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The Honolulu Advertiser

Posted on: Friday, February 25, 2005

STATE OF THE CITY
It's a fiscal nightmare

 •  Full text: State of the City address

The following are excerpts from Mayor Mufi Hannemann's State of the City address yesterday:

It is an honor to return to the chambers where I spent many an hour, not that very long ago.

During my campaign for this office, I had said repeatedly that I wanted to shed light on a budget that had been kept in the dark for too long. That vow had been prompted by my experience on the City Council, where we had been frustrated by the previous administration's lack of candor about where money came from, and how and why it was being spent.

It was largely for this reason that I created the Mayor's Review, a committee of executive-level volunteers from business, government, labor and the non-profit community, headed by my unpaid senior adviser, Paul Yonamine, who was joined by my policy adviser, John Zabriskie, another volunteer. Paul and John are seasoned executives with extensive experience in business and financial management and auditing. The review group, which eventually numbered 60, was charged with conducting an independent, top-to-bottom examination of city government. Their only instructions were, "Get the facts and give me the truth."

The findings of that review provide the starting point for my straightforward talk on the state of our city.

Finances

The conclusions reached by the Mayor's Review serve to confirm sentiments I had often conveyed in these very chambers as a council member and expressed in my campaigns for mayor.

A clever game of budgetary obfuscation and misdirection was clearly perpetrated on the people of the City and County of Honolulu by my predecessor to delay raising taxes or cutting services.

Although I will be more specific on the details of our fiscal year 2006 budget when we submit it to you next week, here are some of the conditions that determined, if not constrained, the course of our budget deliberations thus far.

The Mayor's Review revealed that debt service is fast approaching (funding for) public safety — police, fire and the like — as a share of our annual expenditures during the next five years. The amount we pay each year in interest and principal stands at $194 million, nearly 20 percent of our budget. Our debt service for 2006 is expected to increase by $40 million over this year — and that's just the increase.

We've amassed a total debt of more than $3 billion, about $3,000 for every man, woman and child in the City and County of Honolulu.

The prior administration deferred $925 million in debt service and operating expenses, such as repairs, equipment, technology and all the basics of efficient government. They refinanced maturing debt for no apparent purpose, with the result being an increase in our debt obligation of $29 million. They shifted money set aside for capital improvements — that's money from long-term loans — to pay for daily operating expenses, only compounding our debt obligation by another $12 million.

Meanwhile, employee health insurance contributions will continue to climb. Pension costs will go from $47 million in fiscal year 2005 to $62 million in 2006. And, as you know, my predecessor never budgeted for anticipated employee pay raises.

If that weren't enough, they transferred $340 million from the sewer fund and failed to raise sewer fees to cover the shortfall.

Sewage

Since I took office, we have experienced 11 sewage spills. Ten years ago, the Environmental Protection Agency and Department of Health sued the city for our inability to control sewage spills. The settlement, in the form of a consent decree, involved a 20-year plan to address our shortcomings.

However, the previous administration failed to raise sewer fees since 1994 to underwrite the mandated improvements. Instead, they chose to raid the sewer fund and transfer that money to the general fund to avoid having to raise property taxes.

We now find ourselves in the difficult position of having to raise sewer fees to make up for lost financial ground, and must play a frantic game of catch-up after too many years of indifference to one of our most pressing needs. The prior administration's approach to the sewage system has led us to yet another lawsuit, which has left taxpayers exposed to a claim of more than $1 billion in court-ordered penalties — yet put us no closer to fixing the sewers.

Public safety

The police continue to have recruiting and retention challenges that have not been properly addressed. These shortages will continue to worsen because of activation of military reservists and pending retirements.

The Police Department has had its budget stretched because officers have been called upon to provide security for unplanned, unbudgeted, feel-good, city-sponsored events, as well as the seemingly endless parade of, well, parades. HPD has been unable to replace its vehicles and equipment at regular intervals, resulting in a deteriorating inventory that cannot be readily or economically maintained.

HPD routinely devotes manpower to operations under the purview of the state government, like responding to calls at state-owned facilities, bomb sweeps, firearm and sex-offender registrations, the JPO program, and appearing in court for traffic violations. The cost is $13.2 million, with no reimbursement by the state.

Over at the Fire Department, repair and maintenance of the fire stations have been deferred for too long. Minor repairs have become major problems, and we estimate that 44 stations need repairs that will cost at least $6 million, if not more.

The Fire Department's fleet of 72 fire engines has not been replaced regularly. Twenty-two of the department's vehicles are more than 15 years old.

Technology

Our telecommunications infrastructure — the microwave system used by our emergency personnel — has not been maintained in more than 10 years. The software for our accounting system is 23 years old, our human resources and payroll transactions operate on a program 15 years old, and the software for our Division of Motor Vehicles record-keeping predates the personal computer at 30-plus years.

And, of course, you know our multi-prefix city phone system is 20 years behind the times.

Parks and Facilities

We've spent more than $101 million to develop the Central O'ahu Regional Park and Waipi'o Soccer Complex, but those crown jewels of our park system have come at the expense of other heavily used parks. And the millions of dollars that were spent on the Kuhio Avenue and Ala Wai Boulevard projects in the waning days of the previous administration have produced public safety concerns that we must now rectify.

