Report Prepared by: Kimberly Nutt, Housing Program Supervisor, Housing Division/Development Services Department
Title
SUBJECT: Final Public Hearing for Receipt of Additional Public Comment and Approval of the U.S. Department of Housing and Urban Development (HUD) 2021 Annual Action Plan
REPORT IN BRIEF
Re-open the Public Hearing from June 21, 2021, to receive additional public input regarding the Draft 2021 Annual Action Plan and provide direction to staff regarding any final changes to funding activities or other items; Approval of the 2021 Annual Action Plan; and, Authorizing the City Manager to execute all documents necessary to submit the finalized plan to HUD and to accept the CDBG and HOME grants after approval by HUD.
RECOMMENDATION
City Council -
A. Re-open and conduct the Public Hearing to receive any final public input regarding the Draft 2021 Annual Action Plan; and,
B. Provide direction to staff regarding any final changes to be made to any part of the Draft 2021 Annual Action Plan; and,
And, Adopt a Motion:
C. Adopting Resolution 2021-65, A Resolution of the City Council of the City of Merced, California, Approving the 2021 HUD Annual Action Plan, Certifying Compliance with the Requirements of the Community Development Block Grant (CDBG) Program and HOME Investment Partnership (HOME) Program, and Authorizing Staff to Submit All Approved Documents and Certifications to the U.S. Department of Housing and Urban Development; and,
D. Authorizing the City Manager or designee to execute all related documents and allow staff to make any modifications as necessary to submit the Final Draft of the 2021 Annual Action Plan and to accept the CDBG and HOME grants after approval by HUD.
Body
ALTERNATIVES
1. Approve, as recommended by staff; or,
2. Approve, as revised by the City Council; or,
3. Deny the request; or,
4. Refer back to staff for reconsideration of specific items (specific items to be addressed in City Council motion); or,
5. Continue to a future City Council meeting (date and time to be specified in City Council motion).
AUTHORITY
The U.S. Department of Housing and Urban Development (HUD), per 24 CFR 91.105, requires that participating jurisdictions involve citizens in the development of each Five-Year Consolidated Plan, Annual Action Plan, and Consolidated Annual Performance and Evaluation Report (CAPER), including any substantial amendments to the plans; the Charter of the City of Merced, Section 405, 409, and 411 et seq. of the City of Merced; and, pursuant to 24 CFR Subpart F, the City is required to submit the Annual Action Plan to HUD for approval to receive 2021 Program Year grant funds.
CITY COUNCIL PRIORITIES
As provided for in the 2021-22 Adopted Budget; and Council Priorities that include Economic Development - Workforce Development, Housing and Homelessness, and Public Works - Streets.
DISCUSSION
After re-opening the Public Hearing continued from the June 21, 2021, meeting and accepting final public comment, staff requests that Council review and approve the Draft HUD 2021 Annual Action Plan (Attachment 1).
Additionally, staff is requesting any final recommendations and/or changes from Council regarding the project funding and the draft plan before a motion to approve. Attachments 2 and 3 summarize the proposed projects and recommended funding amounts. Any requested final Council changes will be incorporated into the final version to be submitted to HUD. Following submittal to HUD, HUD may require subsequent required corrections to the submitted plan in order to meet their specific requirements for acceptance.
Staff plans to submit the approved plan to HUD by July 15, 2021. HUD’s regulatory “last day to submit” is August 15, 2021. If an Annual Action Plan is not submitted by the August deadline, the City will lose its CDBG and HOME funding for the 2021-22 year. Unlike the previous program year (2020), HUD has not issued any extension waivers for submission of 2021 plans.
Quick Review of Eligible Activities for CDBG and HOME Funds
At the June 21, 2021, Public Hearing and subsequent Council discussion, staff heard a concern expressed that suggested not enough 2021 funding is being directed to address the affordable housing unit shortage in Merced.
To review, expenditure of CDBG and HOME grant funds is entirely regulated by HUD and the City is required to follow those laws - CDBG funding is regulated under Title 24 of the Code of Federal Regulations (CFR) Part 570, and HOME by 24 CFR Part 92.
