HomeMy WebLinkAbout2022-01-25 Water Board Meeting MinutesMINUTES
DEPARTMENT OF WATER SUPPLY
COUNTY OF HAWAI`I
WATER BOARD MEETING
January 25, 2022
Via Zoom/Host Location: Department of Water Supply, 345 Kekuanao`a Street, Suite 20, Hilo, HI
MEMBERS PRESENT: Mr. David De Luz, Jr., Chairperson
Mr. Steven Hirakami, Vice -Chairperson
Mr. Michael Bell
Ms. Julie Hugo
Ms. Kea Keolanui
Mr. Benjamin Ney
Mr. Keith K. Okamoto, Manager -Chief Engineer, Department of Water
Supply (ex-officio member)
ABSENT: Mr. Kenneth Sugai, Water Board Member
Mr. William D. Boswell, Jr., Water Board Member
Mr. Eric Scicchitano, Water Board Member
OTHERS PRESENT: Ms. Diana Mellon -Lacey, Deputy Corporation Counsel
Ms. Ann Hajnosz, Harris & Associates
Ms. Karyn Johnson, Harris & Associates
Department of Water Supply Staff
Mr. Kawika Uyehara, Deputy
Ms. Candace Gray, Waterworks Controller
Mr. Kurt Inaba, Engineering Division Head
Mr. William O'Neil, Jr., Water Service District Supervisor 11, DWS Waimea
Mr. Eric Takamoto, Operations Division
Mr. Joshule Johnston, Water Service District Supervisor II, DWS Kona
Ms. Darlene Casuga, Customer Service Representative IT, DWS Kona
1) CALL TO ORDER — Chairperson De Luz called the meeting to order at 10:00 a.m. A roll call was taken
for Water Board Members in attendance. Six members were present: Mr. Bell, Mr. Hirakami, Ms. Hugo,
Ms. Keolanui, Mr. Ney, and Chairperson De Luz.
Ms. Diana Mellon -Lacey, Deputy Corporation Counsel, briefed the Board on a new requirement under the
Sunshine Law, which she will go over in detail later in the meeting. At this time, if anyone has someone
in the room with them, where they are attending the meeting from, they are supposed to announce that as
well. (There were none indicated.)
2) STATEMENTS FROM THE PUBLIC - none
3) APPROVAL OF MINUTES:
ACTION: Ms. Hugo moved for approval of the Minutes of the December 21, 2021, Water Board
Meeting; seconded by Mr. Ney and carried by roll call vote (Ayes: 6 — Mr. Bell, Mr. Hirakami,
Ms. Hugo, Ms. Keolanui, Mr. Ney, and Chairperson De Luz; Absent: 1 — Mr. Sugai.)
Pagel of 22 January 25, 2022, Water Board Minutes
4) APPROVAL OF ADDENDUM AND/OR SUPPLEMENTAL AGENDA — None
5) WATER RATE STUDY:
Water rate consultant, Harris & Associates, presented the fundamentals of Water Rate Design, including
an overview of rate design objectives, various rate structures to accomplish these objectives and rate
structures used at similar utilities. The consultant is requesting feedback on the type of rate structure to be
implemented in Fiscal Year 2024 (starting July 1, 2023). This would provide the Department of Water
Supply staff a year to update its billing system to accommodate a new rate structure, if needed. The
option to maintain the current rate structure will also be considered.
Ms. Ann Hajnosz and Ms. Karyn Johnson of Harris & Associates introduced themselves and provided the
Board with a brief background on themselves.
Ms. Hajnosz stated that she has been doing water rate studies and water utility consulting for about 30
years. She is originally from Hawaii, is a graduate of the College of Engineering at the University of
Hawai `i, after which she went away and got a master's degree in business with finance concentration and
has been on the mainland for all of those years but has been very fortunate to still work back in Hawaii
with the water utilities in the State as well as some wastewater, solid waste, and some energy utilities.
She has had a great career in working with her home State. She introduced her colleague, Ms. Karyn
Johnson, who is working with her on this project.
Ms. Johnson stated that, similar to Ms. Hajnosz, she has been a utility rate consultant for about 30 years,
working across the west coast and Hawaii helping utilities get financial stability and making sure they
have rates in place that meet their objectives. It has been great working on the studies, and she looks
forward to working with this Department and Board more.
Ms. Hajnosz shared her screen on their presentation. They will start off with a context of where they are
in the study and will go into talking about some rate -setting goals and objectives and talk about why we
need customer classes and why we should consider them, talk about some rate structure considerations,
and do a little history of DWS rates and talk about current rates. The cost of service is right now at the
preliminary stage, and they will show how that impacts rate design, and then talk about rate structure
options. Ultimately, they do need Board feedback on several items; and they will go through that.
To set the stage of where we are, Page 3 shows we are Step 6 of 8. Last time we met in November, we
were at Step 4, which was a determination of the revenue requirements. In between, they were working
on the cost of service, but want to make sure they finalize that in alignment with what the Board wants to
do relative to rate structure changes. That final cost of service will be seen at the next Board meeting they
attend. Right now, they are focusing on rate design and are talking about it in a generic way because they
do not have any results quite yet. It is important to get to what the Board wants to do relative to rate
objectives and goals.
What they need from the Board today is to confirm its objectives, and these are their recommended focal
points: Financial Stability, Fairness, Conservation, Affordability, and Simplicity. In the coming slides,
there are a lot of rate design objectives; and it is difficult, if not impossible, to satisfy all of them equally,
so they will focus on a few of them here. They also suggest and recommend that we maintain the monthly
Standby Charge because it will give financial stability. Third, the Agricultural class has been subsidized
for many years and has been part of the policies of the Department of Water Supply. Right now, they are
at about 55% of cost of service for the Agricultural class; but, again, these are draft results and we expect
them to change a little bit. The idea would be, what they want from the Board is direction on whether we
should keep the cost of service at about the same level as it is now or whether we should be moving
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toward closer recovery of full cost of service. We would not want to do that in one fell swoop because it
would not be fair. A movement toward cost of service would support this rate objective of fairness.
Lastly, they have a plan to move from the current rate structure, as it is, that does not include a
single-family class. They would like to add a single-family class, if the Board agrees; but they would do
that in a matter of steps, within the next two years. They would definitely want to maintain the
conservation focus of the rates, for the single-family class, and then they would want to move toward a
uniform rate for the general use and the agricultural class as well.
Talking about an overview, as mentioned before, rate design is really a function of so many different
objectives and is really impossible to satisfy all of them. In some ways, some of these objectives might
conflict with each other and they really have to design rates that work for the community. The third bullet
on Page 5 is "Identifying unique DWS utility goals and customer demographics guides your level of
analysis and rate structure choices." This is really what they want to do here. A rate structure that Maui
uses does not necessarily apply here. Whatever ends up being selected, they want to make sure it supports
the goals of the utility, supporting financial policies and water resource policies and objectives. Water
rate structures can be a vehicle to help customers understand and appreciate the value of water and also be
aligned with some of the other goals that the utility is trying to achieve. The last bullet is key --in order to
design rates or to change the rate structure, they need good quality data from the billing system; and that is
one of the things they are looking at right now. There is some uncertainty of the quality of the billing
system data that might take a little longer for them to get where they want to go.
The rate structure drivers are shown on Page 6 under the Community Profile. They are going to look at
the size of your customer base, and as important is the diversity of your customer base --whether it is
mostly residential, mostly industrial, or a mix, and whether there is a lot of agricultural use. That is what
is meant by diversity of customer base. They look at the economics of the customer base and what the
economic drivers are. In Hawaii, it is tourism; but there are also some agricultural elements to it. Next
are the policies and sensitivities. Going back to the policies of your utility and how they play into how
they play into how you deliver your services to the communities. Finally, the risk tolerance is a
measurement of how fast we can change. Given the last two years, they will be proceeding with caution,
sensitivity, and empathy to the customer class. The other driver is Consumption Patterns, and this is
where it links to the availability and quality of data. Can rates be designed with confidence that are going
to enable us to collect the revenues we need. That is why it is important that we have good quality data.
They look at things like average annual use, peak period use, which is measured usually on a monthly
basis. They do not have anything more detailed than that. There is also off-peak usage, and these are all
the data points that help them explain and describe what the cost impacts are for the customers and then
that would be reasonably attributed to the customer driving those kinds of costs and they would be
charged a certain amount. That is how it links together.
