Several Oahu nonprofits say they have been waiting as long as three years to hear back from the city on their requests to have about $9 million in loans forgiven — money they received to help house residents with special needs, including the homeless, mentally ill and the elderly.

Federal officials pressured the city to offer loan forgiveness to island nonprofits after Honolulu’s Department of Community Services forgave $1.2 million in loans in 2011 that it had given to ORI Anuenue Hale. 

ORI was the subject of federal and city investigations in recent years. The U.S. Department of Housing and Urban Development alleged that the nonprofit had misused some $7.9 million in federal grant money. HUD also raised concerns that ORI campaign contributions influenced the city’s decision to let the the nonprofit out of its $1.2 million loan.

ORI gave more than $100,000 over the past 16 years to political campaigns. HUD officials were particularly concerned that more than $4,000 donated to City Council Chair Ernie Martin, who was head of the Community Services Department until 2010, influenced the department’s decision to forgive the loan.

The dispute between HUD and the city over ORI has since been settled for $2.9 million, but the federal allegations have never been clearly resolved.

The miniature golf course at ORI Anuenue’s Camp Pineapple in Wahiawa.

Michael Levine/Civil Beat

To ensure that the city was being fair to all nonprofits, HUD told city officials in 2011 that they needed to release a final policy for loan forgiveness for its Community Development Block Grant program. The city receives about $8 million in federal funds for the program annually, which it can distribute either as grants or loans.

“The point of these policies and procedures is so you can’t just come in and say we are going to forgive so and so because we feel like it today,” said Mark Chandler, director of HUD’s Office of Community Planning and Development in Honolulu.

The city’s decision to forgive the ORI loan “was a total flipflop on their normal practice,” he added, noting that up until 2011 it had been the city’s policy not to forgive loans.

In May 2012, Michael Hansen, who was director of the Community Services Department under former Mayor Peter Carlisle, sent a letter to HUD that included the city’s final procedures.

But since then, other nonprofits that have been seeking loan forgiveness say their requests have been largely met with silence from the city.

Terry Brooks, president of Housing Solutions, said two or three years ago he asked the city to forgive two loans — a $1.27 million loan that it received for the Edwin Thomas Building, which has been rented out to Mental Health Kokua to serve mentally ill homeless, and a $2 million loan for Weinberg Hale, which provides low-income housing for the mentally ill.

Initially, the city wouldn’t provide him with a copy of its loan forgiveness policy, said Brooks.

“We finally got an ‘under-the-counter’ copy,” he said.

Brooks said that his organization mailed and emailed a copy of its application to the city. But when he followed up with Caldwell administration staff, officials said they’d never received his application.

They applied again, this time walking the application down to city offices, said Brooks.

The city policy says that the city’s Community Services Department “shall acknowledge the receipt of the request in writing” and follow up with additional information requests before making a final determination on whether to forgive the loan. If the application is denied, the city has to say why.

But Brooks says he never heard back from the city on his application.

“The city never responded to us in writing, ever,” said Brooks. “We don’t even have something in writing that says, ‘We got it.’”

The mayor’s office did not respond to Civil Beat’s request for an interview with Gary Nakata, acting director of the Community Services Department, for this story. The office also didn’t respond to specific questions about when and if the city planned to forgive the loans.

Brooks isn’t the only one who says he has had trouble getting information out of the city.

Rebecca Borja, a senior community planning and development representative for HUD, said that she had inquired with the city about the loans in December, but never heard back.

There are four nonprofits that are seeking loan forgiveness, according to HUD.

Ewa Housing Foundation is asking the city to forgive a $1.7 million loan for its D.E. Thompson Village Housing project, which provides housing for elderly and disabled residents.

Tracy Takano, who serves on the Ewa Housing Foundation, said that his organization hadn’t heard back on its application.

“We haven’t heard from the city,” he said. “We have been trying to get in contact with the city for a few months.”

Mental Health Kokua is asking the city to forgive a $312,000 loan for its Sierra House, which serves the mentally ill. Greg Payton, the nonprofit’s executive director, said he hadn’t heard back from the city on its application since it was submitted in 2013.

“We thought maybe the program terminated or something,” he said. “But we never heard a resolution to it.”

The Arc in Hawaii has asked the city to relieve it of $3.4 million in loans for three housing complexes that serve adults with intellectual and developmental disabilities.

Leiann Fountain, executive director of The Arc in Hawaii, said that the city had audited its housing program in response to its application. She was told a determination would be made in December, but now expects to hear back from the city in March.

“So we are in a waiting pattern,” she said.

In order to qualify for loan forgiveness, a nonprofit has to be in good standing under the CDBG program. It must have operated its housing project in accordance with the program’s objectives for five years, be current on all of its obligations to the city, have no outstanding federal or state taxes and corrected any audit findings, according to the city’s policy.

Many of the city loans date back to the 1990s, said HUD’s Chandler.

The city would benefit from having the funds repaid because it could then distribute the funding to other grantees. But Chandler said that repayment of many of the loans has been deferred by the city — the nonprofits don’t have to pay them back so long as they remain in compliance with the purpose of the CDBG loans.

Chandler said that more than a decade ago, the city began distributing the CDBG funds as grants rather than loans because many of the nonprofits serving high-need residents didn’t bring in enough revenue to repay them.

It’s up to the city as to whether it wants to forgive the loans. But Borja said that the issue at hand is that the city needs to review the applications in accordance with its policy and issue responses.

“That is the issue here — that these nonprofits need a response, whether they are approved or not,” said Borja.