Honolulu’s spending of COVID-19 relief funds questioned

City officials are still trying to decide how to spend much of $386 million awarded through the American Rescue Plan Act. Complicating the matter is a disagreement between Mayor Rick Blangiardi’s administration and City Council members over who gets to make spending decisions, which, in turn, is giving rise to questions about transparency and public oversight.

In March 2021 the federal government awarded ARPA relief funds to states and municipalities as a means to combat the public health and economic challenges of the COVID-19 pandemic. Honolulu received the first of its two installments, $193 million, in June. The balance is expected to arrive this summer.

According to the City Charter, the Council must allocate funds before Honolulu Hale distributes funds. However, in the handling of ARPA allocations, Blangiardi’s administration is largely bypassing Council participation. The administration is dispersing the first tranche of ARPA funding based on pandemic- focused exemptions made in the city budget passed in 2020.

In that year the city received funds from the federal Coronavirus Aid, Relief, and Economic Security Act. At the time, there was a December 2020 deadline for the city to spend the funds. The tight timeline prompted the Council to waive the charter provision requiring it to allocate funds received through CARES and “any other subsequent act or similar act enacted by Congress or the Hawaii State Legislature that may be used to address needs arising from the coronavirus pandemic, or to relieve its impacts.”

Since the city received the first tranche of ARPA funds before July 1, 2021, when the 2020 fiscal year ended, Managing Director Mike Formby maintains that the administration may allocate the first tranche of ARPA funding without official action from the Council.

But Council Chair Tommy Waters has countered that the exemption was intended only for the CARES Act funding, due to the pressing December 2020 deadline — and that deadline pressure is not an issue for ARPA funding, which can be used until 2026.

So far, the city administration expended about $16 million in ARPA funds on community support during the omicron variant’s wave as well as economic recovery and modernizing city services. However, it has approved $69.8 million in ARPA spending.

The administration posts on its OneOahu.org website information about how ARPA funds are being expended. On Monday it began posting line- item details instead of general categories. On Friday, Waters had submitted a memo to the administration requesting the change.

Also, so far, ARPA spending decisions have been made through a nine-person committee created within the city administration. The committee includes department directors, Formby, Deputy Managing Director Krishna Jayaram, Managing Director Executive Assistant Andrew Malahoff, Council member Esther Kia‘aina and Hui Chen, a strategist for state and local fiscal recovery funds.

This committee is not an official one created by charter, ordinance or statute. Such committees are required by law to conduct public meetings or keep official records of their discussions. The committee’s unofficial status has raised red flags from Waters and Common Cause Hawaii, a nonprofit government watchdog group.

In a recent memo to Blangiardi, Waters contended that “the legal authority of the administration to unilaterally approve, encumber and expend these monies is questionable.” In the same letter he urged the administration to disband the committee.

In a statement to the Honolulu Star-Advertiser, Waters wrote, “The people of the City and County of Honolulu need to be able to weigh in via public testimony through the budgetary processes established through the City Charter.”

While Council decision- making includes open meetings during which the public can weigh in with testimony, such input is not a requirement for the city administration’s internal decision-making.

“It is important that we provide our residents with the opportunity to testify on how the $386 million of ARPA monies may be applied to help address our community needs,” Waters added.

Common Cause Hawaii Executive Director Sandy Ma said she has similar concerns. “Why is the executive branch unilaterally expending these funds?” she asked.

“We understand that there is this committee that’s been formed that takes requests for the expenditure of these ARPA funds, but I don’t know what guidelines are being used to vet these requests … and so we’re highly concerned that this could give rise to ethics problems … this could be highly problematic.”

Formby said the unofficial committee was formed because of the strict federal guidelines that came with the ARPA funding.

Having a committee at the administrative level has made it possible to facilitate discussions about the legality of programs, while, he said, the Council may be limited due the state Sunshine Law, which requires meetings where public policy decisions are made to be open to the public. The law prohibits more than two Council members from speaking to each other outside of a public meeting.

With unofficial status, Formby said, “We can sit around a table with the lawyers, and all the different departments can look at the guidelines and can say, ‘How are we going to set up this program, and what’s the best way to do it?’”

He continued, “We want to be transparent and we want to be equitable. And we want to be fair. … The way ARPA moneys are, that requires a level of strategic planning over a four- to six-year period, and administrations are actually in the best place to do that.”

When asked whether these committee meetings could be made public, Formby expressed concern about the precedent that could set for the internal decisions being made within departments.

“Say (Department of Transportation Services) gets together and they decide whether or not to do something on a roadway. Do we want that meeting to be aired public, for everybody to attend and participate? I just don’t know,” he said. “We’re not anti-transparent. I’ve got to consider the impacts to us getting our work done.”

A city survey, issued in January, asking for public comments on how to spend ARPA funds, drew about 1,200 respondents. The top three priorities identified were economic development, especially grants for small businesses; public health; and housing access, particularly services for homeless or at-risk households.

“That community survey will be going out from time to time. … We’re going to open it up again and say, ‘Well, now here we are in June of 2022. We’d like to hear from the community again,’” Formby said.

Formby also stressed that the administration wants to work with the Council to distribute funds and has received requests from Council members about programs they would like to see the funds spent on. The committee is vetting projects to make sure that they fall within federal guidelines. That includes the about $28 million of ARPA funding the Council earmarked mostly for homeless and housing services and nonprofits.

“I’m convinced that the mayor and this administration has done everything within our power to collaborate and work with Council to make sure that those funds are expended in a way that is consistent with their priorities and with our priorities.”

The administration has said the Council will be able to allocate the second tranche of $193 million, expected later this year. The topic is expected to be discussed at Wednesday’s full Council meeting as the panel continues to assemble its budget for the next fiscal year.