HomeMy WebLinkAbout2021-04-27 Water Board Meeting MinutesMINUTES
DEPARTMENT OF WATER SUPPLY
COUNTY OF HAWAII
WATER BOARD MEETING
April 27, 2021
Via Zoom/Host Location: Department of Water Supply, 345 Kekuanaoa Street, Suite 20, Hilo, HI
MEMBERS PRESENT VIA WEBER: Mr. Eric Scicchitano, Vice -Chairperson
Mr. Michael Bell
Mr. David De Luz, Jr.
Mr. Steven Hirakarni
Ms. Judy Howard
Ms. Julie Hugo
Mr. Benjamin Ney
Mr. Kenneth Sugai
Mr. Keith K. Okamoto, Manager -Chief Engineer, Department of Water
Supply (ex -officio member)
Absent: Mr. William Boswell, Jr., Chairperson
OTHERS PRESENT VIA WEBEX: Ms. Diana Mellon -Lacey, Deputy Corporation Counsel
Department of Water Supply Staff
Mr. Kawika Uyehara, Deputy
Ms. Candace Gray, Waterworks Controller
Mr. Kurt Inaba, Engineering Division Head
Ms. Judith Hayducsko, Chief of Operations
Mr. Eric Takamoto, Operations Division
Mr. Warren Ching, Energy Management Analyst
1) CALL TO ORDER — Vice -Chairperson Scicchitano called the meeting to order at 10:00 a.m. and
welcomed Mr. Michael Bell from District 7 to the Water Board. A roll call was taken for Board Members
in attendance (Present: Mr. Bell, Mr. De Luz, Mr. Hirakami, Ms. Howard, Ms. Hugo, Mr. Ney,
Mr. Sugai, and Vice -Chairperson Scicchitano)
2) STATEMENTS FROM THE PUBLIC - none
3) APPROVAL OF MINUTES
MOTION: Mr. Ney moved for approval of the Minutes of the March 23, 2021, Public Hearing on the
Department's Fiscal Year 2022 Operating and C.I.P. Budgets and the Minutes of the March 23, 2021,
Water Board Meeting; seconded by Ms. Howard.
ACTION FOR PUBLIC HEARING MINUTES: Motion was carried by roll call vote
(Ayes: 6 - Mr. Hirakami, Ms. Howard, Ms. Hugo, Mr. Ney, Mr. Sugai, and Vice -Chairperson Scicchitano;
Absent: I - Chairperson Boswell; Abstentions: 2 - Mr. Bell and Mr. De Luz, upon seeking advice from
Page 1 of 16 April 27, 2021, Water Board Minutes
Corporation Counsel that if they were not present, they should not vote on the Minutes as they would not
know if they were correct).
Mr. De Luz stated that he would be voting on the Minutes of the regular meeting as he was present for that
meeting.
ACTION FOR REGULAR MEETING MINUTES: Motion was carried by roll call vote
(Ayes: 7 - Mr. De Luz, Mr. Hirakami, Ms. Howard, Ms. Hugo, Mr. Ney, Mr. Sugai, and
Vice -Chairperson Scicchitano; Abstention: I - Mr. Bell; Absent: I - Chairperson Boswell).
4) APPROVAL OF ADDENDUM AND/OR SUPPLEMENTAL AGENDA - none
5) POWER COST CHARGE:
At the Water Board's March 23, 2021, meeting, scheduling of a Public Hearing was approved for
April 27, 2021; however, the notice requirements were not met to carry out the hearing on that date.
The Department proposes scheduling a Public Hearing on the Power Cost Charge, for May 25, 2021, at
9:45 a.m., to accept public testimony on the proposed increase to take effect on June 1, 2021.
The Manager -Chief Engineer recommended that the Board approve holding a Public Hearing on
May 25, 2021, at 9:45 a.m., to receive testimony on increasing the Power Cost Charge from $1.71 to
$1.85, effective June 1, 2021.
MOTION: Ms. Howard moved for approval of the recommendation; seconded by Mr. De Luz.
The Manager -Chief Engineer explained that the advertising deadline was inadvertently missed in order to
place the public notice prior to this month's Board Meeting; therefore, it is asked that the Public Hearing
on the Power Cost Charge be scheduled to prior to next month's Board Meeting. The information is the
same as was presented at last month's meeting.
ACTION: Motion was carried by roll call vote (Ayes: 8 - Mr. Bell, Mr. De Luz, Mr. Hirakami,
Ms. Howard, Ms. Hugo, Mr. Ney, Mr. Sugai, and Vice -Chairperson Scicchitano;
Absent: 1 - Chairperson Boswell).
6) DEPARTMENT OF WATER SUPPLY PROPOSED OPERATING AND 5 -YEAR
CAPITAL IMPROVEMENT PROJECTS (C.I.P.) BUDGETS FOR FISCAL YEAR 2022:
The Department's Fiscal Year 2022 Operating Budget, totaling $54,913,800, and 5 -Year C.I.P. Budget for
Fiscal Year 2022-2026, totaling $145,700,000, have been distributed for the Board's review. A public
hearing was held March 23, 2021, to accept testimony. The Board may change either Budget or adopt the
budgets as presented over two readings.
The Manager -Chief Engineer recommended that the Board approve the Department's Fiscal Year 2022
Operating and C.I.P. Budgets on this second of two readings.
MOTION: Mr. Sugai moved for approval of the recommendation; seconded by Ms. Hugo.
Mr. Bell stated that he had reservations about voting on this item as he has no understanding of it so far.
ACTION: Motion was carried by roll call vote (Ayes: 7 - Mr. De Luz, Mr. Hirakami, Ms. Howard,
Ms. Hugo, Mr. Ney, Mr. Sugai, and Vice -Chairperson Scicchitano; Abstention: 1 - Mr. Bell;
Absent: 1 - Chairperson Boswell).
