BOARD OF WATER SUPPLY
COUNTY OF MAUI
BUDGET WORKSHOP
Taken at the County Council Conference Room, Seventh Floor,
Wailuku, Maui, Hawaii, commencing at 9:00 a.m. on May 17, 2001
pursuant to Notice.
REPORTED BY: GLORIA T. TAVARES, RPR/CSR #262
Members present:
Peter Rice, Chair
Clark Hashimoto
Mike Nobriga
Jonathan Starr
Orlando Tagorda
Kent Hiranaga
Howard Nakamura
Staff present:
David Craddick, Director
George Tengan, Deputy Director
Howard Fukushima, Corporation Counsel
Mike Quinn, Fiscal
Herb Kogasaka
Jacky Takakura
Holly Perdido
Charlene Suzuki
Ellen Kraftsow
Tony Linder
Mike Cabral
Dexter Lau
Walter Hoger
Paul Seitz
Robert Vida
Andy Pascua
Shirley Falcon, Secretary
Others present:
Elliott Krash
Sally Raisbeck
* * *
CHAIRMAN RICE: I would call to order the Board of
Water Supply, Maui County budget workshop. Today is the 17th,
9 a.m. at the seventh floor of the county building. Present
are board members Howard Nakamura, Orlando Tagorda -- let the
record reflect the board members who are here so we don't have
to read their names every time. Members of the public who are
here -- do we have a sign-in sheet?
MS. FALCON: I have Elliott Krash and Sally Raisbeck.
CHAIRMAN RICE: Everyone else here is staff?
MS. FALCON: Yes.
CHAIRMAN RICE: Okay. Let the record reflect the
names of everybody that's here. Board members, with your
indulgence, I think -- let me outline how we're going to go
through this workshop today; so in the interest of everyone
getting off to do what else they have to do, we can do it.
The first section of the meeting -- let me back up.
I want to emphasize the workshop today is part of the budget
process, which means that today is not the last, the only, or
the first time you are going to get a chance to give input.
What I would like to do is give Mike a chance to go
through -- Dave, whoever, anybody on the staff that you guys
are going to allocate to do it -- a quick presentation, let's
say take 20 minutes, go over the assumptions, go over any
important variance information they have with us.
At that point, we'll go around the room, each board
member can ask a question or questions of staff with regard to
the budget. We can get consensus on things that we agree on.
We'll make decisions at that point. If not, we'll wait on --
if there are any contentious items, we'll wait for the last
half an hour and we'll go through those items one by one. I
think we can be out of here by 10:30 in that regard.
Before we start that, is there any testimony from
members of the public? Sally?
MS. RAISBECK: No, thank you, sir.
CHAIRMAN RICE: Elliott Krash?
MS. KRASH: No, thank you. I'm here to learn.
CHAIRMAN RICE: David? Some of this may be
redundant because most of the people attended the finance
meeting yesterday, but I think you can --
MR. CRADDICK: One thing I'll say here, I was
looking over the county general plan and it talks about a Maui
County road management program that under the -- providing for
the balance development of water sources, transmission systems
for visitors, agriculture, residential and commercial uses
consistent with the Maui County growth management program,
which we understand doesn't exist, and then it keeps talking
about this growth management plan and a number of other points
here.
Without that, I'm not quite sure what they are
talking about. And they seem to use the word "transmission"
and they mean -- I suspect they mean distribution system.
Because it says develop and approve transmission system to
provide better fire protection. We don't provide any fire
protection on the transmission systems that comes up in
distribution systems.
Other than those idiosyncracies of the plan, I think
the CIP generally meets that. And I'll leave the specifics on
the strategic plan to the various points.
And getting into the operation budget, we had the
vacancy there and their suggestion to move those down to --
moving them out of the regular budget to the bottom line in
here, not necessarily eliminating them, and my suggestion on
that would still be to -- a lot of the divisions expect they
are going to fill those positions between here and the end of
the year, and not necessarily move all of them, but the ones
that they don't get filled by the end of the year here, it will
be moved down.
Beyond that, the specifics on the variances I'll
turn over to Mike and the individual division heads.
MR. QUINN: Mr. Chairman, as you said, some of this
will be repetitive for most of the board members that were here
yesterday. To compile what I said yesterday, the documents
that I'll be talking to was a document that was faxed to board
members on May 10th. Draft documents of the operating budget.
And in terms of operating revenue, water sales
accounts for fully 98 percent of our operating revenues. So
obviously water sales are a critical component of our
revenues. Projecting water sales for fiscal year 2002, I
projected an increase of a little bit over $2 million or 7.7
percent over the fiscal year 2001 estimate.
The way I arrived at that is I took -- the estimate
number for this fiscal year is I have actual revenues through
April 30th and I estimated May and June revenues for this
fiscal year, and that's what I used for the year-end estimate
for fiscal year 01.
And I projected a 7.7 percent increase for the next
fiscal year, taking into account that we'll be in our fifth
year of our rate increase, and I have also factored in an
adjustment for an assumption that our new services will
increase about 2 percent. Therefore, the operating revenue is
projected to be $29,136,500.
Interest income, for the benefit of the board
members there's a schedule, Schedule D, I believe it is, which
addresses interest income. Essentially, what I did is I broken
out balances that are not affected by the CIP and balances
affected by the CIP. That's important because, obviously, the
balances affected by CIP are a function of how quickly we spend
down money on our projects.
So my assumption on the CIP portion of the funds was
I took the beginning balances that are projected on your CIP
cash flow chart, which we'll address later, and I put the
ending balances and I averaged them out and I used an interest
rate of 4.5 percent. The county currently gets a higher return
on its monies; but as everybody knows, the interest rates have
been plummeting, and as of yesterday they went down further.
As a matter of fact, three-month treasury bills hit
their lowest point in seven years. So that's why I'm
projecting 4.5. I am not an interest rate guru. That's a
guess on my part. And I have discussed this with the county
treasurer to get a feel for the current rates the county is
receiving. Therefore, I'm projecting 1.1 million in interest
income.
Other receipts is primarily billing for services
that we provide for the county's sewer division. As you know,
the sewer billings appear on our bills and we provide services
for the wastewater division in terms of meter reading, customer
service, collections, all those billing related functions. So
we come up with a subtotal total receipts of $30.5 million.
One of our major expense categories is payroll. The
first item, we're projecting that to be $7,285,000. There was
a lot of discussion yesterday regarding payroll. There is a
schedule relating to that and that is Schedule C, and what we
have done on Schedule C is we have listed each division within
the department, their current vacancy, and the funding related
to those vacancies.
As you'll see in some cases, we are projecting
funding those for half a year or a quarter of a year. If you
will look under water treatment plant, you'll see half pay,
quarter pay, and a correction that I made yesterday on
engineering, the engineering program manager, that is a half
pay also. So vacancies account for 599,000 worth of that
payroll of increase.
We have tried to list comments on each one of these
open positions so board members can get a feel for the status
of those. For instance, in fiscal, the customer relations
assistant job, a test will be given any day. They have already
picked a list of -- have a list of prospective applicants that
qualify.
We interviewed yesterday for the cashier position.
We anticipate filling that next week. So in terms of fiscal, I
anticipate filling all of those jobs by the end of this fiscal
year. And you can sort of self-explanatory the notes on the
other divisions.
One of the issues that came up yesterday was how to
treat these vacancies. There was talk about -- suggestions
about having a separate line item. The only thing is we were
not sure how -- there is still the issue of what we do with
jobs that probably will be filled by the end of this fiscal
year. As it is in my case in fiscal, I am about to fill most
of those jobs within a month. So again, Schedule C is the
breakdown of the payroll.
In addition, we have accounted for -- in the
payroll, we had to account for a provision for pay increase,
which is a union contractual obligation that we have. So we're
anticipating that. Provision for reallocation simply means, on
the payroll sheet, simply means for people that get promotions,
basically, within the fiscal year.
So that's a big number. The payroll number is a big
number and I know the board has been concerned in the past
about vacancies and that's why we tried to highlight those
vacancies in that schedule.
Perhaps in the interest of time, we could refer to a
variance schedule which essentially recaps the variances.
That's Schedule B. What we have done on that schedule is we
have taken the 2001 -- this fiscal year-end estimates is our
best guess at the time of where we were going to come in and we
compared it to the 2002 budget projections and come up with the
variances.
And under each category, for instance, payroll, we
just discussed the raises, the vacancies, we have listed the
major categories that account for those variances. And I'm
going to briefly highlight the reason for those variances.
And the reason the division heads are here and the
rest of staff, is they can get very detailed, and if any of the
board members want to question a particular item in a lot of
detail. And I may refer to the division head if I don't know a
specific answer.
