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STATEMENT OF WALTER S. LEWIS CHARTER REVIEW COMMISSION JANUARY 23, 2006

STATEMENT OF
WALTER S. LEWIS
CHARTER REVIEW COMMISSION
JANUARY 23, 2006

This testimony is to cover four topical areas:

1.Election of Council
2.Total Expense Limitation
3.Citizens Petitions
4.Powers and Duties of Elected Officials.

(1). Election of Council. I have previously submitted to you my memorandum on this subject dated January 1, 2006 and I respectfully refer you to that memo for my views as to making the Council a full time position and districting the election of its members. Since my memo was written I have concluded that term limits should be established for Council members. At present persons must be employed by the County for ten years to be eligible for a pension. I believe it would be unfair to deprive Council members whose only employment by the County is as a Council member of a pension by a term limitation shorter than ten years. The arguments pro and con about term limits are well known. On balance I believe it to be in the interests of the County to set a limit and I think that the citizens of the County should be given the opportunity to decide the question. My suggested text for the ballot issues on making the Council a full time position and election its members by district and on term limits are attached as Exhibits A and B.

(2). Total Expense Limitation. The daunting increases in recent years in the Kauai operating budget have been eye opening . The current budget of $122.9 million is about 80% higher than it was five years ago. The inevitable connection to rising government cost is rising taxes. Kauai property taxes have soared over 100% in the last five years. It appears to many Kauai residents that our government operates inefficiently and that costs are not well controlled. The concept of imposing a spending limit for the County has been previously presented. My suggested text for a ballot issue to establish a regimen of a spending limit is attached as Exhibit C.

(3). Citizens Petitions. The right of citizens to determine how they wish to be governed is a fundamental element of democracy. The Kauai County Charter furthers this concept by expressing the right of citizens to seek through petitions four types of government action –amendment of the charter, adoption of ordinances by initiative or for their repeal by referendum, recall of elected officials and impeachment. Unfortunately in my view the terms of the charter in these regards are in a state of disarray and changes are required if the purposes of these citizens actions can be effectively utilized.

One question for examination relates to the quantum of signatures that should be required on a citizens petition. At present signatures of 20% of the registered voters are required in Article XXII (dealing with initiatives and referendums) and in Article XXVII (dealing with recall). Signatures of 5% of the registered voters are required in Article XXIV (dealing with charter amendments) and in Section 23.13 (dealing with impeachment). I believe that the requirement of obtaining signatures from 20% of the registered voters in order to place a matter on the ballot is unreasonably high and will result in precluding any use of the initiative and referendum and recall procedures. It needs to be noted that the filing of the citizen petition is only one step in the process, the key one being obtaining the requisite majority vote at the general election. I suggest that the requirement for petition signatures in Articles XXII and XXVII be reduced to 5% of the registered voter number.

The Bills proposed by Mr. Asing (Bills 2154-6) to alter the procedures for citizens petitions have been brought to the attention of the Commission. It appears that these Bills have been abandoned. It remains, however, desirable to have standard requirements for the methodology to be used in citizen petitions. The presumably defunct Bills included provisions that would hobble the petition process. Such provisions are in my view unattractive as in the ultimate analysis the petitions are as noted only a preliminary step in presenting the matter involved for voter determination. I propose that the Charter be amended to contain the basic requirements for all petitions – its committee, the statement of the matter to be presented, and the signature and identification of the citizen. If other and not inconsistent or more onerous terms are needed they could be established by ordinance.

I would also propose the elimination of Section 22.02 which contains limitations on initiative and referendum powers and the extension of coverage of Section 27.01 to allow recall of officers serving two year terms. The present provisions unduly restrict the exercise of these citizens powers.

In regard to impeachment some history is relevant. Prior to 1989 HRS 62-13 provided for removal of elected county officials for malfeasance, misfeasance, nonfeasance or maladministration in office by circuit court following a petition by not less than 25 voters and citizens. In 1988 the state repealed this provision related to the Constitutional amendment adopting County home rule. In 1990 the County Council took advantage of this change and presented to the voters a resolution changing the Charter to provide that the number of signatures on the petition be increased to 5% of the registered voters. The change was narrowly approved by the voters. Under the Charter the Board of Ethics may also file impeachment proceedings. (Section 20.04 D (1)). I propose that the process be simplified and made less burdensome by allowing a petition containing the acts or failures to act believed to be grounds for impeachment signed by at least 100 citizens and voters be filed with the Board of Ethics and if the Board finds the charges to be sufficient for the Board to file with the Circuit Court.

