, just the various departments and the individuals we worked
with during the audit. We understand everybody's busy and needed to make
accommodations for us, so we just really appreciate it. Thank you.
CHR. DAVID: Awesome. Well, thank you very much for your work and
your time and for being here today and your patience. Alright, mahalo.
Council Members, all those in favor of filing Communication 922.2 please say
"aye."
Vote on Comm. 922.2: The motion to close file on Comm. 922.2 was carried by the
Filed following voice vote:
Ayes: Committee Members Chung, Eoff, Kanuha,
Lee Loy, O'Hara, Poindexter, Richards, Ruggles,
and Chair David — 9.
Noes: None.
Absent: None.
Excused: None.
Page 29
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May 21, 2018
ORDER OF The Chair directed the Committee to proceed to the next order of business, Order
RESOLUTIONS: of Resolutions.
CHR. DAVID: Mr. Clerk, Resolution 615-18.
Res. 615-18: DETERMINES THE REAL PROPERTY TAX RATES FOR THE COUNTY
OF HAWAII FOR THE FISCAL YEAR JULY 1, 2018, TO JUNE 30, 2019
Proposes rate changes that would decrease estimated real property revenues by
approximately $10,262,796. The Residential, Apartment, Hotel and Resort,
Commercial, Industrial, Agricultural or Native Forests, and Conservation classes
of property tax rates would be decreased; the Affordable Rental Housing and
Homeowners classes of property to remain at their current tax rates.
Reference: Comm. 939
Intr. by: Mr. Richards
Motion to Approve: Mr. Richards moved to recommend adoption of Res. 615-18.
Seconded by Ms. Lee Loy.
CHR. DAVID: Go ahead, Mr. Richards.
MR. RICHARDS: Thank you, Chair, and thanks, everyone. I think in light of all
the conversations we've had today and the episodes, the conversation we're going
to have is probably going to change a little bit based upon this.
The original reason I put this forth, I was seeking a potential for a GE (General
Excise) Tax increase mitigation, when I came to the residents here in our County.
I had put this forth to try and net out—it wouldn't work for everybody exactly,
but approximately a net -net, so if we adopted a GE tax increase, the effect on our
residents would essentially a net wash. One of the challenges with trying to do all
this to get in, and this gets back to my comments about silo legislation, we're not
looking at our budget and we're not looking our income streams together, and I
think we really, really need to do that.
Now, this is shifting a little bit because the conversation—and the reason I chose
to leave these on, even though the GE bill has been postponed, is to have the
conversation coming forward. Actually, at this point I'm actually very happy that
it is on so we can have this conversation. Because in listening to Real Property
and Lisa Miura giving a report and then looking at our budget coming forward,
things are out of whack and we are out of kilter, and so we have to have the
conversations. I think that there's a potential to get some things done. The way I
chose the real property unit rates to reduce for the ones that we touched last year,
the ones that we didn't touch, I didn't attempt to touch this year.
Going forward, I'm not exactly sure how we need to do this, Chair, so I'm going
to ask for a little latitude as far as we go forward. Because once again, we are
Page 30
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May 21, 2018
painting ourselves in the corner when it comes to our budget. We have a budget
before us of $518 million. In listening, our revenue stream is probably down to
$517 or $516 and dropping. We don't have the methodology in place to try and
fix this in the timelines we have. I tried to time this, like I said, so it all hit at the
same time, so we could have the conversations together with latitude from the
Chair.
At this point, I think we have a lot of unknowns and we're going to have to
discuss this as a Council. So what I'd like to do is—and Resolution 616-18 is in
suit with the same thing. I know it hasn't been read in yet. But I'd like to hear
back from my colleagues because we've got some decisions to make going
forward. We're going to have needs in this County that we haven't even
articulated yet. We have a very limited window to work on real property tax, and
we have a very limited window to work on our budget. So there's a whole bunch
of balls in the area right now, and we've got to talk story about this. So, I yield at
this point.
CHR. DAVID: Thank you, Mr. Richards. Council Members, discussion, please?
Ms. O'Hara, go ahead.
MS. O'HARA: I recall couple months ago bringing forth a resolution that was
more akin to Resolution 616-18 than it was to 615-18, with the same intent of
having the discussion, and we didn't. It was kind of shut down because it was
predicated on the assumption that what if we were to pass the GE tax, and as I
understand what Mr. Richards has put before us here, it's predicated on that same
assumption.
We have great uncertainty at this point and time as to real property tax revenues,
so it's not exactly a time to give great consideration to changing rates. I
personally do not think it advisable to change property tax rates on an annual
basis. It provides way too much uncertainty to an economy, and our economy is
suffering greatly right now, I mean, all around. I don't really feel the need to
spend a lot of time in this discussion because it's hypothetical at this point, and
we really do not have the information to consider this.
