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HomeMy WebLinkAbout2003-03-25; City Council; 17114; Reallocation of CDBG FundsCITY OF CARLSBAD -AGENDA BILL AB# 17,114 TITLE: DEPT. HD. 6d w 3-25-03 REALLOCATON OF COMMUNITY DEVELOPMENT MTG. RECOMMENDED ACTION: CITY MGR DEPT. H/RED CITY ATTY. 0' BLOCK GRANT (CDBG) FUNDS Hold a public hearing to accept comments on reallocation of previously appropriated Community Development Block Grant funds, and direct staff to return with documents to reallocate those funds as indicated by the City Council. ITEM EXPLANATION: Backqround Each year, the City receives funding through the U.S. Department of Housing and Urban Development (HUD) under the Community Development Block Grant (CDBG) Entitlement Program to finance programs that serve the needs of lower income persons. The City must comply with numerous regulations in its administration of the CDBG program for Carlsbad. One of the key regulations requires the timely expenditure of the CDBG funds. Recently, the City was notified that it does not meet the federal requirements for the timely expenditure of CDBG funds. The expenditure problem is directly related to the CDBG allocations set-aside for the Housing Reserve Fund, the Join Hands Youth Facility and the Boys and Girls Club Facility proposed for Bressi Ranch. Each of these projects have large funding balances which need to be expended as soon as possible or reallocated to alternate projects that allow for significant expenditures in a timely manner. The City is required to take immediate action to prevent the loss of future CDBG funding. The City Council recently appropriated all of the $376,551 in CDBG funds from the City's Housing Reserve Fund to purchase property at 2578 Roosevelt Street for affordable housing purposes, and those funds were expended as of March 11, 2003. This expenditure will help in the City's effort to meet the federal requirements. Unfortunately, there still remains a large balance associated with Join Hands-Save a Life and the Boys and Girls Club. Join Hands has an appropriation balance of $599,063, and the Boys and Girls Club has a total of $167,114 on balance. These organizations will be u nable to utilize their funds i n a timely manner. Therefore, these two projects, with a total of $776,177 in CDBG allocations, remain a problem from the standpoint of the timely expenditure of the CDBG funds and action is required at this time to address the issue. Reallocation of Funds Previously Set-Aside for Join Hands-Save a Life From 1995 to the present, a total of $642,978 in CDBG funds have been allocated to Join Hands for the construction of a youth recreation facility on Roosevelt Street. Join Hands was allowed to use $43,915 of the funds on predevelopment activities such as surveying, engineering studies, and design of the facility. At the City Council's direction, no additional CDBG funds were to be made available for the p roject u ntil d ocumentation could be p rovided by Join Hands demonstrating that adequate funds were committed/available to complete construction of the project. There was concern that the project might get under construction and then Join Hands would not have funding to complete the project. Join Hands was also required to provide a five-year operating budget to ensure that adequate funds would be available to operate and maintain the facility. Join Hands was unable to provide the documents required to meet the above conditions. In May of 2002, the City Council denied a request from Join Hands to extend the agreement for use of the previously allocated CDBG funds. As a result of the expiration of the agreement in 2002 and the fact that Join Hands has taken actions which will prevent the use of the 2 002-2003 allocation to the project, a balance of $599,063 is now available for reallocation from the Join Hands project to an alternate project. Page 2 of Agenda Bill # 17,114 For additional information purposes, it is important to note that Mr. Frank Sorino, President of Join Hands, has indicated to staff that his organization is proceeding with construction of the youth facility using a combination of volunteers and paid workers. Therefore, in effect, the project has become ineligible for the use of CDBG funds due to strict federal regulations. The federal government has an “all or nothing’’ policy on the use of volunteers. CDBG funds may not be used on construction of a facility unless volunteers conduct all work, or employees paid prevailing wages as required by the Davis-Bacon Act conduct all work. Therefore, Join Hands will not be able to use any of the previously approved CDBG funds or any new CDBG funds for construction of the youth facility. The organization will, however, continue to be eligible to receive CDBG funding to assist in the operation of the facility at a later date. Reallocation of Funds Previously Set-Aside for Boys and Girls Club The Boys and Girls Club has a balance of $167,114 in CDBG funds previously allocated for the acquisition of a site for their new youth facility proposed