HomeMy WebLinkAboutCOM 0065.001 2008-2010William P. Kenoi
Mayor
Lincoln S.T. Ashida
Corporation Counsel
Gerald Takase
Assistant Corporation
Counsel
COUNTY OF HAWAII
OFFICE OF THE CORPORATION COUNSEL
101 Aupuni Street, Suite 325 • Hilo, Hawaii 967204262 • (808) 961-8251 Fax (808) 961-8622
January 5, 2009
Sent via email: no hard copv will follow
Honorable J Stanley Yoshimoto ~~
Chair, Hawaii Count Council
333 Kilauea Ave., 2" Floor ~;
Hilo, HI 96720
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Dear Chairman Yoshimoto and Council Members: r
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RE: Communication 65 (117109 Council Meeting) ~~.
Contingency Relief Funds and the Public Purpose Doctrine
Our Entry No.: WRK 05-11119
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Thank you for agreeing to hear from our office at your January ~, 2009, meeting ,
concerning contingency relief funds and the public purpose doctrine. Throughout the
years, our County and the citizens we all serve have benefited from the allocation by the
Hawaii County Council and the spending by County departments and agencies of
contingency relief funds. Working together, the Council and administration may
collectively have a tremendous positive impact on the quality of life of our citizens and
the communities-they live in.
This letter will serve as an outline for our discussion to ensure continuity of this
valuable County program.
1. What are contingency relief funds?
The Council maintains a contingency relief fund account ("CRF") in its
operating budget. The amount of money annually placed in the CRF account varies; in
some years the balance in the account was zero, in one fiscal year it was $2.7 million.
The fund was created to pay for unexpected expenses (i.e., contingencies) that
may occur during the fiscal year. For example, funds would be used to pay for
replacing a scoreboard at a County gym, in the event the old scoreboard broke during
the year (and a replacement scoreboard had not been budgeted for). Housing this
money in the Council allows all districts to be served as needed, and allows all County
departments and agencies equal and fair access to the funds.
Hawaii County is an Equal Opportunity Provider and EmployerC~~ ~ ~ ,S,
Ref. Toe ~~eeted
Ref. Qate ~U9
Honorable J Stanley Yoshimoto
January 5, 2009
Page 2
in recent years, contingency relief funds have been transferred from the County
to qualifying private nonprofit organizations who perform or deliver services consistent
with an existing County program or service. Examples include funds transferred to
private nonprofits who work with our Department of Parks and Recreation in co-
sponsoring parades and cultural festivals, and funds transferred to a private nonprofit
neighborhood watch association that works in conjunction with our Police Department.
All grants of money must comply with Section 2-139(a)(2) of the Hawaii County Code
1983 (2005 Ed.). This section of our laws specifically requires all funds transferred from
the Council to a County department or agency to support a specific program, project, or
event.
2. Who may receive contingency relief funds?
County departments and agencies may receive contingency relief funds
from the Council. This is done via resolution authorizing the appropriation of funds to
the County department or agency for a specific purpose.
Private nonprofits exempt from taxation pursuant to 26 USCA Section 501(c)3
may also receive contingency relief funds from the Council, so long as the organization
provides services consistent with an existing County-related program or service. The
transfer of funds to the private nonprofit is accomplished through the passing of a
resolution by the Council specifically identifying the nonprofit and stating the County
program, project, or event for which the funds shall be used.
3. What may contingency relief funds be used for?
Contingency relief funds are no different than all other County funds; they
may only be used for a public purpose. Further as explained above, if monies are given
to a private nonprofit instead of a County department or agency, CRFs may only be
used by the private nonprofit for County-related projects or services.
The key question to ask is whether a County department or agency would
ordinarily have the expenditure placed in their operating budget. If the answer is yes
then no problem. If the answer is no, then there may be a question whether the
expenditure fits within the public purpose doctrine, and whether the activity of the
private nonprofit would support an existing County program, project or event.
4. What is the difference between contingency relief funds and the County's grants
in aid program (Article 25, Chapter 2, Hawaii County Code)?
The following represents the significant differences between contingency relief
funds and grants in aid:
Honorable J Stanley Yoshimoto
January 5, 2009
Page 3
Contingency Relief Funds Grants in Aid
Source of funds General Fund General Fund
Criteria for
uglification County related program or service and
ublic a ose Public purpose only
Private non rofit 501 c 3 tax-exem t 501 c 3 tax-exem t
Where is money
transferred toT County department or agency (money
may pass through to beneficiary
o anization if criteria met Beneficiary organization
As evidenced above, the most significant difference between contingency relief
funds and grants in aid is that the expenditure of contingency relief funds requires a
County-related program or service. In contrast, grants in aid may be made to any
private nonprofit, even if they do not further aCounty-related purpose or service.'