Page 2 of 16 April 27, 2021, Water Board Minutes
7)
SOUTH KOHALA:
A. WATER TREATMENT PROPOSAL NO. 2018-08, FURNISHING AND DELIVERING
COAGULANTS TO THE WAIMEA WATER TREATMENT PLANT - REQUEST FOR
ADDITIONAL FUNDS:
A contract increase is requested to cover the cost for additional coagulant ordered and delivered to the
Department. This overordering was identified recently. The Department reviewed the possibility of
returning the overordered coagulant, but the return freight and restocking fees were not justifiable. In
addition, the overordered coagulant can be used to process and treat the surface water at the Waimea
Water Treatment Plant. This chemical is supplied on an "as needed basis," and the cost has been
included in the Department's annual budget.
The Manager -Chief Engineer recommended that the Board approve an increase of $13,360.00 for this
contract, WATER TREATMENT PROPOSAL NO. 2018-08, FURNISHING AND DELIVERING
COAGULANTS TO THE WAIMEA WATER TREATMENT PLANT. If approved, this total
contract amount would be increased from $470,000.00 to a new total contract price of $483,360.00.
MOTION: Mr. De Luz moved for approval of the recommendation; seconded by Mr. Sugai.
The Manager -Chief Engineer stated that there was a cap on that contract of $470,000.00; however,
some material was inadvertently ordered that went over that cap. This is a contract that had been
extended because of COVID-19, which lead to the confusion, and now requires approval by the Board
to amend the contract amount. The material is used regularly in the water treatment process, and it
does not make sense to send the material back and pay restocking fees. The competitive bidding
process was used to secure this supplier.
Mr. Ney agreed with amending the contract as these materials will be used anyway. It should result in
$13,000.00 coming off the next contract. He asked if there is a shelf -life issue on these chemicals.
The Manager -Chief Engineer replied that there were no issues with shelf life. This is budgeted for
and will be that much less in the next contract.
Mr. Hirakami asked what period of time will the extra supply be used up.
Ms. Hayducsko replied that it is approximately an 18 -day supply.
Mr. De Luz stated that he had no issues with this particular matter but wondered if it required another
look at procurement and if the necessary checks and balances are in place. His gut feeling was that it
was an overlap that fell into the new contract period and exceeded the amount. If the process is fine
and there were double checks on the procurement, he had no issue.
The Manager -Chief Engineer replied that the Department is in compliance with State Procurement
requirements. As far as awareness of the contract limitations, he sees it as internal communications
matter and will be communicated with staff better. As the Board may recall, this is a contract that is
awarded on an as -needed basis, and a significant amount of contingency is added because the product
is dependent on the source water quality. If the raw water is more turbid, more of this product is used.
Mr. Ney asked about the cost of water treatment for Waimea versus the cost of pumping from wells,
assuming that treatment would run higher.
Page 3 of 16 April 27, 2021, Water Board Minutes
The Manager -Chief Engineer replied that he did not have that breakdown, but it is still more
economical to treat surface water than the cost of pumping deep wells.
ACTION: Motion was carried by roll call vote (Ayes: 8 - Mr. Bell, Mr. De Luz, Mr. Hirakami,
Ms. Howard, Ms. Hugo, Mr. Ney, Mr. Sugai, and Vice -Chairperson Scicchitano; Absent: 1 -
Chairperson Boswell).
8) NORTH KONA:
A. JOB NO. 2020-1153, AIR CONDITIONING REPLACEMENT AT FIVE (5) WELL SITES —
REOUEST FOR TIME EXTENSION:
The contractor, Hawaii Air Conditioning, Inc., is requesting a contract time extension of 39 calendar
days due to unforeseen equipment delivery delays and the additional scope of work required. These
delays were beyond the control of the contractor.
Staff reviewed the request for the contract time extension and the accompanying supporting
documentation and finds the 39 calendar days justified. Note: There are additional costs associated
with this time extension which are within the existing contingency.
1't time extension — 39 calendar days
The Manager -Chief Engineer recommended that the Board approve a contract time extension of
39 calendar days to Hawaii Air Conditioning, Inc., for JOB NO. 2020-1153, AIR CONDITIONING
REPLACEMENT AT FIVE (5) WELL SITES. If approved, the contract completion date will be
revised from April 26, 2021, to June 4, 2021.
MOTION: Mr. Ney moved for approval of the recommendation; seconded by Mr. Sugai.
The Manager -Chief Engineer stated that the additional scope and cost is from the extra coating to
prevent corrosion. It is within the contingency. When the contractor viewed the existing units and
saw the level of corrosion, and after discussions with staff, it was felt it would be prudent to pay a
little more to prolong the life of these new units.
Mr. Bell asked if there would be a conflict of interest for him as his business uses
Hawai`I Air Conditioning.
Ms. Diana Mellon -Lacey replied that it would not be unless he has some kind of controlling interest in
that company or a close family member does.
Mr. Bell indicated there was none and would be voting in favor.
ACTION: Motion was carried by roll call vote (Ayes: 8 - Mr. Bell, Mr. De Luz, Mr. Hirakami,
Ms. Howard, Ms. Hugo, Mr. Ney, Mr. Sugai, and Vice -Chairperson Scicchitano; Absent: I -
Chairperson Boswell).
