The City Council is scheduled to hold a public hearing on the City of Billings CDBG and HOME funding and annual Action Plan for FY2013-2014. 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 FY2013-2014 Action Plan and budget recommendations in preparation for HUD’s submission deadline for the annual Action Plan on May 15 (see Attachment A). This Action Plan represents the fourth year of the City's overall five-year Consolidated Plan covering FY2010-2014. An additional informational presentation was made during an April City Council Work Session.

1) Hold a public hearing and approve the allocation of CDBG and HOME funding and the FY2013-2014 Action Plan as recommended by Staff and the Community Development Board.

2) Hold a public hearing and approve the allocation of CDBG and HOME funding and the FY2013-2014 Action Plan based on alternative funding strategies as determined by the City Council (Please refer to the Funding Allocation Requirements section of the Council memo).

3) Not hold a public hearing and do not approve allocations of CDBG and HOME funding and the FY2013-2014 Action Plan and return funding to HUD.

The Congressional budget for CDBG and HOME has not been set to date for FY2013-2014. Staff estimates an 8.2% decrease in new funding for both programs.  However, program income and funding remaining from completed projects brings the totals projected for allocation for this fiscal year to $887,062 for CDBG and $550,210 for the HOME program, representing a slight increase in funding allocations from last year ($146,946). The increase in program income is primarily due to a $128,000 sale of Community Development Division land.

Priority-Based Budgeting: Recommendations reflect the results of the City’s priority budgeting process by allocating funding to Tier One programs; First Time Homebuyer and home repair programs. Tier Two programs recommended for funding include the Foreclosure Acquisition / Rehabilitation and the Billings Metro VISTA Project.

Federal revenues projected for the CDBG and HOME programs are provided through HUD (see Attachment B). Staff and Community Development Board recommendations are attached (see Attachment C) and comply with funding limitations.

INTRODUCTION
The Community Development Board has completed the recommendations and public input process for the allocation of CDBG and HOME funding for FY2013-2014. Also considered during this process is the City’s FY2013-2014 Action Plan, which addresses needs identified through the Housing Needs Assessment (2010) and the Analysis of Impediments to Fair Housing Choice (2013). The drafted plans can be viewed online at www.ci.billings.mt.us/CDreports.

The five-year Consolidated Plan for FY2010-2014 is required for participation by the City of Billings in HUD programs, including: CDBG and HOME; homeless programs funded under the McKinney-Vento Act; and the Housing for Persons with AIDS (HOPWA) program. The City of Billings does not receive McKinney-Vento or HOPWA funds, therefore the City's Consolidated Plan and Action Plans are focused on CDBG and HOME activities.

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 fashion utilizing available federal and non-federal resources. The Consolidated Plan and Action Plan serve as planning tools for the City’s CDBG and HOME programs and combines the planning and application requirements for the City’s HUD-funded programs. This allows program planning and citizen participation to take place in a comprehensive context covering both programs.

PROCEDURAL HISTORY
The City of Billings has been receiving CDBG funds since the mid-1970s and HOME funds since the early 1990s. These funds are provided by the federal government and are primarily targeted in Billings to address the affordable housing and neighborhood revitalization needs of the community.

In allocating CDBG and HOME resources, the Community Development Division facilitates an extensive 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 are then forwarded to the Community Development Board and recommendations are prepared for the City Council consideration. Task force input was requested in February and March on housing and neighborhood projects (see Attachment D). The Community Development Board prepared preliminary recommendations for the use of CDBG and HOME on April 2.

The City Council public hearing is required by the Federal government and is part of the 30-day public comment period on the program beginning March 22 and extending to April 22. The City Council is also scheduled to act on the CDBG and HOME programs during the April 22 meeting. An application will then be submitted by HUD’s May 15 deadline 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 prospectively); 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 for federal funds at risk.

The allocation of funding is restricted by the eligibility requirements for CDBG and HOME funding. Projects are focused on activities that promote new affordable housing or preserving the existing supply of affordable housing and neighborhoods where the affordable housing stock is located. The applications for housing and neighborhood activities are consistent with this focus. The Community Development Board reviewed the proposed projects and analyzed various alternatives for funding.

The City may not spend more than 20% of its CDBG funding for administration and planning type activities (estimated at $154,226), and no more than 10% of HOME funding for administrative purposes (estimated at $28,924). The City must also provide at least 15% of its annual HOME allocation (estimated at $48,000) for activities carried out by Community Housing Development Organizations (CHDOs). The City may, but is not required, to allocate up to 15% of CDBG resources ($106,903) to nonprofit organizations or other projects classified as public service activities, ranging from daycare to crime prevention activities.