as part of the Bressi Ranch development. The club’s Chief Professional Officer has submitted a letter (Exhibit 1) forfeiting use of the funds, as they will not be able to use the funds in a timely manner. The Chief Professional Officer has also indicated that the club decided to decline use of the CDBG funds on their new proposed facility because of federal regulations that would have required them to comply with the Davis-Bacon Act (prevailing wage) and other burdensome administrative requirements. ALTERNATIVES FOR FUNDING Historically, the City has received very few applications for the type of CDBG funding available through this proposed reallocation action. This funding must be reallocated to a public facility project. It is not available for use for operating a facility or other administrative costs. This year, the City received three (3) applications for CDBG funding under the public facility category. One application was from Join Hands which was determined to be ineligible for this funding. Another application was from the Boys and Girls Club, which the Advisory Committee recommended against funding. The third application was for funding for the Housing Reserve Fund, which has been recommended for funding by the Advisory Committee. Due to the limited applications to date, staff has made an effort to identify eligible projects in order to allow for reallocation and a timely expenditure of the subject funds. The staff-identified projects noted below are eligible projects, and one or more of the projects could be approved for reallocation of the subject $776,177 in CDBG funds. Centro De lnformacion The Centro de lnformacion must be relocated to an alternate site due to future development of the Pine School property for a Northwest Quadrant Community Park. CDBG funds could be reallocated to assist in relocating the Centro to another site. Relocation assistance could be in the form of acquisition of a property, rehabilitation of a facility, or purchase and installation of modular units for the Centro. Communitv Resource Center The Community Resource Center (CRC) is a nonprofit organization based in the City of Encinitas that provides various homeless prevention and assistance programs for those in the North County coastal region. CRC operates a thrift store on the northwest corner of Roosevelt Street and Oak Avenue. It also operated a satellite office for its public service programs a number of years ago on Roosevelt Street until a substantial lease increase forced them to discontinue operations. Relatively expensive lease rates in the Carlsbad area have prevented them from obtaining another suitable location in this City. CRC is proposing to utilize CDBG funds to assist them in purchasing property at 31 35 and 3147 Roosevelt Street that has recently been appraised at a value of $600,000. The property includes a 2,160 square foot commercial building divided into two separate storefronts and two single family dwelling units. CRC proposes to obtain a loan to supplement CDBG funds that are reallocated for the a Page 3 of Agenda Bill # 17,114 purchase of the property. Their current thrift store operation in Carlsbad would be relocated to the commercial building and public service programs would also be provided from that location. They would provide affordable housing in the single family homes located on the property. Affordable Housing Proiect - 2578 Roosevelt Street As noted above, the Redevelopment Agency has purchased property for development of an affordable housing project at 2578 Roosevelt Street. CDBG funds together with federal HOME Partnership Investment Program funds were used to purchase the property. Up to $717,600 in additional HOME funds have been allocated by the City Council to construct the proposed affordable rental units on the site. Although the actual construction of housing with CDBG funds is not an eligible activity under federal regulations, predevelopment activities is an eligible activity for CDBG funding. It is estimated that there may be up to $240,000 in predevelopment costs for the Roosevelt Street project including design, engineering studies, permit fees, and construction management. Although these costs are an eligible HOME fund expenditure, it is anticipated that all of the allocated HOME funds will be needed for actual construction activities. The Council could approve some of the CDBG funds for the predevelopment costs for the subject project. CDBG/HOME Housina Reserve Fund The City Council may also desire to reallocate the available funds into the City’s CDBG/HOME Housing Reserve Fund to allow for additional property acquisitions for affordable housing purposes. With purchase of the property at 2578 Roosevelt Street, the Housing Reserve Fund has no balance. Staff is currently in the process of attempting to identify other property in Carlsbad that might be purchased for affordable housing. Although no suitable properties have been located to date that could be purchased with the amount of CDBG funds available for reallocation at this time, it