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Questions about bidding procedures taint a $142 million affordable housing deal that is the crowning achievement of Honolulu Mayor Peter Carlisle’s administration.

On Thursday, the Honolulu City Council approved selling 12 affordable housing complexes to a group of private developers who plan to renovate the apartments, provide more low-income housing and turn a profit. This plan includes raising rents.

The city spends more than $6 million a year subsidizing the apartment complexes and has been trying to distance itself from the apartments for more than a decade.

Despite this long-standing wish to unload the properties to a private developer, city council members were tentative in their approval of a sales agreement with the group, Honolulu Affordable Housing Partners.

The agreement passed 6-2, with council members Tom Berg and Romy Cachola opposed. But four of the “yes” votes came from council members who expressed reservations.

Carlisle Slips Up?

Council Chair Ernie Martin was one of those who voted yes with a caveat, and while explaining his stance took several shots at Carlisle and his administration.

“I’ve had reservations from the very beginning,” Martin said, “and I think the administration has done a poor job of offering this package to the council because every hearing we’ve had we received new information that wasn’t disclosed previously.”

He went on to say he was disappointed that Carlisle didn’t even show up to the meeting to present his case to the council. It was an echo of what Berg had said earlier in the meeting.

“If this is the jewel of the Carlisle administration then the mayor himself should have come forth and offered it as such,” Martin said. “Being that his tenure is going to end soon, it would be the perfect time to defend the administration’s decision.”

Questionable Bidding Process

The biggest concern among council members leading into Thursday’s special meeting had to do with the residents of the apartment complexes and whether they would be displaced as a result of the sale.

Honolulu Affordable Housing Partners plans to increase rents for certain residents to bring them up to specific low-income market rates that are based on percentages of the area median income. The city in its management of the complexes did not do this as often as it should have, meaning many residents didn’t see rent hikes that were necessary to keep the apartments solvent.

But during the meeting, council members were made aware of possible discrepancies in the bidding process and that caused several of them to take pause. they questioned administration officials about whether there was an even playing field.

Chuck Wathen, of Pier Management Hawaii and the Hawaii Housing Alliance, was one of the top three bidders hoping to buy the complexes from the city.

He said there are certain aspects of the sales agreement with Honolulu Affordable Housing Partners that made him feel the group was treated differently than the other prospective buyers. Specifically, he said Honolulu Affordable Housing Partners received information during the bidding process that was different from what was available to everyone else.

“This was an unacceptable bid,” Wathen said. “It should have been cancelled before it went to a selection committee.”

But Keith Ishida, the head of Carlisle’s Office of Housing, said the bidding process was transparent. He said there was even a “firewall” between city officials and the bidders because the city used an outside consultant to help broker the deal.

“We believe we’ve run this process very straightforward, very up and up,” Ishida said.

Deputy Corporation Counsel Gordon Nelson echoed this in his own testimony to the council, saying the city is in a defensible position should someone decide to make a legal challenge.

As of Thursday afternoon, there were no challenges to the sale.

Some Extra Help

Support for the affordable housing sale has generally been lukewarm.

Faith Action Community Equity advocates for providing affordable housing to those in need. But the faith-based group wasn’t keen on the sale until it received certain assurances from city council members about improving Honolulu’s rental assistance program.

That program currently helps about 90 people with rental subsidies that are paid to their landlords. On average, the city spends around $13,630 per month on this subsidy. It’s funded through income from the Hale Pauahi parking garage and it has a balance of about $1.2 million.

On Thursday, the City Council [approved a resolution] that would put another $5 million into the rental assistance program using proceeds from the apartment complex sale. This step was necessary to get FACE to drop its opposition to the deal.

While this might seem like the city is simply increasing the amount of money it puts toward providing affordable housing, officials say that’s not the case. It’s expected that the extra $5 million could provide for at least 200 to 300 more people over the course of several years.

Scott Gomes is the senior vice president of CBRE Inc., and helped broker the deal between the city and Honolulu Affordable Housing Partners.

After Thursday’s meeting he said the idea of the rental assistance program is to help individuals during the transition from public to private ownership. He said the likelihood of it becoming a permanent part of living in the complexes is small.

“This is just really a stopgap in case people fall through the cracks,” Gomes said.

The sale between the city and Honolulu Affordable Housing Partners won’t be final until the group has had a chance to complete all of its due diligence. That’s expected to occur sometime next year.

Honolulu Affordable Housing Partners is a group of developers, including Highland Property Development out of Auburn, California, Richard Gushman, who’s well-known in Honolulu, and Stephen Gelber, who is a real estate and tax attorney in the city.