If the Commission wishes I would be glad to provide a draft of the ballot text for the citizens petition changes that I propose.

(4). Powers and Duties. Finally I wish to address an area where I find the Charter as presently constituted to be seriously deficient. That area relates to the powers and duties of Kauai’s elected officials and the question of accountability and sanctions for failure to perform prescribed duties.

Let me begin by mentioning three instances to illustrate where there has been a failure of implementation of actions contemplated by the Charter. First, Article XXVIII provides that there shall be a County Cost Control Commission whose members are to be appointed by the Mayor and the Council within 45 days of the beginning of the Mayor’s term. No appointments have been made and the Commission is not serving. Second, Article XXIX provides for a Salary Commission to be similarly appointed. No Salary Commission is serving. Third Section 3.12 of the Charter provides for a financial audit of the County’s books and accounts at least once every two years. No such audit has occurred in recent years. If the Charter can be flaunted without consequences in cases such as these what is the purpose of having a Charter?

The inadequacies of the Charter are structural. With respect to the Council the Charter (Section 3.01) endows it with legislative powers and identifies in Sections 3.07, 3.10, 3.11, and 3.12 and Articles XXVIII and XXIX certain specific duties, With respect to the Mayor Section 7.05 is captioned “Powers, Duties and Functions” but its content is limited to expression of 13 powers.

The conferral of powers on the Council and the Mayor is necessary to establish their authority. Certain powers exist which are discretionary and exercise is not required. Other powers must be exercised. When the exercise of a power is mandated, e.g. the power of the Mayor to submit to the Council annual operating and capital budgets, the duty to meet the mandate should exist. If there is no duty established then there are no sanctions for failure to perform. The position as to the Cost Control and Salary Commissions and as to the audit exist because there is no expressed duty imposed.

Charter Section 23.10 expresses certain sanctions for “violation of a charter provision” and other matters. But is non-performance a violation when no duty is stated?

In my view an amendment to the charter is clearly needed to specify that as to those powers where exercise of the authority is to be obliged, the elected officials have the duty to act to perform the function mandated. The completion of the cycle requires that where nonperformance or malfeasance occurs a sanction should be identified.

For these purposes I suggest that the provisions of Sections 3.07, 3.10, 3.11 and 3.12 and Articles XXVIII and XXIX and timely action of approval of appointments be identified as duties of the Council and that Section 7.05 A,B,C.E, F, G,I J, L, and M, Section 23.14 and Article XXVIII and XXIX be identified as duties of the Mayor.

Regarding Section 20.04 E I would suggest that it be a duty of the Mayor and the Council to notify the Board of Ethics of any facts known to them which might constitute a violation of Article XX, and require the Board to take any necessary action for enforcement. This would avoid having multiple responsibilities for the same matter.

I believe that any material or willful failure by a county official to perform a duty should become grounds for impeachment of the failing party or parties and justify the commencement of impeachment proceedings in the Fifth Circuit Court. I doubt that it is helpful to also invoke Section 23.10 and say it is a misdemeanor. As noted above I believe the process by which impeachment proceedings are to be implemented should be changed. I would if the Commission so desires be prepared to offer a draft of a ballot text on the power and duty questions I have mentioned.

EXHIBIT A

Effective 2008, shall all Council members be selected by district of which there shall be five to be defined by an apportionment commission to be appointed in 2007, with one member who shall be a resident of the district elected from each district, and effective 2008, shall the service of all council members be as full time positions with members prohibited from other gainful pursuits, and shall be the salary commission set compensation for council members to be applied when full time service commences.

EXHIBIT B

Shall effective for the 2008 election no candidate be permitted to seek election to the County Council who has served more than ten consecutive years as a member of the Council.

EXHIBIT C

Shall effective for the fiscal year commencing July 1, 2007 the amount of the Kauai County operating budget be limited to being not greater than the sum of the operating budget for the preceding fiscal year plus a percentage thereof equal to the average annual increase in the population of Kauai as measured by the two most recent Federal census data and plus a percentage thereof equal to the greater of the increase in the Consumer Price Index in Honolulu during the preceding twelve months or the increase provided for average hourly wages in the collective bargaining agreement covering the most Kauai County employees during such twelve months, and shall expenditures by the County for operating costs greater than such limit be prohibited.

