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CC 2014-10-14_08.e. Reallocate Funds for CDBG � pRR0y0 INCORPORATED 9Z U v m i JULY 10, 1911 cFORNOP MEMORANDUM TO: CITY COUNCIL FROM: TERESA MCCLISH, DIRECTOR OF COMMUNITY DEVELOPMENT BY: I. T.KELLY HEFFERNON, ASSOCIATE PLANNER SUBJECT: CONSIDERATION OF RESOLUTIONS TO: 1) REALLOCATE FUNDS FROM THE CITY'S FY 2014/2015 ADA PROGRAM AND RETROFITS BUDGET TO REPAY THE FEDERAL DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD) FOR PREVIOUS INELIGIBLE COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) ACTIVITIES; AND 2) REALLOCATE CDBG FUNDS FROM PROGRAM YEARS 2011 THROUGH 2014 TO FUND THE REMOVAL OF ARCHITECTURAL BARRIERS FOR THE HOOSEGOW PROJECT AND OTHER CITY ADA PROJECTS DATE: OCTOBER 14, 2014 RECOMMENDATION: It is recommended the City Council adopt resolutions to: 1) approve the reallocation of funds from the ADA Program and Retrofits budget to repay HUD for previous ineligible CDBG activities; and 2) approve the reallocation of CDBG funds from Program Years 2011 through 2014 for the purpose of funding the removal of architectural barriers for the Hoosegow Project and other City ADA projects. FINANCIAL IMPACT: Due to a recent audit of the CDBG program, HUD requires that a total of $23,443 be repaid due to previous Code Enforcement and Fagade Improvement activities determined to be ineligible. Staff recommends that the City use the funds programmed for the ADA Program and Retrofits project to repay HUD. This project currently has a budget of $45,000. Although the City is required to return these funds, HUD will add these funds to the Program Year 2015 CDBG allocation and make them available for the 2015 ADA projects. Therefore, the City will not experience any net loss resulting from repayment of CDBG funds. Council previously approved the Hoosegow Project, which includes funding from CDBG, private donations and City funds. The project is anticipated to require an additional $3,020 to complete construction. In addition, staff recommends reallocating unspent funds previously allocated to fagade improvements to additional ADA projects. BACKGROUND: On August 28, 2014 the County received HUD's CDBG monitoring letter for their on-site monitoring visit conducted the week of June 23, 2014. HUD's monitoring review Item 8.e. - Page 1 CITY COUNCIL CONSIDERATION OF REALLOCATING FUNDS FROM THE CITY'S FY 2014/2015 ADA PROGRAM AND RETROFITS BUDGET TO REPAY HUD FOR PREVIOUS INELIGIBLE CDBG ACTIVITIES AND REALLOCATING CDBG FUNDS FROM PREVIOIUS PROGRAM YEARS TO FUND CITY ADA PROJECTS OCTOBER 14, 2014 resulted in five (5) findings and two (2) concerns. A finding relates to a program element that does not comply with Federal statute or regulation and requires a response from the grantee. A concern has the potential of becoming a finding if not addressed, or an area where the program could be improved. ANALYSIS OF ISSUES: As per HUD's letter, there are two (2) findings that directly involve the City of Arroyo Grande and require action, as described below. The first relates to the level of detail to be included in the County's sub-recipient agreements. The second relates to CDBG expenditures for facade improvement and code enforcement activities in the City's former redevelopment area and the determination that the vicinity of the project locations do not meet eligibility criteria for blight. Finding One: Sub-Recipient Agreements Condition: The County's sub-recipient agreements with the cities do not contain the required elements, such as scope of work, budget, and time line for completion. The County does not have agreements with County departments, such as Public Works, as required. Criteria: 24 CFR 570.503(b) — Describes required elements for subrecipient agreements. Section 570.503(b)(1) states the agreement shall include a description of the work to be performed, a schedule for completing the work, and a budget. These items shall be in sufficient detail to provide a sound basis for the recipient effectively to monitor performance under that agreement. Cause: The County has not followed guidance for subrecipient agreements. Effect: Without a clear scope of work, completion schedule, and budget, the County is not able to determine and ensure that other departments funded by the CDBG program are meeting acceptable and established goals. Corrective action: The County shall 1) revise its active subrecipient agreements to contain the required elements as listed in 24 CFR 570.503(b); 2) establish memoranda of understanding or agreements to cover the appropriate dates and include schedules for completion, detailed scopes of work with clear outcomes and accomplishments, and accurate budgets; and 3) provide HUD with a copy of at least one revised subrecipient agreement