HomeMy WebLinkAboutCOM 0608.002 2016-2018 JEN RUGGLESPublic Works&Parks and Recreation
Council Member .---��.t OF Committee Chair
District 5— Puna Mauka, eP�'•� 'h7, Public Safety&Mass Transit
Pahoa Mauka, Kalapana y V" ,'y�t'' Committee Chair
Phone: 808-961-8536 + ;. = Hawai`i County Building
Fax: 808-961-8912 •,!TE•
cF•K� •r!: 25 Aupuni St. Suite 1402
Email:Jen.Ruggles@hawaiicounty.gov """" Hilo, HI 96720
HAWAI`I COUNTY COUNCIL
c
DATE: January 22, 2018 r '
cv c
-q -,
TO: Valerie T. Poindexter, Council Chair =
and Members of the Hawai'i County Council
FROM: Yen Ruggles, Council Member
SUBJECT: Material for Finance Committee Discussion on Communication 608 - Discussion
with Joseph Kamelamela, Corporation Counsel on use of Contingency Relief
Funds
Attached please find documents relating to Communication 608, which will be discussed at
the 1/23/18 Finance Committee. Please copy and distribute this to Council Members.
Mahalo.
Cern. No. ()OZ.?,
Ref.
• Ref. Dae JAN 2 3. ma_
Hawai`i County is an Equal Opportunity Provider and Employer
JEN RUGGLES Public Works&Parks and Recreation
Council Member Committee Chair
District 5— Puna Mauka, Public Safety&Mass Transit
Pahoa Mauka, Kalapana Committee Chair
Phone: 808-961-8263 Hawai`i County Building
Fax: 808-961-8912 25 Aupuni St. Suite 1402
Email:Jen.Ruggles@hawaiicounty.gov • Hilo, HI 96720
HAWAII COUNTY COUNCIL
August 25, 2017
To: Honorable Mayor Harry Kim
Re: Orchidland Neighbors CRF Grant Follow-up
Aloha Honorable Mayor Kim,
Thank you for inviting the opportunity for me to provide the attached response and legal basis
for the Orchidland Neighbors grant as you requested on in our meeting on 8/17/2017. The
attached response is to address Corporation Council Joe Kamelamela's retroactive approach in
denying the Orchidland Community Center (OCC) transfer that was duly approved as Resolution
211-17 by the Department Director, yourself, and the full County Council. Having respectfully
and thoroughly considered Mr. Kamelamela's concerns, I strongly believe the law and
precedence permits the OCC grant. I've done my best to keep it as succinct as possible while
using evidence, facts, and logic; and have provided responses to the following documents
provided by Mr. Kamelamela:
1. Hawaii County Code 2-137 (3) (Exhibit A)
2. Contingency Relief Funds and Public Purpose Doctrine from the Office Corporation
Counsel (Exhibit B)
3. Addressing Mr. Kamelamela's document provided at our meeting with you titled
"Orchidland Neighbors." (Exhibit C)
I hope this is helpful in making a decision that is best for serving our constituents.
Very Respectfully,
Hawai`i County is an Equal Opportunity Provider and Employer
Hawaii County Code 2-137 (3): (Exhibit A)
"The service or activity to be provided by the nonprofit and funded by the county, shall address...public health and
welfare of the people and the environment as may be determined by the County."
a.The "'service" provided will be a public community center to be used for Food Basket distributions,
emergency/civil defense services, Farmers Markets, and meeting rooms,to be accessed not only by the 3,500 current
Orchidland residents, but for regional public community use.
-The stated public"service" to "address...public health and welfare of the people" was duly approved by:
1. The Office of Housing and Community Development on April 25, 2017.
2. Mayor Harry Kim on May 1, 2017.
3. Hawaii County Council at a public hearing on June 7th, 2017.
b.As it relates to Res. 211-17 the following questions arise: Who represents "the County?" Is "the County"
Corporation Counsel or the County Council?
Consideration#1: Hawaii County Council is made of nine representatives elected by County of Hawaii citizens
whose sole purpose is to represent the County as a whole.
Consideration#2: Corporation Counsel is appointed by the Mayor and confirmed by the Council whose sole
purpose is to protect and counsel the Council on their determinations to protect the County from liabilities, (not
make determinations addressing public health and welfare of people acting as the county). Furthermore,
Corporation Counsel, or any other acting representative of the county failed advise the Council otherwise when
the body made their determination on June 7th, 2017.
Consideration#3:The reference given to our office by Mr. Kamelamela titled "Contingency Relief Funds and The
Public Purpose Doctrine," states the Supreme Court of Hawaii determined "what constitutes a public purpose is
generally a question for the legislature to decide" (Page 3).
Conclusion:The County Council was within its authority as allowed by the County Code when it determined the service
provided by OCC addressed "public health and welfare of the people," and adopted Res 211-17 and public purpose is
more appropriately decided by the County Council public democratic legislative process than Corporation Counsel
opinion.
Contingency Relief Funds and Public Purpose Doctrine from the Office Corporation Counsel (Exhibit B)
According to this document provided by Mr. Kamelamela,the grant to OCC is well within the scope of public purpose:
Hawai'i Law and Cases(Page 3)
a. In Amemiya v.Anderson the question of public purpose was opined with State Act 161 which
financially assisted HECO, (a private,for profit utility).The Court determined Act 161 constituted public purpose
and "begun its analysis by recognizing what constitutes a public purpose is generally a question for the
legislature to decide."
Conclusion:The County legislature determined Res 211-17 met public purpose.
b. "The Court recognized that virtually every State appropriation...results in some private benefit.The
crucial factor,the Court held, is the ultimate objective of the Act; the fact that incidental benefits accrue to
private interests is immaterial;" (Page 4)
Conclusion:the "ultimateobjective" of Res 211-17 is to provide a public service to increase public
health and welfare for the current 3,500 residents of Orchidland and the surrounding Puna
neighborhoods.The incidental benefit of the community space being on private land as benefiting the
Orchidland Neighbors public non-profit's "private interest is immaterial."