Damage control is the wrong beacon

This is to offer some thoughts about TGI’s January 19, 2006 editorial entitled “Damage Control needed at Kauai Police Department”. After using qualified terms such as “rumored” “claim” “allegedly” “widely speculated” “apparently” and “suspected” throughout the piece it wanders to its wobbly conclusion that “damage control” is the answer. I don’t think so. Damage control is a cover up and that can never be a justifiable solution to any problem.

Some of the wisest words in our law are set forth at the beginning of the State Sunshine law which declares: “ In a democracy the people are vested with the ultimate decision making power. Government agencies exist to aid the people in the formation and conduct of public policy. … Therefore, …it is the policy of this state that the formation and conduct of public policy, - the discussion, deliberations, decisions and actions of governmental agencies – shall be conducted as openly as possible.”

A major problem that surrounds our police department is the lack of public knowledge about the actions of the department and its officers. There is no clear public perception of any of the events mentioned in the editorial because they are largely shrouded in secrecy.

Using claimed protection of privacy, executive sessions and attorney client privilege as shields meaningful information as to controversies concerning the department is simply unavailable.

In theory the threatened investigation of the department by the County Council could be of value but that possibility is poisoned by the bias of Council members and because State law and the County Charter are determinative as to the process of police chief selection there is little on which the Council might legislate.

Openness not secrecy should be the policy of our Police Commission and our police department. A better informed populace can lead to identifying the problems which exist and their solution. Damage control is the wrong beacon.

Mayor's Budget Message unbalanced and unfair

The Mayor’s budget message presented on March 15th failed to provide a fair and balanced statement of the County’s spending and property tax revenues to be expected for the fiscal year beginning this July.

The message showed a total budget of nearly $125 million including a line item for “Projects and Real Property Tax Reform” of $10.5 million (which in substance would create an unaccountable slush fund in that amount). The actual spending planned totaled about $114 million, or $11 million higher than the current year’s budget of the $103 million.

Regarding taxes, the Mayor misleadingly stated that assessment rose 48% and “resulted in a $17.1 million increase in tax revenues”. Tax increases do not result from increased assessments, they occur to pay for greater government spending. For this year property tax revenues provide about $53.5 million of revenue to support a $103 million budget. For the coming year the Mayor is seeking about $70.5 million in property taxes to support a budget from $114 million to $125 million. This means that the Mayor is asking for $17 million more in property taxes for a $11 to $22 million increase in the budget. This year property taxes comprise about 52% of the funding for government spending; in the coming year it will be from 56.5% to 62%.

The Mayor does not mention anything about the allocation of the burden among taxpayer classes of the $70.5 million he plans to collect. This year of the $53.5 million levied, taxpayers with homestead exemptions paid about $8.5 million and all other taxpayers paid about $45 million. With the 6% cap under the Permanent Home Use Exemption, taxpayers with homeowner exemptions will pay about $9 million in the coming year (or a little less if the Mayor‘s suggested change in the cap to 2% is adopted) and the other taxpayers will pay about $61.5 million. On average that is about a 37% increase for properties without a homeowners exemption. It could be higher than 37% if the Council finds it necessary to have more revenues to achieve a balanced budget.

Our government officials persist in their spiraling spending increases and providing incomplete, misleading and sugarcoated messages seeking to justify them because of their arrogant view that they can deceive the people they represent. It is time for these abuses to end.

County officials spin soaring assessments

The County continues to offer spin rather than facts about County real property taxes. On March 15th the Mayor submitted to the Council his proposed annual budget for the year beginning July 1st and announced that real property taxes would rise by $17 million. He also noted that property assessments had increased as of January 1, 2005 48% from levels a year earlier. Evidently feeling some explanation was in order he later reminded residents who own and occupy their homes that the new assessments are not tax bills, and that those with homeowner exemptions would be protected “from increased taxes as a result of the escalated valuations”.