On Page 7, the list of eleven rate design objectives comes from the American Water Works Association
(AWWA) M1 Manual, which is the manual for rates fees and charges. Some of them are similar to what
they will be recommending for the DWS, but there are a lot of them on this list; and as mentioned, not all
utilities can choose to focus on all of them. The one that they will point out is #11, that rates are legal and
defendable. In some jurisdictions, they have specific laws related to how you can recover costs from
different customer classes, such as California where they have very prescript rate laws. Ultimately, you
want them to be defendable and based on an industry best -practice study and cannot just be arbitrary.
For the DWS, they want to focus on the five objectives shown on Page 8 - Financial Sustainability (need
rates to give revenue stability). They should be sufficient, predictable, and be stable for the customers so
they would be able to anticipate, in their own monthly budgets, what they would have to pay every month
for water, as well as businesses knowing the rates are predictable and relatively stable over time.
Conservation and Efficiency is something that every utility is looking at to make sure their water
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resources are used efficiently. We want rate structures that promote this and ultimately protect our limited
natural resources. Transparency and Simplicity is something that sometimes gets taken for granted
because we want to design rates that are in line with our community but we also want them to be
relatively easy to administer and explain. If rates are designed that are too complex and the customers do
not understand them, we are not going to be getting the right message to them. Also, you want staff to be
able to explain the rates to customers in a relatively easy fashion. Fairness and Equity is where we do our
cost of service analysis to understand what the equity is --are customers who are creating the cost being
charged the comparable rates. The fairness part comes from, as mentioned earlier with agricultural rates,
if a customer class is less than the cost of service by a large amount, how fast we move them toward
customer service. If that is the desire of the Board, that will tell us how fair that is. It would not be fair to
do it in one fell swoop, but maybe it can be done over time, to be fair. The last objective is Affordability,
which is getting a lot of attention, as has in the past, because of the economics of a lot of our areas of
housing affordability. Other utility rates are going up, and other costs are going up, so we want to make
sure we are paying attention to our water bills; and especially for those on the lower income side, if there
is anything that can be done to make it fair for them. This will be looked at as well.
After we think about the rate objectives, we look at our customer classes (shown on Page 9); and in a
typical utility, you will find these types of customer classes: a single-family customer class, a commercial
and industrial class, sometimes there is an agricultural class (in Hawaii there is one); and a non -potable
class. The reason why they organize utilities into customer classes is that they want to make sure they are
pricing the water to homogeneous users, and typically when you think of a single-family user, they are
using anywhere from 600 gallons per day, maybe up to 15,000 gallons a month, more or less. That is very
different than a commercial customer who uses much higher volume and has different peaking
requirements. Single-family customers think about when they use water; they use water first thing in the
morning and then in the evening. Those are the two peaks that single-family customers create.
Commercial and industrial typically do not have a lot of peaks. The other big cost driver for rates is for
fire protection means. Relatively speaking, your commercial customer classes are going to have a higher
fire protection need than single-family. These are all the drivers that separate the different customer
classes into single-family, commercial, agriculture, and non -potable.
We take our rate objectives, look at our customer classes, and we say what is going to be the most, or best,
rate structure that helps us achieve our objectives and is fair and equitable and gives good pricing signals
to our customer classes. Page 10 shows a relatively simple one. It is a uniform volume rate which is one
rate for all use, no matter what the customer class is. It is very simple and easy to explain but might not
have the most equitable outcome. The second one is class -specific single block rates where, by those
different customer classes, you would have a different rate, depending on the class. This could get closer
to equity because, as said before, certain customer classes are going to drive more costs--peak-flow costs,
for example, or fire -flow costs. You could allocate those costs to those customer classes and that would
be reflected in their rates. The Increasing "Tiered" Block Rates" is what this Department has right now,
where, as you use more water, you step from Tier I to Tier lI to Tier III and Tier IV. That is an indication
of a conservation oriented rate structure where you are trying to discourage use at the highest block.
Some people might want to have that, and that is their choice; but we do not want everybody to be using
water at that highest block. This rate structure is the most appropriate for single-family customers because
they are the ones who have a choice between watering their lawns every single day or only watering once
a week. Finally, Seasonal Rates are used in other areas where it is more seasonal. There are structures
that have one rate for winter months and another for summer months, as is used in Seattle. The seasons
directly affect water use. All of these options are very dependent on what the billing system data can
show and what they can use to set these rates.
Ms. Johnson added that this might be a good spot to reflect on the concepts Ms. Hajnosz has talked about
for what might be appropriate for DWS. These four typical rate structures do not all meet every
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community. This might be a good place to say that they are going to be focusing on the two classes in the
middle --the Class -Specific Single Block Rates and the Increasing "Tiered" Block Rates." When you look
at the first one, the Uniform Volume Rates where you are charging all customers the same rate, that is
probably not appropriate for your community since you have a mixture of single-family, commercial, and
agriculture. This is more designed for a smaller system that has primarily all residential customers.
Seasonal Rates are more appropriate for areas that have true, distinct peaking seasonal differentiations.
Going forward, she wanted to reiterate that the first and last options are probably not something this
community would do.
Ms. Hajnosz continued with Slide 11, Water Rate Design, where she had gone through some of the
Department's older reports; and since 1995, it has had these two customer classes: General Use and
Agriculture. It has always had a monthly standby charge by meter size and it has been island -wide. You
have had a multi block, inverted block rate for General Use since 1995 and a fourth block was added in
2001. The Agricultural rate structure has changed over time: a declining multi -block in 2001, changed to
a flat rate (from 2001-2007), and back to a multi -block, inverted; and now it is the declining block where
the third block is lower than the first and second (2007-current). Since 1995, the Department has also had
a Safe Drinking Water Clause which was to recognize additional regulatory costs that were unanticipated
where the Department was in a time period of high regulations and unexpected costs. More recently, the
Board has expressed a desire to look at moving to a more traditional rate structure, and that would mean
adding a single-family customer class.
Going over the current rates (Pages 12 and 13), effective January 1, 2021, they are shown by meter size.
The General Use rates on the left (Page 13) are all indicating what the charges would be by the blocks and
on the far right, the rates are set by meter size. Depending on the size of the meter, the first, second, third,
and fourth block will vary. The complexity of the rate structure can be seen in this table. For Agricultural
Use Rates (Page 14), they are similar but with a decreasing third block. The first two are increasing
blocks. The background behind this was to say that in the first and second block, the agricultural users
might be acting like residential customers if they have agricultural land and also have a house on that land;
but the third block was more to recognize their commercial agricultural use.
As mentioned before, part of the rate design process is recognizing what the cost of service results are;
and this is very preliminary, but we wanted to give you an idea to show how it would work. Page 15
shows where they took the Fiscal Year 2024 revenue under existing rates and then did their cost of service
analysis in the table and basically added a Single -Family customer, just theoretically. As seen on the far
right, this assumes that a 9.5% system rate increase would be in place. Any of the numbers on the far
right that are less than 9.5% indicate that the particular customer class is already paying higher than its
calculated cost of service. For Single -Family and General Use, their expected rate increase would be less
than 9.5% because they are already paying more than their fair share of cost. The reason why they are
paying a higher share is because Agricultural users are not paying their full share for the cost of service.
That is a subsidized class. The Private Fire Service, on the other hand, is paying a little bit more than their
cost of service so you would see that go down a bit. This is an example, based on absolutely preliminary
data. The results could change once we finalize our cost of service and once we hear from the Board
where we want to go relative to new customer classes, if any.
Going to Page 16 - Water Rate Design - Rate Structure Options, she talked about a couple of rate
structures that you are already pretty familiar with. If we went to a single-family residential customer
class, we would recommend that we stay with the inverted tiered volume rates. This just basically says
that there would be three to four tiers; and as the tiers step up, the rates would step up. As you increase
use from the first block to the second and on up, your rates would increase. This would be a strong
conservation -oriented rate structure. We would basically expect that the high users would be about 5 to
10 percent of the customer bills. We do not want anymore than that in the last block because that could
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put us at risk for revenue erosion. This is where we talk about how some of the rate objectives of
financial stability and conservation could come into conflict because as much as we want to send a strong
conservation message, if it is not done right, we could see revenue erosion at the third and fourth block
levels. That is why data is so important. You need good data to be able to do this right.
