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HomeMy WebLinkAboutStaff Report 206-05 CMR: 206:05 Page 1 of 9 TO: HONORABLE CITY COUNCIL ATTENTION: FINANCE COMMITTEE FROM: CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT DATE: APRIL 5, 2005 CMR: 206:05 SUBJECT: PROPOSED FISCAL YEAR 2005/07 COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) FUNDING ALLOCATIONS, DRAFT 2005-2010 CONSOLIDATED PLAN AND DRAFT ACTION PLAN REPORT IN BRIEF This report transmits the recommendations of City staff and the Citizens Advisory Committee (CAC) for the expenditure of $915,639 in FY 2005/06 and an estimated $824,281 in FY 2006/07 in Community Development Block Grant (CDBG) funds. The draft 2005-2010 Consolidated Plan describes priority housing and community development needs, and sets specific goals for attaining identified objectives. The draft fiscal year 2005/06 Action Plan includes the funding recommendations, contingency recommendations, a commitment of future year’s CDBG funds for an affordable housing project, and the start of a two-year funding cycle coordinated with the Human Services Resource Allocation Process (HSRAP) beginning in fiscal year 2005/06. CMR: 206:05 Page 2 of 9 RECOMMENDATION Staff and the CDBG Citizen’s Advisory Committee recommend that the Finance Committee recommend to the City Council approval of the following: 1. Allocate CDBG funding as recommended by staff in the first 2005/06 Action Plan update to the Consolidated Plan for the period 2005 to 2010. 2. Commit future CDBG funds to repay the General Fund for a portion of the CDBG- eligible site acquisition costs in connection with a new affordable housing project, if a site can be identified and acquired in 2005/06. 3. Authorize staff to submit the 2005-2010 Consolidated Plan to the Department of Housing and Urban Development (HUD) by the May 15, 2005 deadline. 4. Authorize staff to submit the 2005/06 Action Plan to HUD by the May 15, 2005 deadline. 5. Authorize the City Manager, on behalf of the City, to execute the 2005/06 application and Action Plan for CDBG funds and any other necessary documents concerning the application, and to otherwise bind the City with respect to the application and commitment of funds. 6. Allocate Fiscal Year 2006/07 funding as recommended. BACKGROUND Consolidated Plan The City’s Consolidated Plan is a strategic plan of action that addresses priority housing and community development needs, and sets specific goals for attaining identified objectives. It is required by the Department of Housing and Urban Development (HUD) to be updated every five years. The Consolidated Plan and the Annual Action Plan are a requirement in order for the City to receive federal funding from CDBG or the HOME Investment Partnership Act. CDBG Regulations The City of Palo Alto receives funds annually from HUD as an entitlement city under the CDBG Program, authorized by Title I of the Housing and Community Development Act of 1974 (the Act) as amended. The primary objective of the Act is “the development of viable urban communities by providing decent housing and a suitable living environment, and expanding economic opportunities, principally for persons of low and moderate income.” HUD regulations require that all activities must meet one of the three national objectives of the CDBG Program: Ø Benefit low - and very-low -income persons; Ø Aid in the prevention or elimination of slums or blight; or CMR: 206:05 Page 3 of 9 Ø Meet other community development needs having a particular urgency, or posing a serious and immediate threat to the health or welfare of the community. Palo Alto has historically expended all of its CDBG funds on projects benefiting low - and very- low -income persons. There are three primary CDBG program activity areas: Public Services: Social service activities that benefit low -income persons. The maximum amount that can be expended under this category is 15 percent of the grant allocation and 15 percent of the program income for the previous year. For fiscal year 2005/06, the maximum available for public services is $127,392. Public Service Cap Calculation: 2005/06 Entitlement Grant $779,281 Program Income – Housing Improvement Program 2004/05* (Est.) $35,000 Program Income – PAHC 2004/05* (Est.) $35,000 $849,281 x 15% = $127,392 *Federal regulations require the public service and planning/administration caps to be calculated on program income for different years. Planning and Administration: This category may be used to reimburse for fair housing activities, CDBG