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ADOPT A MOTION TO ALLOCATE AND APPROPRIATE GRANT AND GENERAL FUND CONTINGENCY FUNDING FOR A THREE-YEAR OPERATIONS SUBSIDY FOR ST. MARY’S DINING ROOM
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RECOMMENDATION
It is recommended that the City Council adopt a motion to:
1. Allocate and appropriate $5,380,000 of General Fund Contingency, Homeless Housing Assistance and Prevention (HHAP) and American Rescue Plan Act (ARPA) funds for a three-year, campus-wide shelter operations subsidy to St. Mary’s Dining Room.
2. Authorize the City Manager, or designee, to enter into a contract with St. Mary’s Dining Room for the operations of the shelter campus for a period of three years, with option to renew.
3. Approve findings pursuant to Stockton Municipal Code section 3.68.070 in support of an exception to the competitive bidding process.
4. Authorize the City Manager, or designee, to enter into and execute any associated documents and take appropriate and necessary actions to carry out the purpose and intent of this motion.
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Summary
On Tuesday, July 18, 2023, City staff learned that the Stockton Shelter for the Homeless planned to close the shelter (Family Shelter, Veteran’s Shelter, and the Lodge) on or around August 15, 2023. On Monday, July 31, the City declared an emergency to protect the approximately 250 people currently staying at the Stockton Shelter for the Homeless.
Emergency sheltering is a critical component of our homeless system of care. The City does not currently fund shelter operations at Stockton Shelter for the Homeless, nor has the City historically funded substantial investments in shelter operations to the Stockton Shelter for the Homeless or any other Stockton-based shelters. The Stockton Shelter for the Homeless is the largest shelter in the County with more than 300 beds and another up to 180 beds under construction. Providing shelter operating funds that are tied to the City’s sublease of the land represents a structural change and an opportunity for the City to specify an accountability structure, with contractual requirements on sheltering best practices and policies, operational benchmarks, oversight, monitoring, and reporting.
The St. Mary’s Dining Room (SMDR) will provide low-barrier 24/7 shelter operations, including staffing for operations, security, and facility management for all shelter buildings (up to ~500 beds). SMDR will create a master facility plan for its property, that will include the former Stockton Shelter for the Homeless shelter buildings and the Pathways Program currently under development. A 24/7 Intake Center will match guests to appropriate shelter services, and guests will be offered case management services. SMDR will operate the entire campus based on a Housing First model that focuses on assisting unsheltered households move to permanent housing.
During discussions for SMDR to take over the sublease of the shelter property, both the City and County recognized a shortfall in the operational plan and understood that SMDR would need funding to manage the shelter operations. The City and County discussed proposing a commitment to each cover half of the estimated $10,760,460 ($3,586,820 per year) funding gap upon recommendation to and approval by their respective governing bodies. The County identified $5,380,000, half of the three-year operating shortfall, that was presented to and approved by the Board of Supervisors on August 22, 2023 (BL-23-161).
DISCUSSION
Background
On Tuesday, July 18th, City staff learned that the Stockton Shelter for the Homeless planned to close the shelter (Family Shelter, Veteran’s Shelter, and the Lodge) on or around August 15, 2023.
On Monday, July 24, City and County staff met with representatives from the nonprofit Stockton Shelter for the Homeless who confirmed the closure and committed to working on a successful management transition. That same day, City and County staff met with representatives from St. Mary’s Dining Room (SMDR) to discuss the status of its ongoing merger negotiations with Stockton Shelter for the Homeless, including but not limited to the capacity and readiness to assume the shelter operations. SMDR presented a proposed management structure and campus-wide homeless services operating budget that would be the basis of a management transition of shelter operations and could be activated as soon as August 15, 2023 to prevent the displacement of shelter guests.
On Wednesday, July 26, Staff reached out to Caltrans District 10 Right of Way Division notifying them of the urgent nature to get their permission to change the assignment of sub tenants per Airspace Lease 10-SJX005-0100-01. On July 27, 2023, Staff received a letter confirming they concur with the City’s proposal to have SMDR assume the sublease.
