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HomeMy WebLinkAboutStaff Report 147-09______________________________________________________________________________ CMR:147:09 Page 1 of 7 TO: HONORABLE CITY COUNCIL FROM: CITY MANAGER DEPARTMENT: PLANNING AND COMMUNITY ENVIRONMENT DATE: MARCH 2, 2009 CMR: 147:09 REPORT TYPE: PUBLIC HEARING SUBJECT: Adoption of the 2008/09 CDBG Annual Action Plan Amendment to the 2005-10 Consolidated Plan to Provide: (a) Pre-award Authorization to Expend $300,000 from the City’s 2009/10 CDBG Grant for Additional Site Acquisition Funding for the Affordable Housing Project at 488 West Charleston Road; and (b) An Additional Allocation to InnVision the Way Home for Homeless Shelter and Services of $80,000; Adoption of an Ordinance Amending the Budget for the Fiscal Year 2008-2009 to Provide an Additional Appropriation of $300,000 From the Residential Housing Fund for the Acquisition of 488 West Charleston Road and Development of the Site Into an Affordable Housing Project; and Approval of Two Contract Amendments with InnVision the Way Home to (1) Add $56,000 for Services at the Opportunity Center for a Total Not to Exceed Amount of $86,000, and (2) Add $24,000 for Services at the Clara Mateo Alliance Shelter for a Total Not to Exceed Amount of $59,000 EXECUTIVE SUMMARY Council action is requested to amend the City’s Annual CDBG Action Plan in order to provide an additional $80,000 in CDBG funding from Fiscal Year 2008/2009 to InnVision the Way Home to address an emergency funding gap in local programs providing shelter and supportive services to homeless persons; and an additional $300,000 in CDBG funding from fiscal year 2009/10 for the Tree House affordable housing project at 488 W. Charleston Road. The $300,000 for the Tree House project would first be paid from the City’s Residential Housing Fund, and then reimbursed from 2009/10 CDBG funding as soon as possible after the start of the July 1, 2009 program year. The contract amendments will provide InnVision the Way Home with a total of $80,000 in additional funding for homeless services in the current fiscal year. InnVision’s CDBG contract for services at the Opportunity Center will increase from $30,000 to $86,000, and their CDBG contract for services at the Clara Mateo Alliance Shelter will increase from $35,000 to $59,000. ______________________________________________________________________________ CMR:147:09 Page 2 of 7 The allocation of additional CDBG money to these projects will help the City meet its housing and community development goals; assist local non-profits in the provision of housing, shelter and supportive services to low-income persons; and help the City meet HUD’s timely expenditure standard for the CDBG program. RECOMMENDATIONS Staff recommends that the City Council: 1. Approve and authorize submittal to the Department of Housing and Urban Development (HUD) the attached 2008/09 Annual Action Plan Amendment to the 2005-2010 Consolidated Plan to authorize the pre-award expenditure of $300,000 in 2009/10 CDBG funds for additional site acquisition costs for the Tree House affordable housing project at 488 West Charleston Road; and an allocation of $80,000 in additional 2008/09 CDBG funds to InnVision the Way Home to fill an emergency funding gap in homeless supportive and shelter services. 2. Adopt the attached Budget Amendment Ordinance to provide an additional appropriation of $300,000 in interim funding from the City’s Residential Housing Fund for the Tree House project acquisition costs which will be reimbursed from 2009/10 CDBG funding when it is available. 3. Authorize the City Manager or designee to request $300,000 in fiscal year 2009/10 CDBG funds from HUD in order to reimburse the City’s Residential Housing Fund for the additional Tree House acquisition costs. 4. Approve and authorize the City Manager or his designee, to execute the attached contract amendments with InnVision the Way Home to allocate the additional CDBG funds to existing agreements as follows: a) to add $56,000 to the Opportunity Center for case management and supportive services for a total not to exceed amount of $86,000; and b) to add $24,000 to Clara Mateo Alliance Shelter for shelter and supportive services for homeless individuals and families for a total not to exceed amount of $59,000. InnVision operates both of these programs. BACKGROUND The City approved the 2008/09 CDBG Annual Action Plan of the 2005-2010 CDBG Consolidated Plan on May 5, 2008. Two changes are being proposed to the 2008/09 CDBG Action Plan: 1) pre-award