Report Prepared by: Kimberly Nutt, Housing Program Supervisor, Housing Division/Development Services Department
Title
SUBJECT: Request for Continuance of Second Public Hearing Regarding the U.S. Department of Housing and Urban Development (HUD) 2024 Annual Action Plan to the Council Meeting of August 5, 2024
REPORT IN BRIEF
Requests Council to continue the scheduled Second Public Hearing to the August 5, 2024, Council meeting, to allow staff additional time to finalize the plan to an approval-ready status.
RECOMMENDATION
City Council -
A. Open the scheduled Public Hearing, receive any new public comment; and,
B. Adopt a motion continuing the Public Hearing to the Council Meeting of August 5, 2024
Body
ALTERNATIVES
1. Open the public hearing, accept any new public comment, and continue the public hearing to August 5, 2024, as recommended by staff.
AUTHORITY
HUD requires, per Title 24 Part 91 of the Code of Federal Regulations (24 CFR Part 91), that participating local government jurisdictions involve citizens in the development of the Annual Action Plan and any subsequent substantial amendments; the City of Merced HUD Citizen Participation Plan, as amended; and, the Charter of the City of Merced, Sections 405., 409, and 411 et seq.
CITY COUNCIL PRIORITIES
As provided for in the 2024-25 Adopted Budget; and Council Priorities under Housing and Homelessness and other priorities which HUD funds can help address.
DISCUSSION
Background - Review from First Public Hearing
At the First Public Hearing held on June 3, 2024, the City Council and the Public were presented with the initial CDBG and HOME 2024-25 project list, developed from all the formal applications for project funding received from local nonprofit organizations in response to the Housing Division’s Notice of Funding Opportunity. The monetary total of the requests received balanced with the available funding, with the exception of an over-request for Public Service program funding requests. Council provided subsequent direction as to the projects and preliminary award amounts that may become actual upon approval of the Annual Plan after the final public hearing is completed and the plan is approved.
Please see Attachment 1 for the Revised 2024 Annual Action Plan budget that reflects Council’s direction and these amended public service project amounts.
Additionally, Council also requested that staff come up with additional projects to present at the final public hearing that would provide alternative project choice options in two other areas: CDBG-funded Housing/Infrastructure Activities and HOME-funded housing projects. The direction to prepare these options would potentially replace the following initial projects: 1) CDBG/Sierra Saving Grace Homeless Project - Acquisition of Existing 1-4 Unit Residential Property for Rehabilitation and Conversion to Affordable Rental/Permanent Supportive Housing; 2) HOME/Central Valley Coalition for Affordable Housing (CVCAH) - Community Housing Development Organization (CHDO) rehabilitate a CVCAH-owned duplex in need of ADA upgrades; and, 3) A holding project for HOME funds for a future affordable rental housing or rehabilitation project that is yet to be determined.
The funding amounts associated with these initial projects involved a total of $614,325 of CDBG and $1,313,621 of HOME funding. Accordingly, to best meet Council’s request with a revised balanced 2024 Annual Plan budget, staff’s assignment involved finding alternative projects that matched these amounts.
Time Constraint Factors of Alternative Project Options
Following the June 3rd Council meeting, staff held multiple meetings to discuss and develop several alternative options, per Council direction.
Several options for the use of the subject CDBG funds that initially appear to meet HUD eligibility requirements were identified, but for which it should be noted that National Environmental Policy Act (NEPA) reviews still need to be completed to determine if they are truly viable. These alternative CDBG projects are provided at Attachment 2 for information only at this time (see “HUD Guidance Received” below).
No viable alternative project options for the use of HOME funds were able to be identified within the given time. Within recent months, staff has met with at least one rental housing developer that could potentially use HOME funds towards the provision of affordable units in their development. As such, staff’s recommendation at the final public hearing will be for the initial HOME projects to remain in the plan.
Serious factors that must be considered when considering any of the identified CDBG options is whether any of them can receive proper NEPA clearance, be designed, bidded-out, and completed by Engineering Department staff and associated contractors, and perform final invoicing and draw down of HUD funds - all before the City’s annual “timeliness” deadline of May 2, 2025.
HUD Guidance Received
The list of CDBG project alternatives was posted on the Housing Division’s website on June 27, 2024, as part of the concurrent 32-day Public Review and Comment Period that ends July 15, 2024. This timing is extremely important when considering the City’s compliance with HUD and our adopted Citizen Participation Plan (CPP) requirements to provide a minimum of 30 days for the Public to review and comment on expenditure of HUD funds.
The public notice for Public Review and Comment Period was published in the Merced Sun-Star and the Merced County Times on May 30, 2024, and stated that the review and comment period would be held from Friday, June 14, 2024, to Monday, July 15, 2024, for a total of 32 days. The 32 days took into consideration that there were two weekday holidays during that timeframe when City offices were closed, Juneteenth and Independence Day.
HUD regulations require that residents must have 30 days to review and comment on any available funding, and all proposed expenditures of those funds. As the alternative project options and list was not developed and posted until June 27th, this means that the public will not have had 30 days to review the new list of projects before the end of the comment period.
Under this unique situation, Housing staff consulted with our assigned Community Planning and Development (CPD) Representative at HUD for guidance. HUD’s recommended action, given that there is no time to restart a new 30-day public comment period, is:
1. For staff to work with Council to accept and approve the current 2024 Annual Action Plan in its initial format that is currently out for public comment; then,
2. Start a new substantial amendment process to reflect Council’s new direction for non-public service projects.
Given this guidance, Council should not choose, at this time, any of the alternative project options that have been identified. Upon HUD approval of the plan following its submittal to them, we can then proceed with starting a substantial amendment process, if Council so desires.
Additionally, a large amount of additional 2023-24 program income has been received since the June 3, 2024, initial budget was presented. HUD’s additional recommendation as to how to also handle this separate matter is to create a “contingency funding” project for the initial HUD submittal. Then, this contingency project could then be allocated to the alternative project option of Council’s choice with the subsequent substantial amendment.
As a final point, HUD’s recommendation to process a later amendment would also potentially provide staff enough time to complete any NEPA environmental reviews for the options, given that NEPA work should be done at the point of contemplation of a project, not the award (the latter is considered a “choice limiting action” under NEPA regulations).
Staff Request for Continuance of Final Public Hearing
Given all of the above, work on the actual Annual Plan document has fallen behind schedule. Staff needs additional time to prepare the plan for final approval, and requests the final public hearing, approval, and award of funding be continued to the soonest available meeting.
HUD’s last day to submit its Annual Action Plan, or risk loss of 2024 funding, is August 16, 2024. Staff will be able to finalize and submit the plan to HUD following the August 5th meeting prior to the HUD deadline.
IMPACT ON CITY RESOURCES
There is no impact to City resources at this time.
ATTACHMENTS
1. Revised - 2024 AAP CDBG and HOME preliminary budget
2. CDBG Alternative Infrastructure / Parks Projects (for amendment consideration)
3. Public Comment