Senate committee defers bill that would cap water and sewer charges for DHHL beneficiaries after utilities warn of major revenue loss

Senate committees on Hawaiian Affairs, Housing and Energy recessed debate and moved to indefinitely defer Senate Bill 1409 on a recommendation from the chair after county water and sewer officials warned the proposal could create substantial revenue shortfalls.

The bill would limit certain county user fees for Department of Hawaiian Home Lands (DHHL) beneficiaries, a change DHHL asked the legislature to consider to reduce monthly housing costs for beneficiaries. Department of Hawaiian Home Lands Director Carly Watson testified in support and said, "A typical homesteader pays about $240 a month for sewer and water," and that DHHL identified about 4,443 existing DHHL customers for the analysis she presented.

Why it matters: county water and sewer systems said the change would shift costs onto other ratepayers or require service cuts. Multiple municipal officials told the committees they oppose the measure as written because of the scale of projected lost revenue and the potential operational impact on utility systems.

County officials and utilities characterized the potential fiscal effect in testimony. Ernie Lau, manager for the Honolulu Board of Water Supply, said the board "submitted our testimony in strong opposition to this measure" and explained that the utility’s rates cover the cost to "operate and maintain this water system" and capital renewal for pipes, pumps and treatment. The Board of Water Supply estimated Oahu currently serves about 4,500 customers on DHHL lands and projected cumulative lost revenue of roughly $32–$36 million over five years under the proposal as presented, saying the board would need to recalculate impacts on other ratepayers.

Roger Babcock, director of the City and County of Honolulu Department of Environmental Services, said city sewer estimates showed about $5 million in lost revenue for existing customers. Keith Okamoto, testifying for the County of Hawaii (Big Island), told senators his island has "just shy of 2,000 customers on Hawaiian homelands" and estimated an annual revenue loss of about $2.25 million.

In response to those figures, members and staff questioned whether the state or DHHL would identify alternate funding or whether the department could generate sufficient revenue from commercial properties and other projects to offset the gap. Director Watson told the committee DHHL is pursuing revenue-generating projects and said capping monthly bills could materially help low-income beneficiaries who face overcrowding and other socioeconomic challenges. "This $240 a month waiver would go a long way to only addressing the monthly cost that a lot of these individuals and families face," she said.

Committee action and next steps: after extended questioning of department and utility witnesses, the committee chairs recommended indefinitely deferring SB 1409. The Committee on Energy and Intergovernmental Affairs signaled agreement with that recommendation. No final funding substitute or offset was adopted during the hearing.

Votes at a glance

- SB 1409 (County user fees for DHHL beneficiaries) — Committee chair recommended and the joint committee agreed to defer indefinitely (tabled). No formal roll-call tally was recorded in the transcript; the action was made on the chair’s recommendation and noted as agreed by the joint committee.

Context and constraints

Witnesses emphasized that county water rates primarily recover the costs of operating and maintaining water systems and capital renewal; several county witnesses noted utilities receive no general tax support and rely on rate revenue. Testimony included multiple estimates of affected customers and projected revenue impacts; committee members asked utilities to return with detailed breakdowns of how lost revenue would affect per-customer rates and assistance programs.

Ending

Senators and committee staff asked utilities and DHHL to provide follow-up analyses on revenue impacts, customer-assistance programs and potential funding offsets. The committee moved to recess after agreeing to defer the measure; no further action on SB 1409 was recorded in the hearing transcript.