notification that the City intends to expend $300,000 of its expected 2009/10 CDBG funding allocation within the current fiscal year to increase the City’s contribution to the “Tree House” Apartments project site acquisition costs; and 2) an emergency allocation of $80,000 in fiscal year 2008/09 CDBG funds to InnVision the Way Home to address an urgent funding shortfall in mid-peninsula programs that provide shelter and supportive services to the area’s homeless and low-income populations. The CDBG Citizens Advisory Committee unanimously voted to support the two proposed changes to the 2008/09 Annual Action Plan at their meeting on February 19, 2009. ______________________________________________________________________________ CMR:147:09 Page 3 of 7 DISCUSSION The CDBG Action Plan is proposed to be amended to provide funding for two projects, the Tree House Affordable Housing Project and InnVision the Way Home for homeless shelter and services. The amended 2008/2009 Action Plan for these two projects was circulated for public review for 30 days beginning January 30, 2009. No comments were received. The Tree House Affordable Housing Project: Tree House Apartments, L.P., a subsidiary of the Palo Alto Housing Corporation (PAHC), is in contract to purchase a 0.7 acre site at 488 West Charleston Road in Palo Alto for the purpose of developing 35 rental housing units affordable to extremely-low and very-low income households earning between 20% and 50% of the area median income. The total development cost of the project is anticipated to be $13.2 million. The project will include thirty-three (33) studio apartments and two (2) one bedroom apartments and an indoor common area to accommodate a recreation room, a lounge/library, laundry room, common bathroom, a resident service office and a management office. The total proposed floor area is 21,903 feet. At their March 16, 2009 meeting, the City Council will consider approval of a Mitigated Negative Declaration, architectural review and the adoption of an ordinance for a zone change to “Planned Community” for the Tree House project. At that meeting the Council will also consider the funding agreement for the project. Last year, PAHC approached the City seeking financial assistance for site acquisition, and submitted an application for funding from the City’s CDBG and housing development funds. The City Council approved 2008/09 budget allocations for a total of $2,538,577 for PAHC’s acquisition of the project site with $1,538,577 from 2008/09 CDBG funds and $1,000,000 from the City’s Residential Housing Fund. In the fall of 2008, PAHC requested additional financial assistance (Attachment C) in the amount of $300,000 from the City to help defray their out of pocket costs for sit acquisition. The estimated property acquisition costs of $2,865,000 are described below. Site Acquisition Costs Acquisition Price $2,850,000 Closing Costs 15,000 Total $2,865,000 Proposed Sources of Funds City of Palo Alto Residential Housing Fund $1,000,000 2008/09 CDBG Funding 1,538,577 2009/10 CDBG Pre-Award 300,000 Palo Alto Housing Corp. (Deposit) 26,473 Total $2,865,000 Due to HUD regulatory restrictions, CDBG funds cannot be used to pay for the costs of new housing construction, but are limited to land acquisition and a few very specific off-site improvements and pre-development expenses. In an affordable housing project, it is beneficial to use as much CDBG money as possible for the eligible land acquisition costs. This provides ______________________________________________________________________________ CMR:147:09 Page 4 of 7 greater flexibility with other funding sources that may not be as restrictive and can be used for other project costs. By providing the additional $300,000 in CDBG pre-award funds, the City will utilize its CDBG funding more effectively to subsidize the project’s development budget and allow for greater flexibility in other funding sources. HUD regulations also require that the City expend its CDBG funds in a timely manner or risk permanent funding reductions. In order to meet the timeliness requirement this year, the City must expend the funds for the acquisition of the Tree House project site by April 30, 2009. Escrow for the site acquisition will close as soon as possible after Council action on the City’s loan and regulatory agreements, which is tentatively scheduled for March 16, 2009. The additional $300,000 will be funded from the Residential Housing Fund, which will be reimbursed with 2009/10 CDBG funds after the grant agreement with HUD is finalized after