 Welcome to another thrilling, exciting, and physically responsibility episode of Hibachi Talk. I got my good old buddy, Rick Smauer, the fundmeister. Nice to see you, bud. Great, Gordon. It's good to be here. Good to be here. Good to be here. So, pull up a chair, grab a libation, and we're going to talk money. And we're going to talk about the sitting and counting of Honolulu, and their upcoming budget for 2019. So we kind of got into it last week with Natalie Alasa, who's running for City Council on District 4. Right. I watched that, and, you know, that was really a good show, and if some of the folks that are listening today haven't seen that, that might be a great show to segue into this one. Yeah. We're going to talk about the budget that's being proposed with the City. Now what makes this unique, and then a couple of things, is one is the City Council Budget and Finance Committee yesterday did not have quorum. So there could be no presentation or testimony on the budget. And that was going to be their first meeting on the budget. The proposed budget. So you're hearing the budget here first. So there's been nothing in the news about the budget. We're going to present a high-level view of the budget. And the Finance Committee, they have to hear the budget three times. Hear three times. And so now it's already delayed at least one week. And it's got to be heard and reported to the City Council and heard again and reported to the City Council and reported again, and then, or heard again, and then the City Council has to have the three readings too before they can make that. And they've got to have that budget done and approved before the end of June of this year. Right. And we know how fast they work down at the sitting and counting. So this is going to be interesting. And we bring a little bit of expertise to the table. So it's not like we're sitting here and pontificating on things that we don't have experience about. So you did a two-year stint as the Budget and Finance Director of the City. And you did a lot of cool things when you were there. And I was the IT Director, and I had to deal with you. Oh gosh. But you got what you needed, you just had to approve it. I thought you were going to say, I got what I deserved. Well, that too. Yeah. Okay. But we had some pretty good successes when we were there. And I think it's good that we bring these out first before we dive into this $2.61 billion operating budget. Right. Because I think, you know, we really brought some fiscal responsibility to or improved the fiscal responsibility that the City had. And I think that was for really the citizens. Yeah, it was. We put in a totally state-of-the-art financial system. And payroll system on time and on budget in government. Totally unheard of. And you know, I got to give movie credit. Love them or hate them. He was a strong boss and he drove that train. He drove that train and he drove fiscal responsibility for certainly the time that I was there. I could certainly see that and the guidance and the policy that he had was driving fiscal responsibility. Fiscal responsibility. Right. And so back in 2000 and when was this? 2009. 2010. So during that period of time, you lowered our interest rates on our borrowing. Yeah. Well, that's because of some, but I think some of the things that Mayor Hanuman was doing there as, you know, as part of that, I think, you know, some of the things that we got to remember is that you took all of those financial systems that we just talked about and you put them online so that the citizens of the city, well, anyone who had internet, they could come in and they could see and they could think. And it's still there today. It's still there. So that's why we have this information today. Because you are watching this. You can Google fiscal 2019 City and County Honolulu budget and you get the entire 300 and some odd pages of the budget in agonizing detail, which was never there before. But you know, it's kept, it's hard to take it away when it's been put up there. And people that are interested, they now have direct access to it. They don't have to ask, you know, call up either the administration or call up their council member and say, oh, can you tell me what this is? Can you tell me what, you know, or what this number is going to be? And it's all there online. And it's broken down by department, by line item, by full time equivalent employee. So there's a lot of good reasons why you may want to get on as a citizen and look and say, you know, I'm interested in transportation services or I'm interested in environmental services or I'm interested in climate. Now, I don't know why we have a department on climate, but now the city has a department on climate which costs money and there's more people in the climate department than there is in the ethics department. There's something wrong with that picture as far as I'm concerned. Yeah. And I would agree with you on that as well. Because in my mind, the state should really be taking the lead on climate, well, and maybe on ethics too. Yeah, maybe on ethics too. But the state has multiple climate departments. One was just audited by the auditor and said that we don't understand what they do. They haven't done anything. So I mean, all of these full time equivalent employees and the departments cost money. So let's look at money. Fiscal year 2019, where are we going to go? We're going to throw up a pie chart here and show you where your money's going. Because the money comes from us and, you know, either through taxes, you know, general tax. So here's where it gets the money. Here's where we get the money. So here's 2019 operating budget for this proposed operating budget for the city in County Honolulu. And people just take a look at this for a second because there's a couple things I want to bring to your attention. It's $3.32 billion. That's billion. Yeah. And B, and the difference between a million and a billion, I use this as an example all the time, a million seconds is 12 days, a billion seconds is 32 years. So that's what we're talking here. Yeah. We're talking a full lifetime here, if not more, a lifetime and a half of what we're talking $3.32 billion. And real property tax equates to 37% of that. Okay. That's yours of my real estate tax. But let's bring the chart up. I'm going to get where my heartburn is, okay? I think that 37% is a great comment because that sort of says, okay, I can put that around. Let's use that as a benchmark. And how do other things come together? Let's look at carryover, which is the one that drives me crazy, a 23.86% carryover. That's three quarters of a billion dollars. Three quarters of a billion dollars that's sitting there in carryover. I thought we were doing zero-based budgeting. Yeah. Well, let's talk about what the carryover really means. Yeah. What does that mean? Because what that means is that's money that has been collected by the city. But and that is in the current year and prior years that has not been spent. Three quarters of a billion dollars not spent. What was the carryover when you were the director of budget and finance? The last one when I did the 2011 budget was roughly 65 billion dollars. Not B. Or I'm sorry, million. Yeah. 65 million dollars. 65 million versus three quarters of a billion dollars. So this is carryover, which I take as money that was collected but never spent. And if the city never spent it, then really, they should have never collected that money. Collected it from us. Yeah. And now it's more than 10 times the amount of... That it was 10 years ago. Not even 10 years. Yeah. Seven years ago. Seven years. The money that they are collecting and are not spending is more than 10 times what it used to be. So here's comes back to my other point. Can I say there are two things about that? Yeah. One is the administration, that's the mayor, they're requesting that. Right. But the other thing is the city or the city council, they're approving that request. Right. So there are those two pieces of the city government that have increased the money they're requesting and are not spending by 10 times in seven years. Seven years. I mean, so we got a three quarters of a billion dollar float, it's kind of like how I'm looking at it. That's in somebody's bank account. Yeah. It could be in territorial. I don't know. Anyway. We're going down another path. I shouldn't. But here's my other point. If you look at the chart, 40 plus percent of the expenditures in the operating budget give us no services. It pays off debt, 20 percent in debt, 21 percent on what's classified by this administration as miscellaneous. Miscellaneous. AUT, another billion. 20 percent of 3.2 billion dollars. 3.2 billion dollars. And is miscellaneous? Miscellaneous. It's always FICA, EUTF, et cetera. Yeah. I always use a lot on it, et cetera. Yeah. But we should know, what is that more than miscellaneous? So I think the city council should be asking, we want to break down of this and the also thing I think they should be saying is, and this is where you and I can have a good conversation, I think a significant portion of that money that's in the carryover should pay down the debt service. Well, and I think a little bit different about that the carryover should go to fund the unfunded pension liability. Yeah, the unfunded liabilities, the pension liabilities. Yeah. Either way, we win. Yes. And I think that's why the city council has to have a really strong conversation about what is, you know, we have this money. We didn't spend it in prior years. If we're going to ask for it now, what is it going to be spent for? It should not be carried over into another year. Especially if we're doing zero-base budgeting. Okay, we got to take a break. We got to take a break. Yeah. This goes fast. Yeah. We got to take a break. We're going to go pay some bills with money we have, not from our debt service, and we'll be back in about a minute. This is Stink Tech, Hawaii, raising public awareness. Match Day is no ordinary day. The pitch, hallowed ground for players and supporters alike, excitement builds, game plans are made with responsibility in mind, celebrations are underway, ready for kick off. The club's and our supporters rise to the challenge. We make responsible decisions while we cheer on our heroes and toast their success. Elevate your Match Day experience. If you drink, never drive. 9.8. Aloha. Guard of the Tech Star here. Welcome, welcome, welcome. Welcome to my seat. I'm here with my good old buddy, Rick, the former budget finance director of the city and counting in Palo Lilo, a former DIT director, and we're talking about the upcoming budget for the city and county that was supposed to get its first hearing yesterday, but there's city councils in a little bit of turmoil right now. A wee bit. A wee bit. And so they didn't have a quorum and it's been delayed, but we're going to bring it to you first. So in the first half, we talked about 2019, the carryover and how it should be spent. I just want to show that this wasn't just 2019. Look at 18. I'm going to bring up the chart for 2018. The carryover in 2018 was 29.16 percent. So they spent some of it because now carryover is only 23, 22 percent, say? So there was a spend there, but guess what, we now have a history. So we can say, guess what, you can have 6 percent carryover, maybe a 6 percent carryover, or 10 percent carryover is fine, but the rest of it is going to go to, how about back to you and I? How about we reduce our property taxes? Well, that would be good. What about our car registration? Well, we're going to raise the fees. So guess what, we're raising car fees, we're raising... Well, that's proposed. That's