Furthermore, we are still in the works with Bill 108, which is progressing
along. That's our short-term vacation rental or attempt to implement some kind
of short-term vacation rental regulation, which may indeed lead to changes in
property tax classes. I would prefer to wait to do any modifications to the
property tax rate regime, until that piece is done, because otherwise we'll be back
again, six months, a year later, changing property tax rates. I just don't think
that's healthy for the economy or our budget. So, I'm just stating this. It's not
that I don't think it's admirable that Mr. Richards crunched all these numbers.
It's great, but—and I would like to see some kind of offset, if we were to do the
GE tax increase, Absolutely, I've talked about it before. But I, just again, think
this is a bit premature.
Page 31
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May 21, 2018
CHR. DAVID: Thank you, Ms. O'Hara. Anyone else? Mr. Chung, go ahead.
MR. CHUNG: Yeah, I agree with Ms. O'Hara on this. There really isn't much
that can be said at this particular point and time, given all of the uncertainties that
we're facing going forward, but I will say this because I know it is tied in to the
GET proposal. This is really putting the cart before the horse because it has to be
where the GET goes first and then this comes later. But I certainly understand
Mr. Richards' point, where he wants to open up the discussion at least. So in that
regard and going along the lines of what Mr. O'Hara said, I would certainly
consider these two proposals if the GET passes. That's all I've got to say about
this.
CHR. DAVID: Thank you, Mr. Chung. Ms. Lee Loy, go ahead.
MS. LEE LOY: Yeah, thank you. Thank you, Mr. Richards. I think that's been
the challenge I have, is we have conversations about one topic and two weeks
later we have conversations about a topic similar, and it would have been ideal to
have them all together. I think that has a lot to do with the way our processes are
set up, and we try really hard to have legislation kind of complement one another.
I would like to see this resolution, maybe we put a pin in it for a little bit and take
it up when we have more information, when there's not so much uncertainty. We
do have other pieces of legislation that may create another tax category, which
might lend this conversation—allow this resolution to be further developed, to
include another classification. I think it is important, though, that we have all of
the different revenue pieces on the table so we can talk about them collectively
rather than independently. That's what I would like to see with this resolution.
Maybe it's not quite right yet, but I still think the conversation would go a long
way if we dovetailed it with some of the other stuff that we have moving as a
policymaking body. I yield.
CHR. DAVID: Thank you, Ms. Lee Loy. Mr. Kanuha.
MR. KANUHA: Thank you. I agree with each and every one of you. There's a
lot of pieces out there to this entire puzzle, and we don't know the entire impact
of what's really happening out there or what—you know, the GET, somewhere
out there. The other category is somewhere out there. You know, everything
happening in the emergency zone is somewhere out there. So I'm just happy
that—I appreciate Mr. Richards for bringing this up and trying to do something.
wish we had all those pieces, you know, on the table right now to talk about,
that's what makes it really difficult. But I appreciate the conversation. I don't
know how to move forward with this but at least it's on the table for us to talk
about. But I'll just say that. I don't know how we'll move forward.
CHR. DAVID: Thank you, Mr. Kanuha. Mr. Richards, what would be your
preference?
Page 32
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May 21, 2018
MR. RICHARDS: Thanks, Chair. Which highlights the problem we have been
kicking around for the last six months, and it brings back, and I have to say it,
Chair, my ad hoc committee again. If we could put everything on the table and
come up with a recommendation going forward—I get and I understand where
things are. Like I said, this conversation is a little bit different, today, in light of
what's going on in Puna district. The uncertainty that we have going forward is
all over the board.
It is my understanding that with the postponement of the GE tax conversation to
January, this poses a functional problem and we're poised on making a mistake
again, if we don't try and figure some of this out. Echoing what Mr. Kanuha said,
I'm not exactly sure how to go forward with this, because we've got to do is be
sensitive to what's going on; but still we have to balance budget, so I have to pay
attention to that. I don't think the budget we have before us is balanced now. I
don't. Because from what we're hearing, the revenue is going to be down so
we're going to have to work on that one. So how do we go about doing that?
Now, I think it is theoretical that we could look at a GE tax consideration by the
end of the year, fiscal year, but it would take some efforts and some breaches to
get it there. If we do nothing on this, the real property can only be adjusted
between the time the first budget comes out and—actually I think between the
time the certified values come out and the end of the fiscal year, so we have a
short window each year to do that. So when we talk about the vacation rental
side, we're not going to be able to do anything with that until end of fiscal next
year.
So, we've got kind of a lot of balls up in the air. What I'm trying to figure out,
with all of you, is how do we take care of our County? Because I think this next
year is going to be a real tough fiscal year if we don't some sort of process in
place coming forward. I mean, I understand, and here's where the stutter steps
come forward, we have to plan for it. In part, that's why I left these on the
agenda, so we can start talking about it. Because we'd better talk about it.
