The Honolulu City Council voted Wednesday to drastically downsize the countyʻs pandemic-era Office of Economic Revitalization over the strong objections of Mayor Rick Blangiardi who called the move “reckless and shortsighted.”

The decision will result in 15 of the current 21 staff losing their jobs and the agency winding down operations by Sept. 30.

The office was set up in 2020 during the Covid-19 pandemic as a mechanism for distributing $324 million in federal stimulus funds meant to alleviate local economic impacts and support workforce recovery. Since then it has expanded its role to supporting local startups and entrepreneurs and running workforce development, digital technology, food system and agricultural programs.

But its performance was heavily criticized in a city audit in January that found it had achieved only three out of its eight performance indicators in its nearly six-year history. While the audit didnʻt call for the closure of the agency, it provided ammunition for Oʻahu lawmakers who had begun questioning its effectiveness and voted to cut the agency budget for the fiscal year that began July 1.

Blangiardi vetoed the cuts last month, but council members on Wednesday voted 6-2 to override the veto and restore the cuts.

“This is a classic case of mission-creep,” budget committee chair Val Okimoto said.

Those cuts leave four positions intact and around $56,000 in operating funds – effectively shuttering the agency according to its executive director, Amy Asselbaye, who addressed council before the vote.

“That is not good government,” Blangiardi said in a statement. “Good government identifies problems, corrects them, and continues delivering services. The Council chose the easier path of eliminating an entire operation rather than improving it.”

The agency is currently managing around $7 million in grant funds, including $4 million in flood recovery funds. The vote outcome raises questions about where those funds will be directed, Asselbaye said

“OER has served firsthand more than 12,200 beneficiaries through direct capital and capital gain programs. These programs impact O‘ahu’s small businesses, farmers and working residents,” she said.

“An additional 46,595 households were reached through community outreach, door-to-door business outreach, direct access to local produce, rental and utility relief, and support for employee retention, community workforce programs, and most recently disaster recovery.”

Many of the agency staff who will lose their jobs were in the chamber for the vote and spoke about their roles prior to the final vote.

The embattled agency received a further hit to its reputation recently with the charging of a former employee of OER, Dexter Kishida, with defrauding the Hawaiʻi Foodbank during the pandemic. The case did not come up at the Wednesday meeting.

Veto Standoff

The Wednesday vote ends a battle over the future of the office that has been playing out for weeks.

In a June 23 message to the council, Blangiardi used his veto power to restore $1.62 million in salaries, the equivalent of 20 staff positions, and $412,000 in expenses, calling the budget cuts “misguided and indefensible.”

But the council had a veto-proof majority in favor of eliminating the office.

Council Chair Tommy Waters and council members Radiant Cordero, Scott Nishimoto, Esther Kiaʻāina, Andria Tupola and Val Okimoto voted to override the mayorʻs veto.

Council members Matt Weyer and Tyler Dos Santos-Tam voted against, with council member Augie Tulba, who had previously voted to restore the funding, absent. His vote would not have changed the outcome.

After the council meeting on Wednesday, Blangiardi said in a press release the council will own the consequences. Less help will be available to individuals and businesses who need it, he said.

“In taking this action, the Council ignored the overwhelming voices of our business community, nonprofit organizations, economic development partners, and residents who urged them to preserve this office,” he said.

Weyer, who represents the North Shore, also issued a statement expressing his dismay. His district was devastated by flooding in March and benefitted from economic recovery services.

“The Council’s vote to not restore funding and positions to OER is appalling and a setback for the residents, small businesses, and farmers who rely on the critical programs and services this office provides,” he said.

In-person testifiers including Chu Lan Shubert-Kwock from the Chinatown Business and Community Association had earlier asked council members to have patience and give the office more time to evaluate the recommendations of the audit and implement them.

She said that the staff had been very effective going door-to-door with small businesses in Chinatown during the pandemic helping owners access grants when many were otherwise in danger of closing.

“We see the effectiveness in our community,” she said.

ʻRight-Sizing’ The Agency

Other in-person and written testimony spoke about the strong personal engagement by economic recovery staff following the Kona low storms. OER staff who spoke to the council ahead of the vote talked about how they had used their diverse language skills to communicate with non-English speakers about how to access resources after the disaster.

But the functions of the OER were best suited to the private sector or to existing nonprofit agencies, said Ted Kefalas on behalf of the Grassroot Institute, a nonprofit that advocates for government accountability. He described the agency as a “budget sinkhole” that was an appropriate target for a council looking to exercise its fiscal responsibility.

The council members in the majority, while appreciative of the commitment shown by staff, said OER had failed to deliver, and that it had veered into duplicating functions of other county departments like the Office of Emergency Management without the proper authority.

Okimoto said the agency that had been started with nine positions had grown to 24 positions but lacked a clear charter.

She described the council vote as “right-sizing” the agency, which she said will retain positions that support film production and agricultural programs.

Kiaʻāina said that it was regrettable that events had led to the vote, but if the leadership of OER had heeded some of the concerns raised by the council in the budget process over the past years the council wouldn’t be looking to reduce it. 

She and Tupola repeatedly said that the lack of a clear road map for the agency, combined with the issues raised by the city audit, confirmed their decision to overturn the mayor’s veto.

“It wouldn’t have cost a lot of money for you to have developed a city economic development plan,” Kiaʻāina said.

Tupola said she had been communicating with the agency since the June budget decision but had seen no evidence of a change that gave her new confidence.

Council member Nishimoto said his council vote had nothing to do with the Office of Economic Revitalization or a single department, but was about the issue of the separation of powers and the role of the council. In his view, Blangiardi doesn’t have the power to restore budget cuts with a veto.

“This mayorʻs veto is a huge overreach by the executive. It’s very clear when you look at the statute that the mayor can veto any item or items or portions thereof by striking out or reducing the same,” he said. “What the administration does in this situation is it adds money.”

He continued: “When he adds things, that’s an appropriation. And the appropriations are solely the responsibility of the council.”