In materials and supplies, chemicals account for
$100,000 of that $358,000 variance. And 90,000 of that 100 is
allocated to the water treatment plant and primarily for a
corrosion control program that -- it's going to begin July
1st -- or June 1st. So that's essentially the purchase of
chemicals for that program. That's the reason for the increase
in the chemical under materials and supplies.
I think yesterday a question was brought up about
postage, and we have postage increasing $22,000. The essential
problem there was basically our estimate for this fiscal year
end is a little low. We estimated 63,000; we'll probably come
in around $72,000. Most of our postage is for the Honolulu --
the billing program that Honolulu manages for us.
In addition, we have had some additional mailings
over there regarding an active mailing of delinquency notices
which has resulted -- I think is a big part of the reduction,
as we saw yesterday, in our write-offs. So essentially we have
underestimated our year end for 01. So that's why it looks
like such a high variance.
And our postage has increased, of course the postage
rate went up, but our postage is also going to increase. We
have a mailing machine downstairs and it costs us $5,000 to
load that machine up when we load it up for stamps, and we
anticipate doing that three times next year as opposed to
usually twice that we do it. That's a timing issue. I think
we're close to having to do it right around July 1st. So
that's one of the reasons. That's $5,000 a shot.
I think there was a lot of discussion about office
supplies yesterday. What's in there -- in our case in fiscal,
we have a $10,000 variance and that's primarily because we
basically haven't spent much money this fiscal year. So when
we compared, we basically kept with the same budget number. I
think I can reduce that by about $5,000.
That has desks for new employees, replacement of
various office equipment in there. Planning also has
experienced some increase in their employees and there is some
projections for new equipment and desks for those people. So
that's primarily what accounts for that variance. As I said --
I don't know if planning --
MR. CRADDICK: No, she's --
MR. QUINN: I can't speak for planning. In my case,
I could probably reduce that, because I anticipate since we're
filling these jobs by the end of the fiscal year, we can
purchase that equipment, those office equipment this fiscal
year rather than bring it on into next year.
MR. CRADDICK: On the office supplies, the criteria,
I guess right now, if it's less than $500, we don't put it on
the capital list. So that was the change I think that was made
sometime in the last year.
MR. QUINN: Yeah. We used to list that under
equipment portion of the budget. And the equipment portion of
budget has gone down, as you'll see later.
With respect to services, electricity is the primary
component that we have allocated. Well, as you know, we have
asked the board for a budget amendment for this fiscal year
budget and there's a slight increase in next year of $179,000,
and in anticipation of continued high energy surcharges and dry
weather. That's something I can't predict. I just have to
allocate for it, and hopefully we don't have to come back to
the board next year for an adjustment.
I'm going to make the board aware that under
services, under contractual services, a big portion of that --
$47,000 of that $88,000, we have been notified by the Honolulu
Board of Water Supply that they are considering raising our
rates for the billing service. Initially, I fell off the chair
with contemplating a 300 percent increase in the per mailing.
Right now it's about 21 percent.
In support of that, that number has not increased
for years, 21 cents per mailing item is the charge. So I
followed up with them and they had not made a decision as to
the order of that increase, if at all. It may not increase;
but we have factored in a portion of that increase, a good
portion of that is because of that. That may not happen.
On the other hand, it may be worse. I don't
anticipate a threefold increase in one shot though, and I think
they are reluctant to do that, even though they made that
statement.
Lab operation services have increased and I believe
Andy Pascua's group is doing more testing. I don't know --
Andy, you want to add to that? Isn't that correct?
MR. PASCUA: Which one are we counting?
MR. QUINN: Lab services, just basically, aren't you
doing more testing in your lab?
MR. PASCUA: Yeah, we're doing sampling for
unregulated metals and plus we're doing led and copper and it's
something that we didn't project in our last budget.
And this year because of the added expenses, we're
requesting that extra funding because there's a lot of testing
and we're sending all of our samples out to Montgomery Labs in
California. So that's where the expense is. It's an outside
company that's doing our testing.
MR. QUINN: Essentially, those are the variances.
We're prepared to speak to any other variance, I just
highlighted some of the ones that got discussed yesterday. On
any one of those categories, we have a detailed breakdown of
each expense item.
I would like to say that employee benefits, we
projected those to increase. We anticipate our contribution to
the retirement fund to increase. That was a statewide. For
two years we had the luxury of having a low contribution. That
was a decision made at the state level and now we're back to an
increased contribution on employee retirement benefits.
Health related benefits have increased and that's
proportionate to our payroll increase, if, in fact, we have
that and fill those vacancies. All the employee benefit issues
are basically a percentage of -- those numbers are a percentage
of our overall payroll, and we get those percentages from the
county and we apply them to our payroll, and that's how we come
up with those numbers.
County overhead charge has remained low. For some
reason under this new administration, we have had a very low
overhead charge. So we have no issues with that. That's why
we have budgeted $500,000 and we anticipate coming in
significantly lower than that.
MR. HIRANAGA: What's the overhead charge?
MR. QUINN: It's for corp counsel and all the other
departments that -- MIS, that supports us, finance. What they
do is they take a percentage and they allocate the charges to
us based on -- well, each department has their criteria.
There's a study that's done by the finance department every
year, but I forget the name of that study.
They allocate these charges to the various
departments. It's a very thick study. But again, it's dropped
considerably over the past three or four years.
MR. HIRANAGA: Thank you.
MR. CRADDICK: Can I embellish that a little bit?
The overhead charges is something that's been an ongoing source
of irritation for about the past nine or ten years. This
amount here that they charge was something that was a carryover
from when the water department was under the county, as near as
I can tell on this order of magnitude.
In Honolulu, it's been found that it's illegal for
the county to charge this overhead charge to the Honolulu Board
of Water Supply, because they tried to do the same thing,
because none of the other counties paid this charge.
Now, there is something that I agreed to back -- I
don't know when it was, '94 maybe, that we would pay some
percent of our payroll. And mainly because I guess the payroll
benefits and stuff went way down, I think this went down. Now,
I don't know if we're going to see a rise in that.
But in fact, this overhead charge is not based on
anything that we can put our hands on. And I can show you an
agreement with the county where we have a service, an exact
service that they are providing for that.
Granted, in general, corp counsel does provide
services, we do have some services from personnel, and we do
our financial stuff through fiscal downstairs. But all the
items like the checking account charge, every check we have
written we pay a bill on that, we pay our own electricity
charge and it's all separate from this. Those things are not
included under this overhead charge.
If they were, I probably would keep my mouth shut,
because I know we're getting something for it. But there
really is nothing that I can show you that we're getting for
CHAIRMAN RICE: Duly noted for the moment.
MR. NOBRIGA: You pay for a custodian?
MR. CRADDICK: We pay a share in that, I believe.
CHAIRMAN RICE: Are you done, Mike?
MR. NOBRIGA: No.
CHAIRMAN RICE: Not you.
MR. QUINN: David is right, we do get a lot of
support from MIS division, some from finance, and obviously a
lot of work is done by corp counsel. So there is no question
that MIS supports us. I don't want to dismiss some
departments. Management information system, they have been
very helpful to us and even in instituting an accounting system
and the baseyard over on Molokai.
CHAIRMAN RICE: Based on this year's actual -- this
budget, we're reducing the number we have been using before.
We don't need to pick our battles here.
MR. CRADDICK: That's the way I looked at it.
CHAIRMAN RICE: We noted your concern and we'll talk
more about that.
MR. QUINN: I just want to mention one more thing.
Under other costs, this came up yesterday and it should be
noted under claims and judgment. There is a schedule for
claims and judgment. We budget a hundred thousand dollars
usually in the fiscal year. That's what we're doing this
year. There's a very good chance that we won't even approach
that, but we do that to cover ourselves for any potential
claims and judgments.
We also have an item for baseyard rental and as the
board knows, we have not paid that. There have been no demands
on us to pay that this year and we have not had any for next
fiscal year either. So I don't anticipate that. Those numbers
are inflated to the extent that there's a good chance very
little of that money will be spent, if any. And I'm open to
questions from the board.
CHAIRMAN RICE: You want to start, Jonathan?
MR. STARR: One thing that I would like to see is
we're looking at the delta in these numbers, the differential,
but we don't actually have the amounts. It makes it a little
bit difficult to analyze. Because if we realize the auto
expenses going up 32,000, but, you know, I don't know what it
is.
MR. QUINN: We're prepared to talk about that.
CHAIRMAN RICE: What it is, is we get the detail of
the proposed budget, but we don't get the detail of the
estimated year end. So you recapped the variance by category
in total.
MR. QUINN: We did that considering I did not want
to overwhelm you people with paper, that's all.
MR. CRADDICK: If you take this year and you minus
that variance, you will have what the current year is. What we
estimate by the end of the year.
