Bill 4 to Create New Honolulu Council Slush Fund?

by Natalie J. Iwasa, CPA

Last year, Honolulu councilmembers felt obligated to propose a charter amendment to fund a new county grants-in-aid (GIA) program, because funding from the federal government under the Community Development Block Grant (CDBG) and HOME programs was declining.  Despite concerns raised about various components of the proposed program, councilmembers unanimously adopted Resolution 12-44, CD1, FD1,.  Voters subsequently approved the charter amendment.

One of the concerns raised about that resolution and related charter amendment is that councilmembers took out the requirement that the recipients of the grants be 501(c)(3) charitable organizations.  The final wording, “federal income tax exempt non-profit organizations,” means that organizations such as labor unions, political action committees, social clubs and credit unions, are eligible for these grants. 

Why was this change made?  Perhaps the answer lies in the proposed law and policy councilmembers are planning for the fund. 

Bill 4 (2013) and Resolution 13-24 are the measures that will be used to implement the GIA fund and program.  The bill indicates that “council shall select the projects to be funded.”  Not only do they want to select the projects, but they want to do so through the budget process. 

Why use the budget process?  Could it be that the budget is a huge document, and any grant recipients would be buried among hundreds of lines of dollar amounts and text?  This is not a very transparent method of doling out precious taxpayer money.

In addition, the budget chair is the one who decides which amendments get put into the budget.  In the past, we’ve seen members being “punished” for one reason or another and not have their measures even heard.  The budget is an all-or-nothing proposal.  If the budget chair decides not to put in a project from a councilmember, it is highly unlikely that the budget would be voted down because it didn’t include a particular project.

Councilmembers have at least considered that some districts may get left out in the cold using this method.  Resolution 13-24, which sets the policies for this new fund, indicates that at least $250,000 should go to each council district.  This, however, has its own problems. 

What happens if there are no eligible projects for a certain district?  What if there is a particular project in another district that is more beneficial?  

Bill 4, CD1, establishes a new “advisory commission” to review applications and make recommendations based on the priorities set by councilmembers.  That’s another warning flag.  This commission should hold public meetings that allow for public input.  Agendas and minutes of these meetings should be made public.  The commission should select the grant awardees, not councilmembers.  Council should then approve or disapprove of the selections made via a separate resolution, not by burying it in the budget.  This would allow for independent selection, apart from councilmembers who may feel pressure to “reward” nonprofits that have donated to their campaigns directly or indirectly via executive directors and/or employees.

These measures are nearing the end of their approval process.  Bill 4, CD1, passed second reading unanimously.  Resolution 13-24 is recommended for adoption and will likely be considered at the next full council meeting.

The media and other public forums have not raised one single question with respect to this program.  Perhaps that is the greatest concern.

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