BOARD OF WATER SUPPLY
COUNTY OF MAUI
CAPITAL PROGRAMS COMMITTEE MEETING


Taken at the David Trask Building, Conference Room 207,
Wailuku, Maui, Hawaii, commencing at 9:05 a.m. on February 8,
2001 pursuant to Notice.

REPORTED BY:  GLORIA T. TAVARES, RPR/CSR #262

ATTENDANCE - Capital Programs Committee Meeting
              February 8, 2001

MEMBERS PRESENT:      
Howard Nakamura, Chair
Bob Takitani

Others present:       
Jonathan Starr
Orlando Tagorda

Staff present:        
David Craddick, Director
Herb Kogasaka
Mike Quinn
Shirley Falcon, Clerk
             
IWADO COURT REPORTERS, INC.

        * * *

CHAIRMAN NAKAMURA:  We have a committee meeting.
Interested parties can stay.  If you are not involved and would
not like to stay, I would like to ask you to permit us to call
this meeting to order.  It's 9:05 on Thursday, February 8,
2001.  We're meeting in the HGEA conference room, room 207 of
the David Trask Jr. Office Building.
 This is a meeting of the Capital Programs Committee
of the Board of Water Supply.  Present are committee members
Bob Takitani; myself, Howard Nakamura.  Peter Rice committee
member is excused.  I would like to ask Shirley to introduce
the other people present.

MS. FALCON: The staff present, we have David
Craddick, Mike Quinn, Herb Kogasaka.  From the public, Elliott
Krash and Peter Stolle and Howard Fukushima as well as Jonathan
Starr and Orlando Tagorda.

CHAIRMAN NAKAMURA:  Thank you, Shirley.  I would
thank board members Starr and Tagorda for remaining to sit in
and participate.  We have a couple of items on the agenda; but
before we start, is there any testimony from members of the
public on either the items before the committee or on any issue
you would like to comment on?
 If not, first item on the agenda is Communication
01-03.  It's a request from board member Jonathan Starr that a
feasibility study be conducted for a new well Upcountry.  I
believe that you all have a copy of Mr. Starr's letter dated
January 15, 2001 to Chairman Cravalho.  This particular item is
included in the budget for the present fiscal year.
 Do you have any comment, David, before we ask board
member Starr for his comments?

MR. CRADDICK:  I just want to say here before we get
going, at the risk of being admonished by the chair and
committee, we also had a letter from somebody in the community,
I gave it to Fran, and I didn't know she was leaving.  It was a
letter from Mark Sheehan supporting the request.

CHAIRMAN NAKAMURA:  I guess she gave all of these
copies to me.  Let me pass that around.  Committee chairman
shares the concern of the board chairman about late
communications; however, it is relevant.
 Just a brief letter dated February 7, 2001 from Mark
Sheehan, president of Maui Tomorrow, supporting Mr. Starr's
request for a feasibility study.  Also referencing his feeling
regarding stream flow impact report.  I suppose if it turns out
to be relevant in terms of the feasibility study.  So that
communication will be accepted and placed on record.

MR. CRADDICK:  As far as doing a well, I'm not
really sure what they mean by a feasibility study and taking
Mr. Sheehan's letter into account, you need to have a well in
order to answer Mr. Sheehan's letter.  And I don't know what
you would get out of a feasibility study unless you are talking
about just comparing a well with surface water.
 If you want to do that comparison, I have that right
here for everybody.  With a well at the currently located
facility where we have a transmission system, tank,
electricity, the cost is going to be -- is low as it could
possibly be.  The well is deep at that location; it's about --
it's going to be about 2,000 feet deep.
 So the well is rather expensive; it would be a
million dollars to drill the well plus another 900,000 for the
controls and the pump.  But when you compare that to getting an
equivalent amount of water, surface water, you are talking
about a six and a half million price difference, and the
interest alone on that money for the length of the drought can
pay for the operation of that well for a number of months.
 So what you need is real information from a well.
And as far as I know, there's only one way to get the real
information from a well, that's to drill it.

CHAIRMAN NAKAMURA:  Thank you, Mr. Craddick.
Mr. Starr, do you have anything you would like to
say since this is your communication?

MR. STARR:  Yes, sir, thank you for allowing me to
participate here.  I think that the director may have
misunderstood what I was really asking for.  And what my desire
is, is that we engage a hydrogeologist, whether it would be
Mr. Mink, who said they could do it quite quickly, a month or
two, or one of the other eminent firms in our state to tell us
where we would best be locating this well.
 And also as Mr. Sheehan mentioned, to make sure that
we don't do it in a way that would affect any streams, any
stream flow anyplace.  And then once we have that report, that
it be basically taken to the next step, which is an EA.  To my
understanding, there's no need to do an EIS for this, but a
simple environmental assessment will suffice.
 And once we have that and the board's agreement as
to where to drill, we could go ahead and drill the well and
that will make the Upcountry system adequate and allow us to
serve the people on the list and so on.  So that's really my
request, as expeditiously as possible we hire a
hydrogeologist.  It might be more efficient to use the firm of
Mink & Yuen because we are already under contract with them.
 Perhaps it could be made part of the existing
contract; otherwise, I don't know if we need to go out to bid.
It's more your area of expertise on how we get the consultant
to do the -- to tell us where the best place to go and then to
get it done.

CHAIRMAN NAKAMURA:  Thank you, Mr. Starr.  Any other
comments from members of the committee or members of the
board?  Mr. Takitani?

MR. TAKITANI:  I would wholeheartedly support
Mr. Starr's request.  Obviously, I think we have a preference
if there's any degree of uncertainty, that we would go toward
the Pookela area where the facilities are already existing.
But I think the main point is that we critically need
groundwater, we need to do something.  We have been sitting on
this, I won't say idly, but we have not taken action and these
droughts are becoming quarterly occurrences almost.
 So we need to move forward and I don't know whether
we need an EA in that area; but I do believe, as I understand
Mr. Starr's request is for a location and a feasibility study
as to where we can get the best quality water and quantity, and
if we do that, then I could fully support.  I believe we need
that urgently in the Upcountry area.  If all things are equal,
we should proceed closest to the area that we have all our
facilities in place.
 So with that, I would move that we support a
feasibility study with a fast-track movement toward
implementation.  This thing is just taking too long in getting
a site selected.  Let's get on with the task of getting
groundwater Upcountry.

CHAIRMAN NAKAMURA:  Thank you, Mr. Takitani.
Any other comments?  Mr. Tagorda?

MR. TAGORDA:  I was sitting here as an observer, not
to participate in any discussion, but like I said, I am for
this underground water well Upcountry.  We have been in many
years so ineffective in trying to combat the drought problem
Upcountry.  There's only one reason we can mitigate those
problems Upcountry, is to get that underground water.  Thank
you.

CHAIRMAN NAKAMURA:  Okay.  I think the chair shares
the sentiment that has been expressed by Mr. Starr and
Mr. Takitani and Mr. Tagorda.  I believe there is consensus on
a number of issues.  Number one being that we do have a
critical need to develop additional water sources Upcountry and
that groundwater source would be a reliable source.
 We do have funds appropriated in the present budget
for such a project and I believe it is a consensus of those
present that the most appropriate action is to retain the
services of an appropriate consultant, hydrogeologist, as
Mr. Starr has mentioned, to review the Upcountry area and to
determine the optimum location for a new well, which may or may
not be an existing location where the board has its facilities,
but I think that we should look at all options and I believe
that that would be the most expeditious way of moving this
project forward.
 Is that the consensus of those present?  If that's
the case, that is the recommendation of the committee.
Mr. Craddick?

MR. CRADDICK:  I think it would be helpful for the
board to take a stance on whether they think this water would
be able to be utilized any place other than Upcountry.

CHAIRMAN NAKAMURA:  Mr. Craddick, I believe the
appropriation is for a well to service the Upcountry area,
that's the intent of the committee at this point, that's the
priority.  And the action of the committee by consensus and
that we'll recommend to the board, although I'm not sure you
need board action to proceed since you do have an
appropriation, we can advise the board as to the action of the
committee.  But I think we should proceed as soon as possible
to start to solicit the appropriate professional services.

MR. STARR:  I want to comment that I was happy to
see a letter from Mr. Sheehan from Maui Tomorrow because I know
a number of people involved in Maui Tomorrow are the same
people that have been involved with the coalition for the East
Maui water resource.
 I think by sending us this letter what they are
saying is that they agree that the well should be built for
Upcountry; that as long as the EA is done showing that it's not
going to affect the groundwater, stream water, that they are
not going to try to go and block this.  I think that's kind of
the feeling I get from this, which is good.
 So I do feel we should do the EA process, which is a
fairly quick process, and if it does prove that the site that
is recommended, that it will not affect the streams, I don't
think we'll have much difficulty with people coming trying to
block the project.

