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HomeMy WebLinkAbout2004-09-28 Water Board MinutesMINUTES DEPARTMENT OF WATER SUPPLY COUNTY OF HAWAII WATER BOARD MEETING September 28, 2004 HILO OPERATIONS CENTER CONFERENCE ROOM MEMBERS PRESENT: Mr. Earl T. Nakashima, Chairman Mr. Ivan Mochida, Vice - Chairman Mr. Thomas Goya Mr. Loren Heck Mr. Bernard Konanui Ms. Sandra Scarr Mr. George Wilkins Mr. Milton D. Pavao, Manager (ex- officio member) ABSENT: Ms. Pamela Hons, Water Board Member Mr. Christopher J. Yuen, Planning Director (ex- officio member) Mr. Bruce McClure, Director, Department of Public Works (ex- officio member) OTHERS PRESENT: Ms. Katherine Garson, Deputy Corporation Counsel Ms. Linnel Nishioka, Oshima Chun Fong & Chung LLP (to 10:50 a.m.) Mr. Warren Lee, President, Hawaii Electric Light Company, Inc. Mr. Ben Henderson, Department of Hawaiian Home Lands Mr. Eagle Jones, Rural Community Assistance Corporation Ms. Melba Quiocho (12:00 p.m. to 12:12 p.m.) Department of Water Supply Staff: Mr. Quirino Antonio, Deputy Manager Mr. Glenn Ahuna, Engineering Division Head Mr. Daryl Ikeda, Acting Chief of Operations Mr. Richard Tsunoda, Waterworks Controller Mr. Richard Sumada, Assistant Waterworks Controller Mr. Keith Okamoto, Water Quality and Assurance Control Branch Mr. Clyde Young, Operations Division Ms. Patsy Takeguchi, Administration Division (12:00 to 12:12 p.m.) Ms. Susan Okamoto, Administration Division (12:00 to 12:12 p.m.) CALL TO ORDER: Chairman Nakashima called the meeting to order at 10:00 a.m. STATEMENTS FROM THE PUBLIC: None Page 1 of 20 9- 28- 04min.doc APPROVAL OF MINUTES: ACTION: Ms. Scarr moved for approval of the Minutes of the August 24, 2004, Public Hearing on Amendment to the Rules and Regulations, and Minutes of the August 24, 2004, Regular Water Board Meeting; seconded by Mr. Goya and carried unanimously by voice vote. APPROVAL OF ADDENDUM AND /OR SUPPLEMENTAL AGENDA ACTION: Ms. Scarr moved to add Addendum, South Hilo, Item A) Presentation by Mr. Eagle Jones of Rural Community Assistance Corporation to the Agenda; seconded by Mr. Wilkins and carried unanimously by roll call vote (Ayes: 7 - Ms. Scarr, Messrs. Goya, Heck, Konanui, Mochida, Wilkins, and Chairman Nakashima; Nays: 0; Absent: 1 - Ms. Hons). SOUTH HILO: A. INFORMAL PRESENTATION: Mr. Eagle Jones, Regional Environmental Manager of Rural Community Assistance Corporation (RCAC), gave a presentation of RCAC's programs. Mr. Jones explained that they specialize in utility board training, consisting of ownership responsibilities, utility management, and operator certification maintenance (providing courses to operators to maintain their certification levels). He introduced his two representatives in Hawaii, Mr. Kevin Bachman and Mr. Dale Burton, and handed out a packet for the Board to review. He continued that their community assistance program involves on -site technical assistance where they go out to communities to discuss providing safe drinking water for their systems and help with questions about their drinking water facilities (water quality issues). The Manager stated that when Mr. Jones approached him with this information, the first thing that came to mind was that RCAC could provide some valuable assistance to Hawaiian Ocean View Estates (HOVE) in helping them establish a community water system. When asked by Mr. Wilkins if they provide legal advice in getting started with a water improvement districts, Mr. Jones replied that their field staff would refer legal questions to the legal personnel in its Sacramento office. Chairman Nakashima thought it would be a good idea for the Board to refer communities, such as HOVE, to RCAC. In response to Mr. Heck's question if RCAC is under contract by the Department, the Manager replied their services are free of charge to any community. Mr. Jones added that they have funding through the Department of Health (DOH), Safe Drinking Water Branch (SDWB). If a community ever did not want that type of service, they may opt out. They have a list of communities that are preidentified by the DOH, SDWB; and if HOVE was not on that list, RCAC would work with the DOH to get them on. Page 2 of 20 9- 28- 04min.doc Mr. Wilkins wondered what the criteria might be for a community to be put on that list. For example, there is a lot of catchment water use in the Hawaiian Paradise Park area; but a surprisingly amount of people living there do not care to change so you may not get a high fraction of residents who would sign up for an alternative water supply. In HOVE, you would probably get 95% sign up. Two very different communities with the same problem. Mr. Jones stated that HOVE sounds like a community that would benefit from both sides of RCAC's programs - -one on the technical side (drinking water treatment) and the infrastructure funding side. USDA has funds that they have not been able to move, primarily because of the communities not willing to go through that process. He would like to get the word out that they are there to assist. Mr. Heck did not doubt they would be contacted by HOVE. He added that he would be talking with them after this meeting, since he is from that area. He also mentioned the Agenda item today on public notification procedures regarding sodium in the water. He asked if there were any way RCAC could assist with devising a public relations notification. Mr. Jones replied it is within their scope. They help a lot of communities with the process of putting together public notices. Things they would do is help develop some templates for the water system and help with a community education action plan. In response to Mr. Wilkins' question of what type of organization they are, Mr. Jones stated they are a non - profit organization, federally funded through 13 western states. They are more of a community resource than an authority or regulator. Ms. Scarr thought there are several other communities, such as Kona Paradise and Honomalino, and felt that the Department could facilitate getting a list of communities who have made contact with the Department of Water Supply over the last few years about their interest in water. The Manager suggested that what might be a good thing is for the Department to provide Mr. Jones with a copy of the South Kona to Ka`u Water Master Plan. Mr. Jones indicated his office would follow up with information given by the Department. It should be directed to Mr. Burton or Mr. Bachman. The Manager added that this is the same program (USDA) that was used with the Hamakua plantation camps, the Kona Coastview/Wonderview subdivisions, and