The Public Purpose Doctrine-Comparison of case law from other States (Page 5)
a. Four-part test in.determining "public purpose:"
"1. Determine the ultimate goal or benefit to the public intended by the project.
2. Analyze whether public or private parties will be the primary beneficiaries.
3. Consider the speculative nature of the project.
4. Analyze and balance the probability that the public interest will be ultimately served and to what degree.
Generally, a public purpose has for its objective the promotion of the public health, safety, morals, general
welfare, security, prosperity, and contentment for all, or at least a substantial part of, the inhabitants or
residents. Otherwise stated, the test...should be whether the expenditure confers a direct benefit of a
reasonably general character to a significant part of the public, as distinguished from a remote or theoretical
benefit." (Page 5)
•
Conclusion:The OCC grant passes the four-part test in the following ways, respectively:
1. The ultimate benefit to the public is a space for Food Basket distribution, emergency/disaster services, Farmers
Markets, and meeting rooms,to be accessed not only by the 3,500 current Orchidland residents, but for regional
Puna community use.
2. There is no private party in this project.The community center will be owned and operated by a public non-
profit, (as opposed to a private non-profit), charity by volunteers for the sole purpose of serving the public;
there is no private benefit.Thus, the public will be the primary beneficiary of the community center.
3. OCC, a public charitable non-profit owns the property thus there is no speculative nature of the project.
4. The probability that the public interest will be served by the above services is sufficient.
It is not remote or theoretical that the public will benefit from the project's objective of the promotion of public health,
safety, morals,general welfare, security, prosperity, and contentment for all, or at least a significant part of the public.
The project is "distinguished from a remote or theoretical benefit."
b. "The law additionally provides well defined limitations on the expenditure of public funds...for: "celebrations,
entertainments, sports and games," (Page 6) and "religious activities" (Page 7).
Conclusion:The grant provided to OCC does not meet the criteria of a limited use of public funds.
c.The "Summary," reiterates, "Courts will generally defer to the legislative law-making body's determination of
what constitutes a "public purpose." (Page 8)
Addressing Mr. Kamelamela's "ORCHIDLAND NEIGHBORS" document (Exhibit C):
"Grant Means...the term does not include an award whose primary purpose does not include an award whose primary
purpose is to procure an end product,whether in the form of goods, services, or construction; a contract resulting from
such an award is not a grant but a procurement contract."
- If this was true then every contingency fund grant would be illegal. I challenge Mr. Kamelamela to find one contingency
fund grant that has not"procured an end product,whether in the form of goods, services, or construction."
"CRF Grants...Opinion-such grants are not used for construction (that is, CIP). Reason: public monies cannot be used
towards the construction of private facility."
1. It is arguable that the community center will be a "private facility" as it is owned by a 'public' non-profit charity as
defined by the IRS (not a 'private' non-profit, of which many CRF grants are awarded to).
2.There is ample precedence of CRF grants being used for construction of facilities on private land (Exhibit D):
• Res 480-16 funding to Orchidland Neighbors to assist in planning and permitting for construction of community
center.
• Res 113-15 funding construction of Kailapa Community Association Pavilion.
• Res 437-06 for the construction of a wastewater treatment facility and restrooms at Kapoho Vacationland
Estates and Farm Lots, and Kapoho Beach Lots.
• Res 737-08 for the construction of a building for the Fern Forest volunteer firefighter organization.
• Res 101-15 funding construction of a garage for Anekona Ouli Kanehoa VFD company, 9-Bravo.
• Res 602-14 funding for the construction of a bus shelter and site planner for Ho'omalu Ka'u.
• Res 401-07 for the construction of a bulletin board in Ka'ohe Homesteads.
• Res 339-14 for the construction of bus stop signs in Hawaiian Beaches.
• Bill 146 amending Ord. 15-47 granting$2,000 to Orchidland Neighbors for planning and permitting costs to
construct a community center.
3.The facility will be used by the public and operated by volunteers solely for charitable public purpose;therefore there
is no private benefit.
•
"Factors Considered and Evaluated" (Addressing each factor respectively in Exhibit C):
1. Any CRF Grants not expended on government property results in the end good or service existing on private property.
Most CRF grants are not expended on government property.
2. I agree.The service to the public is the legal basis to establish public purpose.
3.The County does not havea law or policy that states such an ordinance is required.
4.The construction of a community facility for Food Basket distributions, emergency/disaster services, Farmers Markets,
and meeting rooms community activities for the public is a "service."
5. It is a "service" as provided by Article 25,Section 2-137(3).
6. When I requested record of this claim Mr. Kamelamela said it was "oral,"Therefore, he has no record of this.
Furthermore,there is ample precedence of CRF grants being used to assist in construction projects, as above;further
demonstrating prior Corporation Counsel opinions have stated otherwise.
7.This is not relevant because it only applies to projects on government land. Furthermore, even if it was government
land,the code does not say CRF grants may only be for projects that do not qualify for block grants.
8. There is no law that says there needs to be contractual agreements in order to continue to support a project with CRF
grants.There is ample historical precedence for the use of CRF grants on construction projects.
9. First,the law does not require CRF grants be used to only to support County-run programs, (if this was the case,the
majority of our CRF grants would not be legal). Second,the OCC community center will be used for emergency civil
defense preparedness, and CERT which is a county program,just like the Hele-On is a County program. It will also be
used to participate in Food Basket, (which,in Puna funded through County Council CRF funds). Secondly,the examples
given above demonstrate precedence of CRF funds being used for non-County-run programs.
Hawaii County Code 2-137 (3):
fy
§ 2-137 HAWAI`I COUNTY CODE
Section 2-137. Eligible organizations.