program management, oversight and coordination, environmental reviews, and general planning activities. Federal regulations limit the amount that can be spent in this category to 20 percent of the grant and 20 percent of the estimated program income for the following year. For fiscal year 2005/06 funding is limited to a maximum of $164,856. Planning/Administration Cap Calculation: 2005/06 Entitlement Grant (Est.) $779,281 Program Income – HIP 2005/06* (Est.) $35,000 Program Income – PAHC 2005/06* (Est.) $10,000 $824,281 x 20% = $164,856 *Federal regulations require the public service and planning/administration caps be calculated on program income for different years. Capital Projects: Capital improvement activities such as housing acquisition, rehabilitation, accessibi lity, and public improvements are the primary focus of the CDBG program. There are no funding limitations in this category. CDBG Applications Applications for 2005/07 funding were mailed to area housing and human service providers on October 12, 2004 and posted to the City’s website. A notice announcing the availability of applications for 2005/06 and 2006/07 CDBG funding was published in the Palo Alto Weekly on October 13, 2004. A proposal -writing workshop was conducted on November 3, 2004 to assist applicants with program regulations and project eligibility questions. The completed CMR: 206:05 Page 4 of 9 applications were due December 10, 2004. The City received 16 applications for funding from outside organizations totaling $1,420,259 for FY 2005/06 and 12 applications for funding totaling $526,384 for FY 2006/07. In addition, the City requested a reservation of $400,00 in CDBG funding in each fiscal year for an affordable housing project. Citizen Participation The City follows a Citizen Participation Plan to encourage public participation in the CDBG allocation and assessment process. The Citizen Participation Plan calls for a nine -member Citizens Advisory Committee (CAC), eight of whom are selected by the Mayor. One slot on the CAC is reserved for a member of the City’s Human Relations Commission (HRC). Members of this year’s CAC were: Eve Agiewich (HRC Liaison), Victoria Bosch, David Charleson, Michael Jakoby, Chris Kelly, Steve Mullen, Elsbeth Newfield, Sylvia Smitham and George Vizvary. Steve Mullen was selecte d as the Committee’s spokesperson. The Committee met weekly during January and February 2005 to discuss and evaluate the applications, interview the applicant agencies and come to a consensus on funding levels. In addition, the Committee went on a half-day tour of some of the local applicant sites. DISCUSSION Consolidated Plan The Draft 2005-2010 Consolidated Plan and Draft 2005/06 Annual Action Plan update are available for public review and comment during the period April 1 to April 30, 2005 (Attachme nt B). Consistent with the existing 2000-2005 Consolidated Plan, the primary need identified in the proposed Consolidated Plan is for affordable housing for low -income persons or persons with special needs. The goal for the 2005-2010 five-year period is to provide 125 units of permanent, affordable housing. Palo Alto’s CDBG program continues to be directed toward expanding and maintaining the affordable housing supply; promoting housing opportunities and choices; maintaining and improving community facilities; and providing supportive services for targeted low -income groups, including persons who are homeless, persons with disabilities, the elderly, and other special needs groups. All of the proposed projects for CDBG funding for fiscal year 2005/06 and fiscal year 2006/07 address the priority housing and supportive service needs identified in the draft Consolidated Plan. 2005/06 Funds Available for Allocation The total amount available for allocation in fiscal year 2005/06 is $915,639. The City’s 2005/06 CDBG grant is $779,281, a 4.5 percent decrease over the prior year’s grant of $816,000. $62,570 in funds remaining from previous projects is being reallocated to new projects. Also included is $45,000 in program income (income generated directly fro m the use of CDBG funds) expected to be received in 2005/06, plus $28,788 in program income received in previous years in excess of the estimated amount. In summary: $779,281 FY 2005/06 CDBG entitlement grant from HUD* 62,570 Reallocation of other previous funds 35,000 Estimated program income for 2005/06 from the City’s Housing Improvement Program (HIP), a single-family residential rehabilitation program that is no longer operational