Happy Homes Subdivision. Mr. Konanui noted that Hawaiian Paradise Park is shown on their pamphlet and asked if they have been contacted. Mr. Jones replied that a lot of those contacts may have been utilized through their other programs, like solid waste. The Board thanked Mr. Jones for his presentation. (Messrs. Jones, Bachman, and Burton left the meeting at 10:18 a.m.) Page 3 of 20 9- 28- 04min.doc NORTH KONA: A. TRI -PARTY AGREEMENT — WATER BOARD OF THE COUNTY OF HAWAII (BOARD), HAWAII ELECTRIC LIGHT COMPANY, INC. ( HELCO), AND DEPARTMENT OF HAWAIIAN HOME LANDS, STATE OF HAWAII (DHHL): Through its willingness to participate in the construction of the Board's Honokohau Production Well, HELCO secured an 100,800 gpd water commitment for the expansion of its Keahole Generating Station. In order to proceed with the expansion of its Keahole Generation Station, HELCO agreed to mitigate the expansion project's impact on the community through a settlement agreement. This includes reducing use of potable drinking water by using brackish water as its primary source for the industrial needs of the project. HELCO was issued a water lease from the State of Hawaii, Department of Natural Resources, for the brackish water use, however, subject to legislative disapproval. HELCO is requesting approval to transfer 90% of its water commitment to DHHL for its Laiopua Project in Kealakehe pursuant to the settlement agreement. The Department has been in discussions with HELCO and DHHL which resulted in the drafting of the tri -party agreement, which complies with and supports the settlement agreement. The tri -party agreement provides for HELCO to complete its expansion project, DHHL to pursue housing for its lessees, and the Department to pursue water improvements; namely, the Palani Road Transmission project that will enable transporting water from the high level sources to our customers in the lower service areas. The tri -party agreement benefits the Department in the fact that it would be easier to provide water to DHHL's Laiopua project than it is to provide water to the Keahole Plant and would reduce further strain on the Queen Kaahumanu pipeline in the area between Kaloko Industrial area to Keahole. (See attached proposed tri -party agreement.) The Manager recommended that the Water Board approve the Tri -Party Agreement and authorize the Chairman or Vice - Chairman to execute the document subject to approval of the Corporation Counsel. MOTION: Ms. Scarr moved for approval of the Manager's recommendation; seconded by Mr. Mochida. Mr. Wilkins and Ms. Scarr declared that they had been involved with the Keahole Defense Coalition and asked Corporation Counsel for her opinion. Ms. Scarr added that since they are now substituting brackish water for potable water, this Agreement is a very favorable thing. Ms. Garson asked for some additional information; and it was determined that since they are not named plaintiffs in the case, it would be fine for them to vote on this Motion. Mr. Goya reported that he would be abstaining due to his previous employment with HELLO. Mr. Warren Lee gave a brief background on the Agreement. Also present was Mr. Ben Henderson, Deputy Director of the Department of Hawaiian Home Lands (DHHL). Mr. Lee acknowledged the hard work of DWS staff and Corporation Counsel in getting this Agreement before the Board for its approval and asked for the Board's approval. The approval will allow the DHHL to obtain needed water from DWS that will also satisfy one of HELCO's obligations in the Page 4 of 20 9- 28- 04min.doc Keahole Generation Station settlement. It will also benefit the general public and the Water Board by allowing HELCO to transfer some of its potable water commitments to the DHHL, once HELCO's right is secured to use brackish water for most of its industrial needs at Keahole. In November 2003, HELLO, DHHL, Keahole Defense Coalition, Department of Health, Department of Land and Natural Resources, the Board of Land and Natural Resources, and individual plaintiffs entered into a historic settlement to settle the longstanding litigation relating to the regulatory, permitting, and related issues concerning HELCO's proposal to modernize and expand the Keahole Generation Station. Among the various settlement items, HELCO agreed to substitute brackish water for its allocation of potable water from DWS as its primary source of water for industrial needs at the Keahole Generation Station. HELCO immediately applied for a long -term brackish water lease from the Board of Land and Natural Resources, which was approved. When the lease is finally effective, based on this Tri -Party Agreement, HELCO will transfer 90% of its existing 100,800 gallons per day additional potable water allocation to DHHL. They believe this is in the public interest and is a multiple "win win win" situation. It will benefit DHHL by providing potable water to its La`i`opua project in West Hawaii. That will offer a stable home occupancy opportunity for many Hawaiian families in West Hawaii. Secondly, it will benefit the Water Board because DWS has available water from a source close to the La`i`opua project. Therefore, serving that project would be less taxing on its Queen Ka`ahumanu transmission line than serving the Keahole Station. Third, it will benefit the water resources and environment because it replaces drinking water with brackish water for industrial uses at Keahole. Finally, it will benefit HELCO and the general public because a settlement will allow HELCO to finish its Keahole plant and enhance its ability to provide reliable electric power to its customers. He thanked the Board for allowing him to testify and for its support in this Agreement. Mr. Wilkins asked about the 100,800 of water a day - -it would be equivalent to about 160 homes at 600 gallons a day. He was curious about the source of the water -- whether it would come from the lower Queen Ka`ahumanu or the high altitude perched water. The Manager replied it would come from the Honokohau, QLT, and Hualalai high -level aquifer. In the Agreement, one of the conditions is the DWS' ability to serve DHHL with this transfer is that it needs to complete a project currently in design to provide a transmission corridor to bring water down to the La`i`opua area. In response to Mr. Wilkins' concern that there is sufficient water resource to satisfy the 100,800 a day, the Manager replied there is. Ms. Scarr commented that it has been a long 12 to 13 years and commended everyone for coming up with this Agreement. This settlement is an essential part of a broader overall