Editorial: Getting and Spending, and Nothing to Show

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Fraud. That word is not too strong to describe the shenanigans employed by state and county officials and private consultants in their eagerness to spend federal money on the underground equivalent of roads to nowhere. Their actions may all be well within the roomy confines of what is technically not illegal. But there can be no argument that their actions fall short of the mark when measured against the standards of probity and cautious stewardship that taxpayers have every right to expect of those entrusted with spending public funds.

With the expiration of the federal construction grant program for sewage treatment plants, it may be tempting to regard past abuses as relics of a more free-wheeling, free-spending age. It is true that with federal funds drying up, opportunities for abuses will be scaled back. But in a sense, this requires taxpayers and environmentalists to be even more watchful. One advantage to the federal grants program of the Environmental Protection Agency was that its grant conditions required grantees at least to appear to follow certain procedures in the selection of contractors and consultants. Conditions attached to the award of state grant and loan funds, however, are much more relaxed. As the battle for these funds grows, it will become increasingly important to make certain that their distribution is based on need and will be spent in the manner that addresses that need in the most cost-effective fashion.

Promises, Promises

Environment Hawai`i has devoted this issue to discussing the evolution of the new Hilo sewage treatment plant and the sewage collection systems on whose construction rides the justification for building the facility. We do so in the belief that through a detailed account of this one case, readers will have a be able to have a better understanding of the specific ways in which slippage occurs in the administration of funds set aside, ostensibly, to achieve some greater environmental good.

If Hilo were an isolated case, our focus on it would be pointless. But, to judge from the 1989 Audit Report of the EPA Inspector General and the follow-up 1990 Early Warning Report, as well as our own review of other files at the Department of Health and the County of Hawai`i, what has happened in Hilo is not an isolated case but rather a textbook case, typical of what has gone on statewide. Huge efforts are directed toward capturing grant money. In the passionate heat of the chase, promises are made with little apparent expectation on anyone’s part that they will have to be fulfilled. Repeatedly, EPA officials have been gulled into believing that the needed sewer connection lines will be built, that the costly new sewage treatment plants will be maintained, that the state, as the EPA’s enforcer, will hold the counties to their pledges — and that the counties will respect them in the morning.

Maybe this time things will be different. Maybe the County of Hawai`i will pursue construction of collection sewers with the same zeal it displayed in the pursuit of federal funds. Barring a miracle, don’t expect that to happen. The incentives, the driving forces that impel the counties in their search for federal or state funds disappear in the face of projects that entail expenditure of county funds with little or no contribution from other sources. And, in fact, recent documents submitted by the County suggest it is on the brink of claiming that construction of the new sewer lines called for as a condition of getting federal money will push it into bankruptcy.

The counties are happy to spend other people’s money. They’re a lot tighter with their own. When county officials are told they have to spend the latter to get the former, they solemnly promise to do so, fingers crossed behind their backs.

Government by Consultants

It won’t do to place all the blame at the doorstep of public officials. Private consultants play an important role, too. They are retained to help the counties design the plants and supervise their construction, and typically are paid fees that rise in direct relation to construction costs. They may have been hired to work for the County, but above all they are in business for themselves. As becomes clear from a review of the Hilo files, the consultants’ interest is in maximizing the size of a project, without regard to the County’s ability to pay its share.

We would note one other troubling aspect of the work of one of the consulting firms hired by the County of Hawai`i: Barrett Consulting Group. At times it seems to have assumed the functions and authority of a governmental agency. When it was time to open bids for construction work, BCG did the honors. When citizens asked the County to consider non-traditional approaches to sewage treatment, BCG was forwarded the requests. When the second-lowest bid on one project complained about the failure of the lowest-bidding contractor to meet EPA requirements, BCG handled the complaint (among other things, apparently drafting letters for the county’s corporation counsel to send out). Time and again, BCG, in its capacity as project coordinator, ghost-wrote letters from county officials to the state and to the EPA.