is possible that a suitable site could be acquired in the future with the addition of other funding. Staff recommends that Council consider the various options for use of $766,177 in previously allocated CDBG funds, and direct staff to return with documents to reallocate the funds for one or more of the above project alternatives. FISCAL IMPACT: The above noted reallocations are required in order to allow for timely expenditure of the CDBG funds and to prevent sanctions by the U.S Department of Housing and Urban Development, which could result in the loss of future funding. There is no direct fiscal impact on City funds as a result of directing staff to return with documents to reallocate CDBG funds. EXHIBITS: 1. Letter from Boys and Girls Club forfeiting CDBG funds. 2. Letter from Community Resource Center requesting funding assistance to Purchase Property. 3.Notice of Public Hearing published on March 21, 2003 3 EXHIBIT 1 TO AB # 17,114 February 13,2003 Frank Boensch City Of Carlsbad Housing and Redevelopment Department 2965 Roosevelt St Suite B Carlsbad, CA 92008 The Boys & Girls Clubs of Carlsbad understands that HUD is asking the city to expend previous years funding by April of 2003, or forfeit these dollars. The city of Carlsbad has been generous in allocating nearly $170,000 for a future Boys & Girls Club facility in Southeast Carlsbad. Unfortunately, at this point in time we are not in a position to use these allocated funds. We therefore officially forfeit these funds to go back into the reallocation pool to be used for other essential services within the Carlsbad community. We hope that in the future the city will continue to include the Boys & Girls Clubs of Carlsbad in their CDBG block grant program. Ron Sipiora CPO Boys & Girls Clubs of Carlsbad The mission of the Boys & Girls Clubs of Carlsbad is to provide activities and experiences that enrich the lives of young people in our community. BOYS & GIRLS CLUBS OF CARLSBAD Admlnlstratlve Office Post Office Box 91 3 Carisbad, CA 92018 (760) 729-0207 FAX (760) 729-2279 www.bgccarlsbad.org - 7805 Centella Street Carisbad, CA 92009 (760) 944-921 1 FAX (760) 944-01 50 - 31 15 Roosevelt Street Carlsbad, CA 92008 (760) 729-0956 FAX (760) 729-2279 Board Of Directors Jim Morrison, President Patrick Casinelli,” Scott Chelberg Liz Cames‘ Gasper A. Chifid, PE Rich Goldman Jeb B. Hall, Esq. DaM Kulchin” Jason Labrum,CFM William D. Long Richard Macgum” Kay Matherly Luke Matteson Alyssa Mercier Brian Milich Betty Moore Eleanor Murrell“ Greg Nelson’ Bailey Noble- Gordon Schmidt,CPI Ernie Soczka Steve Tague Walter Winrow Cannis Wood,PE Past President’ Executive Ofbrs” Corporate Partners Aegis Electronic Group, Inc. Standard Pacific Homes The Corky McMillin Companied Brookfield Homes Retirement Solutions, Inc. Chief Professional Officer Ronald Sipiora EXHIBIT 2 to AB # 17,114 February 18,2003 Frank Boensch Management Analyst City of Cadsbad 2985 Rooseveh St. Suite B Carlsbad, CA 92008-2389 Dear Frank and City Council Members: The Community Resource Center (CRC) is sincerely grateful for the ongoing support of the City of Carlsbad and greatly anticipates our continued efforts on behalf of community members in need. Currently 'CRC is in process of negotiating the possible purchase of property located at 3135 and 3147 Roosevelt Street for a price between $600,000 and $1,000,000. Our intention is to use said property for multiple purposes including a Social Service office and Thrift Store, with the possibility of low income housing also being provided. With the assistance of CDBG funds, CRC will be able to purchase and operate a social service office on Raasevelt Street within a few months. The Community Resource Center has been a mainstay in coastal north San Diego County, serving over 125,000 community members, since opening in 1979. Until 3 years ago, CRC operated a socral service office in Carlsbad, which provided life sustaining essentials to hungry, unemployed and homeless individuals and families. Unfortunately, CRC was forced to dose those doors as a result of increasing expenses. CRC Is anxious to return to the City of Carlsbad, and once again offer comprehensive support services to the working poor and others in need of a helping hand. The Board of Directors, staff, and most importantly the many families we sewe, thank you for considering our request for CDBG funds to purchase property in Carlsbad for use as a social service office. We look forward to our continued partnership: together we can and are making a difference in the lives of many. Yours truly, Executive Director U 5 EXHIBIT 3 TO AB #17,114 City of Carlsbad Community Development Block Grant Program Notice of Public Hearing The citizens of Carlsbad and other interested parties are hereby notified that Carlsbad's City Council will hold a public hearing on Tuesday, March 25, 2003 at 6:OO pm in the Council Chambers located 1200 Carlsbad Village Drive to accept public comments on the potential reallocation of Community Development Block Grant funds previously allocated to the