MR. STARR: The first question, of course, is how do
we cut down these increases? Because we're not getting that
much of an increase in our income stream. So how do we start
to manage some of these costs, what process should we use, if
any?
CHAIRMAN RICE: Okay.
MR. STARR: Could I make that a question to staff here?
CHAIRMAN RICE: Sure.
MR. CRADDICK: I could do a good one. Maybe Mike
can do better on the auto. If you want to spend a few hundred
dollars in buying new cars, we can certainly cut the auto
expense down tremendously. But for $32,000, you have to put in
about $300,000 worth of new vehicles. And I'll leave that up
to Mike to give more detail.
The diesel fuel, I believe in the diesel fuel and
they were running the all-day costs for Kanoa and Hamakuapoko
come into the diesel fuel; isn't that correct? And we started
running the Kanoa No. 2 well last year in March. I don't
believe that was covered, and I don't think we thought we would
have it running this entire year this year. So money is in
there for that on those two items there.
CHAIRMAN RICE: I don't think -- maybe I
misinterpreted Mr. Starr, but I don't think he meant he needed
a whole analysis right this second. I think it's a challenge
to the department, given that revenues are going to increase by
7 percent, expenses can't increase by 10 percent. It doesn't
work that way.
There are factors that we can avoid, but we then
have to compensate for that. So I think that's the message.
And before we end up with a final budget, I think that's the
challenge that we're going to lay back on the department.
And I would make a comment that's related to that.
If your projected year end is X, which means that's the money
you spent this year, you don't take your budget and then add 7
percent. You justify why you are at X, and then you have a
reasonable increase over your actual.
Just don't say, well, I spent less, but I have
budgeted -- I only spent 1500 but I had 10,000 so I can get
12,000 this year. It doesn't work like that. You get 7
percent of 1500. Unless there's some other factors.
MR. QUINN: That did not take place.
CHAIRMAN RICE: I'm not saying --
MR. QUINN: I don't want to offend these guys here.
This is a tremendously long process, and beginning in December,
January, we sit down with every division head and their staff
and we go over every one of these subobject codes line item by
line item.
We tell them where they are as of December and we
annualize that number, and then we say, you know, what are you
going to do that's different next year to justify an increase.
We start basically from ground zero. So they come up with the
things that they think are going to change it. We don't just
pull that budget number. We don't wing it.
MR. CRADDICK: Another thing that you have to
understand, this whole thing is an estimate. There's nothing
real about any of this. Other than that --
CHAIRMAN RICE: I wouldn't say that.
MR. CRADDICK: It's a number we try to work at.
CHAIRMAN RICE: Howard, you are next.
MR. NAKAMURA: I have no questions, Mr. Chairman,
perhaps when we come to capital I will have, but not now.
CHAIRMAN RICE: Orlando?
MR. TAGORDA: No comments for now, Mr. Chairman.
MR. QUINN: I might add, on expenses, if you look at
our year-end financials, this department has done a very good
job. You check the income statement and you will see a very
slight increase in expenses year to year. Once all of the
accounting is -- those are audited statements.
MR. CRADDICK: Even though the budget gets approved,
we don't just -- it's not just carte blanche during the year.
CHAIRMAN RICE: I understand that.
MR. QUINN: The results are what the board wants;
but perhaps -- I get the message, perhaps in some cases the
budget might be inflated, but the end results on the audited
finances are that expenses are under extremely tight control in
this department. I'm not making that up. Those numbers are
audited and available for anybody from the public to look at.
CHAIRMAN RICE: I think that's a good point to make
in defense of the management of the department. But I think
our ability to project more accurately, then, is just something
we need to work on.
You can show a trend of actually controlling
expenses, and expenses not exceeding let's say 2 or 3 percent;
but then when we promote a budget that's far in excess of what
you've actually been doing, you raise your own kind of --
create your own kind of doubts.
MR. QUINN: Again, we have been addressing that
issue. One major category is payroll, and then benefits
related to that. To that extent, that affects the budget
dramatically.
CHAIRMAN RICE: Go ahead, Clark.
MR. HASHIMOTO: I have no questions.
CHAIRMAN RICE: I know Mike does.
MR. NOBRIGA: Under materials and supplies, what is stores?
MR. QUINN: Stores is our inventory that we keep in
the warehouse for pipes, fittings, meters, meter boxes.
MR. NOBRIGA: Of the 44,000 deviation, what is the
total -- what's the net total that you are working off of to
get to 44 more?
MR. QUINN: Basically, the increase, the $44,000
increase is because of -- and I am glad you brought this up
because I think we may be able to save a little bit of money
here. We had anticipated spending $200,000 next year on meters
and try to wrap up the radio read implementation. We're down
to like under a thousand meters that have to be put in. The
actual number is 700 meters.
Since we have accelerated that this year, I feel
comfortable -- we just took a look at the numbers last night in
terms of how many meters have been installed in the past month
and --
MR. NOBRIGA: What's the total?
MR. CRADDICK: 600,000.
MR. QUINN: At any rate --
MR. CRADDICK: Stores total? 600,000 total on page 5.
MR. NOBRIGA: 600,000 and this costs 44,000?
MR. QUINN: I think we can reduce that number.
MR. NOBRIGA: What would help me is if you put the
percentage. Do this again, but yeah, next to all of these
deviations put a percentage of total. Because it looks like a
big number, but when you compare that to your actual, there's a
small percentage. The other question I have is --
MR. CRADDICK: That one is 7 percent.
MR. NOBRIGA: Computer, on the services. Actual
computers or as computer services?
MR. QUINN: It's computer services. Again, as I
mentioned before, we're anticipating a possible increase from
the Honolulu Board of Water Supply.
MR. NOBRIGA: To HP?
MR. QUINN: That's the major issue.
MR. NOBRIGA: Phone, 18,000 more in phone. You have
a rate increase on phone?
MR. QUINN: Plant operation, $9,000 increase. Is
that due to SCADA at all? That's what I have down.
MR. PASCUA: I reviewed the phone expenses that
plant operations had last year, and last year I guess
projection was like 42,000; but because we had made a lot of
changes out there without SCADA and we took out a lot of
phones, and looking at the operating expenses up to March 31st,
I think it showed like 18,000 already spent out of the 42,000.
So we won't be seeing the 42,000 that we projected
using, because of the changes that we made in the system on --
the phone lines we were utilizing that we're not utilizing
anymore.
MR. NOBRIGA: If you are not going to be utilizing,
how come there's an increase?
MR. PASCUA: I projected -- for my division, we went
down lower.
MR. QUINN: No, no. Andy, what are you saying, we
went down lower in terms of anticipating this year-end's
estimate?
MR. PASCUA: Yeah, I put in a lower number than what
I estimated last year.
CHAIRMAN RICE: It looks like there's some savings
from what Andy's saying. We saved money, but we budgeted what
he had last year. It looks like there is probably some --
MR. NOBRIGA: Two more questions. On the other
cost, how much is this? An additional 12,000 for publication.
MR. CRADDICK: I can answer that one. The AWWA, we
have three programs; one, a member of AWWA; two, a member of
the research foundation; and now three, a new one is the bench
marking group. And that bench marking group costs us, I
believe, $7,000 to be a member in that.
One year we were written up in our audit that we
didn't compare our financials and stuff like that with other
people. And this APOC group that does this, we automatically
get a membership in that group to do these comparisons. And if
we were to go join that group directly ourselves, it was
$9,000. So under AWWA, I don't know, because there's a --
MR. NOBRIGA: Why is it called publications?
Publication is like magazines.
MR. CRADDICK: It's publications and subscriptions
and each one of these AWWA things are considered as
subscriptions.
MR. NOBRIGA: Question for Ellen Kraftsow.
Conservation, an additional $43,000 for conservation. How much
money was expended during the last year's drought conservation
efforts?
MS. KRAFTSOW: I would have to check on that. I
actually didn't spend any particularly for the drought because
what I do with the radio stations and the newspapers is I buy a
bulk rate for the whole year, and then I just run the ad during
the time. So I can go back and back calculate it, but I
already -- it's like the money is already there, we already
have an account with them and I just pull them, I run the ads
as needed.
MR. NOBRIGA: What is the additional $53,000 for?
MS. KRAFTSOW: Couple of things. Typically, a lot
of conservation stuff gets bought around towards the end of the
fiscal year. The first six months doesn't show it. This year
we have just been doing -- finally, having needed more
fixtures, we have needed more -- it's been fine.
And we're just now getting to the point where I got
the proposals for the next round, which I was going to bring to
you in June or July, whichever. I had the plan to bring them
in June. For the next media packages, we're only running out
now.
We still don't need movies until next fiscal year,
but that will be coming during next fiscal year, and we're only
now getting to the point where we might consider buying
pictures. So it's more a matter of what we have in inventory
and when we need it and how does it roll over.