Now, I know that Resolution 615 will advance to Council unless I pull it back.
I'm inclined to send it to Council regardless of the vote because it will allow us to
have the conversation going forward. I'm wide open for discussion, but I'll yield
at this point.
CHR. DAVID: Thank you, Mr. Richards. Mr. O'Hara.
MS. O'HARA: I don't really know what discussion we can really have at this
point, Mr. Richards. You're absolutely right, this budget is bleak as I've been
describing it in public, bleak. It's very disconcerting, even in good times, and
what's happened over the last, I don't even know how may days, 17, 18 days.
Bleak doesn't even begin to describe what we're looking at.
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May 21, 2018
Do understand that in emergency response situations, and perhaps Deanna can
opine on this, in many instances when we get funds to cover, say emergency
paving of a road, we have to still come up with some match, am I correct? Just to
give some idea of, how bleak.
(Note: At this time, Finance Director Deanna Sako came forward to
address the members of the Committee.)
MS. SAKO: Deanna Sako, Director of Finance. So one of the things, whether we
get assistance from FEMA (Federal Emergency Management Agency), Federal
Highways, and State. Federal, normally they do have a match; FEMA is 75/25,
we pay 25 percent; and then Federal Highways is typically 80/20, and we pay
20 percent. We have already had to do work on certain roads to make access or
allow people to get out and not be cut off by lava. There's definitely a lot of costs
we're incurring, but we're going to have to pay that 20 percent no matter what.
It's something that we've been thinking about a lot. We'll have some possibilities
tomorrow to share with you guys. None of them are the perfect solution, I can
guarantee that. No, it will not make everyone happy but we've spent a lot of time
thinking about it, especially as the lava track down to the ocean and more people
are impacted. We had to kind of rearrange how we thought about things.
So, it's serious. We have not been presented with something like this in the past.
The past, it's been a flood, tidal wave, earthquake. Iselle, where the event
happened, it ended and then it was clean-up. We had time to appropriate federal
dollars and spend those.
We have not even started to talk to FEMA yet, about preparing the project
worksheets for them to start reimbursing us. What happened with the 2014 flow,
is we did the monthly, so probably about the end of the month we'll start
gathering costs for them. We're definitely working with them on training. A lot
of FEMA's rules have changed. We have to have all our is dotted and is crossed
for reimbursement. Some jurisdictions I've heard are only getting 13 percent
reimbursement because it's difficult to meet those standards.
We believe we have the right rules in place of all the counties. We are the most
familiar with asking for FEMA reimbursement than any other one. We're already
gathering data. We're preparing these huge spreadsheets that we need to gather
for them, keeping copies of timesheets. But this is unprecedented and we're
going to have to all work together.
I am also very aware it is election year and I apologize for that, but sometimes we
have to do what's right for our community and to help each other out. So I think
we'll have a very interesting discussion tomorrow, but definitely probably
different than anyone was expecting originally.
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May 21, 2018
MS. O'HARA: Thank you, Deanna, for that. Along with having to do match, we
have also, just so everyone here is aware, stretched our employee base to the max,
and that's public safety officers, Parks and Recreation, in particular, to the point
where employees weren't even showing up to work because they were asked to
work 80 -hour weeks. Even at that point, overtime is no incentive when you're
just 100 percent burnt out. It's a difficult situation to deal with. The air quality
has been very bad at many times. Most of the businesses in Pahoa were shut
down as well as the post office on Thursday, yet the County still was working. So
we're asking a lot of our employees. I would just make that point too, is these are
extra expenses that we have to cover and we're not always going to get
reimbursement for all of this stuff.
MS. SAKO: Right, we're not. I did have staff try and estimate, and the number
is so overwhelming for this first pay period that I think I want to try and get a
better estimate before we share that.
Like I said, we've never had something like this before. They haven't had to
work in these conditions before. Some of the other agencies are getting relief,
you know, they're bringing in USGS (United States Geological Services) people
from out-of-state, things like that, but our County workers have not really had a
break. But we are very appreciative to everyone who is coming over to help,
including the National Guard and everyone. We couldn't do it without the entire
team that's together.
MS. O'HARA: Did we also not pay for the National Guard?
MS. SAKO: They would like to bill us, but I believe we'll be working that out
with them later. We'll ask them to ask FEMA for reimbursement.
MS. O'HARA: So the State will cover it?
MS. SAKO: That's my understanding per the Mayor.
MS. O'HARA: No, I'm pointing these out because people may not be aware of
all the cost that are going to end up sucking out the County coffers on this
particular event, and I want everybody to realize this is as you said
"unprecedented." It's going to be very extreme.
MS. SAKO: I think even sometimes people don't realize, but even little agencies,
like Finance, not only are they doing disaster or damage assessments, but in
addition, they're manning phone lines up at Civil Defense. So pretty much every
department is impacted.
