Honolulu Mayor Rick Blangiardi’s budget proposal includes cuts in every city department, and City Council members have expressed concern that his plan leaves critical needs unfunded.
But an influx of federal cash has the potential to fill some of the perceived gaps.
The city is anticipating the delivery of approximately $395 million from the American Rescue Plan, the federal COVID-19 stimulus act, according to city officials.
Exactly where that money will be spent has not been determined. Blangiardi hasn’t specified his priorities for the federal funds other than a desire to target the “most needy” residents.
While the previous mayor was given wide latitude to spend $387 million in CARES Act money last year without going through the traditional City Council budgeting process, it may be different for Blangiardi.
The new council headed by chair Tommy Waters has made clear it wants more of a say this time around.
“The Council’s kuleana is to appropriate funds, and we work closely with the Administration in establishing priorities, which they administer and implement,” Waters said in a statement.
“As we are going through the Budget process right now, we have been asking the Administration for their priorities for these funds to ensure that they are incorporated into the Council’s work.”
The American Rescue Plan Act money can be spent in a broader array of areas than last year’s federal relief money. The CARES Act funds needed to be spent strictly on pandemic-related expenditures and couldn’t be used to make up for lost revenue.
The ARPA money comes with new parameters. It can be used to:
Respond to the COVID-19 emergency and its economic effects, including through aid to households, small businesses, nonprofits and industries such as tourism and hospitality;
Provide “premium pay” to essential employees or grants to their employers, not to exceed $13 per hour or $25,000 per worker;
Provide government services affected by loss of revenue resulting from COVID-19;
And make investments in water, sewer and broadband infrastructure.
The funds will be distributed in two installments, according to a summary provided by the City Council. Half should be delivered before May 8, and the remainder should arrive no earlier than a year later.
State and local government recipients may use the funds to cover costs incurred through Dec. 31, 2024. They may not, however, use it toward pensions or to offset revenue losses resulting from tax cuts.
Council Wants Funding To Target Flooding, Permitting, Housing
Several members raised concerns about a lack of funding to address catastrophic flooding of the kind that occurred in Haleiwa earlier this month.
“Big picture-wise, it’s an important issue, and I think we have a lot of lessons to be learned from recent events,” Councilwoman Esther Kiaaina said. “We need to all give stormwater mitigation serious consideration.”
Waters said the Department of Facilities Maintenance has only one crew of five people that inspects and maintains streams islandwide. He suggested creating a second or third crew.
“We have the opportunity, with this influx of federal dollars, to do exactly that,” he said, noting that under Blangiardi’s budget proposal, DFM stands to be cut over $3 million. “Rather than cutting, we should be backfilling these positions.”
Addressing housing and homelessness should also be a priority for more funding, several members said.
Blangiardi’s budget proposal seeks a 17% cut to the Community Based Development Division in the Department of Community Services, which administers several programs serving homeless and low-income residents. And the Department of Land Management, which is tasked with acquiring and developing properties for affordable housing, has a proposed capital budget of $0.
Councilwoman Radiant Cordero said approximately $37 million in the city’s affordable housing fund should be “the floor.”
“We can go more,” she said. “We can put more funding in to support and continue prioritizing affordable housing.”
Waters said federal funds should also be put toward getting bail-out money to needy families more efficiently. Last year, the city’s nonprofit contractors tasked with distributing CARES-funded rent relief were bogged down by red tape and struggled to process applications quickly enough.
In addition, the federal money could be used to hire people in the Department of Planning and Permitting to expedite construction projects, Waters said.
“It would be great to hire a bunch of planners and plan reviewers because that’s all revenue we could be getting that these developers and contractors are willing to pay us, but if we don’t process these permits in a timely manner, that is not revenue that we’re going to generate,” he said.
Councilman Brandon Elefante asked HPD what happens if the Treasury deems the spending unjustified.
“I’m not sure,” HPD Assistant Chief Rade Vanic responded.
Cutting Costs And Seeking More Revenue
To help balance the operating budget, the Blangiardi administration wants to defer payments for retirees’ future health benefits. The move could mean saving $139.7 million this year, according to a budget summary. However, the city stands to pay more than twice as much over the next 25 years, according to Budget and Fiscal Services director Andy Kawano.
“We’re going to have to do that,” he said. “That is a decision we had to make.”
While the city maintains a rainy day fund of about $130 million, Kawano said officials want to avoid dipping into it because it could negatively affect the city’s bond rating, which could lead to higher interest costs.
With tax revenue mainly coming from real property taxes, the city hasn’t been hit as hard as the state during the pandemic, Kawano said.
“It’s not as bad as we thought,” he said. “Coming in we were really worried.”
Still, there have been losses. About $40 million that the state usually passes to the city from transient accommodations taxes isn’t coming this year, Kawano said.
And visitors to Hanauma Bay have decreased dramatically, he said. The park was closed much of last year. The administration is hoping to increase the admissions fee from $12 to $25 for nonresidents.
Meanwhile, fixed costs continue to rise, including payments toward the Employee Retirement System, officials said.
During one hearing, Council Budget Chair Calvin Say raised concerns about pension spiking in which employees close to retirement, mainly police officers, use overtime to boost their retirement pay. The city stands to pay $4.4 million more to the ERS this year because of spiking, according to the administration’s budget proposal.
“I’m bringing this up because I’m frustrated,” Say said to the mayor.
Blangiardi said he doesn’t “plan on being very passive.”
“I’m not in this business to gain friends,” he said. However, he said at a press conference last week that he has no plan to address spiking.
Council members Heidi Tsuneyoshi and Andria Tupola urged the city to make an effort to pursue state funds, including getting TAT money back.
“With respect to the state and governor, I think we need to take a more aggressive approach,” Tsuneyoshi said.
The city should pursue federal money, too, said Kiaaina, a former official for the Obama administration. She encouraged the city to hire a team of specialists who can identify federal grant funds and apply for them on a regular basis.
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