Page 4 of 16 April 27, 2021, Water Board Minutes
9)
MISCELLANEOUS:
A. DEDICATION OF WATER SYSTEMS:
The Department received the following documents for action by the Water Board. The water systems
have been constructed in accordance with the Department's standards and are in acceptable condition for
dedication:
1. Grant of Easement and Bill of Sale
Grantor: Ellen Garver Koizumi
Subdivision No. 2004-000037
Tax Map Key: (3) 7-3-005:030
Facilities Charge: $30,475.00 Date Paid: 2/25/2021
Capital Assessment Fee: $2,500.00
Final Inspection Date: 2/9/2021
Water System Cost: $76,534.00
2. Grant of Easement (for water meter)
Grantors: Thomas L.H. Yeh and Aileen K.F. Yeh; Vern Masaji Yamanaka and
Catherine Yamanaka
Tax Map Key: (3) 7-4-006:048 (portion), WM-1, Lot 2-A (portion)
3. Grant of Easement (for water meter)
Grantor: CP San Felipe 300 LLC
Tax Map Key: (3) 7-4-006:048 (portion), WM-2, Lot 2-F (portion)
4. Grant of Easement (for water meter)
Grantor: CP San Felipe 300 LLC
Tax Map Key: (3) 7-4-006:048 (portion), WM-3, Lot 2-E (portion)
5. Grant of Easement (for water meter)
Grantors: Garth Hidekichi Yamanaka and Katie Yamanaka; James G. Lee, Jr.,
Nicole Leilam Schnitzler
Tax Map Key: (3) 7-4-006:048 (portion), WM-4, Lot 2-D (portion)
6. Grant of Easement and Bill of Sale
Grantor: State of Hawaii, Department of Defense
Hawaii Army National Guard
Tax Map Key: (3) 2-1-012: 003
Facilities Charge: $27,500.00, Date Paid: 10/5/2020
Final Inspection Date: 4/16/2021
Water System Cost: $100,000.00
The Manager -Chief Engineer recommended that the Water Board accept these documents subject to
the approval of the Corporation Counsel and that either the Chairperson or the Vice -Chairperson be
authorized to sign the documents.
ACTION: Ms. Howard moved for approval of the recommendation; seconded by Mr. Ney and carried
by roll call vote (Ayes: 8 - Mr. Bell, Mr. De Luz, Mr. Hirakami, Ms. Howard, Ms. Hugo, Mr. Ney,
Mr. Sugai, and Vice -Chairperson Scicehitano; Absent: 1 - Chairperson Boswell).
Page 5 of 16 April 27, 2021, Water Board Minutes
B. RENEWAL OF CONTRACT FOR MAINTENANCE AGREEMENT - SOUTH
KOHALA, HAMAKUA, AND LAUPAHOEHOE SITES (BRANTLEY CENTER, INC.):
Brantley Center, Inc., presently has a Maintenance Agreement for site maintenance for the
Department's South Kohala, Hamakua, and Laupahoehoe tank and pump sites. They are requesting to
renew the Agreement from July 1, 2021, to June 30, 2022. The rates would be as follows:
South Kohala - $4,392.35/month x 12 months (23 sites) = $52,708.20
Hamakua - $2,944.16/month x 12 months (15 sites) = $35,329.92
Laupahoehoe - $738.48/month x 12 months (3 sites) = $8,861.76
Total: $96,899.88
The Department has the right to award the contract to Brantley Center, Inc., without advertising or
calling for bids, according to Subsection 103D-1010 of the Hawai `i Public Procurement Code.
Brantley Center, Inc., has submitted the necessary documents to meet the requirements as a qualified
rehabilitation facility. There is no increase from their proposal for Fiscal Year 2020-2021.
Brantley Center's performance has been satisfactory, and the costs are reasonable. A total of 41 sites
are covered by this agreement.
The Manager -Chief Engineer recommended that the Board award the contract for the RENEWAL OF
CONTRACT FOR MAINTENANCE AGREEMENT — SOUTH KOHALA, HAMAKUA, AND
LAUPAHOEHOE SITES, to Brantley Center, Inc., for a period from July 1, 2021, to June 30, 2022,
at a total cost of $96,899.88, and that either the Chairperson or the Vice -Chairperson be authorized to
sign the documents, subject to approval by Corporation Counsel.
MOTION: Mr. Sugai moved for approval of the recommendation; seconded by Ms. Howard.
The Manager -Chief Engineer provided some background. This contract supports these types of
rehabilitation facility efforts; and to his understanding, if this contract is lapsed, based on the Konno
[vs. County of Hawaii] decision, the Department would need to have its own internal workers
brought on board to do the work and it may end up costing more. The Department currently has
groundskeeping staff that cover other parts of the island, but this is contract was maintained because
of the number of sites. Brantley Center has been doing a satisfactory job, and they are maintaining the
same costs as prior year for the 41 sites.
Mr. Ney asked about the scope of work.
Ms. Hayducsko replied that it includes mowing, weed whacking, some pulling of weeds, and some
slight sweeping of the control buildings.
Mr. Ney stated that the prices did not look unreasonable, upon doing the math on how many sites are
involved, and he had no conflict with renewing this contract.
Ms. Howard asked if the pump site at the top of Mud Lane is covered by this contract. She has never
seen anyone there except for a Department of Water Supply truck every once in a while, which is fine;
however, the chain link fence has been trashed for at least six months, which could be a problem
because there are homeless people in the area. Otherwise, she is in support of this contract.
The Manager -Chief Engineer thanked Ms. Howard for making staff aware of the chain link fence and
it will be taken care of
Mr. Hirakami asked if periodic cleaning of tanks, etc., is also jobbed out.
Page 6 of 16 April 27, 2021, Water Board Minutes
Ms. Hayducsko replied that once the tanks are turned over to the Department by the contractors,
typically, the Department's building maintenance staff would be painting the tanks. Not a lot of time
is spent on painting them unless there is graffiti. If large fencing is being installed, it may be a
contractor doing the work; but fence patching would be done by the Department's building
maintenance staff. She will check on the tank Ms. Howard mentioned and get back to her after the
meeting.