On Page 17 - Commercial Rate Structures, for the other classes, for the commercial rates, we would be
recommending a single block charge, a flat, or uniform rate, where it does not matter what your usage is.
Again, this class of customers is very diverse --everything from your small mom and pop store to the
Waikoloa Village is in this customer class. Some of those customers peak more than others; some of them
use a ton more water than others; so ultimately, it makes sense and is fairer to have a uniform rate. That
does not satisfy all of our rate objectives necessarily because if you are a high -peaking customer, you are
not really paying your fair share of peaking costs under this scenario. Those that do not have a high peak
that are maybe evenly spread across the day are going to be paying a little bit higher than they normally
would. On balance, for a customer class that is as diverse as typically commercial's would be, a uniform
rate is the way to go. It is easy to understand and it is easy to administer as well. The customer impacts
for your customers moving from the rate structure they are on now --the inverted block rate structure --to
uniform block is going to be a challenge. She asked Ms. Johnson to describe those customer impacts and
the challenges we would expect to see moving from this inverted block to a flat uniform rate.
Ms. Johnson stated that basically, your current rate structure has four blocks with each block having a
higher unit cost. If we are going to move them all to one rate, the customers in your first block and the
customers in your higher blocks are going to have the most impact because we are going to be moving
more towards an average rate. The impact of moving to this is that your customers in your lower block
rates are going to have a slightly larger impact because they are going from a lower unit cost, now to more
of an average unit cost. The customers in the highest blocks are actually going to show a decrease
because they need to be moving down from that highest block to meet that average. It seems a little
contrary to your goals where the more you use, the more you should pay, so it is a transitional structure to
sort of move them all to that average. Again, we would want to do this methodically over time and not
just jump to a structure like this right away to try to mitigate some of those impacts. Overall, this turns
out to be kind of the industry best practice and the fairest rate structure for your commercial customers;
but there will be some near -term impacts, depending on what type of customer you are. It gets a little
challenging to try and explain and that is why they are trying to put together a plan of how you can
smooth in from those tiered rates down to that uniform rate over time and try to mitigate the material
swings for individual customers.
Ms. Hajnosz stated that the key message for rate design is that no one structure is going to meet all of your
utility objectives equally. You will have to give a little bit, either on financial stability or conservation or
maybe a little bit simplicity. Not every rate structure is going to work well with every customer class and
that is why we have various options and why we want to, again, put our users into homogenous customer
classes. Finally, we want to make sure that the adopted rates collect what we need in terms of revenue and
that it achieves the best balance of the rate setting goals. The key questions to consider are what rate
structures best align with your goals and objectives; what rate structures best align with your customer
class characteristics; is there sufficient data available to evaluate and design; and can the billing system
accommodate the rate structure changes. Whatever rate structure we come up with, we think over time,
we can move to that confidence in the billing system; but it just might take a little bit longer than we
thought.
Going back to the slide shown at the beginning of this presentation, what they need from the Board is they
would like to confirm the rate design objectives of financial stability, fairness, conservation, affordability,
and simplicity. They would like to maintain the monthly standby charge as it is because it does create
some really good financial stability. They are going to continue the Agricultural class subsidy but move
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closer to cost of service over time; and in the next iteration when they provide a rate proposal for the
Board's consideration, they can tell what the numbers are with a little more certainty and how fast or slow
they would recommend moving to cost of service. What they want to know is if the Board wants to keep
the Agricultural subsidy and if it wants to move it closer to cost of serve. In the fourth bullet, their plan
for the rate structure change, is if you do want to move to a Single -Family customer class, which would be
done over time; and they are going to maintain that conservation focus and inverted block rate; and then
they would move the General Use and the Agricultural customers to a uniform rate, as Ms. Johnson
described earlier.
The Manager -Chief Engineer turned it back to Chairperson De Luz for questions and discussion from the
Board Members at this time.
Chairperson De Luz asked if the Manager -Chief Engineer could give the Board some insight from the
Department's side as far as the methodology and where the Department sits in regard to this because the
foundation of this study, to a degree, looks at operations and how things are currently done, and may give
the Board some perspective on the questions to ask.
The Manager -Chief Engineer started with the Department's Mission Statement, which was established in
collaboration with the Water Board some years back. Basically, the core mission of the Department is to
provide customers with an adequate and continuous supply of safe drinking water in a financially
responsible manner, comply with all relevant standards, and assist and facilitate development of water
systems in areas not currently served. To him, what that means is financial stability, which Ms. Hajnosz
talked about, and meeting our needs, not for just the immediate future, but for the long-term as far as the
requirements of the Safe Drinking Water Act, because it is non-negotiable that we meet all those
requirements. What it will take to accomplish all of that, as discussed in prior presentations by Harris &
Associates, is setting up good fiscal policies related to CIP reserves so that we can put some money aside
for rainy -day funds or for capital improvement and investments. There have been discussions with
Ms. Hajnosz and Ms. Johnson and we are in alignment with what they have proposed as far as moving
from our current rate structure to that which is closer to industry standards with setting a separate rate
structure for single-family use and general use. In the long-term, it will provide better predictability and
financial stability. Some of the data needs that Ms. Hajnosz talked about, the Department does not have
and will need to be accumulated, systematically, with changing this rate structure. Some assumptions will
have to be used on this initial evaluation because it is not broken down by different classes. It is broken
down by meter size. For example, it would not be known if 5/8-inch meter services a single-family versus
commercial activity. To recap, from the Department's standpoint, it is in alignment with Ms. Hajnosz's
and Ms. Johnson's proposed route to take with this rate study and rate structure.
Chairperson De Luz thanked the Manager -Chief Engineer for his input. What he is hearing is that the
Department is working with Harris & Associates to establish better data sets. As mentioned, with the
5/8-inch meter servicing a single-family versus commercial activity, perhaps looking to the industry for
how they establish that, maybe through affidavits, similar to a dedication in real property --if it turns out to
be falsified, you would be able to collect back usage rates. He looks forward to getting to that next level.
He thought it might be purposeful to list the Mission within the context of these presentations so it can
always be referenced for what the objectives are within the Mission Statement. He then opened it up to
questions from the Board Members.
Mr. Ney complimented Ms. Hajnosz and Ms. Johnson for being very articulate in detail with their
presentations. He liked the idea of having rates homogeneous --one for business, one for agricultural use,
and one for the home owner. It simplifies things, and first and foremost is the need to have a plan that
puts the organization in a sound financial position. One thing with talking about equity is that he thinks a
lot of people that end up wasting water are usually the people without the financial means to fix their
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plumbing or their meter location may not be close to their home or the topography is difficult. He would
like to see how to get to a rate structure that does not fall too heavily on those customers, or perhaps pulls
from a customer base that is more feasible. He would like to see the Agriculture rate subsidy not be so
generous either. He finds that a lot of the fauns put substandard plumbing in; and when it breaks, they
want adjustments. Overall, he thought this plan is moving in the right direction.
Mr. Hirakami mentioned the Commercial Rate Structures, Single Block Volume Charge, and thought it
would be easy to target it to a commercial rate versus a resort rate. If you are operating a commercial
business, you would either add this to your operating cost or your cost of goods sold, for example, the
ones producing bottled water. However, in a resort area, there is no mindset of water conservation.
People come here from the mainland and fill up the tubs for their kids or the resort has water features for
swimming pools, etc. Currently, there is no incentive for the hotels to encourage guests to take short
showers to conserve water, our most important resource. If possible, he would like to see that. Also,
when looking at Agricultural use, he recalled a couple of meetings back where there was discussion of two
different pipelines --one for recycled water and one for potable water. He wondered if that was still in the
works. As far as the water spigots, he asked if there is a way to recover that use from the federal
government, through grants, because he observes people washing their cars or boats at these spigots or
filling up 500-gallon tanks. He would like to see how much water is given out (metered) at a spigot and
whether the cost could be recovered from federal sources. It seems like the Department of Water Supply
is offering this free service, but it is being abused.
Mr. Ney added onto Mr. Hirakami's comments with a question about hydrants sometimes having a
backflow on them and trucks filling up from there. He wondered how it is regulated and if it is reported
properly.
