Ozawa’s Voting Record: Pro-rail in a Pinch

Councilmember Ozawa is chair of the Honolulu City Council Committee on Budget and for about four months has been holding two resolutions that would authorize bonds to pay for rail. The Federal Transit Administration (FTA) has forced the issue by giving a 60-day deadline in a letter they released September 21.

By not putting these resolutions on the committee’s agenda, Ozawa has already cost taxpayers $300,000 – $600,000 in extra bond issuance costs, according to Nelson Koyanagi, Director of Budget and Fiscal Services. But let’s take a closer look at some of the other rail measures.

Bill 22 (2018), CD2, HART’s Capital Budget for Fiscal Year 2019

Earlier this year Ozawa used a sneaky tactic to try to authorize the use of city funds to pay for rail. In a floor draft of Bill 22, CD2, HART’s capital budget, Ozawa included a one-sentence proviso:

(g) Notwithstanding the provisions of Ordinance 07-001, City revenues may be used to pay for the debt service for the $44 million appropriated from the general improvement bond fund. (Emphasis added.)

During discussion on June 6, he stated he came up with “this solution,” because no one had any other suggestions. There had been no discussion of this option during prior meetings. Other councilmembers were therefore concerned that there hadn’t been adequate notice to the public, and the amendment did not pass.

By the way, Ozawa’s support of this proviso isn’t “adamant opposition to using property taxes to pay for rail construction” as he stated in a recent email.

Bill 42 (2017), CD1, Authorizing the Use of City Funds for Rail

In order to address the deadline given by the FTA, the Council recently held special meetings to discuss Bill 42. The bill would allow the use of city taxpayer funds, e.g., real property taxes, to be used to pay for rail. Ozawa voted “no,” but this was a safe vote for him, because Councilmember Ann Kobayashi was the only other no vote. The bill continues to move forward and will be up for final reading on October 30.

When the pressure is on, however, Ozawa pulls through for pro-rail groups, as evidenced by his votes on two measures in 2017.

Bill 34, (2017), CD1, Authorization to Issue Bonds Equal to HART’s Capital Budget

Bill 34 (2017) is the initial authorization to issue bonds to cover capital costs of rail. Ozawa voted “no” on second reading, then switched to “yes” at the final hearing, June 7, 2017. From the Honolulu StarAdvertiser:

City Councilman Trevor Ozawa represented the swing vote, switching from a “no” to a “yes” after he read a statement from the dais at Honolulu Hale.”

All bond issuances must be approved for specific dollar amounts after the general authorization is approved. In this case, Ozawa again shows his pro-rail position when voting on Resolution 17-173.

Resolution 17-173, Authorizing the Sale of $350,000,000 in Bonds to Finance Capital Costs for Rail

On July 12, 2017, Ozawa voted “yes” on Resolution 17-173, which was the authorization for HART’s first bond issuance. Councilmembers Fukunaga, Kobayashi and Martin voted “no.” Six votes are needed to approve bond issuance. Had Ozawa voted “no,” the resolution would not have passed.

Ozawa also does not act with fiscal prudence regarding HART’s budgets.

Bill 21 (2018), CD2, HART’s Operating Budget for Fiscal Year 2019

In testimony before the Honolulu City Council, I asked councilmembers to cut HART’s budget, especially public relations (PR). Ozawa initially cut two PR staff, but then he added them back for final reading. In addition, he gave them $44 million more to spend. Roy Amemiya, city managing director, expressed concerns about this, because it means the city will have less oversight of the $44 million.

Bills 17 and 18 (2015), HART’s Operating and Capital Budgets for Fiscal Year 2016

During the March 31, 2015, meeting of the Hawaii Kai Neighborhood Board, Ozawa stated he made cuts to the HART budget. The record shows, however, that he made no cuts.

According to the FTA, there’s still a $134 million shortfall in HART’s projected revenues. In addition, with a budget of only $848 million for the City Center Guideway and Stations from Middle Street to Ala Moana, it’s very likely that additional funding will be requested. Ozawa may vote “no” on rail measures prior to the election, but when the pressure is on and voters aren’t able to exert much influence, I’m sure we’ll see his pro-rail nature shine through.

Note:  This is a re-post from my site.

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Rail’s Numbers – A Pattern of Errors and Inconsistencies

The HART board formally accepted the audit of their June 30, 2015, financial statements at its meeting January 28. During that meeting, I mentioned that their note on “Liquidity Risk” included a statement that the federal government “may” require the return of federal funds if there is a breach of the grant agreement and that this is inconsistent with statements HART has been making.

HART chair Don Horner then made a point of asking the auditors whether they had found any “pattern of errors,” “inconsistencies” or “sloppy information.” The auditors said “no.” But what Horner failed to point out is that the errors and inconsistencies that I’ve found are beyond the auditors’ scope of work.