Mr. Ney mentioned there is a tank right above where he lives and someone keeps spray painting it. It
has been painted over by the Department several times, and it seems like a recurrence. He asked if
there has been a history vandalism on DWS properties.
Ms. Hayducsko replied that there is one tank many people might see going between Waimea and
Kukuihaele where someone paints the tank to look like a pig. That is left there because it seems to
bring joy to people as they drive by and sometimes there are wings on the pig. However, the
Department addresses graffiti or obscene words as quickly as possible; but some of the tanks get hit
quite often because they are in neighborhoods where the kids are a little bored, perhaps.
Mr. Ney thanked Ms. Hayducsko for that information and did not see it doing any harm.
ACTION: Motion was carried by roll call vote (Ayes: 8 - Mr. Bell, Mr. De Luz, Mr. Hirakami,
Ms. Howard, Ms. Hugo, Mr. Ney, Mr. Sugai, and Vice -Chairperson Scicchitano; Absent: I -
Chairperson Boswell).
C. JOB NO. 2018-1093, REQUEST FOR PROPOSALS TO PROVIDE A SOLAR
PHOTOVOLTAIC ENERGY GENERATION SYSTEM AT FIVE (5) DEPARTMENT OF
WATER SUPPLY LOCATIONS — POWER PURCHASE AGREEMENT (PPA) —
INTERCONNECTION AGREEMENT:
The Provider, ENRG Hawaii Solutions, LLC, and its general contractor, Greenpath Technologies
Inc., desires to seek a different type of interconnection agreement with the electric utility (HECO) at
four (4) DWS locations, per PPA Section 3.5, as seen in the table below:
DWS Location
Interconnection Agreement Type
Hilo Baseyard
Grid -Supply Interconnection Agreement
Microbiological Laboratory
(if Grid -Supply and Grid -Supply -Plus is no
Kona Baseyard
longer available, these sites will proceed through
Waimea Baseyard
a Standard Three -Party Interconnection
Agreement)
This Grid -Supply Interconnection Agreement was previously closed to new applicants but has
recently reopened. It provides a higher credit to DWS' HECO bill (15.14¢/kWh vs 10.55¢/kWh), for
excess energy supplied to HECO, compared to the Grid -Supply -Plus Interconnection Agreement that
was approved by the Water Board at its August 2020 meeting.
The following documents need to be completed, for each location, to start the HECO Grid -Supply
interconnection application and review process:
• Distributed Energy Resources Application Submittal Form
• Grid -Supply Interconnection Agreement
o All required PV system details or technical information to be provided by
Provider/contractor, in accordance with the PPA.
Page 7 of 16 April 27, 2021, Water Board Minutes
The Manager -Chief Engineer recommended that the Water Board approve the DISTRIBUTED
ENERGY RESOURCES APPLICATION SUBMITTAL FORM and GRID -SUPPLY
INTERCONNECTION AGREEMENT, and that either the Chairperson or Vice -Chairperson be
authorized to sign the documents, given that the documents are executed in accordance with the PPA
and require no additional cost, subject to form and legality by Corporation Counsel.
MOTION: Mr. Ney moved for approval of the recommendation; seconded by Mr. Sugai.
The Manager -Chief Engineer stated that the Department will receive money back if there is excess
power ($25,000.00 over the term of the contract). The system is not designed to produce a lot of
excess energy. Mr. Ching was available to answer any technical questions.
Mr. Ney asked if future load was accounted for.
Mr. Ching replied that although the photovoltaic system is designed for current load, to offset use, if
there are additional loads in the future, it could possibly be added by negotiating the Power Purchase
Agreement (PPA). More storage/batteries could be negotiated if needed.
Mr. Ney asked why the Lalamilo Windfarm project was not designed as an export grid application and
why it is a stand-alone system for providing power for pumps.
The Manager -Chief Engineer replied that his understanding was that because wind -generated energy
is in a queue system, HELCO would tap into this one last, after other wind generation sites. The
Request for Proposals process for the system was to cover the Department's needs and not for creating
excess energy. It also ties into the Department's lease agreement with the State of Hawaii.
Mr. De Luz asked he was correct in his understanding that if the owner -operator, ENRG Hawaii
Solutions, LLC (ENRG), should go defunct, it goes back to the customer/generator.
Mr. Ching replied that was correct.
Mr. De Luz stated that it goes back to the second page, Number 3, "Term and termination." The
reason he was mentioning this is because HECO is being heavy-handed in that it gives them the right
to terminate regardless of whether it is a customer or owner -operator breach of contract. Within the
context of the PPA, the maintenance of this facility will be the owner -operator. He asked if there was
a Damages Clause specifically for Number 3 somewhere else in the agreement. He added that this
agreement is with HECO, ENRG and DWS. The damages are small ($25,000.00), but it may be
worth looking at. It effectually gives HECO the ability to terminate with literally very little cause. He
did not suggest changing it, but that it was something to look into. He had an experience where their
owner -provider went under. Other than that comment, he had no issue with the PPA and he would be
supporting this. He appreciated that at least HECO allowed the PPA to be reopened.
Mr. Ching addressed Mr. De Luz's concerns. If this is terminated by HECO, it is the responsibility of
the provider to get it up to par for HECO to reintroduce this agreement; therefore it falls on the
provider. If they cannot, the Department would have to terminate the PPA because without these
interconnection agreements with HECO, the Department cannot accept energy from them as designed
in the PPA. If they do go bankrupt, there are a couple of protections --one is liquidated damages
because they cannot uphold their obligations, and the other is in the form of security, which is a
payment and performance bond for a certain amount that will travel the term of the agreement.
