CC 2014-10-14_08.e. Reallocate Funds for CDBG � pRR0y0
INCORPORATED 9Z
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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
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Item 8.e. - Page 12