Honolulu Grants in Aid

by Tom Yamachika, President, Tax Foundation Hawaii

In line with our recent focus on nonprofit organizations, this week we take a look at the way in which some of those organizations are supported by the Honolulu government.

In 2012, the Honolulu City Council asked voters to approve, and the voters approved, a City Charter amendment that established a “Grants in Aid Fund.” At the time, the City’s primary source for providing funding to nonprofit organizations was money from the federal Department of Housing and Urban Development, through its Community Development Block Grant (CDBG) program. The City was allocated $14.5 million in CDBG money in fiscal 2010, but saw that number shrink to $11.9 million in fiscal 2012. To ensure continued funding for nonprofits, the charter amendment set aside a minimum of 0.5% in real property tax collections into the Grants in Aid Fund. The ballot measure also established a seven-member advisory commission to review grant proposals from nonprofit organizations and then make recommendations to the city government on whether to award grants from the Fund.

In past years, the commission evaluated the proposals that were presented to it and scored them on a 1- to 100-point scale. In 2014, the commission chair said that they “spent hundreds of hours reviewing proposals and worked very hard to ensure grant recommendations were merit-based using fair and objective criteria.” But the City budget bill ultimately passed by the Council contained other provisos specifically providing grants to other nonprofits for various projects. This scenario was repeated in subsequent years. In response, the Mayor, although letting the budget bills become law without his signature, refused to release funding for some of the grants-in-aid that were tacked on to the budget outside of the commission review process. The Council chair responded by saying that the amount of money earmarked for the fund, 0.5% of tax collections, was a minimum amount so the Council was surely able to add to it. And, of course, the commission’s role was never to be the final decision maker on who gets the public money; they are just there to advise. Recently the City Charter Commission entered the fray, proposing a measure that would scrap the fund and the commission, returning the state of affairs to the way it was before 2012.

Certainly, the commission is advisory and the 0.5% is indeed a floor, not a cap. But if the voters in Honolulu approved a system for objectively vetting the proposals from the tax-exempt organizations to do good and worthy things for our city, it looks bad for individual council members to secure money for such organizations while entirely bypassing the commission. People wonder what back-room criteria are being used or whether shady deals are being made, with our hard-earned taxpayer dollars at stake. The Charter Commission’s solution, to do away with the system entirely, seems like a step backward, giving up the transparency that the commission brought to the process.

We know and understand that the politicians make the budget, the commission is advisory, and the commission’s “objective criteria” cannot be expected to accurately quantify the inherently subjective qualities of need and merit. But perhaps the commission’s work is due a little more respect. Certainly, the politicians can fund more projects on the commission’s priority list if they want to commit more than the 0.5%. But if they in their wisdom want to fund entirely different projects, throw money at organizations that didn’t even go through the vetting process, or otherwise look askance at the hard work the commission has done on behalf of the taxpayers, they need to explain to the public what they are doing and why they are doing it.

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