The Manager -Chief Engineer started with Mr. Hirakami's comments on the spigot facilities. The
Department did get some federal grant funding for the construction of about a half a dozen of those
locations. The actual consumption from these locations goes through a water meter, which is read and the
bill paid for by the County through the Department of Public Works. The DWS is being paid for those
uses. He agreed, there are some people who abuse the facilities and it has always been a question of
balancing the need and intent with the actual use. That is something that could be discussed further down
the road, separately from the actual water rates. At this point, we are trying to address the rates for the
99% customer base. Going to Mr. Ney's question about temporary meters off fire hydrants, they are
supposed to be a temporary service, not a permanent one. There is a fee to connect to the fire hydrant, but
they do not pay a typical fee for the installation of a service lateral, installation charges, or facilities
charge. The water consumption is metered and protected by a backflow prevention assembly. Water from
the hydrant is used typically for construction, but there have been applicants coming in for drought -related
uses and other temporary uses. This is another function the Department would probably want to bring to
the Board's attention for further discussion on tightening up some of the requirements within its Rules and
Regulations. Going back to the question regarding subsidies for Agricultural use, that use makes up
approximately 2% of the number of customers. Out of 45,000 customers, 2% are on these rates and make
up about 8% of the total consumption. Hopefully, that additional information will help the Board in
presenting their questions, concerns, and direction to where we move from this point. He understood
where Mr. Hirakami is coming from on whether there is a possibility of evaluating another rate for resorts,
he guessed perhaps a block rate structure similar to the single-family class. With that, he turned it over to
Ms. Hajnosz and Ms. Johnson.
Ms. Johnson pointed out the chart on Page 17 where it shows the single block volume charge. On the
graphic, it shows a flat line, meaning the rate is the same. To clarify what this rate structure really means
is that you would have a uniform rate per unit of water for each customer class, but their bill would go up
as they increase their water usage. The structure would be the whole commercial class, including the
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resorts --say if the rate were $1.00 per thousand gallons, if you are a small commercial customer, you are
going to pay that $1.00 per thousand gallons on a lower amount so your bill will be relatively small. if
you are a resort, you are going to pay that $1.00 per thousand gallons but you would have a lot of gallons
so your bill will be significantly higher. That is where they achieve the "pay for what you use" equity
standpoint within that same class. She pointed out that the resorts would, in fact, be paying their fair share
because they would have a larger monthly bill to pay; and if they wanted to conserve water, they would
have a lower bill. That is how you can make a fair rate with a diverse commercial data set. She asked if
Ms. Hajnosz had anything to add.
Ms. Hajnosz stated that was perfect and she was going to say similar things on the commercial side. If
you are going to split the commercial class, there is tremendous diversity within that commercial class and
diversity even with the resorts where you have some small resorts with very low vegetation needs all the
way to the mega resorts. What Ms. Johnson just described is exactly what they would be looking at where
if you do not have a lot of vegetation and landscape needs, you would not pay as high a bill as the resorts
that do.
Mr. Ney added that some rooms on the west side of the island are upwards of $1,300.00 and it is not like
they do not have the revenue to pay it. If they needed to bring in their water consumption they could scale
back on their landscaping, and that is something they should do on their own, but he thought they could
afford to pay their fair share on this.
Ms. Keolanui agreed and added to Mr. Hirakami's and Mr. Ney's comments about resort and commercial
class and incentivizing the resorts to take that extra step and encourage their guests to be conservative
when it comes to water and added her support to that comment.
Mr. Hirakami stated that resorts use their own recycled water for their golf courses and landscaping and
run a dual system. This is about going with our State's direction --to move away from tourism towards
agriculture and being sustainable, yet we are giving the hotels the same rates and raising the Agricultural
rates. The resorts are all mainland corporate structures, and the money does not stay in this State. The
transient accommodation tax (TAT), the use of water, use of our roads and beaches, that is supposed to
come back to us, but it is not; and now the County is charging 3% on top of that to the tourists. If he were
to stay at a hotel, he pays the same and is considered a tourist. It seems kind of oxymoron and going in
the opposite direction from where our mindset needs to be as a State. In keeping with the nature of what
the State of Hawaii is trying to move toward; and in relation to affordability, to make this an impact on
people, he would think the resorts, if they are just paying the flat rate, yes, they may be paying to use more
water, but that is not the idea of why he sits on this Board. Water is our most precious resource, and he
would want something to incentivize them to tell their customers to please conserve our water.
Ms. Keolanui was in favor of what Mr. Hirakami spoke of and the State trying to move towards
agriculture being the main industry versus tourism. There is a proposed Bill right now that may increase
Hawai`i's minimum wage by double by 2026; and to look at that impact on the agricultural industry is
going to be very great and is going to increase the cost of food, statewide. It is something to think about
when looking at we are choosing in this matter.
Ms. Hugo thought these comments feed into the need for more data, which will better inform the decisions
the Board makes. The kind of data collected should be very focused on what will help in moving forward.
There is not enough information on some of the statements that have been made, and it is needed in order
to make those decisions.
Mr. De Luz went back to the Manager -Chief Engineer's earlier comments on meter size. With regard to
the STVRs (Short -Term Vacation Rentals) that are registered and licensed, he wondered if there is a
Page 9 of 22 January 25, 2022, Water Board Minutes
correlation to their meters and what rate they use, because this goes to the conversation as far as whether
they are technically a resort of sorts. Perhaps the Department can work with Ms. Hajnosz and
Ms. Johnson on those 900 or so registered STVRs to find out their consumption and if that rate works, as
a way to better understand their usage. In some municipalities, such as Las Vegas, they actually have a
water conservation fee added to their bill. It may be a different mindset from what Mr. Hirakami and
Ms. Keolanui mentioned; but unfortunately, if you are on vacation, you could care less about how much
water you use. If the fee could be redirected, similar to how the energy fee is, maybe those opportunities
could go specifically to education and/or assist in conservation within the Department. This does not
suggest adding more to the general use rate, but to figure out a rationale or what the fair share is for those
who create impacts. One of the other issues the Manager -Chief Engineer will be sharing with the Board
later on is the matter of affordability when it comes to hookups for affordable and workforce housing. It
is the same kind of rationale, to some degree, but a different matter, and it goes in line with what is being
discussed here and may be identified in some of the data sets we do not have yet. What he hears from the
Board today is a perspective that the commercial rate needs to be addressed as far as a block rate, perhaps
like a resort class. Secondly, regarding Agricultural rates, he thinks we need to do a deeper dive, if
possible, on other municipalities or similar ones because this is a social issue as far as where we put our
investment as a community. This needs to be appreciated and understood better. He understood the
fairness and creating equity; but that the same time, how consistent is it with the overall mission of
agriculture support. Perhaps the Department has to give the Board more insight into articulating the
Mission Statement with agriculture so the Board can identify how that might come into purpose. He
added that these are just generalizations and he was not suggesting to chop it off in one lump, but was
hesitant to create from 55% to 75% where you are looking at a 20% delta. If they use 8% of the water,
that could be significant for them; and depending on the tier, maybe the block could be reevaluated where
the inverted side or the in-between becomes adjusted to allow for higher consumption. The inversion with
volume is almost the same philosophy as commercial use --the more you use, because of the volume, there
is opportunity for revenue, even though there is a subsidy.
The Manager -Chief Engineer agreed with the statements being made and about the direction the State and
County are trying to move toward and that has to be balanced with the Department's fiscal responsibility
overall to its general customer base. He still thinks 55% is over -subsidized and would like to continue
that discussion with the Board --if not 55% or 75%, perhaps something in between like 60% or 65%. The
other thing that can be done is tighten up some of the loopholes in the Rules and Regulations on who
actually qualifies for the agricultural rates. The County was also going through a process to tighten up on
its agriculture exemption in the real property tax, and DWS would like to be consistent with that process.
It may have stalled so there may not be the opportunity to wait for it, but there are still discussions that
can be had to make it fair and meet State and County goals and balance with the DWS' mission, which is
safe drinking water. He understood that agriculture now has more rules and regulations and perhaps
Ms. Keolanui can provide more input on what it takes to meet FDA requirements on the processing side of
it. If they have to meet it on the processing side, then their consumption is more defined. He could see
that helping the agriculture component rather than the irrigation side. He also agreed with the discussion
about resorts and water use. Most higher -end resorts have a reuse program for their irrigation but he
agreed with taking a look to see if there is a different rate structure that could be utilized for resorts that,
through the rates, encourages conservation or at least not wasting water. With that, there is some
homework to do. Some numbers like the STVRs might take a huge amount of effort because it will take a
parcel -by -parcel evaluation on consumption and we do not know how many are licensed versus
unregistered. We do not know where they are and what type of meter their water is going through. It will
be a balance of where we study and get data to the tenth degree; but at some point, we may have to make
some assumptions.