settlement to allow the Keauhou Generation Plant to be finished and to operate. She also thanked Mr. Mike Matsukawa for arranging a lot of this. The Manager agreed that this is a benefit, as mentioned by Mr. Lee, and there is nothing more beneficial than something like this for the Department. ACTION: A vote was taken on the Motion. Motion was carried by 6 ayes - Ms. Scarr, Messrs. Heck, Konanui, Mochida, Wilkins, and Chairman Nakashima; 1 abstention - Mr. Goya; 0 nays; 1 absent - Ms. Hons. Page 5 of 20 9- 28- 04min.doc SOUTH KONA: A. STANDARD OPERATING PROCEDURE REGARDING SODIUM: Proposed draft Standard Operating Procedure Regarding Sodium was discussed. The Manager reported that if the Board feels comfortable with the new draft handed out today, it will be kept on file to be used in the future. Mr. Okamoto added chlorides as another trigger and also expanded some on why he proposes 60 mg per liter of sodium. The Manager added for clarification that they felt there should be two triggers - -one sodium and the other, chlorides, because chlorides have an affect on sodium, although the specific correlation is not known. The reason they added 250 mg chloride trigger was because of the State's recommendation. In response to Ms. Scarr's question of whether this was shown to anyone who has previously testified to the Water Board, the Manager replied it is being brought to the Board for a first look. When asked by Mr. Wilkins about any changes to the frequency of testing for sodium or chloride, Mr. Okamoto replied that their proposal is to test every year for known high sources, instead of every three years as required by the State. Results will be reported annually in the Department's Water Quality Reports. Mr. Heck asked questions about the cost for testing, as shown in last month's Minutes. He was curious about the broad range - -$5.00 to $50.00 per test. (It was noted by staff that there is a difference in each laboratory and what they charge.) In response to Mr. Wilkins' question if it is necessary to use labs off island, Mr. Okamoto stated that the Department currently has a contract with Montgomery Watson. Mr. Wilkins stated he is a strong proponent of using local sources if they can do the job. Mr. Mochida asked for clarification of the wells listed on the handout. The Manager explained that the wells that are below the acceptable levels are not listed. This list would be the ones that are tested yearly. Mr. Okamoto added that sodium is not a regulated contaminant by EPA. It is set up for aesthetic effects. They have not established sodium as a contaminant. This advisory, developed by the EPA, is to recommend a certain level based on aesthetics. Mr. Wilkins wondered why the EPA has not set a more mandatory standard, in view of the well documented effects that high sodium has on people with high blood pressure. He thought it is a question that should be asked of them. Mr. Okamoto stated that he had a copy of EPA's advisory, which is also available from the web. It has some background on how they came up with these levels. Page 6 of 20 9- 28- 04min.doc Ms. Scarr asked if a Motion was needed to approve the Draft Standard Operating Procedure Regarding Sodium. The Manager replied that the intent was to gather comments today, and if the Board feels comfortable with it, to place it on the agenda for next month for the Board to adopt as a policy. Mr. Heck stated the reason this all came up is from a public relations perception that sodium is hurting people in South Kona. The notice that this Department sent to the public previously was quite technical and lengthy. He would suggest a more straightforward approach showing what the Department has done (more in layman's terms). If this does not satisfy the public, maybe the Department needs to contact EPA. Possibly the RCAC might have some terminology that would help. Ms. Scarr was concerned with Item No. 4. The complaints came from South Kona about Keei Wells A and B when Keei Well D is offline; but if you look at the reading for sodium for the Kahalu`u Shaft, which is serving a greater number of people, the levels are also way up there. She felt the Department ought to do semi - annual notifications in North Kona as well as South Kona. Mr. Okamoto indicated that this is the Department's intent, shown in Item No. 3. The Manager stated that the Department anticipates that the Kahalu`u Shaft chlorides will be dropping over the years because it is making every effort to reduce pumping on the Shaft. Following up on Mr. Heck's comments, Mr. Goya felt there is a need to manage public perception a bit better -- notification, such as this proposed policy; and secondly, the Board's intentions to alleviate these problems. At the last meeting, the Manager mentioned the Department's negotiations with Kamehameha Investments to have their three wells tie into our system alleviate some problems. When that becomes public information, it would be nice to share it with the community. He also suggested showing this to some people from the public and have them provide their opinion on how the Department can communicate with them better. The Manager will look into that. Also, this item will be placed on the Agenda for next month's meeting for approval as a policy. RECESS: Ms. Scarr moved for a recess; seconded by Mr. Heck and carried unanimously by voice vote. Board recessed from 10:40 a.m. to 10:50 a.m. 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 `IOLANI, INCREMENT IV, PHASE I (Subdivision Application No. 82 -168) E.W.O.: 2004 -056 Page 7 of 20 9- 28- 04min.doc Grantor: Maryl Group, Inc. (fka Maryl Development, Inc.) TMK: (3) 7 -6- 012:145 Lots: 18, plus 1 roadway lot Zoning: RA -5A Facilities Charge: 13 units @ $500.00 /unit $ 6,500.00 5 units @ $5,500.00 /unit 27,500.00 Total $34,000.00 Capital Assessment Fee: $2,500.00 Final Inspection Date: August 9, 2004 Water System Cost: $69,309.80 2. GRANT OF NON - EXCLUSIVE EASEMENTS BILL OF SALE UNIVERSITY OF HAWAII, HILO — UNIVERSITY PARK INFRASTRUCTURE IMPROVEMENTS E.W.O.: Various Grantor: University of Hawaii TMK: (3) 2- 4- 001:por. 007 & 012 and 2- 4- 057:por. 025 & 026 Facilities Charge: Various Final Inspection Date: Various Water System Cost: Various 3. GRANT OF NON - EXCLUSIVE EASEMENTS UNIVERSITY OF HAWAII, HILO — UNIVERSITY PARK INFRASTRUCTURE IMPROVEMENTS E.W.O.: Various Grantor: State of Hawaii, by its Board of Land and Natural Resources TMK: (3) 2- 4- 001:por. 007 Facilities Charge: Various Final Inspection Date: Various Water System Cost: Various 4. LICENSE EASEMENT NO. 545 HILO SCATTERED LOTS - PIIHONUA SITE