MR. NOBRIGA: Thank you.
CHAIRMAN RICE: Kent?
MR. HIRANAGA: Yeah. Since I'm new here, I guess I
find the report fairly difficult to understand. I wanted to
propose a format and I'm not sure if your software allows for
this type of comparisons.
But my experience is it's a lot easier to analyze
these budgets and forecasts if we have percentage changes on
all of the major line items and the percentage changes would be
like the 2001 estimate versus 2001 budget, 2001 budget versus
the 2002 budget, and the 2001 estimate versus the 2002 budget.
And just having percentages if you can fit that on one
spreadsheet.
Because I think Jonathan and -- without knowing the
dollar amounts that you are comparing and what the delta is,
these 10,000 -- we don't know if it's a 1 percent variance or
if it's a 25 percent variance.
MR. QUINN: For each line item, you mean?
MR. HIRANAGA: I could put it on the board there
just to kind of give you an idea.
MR. QUINN: No, I understand. We thought of that
before, actually, and it makes sense. I would have to reformat
the spreadsheet, that's all.
CHAIRMAN RICE: I think it would be a good thing.
The board seems to have -- kind of all have the same comments
in that regard. Because what happens in the case of Mike's
first question about stores, it's a 7 percent increase. But in
the other question to Ellen about conservation, it ends up
being a 200 percent increase.
MR. CRADDICK: Can I go into that a little bit more,
about conservation?
CHAIRMAN RICE: I don't want to talk about
conservation yet. We'll get back to that. We'll deal with
Kent's suggestion to change the format.
MR. HIRANAGA: If you want to compare the 2001
budget to the 2002 budget, you don't want to forget the budget
because then it shows what type of integrity there is in the
2001 budget. So that kind of gives you a feeling for how
strong the 2002 budget is.
MR. QUINN: We have a -- I did not hand it out, but
we did cover that already.
MR. HIRANAGA: The 2001 estimate, you said, is April
30th year to date.
MR. QUINN: March 31st.
MR. HIRANAGA: It would be helpful if you labeled
that as we get these drafts, if you put year to date March
31st, so we know you are estimating the balance, the last three
months or whatever. It would be nice to have the actual year
to date, just so we know what that actual number is. If the
software does not provide for that, I don't want you folks --
MR. QUINN: It's something we can work towards.
CHAIRMAN RICE: Don't you actually download that
stuff to a spreadsheet that you prepare?
MS. PERDIDO: Yeah, we do.
MR. QUINN: We have a lot of sub-spreadsheets that
have the year-end estimate and as actual as of December --
initial case of December 2000, and then those sheets all get
summarized into these sheets. We do have the subsidiary
sheets. We do not have the percentages.
In the past we have just supplied the board with
sort of a schedule of percentages to -- but if we wouldn't
increase the paper, if we could figure out a way to do it on
the one spreadsheet. One of my objectives is to reduce the
amount of paper that the board gets.
MR. HIRANAGA: I want to stress that, you know, if
this is something that's going to take an extraordinary effort,
we can work towards it for next year. But it's just comments.
MR. QUINN: I think that would be more appropriate
to work towards. It would involve a considerable amount of
changes and the system would not accommodate that right now.
Which is why I try to come up with these variance schedules so
that -- to address that issue which you bring up. Because I
can't put it --
MR. HIRANAGA: For me, I look at percentage change,
then I look at the dollar amount involved; but without knowing
the scale of that dollar amount, you don't know if it's a big
thing or not. The other -- anyway, those are my -- one of my
comments.
The other thing I think would be helpful is, on your
schedules of hires, if you could put that in writing versus
verbalizing, like put what quarter you intend to hire that
person. Put first quarter, second quarter. Because you are
saying some of the salaries are like -- you are anticipating 50
percent salary.
MR. QUINN: Did you see the schedule?
MR. HIRANAGA: The other ones are -- are a semi-full pay.
MR. QUINN: You can see in many cases we're actively
recruiting, but there are no names on the list. We tried to
list the specifics for every vacancy.
MR. HIRANAGA: For me, if you put anticipate being
hired the first quarter, second quarter.
MR. QUINN: Okay.
MR. HIRANAGA: It's just a --
MR. QUINN: It's difficult for us to do that,
especially when there are no names on the list. It's difficult
for us.
MR. HIRANAGA: It's an estimate. If you think it's
going to be difficult to fill the spot, you should put fourth
quarter. If you think it's relatively soon, you put first
quarter. Then we know it's a three-quarter --
MR. QUINN: That's why we have half pay, we assume
we'll fill it, you know --
MR. HIRANAGA: The ones that are left blank, you are
assuming you will hire them in January -- in July?
MR. QUINN: In many cases they will be hired before
the end of this fiscal year.
MR. HIRANAGA: It would be helpful for me if I had a
head count per department.
MR. QUINN: We don't have that -- we were not
presenting that today. But based on the decisions that -- you
should have -- did you get a chart?
MR. HIRANAGA: I hate to be -- it's better -- if you
are saying you have five vacancies, we look at the head count,
you have 30 employees, we know that --
MR. QUINN: We have that. We'll hand it out. We
have a chart, basically the existing chart, and based on the
decisions the board makes today and approves, then it will
reflect that in the proposed organization and -- but that's why
I did not bring it up today.
MR. HIRANAGA: That way at a glance you can see if,
you know, like in waste treatment you have seven vacancies, if
you have 70 employees, that's not a big deal; if you have 15
employees, that's a big deal, because you are at half the
staff.
MR. QUINN: Okay.
MR. HIRANAGA: My last two questions was, what is
the insurance comprised of?
MR. QUINN: A few years ago we tagged on to the
county's insurance policy. This was major coverage for
anything over $500,000, self-insured up to $500,000. That
$75,000 is based on last year's budget -- the risk manager, the
county has a new risk manager, he is in the process of
negotiating sending out for bids on the insurance this upcoming
fiscal year. He told me to go with that number until he gets a
better number.
MR. HIRANAGA: That's an allocation.
MR. QUINN: Yes, an allocation.
MR. HIRANAGA: You said you have not been billed for
the baseyard, what is that?
MR. QUINN: That's a complicated issue.
MR. CRADDICK: Let me try that one. Up until 1995,
we had a 25-year lease on the baseyard. In 1993, they told us
that the price was going to increase. I think it was a number
of years before they finally came up with a price. But
somewhere around 1997 or so, they actually came up with a price
and what it was going to increase to. We objected to that and
that objection is still out there in never, never land.
But we budget for this basically because we're on a
month-to-month rate down there. We still don't pay anything,
but if we get -- what's going to happen is, is the current
arrangement that we have says we can go in there with no charge
until this is resolved. But then when it's finally resolved,
theoretically there's a bunch of back years we may have to
pay. So at some point we may be looking at many hundreds of
housands of dollars.
But we budget this every year just in case. You
know, so we have at least one year covered.
MR. HIRANAGA: Should that be set as a reserve?
MR. CRADDICK: I recommended it to the board, but
they said no. Leave it at that.
CHAIRMAN RICE: Kent, there's an argument that it
may never be charged, as much as there's -- probably, I think,
is valid as the argument that it might be charged. That's the
quandary that we're in.
MR. FUKUSHIMA: If I may, Mr. Chairman. There is a
lease not amended or modified which provides for the rate or
the lease rents that we're paying presently. They have
indicated, the state has indicated they wanted to charge some
more, but they made no effort to modify or amend the lease that
we have with them. So it's our position that the lease speaks
11 for itself.
MR. HIRANAGA: But they have not been billing for
the existing --
MR. FUKUSHIMA: I'm not aware if they have.
MR. QUINN: They have one letter stating the back
rent, and a proposed current rent. Our corp counsel challenged
it along with several other agencies in the state and that's
the last we heard.
CHAIRMAN RICE: That was two years ago.
MR. QUINN: Two years ago.
MR. FUKUSHIMA: It's not only here on Maui. The other --
MR. QUINN: It's the result of an audit by the
federal government.
MR. CRADDICK: What happened was the FAA, I guess,
gives a lot of money to the airport system every year and they
said that they have to start charging market rates for these
lands, otherwise they are not going to pay what they pay to the
state.
MR. QUINN: For non-airport related activities they
had to charge more.
CHAIRMAN RICE: Anything else, Kent?
MR. HIRANAGA: That's it.
CHAIRMAN RICE: My turn. Maybe instead of going
through each of these variances, because I think there's a lot
more variances that need to be discussed. For example, under
materials and supplies, if you have MR supplies -- is that an
$80,000 variance?
MR. QUINN: Which category?
CHAIRMAN RICE: Under materials and supplies, you've
got MR supplies, which I assume is maintenance -- machinery and
repair supplies, right, in Schedule B?
MR. QUINN: Oh, I'm sorry.
