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HomeMy WebLinkAbout2014-01-08 Board of Ethics Minutes HAWAI‘I COUNTY BOARD OF ETHICS 1 MINUTES – REGULAR SESSION Wednesday, January 8, 2014 10:00 a.m. to 11:58 a.m. Hawai‘i County Building 25 Aupuni Street, Room 1501 Hilo, Hawai‘i 96720 Members and Staff Present: Bernard Balsis, Vice Chair Arne Henricks, Member Glen Hisashima, Member Douglass Adams, Member Renee N. C. Schoen, Deputy Corporation Counsel Mary E. Fujio, Secretary 1. CALL TO ORDER Mr. Balsis called the meeting to order at 10:00 a.m. 2. STATEMENTS FROM THE PUBLIC ON AGENDA ITEMS Wesley Takai had signed up to testify on agenda item 5a. MR. TAKAI: My name is Wesley Takai, and I’m here to speak for myself on the Petition No. 2013-05 and 2013-06. Before I start I would like to thank the Board, members of the Board, for your dedication and time for your public service. I served for five years in the Finance Department, Board of Review, and I understand how difficult it is to render a fair decision in such a complex case, especially—I know that you have a vacancy, so if you have a vacancy, how hard it is, hoping that you’ll have enough members for a quorum. After reading the articles in the September 17 and September 12 [sic] newspapers on the subject matters, I wanted to share some historical information, hopefully to help you in your decision-making. I started as an appraiser trainee in January 1969, five months after returning from Viet Nam, and spent 39 years with the Real Property Division. When hired, I was a state employee, as the real property program at that time was a function of the state government. When I started, the appraisal staff consisted of six appraisers, including myself, and a supervising appraiser. All seven of us lived in the 1 Blanks indicate inaudible or indecipherable speech. South Hilo District. The senior appraiser was assigned the South Hilo assignment assessments, which included the area he lived in. The system of checks and balances that I read in the paper, to ensure uniformity and equalize assessments throughout the County, was already in existence when I started. The assessment of each real property employee’s property, along with assessments of several similar properties, were reviewed by the supervising appraiser. The supervising appraiser’s assessments and comparables were reviewed by the district tax administrator. It should be noted that the checks and balances procedure applied to all properties owned by employees, whether it was the principal residence, vacant lot, or income-producing properties such as a rental. The policy prohibiting Real Property employees from selling real estate was in place when the function was still under the state jurisdiction. As an outcome, and this is number six—as an outcome of the 1978 Constitutional Convention, the people of the state voted to transfer the real property function from the state to the individual counties. The transfer to the counties became effective July 1, 1981, with the requirement that all counties be uniform in their assessment practices for 11 years, from the date of the 1978 general election. To do this, the real property provisions in the Hawai‘i Revised Statutes Chapter 246 were adopted into the code of each county. Various rules and regulations, policies and procedures, legal opinions, checks and balances, etc., were transferred to all counties to meet the uniformity in assessment requirement. I believe the general provisions are still in use today. I would like to end my comments by saying that the assessment controls that are in place today have withstood the test of time, and I do not recall one incident throughout my 39-year career when an employee purposely lowered his or her personal assessment in violation of the uniformity and equality provision of the real property law. And that’s my presentation. I’m just saying that the provisions as I saw in the paper have been in place, most of them, before I started to work in 1969. MR. BALSIS: Thank you, Mr. Takai. 3. APPROVAL OF THE REGULAR SESSION MINUTES OF DECEMBER 11, 2013 Motion and vote: Mr. Balsis moved to approve the minutes, Mr. Henricks seconded the motion, and all members voted aye. 4. NEW BUSINESS a. Petition No. 2013-09: Request for informal advisory opinion from the Director of the Department of Liquor Control, to determine whether there would be 2 any conflict or impediments to his serving as a per diem district court judge in the Third Circuit, while continuing to serve as the Director of Liquor Control. MR. BALSIS: Good morning, Gerald. You have the floor. MR. TAKASE: Thank you. The reason I’m coming to you folks—I’m not really seeking out new employment, but I serve in several different capacities, and one of those is as an officer in the Army National Guard, as a judge advocate. And one of our duties in that position is to provide legal support to the Hawai‘i Army National Guard. Since our Guard has been activated several times now, we’ve had situations where we run into instances where we are getting ready to do court martials, so as part of that function, we need to provide a military judge to these proceedings. So I have been working with the Judiciary, because we’ve had several past—well, several current sitting judges that were past National Guard members, and asking them if they would be willing to serve as members. But since they’re long since retired from the military, they’re not able to sit in that capacity. So the other I guess alternative that was suggested was that—and this was by Judge Ibarra—that he would appoint me as a per diem judge and in turn then I could sit as a military judge, because the military judges are required to be sitting either part-time or full-time as judges in order to serve in the military capacity as well. So that’s kind of the genesis of this proposal and request. So I come here today to seek I guess clearance from the County. I’ve talked to Lincoln Ashida, Corporation Counsel, and both he and I don’t see any real conflicts between my position as Director of Liquor and sitting as a per diem judge. I still hold my law license, but I don’t practice other than through the military side. In our County work, we don’t really have occasions to appear before the District Court. Any decisions or matters appealed from our department would go directly to the Circuit Court as a Chapter 91 appeal, so we don’t envision any time that any matter from our office would be appearing before the District Court. So really I sit here trying to get an advisory opinion from you folks as to whether or not you see any conflicts, and if there is none, then there are several steps that have to be completed to get appointed, and there’s still some question as to whether or not I can even sit as a judge still holding a County position. But that’s something the Judiciary is looking at at this moment as well. MR. BALSIS: Any comments or questions from members? MR. HENRICKS: Yeah, I’d like to make a comment. Other than the fact that you play lousy basketball, I sat in that same position for ten years as a per diem judge in the District Court, and I had absolutely no interaction with the Liquor Commission during those ten years, so I can’t possibly see any conflicts at all. So that’s my experience. I was kidding about the basketball. 3 MR. BALSIS: My only comment, and that is it goes along with what Arne had mentioned, in my review of your letter, as long as you’ve been open about this and you continue to be open about this relationship, and then if for any reason a case or anything from the Liquor Control Board came up to you as a per diem judge, you’d have to recuse yourself-- MR. TAKASE: Yes. MR. BALSIS: --so as to make sure there’s no connection whatsoever. If that be the case, I don’t see an issue, either. MR. ADAMS: I even have a more restrictive view of it. I don’t think the Code even talks to this. The Code talks to service in the County and private financial conflict. This is service in a state position and a county position, which I don’t think the provisions of Article 15 even address in a way that would preclude or disqualify somebody from performing in either of those. The Judiciary piece, that’s a state issue. It’s not ours. So I would move that we file an advisory opinion that indicates that he’s fine under our provisions of Article 15. MR. HENRICKS: I second the motion. MR. BALSIS: Is there any further discussion on this motion? All those in favor of the motion, say aye. MR. ADAMS, MR. HENRICKS, MR. HISASHIMA: Aye. MR. BALSIS: Aye. Motion passed. MR. TAKASE: Thank you very much. 5. UNFINISHED BUSINESS a. Petition Nos. 2013-05 and 2013-06: Informal hearing of petition by Michael Drutar alleging that County employees Mary Ann Todd-Waller and Marilyn Veincent are in violation of Section 2-84(a)(1) of the Code of Ethics because the employees have been assigned to appraise their own properties and set the assessed value of the land of their primary residences. MR. BALSIS: Mr. Drutar, do you have any further comments on your petition at this time? MR. DRUTAR: I’d like to maybe have an opportunity to rebut whatever comments, depending on what’s said, if there’s some clarification needed. I did have a rebuttal towards Mr. Takai’s comment earlier, but maybe it would be best to do it all at once after _________ comments I’d like to make then. 4 MR. BALSIS: Okay. At this time, if I’m correct, there were some items that we wanted presented. Nancy, if you can come forward? And Stan, right? MS. CRAWFORD: Okay, well good morning. For the record I’m Nancy Crawford, Director of Finance—we’re trained in that over at Council side, to introduce ourselves, although I know you know who we are. And we’re here at your request to provide some additional information. Just to recap, and as you’ve just read the agenda item, that we have the two petitions that are before the Board, making a contention that the appraisers