July 1, 2009. InnVision the Way Home for Homeless Shelter and Services: InnVision is the current provider of support services and shelter for the local low-income and homeless population. Staffing and extensive support services are provided at the Opportunity Service Center (OSC) at 33 Encina Way in Palo Alto, and also at the Clara-Mateo Alliance (CMA) shelter located on the grounds of the Veterans Administration campus at 795 Willow Road in Menlo Park. Due to a combination of factors, including the downturn in the economy, a lack of ongoing, regular government funding, a surge in the number of people seeking services, and a decline in corporate and individual donations, InnVision is facing a budget shortfall in its mid-peninsula programs that may necessitate program cut-backs or even closures. The attached December 17, 2008 letter (Attachment D) from InnVision to the City Manager addresses the urgent issues facing the organization and local programs in the current fiscal year and requests emergency funding in the amount of $100,000 to help with a year-to-date budget shortfall of $500,000 in its mid-peninsula programs. To help raise funds, InnVision has: sent out appeals to major donors and the local faith community, soliciting private donations through urgent appeals and extensive media coverage; requested emergency funding from Santa Clara and San Mateo Counties, and the City of Menlo Park; requested an emergency rent reduction from the Veterans Administration; and discussed possible assistance from the Housing Authority of Santa Clara County. They have applied for an equity line of credit on unencumbered property, eliminated 2 key management positions, and reduced top salaries by 12.5%. They are planning a major fundraising event on the peninsula, and to yield cash savings, are attempting to arrange an equity share on their administrative headquarters in San Jose. Although these efforts have produced some positive results, the budget gap predicted for January to June 2009 is still significant enough to require reduced hours at the Opportunity Service Center and a possible total closure of the CMA shelter after March 2009. These two programs, with a combined annual budget of $2 million, are the only ones providing emergency shelter and extensive support services to low-income and homeless persons in the Palo Alto/Menlo Park area. InnVision states that past experience has shown private donations are not generated as ______________________________________________________________________________ CMR:147:09 Page 5 of 7 readily in the post-holiday period, and that additional funding for staffing in the current fiscal year is crucial for the continuation of these “safety net” services. The OSC has been operating for approximately two years at its current location at 33 Encina Way in Palo Alto. The hours of operation were increased from half day to full day when the center’s functions moved to Encina Way from its former site behind the Red Cross building. InnVision has not been able to generate sufficient on-going funding sources to meet the program’s operating budget. Although they have utilized an agency-wide unrestricted reserve fund to fill the OSC budget shortfall in the past, it is no longer possible due to the depletion of the fund. InnVision reports an agency-wide 20% increase in the number of people seeking housing and other services. The City of Palo Alto currently provides $30,000 and $35,000 in CDBG funding for operational expenses at the OSC and Clara Mateo Alliance respectively. Due to the restricted cap (15% of total grant plus CDBG program income) on public service funding, very little additional funding is available for allocation from CDBG funds on an on-going basis. However, due to an unusual and large influx of program income in the 2007/08 fiscal year from loan repayments from Palo Alto Gardens Apartments and the Sheridan Apartments, the public service cap for the current 2008/09 program year could be adjusted to increase spending in this category on a one-time-only basis by up to an additional $80,000. A maximum total of approximately $206,300 could be expended on public service projects in the 2008/09 fiscal year of which $126,300 has already been allocated leaving a balance of $80,000. Funds are available for allocation in the current fiscal year due to excess program income and the reallocation of funds from other projects. If the available funds are not used for a public service project this year, they will roll over for allocation to a capital project in fiscal year 2009/10. They could