The reports that contain these errors have been used by legislators and councilmembers when making decisions related to rail, and I think it’s important we understand just how pervasive this problem is.

Here are the errors, with more detailed information below:

Accrual Basis Mixed with Cash Basis

The legislature had good questions for HART last year when they were discussing the extension of the general excise surcharge tax. One report that HART provided in response was “Revenues from January 1, 2007 to December 31, 2014.” The report shows a mixture of accrual basis and cash basis numbers for revenue. For people who are unfamiliar with these concepts, an analogy would be creating a table of temperatures with some listed as Celsius and others as Fahrenheit. It doesn’t make sense and just isn’t done.

Incorrect Revenues and Inconsistent Expenditures

The revenues report led me to HART’s monthly “Planned vs. Received Project Funding” figure, which is included in HART’s progress reports and the monthly ad that is published in the Honolulu Star-Advertiser. This report double counts $298 million of revenue. This is not an obvious error but had been repeated many months (possibly years – I didn’t go back to check) until it was finally corrected in the August 2015 PMOC report.

HART provided a number of reports to the Honolulu City Council in response to questions about the surcharge tax extension.  Table A-1, “Capital Plan Cash Flows @ 4% GET Surcharge Growth Rate” projects“All Other” revenue to be only $6 million, but as of the date it was given to council, other revenue had already exceeded $9 million. This is the table that Chair Martin based his amendment on for the floor draft to Bill 23 (the surcharge extension) that went to the mayor for his signature.

Table A-1 also shows expenditures to date (June 30, 2015) of $1,512 million, while the “Quarterly Cash and County Surcharge Revenue Report as of June 30, 2015” shows total expenditures of $1,637 million. HART’s monthly “FACTS” ad shows the expenditures at yet another amount — $1,581 million. No one on the council asked HART in a public setting why these numbers don’t match. No one from HART provided me with an explanation.

Other Types of Errors

Mayor Caldwell has stated he prefers the surcharge tax, because 33% to 38% of the tax is paid by visitors and offshore military. The amount is actually less than 20%.  Additional information on this was provided by me to the city council October 21, 2015.

When Ann Kobayashi asked HART for their ridership plan, they gave the council a table with columns of numbers that didn’t add up. Even the “Raw Data” from which the table came from had math errors.

When the city council was discussing authorization for HART to issue bonds backed by the City and County of Honolulu, HART provided the council with a cash flow projection that included a $140 million math error. This document is now part of our city law in Resolution 15-7.

HART’s updated “Project Balance” as of October 15, 2015, was confusing at best and also included a math error. Here’s my suggested presentation of that same information.

The most recent error I found was related to the $26 million change order for the West Oahu Farrington Highway Guideway. HART did not include a credit of about $5,000. However, they did round up administrative costs, so that the net impact was about $2,000 . . . in the contractor’s favor.

Update:  there was one more slide related to the WOFH change order that had an error.  The total was off by $4,000 and was presented to the HART board at its December meeting.

These are just the errors that I’ve noticed. HART produces many other numbers for decision making and “public consumption.” Isn’t it time that they were accurate, complete and consistent?

 

HART Math – When 1 + 1 Doesn’t Equal 2

HART has provided the Honolulu City Council with financial information in response to questions raised about the rail project.  The information includes math errors and inconsistent numbers.

For example, project expenditures are $1,637, $1,581 or $1,512, depending on which report one looks at.  More examples are available in my testimony, here:  Testimony Bill 23 surcharge 11-9-15 special budget with att.

The council is holding a special budget committee meeting at 5:30 p.m. at Washington Middle School.  Please make your voice heard.  The agenda is available here:  Special Budget Meeting Agenda.

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Every Vote Counts, Real Property Tax Update and CFE

Wow!  What a finish — a 47-vote spread between Trevor Ozawa and Tommy Waters in the race for Honolulu City Council.  That’s out of a almost $32,700 votes cast.  It’s interesting to note there were 4,451 blank votes (12%).  It just goes to show that every vote does count.  I’ll continue to attend council meetings and testify on a wide range of issues.

You may recall one of the things I said we need to do is review the entire real property tax system.  The 2014 Real Property Tax Advisory Commission had its last meeting of the year yesterday.  This is a good start.  They made several recommendations that I support.  Chair Martin said the report wouldn’t “sit on the shelf” like the prior report, and that they would be drafting legislation based on the report.  I look forward to that.  Here’s the most recent draft:  http://www4.honolulu.gov/docushare/dsweb/Get/Document-153183/dspage07014491450207921423.pdf.

You may have noticed it’s been a while since my last post.  I’ve been studying for the Certified Fraud Examiner’s test, so I can become a CFE.  My goal is to take the exam by the end of the year.  Recommended study time is about 64 hours, so I’ll be taking a little break from this blog until the beginning of next year.  If something comes up that you think I should know about, however, please contact me.  Aloha for now.