Homelessness in the City & County of Honolulu

Introduction

Homelessness has been a major challenge in the City & County of Honolulu and the entire United States in general. Throughout history, a considerable proportion of the population has lived in appalling conditions. Homelessness is not a problem that only emerged in the modern world; there exists written accounts depicting homelessness back in the middle ages. However, one would expect that with modernization and improvement in technology in the last century, the entire population would be able to afford basic necessities such as food and shelter. This has not been the situation as more than 1 million U.S, residents lack housing. The situation is not just confined to the U.S. but also reflected in other parts of the world. Homelessness is a critical issue that needs to be addressed especially in the developing countries where about half of the population live in appalling conditions. Homelessness contributes to the emergence of slums especially in less developed countries.

A multiplicity of factors are identified as the major cause of homelessness in the United States. Lack of affordable housing has been singled out as the most important factor in determining the level of homelessness in a particular area. This is closely related to a number of overarching themes such as job loss, financial difficulties, and job search problems that contribute to homelessness. The economic blips experienced from time to time determines the employment levels which has a ripple impact in the housing sector. Interpersonal incidents also contribute to a large share of homeless persons. An example of these incidents is domestic violence, disputes, and lack of support from parents. Drug and substance abuse also contributes to homelessness across a section of the population. Lastly, inadequate income assistance programs have also led to the development of conditions that lead to homelessness in the U.S. states.

Thesis

The City & County of Honolulu has sought to address the issue of homelessness that afflicts more than 2,964 of its residents. According to Botelho (2015), the entire State of Hawaii had an estimated 7,620 people living in squalid conditions without proper shelter. Although the figure may seem small compared to the number of homeless people in other states such as California (114,000 homeless people), Hawaii’s population is relatively small, with about 1.36 million people living in the Island. At 487 homeless per 100,000 citizens, the state of Hawaii has one of the highest homelessness rate per capita among the 50 U.S. states. A growing concern is the rising number of homeless in the State of Hawaii, which has prompted authorities to look for concrete and lasting solutions to the problem. This paper will examine the general homelessness situation in the City & County of Honolulu, analyze the local government’s revenues and possible funding options, and look into the public policy issues concerning the revenues.

Local government’s revenues and possible funding options

There are a number of possible revenue sources which the City & County of Honolulu administration can exploit in order to solve the current homelessness crisis. The City & County of Honolulu has already prepared a budget proposal that will be used to solve the homelessness crisis. A number of housing programs have been commissioned with an aim of increasing the number of homes to residents. Notable of these is the Housing First Program which focuses on providing homes based on the state of the citizen’s homelessness. The program was initiated in 2015, and will first provide homes to the chronic homeless citizens. Since the inception of the program, 173 homeless persons have benefited from the project (Botelho (2015). The program ensures the homeless individuals acquire permanent housing in addition to receiving social support services such as medical care to cater to their mental needs and help them regain stability.

According to City and County of Honolulu (2016b), Honolulu’s local government has set aside an operating budget that will ensure the Housing First Program is realized. A total of $5.4 million will be used to cater for rent and support services. A further $1.2 million will be used to acquire housing vouchers. The local government has also initiated a homeless transition project that will cost up to $1.8 million. The entire project is expected to provide housing to about 315 households once complete. The housing First Program pilot phase was implemented in 2012 with a total budget of $1 million. This project focused on the chronically homeless in the regions of downtown Honolulu and Waikiki. The pilot phase of the program helped a total of 71homeless residents. A total of 48 individuals were able to access permanent housing during the pilot phase. About 7 of those in the program left for foster homes while another 7 returned to their former state of homelessness.

There are a number of possible funding options for Honolulu’s local government. The possible source of funding for the homeless project include appropriations by the legislature, grants from public agencies and private entities/individuals, funding from federal government, gifts & donations, and real estate conveyance tax. The major source of funding for the homeless project will come from appropriations made by the legislature. These appropriations are made based on the taxes and other revenues obtained by the state. In 2014 financial year, the Honolulu City Council acquired funding to the tune of $47.2 million which was a new high in terms of housing budget. In 2015, a total of $3 million was spent in the Housing First Program. The largest source of revenue for the city is real property tax collections which account for 34.06 percent of the total 2016 financial year budget. Sewer revenues account for 13.26 percent of the total and 4.19 percent for solid waste management (“City and County of Honolulu,” 2016b).