CHAIRMAN NAKAMURA:  Thank you, Mr. Starr.  Let's
move on to item B, status report on the FY 2001 Capital
Improvement Program Budget.  Chair had requested staff to
prepare a status report to update the committee, as well as the
board, on where we are on all of the projects which were -- for
which funds were appropriated in the FY 2001 budget.  The staff
has prepared and circulated a summary.
 Mr. Starr and Mr. Tagorda, have you received a copy of this?

MR. TAGORDA:  Yes.

CHAIRMAN NAKAMURA:  It's a summary dated February 2001.

MR. STARR:  Just in the package today.

CHAIRMAN NAKAMURA:  Okay.  So Mr. Craddick, would
you like to proceed?  Are we dancing here?  Who is going to
carry the ball?

MR. CRADDICK:  I can do it.  I think Herb did a good job.

CHAIRMAN NAKAMURA:  The water man is carrying the ball.

MR. CRADDICK:  For the safe drinking water
compliance, the Honokahau project is still kind of held up with
some discussions with Maui Land & Pine.  And the other items,
soda ash project for lower Kula, Makawao, and Olinda are
completed.
 I will say just as another side on that, the state
is telling us they don't want us to use these anymore, they
want us to treat at the -- putting orthophosphates in at the
treatment plant, and they were trying to tell us to do that,
cease and desist immediately on this.  I told them we need to
go through our budget cycle and get the chemicals approved,
because these chemicals had already been purchased and the
others will be a budget item for next year.

CHAIRMAN NAKAMURA:  The state is saying that this
process is no longer acceptable?
 
MR. CRADDICK:  Well, they say they don't believe
it's going to work, without even having given it a real good
try.  The reason they are saying it won't work is because in
order for it to work we have to get the pH up too high in the
water system.  And they are feeling that getting the pH up that
high, even though it's not a regulated water parameter, having
a pH of around 10 is not -- it doesn't make the water taste
good.
 We think we could get the pH around 8 by using
orthophosphates.  The problem is, is orthophosphates are not a
normal chemical to be in your body, whereas soda ash is.
That's normally in your body and would not hurt.
 And the other problem with the orthophosphate is it
will react with the corrosion materials that are currently
inside the pipeline and will remove those out of the pipe.  We
feel we'll start having pipe leaks after that, because we know
what bad shape the pipes are in Upcountry.  But that is the
direction they are pushing us in.

CHAIRMAN NAKAMURA:  Any questions on the SDWA
compliance items?  Jonathan looks like he is dying to ask a
question.  Mr. Starr?

MR. STARR:  In other words, the EPA said to stop
using the soda ash?

MR. CRADDICK:  We got a letter to that effect, but I
responded back to them.  We were under a compliance order that
basically was up November 30th of last year.  We had to have
all of these things complete and we did.  And --

MR. STARR:  This is to keep the THMs down?

MR. CRADDICK:  No, this is to address the lead and
copper problem.

MR. STARR:  Okay.

MR. CRADDICK:  What happened after that, I mean like
two weeks before the end of the compliance, we get this letter
saying cease and desist, we want you to switch over to this
other chemical.  Well, first of all, we have not budgeted for
it.  We held a meeting with them, it was December that we met
with them -- early January, I think, first week of January we
met with them.
 Basically told them we would like to continue on
with the program that we had in place.  We're doing a lot more
flushing.  We basically -- during the drought, we had been
flushing.  That was a major part of the program, is in the dead
end lines what happens is the water stagnates there and forms
hydroxides which increase the pH.  So we're flushing that out,
and then we could add this soda ash in, which then hopefully
would not have these high pH's in the system.
 Anyways, they wanted us to immediately switch over.
I told them we don't have the budget for it.  We can't do it.
Furthermore, the compliance order didn't say it had to work; it
just said we had to do the soda ash and we did it.  We felt
that we were in compliance and they, I guess, finally agreed.
 You want to say something?

MS. KRAFTSOW:  It really was not a compliance order.

MR. CRADDICK:  You haven't seen the compliance
order; there is a compliance order.

MR. STARR:  Can board members be given copies of the
compliance order?

MR. CRADDICK:  Yeah.

MR. STARR:  I would like to understand this better,
which I'll do on my own time, but it seems drastic to raise the
pH for --

MR. CRADDICK:  We're not trying to do that.  We're
not trying to do that.  We're trying to keep it down.  A lot of
our problem is our tanks themselves, the tanks have not been
cleaned in many, many years.
 The guys yesterday completed a bypass around Pookela
tank, so we can take it off line.  Somehow when a new tank is
designed -- you could not take one of the tanks off line to
clean it out.  So we had to build our own line around the
tank.  We have done that and we're now bypassing that and we'll
get that tank cleaned out.  Because we know there's a bunch of
stuff in the bottom of the tank that is contributing to the pH --

MR. STARR:  One more question.  Didn't you find that
the reason the Haiku well burned out was because the soda ash
was being drawn down into the cooling system of the pump and
that that had been responsible for the loss of that pump?

MR. CRADDICK:  That was a theory of mine, but I
found out we had not been adding the soda ash at that point, so
whatever caused that problem, that was not it.  We have done
some things to avoid that.

CHAIRMAN NAKAMURA:  And then on this Honokohau water
project, it's basically -- the basic problem is the acquisition
of the easements?

MR. CRADDICK:  Not really.  It's getting the
sequence of operation.  They didn't want our pump to be running
when their pump was not running because they had a very small
tank.  So what would happen is, is their pump could keep
starting and stopping if ours would run when their's wasn't
running.
 So in order to get this sequence of operations
straightened out, that's basically what is holding it up.
Because they had gone down, I believe, built a larger tank;
they went from 10,000 to 100,000 gallons.  So it's not much of
an issue now.

MR. KOGASAKA:  They're requesting we provide some
plans and get the Maui Electric's plan to do that.

CHAIRMAN NAKAMURA:  So this is at this point moving
along, but it's not at a stalemate?

MR. KOGASAKA:  That's right.

CHAIRMAN NAKAMURA:  Any questions?  David?

MR. CRADDICK:  For the next one here, Iao, East Maui
source development.  I suspect with the board's decision to go
with the 8-inch well, this will start moving a little quicker
here.

CHAIRMAN NAKAMURA:  Any questions?  No.  Okay. Wailuku shaft.

MR. CRADDICK:  Wailuku shaft there, what is going on
there, I think it's that Stanford Carr is waiting until this
tank credits issue is resolved and that's not been resolved
yet.  So he's sitting waiting until that is resolved.

CHAIRMAN NAKAMURA:  So on this one when you say
prepared bid documents; that is, you will need to do that but
it's not been initiated as of yet?

MR. CRADDICK:  No, mainly because the land -- we
have a right of entry but not for doing the permanent facility there.

CHAIRMAN NAKAMURA:  And the intent is to replace the
shaft with a traditional well; is that right?

MR. CRADDICK:  Well, I think they would look at the
feasibility of totally doing another well, utilizing that one
as is or bringing the pump to the surface and utilizing it that
way and without the tunnel.  So there would have to be some
feasibility looked at with that project.
 We're just -- it's called this right here because we
feel that well, we already know what it produces, and even
though it may be a little more expensive to utilize that, it's
no risk or very little risk.  Let's put it that way.

CHAIRMAN NAKAMURA:  Any questions on this item?

MR. TAKITANI:  With the dropping of the sustainable
yield or at least CWRM's position and spreadage of the pumpage,
it's not completely alleviating the problem of rising chloride
levels.  Wouldn't the Wailuku shaft become more important as
far as the utilization?

MR. CRADDICK:  There's no question that getting the
pumpage spread south of Iao stream is important however we do
it.  That's correct.

MR. TAKITANI:  Do you have --

MR. CRADDICK:  Keep in mind, we are using the well
right now.  There's no charge to use it.  So whatever pumpage
spreading we can utilize from that is currently going on and it
does help out, mind you, because the chloride levels have
dropped.

MR. TAKITANI:  Where do we stand with the tank
credit issue?

MR. CRADDICK:  Good question.

CHAIRMAN NAKAMURA:  The committee had acted on it in
the past and the matter is still pending before the board, is
my understanding.
 Moving on, Waikapu mauka well.  David?

MR. CRADDICK:  I don't believe we have selected the
consultant yet.  We are still working with Stanford Carr.  What
we have done is we asked them to prepare all of the plans and
specs for the controls because they would be putting a booster
station in there to boost that water up to Wailuku Heights to
service some of the upper elevation projects that they have.
 Because of that booster pump, we wanted them to
design all of the controls and all we would be doing is putting
in the pump and that's a relatively simple job to get that
done.  Once we get things worked out with the development plan
with Stanford Carr.

CHAIRMAN NAKAMURA:  The $80,000 is for plans or
that's for the actual implementation of --

MR. CRADDICK:  That's for plans and specs to put a
pump in.

