The City Council is scheduled to hold a public hearing and take action on the FY2019-2020 Annual Action Plan and the allocation of Community Development Block Grant (CDBG) and HOME Investment Partnerships (HOME) program funding. The public hearing is a mandatory condition to receive U.S. Department of Housing and Urban Development (HUD) entitlement funding. City Council action is needed to approve the Annual Action Plan and budget recommendations in preparation for HUD submission (see Attachment A).

City Council may:

• Hold a public hearing and approve the allocation of CDBG and HOME funding, and the FY2019-2020 Action Plan as recommended by Staff and the Community Development Board.
• Hold a public hearing and approve the allocation of CDBG and HOME funding, and the FY2019-2020 Action Plan based on alternative funding strategies as determined by the City Council (please refer to the Funding Allocation Requirements section of this Council memo).
• Not hold a public hearing and do not approve allocations of CDBG and HOME funding, and the FY2019-2020 Action Plan, and return funding to HUD.

Staff anticipates an approximate allocation of $650,000 in new CDBG and $345,000 in HOME funding to the City of Billings for use in affordable housing and other projects benefiting low income residents. The final HUD allocation amount has yet to be determined, and significant cuts or elimination of programs may occur. Additional CDBG and HOME funding is anticipated through loan repayments in programs such as First Time Home Buyer and Housing Rehabilitation. The Corporation for National and Community Service has awarded the City of Billings approximately $500,000 in federal funds to support the Billings Metro VISTA Project contingent on the City’s CDBG allocation supporting the program.
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.Estimated federal revenues for CDBG and HOME programs and Staff / Community Development Board recommendations are outlined in Attachment 2 and also discussed in the Background portion of this memo. Recommendations comply with funding limitation requirements. Any program income received will be allocated on a close- and shovel-ready basis in previously approved programs, including First Time Home Buyer, Housing Rehabilitation, Foreclosure Acquisition / Rehabilitation, Manufactured Home Repair, Affordable Housing Development, and the Billings Metro VISTA Project.  

Introduction
The five-year Consolidated Plan for FY2015-2019, approved by City Council in April 2015, is required for participation by the City of Billings in HUD programs; CDBG and HOME. The purpose of the Consolidated Plan is to identify the housing and community development needs of low-income households in Billings and develop strategies for addressing those needs in a comprehensive, coordinated manner utilizing available federal and non-federal resources. The Plan addresses current housing needs and the priorities identified in the Plan’s Housing Needs Assessment, Market Analysis and the 2013 Analysis of Impediments to Fair Housing Choice, as required by HUD. The assessment and analysis documents can be viewed online at www.CityofBillings.net/CDreports.
 
The City is also required to prepare and submit Annual Action Plans in alignment with priority needs identified in the five-year Consolidated Plan. The Community Development Board has completed the public input process and funding allocation recommendations for the FY2019-2020 Annual Action Plan.
 
Procedural History
The City of Billings has been a recipient of CDBG funds since the mid-1970s and HOME funds since the early 1990s (approximately $45 million). These funds have been provided and monitored by the federal government and must be primarily targeted to address community affordable housing for low income citizens and poverty-impact needs in Billings.
 
To allocate CDBG and HOME resources, the Community Development Division and Board facilitated the process to gather public input on the use of federal funds. Applications were available at the beginning of December and due at the end of January. Applications were then forwarded to the Community Development Board and recommendations were prepared for City Council consideration. The Community Development Board prepared recommendations for the use of CDBG and HOME funds on April 2, during the Board’s routine monthly meeting.
 
The City Council public hearing is required by HUD and is part of a 30-day minimum public comment period beginning March 23 and extending to April 22. The City Council is also scheduled to act on the CDBG and HOME programs during the April 22 meeting. The Annual Action Plan will then be submitted to HUD for review and, pending HUD approval, the program year will begin July 1.
 
Funding Allocation Requirements
Allocation recommendations conform to pre-determined spending requirements on several categories including: CDBG and HOME administration caps (maximum of 20% and 10% of new funding respectively); public service caps (up to 15% of new CDBG funding); and Community Housing Development Organizations (at least 15% of new HOME funding). Changes made out of compliance with federal spending requirements would place the City’s entitlement status for federal funds at risk.
 
The allocation of funding is restricted by eligibility requirements for CDBG and HOME and must meet pressing citywide community needs as identified in the Consolidated Plan; affordable housing, housing choice, and poverty-impact. HUD policy prohibits the use of federal funds to supplant local government funds on projects communities typically underwrite, regardless of whether federal grant dollars are available.
 
FY2019-2020 Estimated Budget Recommendations
Estimated CDBG budget recommendations include the following:

• Administration set at the maximum cap; $130,000.
• Housing Rehabilitation program support totaling $100,000.
• Foreclosure Acquisition / Rehabilitation support totaling $200,000.
• VISTA program support set at $75,000, which will leverage approximately $500,000 in grant funds from the Corporation for National and Community Service.
• Remaining CDBG funds will be allocated to the First Time Home Buyer program; $145,000.