CMR: 206:05 Page 5 of 9 10,000 Estimated program income for 2005/06 from the Palo Alto Housing Corporation that is generated when rental income exceeds expenses on specific properties acquired or rehabilitated with CDBG funds 28,788 Actual program income received in previous years in excess of the estimated amounts that were allocated $915,639 *The amount of entitlement grant is not confirmed until the President has signed a budget bill approved by the United States Congress. Funding Recommendations – FY 05/06 The chart on the following page shows the applications that were received and the CAC and staff funding recommendations. It should be noted that changes might be necessary in the event that the City’s entitlement grant is increased or decreased when the President signs the actual budget. Attachment A is a narrative explaining the funding requests and funding recommendations in more detail. CMR: 206:05 Page 6 of 9 FUNDING RECOMMENDATIONS* APPLICANT AGENCY 2004/2005 FUNDING 2005/2006 FUNDING REQUEST CAC/ STAFF RECOMMEN- DATIONS PUBLIC SERVICES 1. Catholic Charities Long-Term Care Ombudsman 5,550 8,940 6,000 2. Emergency Housing Consortium Palo Alto HOMES Program 7,650 10,063 8,000 3. Palo Alto Housing Corporation SRO Resident Support Services 22,300 32,585 23,000 4. Shelter Network - Mid-Peninsula Housing Transitional Housing for Homeless Families 19,000 30,000 19,000 5. Clara-Mateo Alliance (InnVision) Family Housing Program 20,900 25,000 21,392 6. Clara-Mateo Alliance (InnVision) Adult Singles/Couples Housing Program 25,000 35,000 21,000 7. Urban Ministry (InnVision) Homeless Drop-in Center 19,100 30,000 24,000 8. St. Vincent de Paul Day Worker Emergency Services 9,500 10,000 -0- 9. Mid-Peninsula Alano Club MPAC Operations N/A 16,000 5,000 Total Public Services (Cap $127,392) 129,000 197,588 127,392 FAIR HOUSING/ADMINISTRATION 10. Fair Housing Services 26,800 26,800 26,800 11. City of Palo Alto Program Administration 145,200 147,500 138,056 Total Administration (Cap $164,856) 172,000 174,300 164,856 CAPITAL PROJECTS 12. Community Housing Inc. Lytton Gardens Counter Top Lavatory N/A 86,575 0 (Combine with ESO) 13. Project Match Senior Group Residence N/A 448,988 0 14. Economic and Social Opportunities Housing and Ene rgy Services Program N/A 60,000 146,575 Combine with Lytton Gardens 15. Emergency Housing Consortium Our House Youth Program N/A 75,000 75,000 15. Stevenson House - Senior Housing Walk-In Cooler/Freezer and Windows/Doors N/A 104,607 0 (Ful l Funding in FY 06-07) 16. Bridge Housing Corporation Fabian Way Senior Apartments N/A 300,000 0 17. City of Palo Alto/ Housing Development Fund Pre -development of New Rental Housing Project 118,500 400,000 401,816 Total Capital Projects (Cap $623,391) 1,075,170 623,391 TOTAL 1,447,058 915,639 *Changes may be necessary if the amount of funding is increased or decreased when the President signs the budget. CMR: 206:05 Page 7 of 9 Funding Recommendations – FY 06/07 The two-year process provides the opportunity for City and non-profit staff to undertake longer- term strategic planning and maximize available funding resources. In 2002, the City Council approved a two-year funding cycle for CDBG applications similar to the HSRAP process. Organizations seeking funding in the second year of the two-year cycle also submitted FY 05/06 applications on December 10, 2004. These were evaluated by the CAC and staff. The Council is asked to review and approve tentative allocations for 2006/07. The City Council will be required to adopt a 2006/07 Action Plan next year. At that time the Council may adjust the tentative allocations. The amount of the City’s CDBG allocation in FY06/07 is uncertain because of federal budget fluctuations and because there is a proposal by President Bush to combine the CDBG program with 17 other programs and reduce total funding to $3.71 billion. The current budget for the CDBG program alone is $4.5 billion. Based on this factor, however, the tentati ve funding recommendations by the CAC and staff assume that the City’s allocation will not increase. Funding requests for public services were similar to those submitted in FY 2005/06 with one exception. The Palo Alto Housing Corporation (PAHC) sought additional funding because it has a foundation grant for fiscal year 2005/06 that might not be renewed in fiscal year 2006/07. With no change in allocation and a cap of 15% on public services, CAC and staff did not wish to cut the funding of other organiza tions in order to increase the allocation for PAHC. CAC