CHAIRMAN NAKAMURA:  Subsequently, we're going to
need an appropriation for the actual installation?

MR. CRADDICK:  That's right.

CHAIRMAN NAKAMURA:  In a subsequent year?

MR. CRADDICK:  Yes.

CHAIRMAN NAKAMURA:  Are you saying that you are
hoping not to expend these funds, that the private parties are
going to expend these or are going to do the work?

MR. CRADDICK:  A lot of that, you know, we hope that
to be the case.  Like especially the one right below it, the
transmission line, I believe we have -- Rojac is talking about
putting that line in, and then we would just do a 50 percent
reimbursement, because they are developing some kind of a
project down by the Apana scrap yard there.

CHAIRMAN NAKAMURA:  Basically, these two projects
are somewhat on hold until you resolve the issues with the
private parties?

MR. CRADDICK:  Right.

CHAIRMAN NAKAMURA:  The hope is that we would not
need to expend all of the funds?

MR. CRADDICK:  Right.

CHAIRMAN NAKAMURA:  Any questions?

MR. TAKITANI:  What's the capacity of the Waikapu well?

MR. CRADDICK:  I believe we put a pump at 2 million
gallons a day.  That's what it was tested at.  It tested very
good at that level.  That would be 1400 gpm.  Possibly we could
go higher but then we would be doing the same thing that we
currently have at Mokuhau, the pumps there pump 4 million each one.

MR. KOGASAKA:  Mokuhau pumps six.

MR. CRADDICK:  Three, three, and four; right?

MR. KOGASAKA:  Six, four and four.

MR. CRADDICK:  Anyways, we don't want this same --
you know, taking a pump here at Mokuhau and then having the
same capacity down here.  What we're trying to do is get some
of Mokuhau and some at Waikapu.  What will eventually happen is
we may have to decrease the pump size of Mokuhau.

CHAIRMAN NAKAMURA:  But the purpose of this well is
basically, again, to spread the pumpage within the aquifer; right?

MR. CRADDICK:  Right.  That's correct.  It does
provide additional water.

CHAIRMAN NAKAMURA:  Any questions?
Kanoa wells.  David?

MR. CRADDICK:  Kanoa wells 1 and 2.  This contract
actually is already going.  Completion date for Kanoa 1 --
actually, we just had a discussion with the contractor
yesterday and I guess the pump motor -- how long was that Herb,
18 weeks?

MR. KOGASAKA:  Yes, 18 weeks.

MR. CRADDICK:  So I guess somewhere in that order of
magnitude, 20 weeks from now, say five months from now that
should be finished.  Kanoa 1 is supposed to be completed in
May, and 2 is supposed to be completed in May of this year.

CHAIRMAN NAKAMURA:  When you say -- I'm trying to
recollect this -- when you say completion, on Kanoa 1, that
well has been -- both of these wells have been drilled?

MR. CRADDICK:  Yes.

CHAIRMAN NAKAMURA:  And this is all the
infrastructure necessary to put them on line.  You have the
temporary connection now; is that it?

MR. CRADDICK:  We did the pipeline project for Kanoa
No. 1 well already.  We put the permanent pipe in.  We have a
temporary pump of our own in there that we're running with a
diesel generator.  We have got the air quality permit to run
the generator.
 We are in the process of getting the air quality
permit for well No. 2.  The pump is in there and everything is
ready to go, and once we get that air quality permit, then we
could start running that.  So we could actually utilize that
here in the not too distant future.  But the job that is going
on right now is for the pump control buildings and putting the
permanent pump in the well.

CHAIRMAN NAKAMURA:  For both Kanoa 1 and 2?

MR. CRADDICK:  Right.

CHAIRMAN NAKAMURA:  So when this project is
completed, that old Kanoa well project will be completed, all
the permanent infrastructure, pipeline, everything will be in?

MR. CRADDICK:  Everything will be in.

CHAIRMAN NAKAMURA:  With the completion of this project?

MR. CRADDICK:  Yeah.  Including the final booster
pump up at the tank.  Those two blanked off booster pumps that
were blanked off will have the final booster pumps in there.

CHAIRMAN NAKAMURA:  When do you expect this all to
be completed?

MR. CRADDICK:  It should be no later than May or
June of this year.

CHAIRMAN NAKAMURA:  Any questions?  Jonathan?

MR. STARR:  This is a million dollar change order to
add drainage swale?

MR. CRADDICK:  I don't think it's a million dollars.

MR. STARR:  Add $1.1 million to add a drainage
swale.  That's what you're asking for.

MR. CRADDICK:  No, it just says proposed change
order is planned.  It doesn't give an amount.

MR. STARR:  We're budgeting a million one.

MR. CRADDICK:  No.

MR. STARR:  That's a lot of money for a drainage
swale.  That means bulldozer time.

MR. CRADDICK:  No, Jonathan.  The 1.1 million is for
the wells.  The drainage thing is for what, Herb?

MR. KOGASAKA:  We have not had a price yet.  It's a
change order that we are trying to get a price on.  We're
trying to complete a design; we need to have this drainage
swale added on to this project.

MR. STARR:  The $1,196,000, that was from a previous year?
 
MR. CRADDICK:  No -- I don't think so.  All it is --

MR. STARR:  If you awarded the contract, it must
have been for the previous year.

MR. CRADDICK:  No, I don't think so.  Anyways, the
drainage thing, I'm going to estimate that it should be about
$30,000.

MR. STARR:  I'm confused on why you have a million
and one budget.

MR. CRADDICK:  That was the budget, but the contract
was for 1.2 million.  So it was 100,000 more than what was
budgeted.  I think this one was just awarded in June before --
well, this is not part of the pipeline projects.

CHAIRMAN NAKAMURA:  Mike, do you have any
clarification to provide?

MR. QUINN:  I show it as the current year budget of
1.1 million and we currently have 1.1 million encumbered, and
there was another 100,000 in the budget, it looks like, from
the water system development fund.  That's the way we set up
the budget -- appropriation initially, 1.1 million from the
source fund and 100,000 from the water system development.  So
it looks like it's a current year appropriation and we have in
fact encumbered the entire 1.1 million.

MR. KOGASAKA:  The budgeted amount is 1.2 million.

CHAIRMAN NAKAMURA:  Sorry?

MR. KOGASAKA:  The budgeted amount is 1.2 million.

CHAIRMAN NAKAMURA:  It should be 1.2 instead of 1.1?

MR. KOGASAKA:  Yes.

MR. QUINN:  There was another 100,000 taken from the
water system fund to give you the 1.2.

CHAIRMAN NAKAMURA:  If you have a change order for
$30,000 or any change order pretty much, you are going to be
exceeding budget then?

MR. KOGASAKA:  Yes, we would be --

MR. QUINN:  You have to come back to the board.

MR. KOGASAKA:  As soon as you get the prices and --

CHAIRMAN NAKAMURA:  You want to move along, David,
to No. 2?

MR. CRADDICK:  Kupaa No. 2 well, I think we finally
got things straightened out with -- first of all, we had -- in
the last well when it was drilled, the consultant said they
didn't think we would be able to get any more wells for
producing additional water in the area that we had negotiated
with Wailuku Agribusiness.
 So we had the choice of putting one backup well in
between Kanoa No. 1 and this Kupaa well that we already have
there, which would only serve as backup or going further north
and getting one that could actually provide additional source.
 If we go on to the state property, we have to get
state permission, and the state currently has it subleased to
the Boy Scouts.  We have sent letters to the Boy Scouts, they
put in their approval.  So we'll be sending a letter into the
state to get access to the property.  Once that happens, then
we would get a jump going to get the well drilled.

CHAIRMAN NAKAMURA:  Okay.  Basically, Kupaa well No.
1 has been drilled but it's not in service, there's only
infrastructure; right?  And you are saying Kupaa 2, at this
point it's the department's feeling that Kupaa 1 -- Kupaa 2
will not be pursued but these funds will be utilized to do an
exploratory well in another location?

MR. CRADDICK:  Right.

CHAIRMAN NAKAMURA:  I would suggest that perhaps the
department's plans should be presented to the board for their
information.  We can do it via this committee's report.  You
have a potential location for this new exploratory well?

MR. CRADDICK:  We did -- the Boy Scouts subleased it
to Buddy Nobriga.  We did go out with him and find a spot that
would not disturb his operation.  We found a good location for
the well.  Subject to getting a consultant on board, there
might be some minor adjustments because of pipeline issues.
But we think we have a location that we can use.

CHAIRMAN NAKAMURA:  The location so far has been
determined by, basically by the department, not necessarily by
the consultant or a geologist?

MR. CRADDICK:  That's right.

CHAIRMAN NAKAMURA:  Bob?

MR. TAKITANI:  David, about how much do we allocate
for source development in the 2001 budget?  And how much do you
anticipate in 2002?

