Private utility company requesting temporary water/wastewater rate increases for Punalu‘u

In 2019, Eva Liu bought more than 400 acres of the former Sea Mountain resort area east of Hawai‘i Belt Road under the limited liability company called Black Sand Beach.

Her grand plan was to build Punalu‘u Village, a development of 225 residential and short-stay units, a village and wellness center, rehabilitated golf course and tennis facilities, as well as extensive infrastructure upgrades. A portion of the coastline also would be dedicated as a conservation area.

To help make it happen, Liu also bought the private utility Punalu‘u Water and Sanitation. Part of the development would include providing $10 million to update the water and wastewater facility.

Due to opposition to the development by the Colony 1 Homeowners’ Association, Liu said via email that she now has ceased further financial support for the water and wastewater company, leaving it without operating funds.

Application for Temporary Rate Increase by Tiffany De Masters on Scribd

Instead, she has applied to the Public Utility Commission for rate increases for the approximately 100 households that use the private system, including the 76 units in Colony 1.

On Thursday, the Public Utilities Commission, which oversees rates, is holding a public hearing online about the matter at 6 p.m. The meeting will be streamed on Webex here. The meeting number is 2553 439 8611 and password is xmGhtYKe583.

For a copy Punalu‘u Wastewater Sanitation’s application to raise the rates, click here.

Liu said: “We have also repeatedly communicated to both the community and the opponents that without a development plan, the developer will not invest approximately $500,000 annually to maintain operations.”

Jeffrey Silva, president of the homeowners association for Colony I, said the association hasn’t spoken for or against Liu’s development.

“What we want is reliable and safe water, wastewater and fire suppression,” he said.

The water and sewer rates for the private system were established 47 years ago — and donʻt appear to have had any increases. The system now serves residents living in Colony I, Kalana Golf Estates and Black Sands Beach Park in Punalu‘u, a remote southeast section of the Big Island.

Silva said the association receives one bill for water and wastewater for all of its 76 units. The other ratepayers in the system pay individually.

Last year, the cost for the association was approximately $29,000.

“I agree, that’s a low rate,” Silva said. “I’m a firm believer in paying what water costs.”

However, if the temporary rates are approved, Silva said the bill for Colony I residents will approach $300,000 per year. And nobody knows for how long the new rates would last.

“We know that any rate increase is difficult given the high cost of living in Hawai‘i,” a letter from Punalu‘u Water and Sanitation to its rate payers said.

Since Liu took over the sanitation company in 2020, it has been operating at a major loss. And, since the beginning of 2023, the sanitation company has been unable to independently fund the operation of its water and sewer utility services, and instead had been paying its bills with a non-interest-bearing loan of $750,000 from its affiliate company, Black Sand Beach.

Now, the sanitation company said the loan money has run out and it no longer has the financial capability to continue operations, which includes paying staff of Big Island Wastewater and Sanitation that handle the daily work.

The applicant “has only been able to acquire additional financing in the amount of $65,000 as a stopgap measure to fund its immediate operating expenses,” the application stated.

The sanitation company said its annual revenue collected through these user rates is currently $25,006. With the proposed rate increases, it would result in approximately $617,415 in annual revenue, according to documents filed with the Public Utilities Commission.

The sanitation company also said a big problem stems from the system originally being designed for 3,000 households as part of the Punalu’u planned land development in the 1960s. Now, it serves fewer than 100 households.

“The result is that each customer must bear a significantly higher share of the system’s total operating costs,” documents stated.

The money raised from the rate increase would be used to pay for the rising operational expenses, which last year were $246,089, and fund repairs and maintenance to the aging infrastructure that was built in the early 1970s.

Big Island Water and Sanitation agreed to extend its service for two months while the state organized the public hearing.

If a rate increase is approved, homeowners will pay Big Island Water and Sanitation to continue the operations.

Colony I and Kalana Golf Estates residents have been concerned about the problems in the system since Liu took the company over. Just last week, Silva said the well went down and the operator didn’t know the cause.

“If the pump had been the problem, we would’ve run out of water in four days,” Silva said. “This is due to poor management and lack of funds.”

The issue was electrical and has since been resolved.

Additionally, Silva said, no fire breaks have been created since Liu took ownership of the sanitation company and some of the fire hydrants in the community don’t have water.

Property owners in the private system pay a standby charge, whether they use water or not, of $50 per month. The proposed temporary rate would increase that charge to $3,262 per month.

In comparison, Hawai‘i County’s Department of Water Supply has a standby charge of approximately $59.

The county charges residential users $2.98 per 1,000 gallons for those who use at least 5,000 gallons per two-month billing cycle.

According to the application for the proposed rate increase in Punalu‘u would go from the current 75 cents to $8.55 per 1,000 gallons.

For the Colony 1 association, if it uses more than 362,000 gallons, the proposed rate would jump up to $15.40 per 1,000 gallons. Silva said the association has used more than that in the past.

The proposal also involves wastewater rate increases.

“Colony I is not against rates going up,” Silva said. “We are against exorbitant and unjustified increases and continued mismanagement.”

Mike Tom who has lived in Kalana Golfing Estates since 2008 said he’s opposed to the rate increase by Liu because she has done nothing to fix the aging infrastructure and he doesn’t trust that repairs will be made if the temporary rate goes through.

He said twice in the last year residents have had to stop using water and some of the fire hydrants donʻt work: “It’s a safety and health issue.”

“She took responsibility on her own in 2019 for PWS (Punalu‘u Water and Sanitation) and she hasn’t done anything and wants residents to foot the bill,” Tom added. “That’s not pono.”