Mayor Kirk Caldwell and the City Council are locked in a dispute that could end up costing the city as much as $121 million if a proposed sale of 12 city-owned housing projects to a private contractor doesn’t go through.
At a news conference Monday, Caldwell accused the Council of putting the $143 million project in jeopardy last week when it introduced a proposal to rescind the sale. He said the project could be lost altogether if the Council follows through with spiking the sale at a meeting Wednesday.
Caldwell called on the Council to step up and work with his administration and allow the project to proceed.
But Council Budget Chairwoman Ann Kobayashi said members are concerned the sale isn’t being handled properly. She said some nonprofit organizations that should be reaping benefits from the sale proceeds have been left out.
"We don’t want to jeopardize the sale," she said, "but we also want the (sale) process to be done fairly and correctly."
The Honolulu Affordable Housing Preservation Initiative — in the works even before Caldwell took office — would result in the sale of 12 city housing projects to Honolulu Affordable Housing Partners LLC, which won the bidding for the project.
Among the low- and moderate-income rental housing projects to be put up for sale are Marin Tower, West Loch Village, Winston Hale and Harbor Village. Tenants should not be affected by the sale, administration officials said.
Proceeds from the sale are expected to be $143 million. Of that amount, the administration plans to use $72.6 million to pay off bonds, $35 million for federal Community Development Block Grant housing projects, $5 million for rental assistance and $26 million for the employee retirement system. In addition, $500,000 would go to the city’s highway fund.
Caldwell said the sale is critical to his administration’s Housing First initiative, which seeks to tackle homelessness by first finding housing for people who are homeless, then dealing with related matters second.
Colin Kippen, state coordinator on homelessness, said at the news conference that the sale is an important part of addressing the city’s homeless problem.
The sale is designed to turn over operations and maintenance of the city’s 12 affordable-housing complexes to the private sector while retaining income-based affordability guidelines. The effort should result in capital improvements and improved operations to benefit the residents, the mayor said.
Caldwell said it’s unfair for the Council to allow the buyer to spend the money to get to this point, then yank it out from under the company.
He said the city will lose out on $121 million worth of expenses and "lost opportunities," including the $3.4 million already committed to the project. The city would also lose $50 million in proposed housing capital improvements, he said, as well as $500,000 in the settlement of a commercial tenant dispute.
According to the Council resolution, the administration admitted that meeting federal guidelines for Community Development Block Grant funding will be nearly impossible to meet, which will likely mean the city will receive a reduced allocation of such funds in future years. The city’s current allocation is $8 million.
Kobayashi said the administration agreed to give a low priority to allocating money to city projects. But some funds will end up going to fixing parks and other city capital improvements, she said.
Kobayashi also said a number of social service nonprofits complained to the Council that there wasn’t proper notice for seeking allocation of the federal funds. Some were ruled ineligible to bid when in fact they were qualified, she said.
Among them are Waianae Comprehensive Health Center, the neonatal clinics at Kapiolani Medical Center for Women & Children and Shriners Hospitals for Children, she said.
Chuck Wathen of Pier Management Hawaii LLC, a developer and affordable-housing advocate, was one of four bidders who lost out to Honolulu Affordable Housing Partners LLC. He said the process was unfair and, as written, will likely end up displacing tenants at at least one project.
Michael Ullman, a homeless advocate and researcher, urged the Council push the project through.
"The Council should focus on working with the DCS (Department of Community Services) and the agencies who were awarded funds instead of further delaying implementation," he said.
Kobayashi said the administration was supposed to involve the Council in the planning and implementation of the sale but failed to keep members in the loop.
"They always do that to us — last minute," she said. "They have never given us enough time to work with them."
But Ember Shinn, Caldwell’s managing director, insisted the Council has been part of the process since spring.
In fact, Council members appointed three members to work on the block grant projects selection committee to review proposals, she said.