MR. CRADDICK:  Didn't we have another one for
actually putting the pump in the Kupaa No. 1 well?

MR. KOGASAKA:  No.

MR. CRADDICK:  That would be the one for next year then?

MR. KOGASAKA:  Yes.  That would be the pipeline.
The transmission would be a substantial cost.

MR. CRADDICK:  It would probably be somewhere in the
million to million and a half range to get a pump in that well
and be able to deliver it into the system.

MR. TAKITANI:  What's the answer?

MR. CRADDICK:  Well, we need that one and a half
million next year, in next year's budget.

MR. TAKITANI:  The question was how much was
budgeted for source development for this fiscal year and how
much do you anticipate for next year?  Knowing that you don't
know exactly, you are still budgeting; but source development
obviously has become a very important item for the board and
with the situation with the Iao aquifer and the growth of South
Maui, etc., where is all this water going to come from, where
is the source?  That's the bottom line questioning I'm asking.

MR. CRADDICK:  The way we've got it is we're getting
on slightly over a million gallons or 1 1/2 million gallons a
day capacity for each year since 1997.  So I think that's what
we're shooting towards.  Keeping in mind that we're only using
three-quarters of a million gallons a day currently in the
central system.  So we're developing at a rate double what
we're using.  That's why we're able to cut back on Iao aquifer
usage.

MR. TAKITANI:  Mike, about how much have we budgeted for --

MR. QUINN:  For that Iao, we budgeted $2,598,000.

MR. TAKITANI:  What about for East Maui?

MR. CRADDICK:  There's nothing budgeted for East
Maui until we get the EIS done.

MR. TAKITANI:  You have --

MR. CRADDICK:  That's an exploratory well.  That's
not a production well.  And even if it was production size, it
would not be able to be used until all the wells are drilled.
I don't think you can count that as a source at any time in the
near future.

MR. KOGASAKA:  I believe it's -- to use that one for
the monitor well.  That was sized by the board in the last
meeting so --

MR. TAKITANI:  What about the drilling arrangement
that we entered into with USGS to drill an exploratory well,
that you could utilize that equipment, you can utilize that to
drill in Maluhia?

MR. CRADDICK:  We could.  We are going to have
something in next year's budget for that because this --
basically the first part of this year they did the well --
actually, most of last year they did the well on Molokai.  The
equipment is now being moved up to Keokea with Hawaiian Homes
and they are going to do one or two more wells there.
Hopefully in the next six months.
 Also one other thing, too, just for the board's
interest, the state will also be drilling a well next year in
the central system to add water to our system.

MR. TAKITANI:  Where?

MR. CRADDICK:  We expect -- and also in this Boy
Scout camp area somewhere.  Possibly a little higher
elevation.  They are doing it for their own project, for their
own source development of their own project, but that's in the
state's budget this year for their own project, based on their
water use development plan.

CHAIRMAN NAKAMURA:  Are you talking about fiscal
year 2001?

MR. CRADDICK:  Yes -- no, 2002.

CHAIRMAN NAKAMURA:  2002.

MR. TAKITANI:  That's in the CWRM?

MR. CRADDICK:  Yes.  I think they are planning on
doing another monitor well, too, somewhere.  After they finish
the one in Mahinahina, they will do another one somewhere in
the central system.

CHAIRMAN NAKAMURA:  It might be appropriate to ask
them to make a presentation to the board as to what their plans
are.  It's an interesting -- it's something we have not -- it's
something at least I had not heard of before.

MR. STARR:  Is that first-come-first-serve?

MR. CRADDICK:  That's what's going on.

MR. STARR:  I don't think there's 3 million gallons
in Maluhia.

MR. CRADDICK:  Their well may have to be further north.

MR. STARR:  Yeah, further north --

MR. CRADDICK:  That's why we are wanting to go and
stake out the ground.

CHAIRMAN NAKAMURA:  Any other questions on this
North Waihe'e?

MR. STARR:  Since we're on the subject of this, I
don't know looking ahead where our next source for central is
realistically going to come from.  It's probably going to come
from Hamakuapoko when the EIS runs its course.  I know that's
wishful thinking now, but I would not be surprised if we can't
get Hamakuapoko on line in the next six or eight months.
 It would be good when that time comes we're ready to
fast track in getting a pipeline and power to that, so H'poko
could be run on to the central system and that should keep us
in good shape for another year or two.

MR. CRADDICK:  Hamakuapoko, I don't know if you
remember the board chair said one time some time ago about, I
know about the pipeline.  There's currently two contracts with
encumbered funds of about $5 million for the pipeline for the
Hamakuapoko wells.
 Maui Electric, I believe, is ready to put the power
in there.  We just have not been pushing them to get the power
in.  We worked out a deal with HC&S.  Obviously, the power will
be cheaper, but it looks like the distribution line is a little
more expensive with HC&S.  So we have to just look at the
economics of that issue there.
 But if that EIS is completed, we will be able to get
those Hamakuapoko wells on line in Central Maui and probably
around 280 days from completion of the EIS.  We may be looking
at -- obviously, we'll have to pay whatever change order there
is in the contract for cost escalation; but since the contract
has been sitting there since 1994, the money is still
encumbered and the bulk of it is being paid by the state.

CHAIRMAN NAKAMURA:  Okay.  Moving along, the drought
project, David?

MR. CRADDICK:  This one, the -- our understanding is
that the request for the $2 million from the state is sitting
on the governor's desk.  It was passed from budget to finance
to the governor.  If that is funded, we would not have to spend
this money.  Now, I can't give you any guarantee that that's
going to come off the governor's desk at this point, but that's
what I know right now.

CHAIRMAN NAKAMURA:  So the scope of this project,
again, is to do what, David?

MR. CRADDICK:  It's basically to do -- this 500,000
would only be to do the EIS for the reservoir, some site
feasibility work and the environmental work to put a reservoir
wherever they figure it was best.

CHAIRMAN NAKAMURA:  And so how big would this -- is
this reservoir proposed to be?

MR. CRADDICK:  We're looking at 300 million gallons.

CHAIRMAN NAKAMURA:  And you have a location
preliminarily identified?

MR. CRADDICK:  There was a study done back in '84,
Herb, or '85 by Belt Collins (phonetic) that did identify a
spot that would be large enough to hold a reservoir of that size.

CHAIRMAN NAKAMURA:  So this would store raw water
and this raw water would go into the treatment facility?

MR. CRADDICK:  Right.  If we got a reservoir of that
size, it would take us up to near the full treatment plant
capacity.  So we wouldn't necessarily have to increase -- I
mean, for peaking days, I guess we would have to add some plant
capacity, but for average day capacity, the treatment plant
would still be able to handle it.

CHAIRMAN NAKAMURA:  So the $500,000 would be for
preliminary engineering and EIS, but if you got 2 million, it
would encompass that plus the complete engineering design?

MR. CRADDICK:  Yes.

CHAIRMAN NAKAMURA:  Any questions on this?
Pulehu well, David?

MR. CRADDICK:  On that, our understanding is that we
should have the right of entry shortly.  There was -- in the
right of entry that they had given us, they wanted us to take
responsibility for all water quality that we dealt with while
we were testing the well and we were responsible for all the
water quality after we tested the well even if we didn't use
it, and basically I said that that was unacceptable.
 We can take responsibility for what we do and that's
all we'll take responsibility for.  And I think corp counsel
talked with their counsel and they agreed to change that in the
right of entry.  And once that happens -- well, we already bid
out putting in the test pump in there.
 We have a pump of our own that we can put in to test
it.  Once that happens, then we'll know, I guess, whether it's
feasible to go ahead and do this.  It does require a six mile
pipeline.  So that's a problem.

CHAIRMAN NAKAMURA:  The landowner is A&B?

MR. CRADDICK:  Yes.  Basically it's been 25 years
since the well was drilled and tested and I don't think it's a
good idea to go ahead with the project without doing another
test to get current information.

CHAIRMAN NAKAMURA:  So you are finalizing the right
of entry, once you do that, then you are going to test pump the well?

MR. CRADDICK:  Right.  That should all be completed
before the end of this fiscal year.

CHAIRMAN NAKAMURA:  Jonathan?

MR. STARR:  I have grave doubts about this
particular one.  I went out there and took a look at it, it's
low down right in the middle of the sugar plantation and it was
drilled a long time ago and then instead of using it, they just
capped it.  They never wanted to use it for the plantation,
which I assume they would have used it for that.
 But the pipeline is going to cost a lot more than
the drilling cost of a well at a suitable location.  Power is
two miles away.  It seems to be in the wrong place.  I would be
really surprised if that gives us sweet, good water.  We're
fooling ourselves with this one.

MR. CRADDICK:  We're not looking for good water;
we're looking for ag water.