MS. O'HARA: I do recognize that. Yeah, it's extremely difficult for everybody.
One of the—kind of—we appreciate that the National Guard and everybody is
here to assist, but what ends up happening is people who are very unfamiliar with
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May 21, 2018
the area are the ones that the victimized people in my district end up dealing with.
They don't know place names. They don't know what to tell people. So there's
been kind of a perception that we're under martial law and everything is very
militaristic. It just adds to the anxiety of what's happening in the district.
It would be really nice if we had more direct staff that we could apply to this
situation, but we don't because we are very thin at this point and time. This
County has been cut every year for the last ten years. That's where we stand.
Here we have a really difficult situation that's testing our capacity, and we're
seeing that it has lots of pukas. So, thank you.
CHR. DAVID: Thank you, Ms. O'Hara. Ms. Ruggles, go ahead.
MS. RUGGLES: Thank you. Deanna, how much of a deficit would this put us
at, just knowing that we're currently going to is $1.2 million in revenue?
MS. SAKO: Well, I mean, $1.2 million. There's a range, and Lisa and I will
work on that range before tomorrow. We have a range in our head, but we want
to kind of tighten numbers a little bit.
In addition, we want to confirm what we're spending out. Even if we were to get
full reimbursement from FEMA, that 25 percent is still a good chunk per paid pay
period. I think what's hard about this one is there's really no end in sight. I
mean, there's nothing that's showing us that it might slow down or stop. Because
of that, you know, we have to kind of plan as if potentially, I guess, we could last
the entire year or half of year. I don't know. There's no good way to estimate
this.
MS. RUGGLES: Okay, thank you. With that, I just want to say that I appreciate
this reduces the residential and agriculture zones. That greatly helps my district.
But as far as serving as an offset, this doesn't make sense to me; because in order
for people to fill this offset, they would actually have to own property. But not
just any property but extra property that isn't home -owner, so these commercial,
agriculture, hotel, and resort—because this doesn't reduce rates for homeowner.
This is kind of taking the burden of taxes off of people who have assets and
putting them on—if this is based on the assumption that we're going to increase
general excise tax, this is going to put the burden on people that don't own
anything, potentially. They don't own any property. We're going to putting the
burden on people that are just buying basic goods, food and medicine rather than
assets, these properties, and that concerns me.
And I'm also confused because—a few of my colleagues have mentioned that the
benefit of increasing the general excise tax is that it puts more of the burden on
the visitor industry, yet this amendment reduces the rates for hotel and resort. If
we truly wanted to put the burden off of residents and put it on to visitors, then we
wouldn't be reducing hotel and resort and increasing general excise tax for
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May 21, 2018
everybody who lives here. So with that, I'm just a little bit confused on how to
move forward with this. I support the ag and residential, but we are in a deficit
right now and we need to consider. So that's kind of where I am with this. Thank
you.
CHR. DAVID: Thank you, Ms. Ruggles. Mr. Richards, go ahead.
MR. RICHARDS: Yeah. I'll just respond to Ms. Ruggles, just so we're keeping
things real clear. Appreciate your concern and I hear you. Like I said, this will
work differently for everyone. There's not a one size fits all. If we look at the
hotel and resort area, they pay taxes and they employ. They are our economic
generator for us, and if we don't take care of our economic generation, we're
being short -sided.
Concerning people that may not own a home but pay rent, they are paying real
property tax because that is included in the rent. So I hear what you're saying,
and don't think it's lost on me, I'm trying to figure out how to make the metric
work. It's hard enough to figure out how to do our paperwork in this office, but
to try and make it work for everybody is a little bit challenging. But, I hear you.
Like I said, this is the best metric I could—given the parameters we have. I yield.
CHR. DAVID: Thank you. Ms. Lee Loy, go ahead.
MS. LEE LOY: It's a difficult time. This is a dynamic time for sure. I think
what Mr. Richards is looking for is all of this, all of this conversation. But where
we go from here—and it is—I think I mentioned it, the last time I spoke, is maybe
putting a pin in it. So maybe either deferring it, where we can use it as a tool to
amend along the way, at least we have something on the table. The idea of just
moving it forward and it not really being a vehicle, that clearly Ms. Ruggles sees
a small bit of upside to, I think we could continue to massage this. I think at the
end of the day, though, we have a situation out in Puna that is very complex, very
dynamic, and very uncertain.
If Mr. Richards is looking for guidance, my suggestion would be put a pin in it,
defer, somehow hold it someplace that we can bring up later or put it on a meeting
further out so that it will time nicely with some of the other conversations. I do
see some value in this, I do. I don't want to throw the baby out with the bath
water. So, thank you.
CHR. DAVID: Thank you, Ms. Lee Loy. Mr. Richards, is it okay for me to say
something? I think it will be—
MR. RICHARDS: Absolutely.