proposed. We've got all these increases. Why do we need these increases when we've got three quarters of a billion dollars of carryover? Right. And are we really... And that means that the city has requested and gotten approved for three quarters of a billion dollars that... They did in 2018? Yeah. The city council approved three quarters of a billion dollars, if not more, for carryover. For what? And now they're going to have three quarters of a billion dollars, 750 million dollars that they got appropriated and didn't spend? Yeah. I mean, this is giving me heartburn. And then they're going to borrow, they're going to float bonds, we're going to float bonds to pay for rail, but also going to float bonds to pay for their operating budget of rail, I've heard, from Natalie last week, which means that we're using our credit card to pay for our operating expenses. It's like you and I running up our credit card and making the minimal monthly payment. Exactly. And we got the money. If we go back to the fixed base budget... Yeah. Zero base budget. Zero base budget, yeah. That means that they are asking for three quarters of a billion dollars more this year than they're spending last year. That's not a... It's strange. Zero base budget. No, that's not zero base budgeting. Or if it is, what's the $750 million increase? It's encumbered. What they're going to spend this year? Is it like... So the question becomes, okay, well those funds are encumbered, okay, what does that mean? You've got signed contracts. Well, those have two-year term limits on capital ones, at least they have those. So there's term limits on the contracts. And that's... And is it to fund FTEs that we don't have, you know, full-time equivalents was employees that we don't have? So we're squirreling that away as well? Yeah. I mean, there's just three quarters of a billion dollars. If they were saying like three million dollars, okay, I can live with it, but not three quarters of a billion dollars with all the stuff that's going on right now. It just doesn't make sense. And maybe I'm dumber than a doorknob, but you know... And maybe I've missed something over the last couple of years. Yeah, maybe you've missed something over and you've been in finance for as long as the dirt. A year or two. Yeah. Okay, so here... So we're just going to kind of look at this thing. So I want to bring up... There's a slide... I want to show a five-year history of resources and expenditures. Just to give everybody a sense, I think it might be slide number six on the deck that I put out there. And you just want to take a look. It's never going... I noticed it's never going down. You noticed that? Yeah. It's never, ever going down. If you take a look at... No, bring up the next one after this, which is going to be a bar chart. Five-year... There we go. Five-year history of resources and expenditures. And by the way, all of this is available online. So this is all available for you, Mr. and Mrs. Citizen, to look at where your money is going. Their hand is in your pocket. And you need to be paying attention to this by department. So you can start looking at this. Every year it's going up. Every year it's going up. The operating expenditures are going up. Capital expenditures are going up. It just continues to go up. Yet we've got a one three-quarters of a billion dollar... I'm not going to let this up... Three-quarters of a billion dollar carryover. Yes. Yet they keep increasing the budget. I noticed they're increasing... Now, they decreased the carryover from 18 to 19. So we'll give them credit for that. Yes. They spent some of that carryover. They spent some of that carryover. But it's still three-quarters of a billion dollars. Yes. I think 50 million dollar carryover is good enough. Yes. Maybe 100. 60 to 80 would be fine. Yes. But we don't... On a 3.6 billion dollar budget. Okay. I think that would be fine and reasonable. And, oh, by the way, if you are so aggressive and so good at getting things done that you've used up that money properly, then you go back to the debt service that you've been paying down and take a little bit more out of it. You have it anyway. Yes. It's not like a line of credit. Yes. You've got the money anyway. And, you know, if we wanted to go... I shouldn't say we, but if the city council said... Or the city council and or the mayor were to say, you know what? We want to... We have spent all of our pothole money and we'd like to... We'd like to do some more pothole work. Then here's another... I think the city council... I think the city council would go out of heartbeat. I want to get 10 more million. Yeah. I think the city council would give you that money like that. Except they'd be squabbling over whose district is the potholes fixed first. That would be... So my thought would be you give each city council person a million dollars for their particular district, then you don't have to worry about the squabbling over ours first for the... Which one is it? I don't think we're... You know, there's a lot of potholes out there and it seems like there are a lot more today. I know the mayor says I'm spending all of this money, but quite frankly, it looks like there's... My car feels like there's a lot more potholes today. Oh, we won't talk about the damage shocks that I've had to replace because of the pothole. I've placed about $1,000. And I don't know if they're still doing it, but back when I was there, if they repaired the same hot pothole five times, they counted that as five pothole repairs. Yeah. No, no, no. That's one pothole repair that you've screwed up four other times. And it didn't last. And we use sub-materials and I can go back to a previous show where we've had pothole and asphalt experts on our show and say that the city is famous for using sub-standard materials and that's why these potholes come back time and