An important source of funding for the homeless project in Honolulu has been the city’s Affordable Housing Fund. In this program, a proportion of the total real property tax revenues is set aside for the purpose of maintaining affordable housing to all individuals who receive incomes of less than 50% of Hawaii’s median household income. This significantly helps in providing houses and also for maintenance purposes.

The homeless project also receives federal support in terms of finances. In the 2016 fiscal year, $1.2 million of the total budget is expected to come from the federal government and will go towards funding rental vouchers in Honolulu. In 2016, the city expects 3.3% of its budget to be funded through federal grants. Another major source of funding for the homeless project is grants received from public agencies and private entities and persons. Grants for the homeless are important in backing the program. In 2015, Honolulu received housing and community development grant amounting to $143,582. State grants account for 0.27 percent of the total budget. In 2015, the state of Hawaii received a grant of $945,101 from Substance Abuse and Mental Health Services Administration (SAMHSA). This grant would be used to support the chronically homeless persons with mental issues or substance abusers in the entire region including Honolulu (“City and County of Honolulu,” 2016a).

The federal funds supports a number of programs mean to alleviate the situation of the homeless in Honolulu region. Some of the programs directly backed by the federal fund include Rental Assistance, Loans for Homeowners, Continuum of Care Program, Community Development Block Grants, and others (“City and County of Honolulu,” 2016b). Gifts and donations are source of funds for use in the homeless project as well as other development program. The program receives support from nonprofit groups, local communities, and businesses. Lastly, the homelessness public policy obtains funding from a general obligation bond (GOB). A GOB is a municipal bond where local governments borrow money and use tax revenues and other available resources as collateral for the debt. By using the GOB for funding purposes, the local or state government is able to save on high interest payments which characterize other types of debt funding.

Restrictions that are (or could be) placed on those revenues

Various restrictions may be placed on the revenues either by the local authorities, state government, City ordinances, Honolulu’s City Charter or even the federal government. Homelessness is complex problem at Honolulu and requires close monitoring to ensure resources are carefully distributed to tackle the problem. The state has introduced a number of restrictions guiding the use of revenues in the various cities. The first limitation involves the distribution of funds among the various programs. The state regulation requires Honolulu to appropriate a segment of the general revenue meant for the housing program to mental health and substance abuse. This falls under the housing support services and is implemented by the department of health dealing with drug and substance abuse (“City and County of Honolulu,” 2016a). The amount varies depending on the budgetary provisions made annually.

The state legislation requires local governments to set aside funds for a rental assistance program. A rental assistance program targets homeless working persons who rent houses to obtain permanent housing. The maximum subsidy per household is $300 per month, provided the applicants pay 40% of their total gross income. The program targets all individuals regardless of whether they are substance abusers. The local government is not supposed to impose any restrictions on the benefactors provided they meet the outlined conditions. The state also requires all local governments to appropriate a certain amount of funds every year for the special housing program. This will ensure continuation of the program. State legislation also places restrictions on property tax rates that can be applied to property owners. It is worth noting that the local governments collects a significant proportion of the revenue from property tax levy.

The state government requires that funds meant for the affordable housing program be used for projects that will be affordable to the common people in the long-run. This calls for development of cost effective houses meant for those in the low income bracket. The income stream generated from rent of the properties can be used by developers to secure loans. Developers also face restrictions on the amount of rent they can charge for the property. Current laws stipulate that developers can charge up to a maximum of 28% of the monthly income of the tenants. This limits the amount of income developers can collect and subsequently the amount debt they can secure based on the income stream. Regarding the use of general obligation bond to make borrowings, the city imposes a 20 percent limitation on the amount of borrowings that can be made under ordinary circumstances. The limitation specifies that borrowings may not exceed 20 percent of the entire operating budget.

