OFFICE OF THE MAYOR

KIRK CALDWELLMAYOR

CITY AND COUNTY OF HONOLULU530 SOUTH KING STREET. ROOM 300 * HONCLUtU, hAWAII 96813

PHONE: I808i 768-4141 * FAX: 1808) 768-4242 • NTERAET: wwvshonoiulu9pv

EMBER LEE SHINNMANAGING D)REOTOR

GEORGETTE T. DEEMERDEPUTY MANAGING DIRECTOR

VIA HAND DELIVERY AND EMAIL

October 18, 2013

Mr. Mark A. Chandler, DirectorU. S. Department of Housing andHonolulu Field Office — Region IX1132 Bishop Street, Suite 1400Honolulu, Hawaii 96813-4918

Dear Mr. Chandler

SUBJECT: On-Site Program MonitoringCommunity Development Block Grant (CDBG) ProgramApril 11-25, 2011 and May2013 and September 27, 2013 Follow-ups

This responds to your September 27, 2013, letter addressed to Mayor Kirk CaIdwell,regarding the City’s proposals to resolve open monitoring findings and concerns relating to theCommunity Development Block Grant (“CDBG”) program of the City and County of Honolulu (the“City”) and the City’s oversight of ORI Anuenue Hale, Inc. (“ORIAH”) and ORIAH’s AlohaGardens Project.

Your letter asked that the City respond in writing regarding HUD’s proposed repaymentdate for the amounts of $2,883,426 to resolve Findings No. 1 through 4, and $26,000 to resolveFinding No. 5.

First, I would like to express appreciation on behalf of the City of your willingness toconsider our responses and proposals. We are especially appreciative of your proposal to workwith the City and ORIAH to ensure CDBG program compliance on the Wellness Center and theAccess LotiParking, while offering a way for the City and ORIAH to develop their own solution forCamp Pineapple.

In order to achieve the foregoing, you have proposed a reimbursement figure of$2,883,426 in non4ederal funds to the City’s CDBG account. While this amount is significantlyhigher than what the City had proposed in its July 18, 2013 letter, we are cognizant of thecorresponding increase in your proposal regarding the acreage of land from which CDBGrestrictions would be removed. Based on recent discussions that we have had with counsel forORIAH, we believe that this consideration significantly enhances the prospects for a resolution

Urban Development

Mr. Mark A. ChandlerOctober 18, 2013Page 2

with ORIAH. We strongly believe that such a resolution would be beneficial not only to ORIAH,the City and HUD, but more importantly, it would be in the best interests of the taxpayers and thecitizens of Honolulu.

While the City finds your proposals to be reasonable, the City has not yet reached thepoint in our negotiations with ORIAH to be able to confirm to you that the resolution along thelines you propose is achievable. Since subdivision of the property and removal of the CampPineapple component requires the cooperation of ORIAH, it is essential that the City first obtainORIAH’s definitive agreement. Deputies in the Department of the Corporation Counsel met withcounsel for ORIAH just yesterday, the results of which were promising. Significantly, ORIAHCounsel acknowledged that any resolution would entail a new written commitment from his clientto comply with CDBG obligations with respect to the Wellness Center for an agreed upon period.

While we regret that the City is unable to state today that both the City and ORIAH canagree to the terms proposed in your September 27, 2013 letter, the City affirms our willingnessto pursue a resolution on these terms with HUD and ORIAH. We are optimistic that we will soonbe able to come to terms with ORIAH; if so, we could then provide you with a definitive date forreimbursement payments.

We appreciate the patience that HUD has shown in this matter, and we continue to urgethat it is better for all concerned to fully exhaust all possibilities for an agreed-upon resolutionbefore proceeding to an enforcement proceeding.

The City intends to continue to work diligently with ORIAH and its counsel towards anacceptable agreement along the lines you have proposed.

Should you have any questions or require additional information, please contactCorporation Counsel Donna Y. L. Leong.

Very truly yours,

Ember Lee ShinnManaging Director

cc: Nelson Koyanagi, Jr., Director, Department of Budget and Fiscal ServicesPamela Witty-Oakland, Director, Department of Community ServicesDonna Y. L. Leong, Corporation Counsel, Department of the Corporation Counsel