Keep tight rein on city spending

The city budget is on the verge of becoming law with a signature from Mayor Kirk Caldwell, a formality that is expected within the week. The document has made headlines as Honolulu’s biggest budget ever — $2.16 billion for the coming fiscal year.

It’s bulkier than the mayor’s proposal by about $70 million, largely because of the revenue from the sale of city rental properties. Most of that will go toward paying down the original debt on the projects, though.

On the whole, it’s a relatively restrained document, imposing no increase in property tax rates or in other revenue enhancements. Caldwell, whose proposal for a fuel tax increase was rebuffed by the Council, maintains that fatter income streams will be needed for needs beyond the 2013-14 budgetary year.

He will have to make a strong case in order to get that through next year: The needed investment the city is making in repairs to roads will have to be spent efficiently in order to justify expanding the program and financing it with added fuel-tax funds.

For now taxpayers should feel relieved that the Council has held the line. Given recent increases in property tax assessments, many may indeed be paying out more city taxes, but at least their elected leaders did not compound the problem with a higher rate.

The Council was also right to approve, albeit at the 11th hour, a restriction on the use of $70 million allotted for vacant job positions. While $5 million of that was set aside in a salary-adjustments account, the remainder does need to be spent on filling vacancies. The mayor had wanted to continue a practice of spending the funds on various unanticipated needs — and, in fact, is concerned there may not be enough money for summer lifeguard hires.

But just as important in budget-making at City Hall is clarity and transparency. As much as possible, budgets need specificity so that taxpayers know up front how their money is being spent.

Where the Council comes up short is in its failure to apply that same discipline to its grants-in-aid approach. City Council Chairman Ernie Martin favored expanding the spending on nonprofit grants beyond the $5.5 million required by a recently adopted City Charter amendment, and the Council ultimately approved an additional $8 million in grants.

It’s not at all clear that the city budget is flush enough for that surge in generosity this year, just for starters. But the bigger problem is that the grants were alloted without undergoing the vetting process by a new review panel that the Council itself established last fall. The mayor has drawn applications from more than 100 nonprofits and should convene the review panel as soon as possible. The Council doesn’t have cause to simply hand out the grants now.

The mayor has said he would be hesitant to release all the funds alloted, which is the right instinct here.

The serious side issue of the Community Development Block Grant funds, though unrelated to the current budgeting process, ought to serve as a cautionary tale about the potentially chaotic repercussions of poor fiscal management. The U.S. Department of Housing and Urban Development has threatened to force the city to repay $8 million in federal grants issued to the nonprofit ORI Anuenue Hale Inc., charging that the organization did not follow assorted rules in spending the grants.

In the wake of the global recession, city governments have been struggling to cover their core costs with limited funds. Both Caldwell and the Council want flexibility for their own spending priorities. But taxpayers expect city leaders to manage their budgets conservatively, with spending decisions carefully reviewed and properly vetted. Whether or not such care will be applied to the new budget bears watching.