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PUBLIC HEARING: FY 2023-24 ANNUAL ACTION PLAN FOR THE COMMUNITY DEVELOPMENT BLOCK GRANT, HOME INVESTMENT PARTNERSHIPS, AND EMERGENCY SOLUTIONS GRANT PROGRAMS
recommended action
RECOMMENDATION
It is recommended that the City Council adopt a resolution:
1. Approving the FY 2023-24 Annual Action Plan and Sources and Uses of Funds for the Community Development Block Grant, HOME Investment Partnerships, and Emergency Solutions Grant Programs; and
2. Authorizing the City Manager, or designee, to execute and submit all documents to the U.S. Department of Housing and Urban Development, execute contracts with sub-recipients, and to take actions necessary and appropriate to carry out the purpose and intent of the resolution.
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Summary
The U.S. Department of Housing and Urban Development (HUD) requires jurisdictions to prepare an Annual Action Plan (AAP) (Exhibit 1 to the Resolution) to receive Community Development Block Grant (CDBG), Home Investment Partnerships (HOME), and Emergency Solutions Grant (ESG) funding. The AAP identifies the specific projects to fund during the year to accomplish the goals established in the Five-Year Consolidated Plan as listed in the proposed Source and Use of Funds (Exhibit 2 to the Resolution). The AAP must be submitted to HUD by May 15, 2023, to meet funding allocation deadlines.
DISCUSSION
Background
To receive annual federal entitlement funds (CDBG, HOME, and ESG), HUD requires jurisdictions to prepare an AAP. The 2023-2024 AAP identifies the specific projects and activities that the City will fund during the year to help accomplish the goals established in the City’s Five-Year Consolidated Plan. This plan reflects year four (4) of the 2020-2025 Consolidated Plan. The AAP contains funding recommendations for CDBG, HOME, and ESG funds for the upcoming program year 2023-2024. The funding recommendations are the result of the public participation process which includes the Community Development Committee (CDC), an advisory body of the City Council. In addition, recommendations align with local established adopted goals and metrics, HUD requirements, and best practices. Final funding recommendations are provided to the City Council for approval.
The City received HUD funding allocations in March 2023 for the 2023-2024 program year which include $3,220,474 in CDBG funds, $1,760,707 in HOME funds, and $275,046 in ESG funds.
Community Input and Funding Process
The AAP development process began in November 2022 with direct e-mail notifications, a press release, multiple social media platform posts, a public notice in The Record, and an advertisement in Spanish in the Latino Times newspaper. These announcements notified the community of the City of Stockton Town Hall for the AAP planning process. The Town Hall was held on December 7, 2022, with a diverse representation of Stockton’s community.
In December 2022, the City continued efforts in developing the AAP with outreach to the City’s housing and community development distribution list, providing notification that the City was releasing a Notice of Funding Availability (NOFA), and accepting applications under the CDBG and ESG programs through January 25, 2023, through the City’s online grant application portal. The announcements reached over 250 agencies, individuals, and stakeholders.
Public notices regarding the draft AAP's availability were published, and the 30-day review period for public input ran from March 16 - April 18, 2023. At the time of preparation of this staff report, the City received no comments on the draft AAP.
Present Situation
Below is an overview of each funding source and a summary of recommended funding for each program within the FY 2023-24 Annual Action Plan:
Community Development Block Grant Program (CDBG)
CDBG is a flexible program that provides funding to address a wide range of community development needs that benefit low-income residents. Cities with more than 50,000 people and counties with a population of more than 200,000 are eligible to receive this funding from HUD as an entitlement grantee. Each year, HUD determines the CDBG allocation using a formula that considers the total population, the number of persons in poverty, housing overcrowding, and the age of the housing units within the jurisdiction. Program regulations require that CDBG entitlement fund programs address one of three national objectives: (1) assist low-income persons, (2) eliminate slum and blighted property, or (3) meet an urgent community need. The City must annually report to HUD how each organization receiving CDBG funding meets at least one of the three national objectives, and all other HUD and Office of Management and Budget (OMB) program guidelines.
HUD restricts the amount of CDBG funds a jurisdiction can allocate within a specific program area. The City may allocate up to 15 percent of its annual CDBG grant to public services that support operational costs and provide supportive services to low-income persons, and 20 percent of the annual grant to program administration. The remaining funds may be allocated to any other CDBG-eligible project.
CDBG funds can be used for a wide range of activities, including:
• Rehabilitation of residential and commercial property
• Demolition
• Public facilities and improvements
• Economic development
• Public services
The primary eligibility requirement for each activity must benefit low- and moderate-income persons. HUD defines low-and-moderate income as a household at or below 80 percent of the area median income (AMI), which in Stockton is an annual income of $66,200 for a family of four.