Estimated HOME budget recommendations include the following:

• Administration set at the maximum cap; $34,500.
• 15% of new HOME program funding set aside for Community Housing Development Organizations - as per federal regulation; $51,750.
• Remaining HOME funds will be allocated to the First Time Homebuyer Loan Program; $258,750.

Staff will be required to adjust the funding amounts allocated to each program if and when HUD notifies the City of grant awards. New CDBG and HOME funding and incoming revenues will be ultimately allocated on a close- and shovel-ready basis in order to ensure timely use of federal funds.
 
Program Income: Additional program income and revenues received will be allocated on a close / shovel-ready basis in previously approved programs. Program income must be allocated, committed and expended prior to drawing CDBG and HOME entitlement funds as per federal requirement.
 
Public Comment: Comments of the speakers at the public hearings may relate to funding amounts awarded, activities prioritized for funding with lower federal revenue allocations, and general comments regarding the Annual Action Plan for FY2019-2020.
 
Proposed Program Elimination: Over the past several years, federal budgets have included the proposed elimination of CDBG, HOME and AmeriCorps VISTA. Conversely, the Consolidated Appropriations Act was signed on February 15, 2019 with level funding for CDBG and an eight percent decrease in HOME. If federal funding programs are reduced or eliminated, the City’s federal Community Development programs would also be reduced or eliminated. 

Stakeholders for CDBG and HOME programs include:

1. Program Recipients - The City serves low income households through a variety of affordable housing programs such as home repair, home buyer, etc. Full descriptions of available programs can be found online at www.CityofBillings.net/comdev.

2. The Community Development Board - As an advisory body to the City Council, the Board provides detailed oversight to both the CDBG and HOME programs throughout the year. The Board also facilitates an extensive public input process to prepare recommendations for City Council consideration. Six of nine total Community Development Board members are representatives of low-income neighborhoods either by residence or task force delegation, ensuring low-income citizen involvement of planning and allocation processes.

3. Neighborhood Task Forces - Task forces have historically been consulted regarding housing and neighborhood programs relative to community need. Funding recommendations continue to be in alignment with task force priorities including emphasis on housing repair and home buyer programs. Direct task force involvement has been reduced on an annual basis since the CDBG and HOME programs in Billings have remained the same for the past 7 years.

4. Non-Profit Organizations - Community organizations serving those experiencing poverty are supported by the Billings Metro VISTA Project. AmeriCorps VISTA members assist in the provision of needed services to those in need.

Consolidated Plan: Projects proposed are consistent with the goals and priorities of the FY2015-2019 Consolidated Plan for the use of CDBG & HOME resources in Billings. The following strategies have been approved by the City Council in the Consolidated Plan to address Billings’ housing and community development needs:
 
Strategy A. Preserve existing affordable housing supply, particularly in older neighborhoods, to support the stability of the current affordable housing stock.
Strategy B. Create affordable housing opportunities to further improve access to and quality of the affordable housing stock.
Strategy C. Expand housing choice options for existing and potential new residents to foster stable, socio-economically diverse neighborhoods citywide.
Strategy D. Support housing and community development specific to lower income and special needs households through poverty-impact initiatives.  
 
Additional information regarding each strategy is located in the drafted FY2019-2020 Annual Action Plan; Attachment A. The Consolidated Plan, including the Housing Needs Assessment and Market Analysis, Analysis of Impediments to Fair Housing Choice, and the drafted FY2019-2020 Action Plan can be found online: www.CityofBillings.net/CDreports.
 
City Council Strategic Plan: Projects align with the Council’s 2015-2019 Strategic Plan (Prior to the 2019-2020 City Council Priorities) in the following strategies and objectives:

• Comprehensive, Orderly Growth: Develop, preserve and revitalize residential neighborhoods that are safe, attractive and provide diverse, affordable housing.
  • Dedicate resources to rehabilitate substandard housing via the provision of loan financing to lower income households in order to preserve and revitalize neighborhoods city-wide.
  • Dedicate resources to develop new affordable housing in all neighborhoods to promote inclusion, diversity, equal opportunity and access.
  • Dedicate resources to acquire and rehabilitate vacant and/or foreclosed properties in order to promote infill, stabilize neighborhoods, and prevent decline.
• Sustainable Economic Development: Provide a safe, healthy and attractive place to live and work; offer quality housing choices, accessible amenities and an environment that provides a desirable quality of life.
  • Dedicate resources to support homeownership and home repair opportunities through loan financing to low income households.
  • Support initiatives to alleviate poverty and promote economic opportunity through Welcome Home Billings, the city’s ten-year plan to impact homelessness and the AmeriCorps Volunteers in Service to America (VISTA) program.
• Involved, United Community: Expand citizen participation in boards, commissions and other volunteer capacities to improve public understanding of and involvement in government functions.
  • Provide national service volunteer opportunities through the AmeriCorps VISTA and the Billings Metro VISTA Project.

City staff and the Community Development Board have made recommendations for CDBG and HOME budget allocations, and the FY2019-2020 Annual Action Plan is ready for Council adoption. The City Council is asked to consider public input received and make a final decision on the FY2019-2020 Annual Action Plan and accompanying CDBG and HOME budget.