E.W.O.: 2002 -031 Grantor: Department of Hawaiian Home Lands TMK: (3) 2 -3- 025:014 to 017 and 047 Lots: 17 plus 1 roadway lot Facilities Charge: $71,950.00 Final Inspection Date: September 10, 2004 Water System Cost: $115,955.00 5. BILL OF SALE AM Cove at Honl's Beach E.W.O.: 2004 -077 Grantor: Sunstone Realty Partners X, LLC TMK: (3) 7 -5 -09 & 18 Portions (Kailua- Keauhou Middle Road, Walua Road) Facilities Charge: To be determined Page 8 of 20 9- 28- 04min.doc CAF: To be determined Final Inspection Date: September 24, 2004 Water System Cost: $515,142.10 Mr. Ahuna reported that Item No. 4 needs to be deferred because not all paperwork was in order. Recommendation that the Water Board accept Items 1, 2, 3, and 5 (and defer Item 4) subject to the approval of the Corporation Counsel and that either the Chairman or the Vice - Chairman be authorized to sign the documents. MOTION: Ms. Scarr so moved; seconded by Mr. Heck. Ms. Scarr used No. 1, `IOLANI, INCREMENT IV, PHASE I, as an example and asked for an explanation of the calculations. The facilities charges is broken down, and she asked what the 13 units at $500.00 per unit is for. She also asked what the Capital Assessment Fee is (CAF), broken down. Mr. Ahuna stated that he broke it down because there are always questions about the facilities charge (FC). The 13 units are from a previous agreement of Mamalahoa Highway improvements with several developers. That agreement specified the FC at $500.00 from a long time ago. The five units at $5,500.00 each is the current rate. The CAF is $500.00 per unit and goes into a pot to do deep wells. When asked if that CAF is still only assessed in Kona (Ms. Scarr thought that had been done away with), the Manager stated it is still only Kona. The Department plans to do away with it. However, in this example, the CAF is still current. The Deputy Manager added that it would need Water Board action to delete it. Ms. Scarr had thought that was done sometime within the last two years. She, therefore, requested that on the Agenda for the next meeting, there be an item that the Board can take action on to delete the $500.00 Capital Assessment Fee for deep wells in West Hawaii. Ms. Scarr asked if the water system cost is subtracted from any FC. Mr. Ahuna replied that it is not subtracted. That is used to capitalize the system - -water improvements. Ms. Scarr asked what happens after it is dedicated to the Department. The Manager replied that it goes on the Department's books for assets. In response to Mr. Mochida's question about the 18 lots, plus 1 roadway lot, Mr. Ahuna replied the roadway lot is not considered a buildable lot and is not assessed. Mr. Wilkins asked about the Bill of Sale on Item No. 5, Alii Cove at Honl's Beach - -some of the charges are noted "to be determined." Page 9 of 20 9- 28- 04min.doc Mr. Ahuna explained that the developer was asked to extend the waterline further than they were supposed to and also to increase the size, so there is a credit. However, the Department is using that waterline already, so the dedication is to make it formal. The credit has not been determined yet because it is still in the process. They are not getting a meter until they pay the FC and CAF. In response to Ms. Scarr's question why Items 2 and 3 (University of Hawaii, Hilo — University Park Infrastructure Improvements) were also so vague, Mr. Ahuna replied that the charges have been assessed; but to accumulate the data to present it to the Board would have been a monumental task. The Manager added that when it gets settled, it may be presented to the Board for information. In the meantime, the Department needs to have these accepted by the Board in order to provide them service. He gave his assurances that the Department can be trusted in what is placed on the Agenda. ACTION: A vote was taken on the Motion to approve Items 1, 2, 3, and 5 and defer Item 4. Motion was carried unanimously by voice vote. B. GASOLINE BID NO. 2002-03, PARTS "A" AND `B" (2), FURNISHING AND DELIVERING GASOLINE AND DIESEL TO THE DEPARTMENT OF WATER SUPPLY: Due to the increase in gas prices, which is allowed by contract, the Department of Water Supply will be experiencing a shortage in the contract with Hawaii Petroleum, Inc. The gas price has risen since the Water Board granted an adjustment to $1.7568 /gallon (from $1.4668 /gallon) in October of last year and added $50,000.00 to the contract amount. The present price is $2.0868 /gallon. An additional $1,104.11 is required to provide gasoline for the Department's vehicles through June 30, 2004. Part "A" is to provide Unleaded Plus gasoline for the Hilo Baseyard, and Part "B" (2) is to provide Low - Sulfur Diesel for the Kona Baseyard. The Manager recommended that the Board award an additional $1,104.11 for GASOLINE BID NO. 2002 -03, PARTS "A" AND `B" (2), FURNISHING AND DELIVERING GASOLINE AND DIESEL TO THE DEPARTMENT OF WATER SUPPLY to Hawaii Petroleum, Inc. The contract will increase from $128,978.00 to $130,082.11. ACTION: Mr. Heck moved for approval of the Manager's recommendation; seconded by Mr. Wilkins and carried unanimously by voice vote. ACTION TO MOVE UP AGENDA ITEM Since Mr. Henderson of DHHL was present, Ms. Scarr moved to take up Miscellaneous Item (D) Professional Services Agreement; seconded by Mr. Goya and carried unanimously by voice vote. D. PROFESSIONAL SERVICES AGREEMENT: Professional Services Agreement contracts for the following Department of Water Supply projects are currently being proposed. However, the projects are not listed on the Department's current Page 10 of 20 9- 28- 04min.doc 5 -year Capital Improvement Projects list; therefore, Water Board approval is necessary to proceed. 