CHAIRMAN RICE: Look at Schedule B. Machinery and
repair supplies, if that's an 80 or even if it's a 60, it's a
huge increase over -- if the budget is 132, it looks like an 80
to me, so that means the budget last year was 52. How's my
math?
MR. CRADDICK: No, that's not correct. I think this
goes back to what Kent was talking about. These variances are
based on the year-end estimate, not last year's budget.
CHAIRMAN RICE: That's fine, perfect. It makes it
worse. If the year-end estimate is 80,000 less than 132.5,
it's 52.5. An $80,000 increase on an actual expenditure of
52.5 is 140 percent or something. So my point --
MR. NOBRIGA: Mr. Chair, my page shows 31,000 under
materials and supplies. 31,000. Underneath on the services,
maybe under the R&M, probably add up to 66.
MR. QUINN: I see 31,000 under materials and supplies.
CHAIRMAN RICE: I see machinery and repair supplies,
code No. 6031. It's under the category of materials and
supplies schedule. I'm using this as an example to point out
that I think what we need to have done in short order by the
department is to provide us with a list of the variances, and
where the variance exceeds 7 percent of estimated year end,
then we should have an explanation.
And David wants to jump in on conservation. I don't
buy Ellen's explanation.
MS. KRAFTSOW: That was not my whole explanation.
CHAIRMAN RICE: I want to get into it. We're not
going to argue about it. If you would do those variance
explanations in writing, then we could address them I think
more easily and more quickly than we can by going -- so
combining on the suggestions, if you would then take the
variances in the proposed budget versus estimated year end.
MR. QUINN: Those that exceed 7 percent, if there
are 7 percent or less, we don't need an explanation. Those
that exceed 7 percent, written explanation. It could be a side
schedule that you could fax around to all of the members of the
board.
MR. TAGORDA: Sounds good to me.
CHAIRMAN RICE: Everybody fine with that?
MR. TAGORDA: Right.
CHAIRMAN RICE: That way we don't have to look at
each individual one.
MR. QUINN: Okay.
CHAIRMAN RICE: Payroll. Just so we can come to
some agreement here, because we have talked about that, and we
all agreed we were going to add a separate line item for the
payroll that reflects positions not hired currently. Unless
they are going to be hired before the fiscal year starts.
MR. CRADDICK: Do you want every single one or like
75 percent or 80 percent of that?
CHAIRMAN RICE: If they're not going to be hired by
July 1, then they go into that separate line item.
MR. CRADDICK: All 100 percent.
CHAIRMAN RICE: Whatever the schedule is here. You
mean a hundred percent of their payroll?
MR. CRADDICK: What I'm trying to do is get it to
where you don't have to deal with each one of these. I mean, I
think it's reasonable to expect that at least 25 percent of
them probably will get filled maybe within the year. So if you
leave some variance, some amount that they have some discretion
with, and leave the lion's share with you, then you are not
going to be dealing with minutiae at every board meeting.
CHAIRMAN RICE: Let's back up. We have, last year
the number was 690,000, positions that were unfilled. We
adjusted that because I think initially, Mike, you listed them
all at their full salary. We talked about the fact that they
are not going to get hired by the beginning of the fiscal year,
so there was no sense budgeting for all of that if they were
going to be hired throughout the year.
That's why Mike did the half quarter thing on this
one; right? I wouldn't change that. All we're doing, versus
having one lump line item for payroll, is to move these to a
second line item so we can better monitor the hiring of these
people. That's all. That's all I'm asking for.
The other question I have with regard to this list
of non-hires, is there any change in the staffing from last
year, this schedule, this work chart, with the number of staff
per department, does this represent any new hires over --
MR. QUINN: No expansion. We haven't had expansion
in three or four years.
CHAIRMAN RICE: Am I making myself clear?
MR. NAKAMURA: I think David has a good suggestion.
Realistically, I think it's very unlikely that we're going to
expend that amount for the positions over the course of the
year. So even if we do have a lump sum for funding the filling
of these vacancies, I think you could take a percentage of this
amount, the 599, 80 percent, 75 percent.
CHAIRMAN RICE: I would be in favor of that. I
don't think that's what he is saying.
MR. CRADDICK: No, that's what I'm saying.
CHAIRMAN RICE: You can estimate what percentage you
think is realistic and explain it in a note. I don't have a
problem with that.
Okay, we talked about that. Okay, anything else we
want to pass on to --
MR. STARR: I have one question, I might have just
missed it. Why are employee benefits up 54 percent?
MR. QUINN: Employee benefits were up for several
reasons. One is, in the past couple of years our contribution
to the employee retirement program was very low, and that was
due to a state decision that the county could contribute a much
lower percentage. Those two years are over, so that percentage
has increased now. That's a state mandated item.
Secondly, employee benefits are inflated to the
extent that the payroll is inflated for vacancies, because it's
a percentage of our payroll.
MR. STARR: The payroll is not inflated 50 percent.
CHAIRMAN RICE: No, the number we were just talking
about, the non-hires. So when you adjust this as a percentage,
you'll adjust benefits accordingly.
MR. QUINN: That's right.
MR. STARR: That seems like a lot. Do we have an
unfunded liability from previous years? How large is that?
CHAIRMAN RICE: No, I don't think so. I think the
percentage is large because we had relief for the last two
years and now we're back to the old level. We had this huge
increase, I believe.
MR. QUINN: Right.
MR. CRADDICK: I will tell you one unfunded
liability that you do have is comp time, which is probably
around the order of a quarter million to $300,000. That
doesn't show up anywhere, audit or budget.
CHAIRMAN RICE: I don't want to hear that.
MR. TENGAN: For my personal clarification, is it
the intent of the board on the second line item for payroll
that whenever we fill a vacancy from that line, that we come to
the board for approval or just to report?
CHAIRMAN RICE: No, we don't need approval. This
schedule of staffing has not changed. The mere reason we're
putting it on a separate line item is we have this ongoing
vacancy situation.
MR. TENGAN: I just wanted a clarification if we
needed to come back to the board for approval.
CHAIRMAN RICE: Not for approval. If you are
creating a new job, then we'll add to that.
MR. CRADDICK: I guess I stand corrected, it does
show up in the audit.
MR. STARR: The other item which is -- I want to go
back to the item we were talking about yesterday, and I don't
know if this is the time to do it, about the capital
replacement fund and the Brown and Caldwell model. Do you want
to take that now?
MR. CRADDICK: Are we going on to CIP?
CHAIRMAN RICE: I want to do CIP. I don't know that we --
MR. QUINN: We can do it during the CIP discussion.
CHAIRMAN RICE: Yeah, okay.
MR. STARR: Can I at least mention what the issue is?
CHAIRMAN RICE: Go ahead.
MR. STARR: This budget is based on a $4 million
contribution to replacement; in other words, replacement of
pipeline, replacement of plant. But we had that Brown and
Caldwell study which showed if we collect $4 million in two
years, if we spend what we need to spend to keep our plant up
to snuff in two years, we'll be going down below zero.
And that if we need to -- if we are going to fund it
so that we have a capital reserve to properly replace our
plant, we have to really put in $8.1 million and its annual
equivalent over the next several years. It's my contention
that we should have that in our budget, even though it would be
showing us having a very large operating loss, it is a more
true reflection of what is really happening.
And in the past we had hardly been taking any
contribution to it. So we have been fooling ourselves. I
would like to see if we could implement a change as the process
goes along and be honest with ourselves about what our true
position is.
CHAIRMAN RICE: I think that's a good point, and I
think the board members should think about that before we get
to the final stage of budget approval. If you're not familiar
with the Brown and Caldwell report, I think Mike has
distributed it, but we can get you a copy. There is a computer
model that we have.
MR. QUINN: I may not have mentioned this before,
but this GASB 34 ruling is going to -- we will have
no choice but to take a look at all of our infrastructure
assets, whether we're depreciating it properly, and because the
Brown and Caldwell study takes it one step further and talks
about what it would cost to replace those assets, which is a
very critical factor.
So next year you are going to see a whole change in
the financials which has been mandated nationwide and will be
subject of a lot of work on our part and the county in trying
to restructure the financials to accommodate. This is one of
the biggest changes in government and county that we'll be
faced with.
And the intent and thrust of it is to convey
accurately to the public the condition of your infrastructure
and whether you are funding the replacement of that. That's
the thrust of it.
CHAIRMAN RICE: That's all we have been talking
about. We're in total agreement.
MR. QUINN: We have no choice but to do that. The
Brown and Caldwell study and all those things will come into
play in the beginning of the next fiscal year. I guess that's
another subject, though, for future.
CHAIRMAN RICE: We should add it in there.
Yeah, Mike?
MR. NOBRIGA: Probably going to be amending this,
but you know how we also talked about that Lanai thing, the
watershed?
