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Study session regarding the Community Development Block Grant Fiscal Year 2024-2025 Annual Action Plan and Budget Allocation. (Danielle Thoe, Housing Manager and Nell Selander, Economic and Community Development Director)
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RECOMMENDATION
Recommendation
Staff recommends that the Community Development Block Grant (CDBG) Subcommittee of the City Council provide feedback regarding the Fiscal Year 2024-25 Annual Action Plan and budget.
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BACKGROUND
The purpose of this study session is to receive feedback from the CDBG Subcommittee regarding the FY 2024-25 Annual Action Plan.
The U.S. Department of Housing and Urban Development (HUD) requires local jurisdictions to prepare an Annual Action Plan (Action Plan) for the upcoming FY 2024-25, to receive funds through the Community Development Block Grant Program. As part of the development of the Action Plan, the City is required to hold two public hearings.
The first public hearing was held at City Council on March 27, 2024 to obtain citizens' views on housing, community, and economic development needs which will inform the Action Plan. Additionally, for those non-profit organizations seeking CDBG funds, they used this public hearing to make brief comments to City Council regarding their programs. At this meeting, Council expressed support for meeting community needs identified and increasing outreach to ensure community members are aware of the services.
The second and final public hearing is scheduled for May 8, 2024. At this meeting, Council will consider adopting the FY 2024-25 Action Plan and make final recommendations on CDBG funding allocations.
DISCUSSION
At present, the City has not been notified of the entitlement allocation for FY 24-25. The federal government has approved the budget for the Department of Housing and Urban Development (HUD) which holds steady the funding appropriated to the CDBG program. Staff have a high level of confidence that the City’s entitlement allocation will be very similar and recommend to budget assuming the same allocation of $457,048.
Based on this estimate, staff have developed funding recommendations for public service sub-recipients and programs. Should the final funding allocation very from the estimated amount by 20 percent or more, staff will return to the Subcommittee and/or City Council to revise the funding proposals, in accordance with HUD guidelines.
The budget outlined in Attachment 1 includes the anticipated entitlement allocation of $457,048, rollover funding of $100,000, and program income of $7,000. Staff anticipates an estimated total budget of $564,048. Note that the maximum percentage of dedicated funding for Public Services (15%) and Administrative Expenses (20%) are based only on the entitlement allocation and are HUD regulated limitations which cannot be adjusted.
CDBG Programs
The following is a summary of currently funded activities under the CDBG program.
Public Services ($69,000)
Plus $87,800 in City funds
In December 2023, the City invited public service agencies to apply for CDBG grant funding. These applications were due on January 18, 2024 and the City received 11 applications. The City received two new public service applications from the Magic Tooth Bus and the YMCA Community Resource Center. Cumulatively, the funding requests from all public service agencies totaled $313,388.
FY 2024-25 is the start of a new two-year cycle. Organizations (subrecipients) that are approved for grant funding for this first year will submit a more simplified renewal application the second year.
Starting in FY 2020-21, in part due the trend of decreasing CDBG allocations and in part in response to challenges meeting HUD income verification requirements, the City provided funding to several organizations through the City’s Housing Fund (Fund 205) instead of CDBG. Considering the public comment and feedback received from City Council at the March 27, 2024 Public Hearing, staff recommends continuing to utilize City Housing Funds for eligible activities. This approach will allow the City to provide grants to all of the Public Service grantees that submitted an application except for the YMCA Community Resource Center.
The YMCA CRC’s application for CDBG funds requested $136,640, approximately double the City’s total CDBG public services budget. Staff had previously encouraged YMCA staff to apply for CDBG funds, as the City’s Core Service Agency and intake point for so many residents but did not anticipate receiving such an outsized request for funds. The two main requests outlined in the YMCA application are: 1) funding for a Cantonese speaking case manager and 2) funding to provide bus passes to clients. While both of these are needed by low-income community members, it is not reasonable for CDBG funds to fully fund a full staff position and bus passes are generally an ineligible use of CDBG funds. Neither of these requests are eligible to be funded by the City’s Housing Fund.
After receiving applications, staff reached out to YMCA to better understand the intentions of the ask and the needs of the organization. These kind of follow-up requests for additional information or clarification are typical of the CDBG review process. Through these conversations, staff let YMCA know that their programs would not be recommended for funding through the City’s CDBG program, but that the City wants to continue conversations about other funding sources which may help to provide these services for FY 2024-25 and beyond.