Funds provided by the federal government also come with a number of restrictions. For instance, rent from the units must be within particular limitations which are published annually by (HUD). The maximum purchase price of the units are also determined by HUD. Specific maximum per-unit subsidy limits must also be observed during the implementation of the project. An important requirement by the federal government is the need for proper auditing of funds used in the project. The federal government requires the participating jurisdiction to conduct thorough assessments of the source and application of funds to determine whether costs are reasonable. This ensures that integrity is enhanced in the homelessness program.

City Ordinances provided by the Mayor may also impose restrictions in the use of the funds. For instance, decisions on available land on which houses for the homeless may be constructed are made by the local government. The local government also establishes small buildings that can be converted into homeless sheltering with minimal costs. Honolulu City Charter is another important document in the restriction of funds used for homelessness public policy. The City Charter document is important in regulating the use of homelessness public policy funds in running of departments and other offices that coordinate various activities. For instance, the Office of Strategic Development receives a portion of funds from the homelessness program in order to run its daily activities. The amount of funds allocated is outlined by the City Charter which must be signed by the Mayor. The local government thus have authority over how the funds may be used. Nonetheless, it must also comply with state and federal government regulations.

How public policy decisions affect the receipt of revenues

Public policy decisions are fundamental in determining the amount of revenues received in Honolulu. Homelessness affects a large number of Honolulu’s residents. The public policy decisions greatly determines the quality of life of individuals in the region. Public policy decisions influence the type of revenue system in place. A quality revenue system consists of elements that complement each other as opposed to being contradictory. The revenue system should enhance the relationship between the local government and the state. State may formulate public policy decisions that influences the mandate of local government in revenue collection. For instance, the state may require local government to introduce new form of taxes. The state also establishes the appropriate tax rates that determines the amount of revenue that can be collected. Higher tax rates can lead to higher revenue collection but on the flipside may lead to inflation or force businesses to close down.

State governments enacts decisions on the overall limitations of state government concerning collection of revenue. When local governments are unable to raise required revenue to support its basic operations, the state should come up with solutions to address such issues. State policymakers may recommend subsidizing the local government to cater for such deficits. Public policy decisions may also affect the receipt of revenues based on data gathering and analysis conducted during evaluation of various projects. Policymakers rely on gathered data to make decisions including financial projections. Inadequate data may cause policymakers to make the wrong financial projections and budget appropriations. This may impact the revenue available for use in the homelessness program. Policymakers can only make good decisions when key data is available in accordance to the local, state, and federal perspectives.

Public policy decisions determine the methods used in collecting revenue. The best way to collect revenue would be through implementing a mix of taxes. Imposing a variety of taxes ensures that revenue collection is not significantly affected by economic blips in particular sectors of the economy that yield taxes. For instance, the region should not rely solely on tax collected from tourism. Rather, it should ensure that the tax base is diversified. Public policy decisions made should ensure that there is relative stability in the collection of revenue. Public policy decisions facilitates accountability in the administration of revenues. Accountability is crucial when accessing grants and other forms of funds especially from the federal government. Lack of accountability may mean that available funds were used inappropriately which may cause various donors to withdraw their funding from various projects. Policymakers must ensure that there are oversight authorities responsible for ensuring that revenues are fairly and efficiently utilized for the benefit of the greater majority.

Public policy decisions significantly impacts the choices of revenue sources to be used. Policymakers may decide on a variety of revenue sources available such as taxes, grants, external debts, local debt financing, and use of government bonds. All these are various sources of revenue that policymakers can choose from. The choice of revenue source depends on a multiplicity of factors that could be country-specific or be determined by global economic trends. The choice may for instance depend on the public authority that the policymakers have, while at times may be shaped by political forces. Public policy decisions also influence aggregate economic performance. Policymakers are involved in making decisions that can enhance the national output of a country. The government is responsible for formulating policies that fix the macro and micro problems that a country may be experiencing. Proper economic policies contribute to a higher economic output and consequently higher revenue for the government.