Nor does it stop there. In a March 28, 1988, letter from then-Chief Engineer Hugh Ono to Scott Kvandal, BCG vice president, Ono praises the work of BCG’s project manager, Jim Lutz, and states that, “I have … because of my confidence in Jim, allowed him to represent the [County Department of Public Works] in compliance matters with the Department of Health and Environmental Protection Agency.”

Where to Now?

It would be unfair to the Department of Health to leave readers with the mistaken impression that it has done nothing since the 1989 Audit Report. A new deputy attorney general, Larry Lau, has been assigned to work on enforcement matters, and he has invigorated a staff that had been demoralized by the previous deputy A.G.’s weak efforts. (The only problem is the customary one: Instead of one deputy attorney general assigned to handle all DOH environmental enforcement cases, one should be assigned to each branch that has enforcement responsibility.)

John Lewin, director of Health, and his deputy, Bruce Anderson, are generally credited by DOH staff with having a sincere interest in correcting administrative problems and a desire to abandon past practices that were driven by concerns more political than environmental. Environment Hawai`i was also favorably impressed with a number of dedicated DOH staffers who, despite low pay, long hours and stressful work conditions, continue to give the state’s taxpayers more than their money’s worth.

Still, as became clear to us in the course of researching this issue, all is not well in the netherworld of Hawai`i’s sewers. Officials in the Department of Health charged with administering construction grants do not seem to pursue their enforcement responsibilities with the same gusto they broker grant awards. Overworked County officials rely too much on consultants whose interests, to say the least, do not always coincide with those of the public.

Ways exist out of this morass. For starters, county councils should give their administrative departments more positions and greater pay. County officials, we know, are extremely reluctant to add new positions. One of the justifications for using consultants is that they are temporary hires. However, if one looks at the long history of involvement of consultants in planning Hawai`i County public works projects — to give but one example: the firm of R.M. Towill was under contract through most of the 1970s and all of the 1980s designing and redesigning sewer systems for the Kona side — the County could just as well (and more cheaply) hire permanent employees to do the same work.

County, state and EPA officials alike should insist that before any project is given the green light, a serious financing plan is in place, and committed to by County legislative bodies, to see the project through to completion. The idea that no one is really serious about making the counties follow through on their pledges has got to stop.

The Department of Health may be reluctant to clamp down on the counties. The Legislature, then, should review the rules for distribution of state grants and loans. Procedures on consultant selection that are at least as stringent as EPA rules need to be in place before any further monies are awarded. Mandatory penalties need to be in place, too, for counties that refuse to comply with the conditions of their grants and loans. At a minimum, a county that fails to meet construction timetables should be disqualified from any receipt of further state funds for any project until it achieves compliance.

Finally, this process by which a consultant’s fee is a function of the size of the project designed is sheer insanity, virtually guaranteeing boondoggles that may be gravy for the contractors, but are a waste for the taxpayer and the environment. In an age of diminishing funds (even in an age of plentiful funds), monies gathered from the public need to be spent with care. Consultants should be paid a flat fee for a job, and, if they are given incentives at all, those incentives should be for design of plants whose construction costs are below what treatment plants of similar size elsewhere are costing (thus encouraging development and installation of lower-cost alternative treatment methodologies).

As for the particular case at hand — Hilo: The Early Warning Report concluded with a set of recommendations. Among other things, it urges the EPA Region 9 and the DOH to:

Require the county to develop an adequate user charge system (the existing one is wholly inadequate to meet present operations and maintenance costs, much less the demands of the more elaborate system now being built);

“Reevaluate the County’s need for wastewater treatment system capacity of 5 mgd”;

“Require the County to revise its priorities for construction of the collection systems by having larger systems … constructed before the other smaller collection systems”;

Amend the special conditions to provide for the return of all grant funds if the collection systems are not completed as required; and

“Require DOH and the County to eliminate the use of cesspools, and require either the connection to sewer system or the installation of septic tanks, if sewer systems are not available.”

The recommendations are reasonable and comprehensive. To them Environment Hawai`i would add only a hearty “Amen!”

Volume 1, Number 5 November 1990