MR. STARR:  If we're looking for ag water, and we're
going to have to pump it uphill and we're going to spend
several million dollars to put a pipe to move it uphill, you
know, to put power up over there, I don't know.
 It seems like it would make a lot more sense to just
go drill one where we want the water, which will probably be a
little further uphill and a little further away from the salt
and pollution in the central valley.  I think the fact there's
a hole there, you know, we're fooling ourselves.  We'd be
better off putting it where we -- you know, doing it properly
where we want it rather than throwing good money after bad.

CHAIRMAN NAKAMURA:  I would assume that once this
process is complete, that the director will have an appropriate
recommendation to the board.  Mr. Craddick?

MR. CRADDICK:  I think that's exactly what I was
going to say.  From this test we'll get a pretty good fix on
the water quality, and I think, like Jonathan says, it probably
will be cheaper for us to drill a well nearby our booster
system, just like we would do for the well for the drinking
water, get it near our booster system so we don't have this
long transmission line.
 The power is already there, everything is there; but
we don't have to risk drilling another well when we already
have one there.  To do this test would be somewhere in the
order of $20,000, a relatively minor amount to get the test
information.

MR. TAKITANI:  When do you think you'll have
sufficient data to make a conclusion?

MR. CRADDICK:  If all goes well with the right of
entry, we should have something before the end of this fiscal
year.  So another five months.

CHAIRMAN NAKAMURA:  Okay.  Anything else on that?
 The next item is the Upcountry source development.
I guess we have discussed this earlier and the recommendation
is to engage an appropriate hydrogeologist to determine the
most appropriate location.  So I think we have dealt with this
item.  Mr. Starr?

MR. STARR:  If there's any way we can even cut one
more step out of it.  I would like to ask whether this is
something that could be tacked on to an existing contract we
have with the hydrogeologist or are we going to have to put
this out to --

CHAIRMAN NAKAMURA:  Any comments on that?  Mr. Corp Counsel?

MR. FUKUSHIMA:  Did the earlier contract go out to bid?

MR. CRADDICK:  Yes, it did.

MR. FUKUSHIMA:  There are exceptions to going out to
bid.  I don't believe it would be appropriate to tack this on
to the present project.  But whether the exceptions to the
procurement process, this I'm not sure.  I would be doubtful
that you can.  I'm just wondering if the department is
participating in this managed selection process that most of
the other county is utilizing whereby you solicit --

MR. CRADDICK:  We have already done that.  We would
have people that -- we have a list of people that could -- we
could use for that already.

MR. FUKUSHIMA:  And that is a process which is
appropriate under the present procurement code, and utilizing
that process I believe you could select --

MR. TAKITANI:  Under the term of a drought emergency
declared, we're able to not have the bid process enforced.

MR. CRADDICK:  Just as an aside here, my main focus
for Mink & Yuen is to get that East Maui plan done and to water
their efforts down.  Knowing they are already a small firm, to
give them something else while that is still pending, I think
is -- I would have to convince myself that they could move on
this quickly and they would not be competing with themselves
for resources.

CHAIRMAN NAKAMURA:  I think the intent of the
committee is to move this project along as quickly as possible
and get the appropriate consultant on board as quickly as
possible.  So we can leave that to the department to determine
how that can best be done and we'll monitor your effort in
accomplishing that, Mr. Director.

CHAIRMAN NAKAMURA:  Waikamoi flume replacement project.

MR. CRADDICK:  On that one, we ordered all the
lumber.  It's just a matter of scheduling the crews to get up
there.  They have been working on a number of projects
regarding these laterals that have been breaking all over the
place and getting the roads fixed up.  As soon as that's
completed, this is the project they are going on.

CHAIRMAN NAKAMURA:  You say you ordered the
material.  Has it arrived?

MR. CRADDICK:  Yes, it's arrived.

CHAIRMAN NAKAMURA:  Any comments or questions?
Alae tank replacement.

MR. KOGASAKA:  We need to complete the -- review the
preliminary engineering report to our satisfaction before we
can proceed.

CHAIRMAN NAKAMURA:  So you have a consultant working
on this?

MR. KOGASAKA:  Yes.  They have prepared a
preliminary engineering report and we need to satisfy ourselves
that that site would be appropriate.

MR. TAKITANI:  How large a tank is that?

MR. KOGASAKA:  I believe it's a 1 million gallon
tank.  It was 1 million.

MR. CRADDICK:  To tell you the truth, Herb -- the
tank that's there right now is 2 million, but obviously we
don't need a 2 million gallon tank there, especially with the
dual line project going in.  We won't have to put a 2 million
gallon tank in.  Whether it was 1 million or a half million, I
don't recall off the top of my head.

MR. KOGASAKA:  Right now it's either half million or
1 million.  I believe it's 1 million.

CHAIRMAN NAKAMURA:  So this 50,000, Herb, that was
for the design or is that for land acquisition?

MR. KOGASAKA:  Land acquisition was allotted for
it.  We don't have a price for it.  We wanted to budget
something so we have something we can use for negotiations.

CHAIRMAN NAKAMURA:  And then so next year you are
going to have to come in for money for construction or in a
subsequent year?

MR. KOGASAKA:  Yes.

CHAIRMAN NAKAMURA:  You don't have construction
funds yet?

MR. KOGASAKA:  No, we don't.

CHAIRMAN NAKAMURA:  Is the engineering design coming
out of this 50,000 or that was a prior years' appropriation?

MR. KOGASAKA:  That's the prior year appropriation, yes.

CHAIRMAN NAKAMURA:  Any questions or comments on
this?  Pulehuiki tank replacement.

MR. CRADDICK:  On that one, we just have a worn-out
tank there.  Pulehuiki Road, that needs to be replaced.  This
is the design work that -- to do a design there.

CHAIRMAN NAKAMURA:  So this has not yet been
initiated in terms of design?

MR. KOGASAKA:  It's not initiated yet, that's true,
but we scheduled it for this January.

CHAIRMAN NAKAMURA:  Sorry?

MR. KOGASAKA:  It was scheduled for January.

CHAIRMAN NAKAMURA:  You have not started the
consultant selection process then?

MR. KOGASAKA:  No, we haven't.

CHAIRMAN NAKAMURA:  Incidentally, how long is that
consultant selection process normally, to go through that, the
entire --

MR. CRADDICK:  I think it can be as quick or as slow
as we want it to be.  What we do at the beginning of the year,
we'll advertize to get people that are interested in the jobs
that we have and so we have a list of all these people, and
then what we'll do is we'll pick five of them to get a detailed
proposal from them.  That usually takes about 30 days.

MR. KOGASAKA:  Yes.

MR. CRADDICK:  So the following 30 days we could
theoretically have a contract with them.

CHAIRMAN NAKAMURA:  Ulumalu water system.

MR. CRADDICK:  That project there is pretty well
designed and ready to go to bid.  We still have the $295,000
loan issue, that has to be resolved, and that is the -- right
now it's the driving force behind the project.  It has to be
completed before we can go to bid.

CHAIRMAN NAKAMURA:  What is the status of that issue?

MR. CRADDICK:  We're trying to get a bond counsel
that is not going to charge us more than the loan that we're
getting or a substantial portion of the loan that we're getting.

CHAIRMAN NAKAMURA:  That's been pending for some
time, then, that issue, as I recall.

MR. CRADDICK:  Yeah, yeah, basically, I guess.  I
don't know, Howard may have more insight.  But what the short
story is, is that corp counsel did not feel that they were able
to give the legal opinion that the RUS needed.  And if we want
to go with who the counsel currently has, which is Orrick &
Harrington, they want it somewhere in the order of $60,000 for
a $295,000 issuance.
 The board did say they wanted to go the revenue bond
way, so we're working towards that end.  And what it looks like
they have done in other places, it's something similar to the
state revolving loan fund, where instead of issuing bonds, we
get a loan with the same guarantees that you would give under a
revenue bond.  And it's those guarantees that have been troubling.

MR. FUKUSHIMA:  If I may, Mr. Chairman, there have
been discussions, and I just got on this fairly recently, when
I say recently, I mean this week.  But there have been
discussions as to whether a revenue bond was the appropriate
way to go.  The primary concern that our office had, and
Ms. Davis pointed out, was if we used Harrington as bond
counsel, it would cost a considerable amount of money.
 It was our idea or our position that perhaps -- and
taking into account the cost of bond counsel -- that perhaps it
would be easier, less expensive to utilize a process that is
already in place and that's the G.O. Bonds.  Although they
would cost a little bit more, but when you are talking about
the amount of $300,000, the G.O. Bond is what, 6 percent?

MR. CRADDICK:  Howard, you don't have a choice in
this.  The G.O. bond goes to RUS, they buy it, the interest
rate is fixed.  It's only the cost of issuance that we're
talking about.  Nobody else can buy these bonds.  If you don't
take the loan with them, then all the grant money you lose.

