ORI Mismanagement May Throw A Last-Minute Wrench In City Budget
Mismanagement of federal grant funds and how the city will come up with $8 million to repay the feds is expected to be part of Honolulu City Council budget talks on Wednesday.
The council is scheduled to vote on a $2 billion spending plan that has pitted the council against Mayor Kirk Caldwell over 鈥 coincidentally 鈥 $8 million the council wants to give to various nonprofit groups through a series of earmarks.
Caldwell and some council members have criticized the earmarks, but others, including Chair Ernie Martin and Ann Kobayashi, have called them necessary at a time when traditional funding sources for nonprofits are drying up.
On Monday the U.S. Department of Housing and Urban Development ordered the city to pay back nearly $8 million it had previously given to an embattled Central Oahu nonprofit in the form of a Community Development Block Grant. The organization 鈥 ORI Anuenue Hale 鈥 has been at the center of a years-long federal probe involving possible kickbacks, political favors and mismanagement of taxpayer funds.
Some council members are questioning whether earmarks for nonprofits are appropriate at time when the city鈥檚 financial cushion is thinning.
Councilman Breene Harimoto, who has been the most vocal critic of the earmarks, said he plans to talk to his colleagues about HUD鈥檚 investigation and findings during Wednesday鈥檚 meeting. He doesn鈥檛 think it鈥檚 prudent for the city to be spending money on special interests when it just incurred a new debt.
鈥淚鈥檓 hoping it will help us focus our attention on (whether we should be) giving away so many of our tax dollars,鈥 Harimoto said. 鈥淚鈥檓 hoping we can have a discussion about that very issue, but I鈥檓 not sure how it will play out.鈥
Budget Committee chair Ann Kobayashi said it may be too late for the council to do anything about the HUD situation before the budget for this fiscal year needs to be passed.
On Tuesday, Civil Beat asked Caldwell’s office how the mayor preferred to pay back the HUD money and what involvement he had with the ORI grants. He was managing director then acting mayor from 2009 to 2010.
The mayor’s office issued a statement late Tuesday from Caldwell. 鈥淭he problems related to (ORI) span almost a decade, and while I served as Managing Director and Action Mayor for about 18 months of that time, I do not recall being briefed on the issues raised by HUD. To my knowledge I did not sign anything related to the loan forgiveness or any other document pertaining to (ORI).鈥
Caldwell spokesman Jesse Broder Van Dyke said the final impact on the city’s finances won’t be known until the city finishes a review of HUD’s concerns. The review will be led by Managing Director Ember Shinn and Corporation Counsel Donna Leong.
Any amount larger than $5,000 that would need to be repaid would require council approval, he said.
HUD has been investigating ORI Anuenue Hale for the past several years. The HUD program is typically used to help underserved individuals and communities, including providing housing or other public services.
ORI was supposed to use the money to buy and develop 30 acres of land adjacent to the for facilities to serve the elderly and developmentally disabled adults.
But what HUD found was that ORI wasn鈥檛 using the money as intended, and had violated rules covering grant recipient. HUD also found that the city provided little oversight of ORI and knowingly allowing it to violate grant standards and city land-use laws.
The HUD report released Monday also alleged that ORI had participated in a kickback scheme and questioned whether city officials forgave a $1.2 million loan for the nonprofit because they received campaign donations from the group while they were running for political office.
Martin is at the center of the controversy because he was head of the Community Services Department in 2010 when the decision was made to forgive the loan. He was also running for City Council that year.
Martin had been employed with the city for more than 20 years and apparently directly oversaw the block grant program from 1997 until at least 2008, according to records released by the city on Tuesday. It was in that period that ORI received millions of dollars through the grant program.
Martin said in a statement to Civil Beat on Tuesday that he has been told by city attorneys he cannot comment on HUD鈥檚 findings related to ORI due to ongoing compliance monitoring and an impending internal city audit.
