LIHU‘E — A bill that would put a reserve fund in the county budget survived a motion for a four-month deferral, after the proposal got stuck on a 2-2 decision by the members of the Kaua‘i County Council’s Finance Committee
LIHU‘E — A bill that would put a reserve fund in the county budget survived a motion for a four-month deferral, after the proposal got stuck on a 2-2 decision by the members of the Kaua‘i County Council’s Finance Committee Wednesday.
The committee’s fifth member, Councilman Mel Rapozo, was absent on a trip on behalf of the council. The split vote pushes the decision to next committee meeting as a special order of the day, when Rapozo will add his vote.
The committee’s decision will then go as a recommendation to the full council, where all seven members will vote on it.
Bill 2457 proposes to create a reserve fund policy that amounts to 25 percent of the county’s actual expenditures from the previous fiscal year.
The administration is not going against the proposal, but they’re saying it’s just not the right times for it, given the county’s financial situation — in the last couple years, expenditures keep going up while revenues are dropping.
“The administration is asking us to defer this reserve policy indefinitely,” Finance Committee Chair Tim Bynum said.
The reluctance by the administration in including a reserve fund in the budget for next fiscal year was met with mixed opinions by the members of the Finance Committee, with two of them supporting a four-month deferral on the proposal and two opposed to it.
Besides Bynum and Rapozo, the remaining three committee members are Nadine Nakamura, Gary Hooser and Ross Kagawa.
Nakamura and Kagawa voted to defer the bill to June 19, well after the budget review sessions for Fiscal Year 2014, which starts July 1.
Bynum and Hooser wanted to approve the bill Wednesday and send it to the full council, but both were willing to compromise on a deferral for four weeks, rather than four months.
With a tie on Nakamura’s motion, Hooser made a different motion, to defer the bill to March 20. But Hooser’s motion didn’t get a second — Nakamura and Kagawa remained silent, and Bynum, as the committee chair, couldn’t second it.
That was when council staff and Council Chair Jay Furfaro reminded Bynum that Hooser’s motion should not have been done, because the tie on the first motion automatically carries the decision to the following meeting as a special order of the day, when the absent member, Rapozo, will have a chance to add the tipping vote.
If Rapozo sticks to his past criticism of creating a reserve fund, the bill may reach full council with a recommendation for a four-month deferral. But at full council, where all seven members have a vote, the outcome of the bill could potentially be a different one.
Councilwoman JoAnn Yukimura, who is not a member of the Finance Committee, spoke openly in support of a reserve fund as a way of forcing the administration to come up with a tighter budget.
Furfaro will also add his vote at full council. He has been one of the main drivers behind a past resolution that created a current budget proviso that sets aside a reserve fund. But the resolution lost effect when the new council formation took office last December, and his position is not clear since he left the discussion earlier on Wednesday.
Not right now
Finance Director Steven Hunt, who replaced former Finance Director Wally Rezentes on Feb. 1, agreed that a reserve fund is a good policy to have. But he said this is not the right time for the administration to budget an additional 25 percent, which could have negative consequences on island residents, such as raising taxes or cutting services to make up for the additional revenue source.
“You are asking us to increase the budget further,” Hunt said. “I don’t think we are prepared for that.”
The budget for FY 2014 is due in three weeks, March 15, at the end of the business day.
Kagawa went along with Hunt’s reasoning, and wanted to receive the bill, shelving it without action. To have a reserve fund policy is a “great idea,” he said, but to approve it now would be “reckless.”
To Yukimura, the bill was not about forcing the administration to find additional revenues, but giving the council and the administration more “discipline” while crafting and reviewing the budget.
Bynum had similar comments to Yukimura, but also proposed a way of collecting additional revenues.
To Bynum, raising property taxes on property owners who don’t live here and have experienced a decline in taxes since 2008 would be a way of collecting more revenues.
Because of a declining real estate market, the administration collected approximately $30 million less in taxes from several classes of taxpayers in the last four years.
But resident homeowners who have a tax cap in their properties saw their taxes increase $1.45 million during the same period.
Hooser tried to get additional guidance from the administration on what would be a prudent amount to have as a reserve, perhaps reducing the proposed amount of 25 percent of the previous year’s expenditure. He and Yukimura would be OK in reducing that amount.
But Hunt said was concerned with guaranteeing the county’s cash flow, and added he was on the job for only two weeks.
Budgeted funds vs. actual expenditures
Last fiscal year’s total expenditures amount to $121.1 million. Under the current proposal, the reserve policy would be roughly $30 million.
At the end of last fiscal year, the county had $44.69 million left in the general fund balance, as reported by the Comprehensive Annual Finance Report. Hunt said what’s left of that money is $15.8 million. If the council passes a bill creating a reserve fund, the administration will have to figure out how to come up with the rest of the money.
But Bynum said Hunt was basing his reasoning on budgeted numbers, which are not real. When the fiscal year ends, there will be a surplus, like every year. He said the administration already has a $4 million in surplus from the first six months of the current fiscal year.
Prior to the motion to defer the bill to June, seeing the unwillingness from Kagawa and Nakamura to approve the bill now, Hooser and Yukimura said they would be open to a softer version of the bill, imposing a smaller reserve fund for the first year.
Additionally, Nakamura had said she had some amendments ready to introduce, and Bynum said was willing to look at it and have further talks to Hunt in the next four weeks. But Nakamura was unbent on deferring the bill until after this year’s budget review sessions.
The bill should surface on the council’s agenda for March 6 as a special order of the day.
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• Léo Azambuja, staff writer, can be reached at 245-3681 (ext. 252) or lazambuja@ thegardenisland.com.