As is too often the case the Mayor’s remarks are only partially correct and are highly misleading. For those taxpayers with a homeowners exemption, any tax increase will be limited by the 6% cap provided in the existing permanent home use ordinance or, perhaps a lower cap suggested by the Mayor. But the great majority of those taxpayers will pay “increased taxes”. However, the Mayor ignores the effect of the 48% average assessment increase will have on all other taxpayers. Given that those with homeowner exemptions pay less than 20% of the property taxes, it is obvious that his honor is evading the principal impact that the soaring assessments will have.

The County officials then launch an unbalanced commentary about recent measures that provide tax relief to certain taxpayers. They disregard exemptions and rate patterns that have been embedded in the tax system and exaggerate the impact of the newer measures. They mention four ordinances that have been enacted by the last Council, but only one, the 6% cap, has any significant revenue impact. In an extraordinary statement, without any analytic documentation, they declare that if the cap were reduced to 2% as proposed, taxes payable by homeowners would be reduced by $7.3 million “this year”. Presumably, they are referring to the fiscal year beginning in July. Since the change from 6% to 2% will only create about $400,000 of tax savings and the County reported that the impact of the 6% cap would impact the current year’s revenue only about $2 million, the accuracy of the $7.3 million claimed seems in serious doubt. But the spin must go on.

The Mayor argues that tax relief is necessary for Kauai citizens, but demeans the four ordinances as “temporary tax relief measures… while long term and comprehensive real property tax reform is completed.” He seems oblivious to the difference between tax relief and tax reform and that tax relief can be provided without tax reform and conversely. His reference to tax reform completion is absurd, because the tax task force recommendations now over one year old have been disregarded and no steps have been initiated to put the reforms they proposed into effect. Mayor, you don’t complete something you haven’t even started.

The failure of our officials to give us straight information about our tax obligations is deplorable and unforgivable.

Mayor's mistaken remarks

According to The Garden Island report announcing his soaring $125 million proposed budget the Mayor declared that the increase stemmed from “a significant increase in projected real property tax revenues that have been generated by a 48% increase in real property assessments”.

If the Mayor had been honest with us he would have told us that there is no necessary relationship between property tax assessments and county spending. Rising assessments are an excuse for rising taxes, not a reason for them. As we all know, if government spending remains constant there would be no need for increased taxes whether or not assessments went up. It is the skyrocketing spending that mandates tax increases.

The Mayor blithely downplays the huge 48% increase in property assessments in the current year which brings the assessed value of taxable properties in the county to over $15 billion. Instead he tells us that they will be responsible for a $17 million rise in tax revenues. Apparently he does not realize that greater assessments could be offset by lower rates. Our government officials just don’t think that way.

His honor also got tangled up in his comment that up to $10.5 million of the budget “could be returned to residents in the form of more tax relief programs”. Setting aside the fact that the County is seeking to invalidate the Ohana Kauai charter amendment which is by far the most meaningful tax relief program that has occurred, resident homeowners only paid $7.5 million in property taxes this year. How does our honorable Mayor explain how over $10 million can be returned to a group that only paid $7.5 million? And isn’t a budget to identify expenditures planned to be made, not moneys planned to be returned to taxpayers?

Then Mr. Baptiste plays games with us about changes in the 6% cap on tax increases for resident homeowners. He says he wants “for the next fiscal year” to change the cap to 2%. Evidently he is unaware that well considered tax legislation should extend indefinitely and not just year to year. How Mr. Tresler and his staff conjure up the notion that the caps would “save” taxpayers over $7 million “this” year is unexplained. If adopted, the Mayor’s proposals would relate to the coming year, not this one.

The Mayor concluded his mistaken remarks with the observation that the assessment notices recently mailed “reflect only a fair market value of properties”. In fact, although by law properties are to be assessed at 100% of market value, the faltering assessment process has averaged assessment amounts at only about 75% of market value and wide discrepancies have existed in the valuation of comparable properties.

It was a memorably disconcerting day for Kauai citizens and taxpayers to observe the irresponsibility of our County officials in presenting and trying to justify the administration’s budget proposals.

Fuzzy Math?

According to the Garden Island article of March 6, 2005 Kaipo Asing spent only $200 to be elected last year for another Council term. Perhaps that was because his proficiency with larger numbers is not outstanding.

The article reports Asing is proud of legislation enacted that in the current year provided $5.48 million in real property tax relief for island homeowners. Let’s check this out.

