LIHU‘E — The county administration recently released its financial report for Fiscal Year 2010, which ended June 30, revealing a dim light at the end of the tunnel. “We are cautiously optimistic that Kaua‘i’s economy is rebounding, but recovery will
LIHU‘E — The county administration recently released its financial report for Fiscal Year 2010, which ended June 30, revealing a dim light at the end of the tunnel.
“We are cautiously optimistic that Kaua‘i’s economy is rebounding, but recovery will be slow and gradual over a 3 to 5 year period,” Finance Director Wallace Rezentes Jr. said in the report.
The island’s economy had a severe downturn since the early 2008 global crisis. Kaua‘i had an 8.1 percent decline in non-farming jobs, the largest loss among all counties, according to the report.
Unemployment reached 9.5 percent in the summer of 2009. The economy has bounced back a little, lowering the unemployment rate to 8.5 percent last October.
Rezentes said the Kaua‘i County Council and the administration have been fiscally conservative over the years, which has benefited Kaua‘i taxpayers. The county’s surplus, or unassigned fund balance, increased to $43.1 million in FY10, from $32.8 million in FY09, according to the report.
Tourism and film
Rezentes, referring to tourism as the island’s “economic engine,” reported that from 2003 to 2007 Kaua‘i experienced one of its largest increases in visitor arrivals.
In early 2008, however, following the shutdown of Aloha and ATA airlines, visitor arrivals started to decline. The following year Kaua‘i had the largest decline in visitor arrivals among all four counties, totaling a 9.6 percent reduction.
The U.S. recession was largely responsible for such decline, since 85 percent of Kaua‘i visitors come from the U.S., according to Rezentes.
The administration, in partnership with the Kaua‘i Visitors Bureau, implemented a visitor stimulus plan in early 2009, injecting $1 million in aggressive marketing.
The latest reports reflect a 3.1 percent visitor-arrivals increase from last year, plus an overall 12.5 percent visitor-spending increase.
In the first seven months of 2010, three major Hollywood productions — plus a movie about a Kaua‘i up-and-coming surfer who lost an arm in a shark attack, Bethany Hamilton — infused some $64 million into the island’s economy.
Real estate and construction
The price of a median single-family home fell to just under $470,000 in 2009, approximately 31 percent lower than in 2006, when the market peaked. The median condo price fell even further in 2009. A median condo cost $547,000 in 2007. Two years later that price fell 47.5 percent to $313,875.
In 2007 and 2008 residential construction permits increased 3.1 percent annually. But in 2009 that number dropped “severely,” reaching a 74 percent decline in last year’s fourth quarter, according to the report.
Non-residential construction also took a blow. The construction of a 56,000-square-foot Safeway, which was the anchor tenant for the already approved Hokulei Shopping Center in Puhi, was delayed to 2011, when it should have been completed this year. The Shops at the Koloa project also were delayed to 2011 or 2012.
Agriculture and energy
In the early 1970s agricultural jobs accounted for more than 25 percent of Kaua‘i’s workforce; today, agricultural jobs represent only 4 percent.
The report credits the seed corn industry as a bolster to the island’s agricultural portfolio, by increasing their leased land holdings and providing many jobs on the Westside.
Rezentes said there’s further reason for optimism as the island transitions its agricultural assets to energy-focused projects.
Last April Grove Farm announced it plans to develop its lands near Lihu‘e Airport into mixed-use residential projects. The lands had been used for sugar plantations for decades, but such operations have ceased.
The project includes conservation and energy design elements, and despite construction being at least two years away, it would employ between 300 and 500 people.
A solar-powered energy mega-project in Kekaha, if it becomes reality, would turn some 100 acres of former sugar plantation lands into a $70 million renewable energy project.
Initiatives and achievements
The county’s $113.8 million capital improvement budget for FY10 helped to stimulate the economy, according to the report.
Projects in progress or completed during FY10 include Kaiakea Fire Station, renovation of the Historic County Building Annex, island-wide ADA sidewalk improvements and island-wide road resurfacing.
The Department of Public Works gave qualified low-income residential users sewer credit relief, already in its sixth year. A total of 8,681 residents qualified for a $20 credit per month, totaling a savings of $173,620 to island households in FY10.
Last March the administration issued $60 million in general obligation bonds to fund various capital improvement projects. In June the balance was $76.9 million.
Risk management and insurance
Rezentes said the county follows a strategy of self-insuring retention amounts, while purchasing excess insurance layers to protect itself from catastrophic losses.
The county’s vehicles have no collision insurance. Property insurance covers windstorm, flood and earthquake damages.
The county has excess liability and excess worker’s compensation insurance for all its employees, including volunteers.
Workers’ compensation, medical and temporary disability costs decreased 3.5 percent in FY10, compared to the prior year. By assigning employees to modified or light duty, the county reduced costs, the report said.
Employee union contracts
Firefighters negotiated an annual salary increase that went into effect July 1, 2007, and will last until June 30, 2011. For those four years, firefighters will get a 5 percent increase annually.
Police officers negotiated a salary increase that fits the same time frame, but the police will get a higher raise, set at 6 percent annually.
Clerical and professional employees negotiated a 4 percent increase, effective July 1, 2007 until June 30, 2009. For the fiscal years between July 1, 2009 and June 30, 2011, there will be no increases for all bargaining units, and furloughs up to 18 days for the first year and up to 24 days the second year.
Utility and janitorial workers negotiated a similar deal than the clerical and professional workers. But they had allowed only 13 furlough days in the first year, plus 24 in the second.
Some bargaining unions voted to receive a 5 percent pay cut instead of being furloughed.
The administration, however, has already come forward with a proposed draft bill that would reinstate full pay and end furloughs. That legislation is in the council’s hands currently.
The County Charter requires an annual financial audit by a licensed and independent certified public accountant, according to the report. RC Holsinger Associates, CPA prepared the county’s for FY10.
• Léo Azambuja, staff writer, can be reached at 245-3681 (ext. 252) or lazambuja@kauaipubco.com.
