Some water
board funds to
flow to city

Over $3 million a year will
go for services used, though the
fee troubles some on the council

By Gordon Y.K. Pang
Star-Bulletin

Some call it a "money grab" that could affect the way the Honolulu Board of Water Supply conducts business.

Others say it's just fair that the city should charge for costs it incurs by performing services for the board and other city agencies.

Regardless, the semiautonomous Honolulu Board of Water Supply will now be pumping 3 percent of its annual revenues -- in today's dollars about $3.3 million -- into the coffers of the city's general operating budget.

The city's 2000 operating budget includes a $6.6 million infusion from the board to reflect "centralized administrative services expenses" for both 1999 and 2000.

Some City Council members are skeptical about the plan.

Councilman Duke Bainum said the recovery costs are puzzling and require a close inspection.

"I don't see how they can justify this fee," he said. Taking away money from the Water Board's account "is going to mean less money for the board to maintain a pure water system."

"How did they arrive at that figure?" said Council Budget Chairman John Henry Felix.

"If there is a legitimate reason for some allocations for expenses, so be it," Felix said. "But by the same token, it has to be based on actual cost items."

Bainum said the administration has made other attempts to get money from the water board or have excess funds returned.

"This is just a money grab by the administration," he said.

But Water Manager Cliff Jamile said he proposed the payment and introduced it to the board, all without coercion or suggestion from the Harris administration.

"At no time did they come up to me and say, 'We need money from you and this is the way you're going to do it,'" he said. "It's what's fair."

Jamile said the amount being paid out is based on 3 percent of gross annual revenues.

"It appears to be a reasonable amount to pay for services being performed for us by the city," he said.

Water supply agencies on the mainland pay 3 percent to 24 percent for the centralized services that they used, Jamile said. Determining how much of city employees' time is devoted to the board's needs would be difficult to determine, he said.

While the board and all water supply functions are independent from the rest of the city, they require help from other city agencies, according to city Budget Director Malcolm Tom.

"We do all their accounting, all of their financing, their procurement," Tom said. "We actually do the internal certifications here, we receive all of their cash, we invest all of their cash for them and we issue bonds for them."

Whether those services add up to $3.3 million is uncertain.

Tom said the actual cost of administration services is difficult to calculate. Instead, an amount is agreed to by the two parties, in this case the city and the board.

City Council Chairman Mufi Hannemann supports the decision by the board.

"This is a reasonable option to reimburse the city for services it's been providing," Hannemann said. "We're looking for money, and if they're willing to free it up, so be it."

Hannemann said the policy makes the board accountable for costs they incur in other city agencies.

Lowell Kalapa, executive director of the Tax Foundation of Hawaii, said the state has a central administrative service charge but exempts a number of special funds from paying them.

Kalapa said the city should have a similar ordinance if it is making similar assessments on its special funds.

Tom said the city took out money from other dedicated accounts, including the sewer and highway funds, for recovery of central administrative costs before he became budget director in 1995.