Carlsbad Boys and Girls Club and Join Hands-Save a Life. Funds totaling $1 67,l 14 allocated to the Boys and Girls Club have been forfeited, as they are not able to utilize the funds in a timely manner. Funds totaling $599,063 allocated to Join Hands-Save a Life require reallocation as grant conditions have not been met and the funds have not been utilized in a timely manner. It is anticipated that the City Council will consider alternatives for reallocation and provide staff with direction to return at a later date with documents to reallocate the funds. Reallocation of the funds will be included in the 2003-2004 Consolidated Plan, which will be available for public review and comment at a later date. An additional public notice will be published and a public hearing will be held regarding the Consolidated Plan. The public may also contact Frank Boensch at 760-434-281 8 to be notified when the Consolidated Plan is available for public review. Persons who have questions or comments regarding the City of Carlsbad's CDBG Program or who would like more specific information on the proposed reallocation of funds may contact Frank Boensch at (760) 434-2818, Monday through Friday between 8:OO am to 5:OO pm. Persons in need of translators or other special services should contact the Housing and Redevelopment Department at (760) 434-281 8. PUBLISH DATE: FRIDAY, MARCH 21, 2003 Q ALL RECEIVED BARRIO CARLSBAD ASSOCIATION 3292 Roosevelt Street Carlsbad, CA 92008 (760) 434-2191 28 March 2003 Mayor Claude "Bud* Lewis and Council Members CARLSBAD CITY HALL 1200 Carlsbad Village Drive Carlsbad, CA 92008 AGENDA ITEM # Y C: Mayor City Council City Manager City Attorney City Clerk RE: CDGB FUNDING FOR CENTRO DE INFORMACION Dear Mayor Lewis and Council Members: At the City Council meeting on Tuesday, March 25, there was a proposal from Housing and Redevelopment to reallocate Community Development Block Grant funding for several projects, one of them being the acquisition of property for a permanent home to house the Centro de lnformacion. The Centro de lnformacion has relocated several time in the past and is now in the process of being moved again to make room for the Pine School property park. As you may be aware, the community has benefited tremendously from the services the Centro provides. We understand that all service programs are important, but the education of our children and new immigrants in our community are of utmost importance to the continued health, vitality and growth of our community. A Village is only as strong as its people and without the resources to help, we will never succeed. Carlsbad prides itself as being a premier city. We need to continue working towards that end. The Centm is only a vehicie that will allow our new immigrants the opportunity to learn the rules and regulations of our country. It is the stepping stone that will enable them to become more productive and skillful in foliowing a career path. Having a place they can call their own has encouraged them to get involved and can foster more pride in their community . Sincerely yours Roy Tarango, President CC; Ray Patchett, City Manager Cliff Lange, City Librarian c)€w.JAE.rnmm 1611 J"SD€Ul& Lx , . - 5- '* cMtJS%m, ci9 92008 C: (760) 729-4030 1 r La j' P> __ _. " ." AGENDA ITEM # 4 " -, - C: Mayor 28 March 2003 City Counca City Manager CityA" Mayor Claude "Bud" Lewis and Council Members *clerk CARLSBAD CITY HALL 1200 Carlsbad Village Drive Carlsbad, CA 92008 Dear Mayor Lewis and Council Members: Being a long time supporter and the Community Partner for "Centro de Informacion", I want to go on record as an advocate for allocating the Communtty Deveiopment Block Grant funds for the purpose of acquiring a permanent site for the facility. The Centro has never had a permanent home and has moved several times during the past few years. The Centro has been an asset to the communtty. Many children have used the facility to do their homework and get the information necessary to advance in school. Many parents are staunch supporters and have benefited by the services the Centro has to offer. The location should remain in the same general area, making it easier for children and parents to walk to the Centro. Please consider the many benefits derived, both in educating and involving the newer residents in the city's process. Ofelia E. 1 scobedo CC; Ray Patchett, Ci Manager Cliff Lange, City Librarian March 27,2003 Honorable Mayor Lewis and Council Members 1250 Carlsbad Village Drive Carlsbad, CA 92008 Dear Mayor Lewis: AGENDA ITEM # c: Mayor City Coundl City Manager City Clerk CitgAttOrnq I am writing this letter on behalf of the Carlsbad City Library Board of Trustees regarding the agenda bill presented to the City Council at their meeting of March 25, 2003 for the reallocation of Community Development Block Grant (CDBG) funds. The Trustees respectfully request that the City Council consider reallocating funds to provide a permanent facility and location for the Centro de Informacih and that the location of this facility be kept