time again. The same potholes keep coming back and they keep painting the same circles around them all the time. It's like it gets filled and then a month later it's back because they're using... Kalanana LA Highway. Yeah, yeah. No. That's the state. Yes, that's the state. It's a combination of both, actually. And the state has said, yes, we've gotten federal funds to do that. But that was a year and a half ago. And it's still there. And we don't have snow. So I've got to tell you, this is a true story. So I was in Utah a couple of weeks ago and I came across... There was a sign on the road that said yellow signs, that damaged road. And I said, wow, look at this. The state or the city is giving me a heads up that the road ahead is damaged. So I drove for like a mile, I kept waiting to find the damaged road. Now there was a couple of minor cracks or whatever, but they classified that as a damaged road. I'm thinking, man, we'd have to spend a million dollars in signs just to say damaged road. And they'd be up there forever. And then they'd have to get permission from the poll committee on whether or not they could put it on. Well, here we go again. So all the extra people we have out there. OK, so we're kind of... But the outdoor circle, there would be so many signs. The outdoor circle would go crazy if there were so many signs. So many yellow signs saying damaged roads. We're giving the wrong impression. No, we're not. I'm saving my tires in my car. I'm out of shock. So what do you think? So what do we get? I'm going to be submitting some testimony. I hope that many of the viewers will submit some testimony. And mine's going to be focusing on the three things. It's like the carryover, the unfunded liabilities and the miscellaneous, which is, you know, FICA pension fund contributions and all those kinds of things, which is 40%, which gives us nothing in return. Yeah, it's just an ongoing amount. 40% of my money is not giving me anything. So it's like walking into the store and I'm going to buy a chocolate bar for $1, but it's going to cost me $1.40 because I'm going to give you 40 cents more for nothing. Right. And you're going to have to pay general excise tax on that as well. Oh, thank you. And the state has a surplus. So the state has a surplus. Well, there you go. And so here's the other thing. So you and I were involved in that. And how about, you know, Go ahead. This is a little off track. I need a proud member back. I'm hyperventilating here. So what is the state going to do with that surplus as well? Again, are they going to take that money next year? Are they going to actually use that to reduce the money that they're going to ask for? The unfunded liabilities that you're talking about, $14 billion. Do you think they have an unfunded pension liability? I heard it was a little bit. I think it was $14 billion. $14 billion. Yeah. Unfunded liabilities for pensions and all of those kinds of things. So $14 billion. Give the union a shock. Yeah. How many, how many seconds, how many years of seconds? $14 billion. That's 32 years times 14. That's 400 years. That's 400 years worth of debt we have out there. Yeah. If we paid a dollar off every second. Every second. Something like that. I don't know how that works. It's just crazy. It's just crazy. So I mean, we need to, as citizens, we need to pay closer attention to this. We can't let them be doing these kinds of smoke and mirror things with the numbers. I want some real numbers when I'm there and giving some testimony down there. We should put pressure on our council members because they're the ones that are approving the carryover. They're the ones that have to provide the votes to get that, to get the budget passed. And what we didn't see here, but I'm sure it probably is online, for the real property tax, there are two pieces of that. What is the value of the property? Right. But then what is the rate? That they're charging. Yeah. And it is. If you go there, it is in there. It talks about the value and the rates. Right. But the real question there is, at least for the property that I own and perhaps yours as well, that the property value, the assessed property value, that's gone up. It's all gone up. Year over year. Yes. If the city to keep the same amount of money, they would have to lower the tax rate. Yes. If the assessed value goes up. Right. So the rate should go down to keep it. Theoretically, the rate should go down. If the rate is not going down, That should go down. That means that same rate, more assessed value, the city is getting more money off of just, that's just math. And so let's say the rate and at the same time the values are going up. Right. It's a double hit on us. Yeah. Especially fixed income individuals. Right. And the real question I guess in my mind is, to keep the property tax level year over year, if the assessed value goes up, city, you should bring your rate down. You should bring your rates down. Especially to cover it. To keep our tax, our tax check the same. Reasonable. Yes. I agree. So anyway, we just burned through 30 minutes. And you can tell we were a little bit animated about this. I hope you pay attention to this. I hope you go online. Just Google city and county hall a little fiscal year budget 2019. The 300 and some odd page document is right there by department in great detail. There's an executive summary. I mean, my hat's off for having all there. So it's available to us and for us to look at it. And if you've got a concern about something, then write in testimony. You don't have to go down there. No. And wait in line. Write in testimony and send it to your council member. Absolutely. And that's what we've got to do. Anyway, Mr. Mauer, sir, it's been a pleasure. Mr. Bruce, my father. Yeah, okay. And so, and like we say at the end of every show, one, two, three. And how are you doing?