MR. FUKUSHIMA:  Whatever the case may be, we thought
it would be appropriate to compare the cost of issuing a
revenue bond or this revolving loan idea, which, in fact, our
bond counsel has already offered the opinion that the type of
loan agreement is essentially a Chapter 49 agreement which is a
revenue bond under the HRS.
 The problems with the revenue bond is that you are
going to have to get rate commitments from both counsel, as
well as the mayor, to make sure that there is sufficient funds
available for the repayment of the loan.  So our suggestion was
to be in the analysis or a comparison between issuing of this
revenue bond/revolving fund loan type of idea versus a G.O.
bond so that the board would have a better handle on which way
it really wanted to go.
 I think when the revenue bond was first suggested,
everybody didn't really know what it entailed, how much it
would cost, etc., and so in light of that, we thought the best
thing to do would be to analyze revenue versus G.O. Bond.
 Mr. Craddick, in my conversations with him
yesterday, thought he could get bond counsel at a very
reasonable rate, and I was a little skeptical whether he could
or not.  But Mr. Craddick was going to investigate potential
costs involved with a revenue bond.  So that's where we stand now.

CHAIRMAN NAKAMURA:  Okay.  Any questions?

MR. FUKUSHIMA:  Or comments?  Or suggestions?  I'm
not sure if the board is set or so convinced that a revenue
bond is the way to go that it's not going to change its mind, I
don't know.

CHAIRMAN NAKAMURA:  Speaking for myself, one of the
reasons the revenue bond came up was because it seemed
appropriate in the light of how the loan was to be paid back,
which was to be paid back through the rate process, and it
certainly looked like revenues.  But I think the board would
certainly have to look at the options of what corp counsel
reviews, what those options are and the cost and benefits of
the options.  But I don't think the board has closed its mind
to it.  That's my opinion.

MR. CRADDICK:  Actually, the bond is being paid back
by the people in the Ulumalu Peahi area.  It's not paid back by
our rates.

CHAIRMAN NAKAMURA:  That's what I meant.

MR. CRADDICK:  It's just that when you issue a
revenue bond, there's certain rate covenants you have to put in
there that say you have to have sufficient rates to cover it.
This is such a minor issue, I don't want to speak for Mike, you
can ask Mike himself, but those kind of covenants are not an
issue in this particular case for such a small amount.

CHAIRMAN NAKAMURA:  The point is whether or not the
board will consider an alternative to the revenue bond which
they previously indicated was a preference, and I think options
should be presented to the board, together with the appropriate
justifications for the board to deal with.

MR. FUKUSHIMA:  As a suggestion, I would think that
if the cost between a revenue bond versus a G.O. bond are
fairly close, that we have got a lot of experience and we have
worked with Harrington for a couple of years.  Frankly, it
would be a heck of a lot easier than going to territory that
myself or other attorneys in the office have not particularly
worked on.

CHAIRMAN NAKAMURA:  Well, we'll look forward to an
appropriate recommendation from corp counsel and the director
on this issue.
 Pipeline replacement.  There's a number of pipeline
replacement projects, so the chair's suggestion is rather than
go into each of them in great detail, if there are any projects
of significance that the department would like to point out to
the committee, or if there are projects that committee members
or board members have questions on, we can deal with those, but
I don't know that it's necessary to go over these individually.
 Any projects, Herb or David, that are particularly
noteworthy that you need to bring any information to the committee?

MR. CRADDICK:  We got a letter from David Goode the
other day, saying that they were going to be delaying some of
the projects that we were working with public works on and I'm
not exactly positive which ones those are on there, but I know
there is one in Kihei there.  I think that --

MR. KOGASAKA:  South Kihei Road, phase IV has been
put on hold.

MR. CRADDICK:  That's on page 5.

MR. KOGASAKA:  I think we're asking for
appropriation the next fiscal year.

CHAIRMAN NAKAMURA:  Sorry?

MR. KOGASAKA:  We'll be requesting appropriations
for that project in the next fiscal year.  This would be for
construction, they anticipate they'll be able to do it next
fiscal year.

CHAIRMAN NAKAMURA:  So if public works is not ready
to proceed, your intent would be to defer the project until
such time that they are ready to proceed?

MR. KOGASAKA:  Yes.  We expended funds for a portion
of the design funds at this time already.

MR. TAKITANI:  Just for reference, Mike, what was
the total pipeline request for the EA, how much --

MR. QUINN:  The total budget was, for pipeline
replacement, it was 5.8 million -- 5,865,000.

MR. TAKITANI:  How much --

MR. QUINN:  Year to date expended is roughly 2 million.

CHAIRMAN NAKAMURA:  We authorized somewhat in excess
of 3 million, is my recollection.

MR. QUINN:  That's correct.  At the last CIP meeting.

CHAIRMAN NAKAMURA:  At the last CIP meeting.  Are
any of these projects going to be coming up for approval by the
committee and the board within the next month or so?  Or have
you pretty much asked for authorization on whatever you can
handle for the rest of the year?

MR. KOGASAKA:  I would like to request funding for
some additional pipeline design projects.

CHAIRMAN NAKAMURA:  Which projects are those?  Maybe
you can identify them now.

MR. CRADDICK:  Ainakula?

MR. KOGASAKA:  That's for construction.

MR. CRADDICK:  I thought you said you wanted to add
in a PRV or something in there?

MR. KOGASAKA:  Yes.

MR. CRADDICK:  That one may be less than $10,000.
We're currently negotiating.  If it's less than 10,000, we
don't necessarily need to come to you.  But that's one.

MR. KOGASAKA:  The Ainakula project is next.  I
believe the funds -- that's not budgeted yet.  That's the one
we would like to go to the construction -- I have April here.

CHAIRMAN NAKAMURA:  So you are going to be asking
for authorization for construction on that?

MR. KOGASAKA:  Yes.

CHAIRMAN NAKAMURA:  We don't have authorization on
that yet, Mike?

MR. QUINN:  You mean in terms of -- no, we don't.

CHAIRMAN NAKAMURA:  In any event, I would suggest
that you prepare your list as soon as possible, Herb.

MR. KOGASAKA:  Okay.

CHAIRMAN NAKAMURA:  Because it's going to be too
late for the February board meeting, but I would think that you
would want it for the March board meeting; and so in order for
that to happen, you probably need to get it on the agenda on
the February board meeting so that it can be referred to
committee for recommendation back in March.  So you don't have
much time.

MR. KOGASAKA:  Okay.

MR. TAKITANI:  One question.  When is that new
accounting procedure going to be taking place where you have to
now account for your depreciation in any financial statements?

MR. CRADDICK:  I think it will be in this fiscal year; right?

MR. QUINN:  What will be required is -- we already
conformed to it, first of all.  In a sense, we depreciated all
our assets.
 I think one of the key items, though, that is a
little bit of concern is that in the allotted summary portion
of the notes, we have to make a statement as to basically
condition of those assets, and I guess the implications or the
thrust of GASB 34 is to let the public know whether you are
sufficiently keeping your assets up-to-date and in good shape,
and that leads to all sorts of things, whether the rates are
sufficient to do that.

MR. TAKITANI:  That's what I was leading up to.

MR. QUINN:  So somehow we'll have to do a lot of
thought of how we'll present that to the public.

MR. TAKITANI:  That was the next question.  How far
are we falling behind?  Because I heard the astronomical figure
of how many millions of dollars we need for replacement.  And
how far are we falling behind?

MR. QUINN:  I think that brings into play the system
replacement analysis that we had done by a consultant, which is
going on 25 years, at least initially what we were going to
do.  It clearly shows that our current revenue stream will not
support that kind of well.  Those kind of fiscal requirements
going out.  Even after maybe two or three years, then something
will have to be done, if we want to meet those replacement
requirements.

MR. TAKITANI:  My concern is, I see every night on
TV the Board of Water Supply, Honolulu Board of Supply in the
news where some main line is broken and constantly in that
situation to repair -- the pipeline replacement.  I don't think
we're that far off from being in that same condition now.

MR. QUINN:  I think the other boards --

MR. CRADDICK:  TV crews just aren't as accessible here.

MR. QUINN:  Specifically, the Big Island and Kauai
are seriously addressing this situation, witnessing a
tremendous increase in rates that they are imposing.  It's out
at public hearing right now.  We're talking about increases on
the order of 30, 40 percent.  Really significant increases they
are proposing.  I think we're going to be faced with a --
shortly, not this year or next, but certainly following that.

MR. CRADDICK:  We still have one more year to go on
the rate increase.  We'll be covered through that.

MR. TAKITANI:  We certainly need to look at the
drought situation as far as having drought pricing or whatever
we end up calling that thing.

MR. CRADDICK:  Yes, there's no doubt about that.