within the same general neighborhood served. The Centro, which was moved to its current modular facility at the hture Northwest Quadrant Park in June 2002, will need to be relocated once this planned park begins construction. This could occur sometime in the next 12 to 18 months. Trustees feel strongly that a permanent facility will give the Centro the stability it needs to build on a program that has been serving the needs of this community since 1991. We believe this is a unique opportunity to provide a permanent home for a valued City program. Thank you for your consideration. Sincereln wee: City Manager Assistant City Manager Library Director Library Board of Trustees THE CARLSBAD “One Gift Can March 28,2003 The Honorable Claude “Bud” Lewis Mayor, City of Carlsbad 1200 Carlsbad Village Drive Carlsbad, CA 92008 LIBRARY kOUNDATION Change a Life Forever” AGENDA ITEM # c1 U Mayor city coundl City Managef w- Dear Mayor Lewis: The Carlsbad Library Foundation Executive Board is asking the City Council to reallocate CDBG funds to the library’s Centro de Informaci6n. The Centro has been providing library services since 1991 and is especially effective in helping neighborhood families become new library patrons. The Centro is also a model family literacy program, helping parents become their children’s first teachers. In addition to the family literacy program based at the Centro, the Carlsbad City Library has successful literacy programs for adults and teens located in its rented Adult Learning Program facilities. Every day the library’s three learning programs create more effective employees, participating citizens and improved lives. The services at the Adult Learning Program and Centro de Informacidn have demonstrated success. However, they are struggling to meet the community’s demands and are constrained by tight space and limited access. The Adult Learning Program is in rented space, and the Centro is in temporary facilities. Their learners, patrons and volunteers need a larger well-designed space where all the programs are located together and more people are accommodated. The Carlsbad Library Foundation is adopting a program called The Carlsbad City Library Learning Center. We picture one central place where magic happens and lives are changed. A place where learners of all ages can enter and discard their fears, where they will learn patiently, quietly, with good humor and without criticism, and with the best resources that the community and library can offer. A place with modern technology, latest techniques, ideal learning spaces, and room to expand. A place learners will leave with confidence in necessary skills -- the ability to read and write and to make use of their public library’s resources. The Carlsbad Library Foundation was founded in early 1999 with a mission “to encourage and recognize donations to maintain and enhance the high quality of The Carlsbad City Library.” With the reallocated CDBG funds, space could be acquired for the proposed Learning Center. The Library Foundation is committed to raising the additional funds needed to make the Center a reality. By reallocating CDBG monies to the Centro de Informaci6n as part of a future Carlsbad City Library Learning Center, the City invests in its future. Sincerely, PC” James Comstock, President 1775 Dove Lane Carlsbad, CA 92009 Phone 760-602-2060 From: Debbie Fountain To: Ray Patchett Date: 4/1/03 8:48AM Subject: Meetings with Councilmembers Hi Ray. The following information is provided as a summary of recent meetings with the Mayor and Council members. On Monday, March 31st, staff met with the Mayor and Councilmembers Hall and Kulchin regarding projects proposed for CDBG funding. Ruth Lewis met with Councilmember Kulchin and I to discuss the proposal for CDBG funding to assist Community Resource Center in purchasing property in the Village/Barrio Area for their thrift store and social services office. The purpose of the meeting was basically for Mrs. Lewis to share information with Councilmember Kulchin. However, I did want to share the following information that I shared with Councilmember Kulchin during the meeting. The question was raised as to how projects were selected for recommendation in the report presented to the Council. I shared that the recommendations were developed based on the need to expend the available funds in an expeditious fashion. These funds need to be expended by April 1, 2004. Staff identified projects that we felt could expend the funds quickly through property acquisition, or existing projects that were underway and otherwise could spend the funds by April 1, 2004. Property acquisition is one of the quickest methods for expending the CDBG funds. As a result, staff primarily focused on possible acquisition projects. The affordable housing project on Roosevelt was recommended only because it is currently underway, it is a city-controlled project (from a timing perspective), and the predevelopment funds could be spent by the noted date. All of the projects listed were CDBG-eligible. The Mayor