BOARD OF WATER SUPPLY
County of Maui
Budget Workshop
Wednesday, November 1, 2006
9:00 a.m.
Planning Department Conference Room
First Floor, Kalana Pakui Building
250 South High Street
Wailuku, HI  96793







		Chair-elect Kenneth Okamura stated that for this meeting, Michael Victorino will conduct 
		this final Budget Workshop.  Chair-elect Okamura will conduct the November 16, 2006 
		meeting.

		I. Call to Order

		Chair pro tem Michael Victorino called the November 1, 2006 Board of Water Supply’s 
		Budget Workshop to order at 9:10 a.m.

		II. Attendance

		Board Members Present:			Staff Present:

		Michael Howden				Eric Yamashige, Deputy Director
		Vice Chair Lee Aldridge			Holly Perdido, Fiscal Officer		
		Marion Haller				Helene Kau, Assistant Fiscal Officer 
		Chair-elect Kenneth Okamura		Ellen Kraftsow, Planning Program Manager
		Chair pro tem Michael Victorino		Alva Nakamura, Engineering Division Head
							Gaye Hayashida, Commission Support Clerk

		Excused:				Also Exused:				

		Carl Holmberg				George Tengan, Director
		Kui Lester				Edward Kushi, Jr., Deputy Corporation Counsel
		Scott Luck
		Ginny Parsons

		III. Announcements

		A. None.

		IV. Testimony from the Public

		A. None.

		V. Budget Items

		The Chair announced that the Department has distributed copies of Summary of Variances – 
		FY05 Actual vs. FY08 Proposed and also Chair-elect Okamura distributed copies of the 
		2004 Water Rate Study and the Fiscal Year 2006 Water Rate Study.  

		Member Okamura asked if there is a report showing the ’06 budgeted amounts and actual 
		amount spent?  Ms. Kau stated not yet, but the Department is in the process of having 
		their audited financials completed and the report he is asking for is prepared after the 
		audit in the event that there are proposed adjustments by the auditor.  

		Ms. Perdido stated that the final audit will be done at the end of November and will be 
		available at the Board’s December meeting.

		Chair Victorino asked what would promulgate adjustments by the auditor.  Ms. Perdido stated 
		that the auditor will give them a breakdown between cash and advancements from the County 
		and will also look at the Department’s claims to come up with an adjusted number if needed.

		Ms. Kau stated that the more substantive increases in electricity were budgeted in the 
		current year and the bigger increases were anticipated in the ’07 budget.  So the ’05 
		budget was before the Department incurred the significant increases.  

		Ms. Perdido pointed out that the budget has a column for FY 2006 and that is the 
		preliminary actual numbers.  Those numbers are pretty much final but there will be a few 
		adjustments from the auditors.

		Member Aldridge asked if the differences between what was budgeted for salaries and what 
		the actual was has been carried through from ’05, ’06, ’07, etc.  Ms. Kau stated yes.  

		Member Aldridge stated that for future reference it would be nice to see actual versus 
		budgeted for each preceding year.  

		Ms. Kau stated that the Department still has to budget for vacant positions even though 
		there have been a consistent level of vacancies in the past few years.  

		Member Aldridge asked what would have happened if all the positions were filled and the 
		Department didn’t have the money to pay for the electricity bills?  Ms. Perdido stated 
		that they would have to go for a budget amendment and take it from any reserves.  

		At this time Member Okamura read from his handout regarding the Board’s role according 
		to the Charter.

		1. Review and submit to the mayor the Department of Water Supply’s request for an annual 
		appropriation for operations and capital improvements.  

		2. Recommend the establishment and adjustment of rates and charges for furnishing water; 
		such rates and charges shall be submitted to the mayor for review and approval.  If approved 
		by the mayor, proposed rates and charges shall be submitted to the council for enactment 
		by ordinance.  

		Member Okamura stated that he is concerned about the process that the Board is going through 
		and that the increases that are being asked for in this budget will be reflected in the 
		rates charged to customers.

		According to the 2004 Water Rate Study future rate and revenue increases were to be as 
		follows:

		Fiscal Year 	2005	No rate increase
					2006	12.0% increase on July 1, 2005
					2007	2.5% increase on July 1, 2006
					2008	3.5% increase on July 1, 2007
					2009	3.5% increase on July 1, 2008
					2010	7.0% increase on July 1, 2009

		The rate increase had to be re-formulated because of new data so in October of that year 
		a 2006 Water Rate Study came out.  However in this one, the stakeholders did not take 
		part in adjusting the rates and it was never brought to the Board’s attention that the 
		increases were to be increased again.  

		Fiscal Year 	2005		No rate increase
					2006	12.0% increase on July 1, 2005
					2007	7.0% increase on July 1, 2006
					2008	3.8% increase on July 1, 2007
					2009	3.8% increase on July 1, 2008
					2010	3.8% increase on July 1, 2009

		But on July 1, 2006 the rate increase was another 12.0% not 7.0% as was proposed.  He 
		feels that there have been too many increases in too short a period of time.  If the 
		Board agrees with this proposed 18.0% increase that means the rates would be increased 
		42% over 3 years.  

		Member Okamura feels that for the average consumer this increase would be a problem.  He 
		suggested that the Board submit this budget to the Mayor without approving it, and include 
		with it the following Board’s concerns and recommendations:  

		1. Recommend no increase or a low increase for this year.

		2. Recommend that the Council fund $3 million for capital improvement needs for the Water 
		Department and $5 million of the $7 million of debt service from property tax collections.

		3. Recommend that the Department place a high priority on energy efficiency and possibly 
		energy generation in their operations.

		4. Recommend that the Department develop a plan for an energy surcharge to meet some of 
		the costs of the current high price of electricity

		The Board should take this opportunity to attach some strong recommendations to this budget.

		Member Howden suggested that we should exempt the ordinary agricultural users from any rate 
		increase.  

		Member Haller asked if Member Okamura looked at changing the Department’s billing so that 
		it reflects an energy surcharge.  Member Okamura stated yes, but that he didn’t know how 
		the Department could do it and that is why he suggests that the Department “develop a 
		plan for an energy surcharge.”

		Deputy Director Yamashige stated that R. W. Beck’s recommendations for the ’07 rate 
		structure will be addressing that.  

		Member Aldridge stated that he fundamentally agrees with what Member Okamura has proposed.  
		An 18% increase for one year is very substantial and this just points out the problem 
		when you don’t increase rates for many years.  He further stated that the energy surcharge 
		may be a sound idea but it doesn’t decrease the cost to the consumer.  

		Ms. Perdido stated that the Water Department is a special revenue fund and have always 
		been self-sustaining.  One of the reasons there were no increases in prior years was that 
		the Department had money and was required to use what monies there was before they were 
		allowed to have rate increases.  The Department would not be self-sustaining if it 
		receives money from the general fund.  

		Ms. Kraftsow stated that the Department’s financial picture is so tight right now that 
		they cannot fund necessary improvements.  The more the Department is forced to rely on 
		debt the less financially healthy the Department will be.  The Department cannot serve 
		the public without more income.  

		Motion:	By Member Okamura to submit the budget to the Mayor with recommendations.

		Second:	By Member Aldridge

		Discussion:	None.

		Vote:	Unanimous.

		VI. Adjournment

		The Board of Water Supply’s Budget Workshop was adjourned at 10:20 a.m.

								Prepared and submitted by:



								___________________________________
								Gaye Hayashida
								Commission Support Clerk


		Approved on: _______________________