CHR. DAVID: Consider this, if we move this forward, and this speaks to the
following bill, I think we're required and I can confirm this, that we have conduct
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May 21, 2018
a public hearing if we move this forward. Now given the uncertainties, the
unknowns, everything that Ms. Lee Loy is talking about, I would definitely
support a postponement indefinitely, postponement to the call of the Chair
whenever this issue comes up. I just need to say that because I think that makes a
big difference on how we proceed, because I don't believe we are in any position
to hold a public hearing, when we don't have any information to contribute.
Thank you.
MR. RICHARDS: So, Chair, can we talk story about this rather than the formal
bounce back and forth? I'm wide open for suggestions. Council Woman Lee Loy
is spot-on as far as getting this conversation going. Clerk, for us to get this done,
we have a window if we're going to use this as a vehicle, if we postpone to the
next Finance—oh, first of all, is it true that if we pass out of Committee, it needs a
hearing?
MR. MAEDA: That's correct.
MR. RICHARDS: Okay, so if we hold this in Committee until next Committee,
do we have time to get it through in this fiscal year to do anything with it as far as
the vehicle?
MR. MAEDA: Well, the next Committee meeting would be June 4th, and then we
have our Special Council second reading on June 6th, so I would say we would
not.
MR. RICHARDS: Okay. Okay, we've had the conversation, and this is exactly
what I predicted six months ago. We painted ourselves in the corner, which is too
bad. Okay, so with that, there's no point of having a public hearing on something
that is not ready for primetime yet.
MR. CHUNG: I have a question.
MR. RICHARDS: Please?
MR. CHUNG: When are we supposed to have a public hearing?
MR. RICHARDS: It would have been tonight.
MR. CHUNG: But it wouldn't have been—
MR. RICHARDS: It was very close timing. Once again, it comes back to the
whole conversation we started in January. This is problematic.
CHR. DAVID: Can we call Deanna up on the timelines?
MR. CHUNG: Yeah.
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May 21, 2018
CHR. DAVID: Director, can you come up and explain? There are some
deadlines on the real property.
(Note: At this time, Finance Director Deanna Sako came forward to
address the members of the Committee.)
MS. SAKO: Due to convenience purposes, the County Clerk usually schedules a
real property tax rate hearing, and I believe it was on the calendar for tonight. But
because the proposed budget that we submitted in May did not have any rate
changes submitted with it, they never actually set up a rate hearing for tonight.
It is possible, I believe, that we have done rate hearings in the past with ranges of
rates. So going down, perhaps, as low as what Mr. Richards is recommending,
having the current rates possibly be a middle point, and even going as high as he
went down on the other end or something like that. So I'm just saying how, you
know, I am familiar with some of the ways it's been done in the past, because it is
challenging to know what to do. I think there's going to be a lot more discussion
about rates and possibilities tomorrow.
MR. CHUNG: What I'm asking, though, is—the reason why he doesn't want to
move this forward is he doesn't want to have a public hearing on it. Correct?
MR. RICHARDS: Paradox then, I don't want to spend the money on a public
hearing because they're trying to save money through all of this.
MR. CHUNG: Right, but that public hearing wouldn't have been held tonight,
right?
MR. RICHARDS: No.
MR. CHUNG: You would have to schedule the public hearing.
MR. RICHARDS: Correct.
MR. CHUNG: My question is what are the requirements for scheduling a public
hearing, I mean, what are the timeframes we're working with? It could be later.
Nobody said—you just—in order for the real property tax rates to be changed,
you need a public hearing, correct?
MR. MAEDA: That's correct.
MR. CHUNG: Right, and absent a public hearing, you cannot have a change. So
we can do just do what Mr. Richards wants. I mean, move it forward to the
Council, either up or down, whatever—I'm going to vote "no", right? But it
doesn't mean that the Council has to schedule a public hearing yet. Because if it's
tied in to the GET, which is going to come back in January, we just hold the thing
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May 21, 2018
off all the way through. Because I think it would be suicidal for us to adopt this
with the GET right now. I don't think anybody in their, no offense, but anybody
right mind would not consider that, right?
So I would say whatever his pleasure is, I'm okay with. But we don't have to
hold it off or defer it because we're afraid of having to have a public hearing. We
just don't need it right now. That bill will only be passed if we have a public
hearing.
CHR. DAVID: Council Members?
MR. RICHARDS: Chair, I think I hear what Mr. Chung is saying. Is it actually
required to have the public hearing before the end of the fiscal year or just before
the real property tax is adopted? That's an interesting perspective, I don't know.
But I knew this was going to create a conversation like this, and this highlights the
problem of all of our financial deal. I'm willing to go either way. But what I
don't want to do is miss an opportunity that if we need a vehicle to try and fix our
budget and we don't have anything, we're going to get stuck.
MS. SAKO: Can I just—there's a lot of moving parts, and I agree.
MR. RICHARDS: Right.