In recent years the Council has enacted only two significant tax relief measures for resident homeowners. Neither of these ordinances was introduced by Mr. Asing. One is the 6% tax cap and the other is the socalled circuit breaker which sets a 3% of adjusted gross income tax cap. According to data furnished by the Real Property Tax Department for the current year (July 1, 2004 to June 30, 2005) property taxes payable by taxpayers in the Homestead class were $7.502 million. This amount would have been $9.407 or $1.905 million higher except for the two ordinances. Where Asing found the remainder of his claimed savings is a mystery.

Perhaps his misguided analysis includes some lowering of tax rates. This action, though, is only a mathematical correction to adjust the tax amounts to conform the budgeted tax revenues and the assessments and could not reasonably be considered tax relief.

Politicians like to claim that they are helping taxpayers. Our Kauai taxpayers would much prefer if our County government controlled its spending appetite so that property taxes could be meaningfully reduced. Over 13,000 of them voted to see the tax relief provided by the Ohana Charter amendment, but Mr. Asing wants to preserve the exclusive power to enact taxes for the Council. Perhaps the Supreme Court will uphold citizens rights to provide needed laws and we won’t have to strain Mr. Asing’s ability with numbers.

Shameful Deception?

The recent announcement by The Garden Island that it intends to examine the operations of our County government is warmly welcomed. That review should include the real property taxation as it surely one of the most inefficient and inequitable County functions.

Under the tax code all properties are to be assessed at 100% of their market value. Not only is this requirement almost totally disregarded, the actual assessments range from as low as 30% of value to around 90%, resulting in an arbitrary and unfair base for taxation. In the current year the total value of assessable properties was computed at $10.5 billion up about 100% from a decade earlier. The actual value of these properties is closer to $15 billion and the over $4 billion disparity and chaotic valuations offer undue opportunity for government manipulation in its annual quest for over $50 million from taxpayers to fund its excessive spending.

Both public and private efforts have sought to make County property taxation more equitable. The Ohana Kauai Charter amendment is a popular and reasonable measure providing tax relief for resident homeowners. By opposing this measure despite its adoption by voters the County is perceived as abandoning the public interest and seeking instead to protect its taxing powers. Since this posture is not politically attractive County officials are trying to portray themselves as having been diligent in adopting tax relief ordinances and anxious to continue on this path.

Our County officials are resorting to shameful deception of our citizens

Despite the near doubling of County spending and property taxation in recent years only two tax reduction measures of significance have been enacted. Both relate to taxpayers with homestead exemptions. One limits property taxes to 3% of the taxpayer’s adjusted gross income. Its concept has merit, but because of a built in limitation it aids only a small number of taxpayers with modest benefits. The other offers a 6% limit on tax increases from year to year. With inflation running at about 2% over the past decade, it allows government to increase its spending at triple the inflation rate. In the current year assessments were up over 20%, and taxpayers enjoyed tax reductions of over $2 million from this measure. This year’s saving will have a continuing effect, but much new impact is unlikely. It should be noted that the Ohana amendment allows only a 2% annual tax increase to apply to resident homeowners.

Desperate to show government concern about taxes, a real property tax task force was appointed. When its recommendations were issued over a year ago it was apparent to our Council they had three fatal defects – (1) the stabilization of assessments they provided would force the Council to raise rates if tax revenue increases greater than inflation rates were desired. This spotlight on the role of the Council in raising taxes was anathema to Council members.(2) the reduction in the number of tax classifications from eight to two would impair the Council’s ability to shift taxes between classes and (3) the triple weighting of improvement values would significantly alter tax liabilities. These factors remain and it is highly improbable that the recommendations (or even part of them) will be enacted.

The pattern of government spending increases is unbroken which precludes any broad based tax relief, but promises by our government officials are not deterred by reality.

The failures by our County government to control its spendings, to have a fair property tax system and to assure its sound administration are of great concern. The need for reform is critical, but its likelihood of occurrence is remote, in common with remedial actions in other areas such as solid waste disposal, traffic problems, infrastructure deficiencies and sewage spills. The focus indicated by the Garden Island paper on government efficiency or lack of it should help. Is it too much to hope that enough of our citizens will sufficiently care about the consequences to them of our County government failures to bring about the fundamental changes that are required?