North Kona well repairs add strain to DWS budget

KAILUA-KONA — While 2017 proved to be a dry year for Kona residents, it also tapped deeply into water department maintenance funds.

So far, the Hawaii County Department of Water Supply has spent just north of $1.4 million in fiscal years 2017 and 2018 on repairs for North Kona deep well sites at Waiaha, Keopu, Hualalai, Palani, Honokohau and Keahuolu — the six wells associated with the water crisis in the region that persisted for nearly all of 2017.

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By comparison, repair costs for those same wells totaled more than $150,000 in FY 2016.

The department’s fiscal year runs from July to June. North Kona’s water crisis — which prompted 362 consecutive days of varying mandatory water usage restrictions throughout North Kona because of well breakdowns — stretched over the 2017 calendar year, January to December.

The cost of repairs that allowed the district to finally climb out of mandatory restriction status crossed two fiscal years — and is still on the rise.

“Repairs to the North Kona deep wells used up a sizable portion of our annual (Capital Improvements) repair and maintenance budget, which is set aside for the entire island,” DWS spokesperson Kaiulani Matsumoto said. “Most of the money spent on repairing the North Kona deep wells (was) provided by our CIP budget.”

The department has doled out more than $1 million of the reported repair funds for the six deep wells in FY 2018 alone, which only reached its halfway point on Dec. 31 — the date from which the most recent DWS financial data is available.

And the department will be required to spend more money, as deep wells at Keahuolu, Hualalai and Waiaha remain offline.

Matsumoto said the department hopes problems at Keahuolu are “top side” and won’t require expensive contracting or equipment costs.

She added DWS may also be able to mitigate costs for repairs at Waiaha, where deep well equipment must be fished out of the well following a botched extraction by Derrick’s Drilling and Pump Services LLC in late July. How much of the cost DWS will shoulder and how much will fall to Derrick’s has yet to be determined.

“Hualalai, that one’s kind of interesting because it’s the one that came on just for a short period of time, so there’s still some issues that need to be ironed out,” Matsumoto said of the deep well that was repaired in early October and tripped off again only a few days later.

Based on DWS information sheets updated on the department’s website Jan. 11, there are no timelines for the return of any of North Kona’s three remaining offline wells.

The flow of money

After a rough 2017, Kona was downgraded in early January to a 10 percent voluntary conservation.

Over that year, several unexpected deep well equipment failures and subsequent repairs in North Kona significantly stressed DWS financial stores set aside to address such matters islandwide.

Monies for repairs and maintenance exist in two DWS budgets. The first is the CIP budget Matsumoto referenced, which holds $2 million in reserve for repairs and maintenance and totals $26 million for FY 2018.

The CIP budget drops precipitously in FY 2019 to under $14 million, phasing down incrementally to $10 million by FY 2022. However, because the CIP budget is project-based, the decline will not influence the $2 million figure for repairs in years to come.

As for the repairs, most equipment comes with a one-year warranty and DWS may try to divert some equipment replacement costs back to manufacturers, though Matsumoto wasn’t able to confirm any such action or the potential results.

“We hold our contractors and suppliers to their contractual requirements including applicable warranties and cannot comment on any pending litigation,” she said.

The second source of repair and maintenance funding is the operations budget, which sets aside a shade under $2.5 million for such purposes and totals just over $54 million for FY 2018.

Expenditures associated with repair services addressed by the operations budget include maintenance costs, contractual services, as well as materials and supplies.

These funds, however, are meant for more than just deep well repairs. They are also utilized for vehicle maintenance, buildings, water system infrastructure and office and field equipment.

DWS has yet to finalize its audited financial report for FY 2017, but Matsumoto said it does not appear the yearlong North Kona water crisis pushed DWS costs higher than revenues. The overall impact of the water shortage to FY 2018 remains an open question.

Matsumoto said the department had spent 47 percent of its operating budget for FY 2018 halfway through the fiscal period, which began July 1, 2017 and will round out on June 30.

The financial strain caused by the problems in North Kona over the last year will not influence water rates on Hawaii Island, Matsumoto said. But regardless, the price of water is going up July 1, when FY 2019 begins. Rates will increase again the following year.

The hikes are based on a five-year rate study that was conducted in 2015 and set rates and rate increases through FY 2020.

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“Based on this previous rate study, there is a scheduled 5 (percent) rate increase for both fiscal years 2019 and 2020,” Matsumoto said. “In (FY) 2020, the department is expected to conduct another rate study to determine whether further rate increases are necessary.”

She added DWS is required to hold public hearings before implementing any rate adjustments.