violated the Code of Ethics by setting the assessed value of the land of their primary residences. Both petitions are factually incorrect. Our department has very strict and thorough safeguards to prevent assessors from setting the specific valuations of their own properties. That’s just not allowed. During the discussion of these petitions, the Board asked for additional information on the practice known as mass appraisal. During mass appraisal, assessors review the valuations for entire neighborhoods, recommend adjustments upward or downward for the neighborhood as a whole, based on market trends and other factors, and those recommendations are then reviewed in detail by the managers of the division. And they are accepted if they are appropriate and justified by the facts. In the case at hand, I believe the Board is essentially asking if there may be a conflict because one of the appraisers, Mary Ann Todd-Waller, has been assigned to conduct a mass appraisal of a neighborhood of 97 parcels, that includes her personal residence. Mary Ann’s work does not affect the value of her home in even the slightest way. Mary Ann dedicated her home for tax purposes, which means the value is frozen, and her work does not change the valuation of her property. It has been frozen since before she was assigned to this appraisal zone, and nothing she recommends regarding land values in her neighborhood will have any effect on her property value. The other appraiser, Marilyn Veincent, who is also assigned to conduct mass appraisals in a zone that includes her home—that valuation neighborhood that includes her home is approximately 2,000 parcels. Any recommendation she might make based on the same analysis we were talking about, which is carefully reviewed, will affect all 2,000 parcels together, up or down. And that again has to be justified and affects the neighborhood as a whole. So with that little recap, then, I would like to say Real Property Tax Assistant Administrator Lisa Nahoopii is with me today, and she’s going to go through a brief presentation to explain mass appraisal. Again, it’s a brief presentation—and to answer a couple of the other questions that were raised by the Board at the last meeting, if that’s okay? 5 MR. BALSIS: Okay. MS. NAHOOPII: Before I start, I wasn’t sure if the Board had received Mary Ann’s last email. She had a family emergency—her mom’s in the hospital, and she had asked that something be read into the record. And I didn’t know if this was appropriate, or if Corporation Counsel does that at a later time. th MS. SCHOEN: Actually, this was emailed January 7, Tuesday, and I think Mary provided that to you all. MR. BALSIS: Yes, we do have copies of that email. MS. NAHOOPII: Okay, so has everybody had a chance to read it? She wanted it read for the record, but I don’t know how that applies. And she had an additional thing to make as well on that. Is it appropriate for me to read what she submitted or no? MR. BALSIS: Any objections? Go ahead. MS. NAHOOPII: Okay. Do you want me to read the letter as well, or just her additional remarks? MR. BALSIS: Her additional remarks I think will be fine. MS. NAHOOPII: Okay. It says, in addition to my response, I’d like to add that I do not and will never give preferential treatment to my property assessment or anybody else’s. I am very virtuous about fairness and equity in my duties as a real property assessor for the County of Hawai‘i. I would never jeopardize my job to temporarily save less than a few hundred dollars a year in property taxes that could be used to assist the less fortunate, seniors, and other beneficiaries of County assistance programs. In view of the fact that property taxes are an allowed itemized deduction from my income on Hawai‘i and U.S. income tax returns, and my position with the County is my only job and source of income, I would not benefit from giving preferential treatment to my property assessment. An assessor for the County who is also a realtor would have more cause to fix assessments than someone whose only occupation or source of income was a real property assessor for the County. And she apologized for not being able to be here today. If it’s okay I’d like to pass out – MS. CRAWFORD: Lisa has a handout here, because we have some graphs and charts just to show you, in explanation to answer some of these questions. So as she goes through this, she wanted to be able to refer to those and have you be able to see them. MR. BALSIS: Thank you. (Ms. Nahoopii passed around her handout.) 6 MS. NAHOOPII: Okay, good morning. My name is Lisa Nahoopii, and I am the assistant administrator with the Finance Department, Real Property Tax Division. Most of us are familiar with fee appraisals as opposed to the process of mass appraisal. I started working in a fee appraisal office in Kona in 1989 and received my state license in 1993. There is a very big difference between fee appraisal and mass appraisal. In an extreme example, if a fee appraiser could do one appraisal a day, seven days a week with no time off, he or she would have completed 365 appraisals a year. Each appraiser here at the County is on average responsible for approximately 10,000 properties. When it comes to both the fee appraisal and mass appraisal procedure, there are 40-hour courses that cover the fundamental aspects of each. Due to time constraints, we have condensed this complex process, as requested by the Board in the last meeting, into a short presentation. The International Association of Assessing Officers, which we commonly refer to as the IAAO, defines mass appraisal as a systematic appraisal of groups of properties as of a given date using standardized procedures and statistical testing. The purpose is the equitable and uniform appraisal of all property in a jurisdiction for tax purposes. When we do mass appraisals, we use the neighborhoods, which came up in last month’s meeting. A neighborhood, for the purpose of mass appraisal, is not the same a neighborhood in the traditional sense of the term. Typically, when we think of a neighborhood, we’re thinking of the cul-de-sac our property is on and a few surrounding streets. For the purposes of mass appraisal, we are looking at groups of properties based on similarities—and in our case, more often than not it is based on location and size. Mary Ann’s property is located in a neighborhood with 97 parcels, while Marilyn’s neighborhood has 1,955 parcels. To determine a land value change, the appraiser reviews the sale price and the previous assessment to determine whether we need the value to change or remain the same for that neighborhood. The sale price to assessment is called a sales ratio, and it is a key element to the justification process for mass appraisal. Every sale and transaction is reviewed for taxation purposes. All valid sales are utilized in the sales ratio for determining and justifying values. Real Property administration does look at the sales that are also marked as invalid to be sure good sales are not accidentally coded wrong or purposely overlooked. Mass appraisal, IAAO, and the Hawai‘i County [sic] is based on the premise of uniformity and equality. An example of this is if there are no sales in one neighborhood, but a comparable neighborhood which has historically been similar over the years does have sales, we cannot simply state because this neighborhood had no sales, this neighborhood—I’m sorry. Because we cannot simply state that if this neighborhood didn’t have any sales, there is no change in value. Being uniform and equitable means that if the neighborhood reflects an increase in sales, because historically they are similar to another neighborhood, they both need to increase similarly. Where a fee appraiser would compare one parcel to another, in mass appraisal we look at entire 7 groups of parcels, entire groups of sales, and neighborhood to neighborhood. I’d like to refer you to the inserts 1 and 2. Insert 1 reflects Marilyn’s neighborhood, and Marilyn is your Petition 2013-06, in which there are 1,955 parcels. This is an area in the Waiākea area, and it’s a very large area. It’s not a small group. Some of us used to call them kumiais. This is a very broad area. And Marilyn—excuse me—in Mary Ann’s case, which is your Petition 2013-05, it is referring to 97 parcels. Now these 97 were based on like properties. Once an appraiser determines whether a change needs to be made or not, they submit the request to myself and the appraisal supervisor. Along with the requested change, we require each appraiser to submit all documentation to support the change. An appraiser cannot simply change their own neighborhood. The request for a neighborhood to change or remain the same needs to be justified. I’ve included Inserts 3 and 4, which is a common submittal that I receive, as well as the appraiser supervisor, to determine whether the justification has been made to change a neighborhood. The administrator or I make all the changes, as we are ultimately the individuals responsible. And I know this is already getting kind of long, and I can get into more detail on this, but I just wanted to show you that they do have to provide us the sales. And then on the bottom, it also includes the sales that was not considered and why. In this case this is one parcel out of a whole group of sales, and because of it could not extrapolate the one single sale price for that particular lot. This year, like every year, I review the preliminary recommendations for the requested changes to the neighborhoods, and I determine whether there is evidence to support the change. The administrator is required to provide to the Board of Review a sales ratio analysis annually, which reflects the ratios of the final value to sale price of vacant land, improved properties, and condominiums. We further break this down to the zone level, and we also provide any data that was not deemed to be utilized