Mr. Ney asked if there would be any way to do a surcharge, like Chairperson De Luz mentioned. The
County's revenue stream would probably be the property tax and they love big development because it
Page 10 of 22 January 25, 2022, Water Board Minutes
brings a lot of revenue into the county; but at the same time, whether it translates into actual benefit for
the people who have lived here for multiple generations. It is a difficult thing to try and promote growth
without putting more hardship on the cost of living. He wondered if there was any means to present that
to the County to say we want a little chunk of that to help shore up our finances and have a bit of revenue
cost in there for a rainy -day fund or whether that was doable at all.
The Manager -Chief Engineer replied that in his opinion, that is separate from his expertise or role here as
Manager -Chief Engineer of the Department of Water Supply. The revenue from the TAT was supposed
to go to the counties for their support services. Whether or not that would work for water, it would
probably go into the general fund. Perhaps the easiest way to address this is through the Department's
Rules and Regulations, through the water rates.
Chairperson De Luz stated that the Department is reviewing its policies as well as affordable housing,
with regard to hookups. One of the things he appreciates , as mentioned by the Manager -Chief Engineer,
is that the Department is confined as far as what is available right now. He believed there are tools that
can be used, such as Affidavits for a particular rate or classification where there could be penalties if an
activity is found to be otherwise; but that is a different side to it. The need here is to have water rates that
are legal and defendable, as Ms. Hajnosz explained earlier.
Ms. Keolanui stated that she would be happy to provide an update on the requirements for food safety for
agricultural enterprises here on island and in the State, if it would be better at another time.
The Manager -Chief Engineer thought it would be cleaner if it were placed on next month's agenda for an
update on FDA requirements related to agriculture usage. To recap today's discussion for Harris &
Associates, what he is hearing is to maintain the agricultural subsidy, maybe something in between 55%
and 75%, such as 60% to 65% or a 1/3 subsidy--66% or 67%; and maybe another rate class for resorts,
from what he heard; and if possible, including STVRs in that evaluation. The good side of things is if we
maintain the single-family use rate, on the STVR side, it will be an escalating rate block structure. On the
agricultural side, with the current rate structure, it being lower for the higher usage, maybe part of what
our evaluation will include is, going back to some of the historical agricultural rates that we had in the
past, after a certain rate, it becomes flat; but it is not going to dip and come down low.
Ms. Hajnosz added that they could just go to a uniform rate, like the commercial rate.
The Manager -Chief Engineer agreed that just some straight, simple subsidy would be the simplest. If it i'
set it up as a 67% subsidy to be a uniform rate without any blocks, it will be much simpler. He saw some
heads nodding in agreement and asked if Ms. Hajnosz and Ms. Johnson were good to go with what was
discussed today.
Ms. Hajnosz replied they are and she and Ms. Johnson thanked the Board and left the meeting at
11:16 a.m.
6) POWER COST CHARGE:
Departmental power costs from all power sources decreased since the last Power Cost Charge rate was
determined. The Department proposes to decrease the Power Cost Charge from $2.15 to $2.02 per
thousand gallons as a result of this decrease. Power cost charges over the past two years were as follows:
Effective PCC
November 1, 2021 $2.15
June 1, 2021 $1.85
Page 11 of 22 January 25, 2022, Water Board Minutes
December 1, 2020
$1.71
August 1, 2020
$2.01
February 1, 2020
$1.90
October 1, 2019
$2.00
Before the Power Cost Charge is changed, a Public Hearing should be scheduled to accept public
testimony.
The Manager -Chief Engineer recommended that the Board approve holding a Public Hearing on
February 22, 2022, at 9:45 a.m., to receive testimony on decreasing the Power Cost Charge from
$2.15 to $2.02.
ACTION: Mr. Hirakami moved for approval of the recommendation; seconded by Ms. Hugo and carried
by roll call vote (Ayes: 6 — Mr. Bell, Mr. Hirakami, Ms. Hugo, Ms. Keolanui, Mr. Ney, and Chairperson
De Luz; Absent: 1 — Mr. Sugai.)
7) SOUTH HILO:
A. JOB NO. 2005-875, PAPA`IKOU TRANSITE AND G.I. PIPELINE REPLACEMENT -
REQUEST FOR TIME EXTENSION:
The contractor, Nan, Inc., is requesting a contract time extension of nine (9) calendar days (6 rain -out
days) due to unsuitable weather conditions. This is the third time extension request for this project.
Ext.
Days
#
From (Date)
To (Date)
(Calendar)
Reason
Excess delays transferring the National
Pollutant Discharge Elimination System
1
11/09/2020
12/17/2021
38
(NPDES) permit (additional 33 calendar
days) and Change Order No. 2
(5 calendar days)
2
12/17/2021
02/15/2022
60
Rain -outs (39 working days/ 60 calendar
days)
3
02/15/2022
02/24/2022
9
Rain -outs (6 working days/
9 calendar days)
Total Days (including this request)
107
These delays were beyond the control of the contractor and this time extension is in compliance with
the contract requirements. Staff reviewed the request for the contract time extension and the
accompanying supporting documentation and finds the nine (9) calendar days justified. Note: There
are no additional costs associated with this time extension.
The Manager -Chief Engineer recommended that the Board grant this contract time extension of
nine (9) calendar days to Nan, Inc., for JOB NO. 2005-875, PAPA`IKOU TRANSITE AND
G.I. PIPELINE REPLACEMENT. If approved, the contract completion date will be extended from
February 15, 2022, to February 24, 2022.
ACTION: Mr. Ney moved for approval of the recommendation; seconded by Ms. Hugo and carried
by roll call vote (Ayes: 6 — Mr. Bell, Mr. Hirakami, Ms. Hugo, Ms. Keolanui, Mr. Ney, and
Chairperson De Luz; Absent: 1 — Mr. Sugai.)
Page 12 of 22 January 25, 2022, Water Board Minutes
a
MISCELLANEOUS:
A. DEDICATIONS:
(This item was deferred by the Board at its December 21, 2021, meeting.)
The Department received the following documents for action by the Water Board:
1. Grant of Easement
Makana Aloha Plantation Subdivision
Grantor: Frank Ornellas, Jr., and Susan McCalla Ornellas
Tax Map Key: (3) 7-5-016:103 (Lot 2-J) portion
Kahului 2n1, North Kona, Island of Hawaii, Hawaii
2. Grant of Easement
Makana Aloha Plantation Subdivision
Grantor: Allan H. Stuart, Jr., and Hydi R. Reddick Stuart
Tax Map Key: (3) 7-5-016:102 (Lot 2-H) portion
Kahului 2nd , North Kona, Island of Hawaii, Hawaii
The Manager -Chief Engineer stated that the Department was revising the recommendation and would
like to remove this from the agenda until such time as the documents are received by the Department.
MOTION: Ms. Hugo moved to remove Items 8)A-1 and 8)A-2 from the agenda; seconded by
Ms. Keolanui.
Mr. Hirakami questioned whether this could have been taken up under Item #4 APPROVAL OF
ADDENDUM AND/OR SUPPLEMENTAL AGENDA if it is known ahead of time that it needed to
be removed. Ms. Mellon -Lacey indicated that if there is enough information in advance of the
meeting, it can be taken up at that time, rather than wait until the agenda item comes up. She added
that she spoke with the attorney in the case of both of these, and there is some information that he is
verifying before the documents would be completed. She followed up recently, but no word yet.
ACTION: Motion to remove Items 8) A-1 and 8) A-2 from the agenda was carried by roll call vote:
Ayes: 6 — Mr. Bell, Mr. Hirakami, Ms. Hugo, Ms. Keolanui, Mr. Ney, and Chairperson De Luz;
Absent: 1 —Mr. Sugai.