The total sources of funds available for the 2023-2024 program year is $6,680,636 and includes $3,220,474 of new Entitlement, $70,000 of estimated program income, $1,397,794 of Successor Agency repayment program income, $592,368 of estimated reprogrammed funds, and $1,400,000 of prior year reprogrammed funds. The activities recommended for funding for the 2023-2024 program year are summarized below.
1. Housing Programs
The City has two active CDBG/HOME funded affordable housing programs:
The Emergency Home Repair Program (EHRP) is designed to assist low-income homeowners in addressing emergency housing problems that represent an immediate health and safety danger to the occupants. The EHRP’s 2023-2024 allocation is $60,000. EHRP loans are funded from the CDBG Revolving Loan (RL) fund, a separate fund where CDBG loan repayments are placed and reused for new loans.
The Housing Rehabilitation Program is designed to maintain low-income community members’ ability to have safe living conditions and prevent displacement. The current program guidelines are being updated to better reflect the needs of the community and serve more residents. The Housing Rehabilitation Program allocation is $200,000.
2. Economic Development Programs
The City plans to fund several programs to assist businesses. These include:
• Commercial Façade Improvement Program provides forgivable loan funds for improvements to the exterior of commercial properties; allocated funds total $235,000.
• Stockton Entrepreneurship Program provides grant funding to new and existing small business service providers that focus on enhancing services for startup businesses and entrepreneurs and providing small grants directly to entrepreneurs. The City will allocate the Stockton Entrepreneurship Program funds through a Notice of Funding Availability (NOFA) process for $140,000 in 2023-2024 program year funding. An additional $150,000 is allocated to Food Entrepreneurs.
• Fresh Produce Access Grant (Stocked Full of Produce) program addresses food insecurity by offering neighborhood convenience stores grant funding to assist with necessary infrastructure upgrades to promote the sale and storage of healthier food options; $30,000 will be allocated for 2023-2024.
• Blight Abatement, formerly called Micro Storefront Beautification Grant assists commercial property and business owners by providing grant funding for blight abatement and storefront improvements; allocated $400,180.
• Public Infrastructure Improvements program aims to provide funding for installing infrastructure improvements to commercial/industrial sites in Stockton; $1,510,261 CDBG funds allocation in the 2023-2024 program year.
3. CDBG Public Service Sub-recipients
Through the annual NOFA process, applications for CDBG/Public Service and ESG Program funds were due on January 25, 2023. The City received 28 applications for CDBG/Public Services funding requests and 13 applications for ESG Program funding. Of those received, 23 applications for CDBG/Pubic Service and 12 for ESG Program were eligible. Applications were submitted through the City’s online Neighborly Software (Neighborly) portal (Attachment A - Grant Applications Received).
The Community Development Committee (CDC) held two public meetings, one on February 8, 2023, for applicants to present their projects and another on February 22, 2023, when the CDC discussed applications and provided recommendations to the City. Before the February 22nd meeting, the CDC reviewed all eligible applications and scored each in Neighborly. The CDC and staff utilized scoring criteria to select projects aligned with the 2020-2025 Consolidated Plan. The City is prioritizing CDBG funding for public services to promote food security, support vulnerable populations, economic development, and advance fair housing, all consistent with the community needs expressed in the Consolidated Plan. The CDC members presented funding recommendations to Economic Development Department staff for review for the City’s final recommendation.
This year’s funding recommendations are based on feedback from the community outreach conducted which recommended the City to provide funding which would yield the highest impact to assist individuals per every dollar spent. The City's recommendation uses HUD best practices and alignment with existing adopted plans. In alignment with community feedback, staff recommends funding the top ten scoring organizations for CDBG public services for a total of $720,000 in CDBG funding.
4. Debt Service
In the past, the City received two Federal Section 108 loans totaling $25.5 million. Future CDBG entitlements and program income were pledged as loan repayment sources. Loan repayment began in 2002 and will extend through 2024; projects that were funded with Section 108 loan funds include Dean DeCarli Waterfront Square, the downtown Cineplex, the Stockton Marina, Joan Darrah Promenade, Morelli Boat Launch, Bob Hope (Fox) Theatre, and Gleason Park Apartments. For this program year 2023-2024, the Debt Service Section 108 allocation is $1,961,541 which will be paid with 2023-2024 CDBG entitlement funds.
5. CDBG Administration/ Program Delivery Costs
This category includes CDBG program administration, the costs associated with daily operations, such as staff costs to administer the program, materials and supplies, training, and consultant services. Program Delivery includes staff costs attributed directly to projects and project delivery costs, such as obtaining title reports and appraisals. Total Administration/Oversight costs for 2023-2024 are allocated as $923,654, and Program Delivery allocations are $350,000.