Public policy decisions on the amount of borrowings to make also affect revenue. The state makes such decisions based on thorough analysis of the economic conditions in the local environment. The state may also introduce budget curbs aimed at controlling the level of spending. Such curbs may reduce the amount of funds local governments require. The relationship between the country and the source of revenue may also determine the amount of revenue received. A state which maintains good public relations with others may be at a better position of receiving funds should the need arise. Collective bargaining by local government may also affect the receipt of revenues. The local government may decide to collectively bargain for an increment in its share of the revenue from the state.

Economic conditions that affect revenue projections

The economic conditions prevailing in the country and across the world affect the projections made by policymakers relating to expected revenues. The amount of revenue is dependent on taxable income, corporate profits, wages and salaries, and other forms of income received by individuals. The first form of economic conditions that affect revenue projections is the unemployment rate in the country. The unemployment rate in the country determines the personal income levels. The amount of income tax is directly affected by changes in personal income levels. Income tax is progressive in nature. When there is high unemployment, income tax revenue also falls accordingly. Policymakers must therefore take into consideration the unemployment levels while making revenue projections (Kemp, 2012).

The unemployment rate is determined by the business cycle prevailing in a country. A business cycle is characterized by two major phases which include expansion and contraction. Expansion is marked by growth, whereby a large segment of the population is involved in productive economic activities. During contraction, there is negative growth and people lose jobs. This is the period when unemployment rate is highest. For instance during the 2008 recession, majority of people lost their jobs in the United States and other parts of the world. This led to a reduction in personal incomes and corporate profits. Consequently, revenue projections were low during the period (Kemp, 2012). This is because the taxable income and corporate profits which are a major source of revenue were low.

The level of GDP also affects revenue projections in a country. GDP of a country is the gross domestic product. In other words, this is the value of all final goods and services produced within a country’s borders less imports (Howlett, 2011). GDP level is used as an indicator of economic performance. A high economic performance as indicated by GDP levels improves the bottom line of the budget. A slow or negative growth in GDP may have several consequences on a country’s budget. First, this would mean less amount of taxable income available. Policymakers would thus lower their revenue projections. This may also create the need to borrow funds to cater for the income gaps. Policymakers partly rely on GDP estimates to make revenue projections. The Congressional Budget Office (CBO) provides policymakers with key estimates and economic analysis including GDP projections. These estimates are then used to make various decisions in various states including revenue projections. CBO’s projection of the nominal levels of GDP has the greatest impact on projected revenue amount in a country (Howlett, 2011).

The Interest rate is also a significant determiner of revenue projections. Revenue projections heavily rely on interest rates in the country. Changes in interest rates have various impacts both to firms, individuals and the government in terms of borrowing (Howlett, 2011). Higher interest rates may have different impacts on the economy. First, they may lead to increased cost of borrowing. The increased cost of borrowing means that the state government will have to pay more money during debt servicing that it would ordinarily pay. This means that more funds will be channeled towards debt servicing. Such a scenario may lead to low revenue projections. Higher cost of borrowing may also have negative implications on citizens. Individuals having loans will be forced to spend more and hence less disposable incomes. This reduces their consumption and overall aggregate demand. Higher interest rates also increases mortgage interest payments and on the other hand reduce personal disposable income. Another impact of higher interest rates is the increased propensity to save.

Generally, higher interest rates lead to low aggregate demand in the economy. This have several consequences on the economy such as low economic growth, unemployment levels increase, and negative balance of payments. The government pays higher interest rates on current loans reducing the amount of money available for various projects in the country. Such conditions negatively affects revenue projections. Policymakers analyze interest rates which gives a measure of the economic conditions in the country.

The level of prices is also used to determine revenue projections in a country. Inflation has mixed effects on the projected revenue of a country. The actual impacts of inflation produces offsetting impacts on a state’s revenues (“OECD,” 2016). Nonetheless, the net impacts would be budget deficits, meaning less revenues for a country. On one hand, inflation increases interest rates which leads to high cost of servicing debts. If interest rates are controlled, the situation is rather different. Increases in prices may lead to higher wages and salaries, profits, and other forms of income. This in turn leads to higher incomes from personal taxes and corporation taxes. High inflation rates may discourage spending, and diminish consumer’s disposable incomes. This is especially when wage increases does not reflect the actual inflation in a country. This may lead to low aggregate demand and consequently low income for the state. High inflation may thus lead to low revenue projections.