MS. SAKO: One of them is, you know, we're going to talk about a lot tomorrow.
But if it moved forward and the public hearing wasn't posted until after
tomorrow's meeting, I believe in the past we have done ranges of rates that were
not always what's reflected in the resolution. But I think the resolution was the
midpoint, and I think in this case we may need that to be the low point, and I'm
not sure how you go about doing that. But there's going to have to be a lot of
discussion tomorrow about how we balance it. I'm not sure how we do it.
MR. RICHARDS: Chair?
MS. SAKO: Oh, the other point I was going to make—
MR. RICHARDS: Chair?
CHR. DAVID: Yes?
MS. SAKO: Sorry, was that the rates have to be set by June 20th, for next fiscal
year, which is the dates you have on your resolution, and so we do need—and if
nothing happens, then we revert back to last year's rates.
MR. RICHARDS: Okay.
Page 40
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May 21, 2018
MS. SAKO: But if anything was going to change, it does have to happen by
June 20th. But because the GE was postponed until January, that would actually
mean it would be effective the following fiscal year, so it would be the next fiscal
year, where the rates would be changed. So by the following June 201h, that's the
other piece, yeah.
MR. RICHARDS: Yeah. No, I get what you're saying Deanna. Thank you. So
since we're not in an ad hoc committee to talk story about this, we talk about this
in Finance Committee. We've got a big problem ahead of us, and that's why
we're having the conversation in Committee. Everybody's been working on
trying to figure out how to get this budget, and then we've got a curveball thrown
at us by Madam Pele.
So how are we going to solve this? I'm wide open for suggestions. If people
would—what I don't want to do is pull this back and then miss an opportunity
that we should have, could have, would have. Actually, I think I can do that.
MS. MAEDA: Well, like Deanna said, this is for this fiscal year, though.
MR. RICHARDS: But actually what we could do, is I could pull it back and ask
for a reconsideration if we wanted to put it back on the table. Isn't that true,
Clerk?
CHR. DAVID: Five days.
MR. RICHARDS: Yeah, within five days. But we're going to have a meeting
tomorrow, so we might have some information. Chair?
CHR. DAVID: Is that your—would like?
MR. RICHARDS: You're Chair.
CHR. DAVID: I know. But in order to do what you're requesting, if you do that,
then we would have—you would bring it back for reconsideration.
MR. RICHARDS: At the next Committee.
CHR. DAVID: And you would have to request it within five days. And the next
Committee meeting will be week after next, on the fourth.
MR. RICHARDS: Yeah, we're going to run out of time.
CHR. DAVID: Exactly.
MR. RICHARDS: We did what I was afraid we were going to do. Okay, Chair,
what would you like to do?
Page 41
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May 21, 2018
CHR. DAVID: Well, we could either—you could either—if you take it back, we
don't have time. You can—or see what this body is going to vote for it, if you
want to?
MR. RICHARDS: Either way. I mean, I can do it to the call of the Chair. I think
the bill is going to die, which is fine; but we're going to lose an opportunity if we
needed one. That's what I was trying to preserve, an opportunity to amend, if we
could use it as a vehicle to try and fix something of a question we don't even
know, have before us as of yet, so I was trying to maintain that. Because I don't
know what we're going to end up with tomorrow. I'm trying to preserve it for
that.
CHR. DAVID: Can I have a—because part of this is contingent upon the GE
also, right?
MR. RICHARDS: Part of it is, but the conversation is different today now.
CHR. DAVID: Yeah, I'm just not
MS. SAKO: Madam Chair, can I make a suggestion?
CHR. DAVID: Yes.
MS. SAKO: Okay, let's say this resolution wasn't on the table. I believe in the
past that if the rates wanted to be changed by Council or someone else, that they
could still submit the resolution by the second reading of the budget, and the
County Clerk scheduled a public hearing in anticipation thereof or whatever. We
may be doing this like a week or two later than we normally would. But one
option might be to withdraw this resolution and submit a new one after
tomorrow's meeting, which may require the Chair to be willing to breach
deadline—because I don't have my calendar with me. So, that's another option.
MR. RICHARDS: Okay.
MS. SAKO: Because I think we do—I agree with you that we want to preserve
all options on everything.
MR. RICHARDS: Correct, and that is my intent with this right now, is to
preserve all options. So if that's the case, then what I'm willing to do is
withdraw. And then after we talk story tomorrow, and then we'll just have to
work with going forward with new information. So with that thank you,
Deanna.
CHR. DAVID: Thank you, Deanna.
MR. RICHARDS: So do I just move to withdraw or do I just withdraw?
Page 42
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CHR. DAVID: You can just withdraw your motion.
Withdraw Res. 615-18: Mr. Richards announced the withdrawal of Res. 615-18.
May 21, 2018
CHR. DAVID: Thank you. Okay, now Resolution 615 has been withdrawn. So
we're moving to Resolution 616, Mr. Clerk.