and one MOU that it establishes for the current program year. The County will prepare the amended subrecipient agreements with the participating cities. However, the City must prepare additional information consistent with HUD's letter by providing additional information on the City's 2014 CDBG funded projects (see Item 8.e. - Page 2 CITY COUNCIL CONSIDERATION OF REALLOCATING FUNDS FROM THE CITY'S FY 2014/2015 ADA PROGRAM AND RETROFITS BUDGET TO REPAY HUD FOR PREVIOUS INELIGIBLE CDBG ACTIVITIES AND REALLOCATING CDBG FUNDS FROM PREVIOIUS PROGRAM YEARS TO FUND CITY ADA PROJECTS OCTOBER 14, 2014 table below for list of approved projects). The County will also look into amending "active" prior year subrecipient agreements with the City, as per the "Corrective Action" for Finding One. Finding Two : Ineligible Activities Condition: HUD's review of the following activities revealed that they were ineligible for CDBG funding and otherwise poorly document. Code Enforcement: • There was no documentation of the service area to support that the activity was performed in a locally defined deteriorated or deteriorating area. • There was no documentation of national objective. No evidence could be provided for slum/blight area, that the redevelopment plan designating a slum/blight area exists, or that any designation is under ten (10) years old. The grantee's delineation of the areas inspected as slum/blight under state or local law require a determination that a minimum of 25 percent of the buildings are deteriorated or deteriorating. The delineated area must have either physical deterioration, property abandonment, high occupancy turnover rates, etc. • There was no documentation that the address where the activity occurred was within a designated slum/blight area. • Documentation of invoice support was deficient. • The time was estimated not based on actual time. • There was no documentation of the addresses or information regarding where the inspections took place. • The activity was funded at $15,556 but the agreement was for $9,081 and indicates a program year of 2010. The project funding listed on the request for funds worksheet amount is $18,062. • Documentation of activities provided was for several years, not the designated program year. Facade Improvements — Veterinary Hospital: • While the national objective was coded as SBA, there was no documentation of redevelopment/blighted area. • The IDIS matrix code of Public Facilities Improvement (General)(03) was incorrect and should be 14E. The building was a private facility. • Funds were used for signage. This was not a condition contributing to removal of blight. • There was no documentation of slum/blight area and how this action arrested that situation. A site visit confirmed the service area does not meet the required criteria. Item 8.e. - Page 3 CITY COUNCIL CONSIDERATION OF REALLOCATING FUNDS FROM THE CITY'S FY 2014/2015 ADA PROGRAM AND RETROFITS BUDGET TO REPAY HUD FOR PREVIOUS INELIGIBLE CDBG ACTIVITIES AND REALLOCATING CDBG FUNDS FROM PREVIOIUS PROGRAM YEARS TO FUND CITY ADA PROJECTS OCTOBER 14, 2014 • There was no documentation that contractors/vendors were checked for debarred or suspended status. Facade Improvements — Log Cabin Market: • While the national objective was coded as SBA, there was no documentation of redevelopment/blighted area. • The IDIS matrix code of Public Facilities Improvement (General)(03) was incorrect and should be 14E. The building was a private facility. • Funds were used for signage. This was not a condition contributing to removal of blight. • Payment was made to the beneficiary, not the company installing the sign. This is unallowable. • Payment support was for $2,887.70. However $5,000 was drawn from IDIS. • There was no documentation of slum/blight area and how this action arrested that situation. A site visit confirmed the service area does not meet the required criteria. • There was no documentation that contractors/vendors were checked for debarred or suspended status. Criteria: 24 CFR 570.208(a)(1) requires that the activity benefit low to moderate income persons within a designated area that is primarily residential in nature. 24 CFR 570.506 specifies that each grantee must establish and maintain sufficient records to enable the Department to determine whether the grantee has met the requirements. 