1) Kulaimano Booster Station Improvements Job No. 2004 -848 Project Scope: This project consists of installing booster station and controls and appurtenances to boost well water to upper tank for improved water quality. The upper service area of Pepeekeo can only receive spring water, which has corrosive properties. The lower area can receive a blend of groundwater (well) and spring water. Treatment attempts for the spring water have not completely resolved the corrosive properties of the spring water and the area exceeded copper action levels determined by the Environmental Protection Agency (EPA). The use of well water for this area would eliminate the leaching of copper from our consumers' home piping beyond EPA's action levels. Consultant: To be determined Construction cost estimate: $200,000.00 2) Waimea Production Well and Supporting, Facilities Job No.: To be determined Project Scope: This project consists of outfitting an encased deep well with a pump, piping, controls, control building, and SCADA for additional source capacity for the Waimea service area. The well is located below our existing 4 mg Clearwater Tank at the Waimea Treatment Plant. When completed this well will serve as a backup to the Parker Well and also supplement the surface source. The Department is working with the State and DHHL in an effort to create a partnership for the development of the well. The State and DHHL desires water capacity for its developments in the Waimea area. This partnership will provide for cost sharing of the development of the well. Consultant: To be determined Construction cost estimate: $2,000,000.00 3) Ahualoa Well -Phase I Job No.: To be determined Project Scope: This project consists of drilling and testing an exploratory well close to our Backwash Tank in Ahualoa. If successful, a production well and reservoir will be designed and constructed to service the Honoka`a, Upper Paauilo, Upper Pohakea, and Ahualoa areas. Drilling by USGS of a monitor well in the area has shown the occurrence of high level groundwater. This proposed added source capacity is essential to the future growth of this area. Consultant: To be determined Estimated Cost: $1,000,000.00 The Manager recommended that the Board approve the new projects, the professional services contracts, subject to results of the procurement process and that either the Chairman or the Vice - Chairman be authorized to sign the documents, subject to approval of our Corporation Counsel. MOTION: Ms. Scarr moved to approve the Manager's recommendation; seconded by Mr. Goya. Page 11 of 20 9- 28- 04min.doc Mr. Ben Henderson spoke on Item No. 2, Waimea Production Well and Supporting Facilities. The well will assist his department and other agencies. Among their plans are to develop homesteads in Lalamilo (36 single - family homes), and develop an additional 400 units in that area. They will not be able to move forward without a commitment of water. They also have existing lots in the Waimea Puukapu area currently unserved, and the Waimea well will help serve those. He expanded on other areas they have plans for development - -in La`i`opua, their department will be receiving the remaining villages in the Villages of La`i`opua, with the exception of Villages 9 and 10. They currently have Village 3 - -they are the only presence in that area. Development of Villages of La`i`opua have been held up because of the issue of ceded land revenue to the Office of Hawaiian Affairs. In agreeing to the transfer of lands in La`i`opua to the department by both the Housing Community Development Corporation Board and the Board of Land and Natural Resources, the Office of Hawaiian Affairs Board of Trustees agreed to waive its interest in those lands. DHHL has current plans to develop what is called Village 4, which is adjacent to their current Kaneohale Development, that is 236 units and is in design at the present time. The approximately 100,800 gpd will serve approximately 151 water commitments, which will help support the development of housing in that area. They also have plans to develop additional villages after Village 4 and will need to seek water commitments for that water also. As a final note, in East Hawaii, they have plans to develop additional residential lots in the Makuu area, adjacent to an area where they have agricultural lots. They are working with DWS on the development of a second well they will be drilling that will be dedicated to the County after completion to provide water source for that area. They recently completed a Big Island plan, which identifies its proposed land uses for this island in an effort to make various government agencies aware of its long -term plans for better coordination. Mr. Goya asked if purchasing lots in existing subdivisions is part of the current plan. Mr. Henderson replied that they have entertained that to some degree but no immediate plans on this island. Over half of their land holdings are on the Big Island. It is more of a critical issue on Oahu rather than here. In response to Mr. Wilkins' question relating to commercial facilities in the "Villages," Mr. Henderson replied there is a high school there, and there may be the possibly of a future hospital. There are parcels available for government community facilities, but he was not sure if any parcels were for commercial use. In response to Mr. Heck's question about DHHL's land holdings in the Ka`u district, Mr. Henderson stated that they acquired about 40 lots in the Discovery Harbour Subdivision, and have a lot of land in the South Point area but no water to serve that land. Ms. Scarr mentioned some earlier discussions on wells in the Ka`u area and a test well that had a very good reading. She stated that a better water supply at South Point would help a lot of projects in that area. Mr. Henderson was thanked for his testimony, and he left the meeting at 11:14 a.m. Ms. Scarr asked why Item No. 3, Ahualoa Well - Phase I, is seen as a priority. Page 12 of 20 9- 28- 04min.doc The Manager explained that Ahualoa is pretty high up because without additional sources in that area, the demand for housing in the area will not be met. If the Department begins to develop additional source, it would help the entire area. Ms. Scarr mentioned that there are already people living in areas without enough water or no public water at all. She asked why this one is priority over others, such as Kona Paradise, for example. The Manager clarified that the Department's obligation is to take care of customers on its system. The Department assists in other areas but does not spend its funds to put in a system. Ms. Scarr noted, after the Manager clarified that these are referred to as customers along the Department's existing waterline, that they are still "new" customers in her opinion. She viewed this as a perfect example of the current policy and a good situation to articulate. The question is if this is the policy that this Board wants - -to expand and upgrade existing systems in preference to installing systems where none exist. Mr. Heck stated that it depends on the definition of assisting those areas that are not currently connected. The definition of "assisting" has been discussed by this Board a number of times. The Manager stated that a good example would be Coastview and Wonderview subdivisions. Mr. Wilkins stated that the key difference for Coastview/Wonderview, and potentially HOVE, is that they are expected to put together their own Improvement District