The City and County of Honolulu failed to produce the comprehensive economic recovery and community benefits originally intended when allocating more than $386 million in federal pandemic assistance, according to a critical report from the Office of the City Auditor.
The 62-page, self-initiated audit, published in August, reviewed municipal expenditures from March 2020 through November 2024. Spanning two separate mayoral administrations, including the cabinet of current Mayor Rick Blangiardi, the evaluation revealed that city officials made substantial departures from their initial 2021 spending strategy for American Rescue Plan Act (ARPA) funds.
Rather than directing the federal aid primarily toward community assistance and local economic revitalization, municipal leaders significantly shifted resources into internal city operations, short-term relief programs, water infrastructure enhancements, and property acquisitions. The audit concluded that these strategic realignments led to limited recovery and community support outcomes for residents and businesses across Oahu.
According to the audit's financial breakdown, approximately $277 million—representing roughly 72 percent of Honolulu's nearly $386.3 million ARPA grant—became concentrated within just four specific areas. The largest share was $131.9 million redirected toward the city's Other Post-Employment Benefits (OPEB) liability for retired municipal personnel.
The remainder of that concentrated spending included $65.6 million dedicated to short-term household relief, $42.4 million assigned to water infrastructure improvements, and $37.7 million utilized for the purchase of the Waikiki Vista property located on Kapiolani Boulevard.
In an August 28 communication to the Honolulu City Council, Acting City Auditor Troy Shimasaki highlighted the stark contrast between the city's initial ambitions and its ultimate disbursements. Shimasaki pointed out that the city had originally targeted $266.2 million for community support and economic recovery programs, yet ultimately spent only $162.8 million in those categories, marking a reduction of nearly 39 percent.
Conversely, spending designated for modernizing municipal operations expanded drastically. While the city initially slated $70 million for operational modernization, final expenditures surged past $176 million. Shimasaki noted that the primary driver behind this expansion was the decision to reprogram approximately $132 million in federal funds to offset city spending on retiree post-employment liabilities.
Mayoral communications director Scott Humber offered a defense of the administration's financial decisions, explaining that early spending plans for the federal State and Local Fiscal Recovery Funds were created through extensive public hearings and consultations with the City Council.
Humber explained that as the program unfolded over several years, various proposed projects were formally evaluated. While municipal agencies successfully implemented many initiatives, others proved unfeasible within the required timeframes. Consequently, alternative projects were prioritized and funded with the federal relief money, with most replacement initiatives undergoing public discussion and formal council approval.
The audit emphasized that despite the shortfall in community-wide recovery outcomes, Honolulu's spending largely complied with overarching federal guidance. Federal regulations permitted municipalities to apply ARPA relief toward revenue replacement. An audit sample examining 28 distinct relief-funded projects valued at $151.7 million determined that the city met 200 out of 238 applicable federal criteria, achieving an overall compliance rate of 84 percent.
Nevertheless, auditors questioned the administration's rationale for directing such a substantial portion of non-recurring federal relief toward an ongoing municipal liability like OPEB.
In response to auditor inquiries, the Blangiardi administration maintained that redirecting funds toward retiree benefits was designed to build fiscal capacity within the city's general fund. This flexibility was intended to accommodate potential hazard-pay settlements for essential municipal employees who worked through the height of the COVID-19 pandemic.
However, the audit pointed out that ARPA dollars were never directly applied to pay those hazard-pay settlements. Instead, the final settlement obligations were funded through the general fund, and the financial cushion generated by the OPEB reallocation was insufficient to fully cover the eventual settlement costs.
The audit also identified significant time pressure as a driving force behind the city's financial decisions. Honolulu faced a strict federal deadline of December 31, 2024, to formally obligate all remaining ARPA funds through binding contracts or sub-awards, making the prevention of fund forfeiture a primary objective during reallocations.
Humber acknowledged that avoiding the loss of federal dollars guided the reallocation process. He noted that the $132 million redirected toward retiree obligations came largely from projects that could not be executed prior to the year-end deadline, arguing that preserving the money locally served taxpayer interests better than returning unused funds to the federal government.
The audit also raised concerns regarding the city's $37.75 million purchase of the 19-story Waikiki Vista building at 2241 Kapiolani Boulevard in 2022. The property was acquired as an affordable housing asset featuring 109 residential units and 124 parking spaces, designed to serve individuals earning at or below 30 percent to 50 percent of the area median income.
Auditors discovered, however, that four nonresidential floors within the Waikiki Vista tower were occupied by three unrelated entities: the Royal Hawaiian Band, Chabad of Hawai'i, and Catholic Charities Hawai'i's Hale 'Imi program. These non-residential occupancies further contributed to the auditor's determination that the city's deployment of pandemic funding diverged from its original community-focused recovery objectives.
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