in the sales ratio. So everything in this process is transparent. This element reflects that not only are the values and our process reviewed by administration, it is also reviewed by the Board of Review, which is comprised of citizens in our community. While the petition talks about an appraiser directly affecting their individual parcel’s land value, in reality they would need to affect their entire neighborhood. The only way an appraiser could significantly affect their own taxes would be to submit a significantly lower recommendation to change the land pricing table for their neighborhood, which would have to be supported by market data and pass our review. An extreme example would be setting their land value all the way to zero, which would never happen, all for just a minimal financial benefit of savings to Mary Ann’s parcel of $81.12 and for Marilyn’s parcel, $72.82. In the last hearing there was a question as to how often administration questioned the recommended values that were submitted. This year I have requested clarification on 45 neighborhoods, and we still have through the end of January to determine final land values, so we’re not quite done yet. This is typical for this period of time. 8 When it comes to the practice of assigning work to zone appraisers and the issue of staff appraisers living within a particular zone, the other counties within the state of Hawai‘i have the same issues, and they utilize the same checks and balances that we do. It is common for staff, as is the case with all workers, to live near work, and in our case the County buildings are both located within these zones under petition. In Insert 5 I have included the location of all of the real property appraisers, as well as myself and the administrator, that own property or have spouses that own property or their dependent children. As you can see, the concentration is within the North Kona and South Hilo areas, which are the two zones that the two ladies under petition live and own their property. A secondary analysis is completed annually of parcels owned by real property staff, from our entry-level clerk to the administrator himself. So not only are the appraisers looked at, but every single one of our staff members are looked at. Because the question last month was mostly on appraisers, I didn’t include the entire staff on this chart. The recommendation for the land value is the only component of value that appraisers can potentially affect. It must be repeated that submitted recommendations are reviewed by Real Property administration and compared to actual sales for a neighborhood. And that goes back to these pages, where they have to provide us with sales to support any change. And if there are no sales, I need to see the relative areas that also do not reflect a change is supported. This is one small part of a multi-step valuation process. And what we have included here is from IAAO, and this is the course 300 that was just taught to all of our appraisers. There is one appraiser that was unable to take the class because he started after this date. The land value analysis is highlighted on the top, and the main takeaway from this is this is our whole process. This portion is just this piece here. Thank you very much for your time. MR. BALSIS: Are there any questions? MR. ADAMS: I have a couple questions, if I could. If I’m understanding what you said, then is it your position that the mass appraisal process does not represent, then—as you show on your last chart here, the land value analysis piece of that, that little block is just one small element of the eventual appraisal process? MS. NAHOOPII: In the mass appraisal, yes. MR. ADAMS: In the mass appraisal piece, right. So would your position be then that really it’s only a fee appraisal that would be in violation of the Code of Ethics policies--it’s virtually impossible for the mass appraisal to represent a violation? MS. NAHOOPII: I don’t know if I can answer that. 9 MS. CRAWFORD: Yes, I would say that our feeling is that this is—this is a relatively small part--in terms of the weight of any assessment, this is a small part in the process, that it is carefully reviewed, and so they are not directly impacting the value of their properties. And while that doesn’t happen in some sort of—as Lisa said, in an extreme case, if it were to happen somehow that they dropped the value, which would never happen, the financial impact to them would be, in this case, $70 or $80. But again we don’t see that happening. We just tried to put that out to give you some idea of the scale. MR. ADAMS: All right. I guess the other point—I don’t know if it’s really a question. The point is that there are other potential benefits from the value. It doesn’t just have to— you don’t have to have the value go down. There’s also potential benefits to someone who would see their value go up, in terms of—just one, as value goes up, that makes it more amenable for potential sales down the road. So the idea that it’s only tax benefits we’re talking about--that’s just one of several that could occur, to the change. MS. CRAWFORD: Right, if such a thing were to happen. But again, there has to be—the analytical process takes place, and there have to be sales that justify that, which is the purpose of the submittal, the recommendation submittal and the justification that’s reviewed by the administrators. MS. NAHOOPII: As a fee appraiser—I’ve only been within the department for so many years--but as a fee appraiser, I didn’t put too much weight on what the County did for their assessments. I mean, that’s not saying much for the County process, it’s just I’m responsible to come up with a value, and if I’m going to put my license on the line—I don’t know about how realtors go about it either, but I see them not really list based on what we have our values quite set at. But I definitely understand where you’re coming from on that. It’s not just a tax benefit. They could look at it from other sides as well. MR. BALSIS: Mr. Henricks, do you have any questions? MR. HENRICKS: Yeah, back to Nancy. Nancy, are you saying that because what you’re doing here is mass appraisal, it takes it out of the area of directly affecting the person’s – MS. CRAWFORD: --directly affecting their individual property. MR. HENRICKS: Is it indirectly affecting them, then? Is that what you’re saying? Because in some way they’re affecting their property. You know they are, right? MS. CRAWFORD: I know they are making a recommendation— MR. HENRICKS: --But it’s affecting their property, though. MS. CRAWFORD: I guess I’m disagreeing, because I know that they are making a recommendation, which is vetted. There is not an automatic rubber stamp of these 10 recommendations. There has to be that impact, and the person who is actually inputting—reviewing and then inputting that is at the administrative level. MR. HENRICKS: But if it’s not affecting her property, then why make the recommendation? MS. CRAWFORD: I guess I’m saying that we’re talking about impacting—someone assessing their individual property versus the mass appraisal— MR. HENRICKS: --That’s what I’m getting at— MS. CRAWFORD: --of the entire 2,000 properties in the neighborhood and— MR. HENRICKS: --That’s exactly what I’m getting to. What is the distinction, you see? Undoubtedly we both agree, if it were a direct appraisal it would be verboten by the Ethics Code, right—we couldn’t do it, right? You know that, because it’s a direct appraisal. MS. CRAWFORD: Right, and that’s how I read— MR. HENRICKS: --I mean if it’s a one on one appraisal— MS. CRAWFORD: --and that’s how I read the petition. MR. HENRICKS: If it’s one on one you can’t do it, right? MS. CRAWFORD: That’s how I read the petition to read. MR. HENRICKS: Okay, but if it’s one on one, we both agree you can’t do it, right? MS. CRAWFORD: Right. MR. HENRICKS: Okay. MS. CRAWFORD: We have processes in place to ensure that does not happen. MR. HENRICKS: And it says here, in your own conflict of interest policy, not to do it if it’s one on one. It says so right here, on your own paper. All right, now I’m asking you, because it goes into the mass area, does that take it outside that area that’s forbidden? So that would be your position now, because it’s a mass appraisal? It’s no longer forbidden because it’s not an individual appraisal. You see what I’m saying? MS. CRAWFORD: I guess my position is that it is so diluted by the process— MR. HENRICKS: --That’s what I’m asking— 11 MS. CRAWFORD: --that it is virtually— MR. HENRICKS: --So does the dilution take it out of the area of directly affecting? MS. CRAWFORD: That’s what I think. But that’s—I mean, obviously that’s what you all are discussing. MR. HENRICKS: See, I don’t know. I’m asking the question because I don’t know. I’m trying to make a distinction. MS. CRAWFORD: Okay. MR. HENRICKS: And that’s one of the reasons I continued it to this day and not make a decision last week [sic], because I didn’t really feel comfortable with it yet. MS. CRAWFORD: We’re trying to share the information to help you see that, but yes, that is our—that both by the size of the neighborhood, the process, the relative portion of the process that this recommendation constitutes—all of that dilutes it to the—we do not consider it direct. MR. HENRICKS: What I’m trying to do is make a legal evaluation of this thing by saying okay, we know it’s affecting. You can’t say it’s not affecting. It is affecting. MS. CRAWFORD: Potentially. MR. HENRICKS: Yes. Okay, so it is affecting her property, right. But is it directly or indirectly? You see, that’s the distinction we have to make at this point. If it’s directly, then it’s a violation of the Ethics Code. If it’s indirectly, then it isn’t a violation of the Ethics Code. So that’s where we’re hung up right now. MS. CRAWFORD: Okay. I understand what you’re considering. And you understand—I did answer your question, right, is that