Tighten rules for state grants-in-aid

The giver of the state’s money is the taxpayer; controlling who’s on the receiving end is supposed to be the purpose of state lawmaking and oversight.

However, the pot of money known as grants-in-aid is a pretty leaky vessel, without the necessary controls. That much is clear from the grants the Legislature approved this session.

Among these was a hefty $605,000 handout to a private Hawaii island company, enabling the purchase of equipment to drill water wells in rural areas that now often rely on rain catchment systems.

The bill authorizing the grant is awaiting a signature from Gov. David Ige; he should firmly reject the gift to Pacific Well Drilling and Pump Services.

And then lawmakers should assign themselves to changing the law, making it crystal-clear that this kind of loose grantmaking is no longer possible.

The grant was supported by state Sen. Lorraine Inouye, who told Honolulu Star-Advertiser writer Kevin Dayton that the well-drilling would help provide clean drinking water to rural areas. She also acknowledged that she knows the family of Kihei Ahuna, the business owner who applied for the grant.

By itself, that is not a sufficient reason to give such a large allotment to a for-profit entity that hasn’t gone through a full vetting process. This was one of the largest capital grants on the list.

State Sen. Donovan Dela Cruz, who oversaw the grant-in-aid process for the Senate, acknowledged that private grants are rare. But they are not unprecedented, he added, citing Navatek Ltd., Navatek Boat Builders and Gilad Productions Ltd. among the previous recipients.

Again, not nearly good enough. It’s unclear how the state administration can provide adequate oversight of private projects in general — and how the well-drilling proposal, in particular, got this far.

In the application, Ahuna lists work as operations manager for Water Resources International Inc. overseeing pump operations and some drilling operations, but that work ended in 2012.

Another big red flag: the company lacks established facilities as well as the needed equipment, operating from Ahuna’s residence in Hilo; currently, he wrote, he is “doing very minimal operations.”

After receiving the grant funds, Ahuna added, he would apply for leases on Department of Hawaiian Home Lands property to establish facilities, “and surely will locate a place of operation if the process becomes too lengthy.”

This does not seem to be a safe bet for the investment of public funds.

The awarding of grants-in-aid is meant to give an assist to nonprofits performing a public service. It was not meant as a boost to a start-up business, one that is unfair to any other for-profit entities that are in competition.

Dayton’s sampling of other businesses confirmed the problem: Using public funds to underwrite the purchase of equipment represents a competitive advantage for Ahuna, who then would be in a position to charge less for his drilling services.

About a decade ago, the legislative process for awarding grants-in-aid came under fire. State Rep. Michael Magaoay was in charge of deciding which applicants would get money and thus was a magnet for campaign contributions from nonprofits seeking to curry favor.

A more robust review process was created, but plainly there are still loopholes to be closed.

State Rep. Nicole Lowen oversaw the review process for the House, and she said she may propose closing them in the statute, reserving grants for nonprofits. That’s a commitment the voters, who are bankrolling all this, deserve to see fulfilled.

Lawmakers behind the latest fiasco should be embarrassed. Even after a previous scandal nudged them toward reform, they still haven’t cleaned up this shameful business.