Recommend a revenue policy that aligns with community values

It is important for the local government of Honolulu to establish a revenue policy that will align with community policies. The best one would be a cost effective policy that does not add pressure to the community since majority of Honolulu residents can barely afford to pay for basic amenities including rent. In this case, public-private partnerships would be the best policy for raising more revenue without impacting the cost of living of the residents. Public-private partnership policy can enable the local government to raise more revenue without necessarily resulting to higher tax rates which may have detrimental impacts to the economy (Delmon, 2011). Currently, the revenue derived from property tax cannot be able to cater for the increasing government demands. Increase in taxation will directly or indirectly impact hard on consumers that the government is trying to protect from high prices of goods and services. For instance, increase in corporation tax will lead to passing of the tax burden to consumers. As a result, the impact falls on consumers.

Public-private partnerships present an integrated and comprehensive way of raising revenues in the face of budget constraints (Delmon, 2011). Public-private partnership programs enable the government to involve the private sector in developing and improving public resources. This is an innovative way to raise revenue without having to increase taxes. The program involves leveraging community properties or assets for advertising, sponsorships, naming rights, and other benefits. Public-private partnership may also involve the development of properties such as housing projects, road construction projects, network infrastructure project, and others. Public-private partnerships can also aim at improving other community services such as education, health, training, and to create employment opportunities.

Public-private partnerships can be used to fund projects such as the homelessness project in Honolulu and other parts. This will enable the local government to achieve its housing objectives without the need to increase taxes or borrowings. However, the local government should develop proper guidelines before engaging the private sector to avoid conflicts of interest. The private sector is motivated by profits while on the other hand, the local government is motivated by the need to improve the welfare of the citizens. The private sector must thus bee checked to ensure that the motivation for profits does not override the overall goal of the project which is to deliver affordable housing to the poor. The local government must ensure that the private partner selected aligns with the community’s values, needs and interests. The government must thus develop policies and procedures that will help the private partner to align with community values and to deliver the requirements of the project as expected.

In conclusion, Hawaii State should develop and implement appropriate policy frameworks to contain the increasingly homelessness problem. Homelessness is currently as issue of major concern in the area after it emerged that more than 7,000 residents lack adequate shelter. Worse still, the number of homeless individuals in the area is rising each year. The City & County of Honolulu must address the housing issue by critically reevaluating its revenue reserves and seeking funding options when budget deficits are experienced. Possible funding options include federal grants, raising funds through issuance of bonds, tax revenue collected, and gifts and donations from other countries, agencies and individuals. The City & County of Honolulu must take into consideration public policy issues concerning raising of revenue to fund the homelessness program. For instance, it is important to ensure that funds are raised in a manner that does not impact the welfare of citizens through raising taxes.

References

Botelho, G. (2015, Oct. 17). Homeless emergency declared in Hawaii. CNN. Retrieved from: http://edition.cnn.com/2015/10/17/us/hawaii-homeless-emergency/

City and County of Honolulu. (2016a). The Executive Program and Budget Fiscal Year 2016. Retrieved from: https://www.honolulu.gov/rep/site/bfs/bfs_docs/FY16_- _Operating_Program_and_Budget.pdf

City and County of Honolulu. (2016b). What is the City Doing to Help? Mayor’s Office of Housing. Retrieved from: http://www.honolulu.gov/housing/ohou-what.html

Delmon, J. (2011). Public-Private Partnership Projects in Infrastructure: An Essential Guide for Policy Makers. Cambridge: Cambridge University Press.

Howlett, C. (2011). Budget and Economic Outlook: An Update. DIANE Publishing.

Kemp, R. L. (2012). The municipal budget crunch: A handbook for professionals. Jefferson, N.C: McFarland & Co.

OECD. (2016). Real GDP forecast (indicator). Retrieved from: doi: 10.1787/1f84150b-en (Accessed on 06 April 2016)