Res. 616-18: AUTHORIZES A DECREASE IN THE COUNTY OF HAWAI` I FUEL TAX
FOR FISCAL YEARS 2018-2019 AND 2019-2020
Decreases the fuel tax by 5 cents per gallon for Fiscal Year 2018-2019, bringing
it to 14 cents per gallon, and by 9 cents per gallon for Fiscal Year 2019-2020,
bringing it to 14 cents per gallon. Fuel taxes may be used to support the safe
and efficient operation of County roads, mass transit, and highway
infrastructure.
Reference: Comm. 940
Intr. by: Mr. Richards
Motion to Approve: Mr. Richards moved to recommend adoption of
Res. 616-18. Seconded by Ms. Lee Loy.
CHR. DAVID: Mr. Richards.
MR. RICHARDS: Okay, this is sort of a companion bill but not really. And
what I'm going to do—because there's so much uncertainty right now. The
difference here is this doesn't apply to this fiscal year. We can change this at any
time. So what I'm going to do is ask that it be postponed until right after—right
in the first part of—well, postpone it for a month. I'm thinking either end of June
or fist part of July. I'd like to hear a few comments on that. This isn't going to
take long.
CHR. DAVID: Council Members? Ms. Lee Loy.
MS. LEE LOY: Thank you, Chair. Deanna shared something very revealing.
We're going need a lot of options and ranges, and who knows—I mean, we might
have to go up on some of these ranges, just based on some of the uncertainty. I
feel bad saying that out loud, but we might even have to consider that too.
Similar to what we did with the previous resolution, I'd like to see this kind of
remain as a vehicle that anybody could use, including the administration. That's
my thoughts. I yield.
CHR. DAVID: Thank you, Ms. Lee Loy. Anyone else?
MR. RICHARDS: Yes, keeping that in mind, very willing to keep it in
Committee until the next meeting because that may give us an opportunity. But I
need to do that.
Page 43
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CHR. DAVID: Okay, so you need—you want to make a motion to postpone this
until our—
MR. MAEDA: June 4th.
MR. RICHARDS: June 4t", yeah.
CHR. DAVID: Okay.
Vote on Motion to Mr. Richards moved to postpone Res. 616-18 to June 4, 2018.
Postpone: Seconded by Ms. Lee Loy and carried by the following
(Approved) voice vote:
Ayes: Committee Members Chung, Eoff, Kanuha,
Lee Loy, O'Hara, Poindexter, Richards, Ruggles,
and Chair David – 9.
Noes: None.
Absent: None.
Excused: None.
BILLS FOR The Chair directed the Committee to proceed to the next order of business, Bills
ORDINANCES: for Ordinances.
CHR. DAVID: Mr. Clerk, Bill 153.
Bill 153: INITIATES AN AMENDMENT TO ARTICLE XV OF THE HAWAII
COUNTY CHARTER (2016 EDITION), BY ADDING A NEW SECTION
RELATING TO FISCAL IMPACT STATEMENTS
Would require that any proposed amendment or revision to the Hawaii County
Charter be accompanied by a Fiscal Impact Statement that describes the
immediate and potential future effects the amendment or revision would have
on County revenues, expenditures, taxes, and fiscal liabilities. The Fiscal
Impact Statement must be prepared in a manner that is easily understood by
voters and would be placed on the County website and be made available for
inclusion as part of any voter information pamphlet that addresses County
ballot propositions.
Reference: Comm. 938
Intr. by: Mr. Chung
Motion to Approve: Mr. Chung moved to recommend passage of Bill 153 on
first reading. Seconded by Mr. Kanuha
CHR. DAVID: Go ahead, Mr. Chung.
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May 21, 2018
MR. CHUNG: Yeah, I don't really think this merits a lot of discussion. It's
basically a very simple concept and something that was the work product of the
Legislative Research Branch, Mr. Henricks, and myself. We put a lot of thought
into this. The only problem that I saw was which department going to be
preparing this fiscal impact statement, and we just kind of decided on the Finance
Department. They probably have the best handle on these types of matters. It
could have been the legislative auditors. It could have been the Legislative
Reference—it could have been the Council. But I just really believed that the
Finance Department might be best to equipped to provide information.
Now, there's another aspect to all of this. I had actually wanted this to be placed
on the ballot so that people could see it and actually be able to digest the fiscal
impacts on any Charter proposal, but I was informed that is actually violative of
either a constitutional provision or some other law that we have in the State,
which prevents something like that from being placed on the ballot. Therefore,
the next best option we had was just to have it disseminated to the voters, whether
it be through voter information pamphlets or on a website.