All grant payments made by the County to nonprofit organizations are to be made
in accordance with these standards so that the funded nonprofit programs yield direct
benefits to the public and accomplish public purposes. No grant to a nonprofit
organization shall be made unless the nonprofit organization meets the following
criteria:
(1) The nonprofit organization is chartered or otherwise authorized to do business
in the State for charitable purposes and exempted from the Federal income tax
by the Internal Revenue Service.
(2) The purposes for which the nonprofit organization is organized provide
benefits to the people of the County.
(3) The service or activity to be provided by the nonprofit organization, and
funded by the County, shall address educational concerns, culture and the
arts, the needs of the poor, youth, the aged, those with physical or emotional
disabilities, victims of crimes, victims of health or social crises, or up blic,
health and welfare of the people and the environment, as may be determined
by the County.
(4) The nonprofit organization has a governing board whose members serve
without compensation and have no conflict of interest between their regular
occupations and the services provided by the nonprofit organization.
(5) The nonprofit organization has bylaws or policies which describe the manner
in which business is conducted, including management, audit, and fiscal
policies and procedures, policies on nepotism, and policies on management of
potential conflict of interest.
(6) The nonprofit organization has at least one year's experience with the service
or activity for which the appropriation is sought or can otherwise demonstrate
to the satisfaction of the County sufficient expertise to successfully carry out
the service or activity.
(7) The nonprofit organization must be licensed and accredited in accordance with
applicable requirements of Federal, State and County laws.
(1983 CC, c 2, art 25, sec 2-137; am 1986, ord 86-52, sec 2; am 2012, ord 12-136, sec 1.)
Section 2-138. Conditions for grants.
Nonprofit organizations to whom a grant has been awarded shall agree to comply
with the following conditions before receiving the grant:
(1) Employ and appoint persons on the basis of merit and ability;
(2) Comply with applicable Federal and State laws prohibiting discrimination
against any person on the basis of race, color, national origin, religion, creed,
sex, age, or handicap;
(3) Agree not to use any public funds for purposes of entertainment or perquisites;
(4) Comply with such other requirements as the director may prescribe to ensure
adherence by the nonprofit organization with Federal, State, and County laws,
and established standards for fiscal and program management;
2-64
•
ADMINISTRATION § 2-138
(5) Allow the director, the committees of the council and their staffs, and the
legislative auditor access to facilities, personnel, records, reports, files, and
other related documents in order that the program, management, and fiscal
practices of the nonprofit organization may be monitored and evaluated to
assure the proper and effective expenditure of public funds; and
(6) Each nonprofit organization shall submit a disclosure form along with its
grant application which lists any board member, officer, director or
administrator that may have a conflict of interest or potential conflict of
interest, including any familial relationship with any of the following:
(A) A member or members of the council;
(B) Staff appointed by a member of the council;
(C) The mayor;
(D) The managing director;
(E) The director of finance; or
(F) The corporation counsel, the assistant corporation counsel, or a deputy
corporation counsel.
The disclosure form shall specify any and all mitigation measures to avoid, in
fact or appearance, any conflict of interest.
(1983 CC, c 2, art 25, sec 2-138; am 1986, ord 86-52, sec 2; am 2012, ord 12-136, sec 1.)
Section 2-139. Procedure for awarding grants.
(a) All grant awards made to a nonprofit organization by the County shall be made in
accordance with one of the following procedures:
(1) Grants-in-aid awarded annually in operating budget:
(A) Annually, before November 30, the director shall, for the purpose of
soliciting applications, establish a sum of at least $1,000,000 to be
available in the ensuing fiscal year for funding requests by nonprofit
organizations. The director shall publish a notice soliciting applications
in two newspapers of general circulation within the County by
November 30.
(B) All applications for grants shall be submitted to the director on or before
January 31 preceding the County's fiscal year, which begins on July 1.
Applications shall be prepared on forms provided by the director.
Applications not in conformance with the requirements of this Code may
be rejected. All application forms shall include detailed information on
specific, measurable outcomes and public benefits to be derived from the
expenditure of County funds.
(C) The director shall submit to the council all qualifying applications as
provided in sections 2-137 and 2-138 for its review and appropriation of
funds. Site visitations of nonprofit organizations submitting complete
applications may be conducted by the council and its designated staff, as
deemed necessary by the chair of the appropriate committee, after
•
2-65
e•
§ 2-139 HAWAII COUNTY CODE
January 31 but prior to final action on the operating budget by the
council. Any site visitations shall be publicly noticed and conducted in a
manner that allows flexible councilmember participation and designated
staff support.
(D) Upon favorable action by the council to appropriate funds for the grant, a
written contract shall be prepared with the nonprofit organization which
shall meet all legal requirements of the County and shall include
program, fiscal, and audit reporting requirements sufficient to allow the
director, the legislative auditor, or council to effectively monitor and
evaluate the use of the grant funds. Agencies shall be notified by the
director of their funding or lack thereof by August 31.
(2) Grants From District Contingency Relief Funds:
(A) Appropriations from the district contingency relief account shall be
transferred to an accepting County department/agency via resolution
identifying the nonprofit organization and the specific program, project,
event, activity, service, equipment, materials, or supplies for which the
grant shall be used.
(B) Any equipment purchased by a nonprofit organization shall be domiciled
with that nonprofit organization, which shall assume any and all
liability for such equipment.
(C) A contract shall be prepared with the nonprofit organization which shall
meet all legal requirements of the County and shall include program,
fiscal, and audit reporting requirements sufficient to allow the legislative
auditor or council to effectively monitor and evaluate the use of the grant
funds.
(3) Other Grants:
(A) Grant awards in excess of$25,000 to nonprofit organizations shall
specifically identify the organization receiving the grant funds and the
purpose for which the grant funds shall be used in an ordinance or
resolution.
(B) Grant awards in excess of$25,000 to organizations that do not qualify as
nonprofit organizations shall specifically identify the purpose for which
the funds shall be used in an ordinance or resolution and be subject to
competition in compliance with chapter 103D of the Hawai`i Revised
Statutes.
