With city workers delivering 2,000 pages of city budget-related documents in boxes to the city clerk’s office Friday, Honolulu Mayor Rick Blangiardi started the process toward approving his proposed $3.63 billion operating budget for the 2025 fiscal year, which begins July 1.

The mayor says the new budget, a 6.4% increase over the city’s current $3.41 billion operating budget, continues his administration’s stated prioritizes to build affordable housing focused on transit-oriented development, strengthen public safety, confront the homeless crisis, improve public infrastructure and deal with associated costs to run and maintain the city’s new nearly $10 billion rail system, Skyline.

Although this is the Blangiardi administration’s third budget, the mayor — up for reelection in November — says it’s the second spending plan that reflects his administration’s priorities.

“This budget certainly does, and this budget provides us with the resources and direction that we clearly want to take,” Blangiardi said during a news conference inside Honolulu Hale. “Our priorities are reflective of our commitment to build affordable housing, clearly what we want to do with homeless, what we want to do with the modernization of (the city Department of Planning and Permitting), certainly public safety is up there, (and) core city services.”

Andy Kawano, director of the city Department of Budget and Fiscal Services, said the proposed $3.63 billion budget is a $220 million increase over the prior year “due to very specific reasons” that he claimed were due to “inflationary pressures, the supply chain challenges, and high interest rates.”

“This budget was difficult to balance,” said Kawano. “All of our Cabinet members that make up department leadership throughout the city sacrificed so that we could balance the budget.”

Besides the operating budget, the Blangiardi administration submitted a $919 million capital improvement program — over $421.2 million less than the current $1.34 billion CIP spending plan — to fund park improvements and upgrade public buildings including Honolulu Police Department facilities, according to a city news release.

As part of the CIP budget, roughly $445 million goes toward wastewater and global consent decree projects — meant to remedy violations of the Clean Water Act, as part of a 2010 settlement reached between the city and federal governments — which amount “to nearly half of all proposed 2025 fiscal year” CIP projects, the news release states.

Additionally, $162.2 million pays for improvements “to bridges, roads, street lighting and other transportation-related projects,” the release adds.

Meantime, the “single largest category of expenditures” for the upcoming fiscal year is $844.7 million, meant to fund the city employee benefits, including nondiscretionary costs like health care, retirement and other post-employment benefits, the release states.

On operational costs, including salaries, the city’s public safety and public health agencies — police, fire and city Emergency Services Department — represent roughly 17% of the proposed operating budget, or $626.7 million, the city says.

The city’s mass transit programs — Skyline, TheBus and TheHandi-Van — are also a major expenditure, coming in at $427.7 million, or about 12% of the operating budget, the city says.

Other proposed budget highlights include:

>> $22.8 million in CIP funding toward affordable housing development, plus $3 million to plan projects in the Iwilei Kuwili rail station area. The budget proposal includes $5 million for grants to incentivize construction of affordable housing units on smaller lot sizes, the city says.

>> $19.5 million for homeless initiatives, including $12.3 million for Housing First initiatives; and $3 million for homeless services “to provide relocation, triage, medical care, respite, shelter, and other wrap-around services at Iwilei Center,” which the city acquired in January for $51.5 million. That acquisition, the city says, will convert the existing 3.8-acre commercial warehousing space to a new, city-owned affordable housing development.

>> $54.9 million in CIP funding for acquisition of new city buses and TheHandi-Van vehicles, plus $50 million dedicated to the rehabilitation of various streets and highways and $10.9 million for the electrification of transportation infrastructure.

>> $55.8 million in CIP funding for various park improvements as well as the acquisition of preservation and conservation lands. Also included is $6 million in Community Development Block Grant money meant to “complete multi-year park improvements throughout the island for eligible neighborhoods,” the city states.

In addition, the city says the proposed $3.63 billion operating budget will include $80 million — gleaned from American Rescue Plan Act State and Local Fiscal Recovery Funds the city received during the COVID-19 pandemic — toward hazard pay “for potential payments to essential city employees who were at risk of exposure” to the virus during the height of the pandemic.

That $80 million payout, the city says, will occur “pursuant to collective bargaining agreements” with employee unions “and/or determined by settlement and/or arbitration.”

According to the U.S. Department of the Treasury, ARPA funds must be obligated for new, eligible uses by Dec. 31. And it adds that jurisdictions have until Dec. 31, 2026, to fully use those funds — money meant for pandemic-related costs incurred after March 3, 2021.

Meantime, according to the city, Honolulu’s major revenue sources for fiscal year 2025 will include projected increases that include $1.73 billion in real property tax revenues and $93.9 million in Oahu transient accommodations tax — or hotel tax — revenues.

Conversely, “debt service comprises roughly 19% of the operating budget, at $677.6 million, a figure that includes principal and interest payments of $446.6 million for general obligation bonds and $231 million for sewer revenue bonds,” the city says.

Meanwhile, Honolulu’s current 2024 $3.41 billion operating budget was an approximate 6% increase over the prior $3.22 billion budget of 2023, while the city’s current $1.34 billion CIP spending plan represented a 30% increase over the prior $1.03 billion CIP budget adopted in 2022.

Next steps include the Honolulu City Council’s three-month review of the proposed budget — from March through June — prior to its approval, expected before June 30.