5. How do 1 get contingency relief funds to a private nonprofit?
Council members are routinely approached by representatives of various
organizations throughout the year who seek financial assistance from the County. The
following is a short checklist that may help in determining whether contingency relief
funds may be appropriated to the organization.
1. Is the organization a 501(c)3? If the answer is no, then they do not qualify
for contingency relief funds pursuant to Article 25, Chapter 2 of the Hawaii
County Code 1983 (2005 Ed.)? If the answer is yes, move to question no. 2.
2. Will the organization provide benefits to the people of the County or
receive just a private benefit? If the organization will receive only a private.
benefit, they do not qualify for County funds. If the organization will provide
benefits to the people of our County, move to question no. 3.
3. Is the service or benefit delivered by the organization one that is
consistent with services a County department or agency already
provides? If the answer is no, then contingency relief funds may not be
used. The organization should be encouraged to seek a grant in aid from the
County pursuant to Section 2-139(a)(1), Hawaii County Code 1983 (2005
Ed.). If the answer is yes, proceed to question no. 4 a .
4. Does the County department or agency support the appropriation of
funds to the private nonprofit? The enclosed routing form will assist you in
'The private nonprofit must "provide benefits to the people of the County." They are not required to
provide or otherwise supplement an existing County program or service.
Other organizations that are not "nonprofits" as defined in our Code may still apply for and receive
grants pursuant to Article 25, Section 2-139(a)(3)(B) (subject to competition for grants in excess of
$25,000), and Section 2-139(a)(3)(C} (subject to competition for grants less than $25,000) through the
Director of Finance.
' Note that even though the services offered by a prospective nonprofit is consistent with services a
County department or agency already provides, the department or agency may already have a contract or
other agreement with ahother nonprofit service provider in place. In such cases, duplication of services
may not be appropriate, and there may be other Impediments that prevent contracting with the
prospective nonprofit.
Honorable J Stanley Yoshimoto
January 5, 2009
Page 4
ensuring all required approvals are obtained, and to ensure that the criteria
explained above are met. Council members are encouraged to initiate
dialogue with the appropriate department or agency head.
Some final fhoughfs
Council members play a critical role in ensuring County funds are expended
legally and in a manner that benefits our community at large. Keeping the above criteria
in mind will legitimately avoid criticism such as "This is pork money," and properly
manage the County's finances in these trying economic times. Real property tax
revenues are essentially the most significant source of revenue for our County. Our
citizens expect (and rightfully demand) that basic infrastructure and other County-
related services" are properly funded and made a priority.
As callous as it sounds, the County cannot be expected to "make up the shortfall"
whenever the State fails to fund or otherwise provide a service within their realm of
responsibility. It is true some of our citizens may suffer when this happens, but we
cause a greater harm in the long run when funds are diverted from our core County
responsibilities in favor of "supplementing" state, federal or private programs.
Thank you for allowing us the opportunity to discuss this very important issue and
process with you.
Very truly yours,
0~''~" `.
LINCOLN S. T. ASHIDA
Corporation Counsel
Encl.
LF: WRK 05.1119 1-5.09 Letter to Council re CRF in servicelLSAlmr
° Section 46-1.5, Hawai i Revised Statutes, as amended,
7/9/08
COUNTY OF HAWAII
CONTINGENCY RELIEF FUNDS REOUEST
TO: DATE:
Department
FROM: ~ PHONE/FAX:
Council Member
A. REQUEST (ATTACH BACKUP INFORMATION, IF AVAILABLE)
1. AMOUNT: $ 2. TO ACCOUNT # (i.e., 010.500.5503.02):
3. TO ACCOUNT NAME (i.e., P&R Adman. OCE):
4. PURPOSE(S) OF TRANSFER:
5. IF THE MONEY IS DESIGNATED FOR A NONPROFIT ORGANIZATION, NAME OF ORGANIZATION:
6. IS IT A 501(c)(3)? ^YES ^ No
*If YES, IRS determination lener must he
anached to thtc form
7. COUNTY-RELATED PROGRAM(S) OR ACTIVITY(HSS) TO BE FUNDED:
8. DEPARTMENTAL GOALS AND OBJECTIVES TO BE ADDRESSED:
I. FUNDING TO BENEFTT THE PUBLIC-AT-LARGE (AS OPPOSED TO PRIVATE BENEFIT)? ^YES ^ NO
10. IS THE PROGRAM OR ACTIVITY FUNDED ESTABLISHED BY CHARTER, ORDINANCE, OR DHtECTION
OF THE MAYOR? ^YES ^ NO
B. DEPARTMENT'S RECOMMENDATION:
^ APPROVE ^ DENY ^ DEFER:
RATIONALE:
DATE:
Department Head
C. MAYOR'S ACTION
^ APPROVED ^ DENIED ^ DEFERRED:
COMMENTS:
DATE:
Mayor