B. MATERIAL BID NO. 2020-15, FURNISHING AND DELIVERING SPARE PUMP AND
MOTOR SETS FOR HAWl #2 DEEPWELL, PARKER #3 DEEPWELL, AND KEOPU #1
DEEPWELL FOR THE DEPARTMENT OF WATER SUPPLY — REQUEST FOR TIME
EXTENSION:
The contractor, Derrick's Well Drilling & Pump Services, LLC, is requesting a contract time
extension of 60 working days, or 89 calendar days, for Section 1 — Haw? 92 DeepwelI, due to
manufacturing delays with the fabrication of stainless steel pump bowl components. These delays
were beyond the control of the contractor.
Staff reviewed the request for the contract time extension and the accompanying supporting
documentation and found that only 60 calendar days can be considered justified. Note: There are no
additional costs associated with this time extension.
Page 13 of 22 January 25, 2022, Water Board Minutes
I" time extension — 60 calendar days
The Manager -Chief Engineer recommended that the Board approve a contract time extension of
60 calendar days to Derrick's Well Drilling & Pump Services, LLC, for MATERIAL BID
NO. 2020-15, FURNISHING AND DELIVERING SPARE PUMP AND MOTOR SETS FOR
HAWI #2 DEEPWELL, PARKER #3 DEEPWELL, AND KEOPU #1 DEEPWELL FOR THE
DEPARTMENT OF WATER SUPPLY. If approved, the contract completion date will be revised
from December 23, 2021, to February 21, 2022.
MOTION: Mr. Ney moved for approval of the recommendation; seconded by Ms. Hugo.
Mr. Hirakami asked who sets the contract time limit because it seems like the Board deals with a lot
of these time extensions and wondered if the timelines are unrealistic.
The Manager -Chief Engineer explained that the project engineers come up with the estimated
timefraine, based on past experience. There is always a balance where you do not want to make it
where everything has to go perfectly to meet the completion date; but at the same time, you do not
want to make it too long because when a job is put out to bid, it is because there is a need for the
project. In this particular case, it is a material bid for spare pumps and motors and not an actual
construction or repair job. To clarify, this is for one portion of this contract, Section, #1 Hawi
Deepwell, and is due to a manufacturer delay. The past two years have thrown schedules off due to
COVID. Hopefully, estimates will get better going forward.
Mr. Hirakami appreciated the information and understood the problems that COVID is causing. He
expressed that he was not criticizing, but merely wanted it to be clearer to him.
Ms. Keolanui also expressed her gratitude for the information provided.
ACTION: Motion to approve the recommendation was carried by roll call vote (Ayes: 6 — Mr. Bell,
Mr. Hirakami, Ms. Hugo, Ms. Keolanui, Mr. Ney, and Chairperson De Luz; Absent: 1 — Mr. Sugai.)
C. GASOLINE BID NO. 2020-05, FURNISHING AND DELIVERING GASOLINE AND DIESEL
TO THE DEPARTMENT OF WATER SUPPLY — REQUEST FOR ADDITIONAL FUNDS:
The Department awarded a contract to Hawaii Petroleum, LLC, to furnish and deliver gasoline and
diesel fuel to its Hilo, Kona, and Waimea baseyards for a term from July 1, 2020, to June 30, 2022.
The original contract amount is $328,280.00 and fuel is ordered on an as -needed basis. The amount of
the contract was based on fuel prices of between $1.58 and $1.63 per gallon for gasoline and $1.82 per
gallon for diesel. Fuel costs have increased substantially through the term of the contract. Additional
funds are necessary to ensure the fuel supplies to DWS' baseyards are maintained through the
remainder of this contract.
The Manager -Chief Engineer recommended that the Board approve an increase of funds of
$160,000.00 to Hawaii Petroleum, LLC, for Gasoline Bid No. 2020-05, FURNISHING AND
DELIVERING GASOLINE AND DIESEL TO THE DEPARTMENT OF WATER SUPPLY. If
approved, the total revised contract amount shall be $488,280.00.
MOTION: Mr. Ney moved for approval of the recommendation; seconded by Ms. Keolanui.
Mr. Ney asked if there was any stipulation or clause in the contract that they would give a price within
a range and that the Department is not obliged but is giving this recommendation out of fairness of the
Page 14 of 22 January 25, 2022, Water Board Minutes
situation and wants to have them give a good rate in the future. It is a big amount but if the
Department is limited to just this supplier, he would be inclined to grant them this one.
Mr. Hirakami stated that he would like to see a price range to justify the increase of funds of
$160,000.00, for example, $1.58 to $1.63 to $2.02 to $2.14; and diesel from $1.82 to $2.05. There are
no parameters for fuel prices here and he wondered how the price increase was figured and what the
base or old rate structure was.
The Manager -Chief Engineer explained that one of the downfalls is this was a two-year contract. The
contractor did their best to estimate their prices for a period of two years. These fuel prices are much
lower than you would pay at the pump. He thought it was in the range of approximately $2.00 from
$1.50 and $1.63.
Chairperson De Luz asked if municipalities are not subject to federal, state, and county taxes. He
knew it is not subject to county tax.
The Manager -Chief Engineer asked if staff had any further information. As far as Mr. Ney's question
of whether this was the only contractor, there was more than one contractor who bid on this. The
concern right now is there are not enough funds and the billing is going to exceed the certified funds
under this contract. Only a certain amount of funds was certified over the two years.
Mr. O'Neil reported that there have been multiple increases in the fuel costs. For the one that was
$1.58, it is now $3.49, a $1.91 increase since the beginning of July 1, 2020. Diesel has increased from
$1.82 to $4.05, a $2.23 increase. These are not one-time increases. Prices have slowly increased
throughout the past year and a half. The Department has gone through about 99% of its contract funds
and the additional $160,000.00 would carry the Department through to the end of the fiscal year.
Ms. Keolanui asked if the $160,000.00 increase of funds is paid retroactively or if it is going to be for
the next five months, until the end of June 30, 2022.
Mr. O'Neil replied that it is not retroactive, but it will carry the Department over for the next five
months.
Mr. Ney did not think the vendor is trying to be dishonest, but rather, just did not anticipate this.
Instead of fighting them on it, he felt it should be granted this one time and the next time, ask them to
evaluate their numbers better.
The Manager -Chief Engineer stated that in the upcoming fiscal year, the Department is looking at
opportunities to participate in Statewide price agreements where you typically get better terms and
numbers because of volume.
Chairperson De Luz asked if the contract contains provisions for the increases.
Mr. Inaba stated that there is an escalation clause within the contract.
ACTION: Motion to approve the recommendation was carried by roll call vote (Ayes: 6 — Mr. Bell,
Mr. Hirakami, Ms. Hugo, Ms. Keolanui, Mr. Ney, and Chairperson De Luz; Absent: 1 — Mr. Sugai.)
Page 15 of 22 January 25, 2022, Water Board Minutes
D. PROFESSIONAL SERVICES AGREEMENT — FEDERAL FUNDING OPPORTUNITIES:
The Department desires to enter into a professional services agreement with a firm who has expertise
in seeking and obtaining federal funding for water infrastructure and related projects. Based on the
anticipated scope of work, the contract amount will not exceed $75,000.00, and will be funded from
the Administrations Operating budget.
The Manager -Chief Engineer recommended that the Board approve the procurement of a consultant to
provide services related to obtaining federal funds.
MOTION: Mr. Bell moved for approval of the recommendation; seconded by Ms. Keolanui.
The Manager -Chief Engineer stated that this agenda item was his request. Everyone has heard about
the potential federal funding coming down the pipeline; and he thought the bulk of it for water
infrastructure is probably going to come through the Environmental Protection Agency (EPA) and the
Safe Drinking Water Revolving Fund Loan; but there may be other federal pots of money available
that the Department would like to explore, and he would like to engage the services of a professional
service consultant to help the Department with grant prospecting and grant writing. If there appears to
be a particular grant that the Department might meet qualifications for, this will hopefully help keep
the Department in the running. He believed there are earmarks available that they call congressional
directed spending that, for a long time, Congress has stopped. In the days of the late Senator Daniel
K. Inouye, he was very adept at getting funding like that for the State of Hawaii. It appears there is
some semblance of funding becoming available. He has met with Representative Kaiali`i Kahele and
his staff as well as Senator Brian Schatz' staff and would like to position the Department so it can take
advantage of these federal funding opportunities.
Mr. Hirakami asked if the $75,000.00 includes administering the grant as well as any reporting on the
grant. Federal grants have a lot of reporting requirements; and normally when you consult, you have
them administer and report on the grant, otherwise, it falls on the Department's staff. He asked if a
Request for Proposals would be put out if this is approved by the Board.
The Manager -Chief Engineer replied that the Department anticipates utilizing the professional service
contract procurement method, which is similar to how the Department hires design consultants. The
Department is asking for this opportunity with a cap of $75,000.00, similar to a design contract. It is
not yet known who the consultant will be and what the exact scope of work will be, but federal grants
all have different deadlines and there is so much out there the Department does not have the resources
to pursue. The plan is to narrow the options down to two or three that would give the Department the
most bang for the buck; and at that point, they would be asked to help write the application and any
follow-up requirements to remain in compliance with the grant.
Mr. Ney mentioned a charter school in Waimea where they receive general funding from the
Department of Education, and they have an in-house grant writer. He wondered if the Department
might want to explore having an in-house grant writer who would be doing this throughout the year
and not missing out on any opportunities.
Mr. Hirakami stated that Mr. Ney is referring to Kann O Ka`aina Charter School and that he runs a
charter school in Pahoa and is used to this. They have a resource developer on staff whose whole job
is to secure, maintain, and report on grants but that this is something different. This is something
where the Department knows there is a pot of money that can be used; and what it is seeking is an
expert to explore, apply, and hopefully administer the grant. When it gets to the contract point, he
hoped the Board would get to see the scope of work. He mentioned the Water 2000 Bill where states
Page 16 of 22 January 25, 2022, Water Board Minutes
were taking millions of dollars a year to get potable water to citizens, especially in rural areas; but
Hawaii missed out except for about $50,000.00 to improve the Hamakua Ditch. There are a lot of
opportunities, especially for the Clean Water Act; and it what Mr. Ney mentioned might not be a bad
idea --to have a resource within the Department to seek federal and state grants.
Ms. Keolanui spoke on the same note as Mr. Hirakami and Mr. Ney, about the scope of work for the
consultant. She would be interested in seeing the contract and how many hours are allotted and
comparing the cost of bringing an in-house grant writer to the team and what the difference between
the two would be.
The Manager -Chief Engineer stated those were all great points. With regard to hiring somebody on
staff, the Department is still trying to operate lean; and an employee's salary is not the total cost of
sustaining the position. One employee making $75,000.00 a year may end up being more like
200,000.00 as far as operational expenses from the Department's standpoint. If the Department were
to open up a position and pay somebody that amount every year, it would want to get that kind of
grant participation every year, or in excess of that.
Chairperson De Luz recapped that what he believed Mr. Hirakami was requesting was updates on the
progress of this professional services contract.
The Manager -Chief Engineer replied that it would definitely be placed on the agenda, showing the
actual consultant agreement, and move on from there.
ACTION: Motion to approve the recommendation was carried by roll call vote (Ayes: 6 — Mr. Bell,
Mr. Hirakami, Ms. Hugo, Ms. Keolanui, Mr. Ney, and Chairperson De Luz; Absent: 1 — Mr. Sugai.)
E. MONTHLY PROGRESS REPORT:
The Manager -Chief Engineer brought the 2018 Kilauea Eruption - FEMA 428 Projects to the Board's
attention. A recent meeting with FEMA regarding the EA kickoff for the road and waterlines, Pohoiki
and Highway 137, went well. As the Board is aware, there are a slew of other projects that actually
total close to $60 million, with an estimate of $40 million in FEMA funding. That was submitted
officially to HIEMA and FEMA through their required protocols early in January for review.
Mr. Hirakami asked about the Kalaniana`ole Avenue Reconstruction project where Jas. W. Glover,
Inc., is now the new contractor; no longer Goodfellow Bros., Inc. The report indicates 90% has been
paid out already, and he asked if Glover was going to finish up the remaining 10%.
The Manager -Chief Engineer stated that this project is a County of Hawaii, Department of Public
Works, project. The Department of Water Supply recognized the benefit of participating in that
contract for the waterline portion. The State Harbors Division decided that instead of maintaining
their onsite fire protection program with on -site water storage, it would be better to install a waterline
in that segment. This Department recognized the benefit to its system and participated with its fair
share of that upgrade. All of the new transmission/distribution waterline is in. The remaining work is
tie-ins from the old pipe to the new pipe.
Chairperson De Luz asked for an update on Waikoloa Reservoir No. 1 Earthquake Repairs that needs
to be re -bid and whether FEMA funds will still be available when this is rebid.
The Manager -Chief Engineer and Mr. Inaba explained that the estimate was about $7 million, but
FEMA rejected that several times. With the Department's appeals, they came up with about
Page 17 of 22 January 25, 2022, Water Board Minutes
$1 million, which is what the Department will get when closing out the contract. The Manager -Chief
Engineer asked Ms. Gray to also report on some other appeals.
Ms. Gray stated that HIEMA an FEMA did approve the Department's appeal for a group of small
projects resulting from the 2006 earthquake. The Department had requested for overrun costs back in
2015 and recently got word that it is approved for about $1.3 million more for those projects.
Chairperson De Luz asked for an update on this, being a surface water reservoir, and how much
additional capacity it would add to the system.
The Manager -Chief Engineer stated that the project will restore 50 million gallons worth of raw water
storage. What that means for the Department and its customers is more stability as far as having that
reserve capacity. The water would still need to be processed through the Waimea Water Treatment
Plant, but in terms of drought and having a buffer of raw storage, it will be available, should it be
needed. Currently, the Department is supplementing with two wells, but the reservoir will provide
more security.
F. REVIEW OF MONTHLY FINANCIAL STATEMENTS:
Ms. Gray asked if there were any questions on the December 2021 Financial Statements.
Chairperson De Luz asked Ms. Gray if she wished to review the communication from N&K CPAs
that was sent to the Board.
Ms. Gray stated that communication recently received from N&K CPAs is normally provided at the
beginning of the audit period and needed to be passed along to the Board for information. The audit is
at the point of being wrapped up. Hopefully, the auditors will be able to present the audit report
within the next month or two.
Mr. Hirakami noticed the reports from the past few months have shown receivables going down; but
in this report, receivables went up. He asked if there was an explanation for it or whether people were
not taking water shut-off notices seriously.
Ms. Gray did notice that fact but did not have a specific explanation at this time and would need to do
more research. She hoped it is not a trend that will continue.
Chairperson De Luz asked how the Department accounts for collection of doubtful accounts and
whether a public utility has more latitude. Generally speaking, depending on policy, an organization
will establish 180 days, when they are written off for allowance to doubtful accounts; and when it is
recovered, it comes back in. It is not about cleaning up the account. He understood that this is a
different situation and he would rather have the way it is reported; but with regard to the audit, he
wondered if it was more of a footnote unless it impacts the financial picture.
Ms. Gray stated that overdue accounts and write-offs go through the collection process; and for those
that are sent to collections and returned as uncollectible, the collection clerk will review and submit
for write-off adjustments. There are situations where customers will come back and pay even though
it has been written off, and it will be adjusted at that point in time. The allowance for doubtful
accounts is normally reviewed at the end of the year and adjusted, depending on the receivables.
Chairperson De Luz thanked Ms. Grey for that explanation.
Page 18 of 22 January 25, 2022, Water Board Minutes
Mr. Ney stated that it would be nice to know what causes the swings in the numbers, just to have a
response or a way to adjust it when needed.
Chairperson De Luz suggested, perhaps in the Department's data set, one of the things to find out
would be where delinquencies occur because there could be a need for a rate adjustment in that
category to be equalized. It might bring another opportunity to understand where adjustments perhaps
need to be considered.
G. MANAGER -CHIEF ENGINEER'S REPORT:
The Manager -Chief Engineer provided an update on the following:
1. North Kona Wells - the Deputy reported that for January 2022, the North Kona well situation is
the same as last month. Out of 14 well sources, 12 are in use or available to use.
2. COVID-19 Update - the Manager -Chief Engineer reported that the Department is seeing some
impacts from the current surges. There are more potential exposures in the workplace than seen
in the past. So far, it has not hampered operations in a severe way; but the Department is already
running lean and therefore, anytime staff are out for any duration, others have to pick up the slack.
