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ADOPT A RESOLUTION AUTHORIZING A CONDITIONAL MATCHING CONTRIBUTION TO SUPPORT THE SERVICE FIRST OF NORTHERN CALIFORNIA, INC. (SFNC) APPLICATION TO THE CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES (DHCS) BEHAVIORAL HEALTH CONTINUUM INFRASTRUCTURE PROGRAM (BHCIP) ROUND 1 AWARD FOR THE SFNC RECOVERY CENTER LOCATED AT 807 NORTH EL DORADO STREET, STOCKTON, CA 95202
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution to:
1. Authorize a conditional award of $300,000 to support the Service First of Northern California, Inc. (SFNC) application to the California Department of Health Care Services (DHCS) Behavioral Health Continuum Infrastructure Program (BHCIP) Round 1 award for the SFNC Recovery Center located at 807 North El Dorado Street; and
2. Authorize the City Manager to submit a letter of support to the Department of Health Care Services (DHCS) confirming the City’s conditional commitment of funds and approval of the site change, subject to SFNC compliance with DHCS requirements; and
3. Subject to SFNC’s compliance with DHCS requirements, authorize a grant of $300,000 to SFNC for the SFNC Recovery Center located at 807 North El Dorado Street; and
4. Authorize the City Manager, or designee, to take all necessary and appropriate actions to carry out the purpose and intent of the resolution, including the execution of grant documents and subordination agreements.
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Summary
In October 2024, the State of California released the Request for Applications for the Behavioral Health Continuum Infrastructure Program (BHCIP) Round 1: Launch Ready grant funds. Through this process, over $3.3 billion was made available to construct, acquire, or rehabilitate real estate assets, expanding the continuum of behavioral health treatment and service resources for Californians. Under Round 1: Launch Ready grant, the state focused on the statewide behavioral health continuum and prioritized mental health community residential beds and crisis settings. Service First of Northern California (SFNC) received a conditional award of $8,239,637.33 for the proposed Recovery Center located at 1005 N El Dorado St, Stockton, CA 95202 (Original Property) (Attachment A).
DISCUSSION
Background
As a requirement for state funds, applicants must meet the minimum matching funds requirement based on the project award amount. In May 2025, Department of Health Care Service (DHCS) sent SFNC a BHCIP conditional award letter outlining expectations and next steps to demonstrate acceptance of conditional funding, including a requirement to submit supporting documentation. In July 2025, Advocates for Human Potential, Inc. (AHP), the Bond BHCIP administrative entity, received a letter from the then Interim City Manager conveying a commitment to provide matching funding.
In November 2025, DHCS and AHP met with SFNC to discuss the need for a revised cash match to confirm that SFNC could still meet the requirement for Bond BHCIP Round 1. Acceptable documentation would include a letter dated and signed by the current authorizing City Manager, bank statements, and other acceptable evidence of a source, which are subject to DHCS’ sole discretion and approval.
On November 18, 2025, City Council approved Resolution 2025-11-18-1604 committing a conditional $300,000 match for the Service First of Northern California Recovery Center at 1005 N. El Dorado St, Stockton, CA 95202 (Attachment B). An Around-the-Bench Memo to Council accompanied the presentation at the November 18, 2025, meeting, which outlined that funding from the California Opioid Settlement Fund program account could serve as matching funds, contingent upon a compliant final award agreement with SFNC (Attachment C). The $300,000 contribution from the City would be added to the other funding sources that SFNC is using to complete the minimum match requirement.
In July 2026, the seller of the Original Property canceled the real estate transaction. The property located at 807 N. El Dorado St, Stockton, CA 95202 (New Property) has been identified as a suitable alternate site.
On August 4, 2026, SFNC provided the following documentation to the City:
1. Letter of support from the Director of San Joaquin County Behavioral Health Services acknowledging SFNC’s change to the project location; and
2. Letter from DHCS outlining required conditions and deadlines to approve the project alternative location and site control (Attachment D).
DHCS approval is conditional upon these actions by Service First, with the deadline of September 3, 2026:
a) Securing an alternate location with site control, initiating the formal scope change process, and providing detailed plans to DHCS;
b) Letters of support from the City and County Behavioral Health Services consenting to the alternative location; and
c) Submitting a Purchase and Sale Agreement (PSA) to DHCS.
Under the Original Property site plan, SFNC stated that the California Recovery Center would provide the following facilities:
• Adult Residential Substance Use Disorder (SUD) Treatment Facility with 16 beds
• Outpatient treatment for SUD with 72 slots
• Social Rehabilitation Facility with 16 beds
• Peer Respite with 4 beds
Upon Council approval, the City will submit a letter of support approving the conditional commitment of $300,000 of matching funds toward Service First of Northern California’s Recovery Center and approving the site change for the facility to be located at 807 N. El Dorado Street. City of Stockton funding is contingent on the full award amount to be provided by the State, as well as SFNC adhering to all conditions outlined in the DHCS letter dated August 4, 2026, a response to which is due by September 3, 2026.
Subject to SFNC’s compliance with DHCS requirements, staff recommends that the conditional funding award of $300,000 be provided to SFNC in the form of a grant, which may be used toward construction, acquisition, and rehabilitation. The City financing will have a 30-year term (and compliance period). A Grant Agreement, Deed of Trust, and Regulatory Agreement will be executed and recorded against the property to secure the City’s investment and restrictions on the use of the property. Upon all financing being obtained for the project, the City’s grant may require subordination to the other funding sources. Even in a subordinate position, upon completion of the project, there will be sufficient value to secure the City’s funding.
FINANCIAL SUMMARY
This resolution conditionally commits up to $300,000 to the SFNC Recovery Center BHCIP grant located at 807 N. El Dorado Street. Previously identified funding from the California Opioid Settlements account remains available for this match.
Attachment A - DHSC Conditional Award Letter - November 7, 2025
Attachment B - Approved Resolution 2025-11-18-1604
Attachment C - SFNC Around the Bench Memo
Attachment D - DHCS Response Letter Regarding Site Change - August 4, 2026