Isles are out $8 million, EPA says

The federal government is withholding $8 million — or all of the 2015 fiscal year funding that’s earmarked for repairing Hawaii’s drinking water infrastructure — because the Hawaii Department of Health continues to do a poor job of spending federal funds, according to the U.S. Environmental Protection Agency.

The annual allotment is usually deposited into the Health Department’s Drinking Water State Revolving Fund and loaned out to the counties to fix water mains and leaking pipes or to clean contaminants from drinking water.

But the Health Department has failed to meet targets for drawing down the balance of the fund, which at the end of last year stood at $100 million.

“It’s hard for the federal government in this day and age to keep giving money to a state when they’re not spending it,” said EPA spokesman Dean Higuchi.

The state has estimated that $1 billion in repairs are needed over the next two decades to fix the state’s drinking water systems. Yet in recent years the Health Department has spent only between 71 and 86 percent of its federal funding annually, leaving tens of millions of dollars sitting in state coffers.

Last year the EPA slapped the Health Department with a notice of noncompliance with loan requirements, threatened to take away funding and required the Health Department to submit a corrective action plan in January.

But the Health Department hasn’t met some of the targets outlined in the plan.

The department was required to commit $56 million in loans by June but made only $48 million in loan commitments, according to the EPA.

Out of $60 million that the department was supposed to disburse to the counties for repairs, health officials released only $48.4 million in funds.

The Health Department is also about four months late in having a plan in place to fund 2016 projects. The department submitted several versions of a plan to the EPA, but none of them was approved.

The EPA sent a letter last week to Virginia Pressler, director of the Health Department, informing her that the $8 million would not be released.

The EPA will release $680,000 to support the state’s administration of the fund.

In order for the state to receive the $8 million, the Health Department has to commit at least $28 million in new loans and disburse $7.6 million in funding between June 30, 2015, and Jan. 29, according to the letter.

Joanna Seto, head of the Health Department’s Safe Drinking Water Branch, said that she expects to meet that deadline.

“We are working very hard to meet those targets with the assistance of our customers,” she said, referring to the counties.

Seto said that the Health Department wasn’t able to meet the spending targets because of delays in construction, unanticipated site conditions and permit delays.

The Health Department has 30 days to appeal the EPA’s decision to withhold the funding, but Seto said that the department doesn’t plan to do so.

Higuchi, the EPA spokesman, said that current water projects probably won’t be hurt by the funding restriction because the Health Department can tap into all of its unspent funds. But he said that there’s always a risk that the EPA will decide to give Hawaii’s funding to another state. The delay also hurts the overall health of the fund, he said.

“It’s like a bucket. You’re pouring into the bucket and nothing is leaving the bucket,” he said. “The whole concept of a state revolving fund is that the (money) should be revolving in and out.”

On Monday the EPA’s Office of Inspector General — an independent arm of the EPA that conducts investigations and audits of the EPA and its contractors — also recommended withholding funding from the Health Department, underscoring concerns with the administration of the fund.

The inspector general’s office noted that not only is the Health Department not meeting spending targets, but also that projects that it placed on its 2016 funding list may not be ready to proceed.

The inspector general’s office is in the midst of investigating the loan program after it received an anonymous complaint in June that the Health Department had “pooled” one of its drinking water awards with state Department of Transportation funds and was failing to spend tens of millions of dollars.

Jeff Lagda, a spokesman for the inspector general’s office, said that he couldn’t comment on the allegations until the agency’s review has been completed.

Seto said that the Health Department hasn’t combined any of its funds with DOT money.

“We in our program do not believe it is possible because we know where all of our money is going,” said Seto.