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Report regarding holding a Public Hearing for a Community Needs Assessment for the HUD Community Development Block Grant (CDBG) Program Year 2025-2026 Annual Action Plan. (Alvina Condon, Management Analyst II)
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RECOMMENDATION
Staff recommends that the City Council hold a public hearing and receive public testimony on the City’s housing, community, and economic development needs for the Community Development Block Grant (CDBG) Program Year 2025-2026 (PY 2025-26) Annual Action Plan (Action Plan) and provide direction to the CDBG Subcommittee regarding funding priorities.
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BACKGROUND
The U.S. Department of Housing and Urban Development (HUD) requires local jurisdictions to prepare an Action Plan for the upcoming program year to receive funds through the CDBG Program. The Action Plan identifies community needs and goals and guides the actions and activities that will address these needs and goals. As part of the development of the Action Plan, the City is required to hold two public hearings.
The purpose of the February 26, 2025 public hearing is 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 may use this public hearing to make brief comments to City Council regarding their programs. The City Council can take this opportunity to ask the non-profit organizations questions regarding their proposed activities and to give direction to the CDBG Subcommittee on funding priorities. The applications from the non-profit organizations can be found in Attachment 1.
The second public hearing is scheduled for May 28, 2025. At this meeting, the City Council will consider adopting the PY 2025-26 Action Plan and make final recommendations on CDBG funding allocations.
DISCUSSION
Funds Available for PY 2025-26
The City has not yet received notification from HUD of its CDBG entitlement amount for PY 2025-26. This is common for CDBG given that it is a federally funded program impacted by the federal budget process and timeline. Staff has developed a path that will deliver the Annual Action Plan by June 2025 and meet community engagement requirements. Given the level of uncertainty surrounding entitlement awards, staff recommends an estimated budget of $403,568, reflecting a decrease of 9% from the entitlement for PY 2024-25. This decrease is keeping with the trend of CDBG entitlement allocation decreases over the past decade. Staff recommendations will be presented at the next CDBG Subcommittee and then the full City Council meeting and will include a contingency plan for adjustments to the budget within a 20% variance. Should the final funding amount vary greater than 20% from the estimated budget, in accordance with HUD regulations, staff will return to the Subcommittee and/or City Council to revise the funding proposals.
The budget outlined in Attachment 2 incorporates the PY 2025-26 award requests. The HUD regulations cap spending on Public Services at 15% and Administrative costs at 20% of each year’s allocation. With a history of decreases to entitlements, the ability of the CDBG program to meet community public service needs has also decreased. In PY 2020-21, the City began to supplement Public Services requests with funds from the Housing Trust Fund (Fund 205). Staff have budgeted up to $100,000 from Fund 205 for PY 2025-26 to fund services such as shelters, transitional housing, and housing referrals.
Notice of Funding Availability
PY 2025-26 marks the second year of a two-year funding cycle for Public Services and Minor Home Repair grantees. To solicit applications for these, as well as minor home repair, fair housing, and City funds, the City publishes a Notice of Funding Availability (NOFA). The City published its NOFA in coordination with San Mateo County and the other CDBG entitlement jurisdictions in the County. While applicants are required to submit a specific funding request to each jurisdiction from which they seek funding, their administrative, contact, and organizational documentation is only required to be submitted once. The NOFA was published on the City’s website and through the City Data Services (CDS) portal on December 18, 2024. The NOFA was advertised on the City website and emailed to organizations who have received funding in the past.
In coordination with the other jurisdictions, the City hosted a virtual Technical Assistance Workshop on January 8, 2025. At this workshop, staff described the eligible uses for the CDBG and City funds. CDS staff also joined this workshop to provide an overview of how to use the CDS platform. Applications were due no later than 4:00 pm on January 21, 2025. The City received 10 applications for Public Services funds, two applications (from one organization) for Minor Home Repair funds, and one application for Fair Housing funds.
