Discussions between the administration of Mayor Rick Blangiardi and the City Council have begun on how to best use nearly $80 million in remaining federal funds received during the COVID-19 pandemic.

The discussions come as the mayor and Council gear up for a new, multibillion- dollar city budget process that starts in early 2024.

The administration said remaining American Rescue Plan Act funding could be reallocated to offset millions in lost revenues due to the pandemic; however, both the administration and Council members say they want to seek public input on how the money should be spent.

Ian Scheuring, the mayor’s deputy communications director, said that as a matter of law, there is “a 15-day letter for approval of reprogramming (of ARPA funds) unless the Council ‘files a written objection.’”

City Managing Director Mike Formby, City Council Chair Tommy Waters and Vice Chair Ester Kia‘aina met earlier this month about the reallocation, agreeing that a procedural “letter of objection” would allow the administration to submit a resolution on the funding and trigger review and public discussion.

“Both the Council and the administration supported Council filing a written objection so the administration could submit a resolution,” said Scheuring, adding that the resolution process is preferred “as it provides the opportunity for full transparency via a public hearing.”

There are at least two portions — or tranches — of remaining ARPA funds, equating to almost $80 million.

Scheuring said the city has its plans for those remaining dollars.

“Monies from Tranche 1 — $40 million — and Tranche 2 — $39 million — will be used to pay down city expenses, which will create more capacity in the FY25 budget,” he said. “The city’s revenue loss due to the COVID-19 pandemic, per U.S. Treasury guidelines, was calculated as approximate $246 million in 2020 and $139 million in 2021.”

In addition, Scheuring said the managing director spoke during an informational briefing for the Council last week about using those moneys to “fund hazard pay impacts on the FY25 budget related to the COVID pandemic.”

Waters approves of using ARPA funds toward granting hazard pay to city workers deemed essential during the pandemic. Earlier this year the Council supported that idea with the passage of a formal resolution.

Adopted in June, Resolution 114 urges the city to provide “hazard or premium pay of up to $13 per hour to eligible city workers who performed essential work during the COVID-19 public health emergency by utilizing a portion of the available” ARPA State and Local Fiscal Recovery Fund moneys.

The Council’s legislation also urges the city “to negotiate with the unions representing city employees to establish reasonable and comprehensive provisions related to eligibility for premium or hazard pay.”

“Our city employees provided critical services throughout the pandemic,” Waters told the Honolulu Star-Advertiser, “and we must do everything we can to ensure they are appropriately compensated for the additional risks they endured in the service of our city.”

The Council, however, does want a fuller discussion on reallocation of the nearly $80 million.

“We are submitting our written objection to Mayor’s Message 234 (2023), which proposes to reallocate approximately $39,011,542 in (SLFRF) monies in advance of the city’s Fiscal Year 2025 budget,” the Council’s Nov. 17 letter reads. “We are requesting this action be submitted via resolution to provide an opportunity for the Honolulu City Council to learn more and discuss the proposed reprogramming of the balance of unallocated ARPA Tranche 2 funds.”

“Managing Director Formby coordinated the objection with Vice Chair Kia‘aina prior to receiving the letter of objection,” Scheuring told the Star- Advertiser via email.

Waters agreed.

“The formal objection by Council Vice Chair Kia‘aina and I is not to the substance of the request but as a matter of process to ensure we uphold the highest standards of transparency and allow for the community to provide their manao,” Waters said via email. “By objecting to this request, the administration must submit a resolution, allowing the Honolulu City Council to discuss the proposed reprogramming of the unallocated funds in a public meeting.”

Both sides, however, are also on a deadline.

According to the U.S. Department of the Treasury, ARPA funds must be obligated for new, eligible uses by Dec. 31, 2024. And it adds that jurisdictions have until Dec. 31, 2026, to fully use those funds — moneys meant for costs incurred after March 3, 2021.

According to Waters, the Council appreciates “the sense of urgency on the mayor’s part to ensure that these critical funds do not expire.”

“But I want to balance the need to move expeditiously with a desire for additional input from the public and my colleagues here at the Council,” he said. “This discussion is crucial to ensuring these funds are utilized in a way that provides the highest value to the people of our city.”

Meanwhile, Formby told the Star-Advertiser that Hono­lulu’s use of ARPA funds is now the subject of a city audit.

“The city is currently being audited on ARPA encumbrances and expenditures by the Office of the City Auditor,” Formby said via email.

That current audit follows the city auditor’s report, which found Honolulu exposed $387 million in federal COVID-19 relief money it received in 2020 to fraud, waste and abuse as it dispensed business and household relief funding during the pandemic.

Most of those Coronavirus Aid Relief and Economic Security, or CARES Act, funds, were programmed under then-Mayor Kirk Caldwell’s administration.

“The Blangiardi administration was responsible for encumbering and expending the final 2% of CARES Act funds and paying invoices on the CARES Act funds encumbered by the Caldwell administration in 2020 but not invoiced for services and/or payment until 2021,” Formby said.

The managing director added that use of ARPA moneys was not the same as using CARES Act funds.

“There were lessons learned from the CARES Act, and the U.S. Treasury rules governing ARPA funds are completely different and stand alone,” Formby said. “The Blangiardi administration also administered ARPA differently as more time was provided to encumber and expend funds.”

In the report released Nov. 8, the city’s audit concluded that Honolulu failed to follow federal guidance related to self-certification of businesses in connection to CARES Act funds.

The city did so as it attempted to quickly disburse $175 million toward a city program called the Small Business Relief and Recovery Fund, the audit says. Conversely, a similar city program, the Household Hardship Relief Fund, meant to provide supplemental income to households that demonstrated economic hardship due to COVID-19, ran short of money soon after its start. The audit further stated that the city’s use of CARES Act funds was linked to the “wasteful and excessive” purchases of city-owned vehicles.