and raise their own funds. It is not clear to him, in this situation of Ahualoa, since there is an existing overtaxed pipe, that these newly added customers are expected to pay anything additional. The Manager explained that they have to pay a $5,500.00 facility charge per service. He added that the Department has been approached by developers, attempting to develop subdivisions in Honoka`a and were turned down because the Department does not have capacity. Also, the State well is not finished yet. Example, if this well is drilled and a developer comes in wants to do a 100 -lot subdivision, they pay $5,500.00 per lot. The Department will get back $550,000.00. Ms. Scarr stated that would happen anywhere. The same scenario applies to any development. She is not making an argument against this project but is just suggesting this be used as an example of how to invest in an area and get back the money through facilities charges. The Manager suggested scheduling this for a future Board Meeting for discussion of the issue of where the Department spends its money versus where is does not. Mr. Wilkins stated that there seems to be a difference in potential development areas- -one where the Department puts in the money with the expectation of being paid back (seems to be what Ahualoa is) and the other where it expects the local people to get together to raise the money themselves. To him that is a profound difference, and he would like to know the justification for it. This should be addressed. Mr. Mochida stated that what people are forgetting is that properties in the subdivisions being spoken about were sold to people without water. The land being sold without water or utilities is Page 13 of 20 9- 28- 04min.doc more affordable. The people buying land with waterlines installed pay a higher price. You cannot expect the Department to spend its money from people it is serving to come and put a system in for other people. If they do their own system, the Department can go in and help them later. The Manager stated that this will be placed on an agenda for policy discussion. In response to Chairman Nakashima's question if the Department is negotiating for that property, the Manager replied that the Department was waiting for the Board's okay first. Mr. Goya asked if legislative money is available for any of these projects. The Manager replied that DLNR will be seeking funding for Waimea Production Well and Supporting Facilities but not for Ahualoa. The reason DLNR is seeking funds for Waimea is because they have special interest in the water use. They also want to allocate some water to the Department of Transportation, having to do with the bypass road plan. Also, DHHL has many projects in Waimea that they want water for. Assuming all that goes through and if the money is released, it will probably not be available until next June or July. ACTION: A vote was taken on the Motion. Motion was carried unanimously by voice vote. C. STRATEGIC PLAN /ANNUAL BUSINESS PLAN: Information presentations were made by the "champions" of the next three strategic initiatives and tactics listed in the 2004 -2005 Annual Business Plan: 1. Mr. Richard Tsunoda His task is to review and improve management of Department's investment portfolio. He reported that the goal is to provide water at the least possible rate and to review and improve management of the Department's investment portfolio. Six tactics were identified. The three highest priority tactics are: 1) Resolve investment responsibility question. The Office of Corporation Counsel rendered an opinion that the management of investments lies with the County Treasurer. The counties of Maui and Kauai operate in the same way (with regard to the respective water departments). Mr. Tsunoda acknowledged Ms. Scarr's comment that Maui's county treasurer has a more aggressive policy than ours. Mr. Tsunoda indicated that he has a lot of dialogue with the County Treasurer regarding our investments, and that the County Treasurer seriously considers any recommendations Mr. Tsunoda may have. Recently, following a presentation by American Savings Bank officials, who spoke of a special type of account that would yield a little higher return than what the Department is getting on its short term investments, Mr. Tsunoda asked the County Treasurer to place $3 million in this account, which he did, 2) Develop an investment policy that achieves balance between investment return and tolerance for risk. Mr. Tsunoda indicated that he would develop a policy for the Department and would continue to work with the County Treasurer, and 3) Develop a debt service policy. Mr. Tsunoda indicated that he would be developing one soon. 2. Mr. Clyde Young His task is to explore alternative internal and external funding sources for system expansion. Tactic No. 1 is to explore loans, grants, and other external funding sources for C.I.P. expansion projects. The RCAC presentation this morning has a lot of potential, especially in bringing Page 14 of 20 9- 28- 04min.doc water to communities without. Another one is to look at developer /DWS joint funds; for example, credits given towards developer benefit. Next is look at State and Federal appropriations, grants and loans (example: State Revolving Fund used for safe drinking water). Legislative, Federal, State, and OHA mentioned earlier. We are making good with OHA (example, Kohala Waterline project). Ms. Scarr stated there is a law that California water districts have used a great deal to fund their transmission lines and their water treatment projects. It is a specific fund. She had sent the information to the Manager in June. She felt that, in Hawaii, we do not take advantage of a lot of specific federal programs because they were written by legislators in other states. The Manager mentioned that the Department does look at these programs; and sometimes, this Department does not qualify. The Department does attempt to get the ones it does qualify for. Also, the Department of Health, which is in direct contact with EPA, will pass along information to us about EPA loans and grants. Mr. Heck stated that it is good to know of all of these funding sources; but the matter is how much time staff has to check into them. It may be a function for the new position the Department is creating - -the public relations person /strategic plan manager. He asked how long it may take to have someone on staff. (The Manager indicated it still needs Civil Service approval and may take another three months.) Ms. Scarr stated it would help to have someone whose job it is to focus on grant