Honolulu needs to cut $20 million from its operating budget even though the city isn’t even two months into the current fiscal year.

A satellite city hall in Kailua will close, the size of new recruit classes for police and firefighters will shrink, the ocean safety lifeguard program and tree trimming services will face reductions.

There’s been an elaborate blame-game over the sudden hole in the budget, with Honolulu Mayor Kirk Caldwell pointing the finger at the City Council for killing his gas tax and earmarking millions of dollars for nonprofits.

But after a Wednesday meeting of the Honolulu City Council’s Budget Committee it appears that much of the unexpected shortfall is the result of a new contract that an arbitrator awarded to Hawaii’s police union. It’s also being attributed to the administration’s failure to anticipate the real cost of the new deal.

The State of Hawaii Organization of Police Officers was recently awarded a new collective bargaining agreement that will cost the city an additional $200 million over the next four years. This deal includes 16.8 percent salary bumps, plus additional pay if officers meet certain conduct requirements.

Caldwell and his staff have said the price tag for the new SHOPO contract — which was awarded in a binding arbitration decision — came as a shock. It was much higher than they had budgeted for, and it arrived just as costs related to contracts with other unions were up for negotiation.

Budget Director Nelson Koyanagi said the city based its budget estimates for what it might have to pay SHOPO and other unions on a collective bargaining agreement that the United Public Workers union had already signed. That was for a 3 percent increase. They assumed that the negotiations with other unions would result in similar agreements. But when SHOPO’s award came in higher — and with the additional perks — the city needed to “substantially” modify other spending plans.

“The feeling was the other unions would be looking at (UPW) as a measure [of] what they would settle at,” Koyanagi said. “But most of the other unions came in at higher than 3 percent so consequently the collective bargaining was very expensive.”

The city initially estimated collective bargaining would cost $20 million in the current fiscal year. That figure is now closer to $40 million, Koyanagi said.

Council Chair Ernie Martin said the administration should have done a better job of anticipating the higher costs, particularly for the police. At the budget meeting, he said that SHOPO historically gets what it wants in collective bargaining and, in an exchange with Managing Director Ember Shinn, he implied that the administration should have expected that.

“Were you or the mayor fully advised of what SHOPO was asking for?” Martin asked Shinn.

“Yes,” she said.

“I’m sure they weren’t awarded everything they were asking for,” he continued.

“Just about,” Shinn responded with a chuckle.

“So you knew what the higher end was?” Martin said.

“We (did),” Shinn answered. “But, you know, chair, we can only make our own projections based on what we think should have been a reasonable approach by the arbitrator.”

Arbitration proceedings were already underway when the Caldwell administration took the helm at Honolulu Hale, but Shinn said Honolulu was the only county to put on an “aggressive defense” when describing its “financial picture” to the arbitrator.

“We were hoping that the arbitrator would take into consideration the fact that our other employees, our non-police and non-fire employees, had not received salary increases for a number of years and had taken furlough days and five percent cutbacks,” Shinn said.

“We were extremely disappointed that in his ruling and in his comments he virtually disregarded the city’s position. If I had to do it over again I would do it differently, obviously, but that was not my call at the time.”

Martin, however, seemed unsatisfied with this response and again pointed to what he said was a long history of public safety unions in Hawaii getting what they want out of the collective bargaining process, setting off even more back-and-forth between the two.

“I can appreciate the fact that the city put in an aggressive argument,” Martin said. “But I think equally as compelling is that SHOPO, as well as fire, have always been favorably looked upon on this particular issue. From the city’s perspective, in hindsight, we should have budgeted on the higher side, expecting the probability that they may have prevailed based on their historic record.”

Shinn shot back, “Woulda, coulda, shouldas and Monday morning quarterbacking is always, okay, but, you know the council could have also done that as well. It isn’t just the mayor’s position on what we did with the budget, so I would appreciate a collaborative view on this. I don’t think blame is entirely shifted to the administration in putting this together.”

Wednesday’s exchange came on top of the administration’s claim in recent weeks that the city was already facing a $26 million shortfall for the current fiscal year. This had surprised City Council members, who said they had passed a balanced budget and didn’t understand where the shortfall came from.

While Koyanagi and Shinn admitted that the council had passed a “technically” balanced budget, they also highlighted the impending need for more money in the coming years.

For 2015, the city is anticipating that its revenues will remain flat while expenses, such as for employee benefits and debt servicing, will increase. This could leave the city with an estimated $156 million budget gap. So the current budget shortfall, and the atmosphere that it is creating, could offer a small sampling of what’s to come.

The administration has proposed several property tax measures that aim to raise revenues by reducing certain exemptions. The City Council is currently considering several of those proposals.

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