To summarize the proposed public services budget is as follows:
CDBG Public Services Funds: $69,000
City Housing Funds: $87,800
TOTAL: $156,800
Minor Home Repair Programs ($100,000)
Amounts to the Minor Home Repair nonprofits are an effective use of funding to support existing City residents to stay in their homes in a safe and healthy environment. Since the start of the COVID-19 pandemic, all of the City’s minor home repair nonprofits have experienced difficulty meeting their goals and providing service in the community. For FY 2023-24, City Council approved funding for Center for Independence of Individuals with Disabilities (CID), Rebuilding Together Peninsula - Safe at Home, Rebuilding Together Peninsula - National Rebuilding Day, and El Concilio. Shortly before the start of FY 2023-24, El Concilio informed staff that the organization was discontinuing their minor home repair program and would not be utilizing the funds during FY 2023-24. The three other minor home repair programs all received funding during FY 2023-24, and all three have also submitted applications to the City for FY 2024-25 funding. During this year, staff have seen these programs rebound well and have greater confidence that the programs will be able to meet or come close to meeting their goals of total households served.
After submitting its application, staff of Rebuilding Together Peninsula sent an email to the City supplementing its application. This email noted the increased cost of materials and staff time that have driven up costs for their projects. It made the case that their funding award be increased to $117,403 for Safe at Home (a 112% increase from the FY 2023-24 award of $55,250) and $44,805 (a 184% increase from the FY 2023-24 award of $15,740). Staff understand the reality of increased costs of providing these minor home repair services, but also wanted to review the program performance holistically. Both Rebuilding Together programs have experienced issues with proper and timely reporting as well as accurate review and documentation of the homes they submit applications to work on. Staff recommend providing some increase to the funding to both Rebuilding Together programs, though not as high a funding level as requested, and to also require a higher level of performance from the program. If the increased investment in these programs does not come with an increased level of performance, staff will recommend reducing the allocation to these programs in FY 2025-26, the second year of public services awards.
Public Improvement Programs ($277,248)
During the Notice of Funding Availability (NOFA) application process, the City did not receive any applications for public improvements projects. These types of projects are the bulk of what CDBG funds in the City have typically been spent on. Staff still recommend these funds for public facilities projects and are working to identify City projects which may be able to utilize the funds. Staff believe that the lack of response to the NOFA in this category is due to both the complications of contracting and reporting requirements that are required to utilize CDBG funds as well as staff turnover in the Housing Division which has resulted in fewer connections to other City staff and projects. New Housing Division staff are working on making connections with staff in other City departments and are developing a list of capital and facilities projects that may be eligible for funding. It is recommended that the City provide funding for activities in this category. When a project or projects are identified staff will be required to return to Council for approval of any contract which exceeds $150,000 so Council will stay informed as to how these funds will be utilized.
Planning and Administration ($92,800)
The CDBG program allows the City to spend up to 20% of its grant award on program Planning and Administration. Given the anticipated award amount, staff propose to utilize the full budget of $92,800 for these expenses.
Economic Development Activities ($25,000)
During the community outreach process to draft the City’s 2023-2027 Consolidated Plan, the City heard feedback regarding the need to support economic development, job creation, job training, and entrepreneurs. Unfortunately, the feedback received was not included as a goal of the City’s Consolidated Plan. So, while City Council preliminarily approved an allocation of funding to Renaissance Entrepreneurship Center (if funds should allow), the City was unable to allocate CDBG funds to Renaissance.
Recognizing the ongoing need within the community for economic development support, staff have begun the process of amending the City’s Consolidated Plan to allow funding for economic development activities. Once that process is completed, and economic development activities may be included in the City’s 2024-25 Annual Action Plan, staff recommend providing funding to Renaissance Entrepreneurship Center in the amount requested - $25,000.
FISCAL IMPACT
Holding this study session has no fiscal impact on the General Fund. Funding recommendations made by the CDBG Subcommittee, if approved by the City Council, will have impacts to the CDBG budget and the City’s Housing Fund (Fund 205) as described above.
RELATIONSHIP TO STRATEGIC PLAN
By completing the HUD-mandated public process, including the required Annual Action Plan, the City will be able to secure its allocation of CDBG funds for the coming year. This, in turn will advance several components of the City’s Strategic Plan, in particular:
• Promoting Quality of Life by provide funding for social services and public projects to support residents
• Promote a balanced mix of housing options by helping fund nonprofits that work to address various affordable housing-related issues
• Promote financial stability by securing federal grant funds which mean a large portion of funded services do not rely on the City’s General Fund
• Prioritize community connections - by providing information to local residents to help strengthen community relationships.
CONCLUSION
Staff recommends that the Community Development Block Grant (CDBG) Subcommittee of the City Council provide feedback regarding the Fiscal Year 2024-25 Annual Action Plan and budget.
Attachments:
1. Budget FY 2024-25
2. Funding Recommendations FY 2024-25