CDBG funds can only be spent on certain eligible activities under the general categories of Acquisition/Disposition, Public Facilities and Improvements, Public Services, and Housing - but not the construction of new housing. In addition, activities must meet at least one of three HUD National Objectives, being: 1) activities benefitting low- and moderate-income persons; 2) activities which aid in the prevention or elimination of slums or blight; and, 3) activities designed to meet community development needs having a particular urgency (such as during a national or locally declared emergency). A maximum of 15% of the combined sum of the yearly CDBG allocation plus program income can be directed to activities HUD considers public services. Therefore, the City is limited by this sum as to how much we can award to local organizations proposing such activities. Acquisition of homes/duplexes/triplexes for rehab and subsequent conversion to permanent supportive housing is considered a “housing” activity, not a public service and, therefore, is not subject to this 15% public services cap. Finally, the City is required to spend all or most of its CDBG allocation and have no more than 1.5% funds remaining by May 1st of each year (“timeliness deadline”) or HUD will penalize with a smaller allocation the following year.
HOME funds, unlike CDBG, can be directed specifically to construction of new affordable housing units, and the 2021 Annual Action Plan proposes to direct all its 2021 allocation, remaining prior-year funds, and program income received during the year, including funds received from the Grove Apartments payoff in January 2021, towards such construction. Additionally, HUD requires HOME grantees to set aside a minimum of 15% towards activities to be carried out by a Community Housing Development Organization (CHDO), which can also be directed to affordable housing projects. Other eligible uses of HOME funds include homeowner rehabilitation, homebuyer (acquisition, new construction, or rehabilitation), and tenant-based rental assistance (TBRA) activities.
Further discussions as to specifically how and where to direct 2021 and prior year HOME and the Grove Apartments re-paid HOME funds will be discussed with Council in September 2021 as part of its overall review of and strategizing for affordable housing. This discussion will include uses for the expected $27 million of U.S. Treasury and $1.9 million of special HOME-ARP funds allocated to Merced City through the American Rescue Plan Act (ARPA) passed by the U.S. Congress earlier this year. The City has not yet received direction from HUD regarding how to implement the forthcoming HOME-ARP funds or when they will become available.
Project Funding - Public Services and Housing Projects
In April 2021, Housing staff mailed individual Notice of Funding Availability (NOFA) letters directly to 121 non-profit and faith-based organizations, notifying them that funding and technical assistance to develop their programs was available and of an informational meeting that would be held on April 15, 2021, to provide information regarding eligible activities and how to apply for funding. Notices were also published in the Merced Sun-Star and Merced County Times. In response, eight organizations attended the meeting, and nine applications were received.
Staff recommends fully funding all the requested programs and amounts (Attachment 2), particularly as each is a basic HUD-eligible activity and meets a National Objective, addresses the community’s needs as reported in the five-year strategic plan (ConPlan), and the total of public service programming is within the 15% CDBG public service cap. Staff will continue to work with HUD on specific program and eligible expense requirements for each organization to be assisted moving forward.
Project Funding - Infrastructure projects
As explained above, CDBG funds cannot be used towards new construction of housing. The Community Needs Assessment survey conducted over March and April of 2021 showed that City residents felt that “neighborhood infrastructure improvements,” including water and sewer lines, streets, sidewalks/crosswalks, and drainage installations and improvements, was the number one need in the “neighborhood improvements” category, over other choices such as maintenance of vacant lots or trash/litter pickup (#2) or upgrade of parks and recreational facilities (#3).
In response to this, and to designate efficient use of the unusually large amount of CDBG funds currently on hand as a result of the January 2021 Grove Apartment loan payoff, staff recommends tackling several outstanding public works projects in HUD income-eligible census tract areas (Attachments 3 and 4). In these low-income areas where old domestic water wells still remain, staff also recommends using CDBG funds to install missing sections of water main in anticipation of the domestic water needs of low-income homeowners whose wells may dry up with the ongoing drought cycle.
2021 HUD Allocations and Total Funds Available
The CDBG allocation of funding for Fiscal Year 2021-2022 is expected to be $1,132,674, plus
$96,000 of program income (PI) and $258,135.26 in prior-year resources. The FY 2021 HOME
allocation is expected to be $548,734, with an estimated $60,000 in program income during the year and $563,203.88 in prior-year resources. Combined, the total of HUD FY2021 program allocations and other revenue will be $2,658,747.14. The Housing Division does not receive any revenue from the General Fund.