correct? MR. BALSIS: Mr. Adams, do you have any more questions? MR. ADAMS: No. MR. BALSIS: At this time I’d like to ask if Mr. Drutar has any comments. MR. DRUTAR: I would like to make some comments. MR. BALSIS: Yes, please. And counsel, if I’m not following the procedure correctly, please let me know. 12 MS. SCHOEN: Oh sure, I’ll— MR. BALSIS: --You’ll jump right in. MR. DRUTAR: Thank you for letting me speak today again. My name is Michael Drutar. I’m a real property appraiser with the County of Hawai‘i and the original petitioner on this. I’d like to point out first for the record, I’m here on my own time. Even though I filed this petition as an employee of the County, the County Corp Counsel has determined that I have to drive out here on my own car and gas and use my own time, take vacation time, to be a part of this meeting today. But I am here, because I feel this is important. My comments are going to be a little bit stream of consciousness taken, as I was taking notes today. First, to Mr. Takai’s comments. One of the things that he said was he has no remembrance of when an employee lowered his own assessment. I don’t know if this happened after his employment, and I don’t know the name of the person, but I could research that and get it back to you. I do know that there was a past assessor who did lower his own assessed value drastically, and it wasn’t caught for some time. I don’t believe the payment was paid that lowered—that he had affected, so I don’t know if the County was out any money. But someone did lower their assessed value. And when he was confronted with it, he quit. So these things can happen. Not everyone is completely unscrupulous. I don’t even know if it was in his zone, but these things can happen. He had also mentioned that this is the way it’s been happening for a number of years. I’d just like to point out just because something’s been done wrong for a number of years doesn’t mean it’s right now, just out of practice. I think the Code speaks pretty clearly on this. We’re not talking about did someone actually change their value. Conflict of interest is there to make sure someone doesn’t have the ability to change their value. We’re not here to say that either of these two employees have done that. That’s not what I’ve asserted, from the very beginning. It’s that there is a conflict of interest, and I do believe it’s direct. And more importantly, Marilyn, who spoke at our last meeting, answered that question after a little bit of pulling, if you remember, and you can check your minutes, that she does affect her property. What she does affects her property. There is an argument that they’re making that, well, it’s really diluted--we’re affecting a whole lot of properties. To me that actually speaks more to my point. Even if a person were only to—we’re going to play devil’s advocate—just lower their property value a thousand dollars, and they’re in our minimum tax rate of $6.25 per—I think 6.25 per a thousand dollars. On a neighborhood the size of hers, that’s $10,000 in lost revenue for the County. That’s 1,900 neighborhoods being lowered—or 1,900 houses being lowered. It has an effect. So you need to be more scrupulous about this. You have to really make sure that, as you mentioned at the first meeting, the person comes in with a neutral mind and doesn’t have the ability to even make a really small adjustment that wouldn’t be caught. It would be statistically insignificant, but would directly affect their property and directly affect the properties around them. And it’s not just lowering value, as you 13 mentioned. It’s also raising value. I know some people—in fact, one of the instances that really started this all was when I disqualified myself from visiting a property where I’d spoken to someone about real estate years ago. I never had any financial interest. I disqualified myself from going and remeasuring their property. She had called us out there because she wanted her property taxes to be raised so her appraisal would come in higher and she could re-fi her home. So there’s a number of different instances where property values that are assessed by the County do affect what happens for these people in the real world and could affect someone on their own property. The final thing is that it’s really easy to solve this. You just take her out of her neighborhood. She has a bunch of neighborhoods. Any appraiser does, has 40, 50. She said 10,000 properties. There’s tons of neighborhoods. I think I have a hundred. It’s just to remove that one neighborhood from me and give it to another appraiser, and then give one back—just flip flop it and you have no problem at all. It’s a really simple solution. As Marilyn mentioned, we have pretty high turnover here at the County. It’s not like that much information is lost, any more than it’s lost when we lose an appraiser at any position. But basically the Code of Ethics is there to make sure we have a clear mind to avoid any potential conflicts, and to the very least disclose and disqualify, and neither of those things happened. I think Lisa gave a pretty decent presentation on the process. The only thing I would say is in my experience, I’ve never had a neighborhood have a value changed by a supervisor. I don’t know how many got changed last year. They might be able to provide some data for that for you. But I’d say, to Mr. Sitko’s comments at our last meeting, it’s definitely the exception. It’s not the rule, it happens very rarely. So the recommendations of the appraiser are taken pretty seriously. They train us, and they assume, to a large extent, that we are competent to do our jobs. And that assumption could come into some problems later on. So it’s a potential violation, and that’s why I’m seeking the Board’s opinion. That’s all I have to say. I’d be happy to answer any questions anybody else has. MR. BALSIS: Any questions from members of the Board? I have no questions. MR. HENRICKS: I have one question. As to Petition 2013-05, which would be Mary Ann Todd-Waller. Do you have any information that she actually made an appraisal on her property? MR. DRUTAR: I know she sets the values for her neighborhood. MR. HENRICKS: No, on her property. If it had any effect on her property. MR. DRUTAR: It doesn’t appear in her situation that her setting the values will change her property, but it changes her neighborhood. If you wanted to play total devil’s advocate, you could say that your neighborhood value— 14 MR. HENRICKS: --No, I’m asking the question because I have to know that— MR. DRUTAR: --Yes, sir. MR. HENRICKS: Do you have any information that shows that she had-- MR. DRUTAR: --No, hers has been set and locked in for some time. Yes, sir. MR. BALSIS: Okay. MR. ADAMS: Yeah, just a quick—again on both of these, both of these situations, neither of these individuals you’re alleging actually assessed a fee appraisal of their own properties. MR. DRUTAR: Not a fee appraisal. They set the land values for their property. MR. ADAMS: It was the neighborhood mass appraisal. MR. DRUTAR: They set the value for the neighborhood of which their property is a member, _______. MR. ADAMS: You’re using the terminology that we just heard. They did a mass appraisal of the neighborhood parcel that they had responsibility for. MR. DRUTAR: Yes, sir. They did a mass appraisal of the neighborhood and their home. The number they chose for the land value is what appeared on their tax statement. MR. BALSIS: Any more questions for Mr. Drutar? At this point, before the Board goes into discussion, are there any further comments from the department? MS. NAHOOPII: Yes, if I could real quick. We did bring with us the spreadsheets that show the valuation changes on Mary Ann Todd-Waller’s and Marilyn Veincent’s properties. I didn’t make a copy of it for everyone. I didn’t know if it was going to come up in question, but it shows every change that was made, and both of those individuals did not make any changes to either of their parcels. As far as me not having to change any of Mr. Drutar’s parcels or neighborhoods, this is just his second year of valuation, and I think our process is very vast and the appraisers are subject to a certain specific area. And maybe we have done a poor job at educating him on our entire process and all the checks and balances that we have to go through. So I apologize for that. MR. BALSIS: At this point in time, the discussion would be here among the Board. MR. HISASHIMA: Can I have Mr. Sitko come up? 15 MR. BALSIS: Yes. Mr. Sitko? MR. HISASHIMA: Mr. Sitko, you’re the supervisor for all your appraisers. Who’s the supervisor, immediate supervisor? MR. SITKO: The immediate supervisor for the appraisal staff is Mr. Jon Pike. MR. HISASHIMA: My question is, do you folks do personnel evaluations on your employees? MR. SITKO: We do our usual JPRs and annual and the three-month, six-month. MR. HISASHIMA: Does your JPR reflect that you’re doing your duties or not? MR. SITKO: Yes, it does. MR. HISASHIMA: Has any of the two persons in here ever been--had a discussion about what they’re doing was illegal or legal? MR. SITKO: Not as far as being legal or illegal, but as far as their performance, yes. MR. HISASHIMA: Okay, and then I heard suggestion that we could move the appraiser from one district to another. I see you have 13 districts with 13 assessors. Of all these assessors, how many of them live in their own district? MR. SITKO: Only two. MR. HISASHIMA: Only two. This is not a big problem, then. MR. SITKO: Fundamentally, once again, it’s a problem. It is fairly diluted. No, it’s not a big problem. MR. HISASHIMA: Thank you. MR. BALSIS: I ask the Board at this time, are there any questions for any of the—the petitioner or petitionees? Okay. Any comments among the Board on what we want to do? Mr. Henricks or Mr. Adams? MR. HENRICKS: I wanted to hear what my Board members have to say right now. MR. ADAMS: Sure. I’m the new guy, I’ll say something first. We’re looking at petitions - 05 and-06. MR. BALSIS: Correct. 