Page 8 of 16 April 27, 2021, Water Board Minutes
The Manager -Chief Engineer stated that these were very valid concerns and something staff has been
discussing internally with Corporation Counsel. HECO does dictate the terms for a lot of these, and
DWS needs to make sure that ENRG maintain their coverages as they need to. He will be placing that
on Mr. Ching to keep on top of whatever is required of them to uphold their end of the deal; and if
they go out of business, the proper protections are in place to protect the Department and its
customers.
Mr. De Luz also suggested checking with Corporation Counsel about filing a UCC -1 on the
equipment which gives added protection. It is inexpensive to do. Another suggestion for Mr. Ching
would be to set up a tickler for himself in regard to ENRG's annual COI (Certificate of Insurance) and
performance bond to make sure things are in place. In his experience, they had no provision for
change in scope due to inflation. Not to make the process burdensome, but some things can fall
through the cracks.
Ms. Mellon -Lacey mentioned that she has been bringing up a number of these issues, both with
Mr. Ching and with the Manager -Chief Engineer, to ensure there is adequate protection, and keeping a
close eye on the solvency of the owner.
The Manager -Chief Engineer thanked Mr. De Luz and stated he would touch base later for more
information on UCC -1 and what it entails.
Mr. Hirakami asked what discounted rate the Department is paying the provider and if they offered a
buy-back period. In his experience, they had a "10/10/10" agreement where they received a 10%
discount after 10 years and were eligible to buy the system for 10%. Different PPAs have different
terms buy -backs because the useful life of the system is about 20 to 25 years and you need to think
down the line when the money put in will even out.
Mr. Ching replied that the rate the Department is going to pay to the PPA provider is 19 cents per
kilowatt hour and is flat for the 20 years of the term. There is a provision in the PPA where the
Department can purchase a system, which will be after year five or six because the PPA provider
(owner) has tax credits they need to recover. Thereafter, the Department is 100% able to purchase the
system at the termination value, which is substantially less after the initial period.
ACTION: Motion was carried by roll call vote (Ayes: 8 - Mr. Bell, Mr. De Luz, Mr. Hirakami,
Ms. Howard, Ms. Hugo, Mr. Ney, Mr. Sugai, and Vice -Chairperson Sciechitano; Absent: 1 -
Chairperson Boswell).
D. MONTHLY PROGRESS REPORT:
The Manager -Chief Engineer noted that some photos of ongoing projects could be shared with the
Board at the next meeting. Mr. Inaba was available if there were any questions about the report.
Mr. De Luz stated that there is an aggressive schedule in CIP's this coming year and suggested, as
there are two new Board Members, the Manager -Chief Engineer might want to offer some insight on
project management as he was sure questions will be asked about the Department's hiring of
independent project managers to manage projects. Another topic would be issues as they come up in
regard to change orders which invariably will happen with some of these major projects. He
mentioned what he had learned while attending an American Water Works Association (AWWA)
convention and was alarmed to learn how many municipalities, larger than this county, have situations
where they rely on outside project management. Something else to understand are the Department's
more than twenty water systems. From what he can see, this Department has the most diverse
Page 9 of 16 April 27, 2021, Water Board Minutes
operations in regard to specificity of its wells such as how the water is mined. Some of the issues
have resulted in things like bore alignments and dual pumps for redundancy, and it would be a good
exercise for the Department to provide an update or mini training for new Board members.
The Manager -Chief Engineer thought that was a great suggestion and is something he has been
meaning to do and can be inserted as a 15 -minute presentation with some time for questions and
answers if an agenda is on the lighter side. He thought of it as a `DWS 101', covering the
Department's 23 separate water systems. It could be broken up into CIP processes.
Mr. Bell stated that he would appreciate that.
Mr. Ney asked about the different water systems spread throughout the island and if the Department
has ever been able to understand, financially, what the revenue to expense ratio would be in order to
understand each district better and whether some water systems might be generating more revenue
than others. An example may be the system in Laupahoehoe compared to Kona.
The Manager -Chief Engineer replied that he had done his own spreadsheet to help understand some of
that information, although it is not all inclusive. It is difficult to split up some of the operation and
maintenance costs, manpower, resources, supplies, etc.; but definitely electrical consumption could be
evaluated. He is cautious about going there sometimes because the Department would want to
maintain a holistic approach to water systems. Some systems may be subsidizing others, but the
Department wants to retain a single -rate structure where everyone pays the same rate, islandwide, and
avoid geographical bias. It is important for the Board to see where some systems are costing less to
operate than other systems.
Mr. Ney agreed that the cost should be spread uniformly to the rate payers amongst the different water
systems, but an analysis would be good to see, which might point to a water system that is not
generating good revenue and perhaps something could be done, whether it be finding ways to increase
efficiency or adding in more accounts, etc. It would be a long-term planning approach.
Vice -Chairperson Scicchitano thanked Mr. De Luz and Mr. Ney for their great comments and asked if
there were any further questions.
Mr. Hirakami asked if agricultural water rates are lower than residential or commercial rates and if
commercial rates are higher than residential rates or if it is an even rate between a residence and a
hotel, for example.
The Manager -Chief Engineer replied that agricultural rates are subsidized and are lower than the
general consumption rates. Board Member Howard had mentioned, at a prior meeting, that the
Department may want to consider different categories of rates. As of now, there is no differentiation
between a residential or a commercial customer in the rate structure. Basically, there is a tiered, or
block -rate structure where you pay more if you use more water and get into the different blocks. Of
the four -block system, the first block is for someone who uses very little water --less than the meter is
designed for. It actually costs less than the cost of service. The second block is more along the lines
of cost of service. In the third and fourth blocks, the rates are now increasing to where there is an
incentive not to use excess amounts of water. It is a disincentive to be in those block rates. On the
agricultural rates, the disincentive does not exist. It is a flat rate and is discounted across the higher
blocks. This discussion leads into the next agenda item, which is the Review of Financial Statements;
and as a reminder, the Department is going to look at conducting another water rate study and to
consider some factors and possible different categories for rates.