(C) Grant awards of$25,000 or less may be authorized by the finance
director for public purpose projects or programs upon written request of
a funding agency or department. Such grant awards shall not be limited
to nonprofit organizations but shall specifically identify the organization
and program, project or event for which the grant funds shall be used
and comply with the rules and regulations of the director of finance.
2-66
ADMINISTRATION § 2-139
(b) In the event that a grantee organization is unable or unwilling to provide the public
service(s) for which grant funds were appropriated, the following procedures shall
apply:
(1) For grant awards authorized as prescribed in 2-139(a)(1), the mayor may
direct the finance director to solicit applications from eligible nonprofit
organizations to fulfill the specific public purpose(s) for which the funds were
originally appropriated for the remainder of the fiscal year. The director shall
forward recommended application(s) and appropriation measure(s) to the
council for its decision. Funds appropriated to a successor nonprofit
organization shall not exceed the balance of unexpended County funds
awarded to the original nonprofit organization.
(2) For grant awards from the district contingency relief, the council may direct
the return of the full appropriation or the balance of unexpended funds.
(3) For other grant awards authorized as prescribed in 2-139(a)(3), the finance
director may direct the return of the full grant amount or balance of the
unexpended funds.
(1983 CC, c 2, art 25, sec 2-139; am 1986, ord 86-52, sec 2; am 1992, ord 92-151, sec 2;
am 1995, ord 95-138, sec 2; am 1997, ord 97-103, sec 3; am 1999, ord 99-56, sec 1; ord
99-103, sec 2; am 2001, ord 01-16, sec 2; am 2007, ord 07-52, sec 2; am 2012, ord 12-136,
sec 1; am 2014, ord 14-43, sec 2.)
Section 2-140. Repealed.
(1983 CC, c 2, art 25, sec 2-140; am 1992, ord 92-151, sec 3; am 1995, ord 95-138, sec 2;
am 2007, ord 07-52, sec 3; rep 2012, ord 12-136, sec 1.)
Section 2-141. Applicability to noncounty funds; cosponsored activities.
Nothing in this article shall be construed to apply to the appropriation of funds:
(1) Provided to the County for a stated purpose by any person, private entity, or
governmental entity; or
(2) Made to an agency for any activity or program co-sponsored by the agency and
a private or governmental entity or entities.
(1983 CC, c 2, art 25, sec 2-141.)
Section 2-142. Records, reporting, and fiscal accountability requirements.
(a) The nonprofit organization shall follow generally accepted accounting procedures
and practices and shall maintain books, records, documents, and other evidence
which sufficiently and properly account for the expenditure of County funds. The
books, records and documents shall be subject at all reasonable times to inspection,
reviews, or audits by the County expending agency, the director, and the legislative
auditor, or by their representatives.
(b) The County expending agency, director of finance, or County council may request
periodic written reports on the use of County funds.
2-67
E h • b • t
Contingency Relief Funds and Public Purpose Doctrine from the Office Corporation Counsel
By Lincoln Ashida
_ 4
-'} CONTINGENCY RELIEF FUNDS
AND THE
PUBLIC PURPOSE DOCTRINE
Contingency funds are County funds that may only be used for a public purpose. If funds are
going to a nonprofit,then the purpose of the transfer must benefit the people of our County and
be consistent with County services.
When transferring funds to another department, a Contingency Relief Funds Request form must
be filled out; this form will be part of your handouts. Some of the required information is listed
below:
•
• State the purpose of the transfer
• State the County-related program or activity to be funded
• State the departmental goals and objectives to be addressed
Please be specific when filling out the form for the above items so that the public purpose is
clearly stated.
For more information on the public purpose doctrine,please refer to the attached communication,
") dated July 14, 2006, from the Office of the Corporation Counsel.
If you have questions on whether a contingency transfer will qualify as a public purpose,please
contact Corporation Counsel for assistance. When in doubt,please ask before proceeding.
•
•
""j 'I
•
Harry Kim • �c ' �. Lincoln S.T.Ashida
Mayor •
,.� `� • Corporation Counsel
• _ ` *Gerald'Takase
�;t� -}�;��` Assistant Corporation
•
o�.� Counsel
COUNTY OF HAWAII
OFFICE OF THE CORPORATION COUNSEL
101 Aupuni Street, Suite 325 • Hilo,Hawaii 96720-4262 • (808)961-8251 • Fax(808)961-8622
July 14, 2006
Sent via email to all Council Members;hard copy also to Chair
Honorable Stacy K. Higa and Members of the '
Hawai'i County Council
County of Hawai'i
25 Aupuni St.
Hilo, HI 96720 • •
Dear Chairman Higa and Council Members:
•
RE: Contingency Funds and the Public Purpose Doctrine
Our Entry Nos.: WRK 05-11119, WRK 05-11187
On April 3, 2006, a meeting was held concerning the Hawaii County
Council's use of contingency fund monies. At this meeting, it was decided our
office would provide the Council Chair some written thoughts concerning legal
considerations in the use of contingency fund monies to fund various
organizations and projects within our community.
These thoughts and considerations are prospective, and are submitted
with the intent to aid.and guide the Council in the future expenditure of
contingency fund monies.
Rule 33
Rule 33 of the.Rules of Procedure of the Council of the County of Hawai'i
(as amended July 7, 2005), provides in-pertinent part as follows:
Each Council Members shall have direct responsibility over the District
Contingency Relief account.
•
(a) Each Council Members is allotted$100,000 in annual contingency relief,
when appropriated-in the General Fund, to provide for county related
projects.
(b) In an election year(July-December),the Council Member shall be allotted
50%of the appropriation. The remaining 50% (January-June)shall be
allotted in January.
•
Hawaii County is art Equal Opportunity Employer and Provider
•Honorable Stacy K. Higa and Members of the
Hawaii County Council ,_J
July 14, 2006 .
Page 2 C...
(c) Expenditures shall be transferred to County agencies using the appropriate
legislative mechanisms for the benefit of the agencies to provide for the
public.