16 MR. ADAMS: Right. And to take the words as their stated in the petition, it talks about being assigned to appraise their own properties and set the assessed value of the land of their primary residences. And as we have gotten into—as we have received perhaps a more detailed understanding of processes and terminology that is used by the County Real Property Division, the idea that appraisers that do mass appraisals are setting the assessed value of their primary residences seems to me to be more of a remote action than a direct action. So then when I go back and I take a look at the things that we said we wanted to take a look at as a part of this informal hearing, which were associated with Section 2-84(a)(1), no officer or employee shall take any official action directly affecting a business or other undertaking in which that officer or employee has a substantial financial interest, we agreed that it was official action, it was directly affecting, and it was substantial financial interest that were the key elements that were issued. I think that it’s clear by the terminology in the Code, at least to me, official action, decision, recommendation, approval, disapproval, or other action, including inaction, which involves the use of discretionary authority is clearly covered by what we ask our real estate appraisers to do. It’s official action, even within the _______ chart that we saw. And then when we talk about substantial financial interest, a residence is a substantial financial interest. So it comes down, to me, to what I think the Judge was talking about—directly affecting. Does that official action that they take when they do the en masse appraisal directly affect the substantial financial interest that they have? It appears to me, as I look at this, that there are enough of the—that it’s diluted enough, that’s probably as good a term as any--that it’s not a direct action for the purposes of the Code. At least that’s my initial take. But I am clearly open to listen. MR. BALSIS: I’d like to make my comment, if I may. First of all, I agree with you. But I do think that—I’m going to go back to some of the comments of Mr. Sitko at the last meeting, where he actually stated that it would not be an issue to reassign appraisers. And I go back to what Mr. Takai had mentioned earlier, when he made a comment that at that period of time, everybody was in one area and they had to--someone had to do their own neighborhood. If we’re now in a position in terms of the County where it can be spread out so that you are not doing your own neighborhood, or a comparative neighborhood, then the County should take that next step and disperse the assignments. But in this particular case, I agree with Mr. Adams that there’s no findings of a direct violation of the Code of Ethics. Glen? MR. HISASHIMA: No. MR. BALSIS: Mr. Henricks? MR. HENRICKS: That’s my problem that I have. I tend to agree with you to a certain amount, but then I disagree with you to a certain amount. And my disagreement is the word we get back down to, is the word—we know it affects it, but does it directly affect it? That’s what our crux of the word right now. Does mass appraisal take it out of the area of directly affecting? I don’t know, because even if you dilute it, what is the criteria? How much do you dilute it to take it out of direct to make it not enough? And 17 when is it enough to be considered direct, and when is it not enough to be considered direct? So it’s creates a quandary right there. But to me, if it affects a person directly, you can’t say well, not very much directly. It either does or it doesn’t affect it directly. And you can’t say because I’ve diluted it, it no longer affects it directly. I don’t think it can do that. It either does affect it or it doesn’t affect it. So I’m stuck there. I still feel it does affect it. MR. BALSIS: I agree with you. But you have to go back into the history in the department, and what has happened is you’ve had this practice that was 40 years old that has never been changed or never evolved over time. And that practice needs to evolve, because now they have appraisers from all over the place. MR. HENRICKS: Yeah, but are we responsible for their practice or are we responsible for the Ethics Code, as it states? MR. BALSIS: We’re responsible for the Ethics Code, and if their practice is contrary to the—is going against the Ethics Code, then we need to state that fact, and it’s up to them to do something about their practice. MR. HENRICKS: That’s the position I’m at right now. I don’t think—all the concepts about dilution and checks and balances I don’t think can be relevant at this point, until we determine whether her property is directly affected by what she does. No matter what the checks and balances are, it’s immaterial, because that’s an aftermath. Is her action directly affecting the property? That’s it. Simple. MR. BALSIS: The question would be, in my mind, if you’re just going to that specific question, yes. MR. HENRICKS: Okay, that’s my input. MR. BALSIS: Is there any motion or any pleasure of the Board at this time? MR. HENRICKS: Well, I’ll take one step forward, one small step forward. I will make a motion to dismiss Petition No. 2013-05 for not directly—because she did not directly affect her property, because her property at this time cannot be directly affected by anything she does in that area. So I’ll make a motion to dismiss that particular petition alone. MR. BALSIS: Is there a second to this motion? MR. HISASHIMA: Second. MR. BALSIS: Is there any discussion on the motion to dismiss -05? All those in favor of the motion, say aye. 18 MR. HENRICKS, MR. HISASHIMA, and MR. ADAMS (simultaneously): Aye. MR. BALSIS: Aye. So motion [sic] 2013-05 has been dismissed. How about -06? MR. HENRICKS: All right, Mr. Adams, will you comment upon my comments? I may be in trouble, but the _____ concept, the dilution concept. Can you help me with that? MR. ADAMS: When I was listening to our Vice Chair, the thing that comes up to me is, in regards to the previous discussion—we’ve been focused on the appraisals and where the appraisers are in this process. And as it was explained to us today, and I think probably also last time, but explained to us today with pictures, which makes it easier, the appraisers have a piece and then there are other members of the department that also have a part to play in this mass appraisal process, which is what we’re seeing is occurring—that’s I think where we’re at right now. The interesting thing for me is that it’s perhaps the folks that have an overall view that actually have a—let me start that again. The idea that we would suggest, a simple solution, is let’s just move the appraisers, their appraising work, outside of where they live, works for them but it doesn’t necessarily work for the folks that have an island-wide view, as I think Mr. Sitko talked about last time. MR. BALSIS: There’s one person who has that island-wide view. MR. ADAMS: Well, but see, from my perspective, it doesn’t matter whether it’s one or it’s ten, because the process has to be accurate. I don’t think we’re asking that somebody has to be off the island to have the ability to—if our processes, if our rules are such that it’s impossible to do the assessments living on the island, then I think we have to kind of go back and take a look at that. I get stuck again on— MR. BALSIS: I think one of the things that was discussed at the last meeting was the concept that when you’re—and I believe Mr. Henricks made a comment about that— when you’re looking at the island view, you’re looking at such a diluted, I’ll use that word again, aspect that there is no real consequence of being directly related. But when you’re looking at an individual neighborhood which has your specific property in it, rather than a whole group of neighborhoods – MR. ADAMS: I guess I would say that we understand that the individual at the top, if you will, has an island-wide view, but in reality they’re looking at these individual neighborhoods, too. I mean, they’re looking at and validating, as I understand it here, what those individual neighborhood values are. So it’s a second or a third check on what those appraisal values are, right? We know that they rarely have changed, but that is what’s happening. I would be more inclined to be concerned about something that hasn’t been brought up, which is the ability of higher level employees to actually have some undue influence on the appraisers, which are the starting point for this, as a part of this process. So that’s—there’s not been any evidence of that, either. I’m not saying that that’s a problem, but if I’m looking at this in a hypothetical situation, as a process 19 that would be something that I would think would also be a potential issue, given that process. MR. BALSIS: You would have that potential influence on almost any department, whether it would be an appraiser or in any situation. You could take that back to the credit union ______. MR. ADAMS: That’s true, yeah. MR. BALSIS: I do want to make mention that Mr. Takai mentioned, or somebody—or no, Mr. Drutar mentioned that there was someone who had been caught messing around with his own property values, and that person was confronted and— MR. HENRICKS: We don’t know that as a fact. MR. BALSIS: No, but this is—if that had happened, then there are procedures in place. But then again, if you’re looking at it from the top down rather than from the bottom, it’s different scenarios. MR. HENRICKS: Okay, just one more comment on this dilution problem that I’m having, taking it from direct to indirect. MR. BALSIS: Okay. MR. HENRICKS: Okay, when we go through the map or the inserts that we have—okay, now stop me when you think we’re over-diluted or not diluted. How about five properties. Are we diluted enough? MR. ADAMS: No. MR. HENRICKS: How about ten? Are we diluted enough? How about a hundred—are we diluted enough? You see what I’m getting at? MR. BALSIS: I see exactly what you’re getting at. MR. HENRICKS: When do we decide it’s diluted and not diluted, you see? MR. ADAMS: And I thought the dilution you were talking about didn’t have to do with the number of properties but the number of hands that were in the process. MR. HENRICKS: No. You see, I don’t look at the hands in the process. I don’t look at checks and balances, because those are like an appeal of things. They’re not initial actions. Initial action is what I’m looking at. Who’s setting these numbers? You see? Who’s setting the numbers? After that, the checks and balances—everybody has checks and balances all over the County, but we still have to look at individual actions. Who’s 20 setting the numbers and is it direct, that’s what we’re looking at. And so therefore when I get to the dilution problem--I was going to use an analogy, but I don’t know if it’s correct anymore, women might not like it--but the old analogy used to be you cannot be almost pregnant. Either you are or you aren’t. So it’s kind of like this. Is it direct or is it not direct? So I don’t know if dilution is the answer to get it into being indirect, because then you start saying what’s the numbers. When does it become enough diluted that we can say it’s indirect, and when is it not so diluted? Because the _____, like you said, when I said five you said that’s not enough. I was hoping you’d say that. MR. BALSIS: Nancy has a comment she’d like to make. Go ahead. MS. CRAWFORD: Can we offer one more—actually, Lisa was going to offer one more comment, I think about the appraisal – MS. NAHOOPII: And it could be what the dilution part—we might have misunderstood, because I think we were, like Mr. Adams, we were taking it away—I think our concern is I review all of the neighborhood changes. And our take away from that was even if you had gone down to the appraisal level, because we’re at a higher level looking at the whole island, we weren’t part of it. But I think my concern of where it’s going now is, as the administrator and assistant administrator, I mean our jobs require us to review everything and to be held responsible. And I own properties—or my spouse owns properties, I should say, that includes the South Hilo area where this is located. And so I don’t know where that dilution, if we keep going down there, really does end. We were under the assumption, incorrectly it looks like, last time that where Stan was headed to—taking you to, it was on the island-wide, because he does the cost tables and depreciation, and that affects every single parcel, including his. But when I review the neighborhoods, I’m looking at the neighborhoods not thinking—and most of us are like that—we don’t look at TMKs or our individual parcels any more. We’re looking at the neighborhoods, the groups of sales, and everything to that nature. So we didn’t—maybe we didn’t properly address the dilution of interest. Even more so, I think we were looking at the substantial benefit. And I understand that’s only property is a substantial benefit, and we were taking what you were asking was like what would their benefit be, the $81 change or the $60 change to their property as being a substantial benefit to them. And so I apologize, because I think maybe we further confused that. When we—the dilution we were looking at was this little part in this whole big process of the value, and so I don’t know if you have any questions or if I just made that more confusing. MR. HENRICKS: Okay, then I would suggest if you’re going to change my dilution thing, then I have to change my theory, okay? Okay, if you’re using a second dilution theory, dilution process, okay—does the fact that you have a review process in position make her actions direct or indirect? Does it change her actions from being direct or indirect? You see, now that’s your dilution concept. And I don’t think it does. Either she acts directly or she’s not acting directly. But by having a review process doesn’t change that. _______ there again. 21 MR. BALSIS: Comments. Go ahead. MS. SCHOEN: Nancy, did you want to say something, because you looked like you were-- MS. CRAWFORD: I wanted to just say one thing, which is because we were talking about, on this sheet, and because you mentioned checks and balances--I just wanted to make clear that this doesn’t represent checks and balances. This represents other data, information, input that goes to the ultimate evaluation of the property. Just so that’s – MR. HENRICKS: Speak more on that. That might be what I’m looking for, and the fact that there are other inputs that may take it out of the direct concept— MS. CRAWFORD: --Right, and that was—we weren’t trying to show checks and balances here or our checking method. It would be better perhaps if Lisa wants to address this, only because it’s more technical in nature, but the depreciation tables – MR. HENRICKS: If there’s more information coming in from other sources on an equal level, then her actions may not be directly affecting. MR. ADAMS: But I don’t think that’s the case. I think if you did a sensitivity analysis of the inputs that you’re talking about here, clearly the land value analysis provides—is the most sensitive. The depreciation analysis is going to be across the board. Your cost research, your cost tables, is going to be across the board. The thing that is different, that is going to cause the difference, is largely going to be the land value analysis. MS. NAHOOPII: Well, it depends probably where the land value is, because if you’re in a certain part of the island and your property is worth $10,000, your dwelling is going to be way more of the influence. And the dwelling wasn’t up for question. So when it comes to this, there is the cost approach. The cost approach is a very large part and— MR. ADAMS: But does that change, without getting too crazy here, as we take a look at these inputs--is it your position that changes in these inputs will have different impacts on different properties within the neighborhoods? MS. NAHOOPII: The changes in these inputs, they will. MR. ADAMS: So in addition to the—okay, so then we have an individual, we have a person that’s providing the land value analysis. That’s the appraiser. Is that correct? And then you have the information from the sales file? MS. NAHOOPII: Correct. MR. ADAMS: And then the depreciation and the cost tables. Are there any other inputs? 22 MS. NAHOOPII: Well, when it comes to their dwelling, if they do anything to their dwelling, or changes onto the dwelling. That’s going to change. MR. ADAMS: But that’s a fee appraisal. MS. NAHOOPII: No, that’s here, and staff are not allowed to touch their own dwellings. But with Marilyn’s petition, I guess we were focused on the fact that it said that she had affected her value, and she hasn’t. MR. ADAMS: And that’s important, but I’m not there. MS. NAHOOPII: Okay. MR. ADAMS: Where I’m at is actually on the system that you have here. So let me start here again. This is fundamentals of mass appraisal. It comes from the course 300. So we’re talking about the evaluation system for mass appraisal. MS. NAHOOPII: Yes. MR. ADAMS: And as I take a look at the various blocks here, land value analysis is an input to the ultimate recalculated ______ values at the bottom, right? MS. NAHOOPII: At the bottom, correct. MR. ADAMS: Depreciation analysis—well, probably depreciation table and cost tables are also inputs. Is that accurate? MS. NAHOOPII: Not from the appraiser. MR. ADAMS: I understand that, but they are inputs? MS. NAHOOPII: They are inputs. MR. ADAMS: And then are there any other inputs to that recalculated value, as initial inputs? MS. NAHOOPII: Yes, there is some external obsolescence, and there’s other areas that is controlled by the administration as far as inputs on that screen. MR. ADAMS: Okay. MS. NAHOOPII: And I wish we had brought that, because there are a lot of other items that would influence it, including if a property was over-built for an area, if the entire market has gone down, or if the entire market has gone up. The administrator has the 23 control to do that, to change those inputs, and he can do that at a neighborhood level or a mass island-wide level. MR. HENRICKS: It gets complicated, doesn’t it. MR. ADAMS: What’s that? MR. HENRICKS: I said it gets complicated. MR. ADAMS: Well, it is complicated. MS. NAHOOPII: It is complicated. MR. HENRICKS: Okay, let me ask a question, then, a simple question. This one, maybe I can handle this one a little bit better. Let’s say my home. All right, you’ve got me appraised at $250,000 from my tax appraisal, okay? That comes out of your department, right? Okay, but you made a mass appraisal in my area, in my neighborhood. How come the other homes have different numbers on theirs? MS. NAHOOPII: Oh, there could be a couple of different reasons for that. It could be based on the model, whether the increment or decrement changed. It could be— MR. HENRICKS: --But who would determine that? MS. NAHOOPII: Well, a lot of the increment and decrement that changes--or you mean just on your land value, or are you talking about your total assessed value? MR. HENRICKS: Okay, let’s make it simpler. My next door neighbor’s house is appraised at $350,000. How did you know the difference, if you’re doing a mass appraisal? MS. NAHOOPII: Because the computer knows the difference. Because your buildings may be different, so your cost is going to be different. His house might be older, the depreciation would be different. MR. HENRICKS: But who’s making all that up? Who’s determining all that? MR. ADAMS: You have some models. MS. NAHOOPII: Oh, when you go out to look at the house, when they pick up the building originally— MR. HENRICKS: --Who’s looking at the house? MS. NAHOOPII: When they go back out later on, it would be the appraiser for the area. But the appraisers cannot do their own dwellings. 