not, however, be used to address a public service need after June 30, 2009 due to the limitations on the public service cap for 2009/10. Additional funding on a one-time emergency basis will provide InnVision with time to increase private donor contributions and to develop stable, on-going funding sources for these crucial safety net programs. The additional money from the City of Palo Alto may also help InnVision leverage emergency funding from other local or governmental sources. The attached Amendments to two existing InnVision contracts (Attachments E and F) provide additional funding in the amount of $56,000 for a total not to exceed $86,000 for the Opportunity Service Center and $24,000 for a total not to exceed $59,000 for Clara Mateo Alliance. The additional funds would be used to pay on-site program staff salaries to continue the current levels of service. RESOURCE IMPACTS Currently, the 2008/09 budget includes a total of $2,538,577 to the Palo Alto Housing Corporation for acquisition of the Tree House project site, of which $1,538,577 will come from CDBG funds, and $1,000,000 will come from the Residential Housing Fund. A Budget Amendment Ordinance (BAO) is needed to transfer $300,000 from the Residential Housing Fund unallocated balance to the Tree House site acquisition account in the Residential Housing Fund. The Residential Fund would be replenished with 2009-10 CDBG funds. The $300,000 ______________________________________________________________________________ CMR:147:09 Page 6 of 7 interim loan would be needed from the City’s Residential Housing Fund from the date of the close of escrow (approximately April 1, 2009) and the reimbursement from HUD from 2009/10 CDBG funds (approximately late summer 2009). These changes would bring the City’s total contribution to $2,838,577 for the Tree House site acquisition with $1,838,577 from CDBG funds and $1,000,000 from Residential Housing Funds. The $300,000 transaction will reduce the unallocated Residential Housing Fund balance from $927,458 to 627,458. The $80,000 in CDBG funds for InnVision are currently available as unused funds reallocated from other projects. POLICY IMPLICATIONS The actions recommended in this report implement the City’s adopted Housing Element policies and programs supporting the development of very low and extremely low income housing. The 35 Tree House affordable units would be counted towards the City’s housing production goals for the 2007 to 2014 Housing Element period. Both of the actions identified in the proposed 2008/09 Action Plan Amendment are consistent with the City’s adopted 2005 – 2010 Consolidated Plan’s identified priorities of affordable housing and housing-related supportive services adopted by the City Council on May 9, 2005. ENVIRONMENTAL REVIEW Council approval of the 2008/09 Amended Action Plan, adoption of the Budget Amendment Ordinance, and allocation of additional CDBG funds to InnVision are exempt from the California Environmental Quality Act (CEQA) and the National Environmental Policy Act (NEPA) because allocation of funding is not considered a project under CEQA guidelines Section 15061(b)(3). For the Tree House Apartments project, a combined Initial Study/Mitigated Negative Declaration and Environmental Assessment/Finding No Significant Impact (EA/FONSI) has been prepared to satisfy the requirements of both the CEQA and NEPA and will be presented for Council approval with the development application on March 16, 2009. A completed environmental document was available for public review between December 12, 2008, and January 12, 2009. No public comments were received during this period. PREPARED BY: __________________________________ SUZANNE BAYLEY Contract CDBG Coordinator DEPARTMENT HEAD: __________________________________ CURTIS WILLIAMS, Interim Director Planning and Community Environment CITY MANAGER APPROVAL: __________________________________ JAMES KEENE City Manager ______________________________________________________________________________ CMR:147:09 Page 7 of 7 ATTACHMENTS A. Draft Amended 2008/09 Annual Action Plan B. Budget Amendment Ordinance C. Letter from Palo Alto Housing Corporation dated December 15, 2008 D. Letter from InnVision the Way Home dated December 17, 2008 E. Amended Agreement between the City of Palo Alto and InnVision the Way Home for the Opportunity Center F. Amended Agreement between the City of Palo Alto and InnVision the Way Home for the Clara Mateo Alliance Shelter COURTESY COPIES Palo Alto Housing Corporation InnVision the Way Home CDBG Citizens Advisory Committee