(d) All purchases of equipment must follow the procurement law and be
domiciled in the County Departments. Equipment, supplies and products
are the property of the County.
(e) Transfers between the DAE and Contingency Relief accounts are
prohibited.
(f) Transfers from a district account to other district accounts are prohibited.
The Public Purpose Doctrine
It is well settled across our country that all appropriations or expenditures
of public money by municipalities and indebtedness created by them, must be for
a public and corporate purpose, as distinguished from.a private purpose. Brown
v. Longiotti, 420 So.2d 71 (Ala. 1982); Schroeder v. Irvine City Council,-97
Cal.App.4`h 174, 118 Cal.Rptr.2d 330 (4th Dist. 2002).
Generally, a municipality has no power, unless expressly conferred by
constitutional provision, charter or statute, to donate municipal monies for private
uses to any individual or company, not under the control of the municipality and
having no connection with it. Noble v. Martin County Health Facilities Authority,
682 So.2d 1089 (Fla. 1996); Texas Municipal League Intergovernmental Risk
Pool v. Texas Workers'Compensation Commission, 74 S.W.3d 377 (Tex. 2002).
The Public Purpose Doctrine—Hawai'i Law and Cases
Article VII, Section 4 of our Hawaii State Constitution provides as follows:
No tax shall be levied or appropriation of public money or property made,nor
shall the public credit be used,directly or indirectly,except for a public purpose.
No grant shall be made in violation of Section 4 of Article I of this constitution.
No grant.of public money or property shall be made except pursuant to standards'
provided by law.
•
What constitutes a "public purpose has been the debate of relatively few
legal opinions in our State.
•
In State ex rel. Amemiya v. Anderson, 56 Hawaii 566, 545 P.2d 1175
(1976), an action for declaratory judgment was brought by the Hawaii State
Attorney General against the Hawaii State Director of Finance, to resolve the
question of whether the Director could issue, sell and deliver antipollution
revenue bonds and enter into a project agreement with a private, for-profit utility
to finance a government-mandated antipollution project With the proceeds from
the bond sales.
At the time, the State sought to issue, sell and deliver twenty million i'
dollars ($20,000,000) worth of anti-pollution revenue bonds, and enter into a
•
•
Honorable Stacy K. Higa and Members of the
Hawaii County Council
July 14, 2006 •
I Page 3
"project agreement" with Hawaiian Electric Company(hereinafter"HECO").1 In
sum, the project agreement called for an expenditure.of government monies to
HECO to allow it to operate, maintain and repair the Kahe project.
In turn, HECO would pay to the State.during the term of the agreement
rates and charges in the form of rentals or installment sales payments sufficient
to "(a) pay the.principal and interest on the revenue bonds issued including any
premiums payable upon any required redemption; (b) establish or maintain such
reserve, if any,'as may be required by the instrument authorizing or securing the
revenue bonds; (c)pay the feesand expenses of the paying agents and trustees
for such revenue bonds; and (d).pay the expenses incurred by the Department in
administering such bonds or in carrying outthe Kahe (P)roject or the project '
agreement" Amemiya, supra, 56 Hawaii at 569. .
The Attorney General argued;inter alia, that the underlying legislation,Act
161, violated the Hawai'i Constitution, as it appropriated public money or public
property or used the public credit for other than a public purpose.
The Supreme Court of Hawaii'begun its analysis by recognizing what
constitutes a public purpose is generally a question for the legislature to decide.
Anderson v. O'Brien, 84 Wash.2d 64, 70, 524 P.2d 390, 394 (1974); County of
l 7 Alameda v. Janssen, 16 Ca1.2d 276, 281, 106 P.2d 11, 14, 130 A.L.R. 1141
• (1940). Arnemiya, supra, 56 Hawaii at 574.
The Court further noted that in the present case, the legislature in fact
declared in Act 161 that the "financing.of such anti-pollution measures through
the assistance of the State (through the issuance of revenue bonds) is a public
purpose."Amemiya, supra, 56 Hawaii at 574. "Though the legislature's
determination is not conclusive; it is given wide discretion and should not be
voided by the courts unless it is manifestly wrong, i.e. the purpose involved is
clearly a private one. (Citations omitted)." Amemiya, supra, 56 Hawaii at 574.
Balanced against this general maxim, the Court noted that"However,
'(w)hen a constitutional question is properly presented, it is the duty of the court
to ascertain and declare the intent of the framers of the Constitution and to reject
any legislative'act which is in conflict therewith...The presumption, however, is in
favor of constitutionality, and all doubts must'be resolved in favor of the act.'
(Citations omitted)." Amemiya, supra, 56 Hawai'i at 574-575.
Applying the above analysis, the Supreme Court of Hawaii found the
purpose of Act 161 constituted'a public purpose. The Court declared the
following factors as significant in finding a public purpose:.
1 Act 161,Session Laws of 1-lawari 1973, authorized the State of Hawaii to issue$20,000,000 of
t ) anti-pollution revenue bonds to finance the correction of a thermal pollution problem at the time
caused by the discharge of heated water close to the shores off Kahe, Oahu.
Honorable Stacy K. Higa and Members.of the
Hawaii County Council •
July 14, 2006
Page 4 {
1. An examination of the minutes of the 1968 State Constitutional
Convention revealed:a discussion by the Committee on Taxation
• and Finance wherein it was implied that the issuance of industrial
bonds was for a "public purpose;"
2. The Court recognized that virtually every State appropriation,
financing or lending of credit results in some private benefit. The
crucial factor, the Court held; is the ultimate objective of the A7thee
fact that incidental benefits accrue to private interests is immaterial;
and .
3. The Court cited an excerpt from.a North Carolina Law Review
article (52 N.C.L.Rev. 859 [1974D stating that "the exigencies of
modern state government virtually compel the use of tax exempt
P
financing as an incentive to publicly desirable activities in the .
private sector...Just so, the public purpose doctrine need not be a
static barrier to state activity in areas of consuming public
importance:"
•
Amemiya, supra, 56 Hawaii 575-576.