FUNDING RECOMMENDATION

Recommendations from Staff and the Community Development Board reflect the following considerations:

• Long-term sustainability of operating loan programs rather than issuing grants, which will never be recouped by the City to use in future projects. 
   
• If the City chooses to fund grant programs generating no program income, the likelihood of continuing Community Development activities would substantially diminish.

Funding recommendations include the following for CDBG:

• Administration set at the limit for the program; 20% of new allocation and eligible program income - estimated at $154,226.
   
• VISTA program administrative support set at $50,000 to assist with implementation costs as a Public Service activity.
   
• $350,000 for the Housing Rehabilitation Loan Program. This program has no forgiveness feature. Staff and Community Development Board recommend the following changes to the Subordination policy to increase the City’s return on investment:
  • Homeowners must provide financial documentation demonstrating household income at or below 80% of the current Area Median Income.
  • Subordination may not be requested within three years of Rehabilitation Loan origination.
  • Requires submittal of an appraisal report. Previous policy allowed for a market analysis to be submitted in lieu of an appraisal if not required in a refinance.
     
• $250,000 to the Foreclosure Acquisition / Rehabilitation Loan Program. This program furthers the City’s Neighborhood Stabilization Program to purchase, rehabilitate and sell foreclosed homes to low income households. This program has no forgiveness feature.
   
• Remaining CDBG funds to be allocated to the Manufactured Home Loan Repair Program; estimated at $82,836. This program has no forgiveness feature.
   
• No funding allocation for the Special Assessment Grant program, as the average annual expenditure for this program has been under $30,000 since 1994. Further, the program must be administered as a grant program through CDBG and this no longer fits the program income model recommended by the Community Development Board.

Funding recommendations include the following for HOME:

• Administration set at the limit for the program; 10% of new allocation and eligible program income - estimated at $28,924.
   
• Allocation of 15% of new HOME program funding set aside for Community Housing Development Organizations - as per funding regulation; estimated at $48,000 and allocated to Homeword for the Pheasant Home affordable housing project in the Billings Heights area.
   
• Remaining HOME funds to be allocated to the First Time Homebuyer Loan Program; this program has no forgiveness feature. Funding level is currently estimated at $473,286.

APPLICATIONS
Application summaries for activities proposed this year are included as Attachment E. CDBG and HOME resources represent the main federal commitment to communities to address the need to preserve the existing supply of affordable housing and promote the development of new affordable housing. Few other federal, state or local resources are available to address these housing needs.

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 Action Plan for FY2013-2014.

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, first time homebuyer, etc. Full descriptions of available programs can be found online:
www.ci.billings.mt.us/comdev.

2. Neighborhood Task Forces – The task forces communicate neighborhood needs and solutions to those needs utilizing both CDBG and HOME resources. Task forces are also asked to prioritize housing and neighborhood applications. These priorities have been provided in Attachment D for your review. Funding recommendations are in alignment with Task Force priorities including emphasis on housing repair and first time homebuyer programs.

3. The Community Development Board - As an advisory body to the City Council, provides detailed oversight to both the CDBG and HOME programs throughout the year and facilitates an extensive process to prepare recommendations for the City Council consideration.

Projects proposed for consideration are consistent with the goals and objectives of the FY2010-2014 Consolidated Plan and the drafted FY2013-2014 Action Plan for the use of CDBG & HOME resources in Billings. The following strategies have been adopted by the City Council in the five-year Consolidated Plan to address Billings’ housing and community development needs:

Strategy A. Promote the preservation of the existing supply of safe, affordable housing in the community.

Strategy B. Promote new affordable housing opportunities.

Strategy C. Work as an active partner with non-profits, neighborhood groups, and others to address housing and community development specific to lower income and special needs households.

Strategy D. Promote the preservation and revitalization of the community’s older neighborhoods.

Strategy E. Provide assistance to agencies serving lower income households and special needs populations, particularly the homeless, public service activity funding to assist the homeless, the elderly, and those with disabilities.

Additional information regarding each strategy is located in Attachment A. The FY2010-2014 Consolidated Plan, the drafted FY2013-2014 Action Plan, the 2010 Housing Needs Assessment and 2013 Analysis of Impediments to Fair Housing Choice can be found online: www.ci.billings.mt.us/CDreports.

City staff and the Community Development Board have made recommendations for CDBG and HOME budget allocations for FY2013-2014. The annual Action Plan for FY2013-2014 has been drafted and is ready for Council adoption.

The City Council is asked to consider the input that is received and make a final decision on FY2013-2014 CDBG and HOME budgets and FY2013-2014 Action Plan.