At the 40-year-old Neal Blaisdell Center, another heavily used city facility, the arena is badly in need of a new air-conditioning system. Sections of the parking lot are sinking. The rental fees for the facility haven't been revised in years, so any non-profit organization qualifies for a rate that doesn't come close to our costs just for opening the doors. Our golf courses, which can be major money-makers, are in poor condition, with insufficient staffing and rundown equipment.

Staff shortages of 30 percent in many departments are the norm, and have not only affected our ability to properly serve the public, but had a terrible impact on the morale of our city workforce, who have been told year after year to "do more with less."

Despite this rather blunt assessment of the state of the city, I believe we can make significant progress in revitalizing city government by making bold, decisive, courageous decisions with your kokua, patience and understanding.

Our priorities are sixfold:

• We must be honest, truthful and accountable for the public's money.

• We must ensure that our police, firefighters and other first-responders are fully staffed and equipped.

• We must repair our roads.

• We must fix our sewers and tackle our solid-waste and recycling problems.

• We must maintain our existing parks and public facilities.

• We must find solutions to our traffic headaches.

These are more than issues about city services. These go to the very core of our quality of life, our environment and our future.

Fiscal accountability

We've suspended work on the Waikiki Natatorium to save us from having to pour more good money after bad. We've cut the visioning team program, which at one time had been receiving $39 million a year to erect half-million-dollar neighborhood signs and other frills. We've put a stop to the initial segment of the Bus Rapid Transit system, a $51 million boondoggle that won't put a dent in our mass-transportation needs. We've reassigned those costly hybrid buses to heavily trafficked routes.

We just canceled a slew of capital improvement projects, among them 18 construction projects valued at $12.4 million that had been pending for years. We canceled 66 contracts for consulting work alone, valued at $6.9 million. If we had proceeded with construction on all of these projects, the cost to taxpayers would have been $66 million — and who knows how much to maintain them all.

We realize that soaring home prices have placed a burden on homeowners. While the appreciation in value is a bonus for sellers, we know that the cash-poor homeowner could use some relief from property taxes.

That's why, even in this tight fiscal climate, we're proposing increasing the real property tax credits for very-low-income homeowners 55 years and older.

Furthermore, in response to the City Council's request to help our farming community, we are proposing a modest tax break to enable small farmers to operate and survive.

A word of caution: Now is not the time for wholesale rollbacks

in property tax rates, as tempting as they may be, given the rising revenues. The state of the city is such that it will get worse before it gets better, and we'll need every penny to balance our budget.

Roads

It's worth noting that the 1989 fiscal year was the all-time high for road resurfacing. That year saw 319 miles of "lane miles" resurfaced. But that figure plummeted until it reached an all-time low of 35 miles in 2000. Like our sewers, and just about everything else in city government, we need to play catch-up.

Our maintenance of roads will follow a plan and a schedule consisting of three parts. Simply put, the Hannemann administration is declaring a war on potholes, which we will be spelling out in greater detail soon.

The first is that our city road crews will be filling potholes year-round and not only in emergencies. The second part is called first-aid, meaning a three-quarter to one-inch overlay of asphalt on existing roadways in rural areas. We hope to use this method on 30 lane miles between now and December 2006.

The third is major reconstruction of heavily used thoroughfares, beginning with Waimano Home Road, Pupukea Road, Kahuku residential streets, Makakilo Drive, Paiwa and Lumiaina in Waipahu and several major roads in Kaimuki. Altogether, we expect to cover 120 lane miles of roadway between now and December 2006.

Sewers

I noted earlier that we have not paid enough attention to our sewer system. There were shortcomings in the past administration's efforts to comply with the EPA's mandates. And no financial commitment was ever made to fund those needs. That stops now.

As a clear demonstration of our commitment to improving our wastewater infrastructure, we are calling for sewer fund increases over the next six years — a 25 percent increase the first year, and a 10 percent rate increase in each of the following five years.

Solid waste, recycling

Our goal is to launch again the long-awaited, much-delayed curbside recycling program this June or July in Mililani, Wahiawa, and from Mokule'ia to Waimanalo. The rest of the island should begin in the fall when we have an adequate supply of those blue recycling bins.

Our friends on the Wai'anae Coast will have to bear having a landfill in their back yard for a while longer, as we begin an earnest review of alternative disposal technologies and options. However, we will take steps to minimize its impact on the community by landscaping the landfill entrance, picking up litter more frequently, employing odor-control barriers, and completing the long-awaited mauka emergency bypass road for the Wai'anae Coast.

Furthermore, I have asked former Councilman John DeSoto to help our administration lead a community discussion to formulate a more comprehensive benefits package that will help to offset this burden. One subject I'd like for them to tackle is the growing homelessness problem in the area. As you and I know, this is a statewide concern that merits the involvement of all of us.

Transportation

The state Legislature is poised to give us the option of raising the general excise tax by 1 percent to create a dedicated source of local funding, as required by the federal government. We should be judicious in wielding this authority, if granted. Being the fiscal conservative that I am, I always regard raising taxes as the last option.

And though I described this tax levy as an option, I might add that doing nothing is not an option. I'm convinced that a mass-transit system can be built and operated with the cooperation of the public and private sectors, as is being done for the Dulles corridor project in Virginia, Portland's MAX Red Line, or major rapid-transit projects in Vancouver and Ontario, Canada. The only obstacles to this dream becoming a reality are our creativity, commitment and courage.

While there is much to celebrate about our proud past, we should also use this occasion to reaffirm our commitment to changing the culture at City Hall, to working with our co-leaders in government, and to making Honolulu the best place to live, work and raise our families.