MR. QUINN: Yeah.
MR. NOBRIGA: Are you going to show --
MR. QUINN: The 20,000 -- or the 50,000, no, we're
going to just handle that with a grant. Separate control for
pass-through money.
CHAIRMAN RICE: No, he is talking about yesterday's
meeting when he asked about the --
MR. QUINN: The 20,000. I don't think we should
show that.
MS. KRAFTSOW: That's fine. However, the county
works as long as we can live up to our requirements.
CHAIRMAN RICE: So you'll look into that and make
the appropriate amendment next time.
MR. TAGORDA: Mr. Chair, may I make a few comments
with regards to the Brown and Caldwell study. Because to me I
think we're not supposed to solely be dependent on the findings
of Brown and Caldwell with all of these different consultants.
What I mean is we employ more, aside from Brown and Caldwell,
and then we compare their reports. We cannot be solely
dependent on their findings about this department.
CHAIRMAN RICE: Philosophically, I think I would
agree with you that we employ a consultant and it's incumbent
on the board to take that consultant's recommendation and then
deal with it, yes, no, different, whatever. I think in the
case of Brown and Caldwell specifically, ironically, probably
not ironically, probably for good reason, the 8.1 million is
very close to our actual depreciation number.
While there are probably some areas where there's
not overlap, it's pretty close. That number is going to be --
we don't like the fact that we have to have that, but it is --
I think it's pretty close to the real number for us to do that.
MR. CRADDICK: One other thing you have to consider,
this is a model. It's not anything that Brown and Caldwell is
saying there's a number of assumptions in there, those
assumptions can be changed. And the number is going to be
different. So to say that it's something from Brown and
Caldwell that somebody has to go get something to compare,
anybody can enter numbers into that model and the results will
change.
CHAIRMAN RICE: Yeah, that's a very good point, and
that's exactly why you don't go entering in new assumptions
just so you can get the number you want out of there. You make
real assumptions about useful life, replacement costs of the
assets.
MR. CRADDICK: Interest rates.
CHAIRMAN RICE: Interest rates and those kinds of
things. Sure, it's not a perfect science. Will a pump last
one or two years more than you think, yes; but it may last one
or two years less than you think. So it's a working model, but
I think it's a necessary model.
MR. CRADDICK: Very good.
CHAIRMAN RICE: Anything else on the operating
budget, capital, CIP?
MR. CRADDICK: Can we take a break here?
CHAIRMAN RICE: One minute.
(A recess was taken.)
CHAIRMAN RICE: Let me call the meeting back to
order. Let me say something for -- who is missing? Some of us
are new, and I ran into the same situation that Kent did last
year with the budget and finances and things that I was used to
in business that are different in public life.
We have done things differently in the department
over the years and I think that in some years staff gives a
schedule and the next board says we don't need it and they put
it away and the next board says they want it. So I think, not
to be a decision that's made today; but over the course of this
budget approval process, maybe we can come together on a format
that we all like and Mike can do that from now on. Think about
that. We had some good suggestions by Kent.
MR. QUINN: Some boards have asked for almost no
information and other boards ask for a lot of details.
CHAIRMAN RICE: You knew last year we were an active
information seeking missile here. Kent has now impressed me
with his financial wherewithal. He may become the new chairman
of the finance committee.
Okay, CIP.
MR. CRADDICK: There are three things that were
passed out here. There is this little map, and that goes to
page 44 of this book right here. That we passed out -- it
wasn't passed out previously. The next thing is, this here is
just to -- so everybody knows what the general plan is, and
then there's this one here that has -- Ellen, how about if I
let you explain that one there?
MS. KRAFTSOW: This is the community plan
boundaries, and the project numbers correspond to your books
and lists and everything. It shows which projects are in which
community plan area, and it also shows the list of projects in
each community plan area.
This is not the whole story about implementing the
community plan, but it shows the implementation matrices for
the community plans for the water department. So you can look
at each one and relative to those matrices.
I will say, though, for instance, in Makawao,
Pukalani, Kula, right up-front, the number one goal, policy and
objectives, they talk about developing infrastructure for ag
and making that a goal and policy, but then they don't put it
in the implementing actions in the back.
So you can't really look at these implementing
actions alone; but it was sort of what could we give you by
tomorrow, you know, in terms of something you could look at and
immediately compare. This is just a little thing that will
help you equate projects to community plans.
If you want -- I don't know how you want to do this,
if you want to have Mike go over the front page or me. I think
you understand it basically already. We have the page numbers
of the projects on the table and more description in the
books. I don't know what's the board's pleasure in terms of
reviewing this.
MR. QUINN: May I reiterate what I said yesterday.
Another option for the board is not to transfer $4 million into
CIP. If they want to retain it in the emergency fund, that's
just an option. We currently are transferring $4 million
dollars into the CIP reserve fund from the operating budget.
An option the board has is to only transfer $2
million; therefore, the emergency capital line item on the
operating budget would increase by $2 million. I would just
throw that as an option, if you guys decide to do that later on.
CHAIRMAN RICE: I think that's something that the
board needs to consider before we finalize the budget, and I
think the issue is the decision about what the emergency
working capital fund level should be, and then as we talked
earlier, the amount that we're going to put into the capital
improvement line item.
MR. NAKAMURA: Perhaps just an overview for now,
Mr. Chairman, without getting into specific projects in view of
the time constraints.
CHAIRMAN RICE: I think that's a good idea and I
think we probably need another discussion where board members
can bring questions on specific projects back.
Mike, you want to do an overview? Or David?
MS. KRAFTSOW: I can do that.
MR. CRADDICK: On CIP.
MS. KRAFTSOW: In terms of meeting board objectives,
the board at one point set certain bullets, source --
compliance -- getting out of Iao Valley, source storage and so
on. The overall funding for those amounts is right on the
front page by board program.
By district, there's about a million or so in
projects for any district that would affect the whole system,
or that are not district specific. There's about 4.95 million
for Central Maui. Just under a million for Hana. About 1.8
million, a little over that for West Maui. About 670,000 for
Molokai, and about 8.7 for Upcountry. Those are rough numbers.
MR. STARR: Could you repeat that again?
MS. KRAFTSOW: About 1 million in just things that
could go anywhere, like small pipeline replacements. That's
for wherever you need it, you know, those kinds of things.
About 4 or 5 -- 4.9 some odd million for Central.
About .97 between -- just under a million for Hana. Lahaina
has 1.8. Molokai has about .67. Upcountry has about 8.7. I'm
rounding those numbers out so it's not going to come out to
exactly -- that's how it breaks down by district.
A lot of these are projects that are scheduled for
construction now that has already been designed in previous
years. Another thing that we looked at, of course, is which
pipes have been breaking and are in need of repair. There are
some items to comply with zoning or with other programs of
other departments, such as some of the Kihei lines and the
Kaunakakai line are in concert with public works, so we
arranged our schedule to work with them. The Wailuku is,
because of the Wailuku town and development of the planning
department.
There are several for pressure or flow concerns, and
then there are some where -- for the zoning. Those are the
kinds of things we looked at.
CHAIRMAN RICE: So the detail of the projects that's
behind here is by type of work; i.e., Iao source drought.
MS. KRAFTSOW: These are Bob's bullets, the bullets
that the board agreed to at some point as their programs and
their program priorities. This database was originally
designed so that it can print by district, by project
classification, by board program, by source of funds. You can
have it printed out any way you want.
And it was designed -- we looked at -- first we
looked at all the maps and we looked at any place where the
lines were substandard. We also drew in -- this was before we
had our GIS system -- the zone section and parcel over a fire
protection map set, so we can identify everywhere that was
substandard for zoning.
Then we did our forecast, then we looked at the
planning department's forecast, our own forecast and a couple
other forecasts. And we said okay, this is what we have now in
terms of storage, this is what we have now in terms of source,
this is what we have now and this is what the forecast would
demand by standards, and this is where we're short and this is
what we're going to need.
And we made this -- it's like this thick
(indicating), the book of projects for the next 20 years. The
book is arranged in order of our fire protection map set. When
we printed it, it was over a thousand dollars. It was like
1500 to $2,000 to print, plus that was with staff doing all the
collating, which took two and a half days. So we have not made
a habit of printing that too often with all the pictures and
everything. But that's how the CIP was designed initially.
And for the GIS, we have been doing an inventory and
the hydraulic model of all the lines and the sizes and the
ages, which got fed into the Brown and Caldwell model, and
which we also used in the CIP. It needs readjustment and
improvement, but that's sort of how the CIP is done. And every
year it's updated based on what we actually have and what is
actually breaking. You can obviously change things around.
I'm not sure what else you want to know about this
year's CIP.
CHAIRMAN RICE: Questions?
