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TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: DIRECTOR OF PUBLIC WORKS
DATE: FEBRUARY 3, 2004
SUBJECT: AGREEMENT TO EXCHANGE COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) FUNDS FOR FY 2003-2004
Staff Coordinator: Judy Huey, Senior Administrative Analyst
6. Defer any decision on how to program funds generated by the sale of CDBG funds until the fiscal year 2004-05 budget cycle.
The Community Development Block Grant (CDBG) Program is a federally funded, County administered grant program under which the City receives annual funding for eligible projects which benefit persons of low and moderate income levels and/or aid in the prevention or elimination of blighted conditions. Under the CDBG guidelines, funds in excess of 150% of the City’s annual allocation are subject to recapture by the County of Los Angeles Community Development Commission (CDC). Cities are encouraged to sell
CDBG funds if funds cannot be expended. The CDBG funds are typically sold at a discount due to the regulatory burden assumed by the purchaser since general funds have no restrictions.
During fiscal year 2003-04 excess CDBG funds became available for sale when the City Council terminated the Altamira Canyon drainage project at the May 20, 2003 City Council meeting. The project was canceled due to a funding shortfall and because the necessary rights-of-way to construct the project were not acquired.
At the City Council meeting of August 19, 2003, staff was directed to exchange $400,000 of the City’s excess CDBG funds for $230,000 of general funds from the City of West Hollywood. The exchange rate was $.575 of general funds for $1.00 of CDBG funds. This amount was chosen after reviewing the CDBG fund balance and the estimated costs and schedule of completion for several projects and programs. Staff was directed to come back to the City Council with a recommendation that additional CDBG funds be exchanged if actual costs of projects or programs were less than those estimated, or if projects could not be completed to meet the Community Development Commission (CDC) deadlines.
At this time, approximately $150,000 of excess CDBG funds are available for sale. The City of West Hollywood has offered to purchase $150,000 in CDBG funds from the City in exchange for $93,750 in general funds. The exchange rate is $.625 of general funds for $1.00 of CDBG funds. A higher rate of exchange than the previous sale was negotiated due to a greater demand for CDBG funds.
The Community Development Commission (CDC) has set a February 18, 2004 deadline for the exchange of CDBG funds that are in excess of 150% of the City’s annual allocation. Staff recommends that two projects be cancelled and one project be delayed to meet the CDC deadline and avoid the recapture of the excess $150,000 CDBG funds. The CDBG allocations for the cancelled and modified projects are presented in the following chart:
Two projects in the Portuguese Bend area are recommended for cancellation because they have not yet been approved by the CDC due to environmental issues. One project is a Groundwater Study of the area and the other project provides for the Installation of Dewatering Wells. The Hesse Park Restroom ADA Upgrade is still in the design phase
and construction is not scheduled to begin until after the February 18, 2004 deadline. It is anticipated that the design portion of the project will be completed this fiscal year and construction will begin at a later date when adequate CDBG funding is accumulated to replace the funds that have been sold.
The Abalone Cove Landslide Abatement District (ACLAD) has requested that the City use a portion (approximately $35,000) of the general funds generated by the proposed sale of CDBG funds to fund the cancelled Groundwater Study project. A copy of the January 21, 2004 letter from ACLAD is attached to this staff report. Staff recommends that this study be included for consideration with other drainage projects when the FY 04-05 budget is prepared.
Adopting the staff recommendations will facilitate the exchange of CDBG funds from the City of Rancho Palos Verdes for general funds from the City of West Hollywood. The Community Development Commission of the County of Los Angeles will transfer the CDBG funds from the City of Rancho Palos Verdes’ CDBG funding account to the City of West
Hollywood’s CDBG unallocated funds account. The City of West Hollywood will send a lump sum payment to the City of Rancho Palos Verdes fifteen (15) days after CDC’s notification to both cities that the CDBG funds have been transferred to the City of West Hollywood’s unallocated funds account.
Request staff to appeal the recapture of CDBG funds. It is unlikely that the CDC would approve an appeal because the cancelled and modified projects are not in the construction phase.
The sale of CDBG funds to the City of West Hollywood will decrease the fund balance of the CDBG program and generate $93,750 in general funds. These funds would be used for City projects that would otherwise be ineligible for CDBG funding.
Dean E. Allison
Director of Public Works
Agreement to Exchange CDBG Funds
January 8, 2004 Letter from RPV City Manager to CDC
January 7, 2004 Letter from the City of West Hollywood
January 21, 2004 Letter from ACLAD
RESOLUTION NO. 2004-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS
VERDES, AMENDING RESOLUTION 2003-42, THE BUDGET APPROPRIATION
FOR FISCAL YEAR 2003-04, FOR A BUDGET ADJUSTMENT TO THE CITY’S GENERAL FUND
WHEREAS, Section 3.32 of the Rancho Palos Verdes Municipal Code provides that all expenditures in excess of budgeted allocations must be by supplemental appropriation of the City Council; and
WHEREAS, on June 3, 2003, the City Council of the City of Rancho Palos Verdes adopted Resolution 2003-42, approving a spending plan and authorizing a budget appropriation for the 2003-04 fiscal year; and
WHEREAS, the City has agreed to exchange its Community Development Block Grant (CDBG) allocation for General Funds from the City of West Hollywood; and
WHEREAS, a budget adjustment in the Community Development Block Grant Fund is necessary to appropriate the expenditure; and
WHEREAS, a budget adjustment in the General Fund is necessary to recognize the revenue from the exchange of funds.
BE IT, THEREFORE, RESOLVED BY THE CITY COUNCIL OF THE CITY OF RANCHO PALOS VERDES:
The following adjustment be made to the funds:
CDBG Fund 110-910-35 Professional/Technical Services ($150,000)
General Fund 001-375.10 Miscellaneous Revenue $ 93,750
PASSED, APPROVED, AND ADOPTED THE 3rd DAY OF FEBRUARY 2004.
Resolution No. 2004-
State of California )
County of Los Angeles )ss
City of Rancho Palos Verdes )
I, JO PURCELL, City Clerk of The City of Rancho Palos Verdes, hereby certify that the above Resolution No. 2004- was duly and regularly passed and adopted by the said City Council at regular meeting thereof held on February 3, 2004.
CITY OF RANCHO PALOS VERDES
Resolution No. 2004-