and Councilmember Hall met with Frank Sorino to discuss funding for the Join Hands Project. Again, the primary purpose of the meeting was for Mr. Sorino to share information and request that CDBG funding remain with the Join Hands Youth Facility Project. Mr. Sorino explained that his project is ready to go and that the funds can be spent by April 1, 2004. However, Mr. Sorino did share that some of the conditions placed on the project would need to be removed by Council in order for Join Hands to use the money. He mentioned concern about both the 20 year loan condition and the matching funds requirement. Staff indicated that we would not be supportive of providing the funding without security. The reason for this is that the City funded the purchase of the property in its entirety and Mr. Sorino is also requesting that we fund the entire construction of the facility with the available CDBG funds. The City, therefore, would need security that the City could get its money back if Join Hands ceases to exist or sells the property. The prevailing wage rate that is required to be paid is the primary reason Join Hands is requesting that CDBG funds be used in their entirety for the construction. Join Hands would like to use any funds it raises for operation or other interior improvements at some later date, which would not trigger the prevailing wage rates. The issues associated with Join Hands and their use of the CDBG funding are complicated. As a result, I will not go into more detail at this point. However, if you would like more information, please let me know. I have attached a report that was presented to the Council last year (May, 2002) on the Join Hands project for information purposes. This memo was prepared in response to Join Hands request to eliminate the * matching funds requirement and extend the use of the CDBG funds last year. The Council decided against both the elimination of the matching funds requirement and the extension of the funding at that time. Thanks. cc: Frank Boensch; Sandra Holder May 13,2002 TO: CITY MANAGER VIA: HOUSING AND REDEVELOPMENT DIRECTOR FROM: MANAGEMENT ANALYST UPDATE ON JOIN HANDS PROJECT Mr. Frank Sorino, of the Join Hands organization, recently submitted a letter requesting that he be allowed to speak to the City Council at a future meeting regarding a couple of issues related to the organization’s use of CDBG funding to construct the proposed Join Hands Youth facility on Roosevelt Street. His letter has been forwarded to your office for scheduling on a future Council agenda, possibly May 21,2002. This memo provides information related to Mr. Sorino’s anticipated requests. At this-time, it is staffs understanding that Mr. Sorino will make two requests during his presentation to the Council. First, he will ask for a waiver of the matching funds requirement included as a condition to receiving the recently allocated $150,000 CDBG gradloan for the Join Hands project. Second, Mr. Sorino will ask the City Council to approve an additional one (1) year extension on the use of the $449,000 in CDBG funds which reflect the remaining balance of funds allocated to date for construction of the subject project. Matching Funds Requirement For CDBG program year 2002-03, the City Council approved an additional $150,000 in funding for the construction of the Join Hands Youth facility with the condition that the organization match the contribution dollar for dollar in cash. In-kind or volunteer professional services were not allowed to count as “match” for complying with this requirement. The Advisory Committee as well as the Council felt that it was important that Join Hands demonstrate the ability to raise some of the cash needed to construct the subject facility in order to receive any additional CDBG funding from the City. A concern was expressed that if Join Hands is unable to raise funds to construct the building that they will have a very difficult time raising funds for ongoing operations. The matching funds requirement, therefore, tests the public support for such a facility. As a reminder of past funding actions, the City provided CDBG funding to Join Hands to purchase the site for the proposed youth facility ($81,599) and has previously allocated construction funds ($492,978) for the facility. The additional $150,000 in CDBG funds approved for program year 2002-2003 will bring the total allocated by the City for construction of the facility to $642,978. Join Hands has expended approximately $44,000 (of the CDBG funds) to date on predevelopment costs. Based on a current bid, Join Hands believes that they now have adequate financial resources to construct the facility with the City’s CDBG funding allocated to date and the organization’s contributions (approx. $51,000). Rather than match the City’s $150,000 additional funding, however, Join Hands would like to receive the noted funds from the City with no matching fund requirement and use any additional funds that they raise or receive for start-up and operation of the facility. Join Hands has received a