City Council members are asking the head of the Honolulu Board of Water Supply to help explain to the public why water rates are going up in October, while he defends a program that gave big bonuses to top employees.

Honolulu Board of Water Supply manager and chief engineer Cliff Lum yesterday said the board is raising rates for the first time in 13 years because operating expenses overall have gone up between 30 and 35 percent. "That's why we're raising rates," he said.

"Did we raise rates to give bonuses? Absolutely not," Lum said.

The board's top two executives received lucrative one-time bonuses in December 2004 as part of a total $555,763 in incentives to 49 employees over three years.

News of the bonuses first appeared in The Advertiser last month.

Board officials acknowledged giving bonuses of $63,000 to the then-manager and chief engineer and $54,000 to then-deputy manager after they met performance goals reviewed and approved by the board.

At the time they received those bonuses, the executives were paid $126,000 and $120,000 a year, respectively.

Since then, residents facing higher rates have complained about the actions of the city agency.

That prompted City Councilman Charles Djou to propose the water board prepare a public report to the council on the program that prompted the bonuses.

"The Honolulu Board of Water Supply recently voted to increase water rates by 57 percent while they issued salary bonuses of over $500,000 to senior staff," Djou said.

He said he supports modern management practices in government but wants to know more about the entire program.

The board adopted the program after the state Legislature passed a law in 2003 that allowed the board more autonomy over its actions.

Councilwoman Barbara Marshall said she and other council members are getting calls and letters of complaints from residents who are receiving notice in their water bills that they will soon see an a five-year upward climb — beginning on Oct. 1 — when the first increase of 13 percent takes effect.

Djou and Marshall both are awaiting the city auditor's report on the Board of Water Supply that is being prepared now in a separate action.

Under the program, the top two water executives and nine other management officers received bonuses ranging from $12,500 to $46,004 for reaching performance goals. A separate civil service incentive program provided 38 employees with a total of $171,259 in bonuses.

Lum said he thinks the bonuses are an effective way to help guide good work by offering incentives for meeting performance goals.

He said he understands that the program may make the agency a target for criticism since other government agencies do not have similar programs. "If that comes with a bull's-eye, so be it," he said.

But Lum said he believes that the self-sustaining agency — paid by the customers who get fresh water from the system — is well-run and keeps costs down. "We're the cheapest on the West Coast," he said. "We're the cheapest in the state."

Lum said the difficulty of hiring sought-after engineers for lower-paying government jobs is showing up on Kaua'i where the county has been without a top manager of its water board for eight months. He said the board there has proposed raising the salary range and offering incentives to try to lure someone there. "They simply cannot get a qualified person to apply for the job," he said.

The council voted to approve the resolution asking for a report on the bonus program, its goals, timeline, budget, expenditures, improvements and savings. They asked that the report be completed six months after the city audit is completed.

Before then, Councilman Nestor Garcia said, the board needs to give the public and the council a good explanation of what he called "the October surprise" of higher rates.

Reach Robbie Dingeman at rdingeman@honoluluadvertiser.com.