The county water department plans to trim $459,400 to create its $54.9 million operating budget for the new fiscal year that begins July 1.
The 1% decrease comes on the heels of an average 13% increase in water rates initiated Jan. 1, with a drop in water use accounting for the reduction, Manager-Chief Engineer Keith Okamoto told the Water Board on Tuesday.
Okamoto anticipates a $2.5 million decrease in power costs, a wash in the budget as the cost is passed through to customers.
The budget includes an additional $630,572, a 3% increase, in personnel costs including raises and benefits, for the Department of Water Supply’s 198 employees.
“This has been a challenging year,” Okamoto said. “This budget is a good budget, I think, moving forward.”
The budget will be the subject of a public hearing scheduled for 9:45 a.m. March 23 prior to the regular board meeting. Then it faces two votes by the Water Board.
In addition to the rate hike, utility management plans to cut 2% from its operations and maintenance budget by cutting vacant funded positions. The original plan trims the utility’s operating reserves to 47 days, compared to the goal of 60 days.
The budget also includes $7.8 million to pay down debt and $1 million — almost twice last year’s amount — to put into capital improvement reserves. Investing in CIP projects is important for the future of the system, Okamoto said.
“Nationwide, it’s an aging infrastructure and we work to keep it up,” he said. “We do improvements or repairs or capital improvement projects to replace aging infrastructure but also to increase capacity and meet flow demands.”
The CIP budget totals $34 million for the coming year, with the two costliest projects the Lalamilo 10 million gallon reservoir, at $11 million and the Waikoloa reservoir at $8 million.
Board member Ben Ney was concerned the system was operating too close to the edge. On the books, the system seemed to have a $9.3 million operating loss last year, according to its annual audit.
“I almost think there needs to be a trajectory change,” Ney said.
But that number includes $14 million in depreciation of equipment, which is a noncash item, said Chad Funasaki, principal for auditors N&K CPAs Inc.
“Eventually, we’ll have to make sure we’re not overall spending more than we’re bringing in … If there’s any red flags to financial health, we’re aware sooner rather than later,” Okamoto said.
He said the department can adjust during the budget year by delaying equipment purchases and postponing new capital improvement projects, for example.
“Those are some of the things we can implement quickly,” he said.
The water bill includes an energy charge, a water consumption charge, a set standby charge and a power cost charge that fluctuates with the price of electricity. The water department, a semi-autonomous agency, doesn’t get tax dollars but is funded by charges for its water service.
Email Nancy Cook Lauer at ncook-lauer@westhawaiitoday.com.