Column: City careful about its housing debt obligations

As avid readers of the Honolulu Star-Advertiser, the mayor and I were disappointed by the incorrect headline on Tuesday, “$253M in funding expected to lapse, city officials say,” as well as the missed opportunity to tell the full story of the Blangiardi administration’s affordable housing strategy and successes.

The city is not lapsing $253 million in funding. The city expects to expend at least $276 million on affordable housing projects by June 30, primarily using other sources of funds. Our strategy, by design, avoids incurring additional debt and debt service, preferring instead to reserve this capacity for the planned construction of affordable housing. Because June 30 is a month away, the amount of appropriations that could lapse is uncertain given active projects currently in due diligence, a lengthy investigative process that ensures investments are in the best interest of taxpayers.

In a departure from the past, this administration will not simply purchase existing properties to spend down appropriations. Instead, we prioritize large acquisitions (over 100 units) and building new units in our communities, especially in our transit-oriented development (TOD) zones.

An appropriation is an authorization to expend city resources and is akin to having a credit limit on a credit card. When the Blangiardi administration came into office, we inherited millions in unused bond proceeds and opportunities to use resources such as Private Activity Bonds (PAB), State and Local Federal Recovery Funds (SLFRF), Charter Affordable Housing Funds and other federal funds. Knowing this, the mayor and I exercised fiscal integrity by not adding to the city’s debt service on general obligation bonds, absent compelling circumstances.

The Blangiardi administration worked tirelessly to reestablish the city’s PAB program, which had been dormant for two decades, and in January 2023 awarded $135 million in tax-exempt multifamily affordable housing bonds to two affordable housing rental projects on Oahu: Maunakea Tower Apartments in Chinatown (397 units) and Jack Hall Waipahu Memorial Housing (144 units). The PAB program is a win-win for the city and taxpayers in that the community gets much-needed affordable rental housing without incurring more debt service from a bond issuance.

An example of a recent cash investment in affordable housing is the acquisition of Waikiki Vista in Moiliili. In October 2022, the Blangiardi administration purchased this property for $37.75 million using federal funds (SLFRF). Waikiki Vista is the city’s largest affordable housing acquisition ever, at over 100 units. The use of SLFRF funds enabled this administration to take title without incurring additional debt or debt service. In addition to SLFRF, the city used non-debt service Charter Affordable Housing Funds and other federal funds in 2022 to award more than $23 million on projects that will together add more than 700 affordable housing units to our communities, with another procurement planned this year.

The Blangiardi administration is committed to the development of iconic TOD communities around the island. We are in due diligence on multiple properties in Iwilei with a vision to activate the community near the rail station with affordable housing, improved infrastructure, complete streets, mixed-use retail and commercial, service providers, community space and a rail park-and-ride. The fiscal year 2022 affordable housing appropriations restricted our ability to develop the parcels to their full potential so we collaborated with the City Council to get a new CIP (capital improvement project) appropriation in the fiscal year 2024 budget with a revised proviso. This is an example of how appropriations lapse and new appropriations provide increased capacity.

We are determined to build new affordable housing to replace our aging inventory around the island, all the while creating good paying construction jobs. Our commitment to a long-term affordable housing strategy that best serves all of our communities is unwavering.

Mike Formby is managing director of the City & County of Honolulu.