On Monday, July 31, the City declared an emergency to protect the approximately 250 people currently staying at the Stockton Shelter for the Homeless.
That same day, staff met with Salvation Army to discuss their ability and readiness to assume operations should it be necessary.
Later that same day, both the Stockton Shelter for the Homeless and SMDR were sent an agreement to sign that would transfer the current lease of the shelter site to SMDR which would ensure no gap in service to our unsheltered homeless individuals. SMDR returned a signed document on Tuesday, August 1st and the Stockton Shelter for the Homeless did not sign.
Without a signed agreement, approximately 250 homeless individuals were at imminent risk of losing a safe and secure place to sleep at night and being in close proximity to meals, showers, and services that they rely on during the day. Therefore, on August 2nd, Stockton Shelter for the Homeless nonprofit entity was sent a letter to vacate the property by August 16th.
The Local Emergency was ratified by the City Council on Thursday, August 3, 2023.
During this time, Staff focused on planning and preparing for any potential outcome, concurrently working on the following strategies:
• Assignment of Existing Lease: Working with both the Stockton Shelter for the Homeless and SMDR to facilitate the assignment of the sublease, as this was deemed the least disruptive to the approximately 250 shelter guests. The City hired outside council with expertise in non-profit law to help coordinate the legal requests made by each entity;
• Turnkey Interim Solution: Coordinating three local nonprofits to develop a proposal for a “turnkey interim sheltering solution” that would accommodate all individuals currently sheltering at Stockton Shelter for the Homeless and would be ready for implementation on or before August 16th; and,
• Emergency Temporary Shelter: Developing a City Emergency Sheltering Plan utilizing the Civic Auditorium as an emergency shelter solution, including the purchase of 250 cots and sufficient emergency blankets for two weeks of emergency shelter, in the event the plan was implemented.
On Thursday, August 10, the Stockton Shelter for the Homeless and SMDR signed the Assignment and Assumption Agreement (Attachment A) transitioning the Stockton Shelter for the Homeless sublease, including operations, to SMDR effective September 1, 2023. SMDR and the City also signed an amendment to the Airspace Lease (Attachment B).
Present Situation
Stockton Municipal Code 2.82.110 states that any expenditures made in connection with emergency activities […] shall be deemed conclusively to be for the direct protection and benefit of the inhabitants and property of the City. The City has incurred $358,482.48 in costs related to the Emergency Declaration and associated strategies, including costs associated with the Assignment and Assumption Agreement, the amended Airspace Lease, and emergency planning expenses, including equipment and supplies purchases, and contingency planning and consulting fees incurred by nonprofit partners that were paid by either ARPA or General Fund Contingency funds, as described below.
Pursuant to Section 12 of the executed Assignment and Assumption Agreement, the City agreed to provide the Stockton Shelter for the Homeless funding for the continued operation of the premises, “Premises Operating Expenses,” beginning on August 16, 2023, and ending on 12:00 PM (Noon) PST, on September 1, 2023 in an amount equal to the July Payroll Charges and July Utility Charges, or $62,484.45 supported by General Fund Contingency.
Pursuant to Section 2 of the executed Amendment to Airspace Ground Sublease, the City agreed to provide St. Mary’s Dining Room $250,000, supported by ARPA funds, to be used as short term or “bridge funding” for costs directly attributable to assuming operations of the homeless shelter and necessary investments to bring current living quarters up to minimum standards.
The City engaged the Salvation Army as the Lead, with SMDR and United Way as partners to Salvation Army to develop a proposal for a turnkey interim sheltering solution that would accommodate all individuals currently sheltering at Stockton Shelter for the Homeless and would be ready for implementation on or before August 16th. This served as a contingency option in the event that an agreement could not be reached between the City, the Stockton Shelter for the Homeless, and SMDR to reassign the sublease. Costs incurred by Salvation Army and the partner agencies for the planning and preparation for this proposal were $17,568.03, supported by the General Fund Contingency.