24 MR. BALSIS: Mr. Drutar? MR. DRUTAR: I would really like to speak on that point. If an unscrupulous appraiser who is assigned to a zone that included their home, set land values, they are also the ones picking up buildings and additions, and no one checks that. That number that’s calculated is a computer model, as they mentioned. But let’s say I’m an unscrupulous person and I added a 20-foot by 20-foot garage. Well, maybe I’ll just say it’s 20-foot by 10-foot. No one’s going out there and checking that. My assessed value is lower. Let’s say I add a whole addition on there, and I fudged the numbers on the measurements. The computer model is just based on the measurements that I took, and no one goes out there and ever, ever checks that. We have zero auditing for checking of the size or grade of dwellings. Maybe it’s supposed to be graded at a 4+, like a Pualani Estates home, but I’m going to go ahead and grade it at a 4- to save myself some money there. No one is ever going to go out and validate that, either. So then you start getting into some really direct ability to change the value of your property, because as the zone appraiser, you get the building permit report that shows all the buildings that you have to add into the system in that zone. There’s no one to check it for you. There’s no one who’s going to come in and audit that. We have no auditing procedures whatsoever. So if someone continues to have their zone as an appraiser, there’s a possibility they could be significantly affecting the tax value of their property moving forward. Again, I’m not saying it happened, but if they never had that zone with their neighborhood—or just the neighborhood, keep all the other neighborhoods around it. Just lose that one, give it to another appraiser, and the County would not be exposed to being duped by somebody. And that’s really what we’re getting at. MR. BALSIS: Okay. MS. NAHOOPII: First of all, that’s not true. There are checks and balances. There is a permit report that’s run. There is Pictometry, which is an edit check that the administration does. But none of that really applies to what the petition was filed on, and I don’t want to get so convoluted that we’re getting far away from what this is. But I just want to clarify there are checks and balances. But you don’t want to hear us say those words, so I don’t know how to say it. There could be an unscrupulous person in the County. It doesn’t have to be an appraiser. It could be anybody throughout the whole County. And so we are held to a different standard than everybody else. I understand that. And there is Pictometry that is checking it. We are trying to really review those. But at the same token, we can’t just go after one person at a time. We have to look at the groups or the neighborhood, because then it’s not a fair and equitable process, and that is what our ordinance requires of us. So I don’t know if there’s anything else. MR. BALSIS: Mr. Henricks, do you have any more questions or comments? MR. HENRICKS: No, I’m lost enough. 25 MR. SITKO: Do you mind if I jump in here? MR. BALSIS: Go ahead, Mr. Sitko. And then I think we can go on to our finalizing. MR. SITKO: Basically, one of the things that—it was brought up when you said, when does a neighborhood become significant, and how many parcels. Yes, there is a statistical answer to that, okay. It would have to be at least over 15. Below that, it’s a meaningless number. It can’t be any smaller than that. The other thing I would like to point out is that is why we don’t allow the individual appraiser to touch his property. That’s the data that’s put into the model. That’s how the differences in valuation occur between one house or another. It’s the individual information on that parcel. And to the point of having somebody continuously misvalue property in his area, we annually have to—and we do run it, on a actual appraisal level—a sales ratio report, which would compare the information that they’ve input. Okay, so if somebody’s fudging with a 10 by 20 instead of a 20 by 20, sooner or later this comes out, when actually compared to actual market sales. In other words, the ratio isn’t going to be very accurate or very good. So there are mass appraisal built-in controls on this. That’s all I wanted to say. MR. BALSIS: Okay. Mr. Henricks? Mr. Adams? MR. ADAMS: And I appreciate all that. And I think that—which is a nice way of starting to say but—these are after-the-fact, at least it seems to me. And as that—I understand that you’re in the position of trying to make sure that you have the ability to monitor, but I don’t see that as what I vote on. I see us as voting on what the Code says. And the after-the-fact doesn’t meet the level of the Code. So we come back, I think, to those three elements. And the more I hear, the more I’m concerned that all three are actually there. MR. BALSIS: Okay. At this point I want to make a note that we’ve dismissed Petition -05, and so do we have a motion with regards to Petition -06? MR. HISASHIMA: Can I make a comment? MR. BALSIS: Yes. MR. HISASHIMA: I’m stuck between two. Why between two? Yes, the process is there. However, we’ve heard from other people saying that this has been going on for 40- something years. Has any of the system been updated to today to protect the assessors? I don’t think so. You’ve got to protect your employees, that this does not happen. And who I say that to is supervisors. So I’m stuck between the two. Yes, they may have violated, but if they don’t do their job, what’s going to happen to them? I believe that supervisors should protect their employees at all costs. If this is coming up, call them in and talk to them. This might be a violation. What can we do about it? It’s not administration against employees. We’re together. This is one island. The island’s too damn small. What if somebody buys a nice $3 million home in Kona? Now what 26 happens? And let’s say an assessor buys a home. Now what happens? And he’s assigned to assess that area. What systems are in place to protect the assessors? That’s what I look at, and that’s why I’m stuck between the two. Yes, I can see the violation. But who’s protecting the assessors, period? It’s incumbent on me as a supervisor to make sure everything is on the table, everything is clear. Everybody uses the word transparency. I don’t know if it’s transparency if you don’t tell your people what’s happening. They should be the first one to know. You’re in violation, so don’t do it. If you do it then consequences will come down. But if you don’t tell them, they do it, and then what happens? You lost your assessor. You lost that person. That’s why I’m stuck between the two. I may vote yea, I might vote nay. Can we vote kanalua? MS. SCHOEN: No. MR. ADAMS: Only the Council. MR. HISASHIMA: That’s the only problem I got. MR. HENRICKS: All right, and on finality I’m saying this. I find in all this evaluation that the appraiser’s input is in fact directly affecting the outcome of what the evaluation is. So therefore I’m making a motion that there has been a violation of the Ethics Code according to Section 2-84 in this particular instance. MR. BALSIS: There is a motion on the floor. Is there a second to this motion? MR. ADAMS: Second. MR. BALSIS: Is there any discussion on this motion? The motion is that there has been a violation. MR. HISASHIMA: I have a discussion. MR. BALSIS: Go ahead. MR. HISASHIMA: So I put the question out to the administration. So what are you folks going to do to correct this? Because going come back to you folks. How you folks going to correct it? We’re all together in this same problem. Wherever the assessor is—you got 13 of them—we’ll all in the same problem. MR. BALSIS: And I think that that was discussed previously by Mr. Sitko, in that Mr. Sitko mentioned that he could reassign the appraisers, which would eliminate the whole situation. So on going into the future, they have a method. MR. HENRICKS: Call the question. Call the question. MR. BALSIS: So all those in favor of this motion? 27 MR. ADAMS: Aye. MR. HISASHIMA: Aye. MR. HENRICKS and MR. BALSIS (simultaneously): Aye. The motion’s been passed that there has been a violation in the Ethics Code. MR. HENRICKS: All right, I’d like to make a further motion. MR. BALSIS: Go ahead, motion. MR. HENRICKS: I’d like to make a further motion. I move that there be no sanctions taken against the employee by this Board, because it was a policy decision of the employer. MR. BALSIS: I second that motion. Any discussion? MR. HISASHIMA: Hang on. Does the Board have the right to sanction, or do we send it to appointing authority? MS. SCHOEN: Usually the Board will issue their opinion and forward it to the petitioner, the respondent, and the appointing authority. MR. HISASHIMA: Who is the appointing authority? MS. SCHOEN: In this case, for this employee, it would be the Director of Finance. So the Board doesn’t itself issue— MR. HENRICKS: --All right, then I’ll rephrase the motion. I move that we recommend no sanctions be taken against this employee, because this was a policy decision and not an employee decision. MR. HISASHIMA: Second. MR. BALSIS: Any discussion on that motion? MR. ADAMS: Yeah, just a question. Do you want to add anything to that in terms of recommending to the department— MR. HENRICKS: No, I think they ______. But I think you should say what you were going to say, though. MR. ADAMS: That’s what I was going to say. 28 MR. HENRICKS: Okay, go ahead. MR. ADAMS: No, no, that’s what I was going to say. MS. SCHOEN: So, I mean, as you know, you folks usually review the draft of the informal advisory opinions, so you can do that and make whatever changes, additions, or deletions that you want to articulate what the Board has discussed here and found. MR. ADAMS: Yeah, okay, I will say what I was going to say. The processes we’ve gone over now and