MR. TAKITANI:  The concern is, you know, we never
bring it up.  The other systems are subsidizing greatly the
Upcountry system.  At some point in time that really needs to
be addressed and we need to be looking at the whole structure there.

MR. QUINN:  As does the expansion side, the water
system development, we should be also thinking seriously of
taking another look at that.  I know the board took a look at
it earlier last year, was it?  About a year ago.

CHAIRMAN NAKAMURA:  Any other comments on pipeline replacement?

MR. KOGASAKA:  Yes.  I would like to talk about a
Paukukalo waterline project.  And we stopped -- we have deleted
the portion of where the archeological areas are located, we
have taken that out of the contract and we would like to
complete that portion by hiring an archeologist and taking this
out of the contract and completing the work by department
personnel, if possible.  We would need to go through the
procurement process with the archeologist for -- or an
archeological consultant.

CHAIRMAN NAKAMURA:  I don't know what the answer to
that is.  I guess that's something you need to take up with
corp counsel.  As far as -- I think the committee is -- how you
proceed with the project is really kind of an administrative
function as long as you are doing it within the budget.  So if
a decision is made to do it in house and to terminate the
contract, I don't think board action is required.
Mr. Takitani, do you agree with that?

MR. CRADDICK:  What he is talking about is
archeologist work.  We can't do that in house.

CHAIRMAN NAKAMURA:  I know, I realize that.  But all
I'm saying is that if it's within the contracted amount.  And
how you get the archeologist is your --

MR. CRADDICK:  It's not within the budgeted amount.

CHAIRMAN NAKAMURA:  Well then, if you have to come
back to the board, you need to submit a formal request.

MR. KOGASAKA:  The remedial measures that were
presented to the board, is the archeological amounts approved or --

CHAIRMAN NAKAMURA:  I don't recall what the action
of the board was.  I know it was in the finance committee, is
my recollection, and the finance committee did take some kind
of action, but what that action was I'm not sure.

MR. QUINN:  I guess I show no money available for
that project at this point.  It's either spent or encumbered.
I guess, Herb, you need additional money to complete this?

MR. KOGASAKA:  Yes.

MR. QUINN:  He is trying to respond to your
question, Mr. Chairman, that he may be coming back.

CHAIRMAN NAKAMURA:  You need to make that request.
If you need additional funding for whatever purpose, you need
to make the request.  Any other comments on these projects? Herb?

MR. KOGASAKA:  I would like to raise the issue that
the project on the Upper Kula transmission line, Ulupalakua to
Kanaio, options on the --

CHAIRMAN NAKAMURA:  My comment on this is that this
says the department presented options to the Capital Programs
Committee and that is in our current statement.  There's
nothing that was presented to the Capital Programs Committee.
As far as there may have been some discussions with individual
members; however, my recollection is that there has never been
any kind of a formal request for action on this project.

MR. CRADDICK:  We'll do that then.

CHAIRMAN NAKAMURA:  Suggested at the appropriate --

MR. CRADDICK:  Yeah.

CHAIRMAN NAKAMURA:  Okay.  Any other questions or
comments?  Jonathan?

MR. STARR:  I want to take up with where Bob left
off before.  In some casual conversations I had with a number
of council members, they're all kind of asking, you know, How
are you doing for money?  I said we need an increase, and they
said to do it this year, don't come back to us next year,
election year.
 I really feel that this is the year to act and that
they'll treat it favorably.  So whether we go after the
development fees or rates, my feeling is we should go after
both and settle for one -- a good increase in one of them or
something.  I don't know, this is the committee -- how to start
the ball rolling, but I think we should.

CHAIRMAN NAKAMURA:  I think these items are
presently Mr. Rice's finance committee, both the study on --
the reserve study is there, together with -- I believe there's
some other financial issues in the committee that would impact
on the rates and the fees.  That's probably the appropriate
location for that discussion.  Not wanting to take Mr. Rice's
prerogative.
 Any other questions or comments?  One question, what
is the status of that Molokai project, that Iliahi stream resurfacing?

MR. KOGASAKA:  We're going to try to get informal
reproposals for the resurfacing work and contract with them,
the paving company.

CHAIRMAN NAKAMURA:  I thought we had a proposal.

MR. KOGASAKA:  I think --

MR. CRADDICK:  There's a time limit on that.

MR. KOGASAKA:  I think we need three proposals.  We
were able to get two.  Anyway, we're pursuing that paving
contract.

MR. CRADDICK:  What it is, Howard, there's a time
limit, and with the added cost, it takes it over the 25,000
that we could have issued with the requisition.  Now we have to
make a contract.  So if we can't get the third price, then
we'll actually have to make a new contract for it.  We can't do
it by requisition anymore.  But I will say -- well, anyways,
never mind, I won't say.  That's what we're doing.

CHAIRMAN NAKAMURA:  Okay.  Perhaps corporation
counsel can help you again determine the most expeditious way
of moving ahead.
 Let's move to page 6, reliability.  David?

MR. CRADDICK:  I believe that generator, the specs
are ready for that, so that should be going to bid shortly.
         
CHAIRMAN NAKAMURA:  What was the -- these have no
estimated costs?

MR. CRADDICK:  That was $100,000, I believe, that generator.

CHAIRMAN NAKAMURA:  $100,000?

MR. CRADDICK:  Yes.  Is that the bid item there?

MR. QUINN:  We budgeted 100 for it.

CHAIRMAN NAKAMURA:  The specs are prepared and you
are ready to go out to bid?

MR. CRADDICK:  Right.  On the Keanae well, Herb?

MR. KOGASAKA:  The designing is being worked on
right now and we hope to go to bid by the end of this fiscal
year, if not sooner.

CHAIRMAN NAKAMURA:  What is the amount on this?

MR. QUINN:  200 in the appropriation.

CHAIRMAN NAKAMURA:  200.  Any questions on these
reliability projects?
 Facilities.  Maybe you can give us the dollar
amounts for all of these projects.

MR. CRADDICK:  I believe all three of those were
around the order of $50,000.

MR. KOGASAKA:  Chlorination retrofit was 40,000.

CHAIRMAN NAKAMURA:  What's the status?

MR. CRADDICK:  I'm pretty sure that one was
complete.  The Alaeloa one was complete.

CHAIRMAN NAKAMURA:  Is that right, Mike?

MR. QUINN:  I still show a balance of 40,000
available.  Alaeloa?

MR. CRADDICK:  Yeah.  I'm pretty sure that one is complete.

MR. KOGASAKA:  Next one.

CHAIRMAN NAKAMURA:  What is this, complete or is it
not complete?

MR. CRADDICK:  It may be that just the materials are
ordered and it's not installed yet.

CHAIRMAN NAKAMURA:  And then Napili well A.

MR. QUINN:  35,000 budgeted.  35,000 still available.

MR. KOGASAKA:  That's not completed yet.  We're
working on that GAC band right now.  And they were going to do
the work.

MR. CRADDICK:  Under that contract.

CHAIRMAN NAKAMURA:  Kahana Valley.

MR. QUINN:  $50,000 appropriated, still out there.

CHAIRMAN NAKAMURA:  Is there anything happening on
this?  Are you hoping that it dies and goes away?

MR. CRADDICK:  That's what we're hoping.

CHAIRMAN NAKAMURA:  The issue.  I'm not making any
reference to any personalities.  Nothing is happening on this?

MR. KOGASAKA:  No, we have been contacted by the
person.  We're trying to work on finding time to work on that.

CHAIRMAN NAKAMURA:  Is this something that the
department has to try to resolve, or is this something that the
corp counsel needs to resolve, or both?

MR. CRADDICK:  What it is, is he's trying to get us
to resurvey the state property and give him some portion of it
and do some surveying for land that belongs to his wife.  It's
up near our intake in the valley, and because he never had a
survey on it, he wants to know where it is.  And they don't
really have anything to do with our facilities down there.
 The only thing is, is that we have a pipeline that
apparently is not in our easement, and quite frankly, what we
should be doing is using this money to condemn where the
pipeline is, because it's not -- it will cost us the whole
$50,000 to dig it up and relocate the thing where he wants it relocated.

MR. KOGASAKA:  I think we need to make an easement
map, that's one of the items.  But there are numerous other
items that he has requested.

CHAIRMAN NAKAMURA:  Any questions on these items?
Efficiency.  Give us the dollar amounts.

MR. QUINN:  I show two appropriations of $30,000
still available for the manhole key system and a $40,000
appropriation still available for the flow meter installation.
So $70,000 for those.  Money is still available as far as my
records go.

CHAIRMAN NAKAMURA:  Status?

MR. KOGASAKA:  We have not gotten anything on that
yet.  We need to select the site, the appropriate site.

CHAIRMAN NAKAMURA:  What's the nature of this project?