As part of this strategy, and in the event the City would need to implement its own Emergency Shelter Plan utilizing the Civic Auditorium, the City purchased supplies, including 250 cots and sufficient emergency blankets for two weeks of emergency shelter. Costs for these supplies totaled $28,430, supported by ARPA funds.
Both the City and County recognized a shortfall in the operational plan and understood that SMDR would need funding to manage the shelter operations. SMDR estimates the three-year operating gap for 24-7 sheltering (beds, food, hygiene) for the following Stockton Shelter for the Homeless’ buildings: Family Shelter, Veteran’s Shelter, Lodge, and the Navigation Center to be $10,760,460, or $3,586,820 per year.
The City and County discussed proposing a commitment to each cover half of the funding gap, $5,380,000 respectively, upon recommendation to and approval by their respective governing bodies. This funding would be contingent upon SMDR’s willingness and ability to transition and assume shelter operations without the displacement of any homeless individuals.
The County identified $5,380,000, half of the three-year operating shortfall, that was presented to and approved by the Board of Supervisors on August 22, 2023.
The substantially negotiated operations contract (a substantially completed draft has been included as Attachment C) provides the City a path for accountability, consistent program standards and high levels of service. SMDR will provide low-barrier 24/7 shelter operations, including staffing for operations, security, and facility management for all shelter buildings (up to ~500 beds). SMDR will create a master facility plan for its property, that will include the former Stockton Shelter for the Homeless shelter buildings and the Pathways Program currently under development. A 24/7 Intake Center will match guests to appropriate shelter services, and guests will be offered case management services with the goal of moving individuals to permanent housing.
The City’s commitment of $5,380,000 for half of the three-year operating shortfall would come from a combination of three sources:
• $800,640 from the Council-approved ARPA contingency fund. Those funds have already been received by the City and are available for use.
• $760,000 from the Council-approved Homeless Housing, Assistance, and Prevention (HHAP) Round 1 grant funds. These funds were recaptured from subrecipient projects that were either not extended or projects that terminated and did not fully expend their funds. These funds have already been received by the City and are available for use.
• $1,899,412 from the Council-approved HHAP Round 3 grant funds.
• $1,919,948 from the General Fund contingency. Per the Emergency Declaration, the City Manager, or designee, is authorized to adjust appropriations from the General Fund Contingency account to General Fund Departments as needed for unexpected expenditures or emergencies that are unanticipated at the time of the budget adoption.
Findings
Pursuant to Stockton Municipal Code (SMC) 3.68.070, Council may approve findings which support an exception to the competitive bidding process. These finding include:
1. Cases of Emergency. Ensuring the protection, stability, and continuity of services to individuals relying on the former Stockton Shelter for the Homeless site, the largest shelter site in the City, is in the interest of averting a public health and safety emergency within the City. The City Manager, in his capacity as Director of Emergency Services, issued a proclamation of the existence of a local emergency on July 31, 2023, due to the potential imminent closure of the shelter site. That emergency proclamation was ratified by this Council on August 3, 2023. In an effort to resolve the pending emergency, the City negotiated an assignment of the shelter’s sublease to SMDR. However, without an operating subsidy, SMDR will be unable to operate the shelter property and avoid a public health and safety emergency.
2. The City does not have sufficient staff, resources, or experience to assume operations of the homeless shelter itself.
3. SMDR already operates three of the four components of a shelter adjacent to the site of the shelter property: they have been providing hygiene services, meal services, and social services. Additionally, on March 21, 2023, this Council approved a procurement process that found SMDR is qualified to operate a low barrier shelter project (the Pathways Program).
4. SMDR holds the sublease to the shelter property, which vests SMDR with control of the property for the duration of the sublease that expires on December 31, 2027.
FINANCIAL SUMMARY
This request includes $1,919,948 of General Fund Contingency. The remainder $3,460,052 of funds incur no financial impact to the City’s General Fund or any other unrestricted funds as a result of this action. HHAP 1 and 3 grant funding will be budgeted and appropriated in the Special Grant Fund, Housing Division, Community Services Program.
Attachment A - Assignment and Assumption
Attachment B - Amendment to Sublease
Attachment C - Shelter Operating Agreement