Page 10 of 16 April 27, 2021, Water Board Minutes
E. REVIEW OF MONTHLY FINANCIAL STATEMENTS:
Ms. Gray asked if there were any questions regarding the Financial Statements.
Mr. De Luz shared some thoughts on the challenges of the Deferred Inflows liability as it relates to
restricted cash on the audit. It is difficult to target; and, unfortunately, the Department has no
management over it. It is a number that the Department gets and has to be represented accordingly. It
is a contingent liability. When the Department worked with its auditors, from a cash position on the
balance sheet, the Department did not qualify for PPE loans. There may be some internal discussions
needed to look at a conservative way of having a restricted cash account for the Deferred Inflows.
The offset would be it is something which has to be paid at some point in time, and it would create
more prudent cash management as rate studies are done, sort of like the Energy CIP concept. In
addition, the Department has been suspending its accounts receivable --the $1.5 million. Based on
trend, perhaps the Department should be accruing for a doubtful accounts liability on the financials.
There are monies in the second round of CARES Act which could probably be something where the
Department has an accounts receivable for the anticipated CARES Act grants to show net potential
liability for charge-off. In his experience, anything over 90 days goes into an account for doubtful
accounts; and if it comes back in, it is more for understanding how the cash position is managed. This
also goes to when collective bargaining takes place, to have them understand that the Department has
restricted cash funds that have to be accounted for. This could be a policy management decision or a
footnote.
The Manager -Chief Engineer stated that there are no specifics for the CARES Act and the American
Jobs Plan. One promising thing is the emergency rental assistance the County has gotten some funds
for. The Department has been getting the word out by bill stuffers and a press release that this applies
to utilities, but it is only provided for those who are renting and not for homeowners. It is hard to
predict what kind of outcome will be seen from that. Ms. Gray did compile delinquencies to give an
understanding of what the Department's position is which allowed her to set a goal for what she hopes
to see from this program. There was a better-than-expected result from Hawaii Electric Company's
utility assistance program, where the Department received more than thought. He asked Ms. Gray to
touch upon that.
Ms. Gray stated that the Department received more than $10,000.00 to pay toward delinquent water
bills, which was paid directly to the Department for those who applied for the funding program for
their accounts. The program is managed by Aloha United Way, in conjunction with Hawaii Island
United Way. The program lasted about 24 hours and was available to customers until it reached its
capacity. With this rental and utility assistance program that the County has lodged, it is working
with the partners in the community, and they have more funds available. The hope is to reach
$1 million; but whether it happens, depends on customers applying for it. The Department can get the
word out to them; but whether they are going to utilize the assistance, or qualify, will be determined
by the County and their partners in the program.
Ms. Hugo asked if the $10,000.00 accounts for the decrease in the delinquency.
Ms. Gray replied that was correct.
Mr. Hirakami asked if it would it be a good idea for the Department to put a piece in the newspaper
and make people more aware of the incentives so they can pay off their bill. Paying for the
advertisement would be a good investment as it may result in more revenue.
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The Manager -Chief Engineer asked the Deputy to plan for a paid ad, which would identify the
partners and who they can contact.
Mr. Ney asked if the Department is able to apply for grants, etc., independent of the County. It seems
like the County and the State have gotten allocated money to help subsidize and offset expenses; but
the State is hoarding the money, mentioning their pulling the County portion of the Transit and
Accommodation Tax and having the counties raise the tax on tourists to recoup that 3%.
The Manager -Chief Engineer replied that for some of the large programs, they are only funneled
through the County. The Department of Water Supply has to do its own public relations work to get
the word out for customers to take advantage of the program. There are other grant opportunities,
such as one worked out with then -Senator Kahele's office, where they had some discretionary
funding. Three projects were submitted for consideration as part of their community projects funding
program.
Mr. Ney asked if it was a single- or a joint -filing for the rental relief for landlords and renters.
The Manager -Chief Engineer replied that the Department is not involved with the process. The renter
has to go to one of six partners with the County --Hope Services Hawaii, Hawaii First Federal Credit
Union, Neighborhood Place of Puna, Habitat for Humanity Hawaii Island, The Salvation Army, and
Hawaii County Economic Opportunity Council.
Mr. Ney suggested that the Department reach out to those organizations and ask them to please let
people know that they can apply this to offset their water bill.
The Manager -Chief Engineer suggested that aside from relying on them, Mr. Hirakami's idea was
also a good one, where the Department would pay for a newspaper ad to get the word out.
Mr. De Luz suggested adding some advertising to its public notices, for example, joining an ad to an
ad where the public notice would be one box with another just below it, for example a DWS Tip or
something to that effect where you are leveraging the opportunity of the larger ad. Another
suggestion for the water rate study is perhaps a public benefit fund at a small percentage (less than
1%), like the energy utility uses, which would provide the opportunity for the Department to assist
anyone in distress on their delinquent water bills. The reason for this suggestion is he believes the
Department has a social responsibility to help, and the reality is that people in the lower income
groups are hit the hardest at any given time in situations like COVID. It could be a nominal
surcharge, whether voluntary or something else. Perhaps another utility is doing something to that
degree. It may take an administrative amount to manage it and would have to be vetted first.
The Manager -Chief Engineer thought that was a great suggestion and would not have to wait for a
water rate study. It is something that could be discussed with the Board, like the energy CIP rate, and
move to public hearing. He was on board with that and even finding a way to assist with affordable
housing, which is another great need in the community. Going back to the Financial Statements, he
asked Ms. Gray to address some questions from the previous Water Board meeting.