Applications for Funding
Applications are evaluated based on multiple criteria. Programs must meet the CDBG eligibility criteria as well as the specific priorities the City has identified in its 2023-2027 Consolidated Plan. The City’s current Consolidated Plan covers PY 2023-24 through PY 2027-28. Through the community engagement process for the Consolidated Plan, the City identified the highest community needs to be met with CDBG funds.
These needs are translated to four Goals the City outlined in its Consolidated Plan:
• Goal 1: Increase, maintain, and improve the supply of affordable housing for extremely low-to moderate income individuals/families.
• Goal 2: Preserve and improve public facilities and infrastructure that serve low-income neighborhoods or special needs residents.
• Goal 3: Provide public services to improve the quality of life for low-income individuals and families, including those at risk of becoming homeless and special needs populations.
• Goal 4: Support service-enriched shelter and transitional housing for homeless families and individuals.
The City may not provide CDBG funding to a program that does not meet at least one of the goals of its Consolidated Plan. To fund such a program, the City would need to amend its Consolidated Plan to include a goal covering those types of programs.
Below is a summary of the funding activities which are available through CDBG and supplemental City funds:
CDBG Public Services Activities - $60,535 Available (Estimated)
The majority of NOFA respondents proposed programs that CDBG classifies as public services activities. These activities provide services to improve the quality of life for low-income individuals and families, including those at risk of becoming homeless, senior and youth services, and special needs populations. Additionally, activities that provide service-enriched shelter and transitional housing for homeless families and individuals.
City-Funded Housing Activities (non-CDBG) - $100,000 Available (Estimated)
Income received from in-lieu fee payments is deposited into a housing trust fund (Fund 205). These funds may be used to support public services applications which provide housing and shelter to low-income persons or work to keep low-income people housed. By using these funds to support qualified housing-specific public services activities, the City is able to more fully meet community needs than it would be able to with CDBG public services funds alone.
CDBG Minor Home Repair Activities - $90,000 Available (Estimated)
Activities that increase and improve the supply of affordable housing for low-income households. This includes minor home repairs for health and safety priorities as well as accessibility modification programs.
Fair Housing Activities - $12,575 Available (Estimated)
The City has targeted the HOME Administrative funds it receives from the County for fair housing activities since the CDBG regulations require the City to affirmatively further fair housing. Fair housing activities may only be funded from administrative or public service type funds. Using these HOME Administrative funds to fund fair housing activities allows other activities to be funded under the public services cap.
CDBG Public Improvement Program Activities - $198,286 Available from PY 2025-26 (Estimate)
Those funds not set aside for public services, minor home repair, or administrative expenses have typically been utilized for public improvement activities. These are projects that meet Goal 2 above and include capital projects which benefit low-income neighborhoods and people. The City did not request applications for these types of activities. Program staff have worked with other City departments to identify projects that may benefit from CDBG funds. In addition to the $198,286, there are additional funds in this overall category. These funds were reallocated to public improvement activities from unspent CDBG funds from previous years through an amendment to the PY2024 Annual Action Plan.
CDBG Administration - $80,714 (Estimate)
The City may use up to 20% of the entitlement amount for grant administration.
Next Steps
Following this public hearing held at City Council, the CDBG Subcommittee will meet for a second time to consider the public testimonies and finalize funding recommendations on March 5, 2025.
FISCAL IMPACT
There is no fiscal impact on the General Fund to hold this Public Hearing. For the City to allocate federal funds, two Public Hearings must be held - this is the first of two hearings. At a subsequent City Council meeting, Council will be asked to consider adopting the Annual Action Plan following the second Public Hearing.
CONCLUSION
Holding the first of two public hearings for the PY 2025-26 Annual Action Plan is part of the process to receive public input and direction from the City Council on eligible uses of CDBG funds.
Attachments:
1. PY 2025-26 Consolidated Package of Applications Received
2. PY 2025-26 Grant Allocation Requests