HomeMy WebLinkAbout2021-04-28 Draft EMC letter to Council re Wastewater Treatment Financing
Mitchell D. RothGeorjean Adams
Mayor Chair
Ramzi I. Mansour Rick Gaffney
Director, Department of Vice Chair
Environmental Management
County of Hawai‘i
ENVIRONMENTAL MANAGEMENT COMMISSION
25 Aupuni Street •Hilo, Hawai‘i 96720
Ph: (808) 961-8083 · Fax: (808) 961-8086
MEMORANDUM
DATE: April _, 2021
TO:Maile David, Council Chair
and Hawai‘i County Council Members
FROM:Georjean Adams, Chair
Environmental Management Commission
RE:Wastewater Management Funding Consultation
The Environmental Management Commission (EMC) voted at its meeting on March 24, 2021 to
recommend the County Council bring in a financial consultantto present options for creating a
dedicated and sustainable funding source for wastewater operations maintenance and capital
coststhat strongly considers, among other options, enterprise funding and energy savings
performance contracts.
Environmental Management Director Ramzi Mansour has met several times withthe Council
and its RAWEEM and Finance Committees, as well as the EMC, making clear the critical need
for new and continuing funding to repair, maintain and improve the county’s wastewater
management operations.Director Mansour has recommended hiring a financial consultant
knowledgeable in environmental funding mechanisms, especially in establishing an Enterprise
Fund, to provide options on how to ensure adequate funding for daily and future safe wastewater
management.The EMC supports his recommendation.
A study of funding options is necessary as the current sewer fee mechanism and reliance on
shifting general fund priorities are insufficient. Grants may be sufficient to fund new capital
efforts, but are not sustainable enough for ongoing planning and operation support and present
their own timing issues.The EMC was impressed with the concept of an Enterprise Fund as it
focuses on a long-term planning process that includes preventative and ongoing maintenance,
staffing, training, and future needs, as well as financial reporting and auditing.From the
Bizfluent description of an Enterprise Fund (https://bizfluent.com/facts-7304143-government-
enterprise-fund-.html):
A government’s general fund is a pool of cash raised from taxes and can be spent
County of Hawai‘i is an Equal Opportunity Provider and Employer.
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wherever the government needs it. An enterprise fund is more specific. Enterprise fund
money can only be spent on a specific purpose, such as parks and recreation. Most of
thefundingcomes from fees related to thefund's mission.Governments don't have to rely
on fees to cover all thefund's spending. If necessary, a government can pay for some of
the services with tax dollars. Most of the financing, however, is based on the fees or
bonds backed by future fee payments.
Tying fees and services together through anenterprisefundhas advantages. Users and the
general public can see how much it costs to provide particular services, and why the fees
are set at a certain level. It's not always possible to balance fees and the cost of services
perfectly, though. A fundmay run in the red one year, which is a sign the government
needs to raise fees. If the fundturns a profit, the money carries over to operations in the
next fiscal year, and fees might drop.
The City and County of Honolulu adopted an ordinance to establish an enterprise fund in 1998
for its Sewer Fund. While Hawai‘i County does not have, nor will likely have, the installed
customer base that Honolulu has (80 percent of homes connected), the Honolulu wastewater
enterprise fund can provide initial guidance to the consultant. The Office of Council Services
there can also provide assistance in drafting appropriate legislation. On the capital side, bond
counsel will need to be consulted as an enterprise fund is also an investment vehicle and needs to
offer the transparency and stability that investors require. Additional resources are available
through the National Association of Counties (NACo) as enterprise funds are commonly utilized
around the country and exemplify good governance.
We anticipate that a knowledgeable consultant could provide a combination of feasible options.
For example, EMC has recommended innovative funding via Energy Savings Performance
Contracts (letter to Council October 10, 2020).
Please consider this recommendation as critical to effectively managing our wastewater
resources and take prompt action.
Sincerely,
Georjean L Adams, Chair
Environmental Management Commission
C: Ramzi I. Mansour, Director, Department of Environmental Management
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