Ms. Gray reported on questions from Mr. Hirakami at the last meeting in regard to the Water Rate
Study, provided by Harris & Associates. The questions and answers as follows:
Question #1: Pertaining to the Water Rate Study Report, Mr. Hirakami said the report included some
predictions on future water use but the history was only 2006 and 2010. He asked why 2020 water
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consumption was not included. There is a table predicting what the consumption is going to be years
from now but it did not include 2020.
Hs. Gray reported that she reached out to Harris & Associates and their response was basically it
was the timing of when the rate study began, in which they conducted the analysis starting in August
of 2019, only the beginning of Fiscal Year 2020. They like to use the most recent data at the time;
therefore, they used Fiscal 2019 data as a starting point.
Question #2: Regarding the Water Rate Study, Pages 6-7, Table 6-3, the Projected Average Day
Demand by Water System, 2006 Water Master Plan, shows Fiscal Years 2005, 2010, and 2025.
Mr. Hirakami wondered why there was such a gap in the projected demand.
The response to that from Harris & Associates is that in master planning, the year intervals are
greater so they need to use a longer planning horizon, decades versus annual, which would be too
short of a time to use as far as their planning horizon.
Question #3: Regarding Table 6-1 in the Water Rate Study Report, Mr. Hirakami's concern was that
the table includes the methodology used by the different counties; and in there, it also included
Hawaii Wastewater, which he mentioned has nothing to do with the Department of Water Supply.
The response from Harris & Associates was that the table reflects the different methodologies of the
different counties, as well as Hawaii Wastewater, used in their studies before implementing the
facility charges; and Hawai `i Wastewater had the most recent study on this island. That is the reason
why they included it in the table.
The Manager -Chief Engineer elaborated on why Hawaii Wastewater was used in the analysis by
Harris & Associates. His take on it is that it is a general evaluation of the kind of methodologies that
go into establishing impact fees. This Department is similar to the other water utilities; but instead of
Impact Fees, they are called Facilities Charges. Kauai calls it a Facilities Reserve Charge, but they all
have similar mechanisms. He supposed the Hawaii County Wastewater Division had just had a study
done on determining their impact fee. It may have been a reference for Harris & Associates in finding
the different methodologies used to come up with their figures.
Mr. De Luz stated that for the newer Water Board members, if they have not already gone through the
audit report and the contingency plan, it would be good to provide them with a copy. Also, when
getting to the next water rate study, there are two areas to understand. One is, as Mr. Ney mentioned,
what the service cost is per system. In addition to that, what is the future growth in regard to
expanding distribution and storage. If you have "X" number of customers on the 23 water systems, as
he believes Mr. Ney was eluding to, is there exponential growth or are there areas based on current
goals, whether it be affordable housing and/or development that shows where the need will be. One
challenge for counties in Hawaii is not having the floating General Obligation Bonds for expansion.
They rely almost exclusively on the private sector. There is a need to plan now for 10 to 40 years
down the road; and from what he can see, there is very little opportunity for expansion other than just
keeping pace. That is not a bad thing; but perhaps in the rate study, if water is truly viewed as a social
responsibility, like public safety, there is a need to step up on how to finance those matters. It may be
something to address regarding policy.
The Manager -Chief Engineer explained that the Department does not typically replace size for size.
For example, if a tank or waterline is going to be replaced, the capacity will be increased. The
challenge in expanding water systems is the Department does not have the capacity, as a developer
would, to sell the land that the infrastructure services. If a waterline were extended a mile down the
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road, the hopes are to get new customers at some point, and that is not a prudent financial move for
the Department. A developer can do that because they have the land to sell and recoup the cost for the
capital investment.
Mr. De Luz stated that this is where the impact fees come into play for subdivisions, but the
methodology in this State is that the private sector has to pay 100% for it up front with very expensive
money. His suggestion would be that the Department take a posture that there will be impact fees in
an area where the Code allows for development to occur. For an average lot, it costs no less than
$30,000.00 to bring water in because of the restrictive water variance. You can get land cheap, but
the infrastructure costs mean you have a double or triple investment to get your money back. If you
work with a developer that has the land and plan with them, not necessarily the utility, the mindset has
to be changed. The County has to look at this as a responsibility with the utility helping with input
and management resources. It does not make economic sense for the utility to do it because,
operationally, they will have what are called stranded assets, just like the electric utility, where there
are pipelines and storage going to nowhere. This is forward thinking and he felt that the Department
needs to have an internal discussion and then work with organizations, for example, the rate study and
see how it would look if the choice is to create this opportunity. The County Code does not promote
affordable housing, which puts the responsibility of investment on the developer. It is a methodology
that needs to be rethought because the way he sees it, other than the west side, rural development in
East Hawaii will concentrate in South Hilo where there is water variance and cheap land and will
continue to bring pressure from people asking for public services such as Hawaiian Paradise Park.
You are going to pay dearly when someone gets to understand the CDP (Community Development
Plan) is actually the contingent liability in regard to performance. This is a matter of rule of law on
the CDP. Before getting into that predicament, he thinks the Department should be very proactive in
understanding what needs to be done.
The Manager -Chief Engineer stated that this could get into tons of philosophical discussions. For this
Department, if there are opportunities to partner, it continues to do that. However, when someone
wants to develop on land that has no connection to existing infrastructure, that is the challenge. This
Department keeps in touch with the Planning Department so that policy decisions are tied to the
land -use decisions being made county -wide. Affordable Housing is a big priority. It is a matter of
how to make that happen in a prudent manner and not overburden the existing customer base. It is not
going to happen overnight. Where there are pockets of maybe 20 or 30 units to get going, at least
there can be something happening and work toward the larger developments. He concluded that this
is a bit off topic and asked if there were any further questions on the Financial Statements. There
were no further questions.