Spears v. Honda, 51 Hawaii 1, 449 P.2d 130 (1968), rehearing denied, 51
Hawai'i 103 (1969),•represents a suit for declaratory judgment brought by
concerned citizens, challenging the Department of Education's use of State funds
to provide bus transportation subsidies to sectarian and private school students.
By legislative act taking effect in 1965, the State assumed responsibility
for several governmental functions previously delegated to the various county
governments, including "the transportation of school children. (Internal citation
omitted)." Spears, supra, 51 Hawai'i at 2-3. In 1967, the legislature further
authorized the State Department of Education "to provide suitable transportation
for all school children in grades kindergarten to 12 and in special education
classes...and to promulgate rules and regulations relating thereto with a view to
providing equal opportunity for education to the school children of the State:
(Internal notes omitted)," Spears, supra, 51 Hawaii at 3.
On August 1, 1967, the Board of Education adopted Rule 1 of the State
School Board. This rule established regulations for the granting of subsidized
bus transportation to school children attending both public and.nonpublic
(sectarian or parochial, and private)schools. Under the regulations, the children
paid the first ten cents of the cost of a bus ride, and were subsidized only for the
remaining cost of the ride (usually fifteen cents). Spears, supra, 51 Hawaii at 3.
Through 8n arrangement established by the State with the non-public
•
schools, tickets for were issued to qualifying students at the non-public schools.
The total amount of the government subsidy attributable to the non-public
schools for the schoolyear 1966-67 was approximately $42,000. However, prior
Honorable Stacy K. Higa and Members of the
Hawaii County Council
_ July 14, 2006 •
• Page 5
•
to this sum being disbursed to the non-public schools, the instant lawsuit was
filed,
The plaintiffs in this case argued the enabling legislation and Board of
Education rule violated the State Constitution in that funds were appropriated for
the "support and benefit"of nonpublic educational institutions, a non-public
purpose. Spears, supra, 51 Hawaii at 5.
•
The State in turn argued there was no constitutional violation, since the
money was intended (and arguably did in fact) benefit the children, and not the
non-public school itself. The Court referred•to this as the "Child Benefit Theory"
found in other cases throughout the country. Spears, supra, 51 Hawaii at 5-6.
The Supreme Court of Hawaii found no public purpose existed in the
subsidization of bus service for non-public school students, and declared those
portions of the enabling legislation and Board of education rule unconstitutional.
in sum, the Court found that a review of the legislative history of the
Constitutional Convention of 1950 revealed an express intent to reject the "Child
Benefit Theory" in Hawaii, with respect to the appropriation of public monies for
non-public school students.
! The Court's opinion discussed the need to balance State regulation and
supervision of non-public schools (a necessary component of prudent
governance) against the appropriation of public funds to non-public schools (a
prohibited act). Spears, supra, 51 Hawaii at 8.
•
r The Pubic Purpose Doctrine_ Comparison of case law from other States
A majority of courts in'the United States follow a four-part test in making
the determination whether funds are for a "public purpose." This process is as
follows:
1. Determine the ultimate goal or benefit to the public intended by the
project.
2. Analyze whether public or private parties will be the primary
• beneficiaries.
3. Consider the speculative nature of the project.
4. Analyze and balance the probability that the public interest will be
ultimately served and to what degree.
generally, a public purpose has for its objective the promotion of the
,public health, safety, morals, general welfare, security, prosperity, and
,contentment for all, or at least a substantial part of,the inhabitants or residents,,
Noble v. Martin County Health Facilities Authority, supra, 682 So.2d 1089(Fla.
1996): Otherwise stated, the test of a public purpose should be whether the
) . expenditure confers a direct'benefit of a reasonably general character-to a
significant part of the public, as distinguished from a remote or theoretical benefit.
Honorable Stacy K. Higa and Members of the
Hawaii County Council
July 14, 2006
Page 6
•
Town of Beloit v: County of Rock, 259 Wis.2d 37, 2003 WI 8, 657 N.W.2d 344
(2003).
The law additionally Provides well defined limitations on the expenditure of
public funds. For example, without express authority, a municipal corporation
11- ota••ro. i- - - _P - -. .- • - -• _.'01 -I -i.'•u•-• ••l
and games, etc. Such power cannot•be implied. Brandes V. City of DeerfieldBeach, 186 So.2d 6 (Fla. 1966). .
•
•
The "express authority" referenced above generally requires specific
enumeration in a governing document, such as our Hawaii County Charter.
The County's Annual Grant Process •
Chapter 2, Article 25 of the Hawai'i County Code 1983 (2005-ed.)
(hereinafter"Hawai'i County Code"), provides for the annual granting of County
funds to private non-profit entities in our community. This article is reproduced in
its entirety and enclosed as an attachment hereto.
Non-profit status is not the sole condition precedent to the receipt of
County monies. The private entities are required to comply with a number of •
conditions, including the non-use of these monies for entertainment purposes,
and evidencing a "public purpose"as defined in detail above: (,
Further, grant funding is not a "year-round"process. There are specific
requirements providing for grantees to apply kr funds by a specified date, and
submitting necessary paperwork. it is important to note that deviation by the
Hawaii County Council from these established guidelines as required by our
ordinances may result in claims of denial of equal protection of the law by those
aggrieved or even claims of malfeasance of office on the part of any Council
• Member that abridges these requirements.
•
The lesson in this area is simple. Contingency funding, in our opinion,
should generally not be used to fund organizations that would otherwise qualify
for grant funding pursuant to Chapter 2, Article 25, Hawaii County Code. This is
• because in the case of our annual grant funding, there are built-in safeguards
(i.e., the requirements of the ordinance and the Council's review process) that
ensures that grantee organizations qualify. Further, once the money is .
transferred to the grantee organization,the County generally bears no liability for
any occurrence down the road.