MR. CRADDICK:  Flow metering in the system in order
to track our water loss and stuff like that within the system,
so we know if past this point so much water is going by, and
we're billing 90 percent of that or 75 percent of that or
whatever.
 Basically, what has really been going on is the crew
has been fairly well used up and getting those two Kanoa wells
operational and keeping them operational, because we are
running them on diesel generators, so it's taking time doing
that, that things have fallen by the wayside.

CHAIRMAN NAKAMURA:  The funds are to acquire the
meters and to have our own staff install them?

MR. CRADDICK:  Right.  I believe they might have the
meters already.  I think it's more the manhole, things like
that, getting it installed.

CHAIRMAN NAKAMURA:  The manhole?

MR. CRADDICK:  You have to dig down --

MR. TAKITANI:  Mr. Chair, one question along that
line.  What is the figure we're currently thinking for and
unaccounted for water -- the electronic metering system, the
badger meter was supposed to help us identify the areas of
water loss.  Where do we stand on that?

MR. CRADDICK:  Using real gross numbers for the
annual report, what's pumped versus what we bill for is around
9 percent.  I think Ellen is showing different numbers in more
detailed studies, but generally overall system wide it's about
9 percent.  For some reason Molokai is extremely high up in the
20 percent range.  Some systems are lower than that.

CHAIRMAN NAKAMURA:  Hydraulic model.

MR. QUINN:  I show $200,000 appropriated and $37,890
expended to date.

MS. KRAFTSOW:  We accepted the phase one initial
construction of the model report in January and we have drafted
the specs for the calibration and expect to bid them in March,
or actually, bid them within the -- send them out for bid
within the next few months -- a few weeks rather.

MR. CRADDICK:  And awarded in March.

MS. KRAFTSOW:  Yes.

CHAIRMAN NAKAMURA:  You expect to expend all of these funds?

MS. KRAFTSOW:  Yeah, actually, right now it's
looking like -- it should be pretty close, maybe even go over a
little, but we'll try not to.  We're looking at possibly
breaking it into phases because they -- in discussions with the
consultant, they think it's a bit much to bite off all at once,
what we're trying to do.  So we may break it into a two-year
project.

CHAIRMAN NAKAMURA:  What will be the benefit to the
department upon completion?

MS. KRAFTSOW:  Many benefits.  I think ultimately
we'll be able to look at what happens when we put certain pipes
on or take certain pipes off or size different tanks
differently.  We're having a demand model constructed also,
we'll be able to tie the two together and look at the scenarios
for demand growth and pricing structures.
 It should be -- I would think it would be very
beneficial both for project planning and design and for maybe
eventually developing cost estimates, rates.

CHAIRMAN NAKAMURA:  Any questions on this?  SCADA system.

MR. QUINN:  A current year appropriation of 50,000
and $39,338 still available.

CHAIRMAN NAKAMURA:  Status?

MR. KOGASAKA:  They are installing the SCADA system
in different water districts.  I'm not too sure how far along
they are right now.

MR. CRADDICK:  They are working in the Upcountry
area right now.  I'm sure the bulk of that will be spent by the
end of the year.

CHAIRMAN NAKAMURA:  What information does this provide?

MR. CRADDICK:  It's not -- well, it monitors the
entire water system.  Other than Upcountry, that's the last
place we have not completed.  It gives the tank -- we can
operate the pumps from wherever.  The way it works is this is
monitoring the system, the alarm comes in, somebody can check
why there's the alarm, like if a tank is starting to go low, we
catch it before the thing goes empty and do something about it,
hopefully.
 It saves the guys from having to drive out and look
at the tank and see what's wrong.  And you can see it right
there on the screen.  I guess the big advantages of it over
other SCADA systems is you don't have to have somebody sitting
there at the table looking at it.  It actually notifies you,
comes up on the pager, the guys have laptops, they open them up
and see what's going on and maybe correct it right from
wherever they happen to be.
 So it allowed us to take time -- what has shown up
on the time sheets previously as miscellaneous work, going to
look at the tank and things like that, to doing -- actually
doing maintenance type of work.  For instance, we got that
paving machine and we have this vacuum to go and actually do
maintenance work on the valves, which has really never been
done before in the system.
 We're actually able to get the guys to do real
maintenance work instead of -- the analogy would be the chicken
running around with its head cut off.

CHAIRMAN NAKAMURA:  Any questions or comments?
Alternate energy sources.

MR. QUINN:  Appropriated 500,000, still available.

MR. CRADDICK:  The estimate, like I said -- we said
was 900,000 and I can't really justify spending any part of
that for that amount of money.  Now, if we see that the
improvements that they are talking about for Hamakuapoko can
carry on to Kamole weir by only adding, say, a couple of
hundred thousand more, then it may be worth it.  But they have
not completed the study on what they need to do for Kamole weir.

CHAIRMAN NAKAMURA:  Jonathan?

MR. STARR:  Where is that coming from?

MR. CRADDICK:  Puunene Mill.

MR. STARR:  They are not running it from Puunene, it
has to be somewhere -- I assume it's in Paia.

MR. CRADDICK:  To tell you the truth, I don't know enough.

CHAIRMAN NAKAMURA:  So you've proceeded to the point
of having them identify their potential locations where they
can provide power and you've identified the locations where you
need power?

MR. CRADDICK:  Yes.

CHAIRMAN NAKAMURA:  And they have come up with some
specific proposals to provide power to those locations?

MR. CRADDICK:  Right.

CHAIRMAN NAKAMURA:  The estimated cost of that is 900,000?

MR. CRADDICK:  For Hamakuapoko and Pulehu area.

CHAIRMAN NAKAMURA:  Do we have an analysis as to
what our savings would be?

MR. CRADDICK:  Well, the Hamakuapoko wells are --
total installed capacity horsepower is 500 horsepower, so it
wouldn't justify just the interest alone on that other money
under the current operating range, it would not justify doing
it.  You need to get something to Kamole weir and then do some
study at that point.

CHAIRMAN NAKAMURA:  At this point, it's kind of
basically stalled, or is anything really happening?

MR. CRADDICK:  I think they are looking at Kamole
weir on what they can do, but we're talking about two megawatts
of power there.  So that's a fairly substantial demand when
that's on line.

CHAIRMAN NAKAMURA:  So this is still ongoing then?

MR. CRADDICK:  Believe me, their study is very
detailed.  They are very detailed down to the nuts and bolts
that they need to put all of this in.  The work they have done
has been quite extensive so far, but they are the ones doing it.

CHAIRMAN NAKAMURA:  HC&S is doing it.

MR. CRADDICK:  Right.  It's not costing us anything
to get that.  I suppose we can go out and hire somebody to go
do that if we wanted to move it faster.

CHAIRMAN NAKAMURA:  Any questions or comments?

MR. TAKITANI:  Is this looking at alternate sources
also, not only fossil fuel?

MR. CRADDICK:  All of these we would be required to
have our own standby backup power.  It's not firm power that
we're getting from them.  So that issue is still there.  But we
do have the two megawatt generator at Kamole weir.  We do have
generators for Hamakuapoko.  So it's not an issue.  We do have
the generators already for the facilities.

CHAIRMAN NAKAMURA:  Any other questions or comments
on this CIP status report?  The chair's intent would be to do
this perhaps orderly, Herb and Mike.  And as I said, I think if
you have projects that you need authorization on the pipeline
replacement, I suggest you initiate those relatively quickly.
Jonathan?

MR. STARR:  There's one item I seem to be missing.
Wasn't there a new well for Hana in --

MR. CRADDICK:  I know we said we would hold up on
that until we had a chance to talk with Hana Ranch and now
people are talking to them on their own.  Different people talking.

CHAIRMAN NAKAMURA:  There was an issue on location; right?

MR. CRADDICK:  Yes, because it doesn't make sense
for us to do a well when there's already one there.  If we
could just work to integrate the system there, which one to
provide backup for the other.  There's not any big demand
there.  It's more just integration of the system to utilize
each other's facilities and give them the comfort level, you
know, if they want to do some kind of subdivision, that we're
not going to say no, you can't use the water from the well.

CHAIRMAN NAKAMURA:  One general question, David.  In
terms of the capital improvement program, is there one agency
that is in the department that is responsible for overseeing
the entire program or is it basically separated out to
different entities once the budget is approved?

MR. CRADDICK:  There are things that are different
entities.  Some things are with the field operations people or
plant operations, but the bulk of it is with engineering.
Those meter things, things like that would be with plant
operations, and SCADA is with plant operations.  Soda ash
retrofit, plant operations.

CHAIRMAN NAKAMURA:  The general responsibility for
seeing to it that the projects are implemented or to oversee
the process, would you say that's engineering?

MR. CRADDICK:  Yes.

CHAIRMAN NAKAMURA:  Okay.  Any other questions or
comments?  If not, thank you for coming.  The meeting is adjourned.
(The deposition concluded at 10:50 a.m.)

IWADO COURT REPORTERS, INC.