POSTED: 01:30 a.m. HST, Oct 29, 2012
In two separate amendment proposals, Honolulu voters are being asked to create special funds to be spent for specific purposes, and to funnel general city revenues to nonprofit organizations to make up for federal cutbacks. Neither of the proposed changes to the City Charter have enough rationale behind them so should be rejected.
In various areas, the city already spends various fee revenues to help pay for logical purposes, such as golf fees, Honolulu Zoo proceeds and bus fares. It generally needs more revenue to pay what is needed, in which case the mayor recommends that the City Council direct the additional funds to keep the operations going under a normal budgetary process.
A proposed amendment to the charter would allow the Council to authorize the special funds collected from licenses, fees, taxes and other sources to be "set aside and expended for their intended public purposes," without the mayor's recommendation. Council Chairman Ernest Martin has said that Mayor Peter Carlisle's proposal to raise the fuel tax carried no assurance that it would go to paying for road improvements.
Mike Hansen, Carlisle's budget and fiscal services director, points out that the City Council's unilateral creation of special funds could result in proliferation of them, creating inflexibility in the budget process when the city "should use the least amount of individual funds as possible."
We concur. Hansen also noted that accountability already exists for special funds such as highway, sewer and housing development funds.
Lowell L. Kalapa of the Tax Foundation of Hawaii has commented that instead of the Charter amendment providing transparency of city fiances, "these special funds hold the potential for making sure taxpayers don't know what's going on with their tax dollars." Approval of the amendment would result in these funds being "used to obscure how elected officials are handling your money," he warned, rightfully.
The other proposed City Charter amendment would require that at least half of 1 percent of annual general fund revenues be given as grants to federal income-tax nonprofit organizations to provide services for needy residents. The proposal stems from the Council's concern about community development grants by the U.S. Department of Housing and Urban Development in Honolulu having dwindled from $14.5 million in fiscal year 2010 to $11.9 million in fiscal 2012.
Hansen estimated that the 0.5 percent appropriation — totaling about $5 million a year — could result in cuts to city services. Though well-intended in the desire to aid nonprofits, such off-the-top generosity by the city can't be seen as a smart fiscal move while the country continues to recover from the recession.
This is no time for the City Council to try proliferating special funds from the next mayor, or to try to make up for federal shortfalls at the expense of basic city services. As much as possible, the integrity and accountability of the city budgeting process should be based on annual justification and be kept intact.