Emergency Solutions Grant Program
ESG funds emergency shelters, homeless service providers, and homeless prevention and rehousing programs. Street outreach, emergency shelters, homelessness prevention, and rehousing assistance are eligible activities. Funds may also be used to provide the required Homeless Management Information System (HMIS) and administrative activities. The purpose of the ESG program is to assist people in securing stable, permanent housing after experiencing a housing crisis or homelessness. Therefore, HUD limits the amount of a jurisdiction’s ESG grant that can assist emergency shelters and street outreach activities to no more than 60 percent of the total ESG allocation. Additionally, the City can allocate up to 7.5 percent of the grant for program administration.
The City is prioritizing ESG funding for Emergency Shelter Operations/Transitional Housing and Homelessness Prevention services due to other investments and commitments in street outreach and rapid re-housing activities. The CDC reviewed 12 applications and provided funding recommendations to the City during the same process mentioned above for CDBG Public Services. Allowable uses of the funding include HMIS licenses for data reporting and monitoring. The City’s best practices recommendation is to fund three organizations for $255,796 in ESG funding.
HOME Investment Partnership Program
Local governments must use HOME funds to create affordable housing for low- and moderate-income households. HOME funds are awarded annually as a formula grant to participating jurisdictions. The Housing and Urban Development Department (HUD) allows state and local governments to use HOME funds for grants, direct loans, loan guarantees, and other forms of credit enhancement.
HOME funds can be used for four primary activities: homebuyer programs, homeowner rehabilitation programs, rental housing programs, and tenant-based rental assistance. The maximum income of a household assisted by a HOME funded project must not exceed 80 percent of AMI.
The total sources of funds available for the 2023-2024 program year is $3,078,365 including $1,760,707 of new Entitlement, $200,000 of estimated Program Income, and $1,117,658 of the Prior Year’s Program Income.
HOME Administration/Loan Fund
Administration includes the general costs associated with the administration and oversight of the HOME program. A jurisdiction may spend up to ten percent of its entitlement and program income on administrative costs. Housing Program Delivery includes costs attributed to specific housing projects.
The Loan Fund sets aside HOME funds available as loans for multi-family developments. Currently, the City of Stockton has open commitments for funding on six (6) projects currently in development. The City is prioritizing the completion of current and active projects. In January 2023, the City released a Request for Letters of Interest from qualified affordable housing developers to submit project concepts; the procurement process is currently open. The City may recommend HOME loan funds to support project completion of eligible programs in which site control has been obtained and additional sources of funds identified. Staff will bring all future funding recommendations to Council for final approval.
Community Housing Development Organizations Project Assistance
HUD regulations require that 15 percent of the City’s HOME allocation be reserved for affordable housing projects undertaken by Community Housing Development Organizations (CHDO), community-based organizations that develop affordable housing HUD has established requirements for CHDO certification, and the City utilizes a checklist to ensure that all the requirements are met before certifying an organization as a CHDO. The total funds allocated for CHDO in the 2023-2024 program year is $264,106.
Notification
In conformance with HUD’s requirements and the City’s Citizen Participation Plan (CPP), a summary of the AAP and a notice of the public hearing were printed in The Record on March 9, 2023, and in the Latino Times on March 8, 2023. A copy of the draft Annual Action Plan is posted on the City’s website, and a hard copy is available at the City’s Economic Development Department.
As part of the CPP process, the City Council must hold a public hearing on April 18, 2023, to solicit comments from the public regarding the FY 2023-24 AAP activities and proposed funding allocations.
FINANCIAL SUMMARY
The AAP includes actual appropriations from HUD to the Economic Development Department’s FY 2023-24 budget: CDBG, HOME, and ESG. These appropriations will help fund Housing Programs/Affordable Housing, Subrecipient Assistance, Economic Development Programs, and Debt Service - Section 108 Loan. These appropriations depend on federal budget appropriations and receipt of funds from HUD.
To ensure compliance with the broad range of federal and local grant regulations, twenty percent of CDBG funding, projected at $923,654, approximately ten percent of the HOME allocations, projected at $245,000; and seven percent of ESG funds, projected at $19,250, will be used to administer the grants, for a total of $1,187,904. The CDBG, HOME, and ESG program administration includes completion of environmental reviews, monitoring of Federal wage projects, disbursement of funds, contract and invoice management, and monitoring each sub-recipient to ensure funds are expended according to the City contract, HUD, and OMB regulations.
Attachment A - Grant Applications Received