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The Honolulu City Council wants the authority to create special funds to ensure fees and taxes paid by the public are spent for the proper purposes, such as requiring fuel tax revenue to pay for road improvements.
But the administration says such a City Charter change could lead to a proliferation of special funds and additional costs.
The proposal is one of two questions voters will be asked on the general election ballot to amend the City Charter.
Council Chairman Ernest Martin said the debate on the mayor’s proposed raising of the fuel tax showed there was no guarantee the revenue would go to fund the programs for which the tax was collected.
"The concern was the moneys would go back to the general fund with no reasonable assurance it would go back to that specific activity."
Martin said if the amendment passes, the City Council will look to create funding mechanisms to ensure funds are redirected back to intended facilities and activities.
Mike Hansen, director of the Department of Budget and Fiscal Services, said authorizing the City Council to unilaterally create special funds could potentially lead to a proliferation of them. It adds complexity, creates inflexibility in the budgetary process and generates additional costs with added special funds, said Hansen.
"Government should use the least amount of individual funds as possible," he said.
"There is already a process to create special funds," he added, adding that the process allows for funds to be created by the mayor’s recommendation to the City Council. "We certainly don’t believe the process is broken."
Hansen said there is accountability for special funds such as the city Highway Fund, Sewer Fund and Housing Development Special Fund.
The second ballot question asks whether a minimum of 0.5 percent of the annual general revenues should be appropriated for the grants-in-aid fund to provide services for the economically or socially disadvantaged populations or to support services in areas of culture and arts, economic development and the environment.
The question stems from the City Council’s concern about dwindling community development block grants from the federal government. Money allocated from the U.S. Department of Housing and Urban Development dropped from $14.5 million in fiscal year 2010 to $11.9 million in fiscal year 2012.
IT’S UP TO THE ELECTORATE
Oahu voters will be asked on the general election ballot to consider two proposed amendments to the City Charter:
>> “Shall the revised City Charter be amended to authorize the city council, on its own initiative or on the recommendation of the mayor, to establish funds to ensure that, when appropriate, monies collected by the city from licenses, fees, taxes and other revenue sources are set aside and expended for their intended public purposes?
>> “Should a minimum of one-half of one percent (0.5%) of annual general fund revenues be appropriated for grants in aid to be awarded by the city to federal income tax exempt non-profit organizations to provide services to economically and/or socially disadvantaged populations or provide services for public benefit in the areas of the arts, culture, economic development or the environment?”
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Martin said, "What this program seeks to formulize is a grants-in-aid program so there will be some level of sustainability to support the private nonprofits in their mission toward servicing economically or disadvantaged populations like the homeless, at-risk youth, people seeking employment training as well as supporting the activities of culture and arts and economic development." The program will also provide more flexibility to benefit smaller organizations.
If the amendment passes, an advisory commission would be created to coordinate and distribute funds. Members would be appointed by the mayor.
Hansen said the mayor’s administration is concerned that appropriating a minimum of 0.5 percent, or approximately $5 million, could potentially result in cuts to other services because of the city’s tight budget. The estimate is based on the current general fund revenue of just more than $1 billion.
"It’s taking money right off the top," he said. "We would have to find additional revenue or reduce services to pay for this."
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