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UPDATED 1:46 p.m. 12/10/13

Mayor Kirk Caldwell says his entire homelessness initiative could be at risk if the Honolulu City Council decides to kill a $142 million affordable housing deal that’s been in the works for more than a year.

Homelessness has been a top priority for Caldwell since he took office, and he’s relying on a portion of the proceeds from the housing sale to prop up his multi-million dollar “Housing First” initiative that aims to get some of Honolulu’s most visible homeless off the streets.

But on Friday, Council Chair Ernie Martin introduced two resolutions that could seriously jeopardize Honolulu’s planned sale of 12 affordable housing complexes to private developers who would take over the operation and maintenance of the facilities. Martin is unhappy with the city’s plan to give about $35 million of the sale proceeds to certain nonprofits and projects that he thinks have not been fully evaluated.

Martin’s resolutions, scheduled to go before the City Council Wednesday, open up the possibility that the sale of the properties would be delayed or even cancelled. Caldwell said either scenario could threaten his homelessness proposal.
“This sale is tied to our Housing First initiative and as you know we have an evolving homeless problem,” Caldwell said during a Monday press conference. “Everyone reports that it’s more visible and it’s becoming aggressive. The old way of doing things is not working well enough so we are trying to break the model and move the needle.”

Housing First is the idea that the best way to combat homelessness is to give someone a place to stay first and then provide them with services, such as those related to mental health and drug treatment. Caldwell planned to use $7 million from the $142 million to pay for the Housing First initiative.

The seriousness of the mayor’s effort was underscored by the presence of Gov. Neil Abercrombie’s homelessness czar, Colin Kippen, at the news conference. Kippen echoed Caldwell’s sentiments and urged the council not to pass Martin’s resolutions.

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Honolulu Mayor Kirk Caldwell holds news conference to announce the impact of a resolution by the City Council to cancel the sale of the city’s affordable housing complexes.

Kippen lauded Caldwell for his recent efforts to combat homelessness in Hawaii and, in particular, the mayor’s push to partner with the state and local service providers.

Kippen said the Housing First model is the right approach for the state. But he also warned that the initiative could crumble if the council cancels the affordable housing deal.

“Housing first is a national best practice, and it’s a national best practice because it’s been shown to work,” Kippen said. “We all see homeless people who are chronically homeless on the streets in our neighborhoods. We know who they are. They’ve been there for years. They’re unkempt, they’re unwell and they will die on those streets. What we’re trying to do is end that.”

But the stakes for taxpayers are much higher than just losing out on the Housing First initiative. Administration officials said killing the $142 million deal will have serious financial ramifications throughout city government.

There’s a $2 million termination clause in the sales agreement, and the city estimates that litigation would cost an additional $500,000. That’s on top of the $900,000 the city has already spent on attorneys, brokers and appraisers while prepping for the sale.

But the loss of revenue from the housing sale also would come at a bad time. The city is facing a $28 million budget shortfall in the current fiscal year that has already resulted in cuts to services.

The city planned on using $27.4 million from the windfall to bolster its revenues in the current fiscal year.

Honolulu also spends more than $7 million a year to operate the affordable housing units — about $20,000 a day. These expenses weren’t included in the current budget so if the sale is delayed or nullified the city will have to find an additional $4.8 million to continue operating the facilities.

Officials also said there’s an opportunity cost to canceling the deal since the buyers had proposed $50 million worth of improvements to the city’s housing complexes. No deal means no fixes.

But what appears to be at the center of the disagreement between the Caldwell administration and the City Council is $35 million from the sale that was administered by the city and other expenses.

The administration and a selection committee recently announced a list of nonprofits and some projects that would be recipients of the housing sale proceeds. But Martin and others expressed concern that the city hadn’t fully vetted the projects before allocating the money.

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Honolulu Mayor Kirk Caldwell at a news conference, holds up City Council resolution to cancel the sale of the city’s affordable housing complexes.

UPDATED Nearly $16 million is currently proposed to go to the U.S. Veterans Initiative for a homeless service center, transitional housing and other projects. Millions more had been set aside for a number of city parks across Oahu, including in Kahuku, Waianae and Wahiawa.¹

Martin couldn’t be reached for comment Monday. In a statement issued after Caldwell’s press conference, he didn’t say which specific funding decisions he disapproved of. But he said the overall proposal put forth by the administration was subpar. As a result, he said, it left the council with little choice but to consider “drastic action.”

“The sale must take place under the structure of a sound plan for using the proceeds,” Martin said. “Until such time, it would be irresponsible for the Council to put public funds at risk.”

He also noted that the City Council has supported Caldwell’s Housing First initiative as a means to get the chronically homeless off the street.

The City Council is expected to discuss Martin’s resolutions during its regular meeting Wednesday as well as another resolution that lays out how the $35 million in sale proceeds would be spent.

What has Caldwell concerned, though, is that it may be too late. He said investors are feeling shaky simply because the resolutions to kill the sale were introduced in the first place. Finding a new buyer could take years, he said.

Instead, he pleaded for City Council members to keep the dialogue open and to work with the administration to complete the sale.

“We’re open to changes and modifications, but that requires discussion,” Caldwell said. “Playing chicken never results in discussion. It results in one person or the other swerving off the road. What I don’t want to happen is this sale to die as a result of this game.”

Read the city’s financial impact of canceling the affordable housing sale:

Read Martin’s resolutions here: