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Attachment 11 - Report to Cupertino City CouncilCOMMUNITY DEVELOPMENT DEPARTMENT CITY HALL 10300 TORRE AVENUE • CUPERTINO, CA 95014 -3255 CUPERTINO TELEPHONE: (408)777- 3308•ww xupertino.org - - d-- - -- -- — CITY COUNCIL STAFF REPORT Meeting: April 1, 2014 Su�ect Fiscal Year 2014 -15 allocations for Community Development Block Grant (CDBG) Program, General Fund Human Service Grants (HSG) Program, Below Market -Rate (BMR) Affordable Housing Fund (AHF) and CDBG Annual Action Plan (Action Plan). Recommended Action Conduct the first of two Public Hearings; and 1. Continue final approval of fiscal year 2014 -15 Community Development Block Grant (CDBG) Program, General Fund Human Service Grants (HSG) Program, Below Market -Rate (BMA) Affordable Housing Fund (AHF) funding allocations and Community Development Block Grant (CDBG) Program Annual Action PIan to April 15, 2014 to complete the 30 -day public review period as required by the United States Department of Housing and Urban Development (HUD). Description This is the first of two required public hearings regarding the use of fiscal year 2014 -15 CDBG funds and the CDBG Annual Action Plan as required by HUD. Discussion A Request for Proposal (RFP) was issued on December 18, 2013 inviting applicants to apply for grant funding for the upcoming fiscal year 2014 -15. The RFP deadline ended on January 24, 2014. Immediately following the RFP deadline period the Housing Commission began their initial rating and ranking of grant applications at their regular meeting held on February 13, 2014. At the February 13, 2014 Housing Commission meeting each applicant was provided an opportunity to present their application to the Housing Commission. In addition a special Housing Commission meeting was held on February 24, 2014 in order for the Housing Commission to finalize their grant application funding recommendations to the City Council. During the Housing Commission rating and ranking meetings in February 2014 the City of Cupertino was estimating a fiscal year 2014 -15 CDBG entitlement grant amount of $330,000. Attachment C provides a fiscal year 2014 -15 grant application summary including the Housing Commission's CDBG, HSG and BMR AHF funding ATTACHMENT 1 1 Page 2 of 6 2014 -15 Allocations for CDBG, HSG, BW AHF and CDBG Annual Action Plan April 1, 2014 recommendations to City Council and is based on the estimated CDBG entitled grant amount of $330,000. On March 19, 2014 the City of Cupertino was notified that the estimated fiscal year 2014 -15 entitlement amount will be $310,943. Due to the difference in CDBG funding, Attachment B provides the adjusted fiscal year 2014 -15 grant funding recommendations based on the final CDBG entitlement amount of $310,943. The agencies on the recommended funding list have been informed of the revised grant amount. In February 2008, the City Council voted to move to a two -year funding cycle for public services to reduce the amount of time non - profit agencies spend preparing applications for funding. However annual public hearings are still required by HUD to review the CDBG Action Plan and finalize CDBG allocations. Fiscal Year 2014 -15 will be year one of a two-year funding cycle for awarded CDBG public service grant applications, HSG grant applications and BMR AHF grant applications. Agencies who are awarded in fiscal year 2014 -15 and who remain in good standing will receive a one year contract amendment for fiscal year 2015 -16. CDBG capital housing project applications will remain on a one year funding cycle. The City of Cupertino is obligated per HUD to have two CDBG public hearings each year to review funding and review the Action Plan. Community Development Block Grant (CDBG) Program Fiscal year 2014 -15 will be the City of Cupertino's twelfth year as an entitlement jurisdiction receiving a CDBG grant directly from HUD. HUD regulations require that eligible housing activities selected for funding must benefit very low and low- income households or eliminate a blighted area or address an urgent (emergency) community need and must also meet a national objective. In addition, only certain types of eligible activities qualify under the CDBG regulations. Examples of eligible activities are: • Public improvements Public service activities • Affordable housing developments • Property acquisition for affordable housing • Rehabilitation of affordable units As a result, of the changes to the CDBG entitlement funding for fiscal year 2014 -15, the City of Cupertino estimates it will have a total of up to $820,943 in CDBG funds eligible to allocate. The estimated total of $820,943 in CDBG funds for fiscal year 2014 -15 includes the 2014 -15 entitlement amount of $310,943, $10,000 program income (PI) generated from loan repayments, and $500,000 of available uncommitted funds from the prior fiscal year 2013 -14. The funding sub - categories in the CDBG funds include: Administrative Funds CDBG administrative funds cannot exceed 20% of the estimated 2014 -15 entitlement amount ($310,943) and PI ($10,000). Therefore, an estimated total of $64,188 is proposed Page 3 of 6 2014 -15 Allocations for CDBG, HSG, BMR AHF and CDBG Annual Action Plan April 1, 2014 to be allocated for administrate costs to cover salary and benefits for staff, who assist with the operation of the CDBG program. Public Service Funds CDBG public service funds cannot exceed 15% of the 2014 -15 entitlement amount ($310,943) and PI ($10,000). Therefore, an estimated amount of $48,141 is proposed to be allocated toward eligible public service activities. Eligible public service activities must benefit low- income households. Examples of eligible public service activities can include childcare, emergency services, fair housing services and senior legal services. CDBG Capital Housing Projects The remainder of the 2014 -15 CDBG entitlement grant funds (65 %) or $208,612 is available to be allocated toward eligible CDBG capital housing projects. Also for fiscal year 2014 -15, an estimated $500,000 of uncommitted funds from the prior fiscal year 2013 -14 is available to be allocated for eligible CDBG capital housing projects, thereby increasing the total amount available to be allocated for eligible CDBG capital housing projects to $708,612. Based on fiscal year 2014 -15 Housing Commission CDBC capital housing project funding recommendations, $557,000 out of $708,612 available is recommending for funding. During the course of fiscal year 2014 -15 staff will continue to seek opportunities to expend the remaining $151,612 of available CDBG capital housing project funds. Eligible CDBG project activities can include purchase of land for affordable housing, rehabilitation of qualifying units, construction of affordable units and public improvements in low- income neighborhoods. General Fund Human Service Grants (HSG) For a number of years the City Council has appropriated approximately $40,000 from the General Fund to fund human service agencies. Formal agreements and monitoring are required for this program, but the requirements are less stringent than for federal funding. The Housing Commission reviews HSG applications at the same time as the CDBG applications and makes funding recommendations to the City Council. If the Council reduces or increases HSG funding for fiscal year 2014 -15, HSG grant applicant amounts will be reduced or increased proportionately. Below Market -Rate (BMR) Affordable Housing Fund (AHF) The Below Market -Rate (BMR) Affordable Housing Fund (AHF) receives its revenue from the payment of housing mitigation fees from office, commercial, industrial and residential development. The Housing Commission reviews BMR AHF applications at the same time as the CDBG applications and makes funding recommendations to the City Council. Charities Housing —19935 Price Avenue This year a new grantee, Charities Housing, has requested funding in the amount of $125,817.50 to fund acquisition and operations of 19935 Price Avenue for a period of 15 Page 4 of 6 2014 -15 Allocations for CDBG, HSG, BMR AHF and CDBG Annual Action Plan April 1, 2014 years. The City originally provided both CDBG and Affordable Housing Fund (AHF) grants and loans for a total of approx. $1,662,210.70 for acquisition and rehab to Senior Housing Solutions (SHS) for the property on Price Avenue. The Price Avenue property is a 5- bedroom residential dwelling unit providing very low- income rental units to five seniors. Charities Housing, another local non -profit housing organization, is proposing to acquire SHS, which would include acquiring their properties and outstanding loans /debts. Charities Housing is requesting a total financial subsidy from the City of Cupertino the amount of $251,635 which equates over the next two year funding cycle ( Y ear 2014 -15 and fiscal year 2015 -16) to $125,817.50 per year. Charities Housing is flexible in receiving $125,817.50 per year over the next two fiscal years. Attachment D provides a detailed description of the property and the funding request. If Charities Housing is awarded they will acquire the 19935 Price Avenue home from SHS and assume all of the existing grant and loan obligations. Charities Housing would also perform all property management functions going forward. The 19935 Price Avenue home provides much needed rental senior housing to extremely low- income households in Cupertino. The City's 2007 -2014 Housing Element and CDBG Consolidated Plan identify extremely low- income and senior housing as a high priority. If the City of Cupertino decides not to subsidize Charities Housing there is a possibility that the property could be resold and there may not be enough equity in the property to pay off all existing obligations. The City will also have 'to review and implement other methods of achieving goals to house extremely low- income households. The Housing Commission recommended funding this request. Below is a summary of adjusted fiscal year 2014 -15 CDBG, HSG and BMR AHF funding recommendations based off an estimated CDBG entitlement amount of $310,943. Details including full grant descriptions are included in Attachment F. Adjusted Fiscal Year 2014/15 No. Grant Application Summary (Based off FY 2014f13 FAL $310,943 CDBG Bnt't1MMt AMM22 CDBG Public Service Applications: 1 (Two -Year Funding Cycle) Eden Council for Hope and Opportunity - Fair Housing a^ - ---- b Live Oak Adult Da Services - Senior Adult Da Care West Valley Community Services - Community Access to c Resource and Education (CARE) Faith In Action Silicon Valley Rotating Shelter - Rotating d Shelter Program Adjusted FY 2014/15 Housing Commission Funding Page 5 of 6 2014 -15 Allocations for CDBG, HSG, BRIR AHF and CDBG Annual Action Plan April 1, 2014 Next Steps As mentioned earlier, this is the first of two required public hearings regarding the use of fiscal year 2014 -15 CDBG funds and the CDBG Annual Action Plan as required by HUD. The second Council hearing for the final approval of fiscal year 2014 - 2015 Adjusted FY 2014lI5 No. Adjusted Fiscal Year 2014/15 Housing Commission Grant Application Summary Funding (Bssed off FY 2014/15 EsL $310,943 CDBG Entitlement Amooat) Recommendations CDBG Capital/Housing Project Applications: 2 (One -Year Funding Cycle) Rebuilding Together Silicon Valley - Housing Repair and a Rehabilitation Program $ 57,000.00 b Habitat for Human - Home Repair Program $ - Cupertino Communty Housing For The Disabled, Inc. - Le c Beaulieu Rehabilitation $ 500,000.00 Sub -Total 55700000 CDBG Program Administration: 3 (One -Year Funding Cycle) a Administration $ 64,188.00 Sub -Total $ ir4 i8 &00 General Fund Human Service Grants (HSG) Applications: 4 (Two -Year Funding Cycle) Catholic Charities of Santa Clara County - Long -Term Care a Ombudsman $ 6,500.00 b Maitri - MTH Direct Client Services $ 12,000.00 c Senior Adults Legal Assistance - Legal Assistance to Elders $ 9,800.00 d Faith In Action Rotating Shelter - Job Development Program $ 7,700.00 e United Way of Silicon Valle - 211 Santa Clara County $ 4,000.00 Sub -Total x 40,000A0 5 Below Market -Rate (BMR) Affordable Housing Fund (Al-IF) Ap licaflons (Two-year Funding Cycle): a West Valley Community Services - Affordable Placement Program $ 109,000.00 b Project Sentinel - Landlord/Tenant Rental Mediation $ 30,000.00 c Charities Housing -19935 Price Avenue Acquisition and Rental Subsidy $ 125,817.50 - .. ... Sub -Total ; $ 264,81250 TOTAL z. ' , $ 974,13650 Next Steps As mentioned earlier, this is the first of two required public hearings regarding the use of fiscal year 2014 -15 CDBG funds and the CDBG Annual Action Plan as required by HUD. The second Council hearing for the final approval of fiscal year 2014 - 2015 Page 6 of 6 2014 -15 Allocations for CDBG, HSG, MM AI-IF and CDBG Annual Action Plan April 1, 2014 CDBG, HSG and BMR AHF funding allocations and Action Plan to complete the 30 -day CDBG Action Plan review period is scheduled on April 15, 2014. Prepared by: Christopher "C.J." Valenzuela, Senior Housing Planner Review Ted by: Aarti Shrivastava, Director of Community Development Approved for Submission by: David Brandt, City Manager Attachments: A. Draft Resolution B. Adjusted Fiscal Year 2014 -15 Grant Application Funding Summary C. Fiscal Year 2014 -15 Grant Application Funding Summary D. Fiscal Year 2014 -15 Draft CDBG Annual Action Plan E. Description of Charities Housing Funding Request -19935 Price Avenue F. Fiscal Year 2014 -15 Housing Commission Funding Recommendation Grant Descriptions Page 1 of 2 2014 -15 Allocations for CDBG, HSC, BMR AHF and CDBG Annual Action Plan April 1, 2014 Description of Charities Housing Funding Request —19935 Price Avenue Included in the fiscal year 2014 -15 BMR AHF funding recommendations from the Housing Commission to the City Council is the affordable housing property located at 19935 Price Avenue. In 2009, Senior Housing Solutions, Inc. (SHS) a Iocal non -profit housing organization acquired and managed an affordable housing property located at 19935 Price Avenue, Cupertino, CA 95014 with assistance from the City of Cupertino and Housing Trust of Santa Clara County ( HTSCC). The City of Cupertino provided a combination of loans and grants for acquisition and rehabilitation from two funding sources which included the Community Development Block Grant (CDBG) Program and Below Market -Rate (BMR) Affordable Housing Fund (AHF). Between loans and grants the City of Cupertino provided a total of $1,662,210.70 to SHS toward the Price Avenue home. The HTSCC also provided an additional $100,000 loan to SHS. See table below which provides a summary of all loans and grants for 19935 Price Avenue. Charities Mash p Portk6c Analysis for Senor housing Solutims a Prcjerd Match Im Deed of Trust Start Maturity The Price Avenue home is a five - bedroom, three -bath, single family residential (SFR) dwelling unit currently being rented to extremely low- income seniors. The HTSCC has a provision in their loan agreement with SHS that the property must be rented to extremely low- income households. There are no project based or individual tenant based Section 8 Housing Vouchers associated with this property and therefore the property is currently running ring at a deficit. The Section 8 Housing Voucher program provides rental assistance to low- income households. In Santa Clara County, the Housing Authority of the County of Santa Clara County administers the Section 8 Housing Voucher Program. A low- income household pays about a third of its income in rent to the landlord, and the Housing Authority of the County of Santa Clara County pays the rest of the rent up to a certain limit directly to the landlord. In 2013, Charities Housing another local non - profit housing organization notified the City of Cupertino that SHS was experiencing financial hardship as an organization and Page 2 of 2 2014 -15 Allocations for CDBG, HSG, BMR AHF and CDBG Annual Action Plan April 1, 2014 Charities Housing is considering acquiring a total of eleven SHS properties in six different cities along with SHS financial obligations. Charities Housing is in the process of conducting a financial assessment of all SHS properties and financial obligations which includes the property in Cupertino located at 19935 Price Avenue. Upon Charities Housing conducting a physical needs assessment and financial assessment of 19935 Price Avenue property they have identified that the property is currently operating at a financial deficit and needs additional operating reserves, maintenance and repairs. Therefore, Charities Housing is requesting a total financial subsidy from the City of Cupertino in the amount of $251,635 which equates over the next two year funding cycle (fiscal year 2014 -15 and fiscal year 2015 -16) to $125,817.50 per year. Charities Housing is flexible in receiving $125,817.50 per year over the next two fiscal years. The $251,635 of total financial subsidy would include one -time upfront costs in the amount of $33,665 associated with the acquisition of the property from SHS and also include an additional $217,970 which would provide fifteen years of financial operating subsidy and reserves to ensure that the property remains in its current use. This item was also taken to the Housing Commission on both February 13, 2014 and February 24, 2014. The Housing Commission has recommended that the City Council fund Charities Housing in the amount of $251,635 or $125,817.50 per year over the next two year funding cycle. The current estimated balance of the BMR AHF is approximately $5,700,000. If Charities Housing is awarded they will acquire the 19935 Price Avenue home from SHS and assume all of the existing grant and loan obligations. Charities Housing would also perform all property management functions going forward. The 19935 Price Avenue home provides much needed rental senior housing to extremely low -income households in Cupertino. The City's 2007 -2014 Housing Element and CDBG Consolidated Plan identify extremely low -income and senior housing as a high priority. If the City of Cupertino decades not to subsidize Charities Housing there is a possibility that the property could be resold and there may not be enough equity in the property to pay off all existing obligations. The City will also have to review and implement other methods of achieving goals to house extremely low- income households.