MR. STARR: I got very confused about where the line
is between operations and projects that should be funded under
operations, which include, say, pipeline replacements, and
where we're talking about system expansion, which should be
completely and totally segregated and paid for under meter
fees, basically the water development, source development and
then transmission and storage fees.
MS. KRAFTSOW: There's a field in your database
that's on your sheets called "improvement or expansion." It's
shortened but it's there and it's got either an I or E. If it
has an I, it's basically an improvement project and if it's got
an E, it's basically an expansion project.
MR. STARR: My feeling is that we should be dealing
with two completely separate sets of paper, because I think we
do have a tendency to commingle, even it's commingling in our
own minds. But I know that --
CHAIRMAN RICE: You can sort this by source of
funds; right?
MS. KRAFTSOW: I can sort it by improvement or
expansion. Yes, and by source of funds.
MR. QUINN: It is by source of funds.
MS. KRAFTSOW: Yeah, it's by source of funds on
these sheets. This is by board program and source of funds,
but I can make it -- I can separate improvement and expansion.
It's very flexible.
CHAIRMAN RICE: It might be good to look at it that way.
MR. CRADDICK: Actually, it really is, because the
minute you know the reason for the fund, the minute you know
the reason for the fund, it's already separated that way. So
if you know that the capital reserve fund is only replacement
stuff, that's all it is. The water development fee, source,
storage, they are all expansion -- well, I take that back. The
storage fund can be used for either.
MS. KRAFTSOW: The capital reserve, like if you have
a well that -- it's not really replacement, that Waikapu well.
MR. CRADDICK: It's not adding new source.
MR. QUINN: Essentially, David is correct. Capital
reserve is replacement fund. Those other water system
development funds, which is depleting very fast, and source are
used for expansion projects.
CHAIRMAN RICE: I think I may -- I'm considering
appointing a committee to deal just with the water development
fee to move forward. I think that's an important component
that we need to deal with.
Any other questions? Yes, Mr. Nakamura.
MR. NAKAMURA: Couple of quick questions. Mike,
what is the total of the amount that has been encumbered from
prior year projects, "prior year" being FY 2000 and back, just
ballpark?
MR. QUINN: I can get you that in one second. You
had also asked, board member Nakamura, in this particular
budget that you have in front of you, how many projects are
being carried over. That's approximately $5.3 million worth of
projects.
MR. NAKAMURA: Last year's capital budget, as I
recall, was about 16 million, so you are going to spend or
encumber approximately 11 -- 10 or 11 million this year, by the
end of the year?
MR. QUINN: Almost $11 million and/or encumberable
(sic). Year to date expended is 5.9 million and current
encumbrance is 5.1. It probably would be good if I gave these
reports to the board so they have it for future reference.
It breaks down every one of our projects as to what
was carried over from last year, what is currently encumbered,
and what has been spent on each project. As the board knows,
we have a lot of projects we're tracking yet.
While you are talking, I'll just --
MR. NAKAMURA: Maybe while you are doing that, I can
ask Dave a question. What is our -- how are you organized to
implement capital projects, Dave, in your engineering section,
how does that work? How big of a staff do you have to pursue
the implementation of these projects?
MR. CRADDICK: The design portion of it is mainly
handled by -- once it's designed, you know, it goes out for
construction and it's handled by the district engineers, and
that's the current organization.
MR. NAKAMURA: So in the design section, how many
engineers do you have?
MR. CRADDICK: One.
MR. NAKAMURA: You have one engineer handling $18
million of CIP, plus some additional number of carryover
projects?
MR. CRADDICK: Only the design portion of it, not
the construction portion of it.
MR. NAKAMURA: No, I'm talking about design.
MR. KOGASAKA: We're trying to distribute some of
the design section to the district -- to the other -- other
projects. Each of the districts. The number was just that --
that's what we came out with, but the intent is to try to
distribute the design out a little bit more. Balance out the
load.
MR. NAKAMURA: We can discuss this in greater detail
later. I guess my concern is, basically, just as we
appropriate funds for capital projects to be sure we have a
mechanism that we can implement them on a reasonable basis,
expeditiously, and if there's a need for the department to get
some assistance in having that done, then we should look at
that. A lot of these projects are important projects and we
need to move forward.
MR. CRADDICK: Can I ask where you are getting the
$18 million figure from in design projects?
MR. NAKAMURA: The total CIP proposed for this year
is 18,200,000.
MR. CRADDICK: Not all of that is design.
MR. NAKAMURA: I did not say it's all design. It's
all construction -- it's design and construction. It's a total
CIP budget. I don't think there's any question about that.
All I'm saying is that every year we seem to have a
fairly high percentage of projects that cannot be implemented
for some reason or other. And if it's a matter of getting some
help on the design end, which is the front end, then we should
look at that. That's all I'm saying.
CHAIRMAN RICE: Jonathan? You know what, we have
another meeting scheduled at 10:30. So we'll recess, convene,
recess, and then go back into it.
MR. FUKUSHIMA: Certainly.
CHAIRMAN RICE: So I'll recess the workshop.
CHAIRMAN STARR: I'm going to convene the
operational review and evaluation committee and recess.
MR. FUKUSHIMA: You are in recess --
CHAIRMAN STARR: Recess until the call of the chair.
CHAIRMAN RICE: I'm going to call back to order the
workshop on the budget. Go ahead, Jonathan.
MR. STARR: Couple of items. One is the $350,000
for the Ulupalakua to Kanaio. Is that -- I know we were
discussing that in another meeting yesterday. Is that the same
project? Is that based on one of those -- is that a material
cost that you took for that?
MR. CRADDICK: That's what we had budgeted this
current year. That's all.
MR. STARR: Okay. In other words, that's -- you
just took a number that was budgeted in a current year and
moved it forward?
MR. QUINN: It's carrying over, yes.
MR. STARR: I see the Pulehu source project, Pulehu
well and transmission project. I'm not sure what that is, but
I see we have been spending money on that. Where is that going
to? What have we spent that $49,000 on?
MR. CRADDICK: What are you looking at, Jonathan?
MR. STARR: I'm looking at this -- it's a current
fiscal year that Mike just handed out. It's under drought. I
see we spent $49,000 on that item.
CHAIRMAN RICE: Pulehu well and transmission, PJT,
is that what you're looking at, 41755?
MR. STARR: Yeah, what are we doing with that?
MR. CRADDICK: That is to test the Pulehu well.
MR. STARR: What?
MR. CRADDICK: That's to test the Pulehu well. The
one that's existing there, what is called sometimes the North
Kihei well.
MR. STARR: The one that's out on the plantation?
MR. CRADDICK: Right. Is that correct, Andy?
MR. PASCUA: The 7500 that's encumbered is what I
had projected for a contract that I worked out with the
installer. As far as the 41,000, I don't know.
MR. STARR: I would like, at a future date, an
explanation of that.
CHAIRMAN RICE: Sure. Could you get that for
Mr. Starr? Very good.
Any other questions?
MR. HIRANAGA: Mr. Chair, just a comment. I wonder
if the department can label these, you know, draft one, draft
two. Because I have these two reports that have different
ending cash balances and I'm not sure which of them is the more
current version.
MS. KRAFTSOW: There were some projects that after
we had passed out the initial draft to the board, the engineer
came back and said we can get these done faster.
MR. HIRANAGA: It would be nice if you said draft
one, draft two, draft three. Also on the operating budget if
they can label those, because I have two versions.
MS. KRAFTSOW: I have a list of carryover projects
if you want that. I think somebody mentioned that.
CHAIRMAN RICE: Mr. Nakamura requested that.
MS. KRAFTSOW: Do you want me to go through that?
MR. NAKAMURA: Not now. I wanted to know what the
total was. But I guess the total of all the balance available
from both the current fiscal year and prior encumbrance is like
almost 12 million, right, Mike?
MR. QUINN: Correct, eleven-nine, yeah.
MR. NAKAMURA: That's a significant amount of money.
MR. TAGORDA: Um-hm. Mr. Chair?
CHAIRMAN RICE: Yes, Orlando.
MR. TAGORDA: If I may continue Mr. Nakamura's
questioning in line of that. Out of the 18 million, Mike,
budgeted for CIP, how much really is for fiscal year 2001,
2002, excluding the 12 million, and how much is for pipe
replacement here? It's not 7 million.
MR. QUINN: 7.4 is for pipeline.
MR. TAGORDA: The 7.4, what I'm asking is how much
is the new project for pipe replacement this 2001, 2002? You
exclude the prior encumbrance as an old project that we never
finished.
MR. QUINN: Under pipeline replacement, the projects
that are carried over -- you have pipeline replacement --
MR. TAGORDA: Maybe if you can do something for me,
I would like the staff to highlight those.
MR. QUINN: I can calculate it right now for you. I
can read them off for you if you want. You want me to read
them off or just hand it to you?