commitment for a maximum loan from another agency of $150,000. Join Hands intends to use all or a portion of this loan to meet the matching requirement of the City’s CDBG funds. If the matching funds requirement is removed as a condition of their receipt of the $150,000 in CDBG funds, Join Hands then intends to use the loan proceeds for start-up and/or initial operation of the facility. Recently, a couple of Council members have expressed some confusion regarding a letter sent by staff to Join Hands inquiring as to the repayment plan for their loan. The City has provided its funding in the form of a zero interest, deferred, forgivable loan. No repayment is required on this loan unless Join Hands ceases to operate for any reason, or Join Hands does not operate the facility according to its approved permit. The loan referred to in the subject letter did not relate to the City’s loan. It related to the additional (or separate) loan discussed in the above paragraph. As noted, Join Hands has a commitment for a loan which can be used to either meet the matching funds requirement for the City’s CDBG funding or to use for start-up or operation of the youth facility. Staff was concerned that Join Hands was considering accepting a loan (that must be repaid) with no repayment plan. Join Hands had requested a determination from staff as to whether or not the City would subordinate its loan to this second loan, and whether or not the loan (up to $150,000) could be used to meet the matching requirement for the additional $150,000 in CDBG funds. Staff indicated that more information was needed on the source of funding to repay the loan before we would make a recommendation on subordination or use of the loan proceeds to qualify as matching funds. In staffs opinion, it is not wise for Join Hands to take out a loan to pay for operating or matching funds requirements. The Girls Club faced a similar problem several years ago and nearly lost their facility to foreclosure because they accepted loans with a repayment plan that was unknown, uncertain and/or very risky. Because the City’s contribution to the project is substantial, staff felt that Join Hands should indicate its loan repayment plan before any recommendation could be made on this matter. Extension of Funding: Agreement The subrecipient agreements for the use of CDBG funds typically require that all CDBG funding be expended within one (1) year. Due to the length of time it has taken for Join Hands to develop its project, several extensions have been granted administratively to allow Join Hands to continue to hold their CDBG funding for construction of the subject project. Last year, staff indicated to Join Hands that we could no longer approve their extension of funding at an administrative level. The City Council approved an extension of the balance of current funds to June 30, 2002, and now must approve all additional extensions of the funding agreement. Although Mr. Sorino believes that adequate funds are committed to complete the project, Join Hands will not be able to use dl of the allocated CDBG funds by June 30, 2002. Therefore, Join Hands will need an additional extension from the Council to allow the organization to continue use of the funding into the next program year (2002-03). Staff believes that Mr. Sorino will be requesting the extension when he speaks to the Council. Operating: Plan For information purposes, it is important to note that the Join Hands project has also been conditioned to submit a construction budget for approval by the Housing and Redevelopment Director. The budget must be approved before any remaining CDBG funds may be released for construction purposes. The budget must show that adequate funds are available to complete construction of the facility. In addition, a five- year operating plan for the facility must also be approved by the Housing and Redevelopment Director prior to the release of additional funds. The construction budget and operating plan have not yet been submitted to the City for review. However, staff is concerned because Mr. Sorino has indicated in previous conversations that he hopes to repay the loan noted above and/or generate other revenue for operations by renting space or the entire facility to other organizations. Use of the facility by organizations other than Join Hands may require approval of an amendment to the project’s Redevelopment Permit by the Housing and Redevelopment Commission. Staff has indicated to Join Hands that we would not be willing to approve a construction budget or five-year operating plan at this time if plans to repay a loan for the project or generate operating income include a use that would require an amendment to the Major Redevelopment Permit. Staff anticipates that the use of the Join Hands facility will eventually be another issue that will be presented to the City Council for consideration. Please feel free to call me at x281 8 if you need any other information on the project or related funding, FRANK BOENSCH C: City Attorney Community Development Director