24 CFR 85.20(b)(3) requires effective control and accountability be maintained for all grant and sub-grant cash. Cause: A lack of checks and balances to ensure that all documentation is completed accurately and thoroughly, and a lack of knowledge of the specific requirements of the regulations. Effect: CDBG funds were expended on activities that were not eligible. Corrective Action: The Department requires repayment of funds for the Code Enforcement and Facade Improvement projects described above. Although not specified in HUD's letter, according to the County's accounting of expenditures and HUD's reporting system, the following amount, of CDBG funds were expended for each activity: Item 8.e. - Page 4 CITY COUNCIL CONSIDERATION OF REALLOCATING FUNDS FROM THE CITY'S FY 2014/2015 ADA PROGRAM AND RETROFITS BUDGET TO REPAY HUD FOR PREVIOUS INELIGIBLE CDBG ACTIVITIES AND REALLOCATING CDBG FUNDS FROM PREVIOIU'S PROGRAM YEARS TO FUND CITY ADA PROJECTS OCTOBER 14, 2014 Code Enforcement by the City of Arroyo Grande $15,556 Fa ade Improvements—Veterinary Hospital $2,887 Fa ade Improvements—Log Cabin Market $5,000 Total: $23,443 The other three (3) findings in HUD's letter were unrelated to the City. Given the level of scrutiny that the County and participating cities are receiving from HUD, it is evident that the only eligible and practical use of the City's CDBG funds is for public facilities and possibly economic development. As mentioned above, the repayment of the $23,443 will return to the City in the form of additional CDBG funds. It is expected that the City will receive the $23,443 in 2015. Staff recommends allocating this funding to City ADA projects. In addition to the above funds, the City's approved CDBG Action Plans for years 2011 through 2014 include funding for facade improvement that have unspent balances. These funds must be reallocated as part of the workout plan to avoid potential loss of this funding. These projects are listed in the following table. ROO CT" AE' ,, Ion, Recommended City Council Reallocations: Fa ade Improvements 2011 $2,540 Fa ade Improvements 2012 7,460 Facade Im rovements 2013 10,000 Fa axle Im rovements 2014 5,000 T , f ,� �Il���111)1I111�111f11111111���ff�� ���fffflll $25,000 Because the CDBG funds for the projects listed above have not been spent, staff proposes that they be reallocated to provide additional funding for the removal of architectural barriers for low and moderate income people with severe disabilities by constructing ADA improvements for the Hoosegow Project and other priority ADA projects within the City. The Hoosegow Project was previously approved by the Council and is utilizing $21,927 in CDBG funds, but requires $3,020 in additional funding to complete. Staff recommends allocating the remaining $21,980 for removal of architectural barriers throughout the City at various facilities and/or curb ramps. Item 8.e. - Page 5 CITY COUNCIL CONSIDERATION OF REALLOCATING FUNDS FROM THE CITY'S FY 2014/2015 ADA PROGRAM AND RETROFITS BUDGET TO REPAY HUD FOR PREVIOUS INELIGIBLE CDBG ACTIVITIES AND REALLOCATING CDBG FUNDS FROM PREVIOIUS PROGRAM YEARS TO FUND CITY ADA PROJECTS OCTOBER 14, 2014 The reallocation of CDBG funds for these projects provides access for people with disabilities and meets the following CDBG criteria: 1. Consistency with federal regulations and laws; 2. Community support (for example, approval of project by a City Council); 3. Seriousness of community development need proposed to be addressed by project; 4. Degree to which project benefits low-income and very low-income families or persons; 5. Feasibility of the project to be completed as budgeted and by June 30, 2014; 6. Cost effectiveness of funds requested and leveraging of other funds; and 7. Organization's experience or knowledge regarding CDBG or HOME requirements. ADVANTAGES: Repayment and reallocation of the CDBG funds will keep the City in good standing with HUD. The funds will be returned to the City and be used for specific ADA projects. DISADVANTAGES: Repayment of the CDBG funds will reduce the current ADA Program and Retrofits budget from $45,000 to $21,557. However, it is anticipated that the funds will be available for the City to use for 2015 ADA projects that are eligible for CDBG funding. There are no disadvantages identified for reallocating previously unspent CDBG facade improvement and code enforcement funds for the benefit of eligible activities on the Hoosegow Project and other City ADA projects. ALTERNATIVES: The following alternatives are provided for the Council's consideration: - Accept staff's recommendation and adopt the resolution; - Modify staff's recommendation and adopt the resolution; - Provide direction to staff ENVIRONMENTAL REVIEW: The repayment of CDBG funds is not considered a project under the California Environmental Quality Act (CEQA) and National Environmental Policy Act (NEPA). PUBLIC NOTIFICATION AND COMMENTS: The Agenda was posted in front of City Hall on Thursday, October 9, 2014. The Agenda and report were posted on the City's website on Friday, October 10, 2014. No public comments have been received. Item 8.e. - Page 6 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARROYO GRANDE APPROVING REPAYMENT OF COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) FUNDS TO THE FEDERAL DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD) FOR CERTAIN INELIGIBLE ACTIVITIES WHEREAS, via a Cooperation Agreement with the County of San Luis Obispo (hereafter referred to as the "County") executed on May 24, 2011, the City agreed to become a participant for a period of three years with the County and other cities therein as an "Urban County" under the Federal Department of Housing and Urban Development (hereafter referred to as "HUD") CDBG program; and WHEREAS, per the Cooperation Agreement, the City retains the authority to determine which projects are to be funded with its allotment of CDBG funds, subject to Title 24 Housing and Urban Development regulations (24 CFR 570); and WHEREAS, the City allocated funds during previous CDBG program years to Code Enforcement and Facade Improvement activities; and WHEREAS, from June 23 through June 27, 2014, HUD audited the County's CDBG program, including the City of Arroyo Grande's Code Enforcement and Facade Improvement programs, and concluded that these activities were not eligible; and WHEREAS, HUD requires repayment of funds for certain Code Enforcement and Facade Improvement activities in the amount of $23,443. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Arroyo Grande, that $23,443 be repaid to HUD from the City's ADA Program and Retrofits budget for previous CDBG Code Enforcement and Facade Improvement activities determined ineligible under the CDBG Federal program. On motion of Council Member , seconded by Council Member , and on the following roll call vote, to wit: AYES: NOES: ABSENT: the foregoing Resolution was passed and adopted this 14th day of October, 2014. Item 8.e. - Page 7 RESOLUTION NO. PAGE 2 TONY FERRARA, MAYOR ATTEST: KELLY WETMORE, CITY CLERK APPROVED AS TO CONTENT: STEVEN ADAMS, CITY MANAGER APPROVED AS TO FORM: TIMOTHY J. CARMEL, CITY ATTORNEY Item 8.e. - Page 8 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARROYO GRANDE APPROVING REALLOCATION OF COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) FUNDS FROM CERTAIN PROJECTS APPROVED IN YEARS 2011 THROUGH 2014 TO FUND THE REMOVAL OF ARCHITECTURAL BARRIERS AT THE HOOSEGOW PARK AND FOR THE CITY'S CURB RAMP PROGRAM CITYWIDE WHEREAS, via a Cooperation Agreement with the County of San Luis Obispo (hereafter referred to as "County") executed on May 24, 2011, the City agreed to become a participant for a period of three years with the County and other cities therein as an "Urban County" under the Federal Department of Housing and Urban Development (hereafter referred to as "HUD") CDBG program; and WHEREAS, per the Cooperation Agreement, the City retains the authority to determine which projects are to be funded with its allotment of CDBG funds; and WHEREAS, the City allocated funds during the CDBG program years 2011 through 2014 to various projects; and WHEREAS, the City desires to reallocate unspent funds from aforementioned CDBG program years to fund the removal of architectural barriers at the Hoosegow Park and various curb ramp locations citywide; and WHEREAS, on October 14, 2014, the City Council held a duly noticed public hearing to consider reallocation of CDBG funds from certain projects approved in Program Years 2011 through 2014 as follows: Existing Funds Allocated;: Fa ade Im rovements 2011 $2,540 Fa ade Im rovements 2012 7,460 Fa ade Im rovements 2013 10,000 Fa ade Im rovements 2014 5,000 X1111 ,.,I,1, ,J fl �DII�I�I��U�I�Jff1 lllllllff���� �I �� $25,000 �mr��ded � a�Y1�f ®alioca�0rr : Hoose ow Park Pro'ect Ramp 2011 $2,540 Hoose ow Park Project Ram2 2012 $2,460 ADA barrier removal —curb ramps 2012 $5,000 Item 8.e. - Page 9 RESOLUTION NO. PAGE 2 RO EOTTW E i;t1 ,Q SG` K0'1ING,, I I T ADA barrier removal — curb ramps 2013 $10,000 ADA barrier removal -curb rams 2014 $5,000 i ��11� � $25,4fl0 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Arroyo Grande, California, to recommend that the Board of Supervisors for the County of San Luis Obispo adopt the reallocation of the City's CDBG funds from the 2011 through 2014 Action Plans as listed above for the purpose of funding the removal of architectural barriers at Hoosegow Park and other priority areas within the City. On motion of Council Member , seconded by Council Member , and on the following roll call vote, to wit: AYES: NOES: ABSENT: the foregoing Resolution was passed and adopted this 1 "' day of October, 2014. Item 8.e. - Page 10 RESOLUTION NO. PAGE 3 TONY FERRARA, MAYOR ATTEST: KELLY WETMORE, CITY CLERK APPROVED AS TO CONTENT: STEVEN ADAMS, CITY MANAGER APPROVED AS TO FORM: TIMOTHY J. CARMEL, CITY ATTORNEY Item 8.e. - Page 11 I THIS PAGE INTENTIONALLY LEFT BLANK Item 8.e. - Page 12