and loan information and application writing. That person's position would be paid for many times over if they were successful. Mr. Mochida mentioned the downside to having someone full time is that even if they are not productive, you have to keep them. Possibly hiring a consultant would be a better idea. Mr. Young mentioned that was one of the other tactics; and as details are worked out, we can move into another tactic. Tactics are dropped as they are finished, and the next one is worked on. Tactic No. 2 is to implement a joint DWS /HELLO pilot hydro - generation project. He has met with HELCO and working on site selection. There are some legal and procurement issues that have to be worked through, but it is moving forward. For Tactic No. 3, he is in the beginning stages -- working with HELCO on power factor correction capacitors. That is a way to use the existing power we get more efficiently. There are also some legal and funding issues involved. The legal issue is how we procure working with HELLO. May have to put it out for bid. Mr. Goya clarified that it is because it is on the customer side of HELCO's meter; therefore, there are additional legal requirements to protect the customer base. 3. Mr. Richard Sumada Page 15 of 20 9- 28- 04min.doc Mr. Sumada's strategic initiative was to review and improve the Department's revenues and expenses to minimize rates. Two tactics were identified - -one was to employ a collection agency to pursue delinquent accounts; and the second was to recruit and hire a credit and collection clerk. The first plan, looking at the Frank Huff collection agency, is dependent upon bringing in the new credit and collection clerk. That would be a good time to look at procedures and make any changes since the collection clerk would be working directly with the collection agency to be involved in the whole process. In response to Mr. Wilkins' question if a cost or benefit analysis was done on having the collection agency versus an internal clerk, or having both, Mr. Sumada replied that both would be needed. This clerk would be dedicated full time to provide information the collection agency needs to work with. Mr. Wilkins asked if there is a history of the collection agency following a bad debt to another island. If not, it is a question that should be asked of them. Mr. Tsunoda stated that occasionally, payments come in from collection agencies off island, so he believes they partner with other agencies and each takes a percentage. However, he was not sure how aggressive they are being pursued. Mr. Mochida felt that the Department should take more aggressive measures before delinquent accounts happen because delinquencies can go on and on; for example, requiring more down payment up front on a meter. Perhaps the Department's computer system could "flag" an applicant that has a poor rating, and make them pay triple the amount. An "after the fact" attitude is a bad way to run a business (you are going to lose 40% of your revenue to a collection agency). That collection agency might not work that hard on a $50.00 account. You do not want to be bad to people; but if people are bad to the Department, you have to be more aggressive. Mr. Sumada stated that the Department had looked at making the Rules and Regulations more strict, particularly on deposits -- whether deposits are given back or not, and who deposits are collected from. However, it was not changed much, mainly because of unfairness; there is a problem with making the rules target some customers more harshly than the rest. The Manager added that there have been many discussions on this; and it is a really hard balance in making it affordable for those that are good customers, and yet providing for those that might not be. If you make the initial deposits high, it is detrimental to good payers. Ms. Scarr agreed with Mr. Mochida that the Department could use information that other businesses use; for example, someone's credit rating. The amount of deposit they need to put down may be dependent on the credit rating they have. If it is a bad credit risk, why should the Department and all its other customers assume that risk. The Manager replied that it is legal, as long as you have a basis. To do that, a rule change would be needed. Ms. Scarr suggested proposing a rule that follows good business practices, which takes into account people's credit. She asked that, in conjunction with Ms. Garson, that a new proposed Page 16 of 20 9- 28- 04min.doc rule be drafted with the intent to collect deposits from customers, commercial or residential, for initial service that reflects their credit history. Ms. Garson stated that she was under the assumption that you had to pay for a credit rating on a person so it will mean expenditure of funds and then you would have to run it on every single applicant. She cautioned the Board before jumping into that because in the end, it might not be worthwhile to place that kind of requirement in there. She added that she and Mr. Sumada had talked about this more than a year ago, but there is also the possibility that her office assists in the collection efforts - -in a sense, doing what Frank Huff Agency does. However, her office has not had the resource to do it; but she will work with him on trying to beef up the whole process. MANAGER'S REPORT: The Manager asked the Board to skip to Manager's Report, No. 1, in the interest of time; recess for lunch, and take the remaining Agenda items in the afternoon. There being no objections, the Manager reported that Employee of the Quarter for the second quarter of 2004 is Ms. Susan Okamoto. Ms. Takeguchi, Secretary - Administrative Assistant, stated that Ms. Okamoto is a Clerk II, has been with the Department since March 2002 and also worked in the Department on a limited term appointment from May 1998 to February 1999 as Clerk- Typist. In the two years, she has demonstrated dedication to the Department's employees and the public. She is cordial and pleasant to the public, she also has been attending workshops pertaining to clerical matters in an effort to become more efficient in completing her duties. She participates in the Water Week, the County Annual Food Drive, and the Blood Drive. (Ms. Okamoto was presented with an award by Chairman Nakashima.) RECESS: The Board announced lunch recess at 12:12 p.m., to reconvene 2:00 p.m. RECONVENED: 2:05 p.m. D. PROFESSIONAL SERVICES AGREEMENT: Taken up earlier. E. MONTHLY PROGRESS REPORT: In response to Ms. Scarr's request for an update on Keei Well "D," Mr. Clyde Young reported on problems with the motor control