and staff recommend funding levels comparable to FY 2005/06. Funding of CDBG administration and fair housing is also recommended at the FY 2005/06 level, with a proportional decrease or increase sho uld the funding allocation change. In the category of capital projects, CAC and staff recommend $60,000 for Economic and Social Opportunities to continue its Housing and Energy Services Program and $163,248 for Stevenson House for the replacement of windows and doors at its senior housing facility. An additional $312,535 will be allocated to the CDBG Housing Development fund for the acquisition of an affordable housing site. Commitment of Funds HUD regulations require that CDBG funds be expended in a timely manner. The regulatory requirement is that no more than 1.5 times a jurisdiction’s annual entitlement grant amount may remain in the letter of credit 60 days prior to the end of the program year. In an effort to reduce the backlog of unspent CDBG fund s, HUD will employ monetary sanctions against jurisdictions that exceed the regulatory standard. Failure to meet the expenditure standard by May 1, 2006 will cause HUD to reduce the City’s next grant by 100 percent of the amount in excess of 1.5 times the annual grant. For this reason, all funding applications were scrutinized to insure the readiness of the program or project to move forward and expend funds in a timely manner. The acquisition of an affordable housing site is a top priority in the Cons olidated Plan. Staff and the CAC recommend that $401,816 in fiscal year 2005/06 funding and $312,535 in fiscal year 2006/07 funding be allocated to CDBG Housing Development. The City Real Estate department is investigating a potential affordable housing site that was referred by the Finance Committee. Due to the expenditure standards, the recommendation is contingent upon the progress made in CMR: 206:05 Page 8 of 9 negotiations with the property owners. Staff and the CAC will review progress made on the acquisition in mid-Septe mber. If substantial progress has not been made by that time, staff and the CAC recommend an alternative plan for the funds in fiscal year 2005/06. Staff and the CAC recommend $86,575 in additional funding for Lytton Gardens to replace the sinks on an additional floor in its skilled nursing facility. $25,000 in additional funding is recommended for Emergency Housing Consortium’s Our House Youth Project and $163,248 is recommended for windows and doors at Stevenson House. The additional $126,993 will be reallocated to projects in fiscal year 2006/07. POLICY IMPLICATIONS All of the applications recommended for funding in fiscal years 2005/2006 and 2006/07 are consistent with the priorities established in the City’s adopted Consolidated Plan for the period 2000 to 2005 and the draft Consolidated Plan for the period 2005 to 2010. They are also consistent with the housing programs and policies in the adopted Comprehensive Plan. TIMELINE Funding recommendations made by the Finance Committee will be forwarded to the City Council for review and approval at a public hearing scheduled for May 2, 2005. The funding allocations and Consolidated Plan update will be submitted to HUD by the May 15, 2005 deadline. ENVIRONMENTAL REVIEW For purposes of the National Environmental Policy Act (NEPA) and the California Environmental Quality Act (CEQA), budgeting in itself is not a project. HUD environmental regulations for the CDBG program are contained in 24 CFR 58 “Environmental Review Procedures for Title I Community Development Block Grant Programs”. The regulations require that entitlement jurisdictions assume the responsibility for environmental review and decision-making under NEPA. Prior to the commitment or release of funds for each of the proposed projects, staff will carry out the required environmental reviews or assessments, and certify that the review procedures under CEQA, and HUD and NEPA regulations have been satisfied for each particular project. ATTACHMENTS Attachment A: Staff and CAC recommendations for FY 2005/06 and 2006/07 CDBG Funding Attachment B: Draft Consolidated Plan Update for the period 2005 to 2010 and 2005/06 Draft Annual Action Plan CMR: 206:05 Page 9 of 9 PREPARED BY: _______________________________ Eloiza Murillo-Garcia, Associate Planner - CDBG DEPARTMENT HEAD: ______________________ JULIE CAPORGNO Advance Planning Manager CITY MANAGER APPROVAL: ____________________________ EMILY HARRISON Assistant City Manager cc: CDBG Citizens Advisory Committee Members 2005/07 CDBG Applicant Agencies