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HomeMy WebLinkAboutStaff Report 185-06 CMR: 185:06 Page 1 of 9 TO: HONORABLE CITY COUNCIL ATTENTION: FINANCE COMMITTEE FROM: CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT DATE: APRIL 4, 2006 CMR: 185:06 SUBJECT: PROPOSED FISCAL YEAR 2006/07 COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) FUNDING ALLOCATIONS 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 $995,784 in FY 2006/07 Community Development Block Grant (CDBG) funds. The draft Fiscal Year 2006/07 Action Plan includes the funding recommendations and the second year of a two-year funding cycle coordinated with the Human Services Resource Allocation Process (HSRAP) beginning in fiscal year 2005/06. 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 and the Citizens Advisory Committee (CAC) in the 2006/07 Action Plan update to the Consolidated Plan for the period 2005 to 2010. 2. Authorize staff to submit the 2006/07 Action Plan to the Department of Housing and Urban Development (HUD) by the May 15, 2006 deadline. 3. Authorize the City Manager, on behalf of the City, to execute the 2006/07 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. CMR: 185:06 Page 2 of 9 BACKGROUND Consolidated Plan The 2005-2010 Consolidated Plan, adopted by Council on May 9, 2005, is a 5-year strategic plan of action that addresses priority housing and community development needs and sets specific goals for attaining identified objectives. Each year an Annual Action Plan is prepared to identify specific projects to be funded to implement the Consolidated Plan. The Consolidated Plan and the Annual Action Plan updates are required by HUD in order for the City to receive federal funding from programs such as the Community Development Block Grant (CDBG) or HOME Investment Partnership Act. The primary need identified in the Consolidated Plan is for affordable housing for low- income persons or persons with special needs. The goal for the five-year period is to provide 125 units of permanent, affordable housing. Palo Alto’s CDBG program is 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. In 2002, the City Council approved a two-year funding cycle for CDBG applications, similar to the HSRAP process. All of the proposed projects for CDBG funding for fiscal year 2006/07 address the priority housing and supportive service needs identified in the adopted Consolidated Plan. The Draft 2006/07 Annual Action Plan update has been made available for public review and comment during the period March 27 to April 27, 2006 (Attachment B). 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: ¾ Benefit low- and very low-income persons; ¾ Aid in the prevention or elimination of slums or blight; or ¾ 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. CMR: 185:06 Page 3 of 9 There are three primary CDBG program activity areas: 1. 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 2006/07, the maximum available for public services is $113,502. Public Service Cap Calculation: 2006/07 Entitlement Grant $711,680 Program Income – HIP 2005/06* (Est.) $10,000 Program Income – PAHC 2005/06* (Est.) $35,000 $756,680 x 15% = $113,502 2. Planning and Administration: This category may be used to reimburse 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 2006/07, funding is limited to a maximum of $151,336. Planning/Administration Cap Calculation: 2006/07 Entitlement Grant $711,680 Program Income – HIP 2006/07* (Est.) 10, 000 Program Income – PAHC 2006/07* (Est.) 35, 000 $756,680 x 20% = $151,336 *Federal regulations require the public service and planning/administration caps be calculated on program income for different years. 3. Capital Projects: Capital improvement activities such as housing acquisition, rehabilitation, accessibility, 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 in October 2004. A proposal-writing workshop was conducted in November 2004 to assist applicants with program regulations and project eligibility questions. The City received 18 applications for funding totaling $1,447,058 for FY 2005/06 and 14 applications for funding totaling $1,029,918 for FY 2006/07. Because there were only two capital projects submitted during the initial application request period in October 2004, the City issued a special RFP for housing and capital projects only in October 2005. Two applications were received for housing acquisition CMR: 185:06 Page 4 of 9 projects and four additional applications for capital projects were received totaling $856,899. 