MR. TAGORDA: Go ahead if you want to. I believe
most of these are old projects under pipeline --
MR. QUINN: Ai Street, Aina Kula -- for $50,000.
Aina Kula waterline.
MR. TAGORDA: What year did that project start, Mike?
MR. QUINN: That's a carryover from this current
fiscal year. Aina Kula, we would have to reference the other sheet.
MR. TAGORDA: I think that's a lot of project for you to --
MR. QUINN: First encumbrance on that project was in 1999.
CHAIRMAN RICE: Why don't we get a list. You don't
have to do it right now.
MR. TAGORDA: You don't have to do it right now, Mike.
CHAIRMAN RICE: He just wants to know what projects
are new pipeline replacement.
MR. QUINN: This list I handed out, Orlando, the way
you read this is you look at -- the first column is prior year
encumbrance. Anything in that column is a carryover into this
year's fiscal budget, 01 we're talking about now. So the
working budget becomes the prior year encumbrance plus the
amended budget, which is this year's budget, then your total
working budget, then you have year to date expended and current
encumbrance.
So it's very easy to tell which is the current
project and which is the carryover project. Anything in the
prior year encumbrance column is a carryover project. You can
see -- that's for this fiscal year 2001. For instance, if we
go to pipeline replacement, we see that 2.357,591 is the prior
year encumbrance for pipeline replacement.
Then you have this year's current budget which is
5.865 which gives us a total working budget of 8.2, and out of
that we have expended 3.1 and we have encumbered 1.6. Then we
have your balance there. So we have to track, from a fiscal
standpoint, we have to track all prior year projects plus the
current year projects. That's how you read this.
MR. TAGORDA: Okay.
MR. QUINN: That's the purpose of it, so that you
can see what the total is and not just -- obviously, we're not
just dealing with the current fiscal year's budget. There's
carryover.
MR. TAGORDA: Mike, your 89 G.O. bond on your CIP.
You have a beginning cash balance of 70,000. Is that right?
MR. QUINN: That's correct. That's the Iliahi
project that's been discussed at the board.
MR. TAGORDA: In your operating budget, that G.O.
bond did not show up here.
MR. QUINN: No.
MR. TAGORDA: Because that money is already encumbered?
MR. QUINN: It's gone. It's not an issue.
MR. CRADDICK: It's not in the operating budget.
It's not part of the operating budget.
MR. QUINN: No, he is saying it's not listed as a bond.
MR. TAGORDA: It's not listed on the G.O. bond.
That's what I want.
MR. CRADDICK: Actually, 89 got refunded.
MR. QUINN: It was refunded. Once that project is
completed, very shortly we hope, we can go in.
CHAIRMAN RICE: Any other questions, board members?
MR. QUINN: Very important issue here that I
forgot. We have -- and this has to be approved by the board.
On this schedule that you have in front of you, we have taken
the DBCP fund and transferred it, you'll see, into the capital
reserve fund. So that's an issue the board has to approve.
That money is sitting there, it's accumulating interest.
There is a resolution existing by the board that
we're to come back to the board to utilize that money. So
that's an issue that I wanted to bring up.
My assumption, and I don't know if the board agrees,
that money is sitting there and it could be used for CIP. I
don't see any restrictions other than the restrictions the
board has put on us by virtue of that resolution.
MR. STARR: Aren't we spending that in Napili?
MR. QUINN: We have not spent a dime of it.
MR. STARR: What --
MR. QUINN: There's a resolution saying --
MR. STARR: What do we pay for the contactors at
Napili with? And what do we pay for the contactors at
Hamakuapoko?
MR. CRADDICK: There are different sizes: one is 15
ton; the other is 10 tons. There's no comparison between the
two projects.
CHAIRMAN RICE: He is saying what funds were used to
pay for those. We didn't use it.
MR. QUINN: No, we haven't used it.
MR. STARR: What, we haven't used it?
MR. QUINN: No.
MR. STARR: Shouldn't we be using it for that?
MR. QUINN: That's why I bring it up. There's a
resolution thing, we have to come back to the board to utilize
those funds.
CHAIRMAN RICE: We should put that on the next agenda.
MR. QUINN: I want to make note --
MR. STARR: We're spending the money.
CHAIRMAN RICE: We're spending the money for the
things it was designed for. So then we should requisition that
on a regular basis, and then we'll have -- refer it to finance,
then we'll make a recommendation. What Mike is saying is
putting the whole amount in capital reserves.
MR. CRADDICK: That's what we have done in here. So
if you don't want to do that --
MR. STARR: No, we don't want to do that, if we
spend it, it gets filled back up again.
MR. CRADDICK: What?
MR. QUINN: I don't understand.
MR. STARR: Isn't there -- doesn't that fund get
replenished when we spend it on DBCP projects?
MR. CRADDICK: No.
MR. QUINN: If we dig a well that has DBCP in it,
we're entitled to a reimbursement, but that's over and above
these monies. I'm not sure --
MR. CRADDICK: Maybe what you are thinking of is the
operating cost, is that what you are thinking about? Every
year there will be operating costs that will go into that fund
and --
MR. STARR: No, when we get, not the full amount for
existing wells, but we get a partial --
MR. CRADDICK: That's what this is. That's all
we're ever going to get, unless another --
CHAIRMAN RICE: And we have operating costs.
MR. CRADDICK: He is talking about existing wells,
that's all we're ever going to get for existing wells, unless
another well goes bad. If another well goes bad, yes, we'll
get more. But there's no regular money coming in.
MR. STARR: So we should be spending this again --
we should be spending this since this is the money that we got
to pay for that.
CHAIRMAN RICE: Yes. So I guess that's something
for the board members to think about when we approve the
budget. Do we want this money in this account? You don't have
to make a decision on that now.
MR. QUINN: There's no restrictions on that.
MR. STARR: I have a question here.
CHAIRMAN RICE: Go ahead.
MR. STARR: What's the -- how much is in our budget
for water system development, including source, storage, and
transmission?
MR. QUINN: In the budget. We have in the water
system development, we have 5.2 million and in source we have
1.4.
MR. STARR: Storage is another --
MR. QUINN: Storage is not an issue.
MR. STARR: So almost 7 million. How much have we
received in source development income?
MR. QUINN: In water system development, we
anticipate approximately $1.4 million in roughly a year from
water system development fees.
MR. STARR: So in other words, we're getting about
1.4 and we're spending about 7. I just want to point that out.
MR. QUINN: If in fact we spend that money this
year, you know --
CHAIRMAN RICE: Mr. Craddick is very happy that you
are pointing it out. As I said earlier, it's something that's
one of our priorities for this coming year, and my intention is
to employ a committee to deal with that water source
development fee recommendation.
Anybody who thinks they might be interested might
talk to me between now and the next meeting. In the interest
of -- did someone say something here?
MR. HIRANAGA: I have a question. As these items
come up that need our attention, are these going to be provided
to us as bullet points in a summary of what has been discussed
today? Or are we supposed to be taking individual notes to
remind ourselves that these are important items to be
discussed? I'm not sure what the procedure is, I know we have
a court reporter, but versus pouring over minutes --
MR. QUINN: What has happened, Fran, who is not
here, they supply annotated agendas. I'm not sure about the
timing. You won't have that -- maybe that's the issue.
MR. HIRANAGA: When we see the next draft, is there
a summary of the changes that were questioned?
MR. QUINN: We can supply all of that.
MR. HIRANAGA: So we don't have to pour over all the
numbers here. You made the comment about the DBCP, that should
be footnoted here on the report saying attention to this --
versus a verbal comment. I mean, if it's important -- you
determine the importance of it, because we don't want to have
20 footnotes. But whatever you feel is significant should be
footnoted.
CHAIRMAN RICE: What I would like to ask the board
members is, between now and the board meeting next week, is if
you have comments or suggestions regarding CIP, would you
direct them to Howard, who is the chairman of that committee,
so we can come to some agreement at the next meeting about the
next step. Which is then to approve a budget to go out to
public hearing, which is not approving the budget finally; it's
just to bring it to the next step.
So we're going to get the information from staff on
the variances and we're going to get information to Howard's
committee and CIP and we're going to try to come to some
agreement on a budget that we're going to take to public
hearing at the next meeting. Does that sound reasonable with
everyone?
MR. HIRANAGA: Which meeting is that?
CHAIRMAN RICE: Next week Thursday, the 24th. It's
not approving the final budget. We're just a step in the
process.
Is there anything else? Info that the board members
need, want? Okay, we're going to adjourn the workshop. Going
once. Adjourned.
(The deposition concluded at 11:00 a.m.)
Department of Water Supply
County of Maui
P.O. Box 1109
Wailuku, HI 96793-6109
Telephone (808) 270-7816
Fax (808) 270-7833