F. MANAGER -CHIEF ENGINEER'S REPORT:
The Manager -Chief Engineer provided an update on the following:
North Kona Wells - the Deputy provided some background for the new Board members on this
agenda item. The Department had some challenges in the past with wells in the North Kona
system. Geographically, the North Kona system runs from Makalei in the north to about the
Honalo/Keauhou area in the south. A couple of years ago, the Department made a commitment to
the Board and the public to meet its mission of providing communities their water needs and also
providing a monthly update to the Board on the status of the well repair projects in the region. He
provided his report for this month. In the North Kona water system, there are 14 total sources that
service the community. Currently, eight wells are online and five are offline. One was repaired
and is going through some final testing. Of the six that are offline, Kahalu`u B has been repaired.
The pump and motor have been installed. The well has been purged, and the well was chlorinated
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last week. Some tests will be run this week and the hopes are the well will be in use in early May.
For Kalaoa Well, the contractor is expecting to start installation the first week of May, and testing
thereafter. For Palani Well, the equipment is expected to be on island the first week of May with
installation thereafter. Wai`aha Well is on litigative hold. For Keahuolu Well, the equipment was
received on island; but there was an issue with the motor as the contractor was preparing it for
installation. In order for the contractor to maintain the unit warranty on the installation, the
contractor and the manufacturer decided to ship another motor to the island, which is expected in
mid-May with installation thereafter. For Makalei Well, the Department continues to work with
the developer for them to get their repair project out to bid.
2. COVID-19 Update - the Manager -Chief Engineer recapped earlier discussion about the County
emergency rental assistance program. The Department will continue to move forward with some
of the great ideas heard today to get the word out to customers that this resource is available and
who to contact to take advantage of the opportunity. The Department has been taking a very
conservative approach in its daily operations to accommodate physical separation. The
Department has not had any COVID-19 infections in the workplace but has had some possible
indirect exposures. Efforts have been working well for the Department; however, at some point,
with people receiving vaccinations and other venues opening up, the Department will also start
moving toward that. The Department is maintaining appointments only and is not shutting people
off. Even with that, some people say they will not pay their bill unless they can pay in person. The
Department's Credit and Collections Clerk has made some appointments to handle those higher
delinquent amounts and a few have come in and made their payments. The Department tries to
accommodate customers in a reasonable fashion while minimizing exposure the public and staff.
Legislative Matters - the Manager -Chief Engineer reported that the problematic Bills that popped
up this Session appear to all be dead. He will continue to try and establish relationships with
Legislators and elected officials and explain the Department's perspective, as this may continue to
happen year after year, given the State's financial situation. The Department continues to work
with the other water utilities and has frequent meetings to share perspectives, challenges, and
concerns with legislation.
4. Employee of the First Quarter 2021 - the Manager -Chief Engineer was pleased to announce that
the employee of the first quarter of 2021 is Ms. Eileen Aburamen. Eileen was present at the
meeting. Ms. Hayducsko stated that Eileen has been with the Department since 2008. In the last
six years, she has been in charge of administrative work in Hilo Operations. The Operations
Division has the majority of the Department's staff. The Board may recall seeing Eileen at the
front counter during the days when Board meetings were held in their conference room. She is in
charge of their dispatch, their procurement, timesheets, schedules, stand-by, ordering all the parts,
and inventory work and is a very hard worker. COVID has been really hard and there have been
staff shortages. They are lucky to have her helping out. The Manager -Chief Engineer recalled
Eileen helping to procure hand sanitizers in the beginning parts of COVID-19 when they were hard
to find. She lived in an area where the local store happened to have a supply, and she sent a family
member to purchase the limit, and brought to the Department for reimbursement. This is one
example of how goes over and above her heavy workload and he thanked her for her contributions.
Ms. Aburamen thanked everyone and stated that employment with the Department has been great.
It has its challenges, but they only make one stronger. The Board congratulated her on this award.
(Mr. De Luz left the meeting at 11:44 a.m.)
Retirees of the Department of Water Supply - the Manager -Chief Engineer turned it over to
Ms. Gray, who has two employees that either have or are retiring. Ms. Gray noted that the two
employees were not in attendance today, but they are: Ms. Brenda Isa, who retired last month. She
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10)
started with the Department back in February 2014 as an Accountant II and ended her career after
seven years as an Accountant 1V, overseeing the management accounting section, which includes
daily accounting operations such as accounts payable, payroll, and general ledger accounting. She
had more than 30 years of service with County and State government. The second person is
Ms. Lani Aguinaldo who will be retiring at the end of this month. She started in May 2005 and has
dedicated 16 years to the Department, serving as Customer Service Representative. She is one of
the first people a customer will talk to regarding their water accounts, and the Department has
definitely had the benefit of her representation for the Department. Thanks go out to both Ms. Isa
and Ms. Aguinaldo. The Manager -Chief Engineer also recognized them for their hard work.
G. CHAIRPERSON'S REPORT:
Vice -Chairperson Scicchitano stated that he appreciates the cross-section of the Department staff and
the Board in its discussions. There were thoughtful and great questions today and good insight. He is
happy to be serving on the Board and thanked everyone for their contributions today.
ANNOUNCEMENTS:
Next Meeting: - May 25, 2021, 10:00 a.m., via Web Conferencing
11) ADJOURNMENT
ACTION: Ms. Howard moved to adjourn the meeting; seconded by Mr. Ney and carried by roll call
vote (Ayes: 7 - Mr. Bell, Mr. Hirakami, Ms. Howard, Ms. Hugo, Mr. Ney, Mr. Sugai, and
Vice -Chairperson Scicchitano; Absent: Mr. De Luz and Chairperson Boswell).
(Meeting adjourned at 11:49 a.m.)
Recording Secretary
APPROVED BY WATER BOARD
MAY 25, 2021
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