The Office of the State Auditor is auditing a program in which the Hawaii Department of Education collects impact fees from residential housing developments in certain areas.

The performance audit was self-initiated, State Auditor Les Kondo told state Board of Education members Thursday, to gain a “very broad, general understanding of the program.”

“We’re assessing the department’s performance of these projects, how they’re actually implementing these programs,” he said in a brief presentation at a BOE meeting. “I understand there’s been very little activity in this program, which may help us or may not help us.”

State Auditor Les Kondo speaks about the first HART Audit.
State Auditor Les Kondo told Board of Education members they should think of the audit initiated by his office as “a free service.” Cory Lum/Civil Beat

School impact fees were established by the Legislature in 2007 to address the impact of new residential development on schools. Act 245 directed developers to either pay a fee or provide land to contribute to the cost of building new or expanding existing DOE facilities.

The DOE has since identified five impact districts for the fees — the latest being the Kalihi to Ala Moana corridor on Oahu that tracks the path of the Honolulu rail project — which has so far generated about $5.5 million total, in an account maintained by the DOE’s facilities branch.

Department of Education personnel, as well as some board members and outside stakeholders, have already been asked to provide information about how the program operates, Kondo said. His office has been working on the audit since mid-February, with a draft report expected sometime in June.

Although state audits typically take six months to complete, Kondo told the board he expects a quicker process because of the relatively small scale of the fees program.

“Our goal is to help you out. You get a free service,” he told board members. “Hopefully, we make real, meaningful recommendations to make your operation better. It’s really for the department to improve management and operations of your programs.”

Implementation of the fee program has been uneven and sometimes controversial over the years.

“The process has gone through a metamorphosis,” said BOE member Brian DeLima. “When you look at this history, it appears this is something fraught with difficulty.”

The newest impact fee district stretches from Kalihi to Ala Moana. Department of Education

The program concept raised a grumble in West Hawaii — the earliest school impact district identified by the DOE — causing then-mayor Billy Kenoi to refuse to collect fees from developers, saying they would financially burden small property owners.

The area has not collected any school impact fees to date and Kondo told the board he didn’t plan to approach the current mayor, Harry Kim, about those underlying reasons.

The Legislature came up with the formula for school impact fees, while the DOE determines the district and conducts the fee analysis. Fees are calculated by the total school land requirement multiplied by the value per acre of potential future school sites.

Other fee districts identified so far include Leeward Oahu, West Maui and Central Maui. The impact fees for the regions range from $3,300 to $5,300 per unit.

The DOE’s fees analysis has also seen adjustment. A draft analysis three years ago proposed an impact fee for the Kalihi to Ala Moana area at about $9,300 per housing unit, but since taking effect on Oct. 1, that fee was adjusted to $3,800 per unit.

The impact fees are not applied to commercial, industrial and senior housing projects, but affordable housing developments are not exempt. That’s riled some developers, including Stanford Carr, who said the added fees “exacerbate an already challenging task.”

“If the DOE wants to extract an impact fee for new housing, they’re making it further difficult to build housing in an already constrained market,” Carr said.

The audit comes at an interesting time.

While the DOE conducts its own internal financial audits, it’s faced some increasing calls in recent years by legislators for a financial audit from the state Auditor’s Office, as proposed by Senate Bill 856, which is still alive this session.

Kondo’s office did not take a position on that bill, instead commenting that it would prefer to see a clarification of the scope of the desired auditing or more specific direction.

When it comes to the school impact fees, Kondo told Civil Beat he purposely chose this program because it would be relatively easy to do in the designated timeframe and responded “I do not know” as to whether it’s a potential sign of more DOE audits to come.

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