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Report regarding holding a Public Hearing on the City’s housing, community, and economic development needs for the Fiscal Year 2024-25 Annual Action Plan and providing direction to the Community Development Block Grant (CDBG) Subcommittee regarding funding priorities. (Danielle Thoe, Housing Manager)
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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 fiscal year (FY) 2024-25 Annual Action Plan and provide direction to the Community Development Block Grant (CDBG) Subcommittee regarding funding priorities.
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BACKGROUND/DISCUSSION
The U.S. Department of Housing and Urban Development requires local jurisdictions to prepare an Annual Action Plan (Action Plan) for the upcoming fiscal year (FY) 2024-25, to receive funds through the Community Development Block Grant (CDBG) Program. As part of the development of the Action Plan, the City is required to hold two public hearings.
The purpose of the March 27, 2024, 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 second public hearing is scheduled for May 8, 2024. At this meeting, the Council will consider adopting the FY 2024-25 Action Plan and make final recommendations on CDBG funding allocations.
DISCUSSION
Funds Available for FY 2024-25
The City has not yet received notification from HUD of its CDBG entitlement amount for FY 2024-25. This is common for CDBG given that it is a federally funded program impacted by the federal budget process and timeline. During the week of March 11th, the federal government signed into law a spending bill which includes HUD’s budget for the CDBG program. Funding levels for CDBG remain unchanged from this fiscal year and staff feel comfortable now recommending the Annual Action Plan budget for an allocation equal to that received for FY 2023-24. This results in an estimated allocation of $457,048 for FY 2024-25. While the spending bill has passed, there could still be adjustments to the City’s grant allocation when HUD applies the grant formula. With the staff recommendations to be presented at the next CDBG Subcommittee and then full Council meeting, staff will bring a recommended contingency plan for adjustments to the budget within a 20% variance. Should the final funding amount vary greater than 20 percent 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 1 incorporates the FY 2024-25 award and program income. Including the potential entitlement ($457,048) and estimated program income ($7,000), staff anticipates an overall budget of approximately $464,048. The HUD regulations cap spending on Public Services at 15% and Administrative costs at 20% of each year’s allocation.
The budget also accounts for estimated rollover funds unspent during previous years which are approximately $100,000 in un-encumbered funds. This number may increase if all encumbered funds are not fully utilized. While the City has a large amount of rollover funds unspent from past years, the 15% cap on public services funding and 20% cap on administrative funding may not include use of those rollover funds. The rollover funds can only be used for construction type projects.
With a history of decreases to entitlements, the ability of the CDBG program to meet community public service needs has also decreased. In FY 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 FY 2024-25 to fund services such as shelters, transitional housing, and housing referrals.
Notice of Funding Availability
Fiscal Year 2024-25 marks the first year of a two-year funding cycle for Public Services grantees. To solicit applications for these, as well as public improvements, 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 5, 2023. The NOFA was advertised on the City website, emailed to organizations who have received funding in the past, and was advertised on social media.
In coordination with the other jurisdictions, the City hosted a virtual Technical Assistance Workshop on January 4, 2024. At this workshop, staff described the eligible uses for the CDBG and City funds. City Data Services staff also joined this workshop to provide an overview of how to use the CDS platform. Applications were due no later than 5:00 pm on January 18, 2024. The City received 11 applications for Public Services funds, three applications for Minor Home Repair funds, one application for Fair Housing funds, and one application for Microenterprise Assistance 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 FY 2023-24 through FY 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:
Public Services Activities - $69,607 Available
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): Fund 205 - $100,000 Available
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.
Minor Home Repair Activities - $100,000 Available
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 - $13,400 Available
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.
Public Improvement Program Activities - $190,000 Available
Those funds not set aside for public services 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 receive any applications for these types of activities. Program staff are working with other City departments to identify any projects that may benefit from CDBG funds. Additionally, staff are considering a decrease to this budget to allow for funding of the economic development activities described below.
Economic Development Activity - fund availability TBD
The City’s approved 2023-2027 Consolidated Plan did not include economic development activities as a priority goal for the City. The need for additional economic development efforts was brought up during the Consolidated Plan community outreach process and the ongoing impacts of the COVID pandemic continue to impact small businesses. Current CDBG staff are unsure why this was not included as a priority or goal in the Consolidated Plan activity but recommend that the Consolidated Plan be amended to allow funds to be spent on economic development programs. Dependent upon how these programs are structured, such expenditures may fall outside of the City’s public services cap.
Staff have begun the process of amending the Consolidated Plan by publishing the proposed amendment. The City may not budget to fund economic development activities at this time, but staff plan to return to Council to both approve the 2023-2027 Consolidated Plan amendment and to amend the FY 2024-25 Action Plan to allow for economic development activities. This full process will lag behind this CDBG award process and Annual Plan approval.
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.
RELATIONSHIP TO STRATEGIC PLAN
By completing the public process mandated by HUD and outlined in the City’s CDBG Community Participation Plan, the City will be able to adopt and submit to HUD the required Annual Action Plan. This will enable the City to secure its allocation of CDBG funds for the coming year. This in turn will advance several priorities of the City’s Strategic Plan, including:
• Provide funding for social services and public projects to support residents.
• Help fund nonprofits that work to address various affordable housing-related issues.
• Shift the financial burden away from the City’s General Fund by securing Federal grant funds.
• Partner with nonprofits that provide information to local residents and help strengthen community relationships.
CONCLUSION
Holding the first of two public hearings for the FY 2024-25 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. FY 2024-25 Grant Allocation Requests
2. FY 2024-25 Sub-Recipient Applications