heard in two months’ time, the process. And it’s clear that you’ve designed it to, as we’ve heard, put as many eyes on folks that have control over substantial financial interest, to use the terminology of the Code. As you’ve heard from us, it’s pretty clear that that we don’t really have an option here to say that what you’re doing is enough. So we hope that you understand it was clearly, I think—my perspective on this—it’s clearly not an issue with the employee. I think that we want to make that clear. But I think that the department needs to take a look at something else that’s going to protect your assessors. MR. BALSIS: I call for the question on this motion. All those in favor? MR. HENRICKS: Aye. MR. ADAMS and MR. HISASHIMA (simultaneously): Aye. MR. BALSIS: Aye. At this point in time, moving on with the agenda, we’re going to move to Petition No. 2013-07. b. Petition No. 2013-07: Review draft order dismissing the petition by Michael Drutar alleging that County employee Jaime Ortiz Nava “may possibly” be in violation of Sections 2-84(a) and 2-84(d) of the Code of Ethics because he represents the County of Hawai‘i in tax appeals and his wife “represent[s] tax payers against the County of Hawai‘i at Tax Appeals, for compensation.” Motion and vote: Mr. Balsis moved to approve the draft as written, Mr. Henricks seconded the motion, and all members voted aye. c. Petition No. 2013-04: Review draft order dismissing petition from Eric Weinert alleging that Councilmember Brenda Ford was in violation of Section 2-84 (conflicts of interest) of the Code of Ethics because of her participation in Bills 109 and 113, “both impacting and putting papaya growers out of business as conventional farmers while claiming to grow non-GMO papaya on 1/4 acre at her farm.” 29 The Board discussed whether any more details should be added to the draft and decided it was sufficient. Motion and vote: Mr. Balsis moved to approve the draft as written, Mr. Henricks seconded the motion, and all members voted aye. d. Petition 2013-08: Review draft informal advisory opinion requested by William Hanson regarding his involvement with the Big Island Amateur Radio Club and his employment as an administrative officer with the Hawai‘i County Civil Defense Agency. Motion and vote: Mr. Balsis moved to approve the draft as written, Mr. Henricks seconded the motion, and all members voted aye. Motion: Mr. Balsis moved to go into executive session for review of the confidential items agendized therein and possible conferral with counsel. However, Mr. Adams said he wanted to tell Ms. Crawford something before they did so and asked if it would be all right to bring her back into the room, as she was just outside talking to the media. Mr. Balsis said his motion would be on the table. Mr. Adams stepped out and asked Ms. Crawford to come back in for a moment. MR. ADAMS: I’m actually not asking questions. I’m making a statement, but it’s important that you hear it. MS. CRAWFORD: Okay. MR. ADAMS: As a part of the review of the petitions, on one of the petitions that we looked at last time, there was a discussion of the process that was undertaken by the department to take a look at alleged ethical code violations and the fact that a department engaged in investigation of those Ethics Code violations. As a Board member—I’m not speaking for the Board, but as a Board member, my concern is that when it comes to the Ethics Code, I believe that the Board has the responsibility by Charter and by the Code to do any investigating that comes, when it has to do with a violation of the Ethics Code. Policy—different issue. Department policy that may be based on the Ethics Code, probably a different issue as well, maybe a conversation. But when it comes to a discussion of the Code itself, I think it’s at least clear to me that the responsibility lies with the Board to hear petitions. There’s a process that’s set up for us to do that, and then even to do the investigation. That’s my comment. MS. CRAWFORD: Could I make one statement? MR. BALSIS: Go ahead. 30 MS. CRAWFORD: Just clarification, and because we’re discussing personnel matters I want to be very careful what I say, unfortunately. Down the line I would be happy to share additional information with you after personnel matters have been fully settled. When something is brought to our attention through the supervisor’s review or for whatever reason, if we find an employee is perhaps engaging in inappropriate behavior, that—I mean that naturally is something that we investigate. Not necessarily ethics related at all. And an investigation could be much broader than an ethics—anything that might fall under the Ethics Code, and any investigation that we might enter into. I apologize if it appeared that we were doing ethics investigations on the basis of language that might have been used in a letter that you read. But the truth is, an investigation into—if there were to be an employee stealing money and we became aware of that potential, we would initiate an investigation to try and determine that. And the same is true for a number of other kinds of things some employee might engage in, and they might or might not fall under the Ethics Code. But I just—we would initiate an investigation in that case. MR. HENRICKS: I think what Mr. Adams is getting to is that when you make a final determination and when you put it in writing, it’s that he rather that you state that the employee is in violation of a department policy and not in violation of the Ethics Code, you see. Because when you say they’re in violation of the Ethics Code, you have made a finding that he says it’s his right to make. MS. CRAWFORD: And I absolutely agree and understand, and from six months ago now am aware the use of the language was totally inappropriate and would not—I mean, we never meant to be stepping on the Board’s toes or engaging in any processes that certainly are under the Board’s purview. And I think that the terminology used implied that, and I apologize for that to all of you. And I appreciate you bringing me in to give me the opportunity to say that, because we were not present at your September meeting, because we understood that it was a simple request of the employee to discuss whether or not his real estate activities—the Board felt that was a conflict with his work. And I felt that was his personal business to ask and was not here, and I think then--I wish that I had been here to have discussion then. But I apologize for that. MR. HENRICKS: Mr. Adams accepts your apology. MS. CRAWFORD: Thank you. Thank you all. MR. HISASHIMA: Can I make a comment, maybe it could help you? I read your policy on the—conflict of interest policy. MS. CRAWFORD: Yes. MR. HISASHIMA: It’s enforceable. You can do investigation on it. However, I would tighten it up a little bit more. On the violation part, you have a broad statement about punishment. You can follow what contracts is—30 days, whatever days. That’d be 31 stronger than using ethics, because that would show that you knew about this policy, you violated this policy, therefore this is now an administrative review. MS. CRAWFORD: Right. MR. HISASHIMA: Then when you find your findings, we’re not here to back up your investigation. We’re looking at the ethics—was it violated or not, because some of your employees came over and said they wanted our opinion on that investigation, which we never did. So they don’t know the process. MS. CRAWFORD. Right, I appreciate that. MR. HISASHIMA: So I would advise you to inform your employees what your policies are and what could be done. Remember last time I asked you if you folks have policies for everything you do? This is the core of your corrections aspect for your employees. This is how you hold them to a standard. Remember I asked you about dress code? You folks don’t have one in writing. When is it going to come out in writing? Because I was going to prove it to you. One day I come in here with bermudas and t-shirt. The County doesn’t have a dress code. The County doesn’t have a dress code, so how they going to hold me accountable? That’s what I look at. Tighten it up, it will be good. It will let the people know what they can do and what they cannot do. MS. CRAWFORD: Okay. Thank you for your feedback. MS. ADAMS: Thank you, Director, for coming back in. MS. CRAWFORD: And thank you very much. I do appreciate your feedback and the opportunity to hear you and have this part of the discussion. Mr. Adams called for the question on Mr. Balsis’ motion to go into executive session, and Mr. Balsis asked for a vote on the motion that was made and seconded, to go into executive session. Vote: All members voted aye. 11:37 a.m. The Board left regular session. * * * * * 11:55 a.m.: The Board returned to regular session. 6. VOTING ON EXECUTIVE SESSION MATTERS a. Review of the executive session minutes of December 11, 2013. 32 Motion and vote: Mr. Balsis moved to approve the minutes with the corrections noted in executive session, Mr. Hisashima seconded the motion, and all members voted aye. b. Review of Confidential Financial Disclosure Forms filed pursuant to Section 2- 91.1(d), Hawai‘i County Code, by County board and commission members and designated County employees, where personal matters will be reviewed. Motion and vote: Mr. Balsis moved to approve the two disclosures, Mr. Adams seconded the motion, and all members voted aye. 7. ANNOUNCEMENTS Mr. Balsis announced the Board’s next meeting: February 12, 2014, at 10:00 a.m. at the same location or another to be determined. Mr. Adams said he would likely not be available to meet on March 12, 2014, the Board’s regularly scheduled meeting date. He would be available another day that month, however. Mr. Balsis said he was not available in March at all. 8. ADJOURNMENT Mr. Balsis adjourned the meeting at 11:58 a.m. Respectfully submitted: _______________________________________ Mary E. Fujio, Secretary 33