Combined with the Grove Apartments’ payoff remaining funds, the below figures are the total funds available for 2021 program funding and include the CDBG, HOME, and Housing Successor LMI Asset fund program income (PI) received from the Grove Apartment payoff.
|
Revenue/Fund Type |
CDBG |
HOME |
LMI Assets |
|
2021 Allocation + PI |
$ 1,486,809 |
$ 1,171,937 |
N/A |
|
Grove Payoff Funds |
$ 1,477,752 |
$ 1,468,861 |
$ 1,582,488 |
|
Total Funds Available: |
$ 2,964,561 |
$ 2,640,798 |
$ 1,582,488 |
As discussed in the June 21, 2021, Administrative Report and referenced in the April 5, 2021, affordable housing presentation to Council, the LMI Asset funds received from the Grove Apartments payoff will be used to fund the 50-unit Gateway Terrace II affordable rental housing project on K Street between W. 13th and W. 12th Streets. The project has been important to the City’s affordable housing issues since its inception and will provide 10 units of permanent supportive housing to homeless veterans, in addition to the provision of more low-income housing options for Merced residents.
History and Past Actions / Public Review and Comment Period
In the June 21, 2021, Administrative Report, staff reviewed HUD’s regulatory deadlines for submittal of this Annual Plan and are still on-target to meet an anticipated submittal date of July 15th, ahead of HUD’s August 15 regulatory submittal requirement. Staff is working concurrently to this public hearing process to further develop the plan with details such as public agency consultation and citizen participation comments received to ready it for final submission.
Since the pandemic began in early 2020, HUD has issued waivers that give jurisdictions flexibilities of various deadlines and required processes, including citizen participation, in considering the hurdles most, if not all, grantees are facing from the additional, but necessary, workload resulting from multiple tranches of emergency funding that have come available over the last year. The latest waiver was issued on May 14, 2021, after HUD discovered a miscalculation of the CDBG allocations issued nationwide, allowing grantees to reduce their public comment periods for 2021 Annual Action Plans to no less than three days. Housing staff chose a 15-day review and comment period to accommodate more consideration to our residents.
The 15-day public review and comment period was held from June 8 through June 22, 2021, and housing staff received no written, in-person, or other comments, other than those received in-person at the first public hearing held on June 21, 2021, during the comment period. The draft plan was posted for public viewing on the Housing Division website (www.cityofmerced.org/housing <http://www.cityofmerced.org/housing>) and viewing locations and comment submission methods were published in the Merced Sun-Star and Merced County Times newspapers on June 3, 2021, as well as on the Housing webpage.
Citizen participation in this process is crucial to a complete and thorough plan. Focus group
workshops and informational meetings, announcements of project funding availability, online
community needs assessment surveys, town hall meetings, public hearings, and even social media comments on the City’s Instagram and Facebook pages provide citizens the opportunity to participate in and give input to the community’s needs and this plan as it is being developed. These plans are essentially guided by the needs and the priorities expressed by residents and community stakeholders who participated in the process.
The 2021 Annual Action Plan implements the second year of the 2020-2024 Consolidated Plan that was approved by Council on November 30, 2020, and by HUD on March 10, 2021. Housing staff continues to work diligently to implement programs that were awarded 2020 funding, but have been delayed in receiving it due to the tumultuous year. The 2021 plan includes a description of how this year’s funding will be used to address identified objectives for housing, homelessness, and economic development, and some 2020 recipients will receive 2021 funding that enables them to continue beneficial services to the low-income and homeless in our community.
IMPACT ON CITY RESOURCES
No budget appropriation action is required at this time. The Housing Division expects that it will not need any funding from General Fund as a supplement for 2021-22 Fiscal Year.
After its initial miscalculated allocation announcement in March of 2021, HUD issued a correction notice on May 14, 2021, which notified the City of its corrected CDBG and HOME allocations for Program/Fiscal Year 2021-22, and the budget outlined in the Draft 2021 Annual Action Plan is based upon those corrected expected allocation amounts.
ATTACHMENTS
1. Draft 2021 Annual Action Plan
2. 2021 Project Funding List - Public Services, Housing, and Administrative
3. 2021 CDBG Infrastructure Projects
4. HUD-designated Income-Eligible Census Tract Map
5. Draft Resolution