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 seven-member Citizens Advisory Committee (CAC), six 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), Susie Brain, Dave Charleson, Lynn Fielder, Michael Jakoby, Steve Mullen and George Vizvary. Steve Mullen was selected by the Committee as spokesperson. The funding recommendations made by the Committee and supported by Council in 2005 were preliminary for fiscal year 2006/07; therefore, the CAC met on four occasions in January and February 2006 to review and finalize those funding recommendations. The new capital projects and housing applications that were received during the special RFP process were also discussed at these meetings. DISCUSSION 2006/07 Funds Available for Allocation The total amount available for allocation this year is $995,784. The City’s 2006/07 CDBG grant is $711,680, an 8.7 percent decrease over the prior year’s grant of $779,281. $160,785 in funds remaining from previous projects being reallocated to new projects. Also included is $45,000 in program income (income generated directly from the use of CDBG funds) expected to be received in 2006/07, plus $78,319 in program income received in previous years in excess of the estimated amount. In summary: $711,680 FY 2006/07 CDBG entitlement grant from HUD* 160,785 Reallocation of other previous funds 10,000 Estimated program income for 2006/07 from the City’s Housing Improvement Program (HIP), a single-family residential rehabilitation program that is no longer operational 35,000 Estimated program income for 2006/07 from the Palo Alto Housing Corporation that is generated when rental income exceeds expenses on specific properties acquired or rehabilitated with CDBG funds 78,319 Actual program income received in previous years in excess of the estimated amounts that were allocated $ 995,784 *The amount of entitlement grant is not officially confirmed until the President has signed a budget bill approved by the United States Congress. CMR: 185:06 Page 5 of 9 Funding Recommendations – FY 06/07 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 may 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. The CAC and staff made preliminary funding recommendations for fiscal year 2006/07 during the fiscal year 2005/06 funding process. The CAC and staff reviewed the preliminary recommendations when the actual funding amount for fiscal year 2006/07 was available. The actual funding available for the public services category was approximately $10,000 less than had previously been estimated. Staff and the CAC recommend a decrease in funding of approximately $2,000 from the five applicants with the largest funding requests: Urban Ministry/InnVision, Clara-Mateo Alliance/InnVision (2 applications), Shelter Network, and Palo Alto Housing Corporation based on the levels that were proposed in the preliminary recommendations. Staff and the CAC recommend that three remaining applicants, Emergency Housing Consortium, Catholic Charities, and Mid-Peninsula Alano Club be funded at the level proposed in the preliminary recommendations that were approved by Council in May 2005. Staff and the CAC believe that funding cuts would be more detrimental to those applicants with smaller grant amounts because the same grant administration requirements apply. If the grant amount is too small, it is not cost effective to administer it. In the fair housing/administration category, staff and the CAC recommend funding at the same level for fair housing services with the balance being allocated for CDBG program administration and support. The funding for CDBG program administration will be decreased from the previous fiscal year because of the limited amount of funding available in this category. In order to make up the difference, the City will add approximately five percent to each capital project to compensate for staff work for project delivery. Six applications for capital projects were received in fiscal year 2006/07. Staff and the CAC recommend funding for five of the six capital projects. Funding for one of these projects, the Community Working Group Alma Garden Apartments acquisition, was already approved by Council on March 6, 2006. Staff and the CAC recommend funding for four additional projects. Stevenson House had previously submitted an application for the retrofit of windows and doors in the common areas of its building. During the special RFP process that was undertaken in October 2005, Stevenson House submitted an additional application to expand its project to retrofit the windows in doors in the “B” building. The window and door retrofit project will make the building more energy efficient and Stevenson House will save on its heating and cooling costs. Stevenson House also submitted an additional request for the upgrade of its fire alarm system so that it will meet current code requirements. Its existing system was installed in 1968 and it is not possible to obtain replacement parts because the company that installed the system has since gone out of business. Staff and CMR: 185:06 Page 6 of 9 the CAC also recommend continued funding for Economic and Social Opportunities for its Housing and Energy services program, which provides minor home repairs and accessibility upgrades to income-eligible Palo Alto residents. Lytton Gardens submitted a funding application for a new elevator for its health care center. Staff and the CAC do not recommend funding for this project because only a portion of the occupants at the health care facility qualify as low-income. One of the primary missions of the CDBG program is to provide services for low-income persons. In