With contingency funding, given the legal requirement the County maintain
a,degree of control over the project (See Noble v. Martin County Health'Facilities
Authority, supra; Texas Municipal League Intergovernmental Risk Pool v. Texas
Workers'Compensation Cbrnmission, supra), there is a more colorable argument
Honorablet
S acy K. Higa and Members of the
Hawaii County Council
} July 14, 2006
Page 7
• the County will bear some liability.2 This is exactly the reason contingency funds
are presently"funneled" through existing County projects in the respective
County departments. This process ensures there is a recognized and valid
"public purpose'in the expenditure of County funds.
Examples
Some examples of legally prohibited uses of contingency fund monies4
would be the transfer of funds to a church in order to advance religious purposep
or objectives. Clearly, such an appropriation would violate the establishment
clause of the First Amendment of.the United States Constitution. American Civil
Liberties Union v. City of Birmingham, 791 F.2d 1561 (6th Cir. 1986).
This is not to suggest County funds may not be expended for any activity
having any nexus to a religious organization or activity. For example, the
County's funding of its annual Christmas opera house at the County Building is
as
permitted, the objects on display splay are secular in nature, and are more akin to a
seasonal celebration than a religious ceremony.
Another legally prohibited use of contingency funds would be monies
given to school organizations for theos
ur
P p e of funding entertainment activity.
As provided in Brandes v. City of Deerfield Beach, supra, and the progeny of
I case law that follow it, absent an express provision in our governing laws (Le.,
our Charter) that allow such expenditure, no such authority to expendmoney
may be implied.
3
Permitted uses of contingency funds include the funding of supplemental
equipment used by our County emergency medical services, so long as the
equipment become the property of the County; and the funding of traffic safety
barriers on County right of ways, fronting schools or churches, since such
projectsbenefit the public at.large,, and not simply the school or church.
Again, our laws instruct us that if the primary objective is to subserve a
public municipal purpose, it is immaterial that private ends may be incidentally
advanced. Bryant v. City of Atlantic City, 309 N.J.Super. 596, 707 A.2d1 1071
(App. Div. 1998). Thus, in the traffic safety barrier case above, if the primary
objective is to protect motorists, pedestrians, and area residents alike, the
•
a We do not concede the County is absolutely liable for any damage occasioned simply by virtue
of the County's funding of a project. We simply recognize that itis a more colorable argument.
3 A further concern is the inappropriateness of transferring County funds to State organizations,
absent a well-defined and legally recognized and memorialized agreement. In the case of
schools,the State government is charged with providing for the education and welfare of our
children. If the State does not allow the expenditure of public funds for entertainment activity,the
County should clearly not allow such expenditure. This is why social organizations at our public
schools privately fundraise to cover these expenses (I.e., sport clubs,grad nite activity, etc.).
•
Honorable Stacy K Higa and Members of the
Hawaii County Council
July 14, 2006 (
Page 8
•
expenditure of monies is not prohibited if the school or church benefits from the
construction.
Summary -
1. All expenditures of public money and resources must be for a "public
purpose."
2. 'Courts-will generally defer to the legislative law-making body's
determination of what constitutes a "public purpose." However, if there
is a constitutional challenge to such.funding, courts will turn to the
intent of the framers of the constitutional provision that prohibits such
non-public purpose expenditures for,guidance.
3.• Expenditure of contingency account funds should run through County
Y
departments with existing projects to ensure compliance with theublic
purpose doctrine. p
4. All private non-profit-organizations that seek County funds should be
encouraged to apply for such funds through the County's annual
granting process. The Council should examine all requests for monies
from private non-profits that are not part of this annual process very
closely.
5. All requests should be examined on a case-by-case basis, taking into
account the unique facts and circumstances of each request.
We hope this analysis has assisted the Council in examining requests for
expenditures of contingency monies. As is often the case in our County work,
our opinion serves as a guide only, and every request should be examined on a
case-by-case basis,taking into account the unique factual circumstances
presented. Please feel free to contact our office any time legal assistance or
guidance is sought or required.
Very truly yours,
I
LINCOLN S. T. ASHIDA
Corporation Counsel
Encl.
c: Honorable Harry Kim, Mayor(w/encl;)
Honorable William T.*Takaba, Finance Director (w/encl.) -
Honorable Constance Kiriu, County Clerk (w/encl.)
S: Departments/Council/LSA Corresp./Letter to Council re contingency funds 3-10-06/LSAmr
Exhibit C
"Orchidland Neighbors" document provided to District 5 Office on August 17th, 2017
By Joseph Kamelamela
•
ORCHIDLAND NEIGHBORS
Background: March 2015, formed a 501c3 non-profit organization "to plan, design and build a
multi-purpose community facility. In 2016, Orchildland Neighbors purchased two (2) acre side
by side lots off of Orchidland Dr., funded by a private loan and covered by private donors.
Hawaii State Constitution: Article VII, Section 4 provides that "[n]o tax shall be levied or
appropriation of public money or property made, nor shall the public credit be used, directly or
indirectly, except for a public purpose."
Grants for Contingency Relief Funds: program, project, event, activity, service, equipment,
materials, of supplies benefiting the people of the County and be consistent with County
services in compliance with the public purpose doctrine.
"Grant" Means: the furnishing of assistance, whether financial or otherwise, to any
person to support a program authorized by law. The term does not include an award whose
primary purpose is to procure an end product, whether in the form of god services, or
construction; a contract resulting from such an award is not a grant but a procurement
contract.
CRF Grants: Office of the Corporation Counsels' Opinion-such grants are not used for
construction (that is, Capital Improvement Projects (CIP)). Reason: public monies cannot be
used towards the construction of a private facility.
Factors Considered and Evaluated: In opining that the Contingency Relief Fund cannot be used
for the preliminary work (that is, planning designing, and permitting) required for the
construction of the Orchidland Community Center (OCC) because it violates the public purpose
doctrine, the following were factors utilized in the decision:
1. The OCC is being constructed on private property!
_ _ 2. The fact that the grant is being used by a non-profit organization is not a legal basis
to establish public purpose. Com"
3. The County does not have an ordinance that establishes a fair and equitable
program that authorizes the use of County monies for the construction of a private
facility.