The Department's Public Information Specialist sends out weekly emails to staff, reminding them
of best practices and precautions to take. Employees are being responsible, but it is just the nature
of this variant that is so contagious that the Department is being impacted.
3. Sunshine Law, Act 220 - Ms. Mellon -Lacey updated the Board on the requirements under
Act 220. Act 220 was passed in the last Legislative year and was supposed to go into effect the
first of January, 2022. There has been a delay in part of it until the end of February, but only one
part. The purpose of this was to sustain the possibility for boards to meet by what they call
Interactive Conference Technology (ICT) as this board has been meeting throughout this
pandemic. That means all of the board members are in their own locations and the Department is
offering, via Facebook, the opportunity for the public to view the meeting; but it is a bit of limited
participation in the live sense for them. The big change that came with this legislation is that, on
top of allowing the Board to continue with the remote meeting format it is using, it added the
requirement to have at least one in -person meeting location, which can be used by the general
public, as well as board members, if they want to participate in an in -person site and not via
Zoom. Everyone had been scrambling to get that piece in place for January; but then because all
of the counties were pushing the Governor that it was not the time to go ahead with this, the
Governor agreed to delay it until February 28, 2022. It may go back into effect in March and will
require the Department to have at least one in -person location for the public. There is also a
change in notice requirements where the notice will have to inform people where they can attend
in person, once this goes into effect. There are some other pieces to the Act that are not delayed.
One of them is visibility, but she did not think there is a problem with this board. The
requirement is that at least a quorum of the board members have to be visible to the public during
the public portions of remote meetings. There had been problems with some boards and
commissions where a lot of people were turning off their videos. This is not required in executive
sessions that are closed to the public. Another requirement, which she had brought to the
Chairperson's attention this morning, is that at the start of a remote meeting, the presiding officer
must announce the participating members, which is currently being done by roll call; but if a
board member is participating from a non-public location, they have to state if there is anyone else
in the room with them. The way that is defined does not mean "in the building," but actually "in
the room" with the board member. Another requirement is that, generally, votes must be taken by
roll call, which this Board has been doing. That has been a recommendation in the past but it is
now a requirement. They now say the Chairperson can first ask if any member plans to object;
and if there is no member indicating that, then you would not have to do a roll call on every vote.
You could just take the "ayes" because there is no one indicating they are going to object. She
Page 19 of 22 January 25, 2022, Water Board Minutes
personally likes what this board has been doing with the roll calls. It makes it very clear to
anyone watching how each person is voting; and despite the fact that you can do it this way now,
she would recommend continuing with roll call votes, particularly for this board as an active
board that is making decisions about how the Department actually operates. It is not just an
advisory board. There is also included information about what happens if there is a situation
where the public portion of the meeting experiences a disruption in the technology and cannot
retain connectivity. In that case, you are required to recess for up to 30 minutes while attempts
are made to restore the connection. That does not apply if one member has problems and you
maintain a quorum. The other thing that is recommended in the Notice is that you could put, in
the event of any technical difficulties, that the meeting would take up to a 30-minute recess and
then reconvene. If not possible to restore the connection, you could even set an alternate day in
that Notice where, in the event of not being able to continue, you would have a way to continue
and circumvent noticing all over again with the six -day requirement. With a multi -site meeting,
you can have more than one location, for example, if the Department wanted to have an in -person
location in Kona as well as Hilo, but that is not a requirement. Her way of thinking is it is
probably good to keep it as simple as possible, but that may be something to think about in terms
of people being able to attend readily in person. One question she had posed to the Office of
Information Practices (OIP) was if people could be asked to RSVP in order to know what size
room to have available or whether that room would be needed at all. That was discouraged
because it was viewed as putting up a barrier so that if somebody could not decide in advance and
then later decided they want to attend the meeting, it needs to be available to them. She had a
handout on this Act which will be provided to the Water Board. It is a brief overview and
provides information on the OIP website (OIP.hawaii.gov). She asked if there were any
questions.
Mr. Hirakami asked if the requirement to keep the screens on is on the full capacity of the Board
(five out of nine); or where the Board now has seven members, if it would be four out of the
seven --which would be the quorum.
Ms. Mellon -Lacey replied that she would say you ought to use the number of board members
entitled, which is nine; however, she would en on the side of having more people visible than not
visible. In this Board's case, she does not see a problem because the members are good about
making themselves visible. There had been times when people participated where they were not
able to be visible. The best practice is when you are in the public part of the meeting, to always
be visible.
Mr. Ney mentioned that he would love to get back to more of the ability to have meetings in the
physical setting with a hybrid log -on video if board members are not comfortable attending in
person. He would like to get an update from the Manager -Chief Engineer when that might be
possible. He realized everything is kind of discretionary and nothing is really uniform on how
organizations are starting to address coming back into that.
Mr. Hirakami asked how close the filling of two vacant spots on the Water Board have come. The
two board members whose terms ended last year can carry over for 90 days, which he has done on
other boards.
Ms. Mellon -Lacey replied that they can carry over for 90 days. Her understanding is that the
nominations come through the Mayor's Office; and the last time she spoke with Ms. Pomaika`i
Bartolome, who works on this in the Mayor's Office, she was hoping to have some names by
February.
Page 20 of 22 January 25, 2022, Water Board Minutes
The Manager -Chief Engineer stated that from the Department's standpoint as far as prospective
board members, he would ask for updates from the Mayor's Office and not get involved in
suggestions because, to him, that is a conflict.
Ms. Mellon -Lacey agreed. The Administration has done a good job filling spots quickly and she
is optimistic the two vacancies will be filled soon.
Ms. Keolanui asked what the notification would be for the public hearings and what sources were
being thought of for going through for that, whether it be newspaper or some other means.
Ms. Mellon -Lacey replied that the only time the newspaper is used is for special meetings of the
board. Otherwise, the County's website is the main place where notices are posted.
Chairperson De Luz stated that the Board will await Ms. Mellon-Lacey's update next month,
meanwhile, the Secretary could forward the Act 220 handout to the Board members.
4. Employee of the Quarter Fourth Quarter 2021) - the Manager -Chief Engineer announced that the
employee of the quarter for the fourth quarter of 2021 is Ms. Darlene Casuga of the Department's
Kona Office. He turned it over to Mr. Joshule Johnston, Water Service District Supervisor 11, to
say a few words about his valued employee. Mr. Johnston stated that he had to pry Darlene away
from her Customer Service desk. She is the only one there at the moment, and it is very busy. He
praised her for being very helpful to all of her customers and being outstanding throughout this
time, ever since the pandemic started. She is always courteous and kind to the customers, going
above and beyond. She always at the office before he gets there and leaves after he leaves and is
an overall outstanding employee. This is well -deserved recognition, and it is a privilege and
honor to be part of this today. The Board congratulated Darlene and thanked her for her
dedication. She was asked if she wanted to say a few words. She thanked everyone for this
appreciation and stated that she normally does not like recognition but was grateful to have a great
support system there. She does not do it alone; it is a team effort. She does what needs to be done
and looks forward to getting someone in the next desk soon. Chairperson De Luz thanked her and
indicated that the crux of any organization is people like Darlene, the unsung heroes. The
Manager -Chief Engineer added that she is the face of the Department when people visit the Kona
office. He has known her for many years and there have been many compliments from the public
about her. She is appreciated for everything she does.
H. CHAIRPERSON'S REPORT:
Chairperson De Luz stated that he had nothing to report; but to follow up, Mr. Hirakami will be
working with the Manager -Chief Engineer on the project for his goals; and hopefully, when that is
ready, it would be great to see it as an agenda item under the Manager -Chief Engineer's Report for
insight and updates.
9) ANNOUNCEMENTS:
1. Next Meeting: - February 22, 2022, 10:00 a.m., via web conferencing
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M.
ADJOURNMENT
ACTION: Mr. Ney moved to adjourn the meeting; seconded by Ms. Keolanui and carried by roll call vote
(Ayes: 6 — Mr. Bell, Mr. Hirakami, Ms. Hugo, Ms. Keolanui, Mr. Ney, and Chairperson De Luz;
Absent: 1 —Mr. Sugai.)
(Meeting adjourned at 12:31 p.m.)
Recording Secretary
APPROVED BY WATER BOARD
FEBRUARY 22, 2022
Page 22 of 22 January 25, 2022, Water Board Minutes