addition, CDBG assistance for public facilities is a lower priority in the City’s adopted Consolidated Plan for 2005-2010. The top priority identified in the Consolidated Plan is affordable housing. These activities include the creation of new affordable housing and the preservation of existing affordable housing. The Stevenson House and Economic and Social Opportunities projects address high priority needs identified in the Consolidated Plan. CMR: 185:06 Page 7 of 9 FUNDING RECOMMENDATIONS1 APPLICANT AGENCY 2005/2006 FUNDING 2006/2007 FUNDING REQUEST CAC/ STAFF RECOMMEN- DATIONS PUBLIC SERVICES 1. Catholic Charities Long-Term Care Ombudsman 6,000 8,940 5,800 2. Emergency Housing Consortium Palo Alto HOMES Program 8,000 10,063 7,760 3. Palo Alto Housing Corporation SRO Resident Support Services 23,000 59,897 20,270 4. Shelter Network – Haven Family House Transitional Housing for Homeless Families 19,000 30,000 16,375 5. InnVision/Clara-Mateo Alliance Family Shelter & Services/Elsa Segovia Center 21,392 25,000 18,725 6. InnVision/Clara-Mateo Alliance Single/Couple Shelter & Services 21,000 30,000 18,322 7. InnVision/Urban Ministry Homeless Drop-in Center 24,000 30,000 21,250 8. Mid-Peninsula Alano Club MPAC Operations 5,000 16,000 5,000 9. St. Vincent de Paul Society Dayworker Emergency Services -0- $10,000 -0- Total Public Services (Cap $113,502) 127,392 224,870 113,502 FAIR HOUSING/ADMINISTRATION 9. Project Sentinel 26,800 26,800 26,800 10. City of Palo Alto Program Administration 138,056 155,000 124,536 Total Administration (Cap $151,336) 164,846 181,800 151,336 CAPITAL PROJECTS 11. Community Housing Inc. New Elevator for Health Care Center 86,575 for countertop lavatories $150,000 -0- 12. Stevenson House Retrofit of Windows and Doors -0- 351,799 370,0002 13. Economic and Social Opportunities Housing and Energy Services Program 60,000 60,000 63,3002 14. Stevenson House - Senior Housing Fire Alarm Upgrades 0 45,100 47,6462 CMR: 185:06 Page 8 of 9 FUNDING RECOMMENDATIONS1 APPLICANT AGENCY 2005/2006 FUNDING 2006/2007 FUNDING REQUEST CAC/ STAFF RECOMMEN- DATIONS 15. Community Working Group Alma Garden Apartments Acquisition -0- 250,000 250,000 Total Capital Projects (Cap $730,946) 730,946 TOTAL 995,784 1Changes may be necessary if the amount of funding is increased or decreased when the President signs the budget. 2Includes approximately 5% for project delivery costs. Commitment of CDBG Funds As mentioned in the previous section, Council approved an allocation of fiscal year 2006/07 CDBG funds to the Community Working Group for the acquisition of the Alma Garden Apartments. The approval for this project had to be expedited in order for the City to meet its timeliness standard, in which the HUD regulations say that the City can have no more than 1.5 times its current grant amount in its letter of credit balance by April 30, 2006. Council approved $900,000 in funding from the CDBG housing development fund as well as $250,000 from the fiscal year 2006/07 CDBG allocation for a total allocation of $1.15 million. The $250,000 from the fiscal year 2006/07 CDBG allocation will be advanced from the City commercial housing fund; the City housing fund will be reimbursed with CDBG funds when they are available in fiscal year 2006/07. POLICY IMPLICATIONS All of the applications recommended for funding in fiscal year 2006/07 are consistent with the priorities established in the City’s adopted Consolidated Plan for the period 2005 to 2010. They are also consistent with the housing programs and policies in the Comprehensive Plan. RESOURCE IMPACT CDBG regulations require that CDBG entitlement jurisdictions provide funding for fair housing services. The CAC and staff recommend that the City’s fair housing provider be funded at the same level as the previous fiscal year. Because of this, the amount available for allocation to the City for CDBG administration will be reduced. In order to make up the difference, approximately 5% has been added to each capital project to compensate for staff work for project delivery. In the event that any cost overruns occur, they will be allocated to the General Fund portion of CDBG administration. The remaining proposed projects will be funded solely with CDBG funds and will not have an impact on the General Fund. CMR: 185:06 Page 9 of 9 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 1, 2006. The funding allocations and Annual Action Plan update will be submitted to HUD by the May 15, 2006 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 Entities Assuming HUD Environmental Responsibilities”. 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 2006/07 CDBG Funding Attachment B: 2006/07 Draft Annual Action Plan Update of the Consolidated Plan for the period 2005 to 2010 PREPARED BY: _______________________________ Eloiza Murillo-Garcia, CDBG Planner DEPARTMENT HEAD: ______________________ JULIE CAPORGNO Advance Planning Manager CITY MANAGER APPROVAL: ____________________________ EMILY HARRISON Assistant City Manager cc: CDBG Citizens Advisory Committee Members 2006/07 CDBG Applicant Agencies