4. Although the nonprofit's bylaws states as an objective that it intends to provide
certain services or activities to the community as a whole, the construction of the
OCC is not a "service or activity" under Article 25, Sections 2-137(3) and 2-
139(a)(2)(A), Hawaii County Code (HCC).
5. Neither is the construction of the OCC an "equipment, materials__ or supplies" under
the pertinent sections of Article 25, HCC.y
6. Prior opinions from the Office of the Corporation Counsel have stated that
contingency funds are not to be utilized by non-profits for CIPs; and the construction
of the OCC is a CIP matter.
- 1
The County has granted community block grant monies (which are federal monies)
to non-profits for the construction of private facilities, which will provide public
services, programs and activities, on lands owned by the State (such as, Hospice
facilities on state-leased lands) and County (Hawaii Veterans Memorial, Inc., plans to
provide housing and other community services for veterans and their spouses on
county-leased land). c
There are no other valid County contractual agreements that have been executed to
continue to provide contingency relief funds for the construction of the OCC.
This request is dissimilar to the matter concerning the erecting of bus shelters in
Fern Acres because those shelters would be built at current bus stops where the
County's Hele-On buses pick up and drop off passengers; and the mass transit on
this island is a County-run program.
S
2
510? cz Eynaz‘ s
From: Kamelamela, Joe
Sent: Thursday, June 29, 2017 8:33 AM
To: Ruggles, Jennifer <Jen.Ruggles@hawaiicounty.gov>; Robinson, Kaloa
<Kaloa.Robinson@hawaiicounty.gov>
Cc: Rodrigues, Anthony <Anthony.Rodrigues@hawaiicounty.gov>; Fujiuchi, Chris
<Chris.Fujiuchi@hawaiicounty.gov>; Ho, Nelson <Nelson.Ho@hawaiicounty.gov>; Rudo, Alan
<Alan.Rudo@hawaiicounty.gov>; Schoen, Renee <Renee.Schoen@hawaiicounty.gov>;
Ferreira, Cathy<Cathy.Ferreira@hawaiicounty.gov>; Carvalho, Emarie
<Emarie.Carvalho@hawaiicounty.gov>
Subject: RE: Fern Acres Bus Stops - Resolution 216-17 (Ruggles)
Aloha, Jenn and Kaloa
I need the following information confirmed to issue a final decision. First, are the bus stops
being built on properties that the County has an easement, or consent or an agreement to build
the bus stops on the properties? Second, has or will the design and location be approved by
the appropriate department (I'm unsure whether its Mass Transit and/or Public Works)? And
Third, will the bus stops will be owned by the County? If the answers to the three questions are
affirmative, and I have documentation on them, I might consider approving them.
Can I get information and documentation by 2 pm today?
Mahalo
Aloha Joe,
Mahalo for your consideration.
I am currently in between meetings and I'm sorry that I will not be able to get you the answers
and documentation by 2pm today. Thursdays are days I meet with the community and my staff
is working on meeting deadlines for their assigned projects.
In the meanwhile I'd like to make sure I'm understanding your questions and what you say you
need to approve the grant. From your statement that if the "answers to the three questions are
affirmative" that you "might consider approving" the resolution it appears you are implying these
policy requirements must be met for approval. If this is true, regarding the policy precedence of
your questions I am respectfully requesting you provide me with the law that establishes
conditions for contingency fund grants to non-profits:
1. Are the bus stops being built on properties that the County has an easement, or consent or
an agreement to build the bus stops on the properties?
A. Are you implying funds provided from the county to a non-profit via a contingency fund
grant requires a County"easement, or consent, or an agreement" for the use of the service or
activity on the property that will be utilized?
B. The relevance of this question confuses me because if the approval is contingent on the
answer being yes, we are assuming the County is actually building the bus stop, (which is
confusing because the County is not building the bus stop. The community is building the bus
stop).
2. Has or will the design and location be approved by the appropriate department (I'm unsure
whether its Mass Transit and/or Public Works)?
A. Are you implying the location of and service or activity that non-profit grants will provide
must be approved by a department?
3. Will the bus by Y stops will be owned the County?
p
A. Are you implying the service or activity provided through non-profit grant must be owned
by the County?
If I'm understanding the policy your referring to here in your questions correctly, please provide
me with the law that sets these conditions for contingency fund grants to non-profits.
Mahalo,
Jen
From: Kamelamela,Joe
Sent:Thursday,June 29, 2017 2:26 PM
To: Ruggles,Jennifer<Jen.Ruggles@hawaiicounty.gov>
Cc: Ferreira, Cathy<Cathy.Ferreira@ hawaiicounty.gov>; Schoen, Renee
<Renee.Schoen@hawaiicounty.gov>
Subject: RE: Fern Acres Bus Stops- Resolution 216-17 (Ruggles)
Aloha, Jenn
At 1:20 pm today, I called and talked to Rene Siracusa, who provided answers to my questions.
First, the bus shelters are being built on lands owned by the subdivision association and the
requisite approval to build at the different locations has been obtained from the association.
Second, the shelters are being built only at current bus stops where the County buses already
stop to pick up passengers. And third, although these shelters will not be owned by the County,
they benefit lots of the school children waiting at the bus stops. Ms. Siracusa has indicated that
the funds will be used only for erecting the shelters. Based on her answers, other information I
received and reviewed, the appropriate sections of the Hawaii County Code, the 2006 written
opinion by former Corporation Counsel Lincoln Ashida, and other research, I will approve the
contract on this once it comes into our office.
If you do not have a copy of Mr. Ashida's opinion, would you want a copy of it?
Should you have any further questions, please contact me. Mahalo. Joe
Sent from my Verizon 4G LTE Droid