unit (starter). That equipment should be back online September 29 in order for tests to be done on the motor. If the outcome is okay, the pump and motor can be placed back in the hole as early as by Monday, October 4, 2004; but no promises. The Manager added that if it is not completed by then, the Department will issue a notice in the newspaper. F. REVIEW OF MONTHLY FINANCIAL STATEMENTS: Ms. Scarr noted a lot in Accounts Receivable. Mr. Sumada explained that it is higher than the prior year because the billings that went out during the month was more than last year. The power cost was increased as well (3 cents per 1,000 gallons). Page 17 of 20 9- 28- 04min.doc G. FINANCE COMMITTEE REPORT: Ms. Scarr stated there is no report because Mr. Tanaka was on this Committee and has resigned from the Water Board. H. MANAGER'S EVALUATION: The Board decided to schedule an Executive Session and an open session for the next meeting to deal with evaluations of the Manager. In lieu of forming a sub - committee, it was decided that each Board Member prepare their evaluations, on the forms provided with the Agenda. They will turn them in to the Secretary, who will keep them sealed until the day of the next meeting. Packets will be prepared for each member, consisting of copies of each completed evaluation form, to be discussed during Executive Session. If mailing in the evaluations, they are to be sealed and marked confidential and to the Secretary's attention. Board Members may also bring their forms to the meeting early enough for the Secretary to prepare copies for the remaining members. I. MANAGER'S REPORT: 1. Employee of the Quarter presentation - Ms. Susan Okamoto (taken up earlier) 2. Kona Coastview/Wonderview status - waiting to give Notice to Proceed to the contractor. Waiting until signing of a document by the Mayor. Manager has asked the project engineer, Ms. Shari Komata, to ask the contractor to make some kind of blessing before the project begins because it has been a 20 -year effort to get it these improvements done. In response to Mr. Wilkins' question about public notification, the Manager stated the Department will post weekly updates on its website. Ms. Garson added that October 4 is the closing of all of the bonds. Notice to Proceed will have to come after that date. 3. USGS Drilling Program - the rig is on its way to HOVE. It had to stop in Hilo first for repairs. In relation to the invoice for time the rig has been on this island, the Manager explained the original deal was $400,000.00. Mr. Tribble has gotten a $47,000.00 credit from the Federal government due to the inactivity of the rig while it has been here. The rig has been on this island about two years, and only two holes were completed. The program will not be continued by this Department after this next hole is drilled as the rig's depth capacity will not exceed 1,000 feet. Ms. Scarr asked what it would cost to have a contractor do the same type of drilling as USGS. Perhaps it would be cheaper. Another thought might be for the Department to buy its own rig and staff it if there are enough holes to make it worthwhile. The Manager stated he has pondered over this problem, and maybe a solution would be to make multi - contracts where a contractor is hired to drill a 6 -inch diameter test hole; and if the results are good, the second part is to continue and ream the hole. If the water quality is no good, the contract can be terminated after the first stage. The Deputy Manager updated the Board on USGS' program. In the past, USGS indicated their monitoring wells could not be used for anything other than monitoring. However, Mr. Tribble has researched it further and found that the provision in the Federal law is good up to five years. After that, it can be turned over to another entity for use other than a monitor Page 18 of 20 9- 28- 04min.doc well. That was exciting to this Department because USGS did drill a couple of wells that are sufficient in size in Kohala, and they could be utilized. Mr. Tribble has indicated he will pursue that further. There are other wells on this island this Department may want to pursue obtaining from USGS. 4. Kona Water Quality Progress - the Manager informed the Board about ongoing negotiations with developers in an effort to obtain water corridors. Mr. Wilkins also reported on a reverse osmosis unit available at Lowes that gives a 90 percent reduction of sodium and chloride content working with brackish water at a 40 psi pressure. Home Depot has a similar one with the same sodium reduction capability, and these two run $150 to $160 retail, plus installation. He is trying to spread the word around North and South Kona about the availability of these units because it still seems like it is going to be three years before any remedial exercise is done by the Department of Water Supply. Resignation of Mr. Leonard Tanaka - Mr. Tanaka has resigned from the Board as of September 16, 2004, in order to take care of business and personal matters. The Manager hopes the Mayor's Office will fill the vacancy immediately. Ms. Scarr suggested that the Board Members send emails to Mayor Kim reminding him that the Board will have three vacancies the end of this year, and it is essential that he make these appointments no later than December 1 so they may start their terms January 1, 2005. (Mr. Tanaka's vacancy is District 3; Mr. Nakashima and Ms. Hons will be vacating Districts 1 and 9, respectively.) CHAIRMAN'S REPORT: Chairman Nakashima reported that he was sorry to hear of Mr. Tanaka's resignation. He is a good person and good Board Member. He, too, hopes the Mayor finds a replacement soon. K. WATER BOARD GOVERNANCE POLICIES: ACTION: Mr. Goya moved that this be deferred to the next meeting and that it be handled before lunch; seconded by Mr. Mochida and carried unanimously by voice vote. ANNOUNCEMENTS: Next Meeting: The next meeting of the Water Board will be held on October 26, 2004, 10:00 a.m., at the Department of Water Supply, Hilo Operations Center Conference Room, 889 Leilani Street, Hilo, Hawai `i. Page 19 of 20 9- 28- 04min.doc ADJOURNMENT ACTION: Mr. Goya moved for adjournment of the meeting; seconded by Mr. Mochida and carried unanimously by voice vote. Meeting adjourned at 2:53 p.m. Secretary The Department of Water Supply is an Equal Opportunity provider and employer. To file a complaint of discrimination, write: USDA, Director, Office of Civil Rights, Room 326 -W, Whitten Building, 14"' and Independence Avenue, SW, Washington DC 20250 -9410. Or call (202) 720 -5964 (voice and TDD) Page 20 of 20 9- 28- 04min.doc