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TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: DIRECTOR OF PUBLIC WORKS DATE: JUNE 17, 2003 SUBJECT: EXPENDITURE PLAN FOR THE COMMUNITY DEVELOPMENT BLOCK GRANT PROGRAM RECOMMENDATIONS
BACKGROUND The CDBG Program is a federally funded, County administered grant program under which the City receives annual funding for eligible projects of the City’s choosing. The program guidelines are rigid, and the eligibility requirements are difficult to meet. A flowchart and other exhibits outlining the eligibility requirements are attached. Under CDBG guidelines the City is limited in the amount of time that CDBG funds are allowed to accumulate. In the past the Los Angeles Community Development Commission (CDC) – the agency that administers the program for the federal government – has not been rigid in the enforcement of this guideline. Recently, however, the CDC has made it clear that given the amount of time over which the City has accumulated funds for the Alta Mira Canyon project, if construction is not underway by March 2004, funds in excess of 150% of our annual allocation will be recaptured and given to agencies with eligible construction ready projects. The City’s annual allocation of CDBG funds is approximately $ 240,000. Under such a scenario as much as $600,000 of our CDBG funds could be recaptured. At the City Council meeting of May 20, 2003, the Alta Mira Canyon project was deleted due to a funding shortfall for the project and because the necessary rights-of-way to construct the project have not been acquired. Given the impending deadline to spend the funds accumulated for the Alta Mira Canyon project, staff was directed to identify alternate projects that may be funded under the Community Development Block Grant (CDBG) Program. In addition, as part of the effort to complete projects prior to the March 2004 deadline, Council awarded an engineering contract for preliminary engineering services for the design of an elevator at City Hall. CDBG Allocation in Rancho Palos Verdes The City receives an annual CDBG allocation of approximately $240,000. Historically, the City allocated the funds as follows: CDBG Administration $ 20,000 REACH Program $ 36,000 Home Improvement Program $100,000 Capital Projects $ 84,000 The public service cap (which is a percentage of the annual allocation) for the REACH program is limited to 15%. Timely Use of CDBG Funds The CDBG Program requires the funds to be expended on a timely basis, with no more than 150% of the current year allocation unexpended by March 31. The draw down goal includes the current year’s CDBG monies and CDBG funds remaining from prior years. No more than 50% of an annual allocation, should be accumulated in order to meet the draw down policy by the following March 31 deadline. Therefore, based on an annual allocation of $240,000, no more than $120,000 can be accumulated for a total balance of $360,000 of unexpended funds in any one fiscal year. DISCUSSION Based on discussions between the City Council and staff, the following options have been reviewed and a list of eligible projects has been developed for the Expenditure Plan of CDBG funds.
The approved allocation of CDBG funds for the current fiscal year 02-03 and next fiscal year 03-04 are:
Sale of Block Grant Funds It is clear that the City will not be able to spend adequate CDBG funds in time to meet program guidelines. The most appropriate solution would be for the city to sell a portion of its CDBG funds to generate unrestricted general funds for ineligible CDBG projects such as the restrooms at Del Cerro and Ocean Front Estates. Several cities have indicated that they wish to purchase CDBG funds. Staff estimates that CDBG funds can be sold at 50 – 60˘ per $1. Calculation of CDBG Funds Eligible for Sale After determining the eligibility of CDBG projects and the feasibility to complete these projects presented in the above Expenditure Plan by the March 2004 deadline, the recommended allocations of CDBG funds for fiscal years 2002-03 and 2003-04 are listed as Planned Expenditures in the table below. Deducting these planned expenditures from the Total Funds Available for FY 02-03/03-04 leaves a balance of $610,000 that is eligible for sale.
Note: The maximum amount of CDBG funds that the City may accumulate is 150% of our annual allocation of $240,000 or $360,000. CONCLUSIONS Adopting the staff recommendations will implement only those projects that will expend CDBG funds by March 31, 2004. The balance of funds will be sold to another City in exchange for General Funds that are unrestricted. This would provide flexibility in funding projects without having to meet the target area and federal eligibility criteria. Adopting the staff recommendations will result in staff evaluating how much CDBG funds can be sold, and to make inquires about potential buyers. Staff will gather this information and bring the matter back to the City Council for further action. FISCAL IMPACT The recommended actions will result in the expenditure of funds for projects that can be completed by March 31, 2004. The expenditure of funds for the dewatering well construction, and the engineering study will require additional City Council action prior to the expenditure of any funds. It is estimated that adoption of the recommended actions, and the construction of an elevator will result in the need to sell approximately $610,000 worth of CDBG funds. If these funds were sold for 55˘ per dollar it would generate approximately $ 335,000 of General Fund monies. If the construction of the elevator does not take place an additional $280,000 worth of CDBG funds would need to be sold, and would bring an additional $154,000 in General Fund monies. Submitted by, Dean E. Allison Director of Public Works Reviewed by, Les Evans, City Manager Attachments: Exhibit A – Flowchart of CDBG eligibility Exhibit B – Category 1 eligible projects Exhibit C – Category 2 and Category 3 eligible projects |