You know, it really is just a matter of getting information to the voters so that
they can make an informed decision on something that has, I would say in the past
had a great impact on our financial picture. When you look at it—I mean, you
know, I'm not trying to criticize anything because all of these are actually good
proposals and things that have, I guess, depending on whose perspective you're
looking at, are good things. The Land Fund, you know, that takes a chunk out of
our offers; the creation of the Environmental Management department, branching
out from Public Works, that created a lot of expenses on the part of the County.
Things may look good when you just see it on its face, but I think for any
responsible voter—Council person, we should be looking at its financial impacts
to the County.
So, I just throw that out there. I, quite frankly, think we should have something
like this in place. We might even have to consider it for certain ordinances, as
well. But for now I'm just thinking, you know, give the voters as much
information as possible and let them make an informed decision. Thank you.
CHR. DAVID: Thank you, Mr. Chung. Discussion? Ms. O'Hara.
MS. O'HARA: I know we received a comment from someone saying that this
wasn't necessary; that the voters could make those decisions without the financial
analysis, personally. I would want the financial analysis. I mean, if I were
nothing more than a voter in this County and not sitting here, I would want to see
the financial analysis in order to make my decision on the ballot. I support this
bill and hope that we can move forward with it. As you pointed out, some of the
things that have passed by ballot initiative, the public may not be—have been
aware of what the financial impacts were to the County.
Page 45
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May 21, 2018
You did use the example, of the creation of DEM (Department of Environmental
Management), and I think if we hadn't done that, we'd be sunk at this point
because it was already sinking Public Works back then. So it was a valuable
action but it has cost a lot of money, as you say. So anyhow, I'm supporting this
measure. Thank you.
CHR. DAVID: Thank you, Ms. O'Hara. Anyone else? Ms. Eoff.
MS. EOFF: I'd just like to ask Deanna a question.
(Note: At this time, Finance Director Deanna Sako came forward to
address the members of the Committee.)
MS. SAKO: Yes?
MS. EOFF: I know in the language here it says, "as much as practicable," but
how would you know? Like, you may know an initial cost, but how would you
know like into the future?
MS. SAKO: We might not know into the future. But let's say we go back to the
PONC (Public Access, Open Space, and Natural Resources Preservation
Commission), the creation of the PONC Fund or the PONC Maintenance Fund,
we could definitely take two percent of the current revenue and perhaps even
provide a trend over the last five years or something of how it increased, just to
give people an idea that it may or may not increase the same way in the future.
When we created the new Department of Environmental Management, we might
be able to provide input on, you know, how many personnel we think would be
necessary to run that department and cost that out. It would be for a point and
time, and of there are known increases, we can try to implement that. But we
would do the best we can to at least give people an estimate of what it might cost.
MS. EOFF: And then if there were something that would be negligible, you
would just prepare something that said there would be no impact to the County.
MS. SAKO: Right.
MS. EOFF: Is this something that your department would be willing to take on
then?
MS. SAKO: I think we're willing to take it on. I think—you know, we would
consult with other departments, if necessary, to gather information. But right now
I think we have the best access to the current financial information that will
probably help it, you know, to make those decisions.
MS. EOFF: Okay, thank you.
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CHR. DAVID: Thank you, Ms. Sako. Anyone else? Ms. Lee Loy, go ahead.
MS. LEE LOY: Thank you. I like people having information. So I can definitely
support this bill, because I do. I reflect on the Land Fund, and in concept, it really
was a great idea, but now, I think ten years in, we recognize that fund is
increasing. We have a situation where that funds could be better utilized
someplace else. I think people need to understand, as we move policy forward,
really what is the cost of that policy, and I think this financial impact statement
provides that to our electorate. So I'll be supporting this bill. Thank you.
CHR. DAVID: Thank you, Ms. Lee Loy. Anyone else? No? Alright then, thank
you, Mr. Chung. I think this is a great first step to ensure that we be prepared for
things that come up that has a lot of financial impact, so thank you very much for
this. All those in favor of Bill 153 please say "aye."
Vote on Bill 153: The motion to recommend passage of Bill 153 on first reading
(Approved) was carried by the following voice vote:
Ayes: Committee Members Chung, Eoff, Kanuha,
Lee Loy, O'Hara, Poindexter, Richards, Ruggles,
and Chair David — 9.
Noes: None.
Absent: None.
Excused: None.
CHR. DAVID: Alright, I believe we've concluded. May I please have a motion
to adjourn?
ADJOURN- There being no further business, at 1:17 p.m., Mr. Kanuha moved to adjourn
MENT: the meeting. Seconded by Ms. Poindexter and carried by the following
voice vote:
Ayes: Committee Members Chung, Eoff, Kanuha,
Lee Loy, O'Hara, Poindexter, Richards, Ruggles,
and Chair David — 9.
Noes: None.
Absent: None.
Excused: None.
Page 47
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CHR. DAVID: This meeting is adjourned. Thank you.
"•" • is WA to -
Finance Committee
MD/na
May 21, 2018
;? Ole
(Date)
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