Consideration and Adoption of Resolution No. 2013-07: A resolution approving the City of Flagstaff 2013/2014 Annual Action Plan and authorizing its submission to the U.S. Department of Housing and Urban Development (HUD).

- An Annual Action Plan (AA Plan) is a HUD required document that specifies how the annual allocation of Community Development Block Grant (CDBG) funds will be spent.
- The submission of the AA Plan, is required to maintain the City of Flagstaff’s annual entitlement allocation of CDBG and other federal funds. The AA Plan is due to HUD on May 15, 2013.

Subsidiary Decisions Points: 
Staff is presenting Community Development Block Grant (CDBG) funding options to City Council at the April 9 work session for discussion and consideration.

HUD has not yet released the 2013/2014 CDBG allocation, but has issued guidance to expect a 10% reduction from the 2012/2013 allocation, estimated at approximately $479,000. In addition, the City of Flagstaff is able to combine program income and reallocated funds from previous years to increase the funds available for allocation. Total program income and reallocated funds will equal $114,205 for an estimated total of $593,205 available for the 2013/2014 allocation. Should the City of Flagstaff receive a larger than estimated CDBG allocation, those funds will be distributed evenly among the activities funded. Conversely, should the City receive less than estimated, the activity funding will be reduced accordingly.

Effective Governance - The City of Flagstaff is considered an entitlement community and receives an annual allocation of CDBG funding. CDBG funds over the past 14 years have provided benefit to thousands of Flagstaff residents.

No

A)  Approve Resolution No. 2013-07 and authorize its submission to HUD.
B)  Modify the AA Plan and authorize its submission to HUD at a later time.
C)  Not approve Resolution No. 2013-07, not submit the AA Plan to HUD and risk losing CDBG funding for 2013/2014 and possibly future allocations.

On January 8, 2013 staff received Council guidance to conduct a formal public proposal process to assess the community need for CDBG funds. In addition, Council asked staff to research possible infrastructure options within target neighborhoods. Six external agency proposals were received along with two City of Flagstaff requests.  

Housing staff is responsible for determining whether a proposed activity is eligible and for conducting a risk assessment of the project and applying agency. Federal funds require administrative knowledge and capacity to ensure compliant and timely expenditure of funds. A committee comprised of three community representatives (two non-profit representatives and one target neighborhood representative) and two City staff met to review the external proposals and rank them by consensus. Rankings are created to primarily serve as a risk and benefit assessment and are a crucial part of the staff recommendations forwarded to City Council. Below is a list of the proposals in ranking order. The proposals are divided between Housing/Economic Development and Public Service as they have two separate funding categories and different criteria. Internal City of Flagstaff requests are not ranked (NR) because the City does not have to compete for the use of the funds. A comprehensive Proposal Book that included each of the below proposals was distributed to Council the week of April 1, 2013.

Housing/Econ Dev. Activities	Proposal/Project	Request	Ranking
Bothands, Inc.	Financial Assist. & Counseling	$140,000.00	93
Bothands, Inc.	Job Creation	$70,000.00	86
Catholic Charities	Min Rehab. of E.Shelt/Trans. Hsg.	$53,000.00	77
City of Flagstaff	Owner Occupied Housing Rehab.	$140,000.00	NR
City of Flagstaff	Infrastructure*	$80-$475K	NR

Public Service Activities	Proposal/Project	Request	Ranking
Northland Hospice	Hospice Operational Assistance	$20,000.00	103
Catholic Charities	PATH Operational Assistance	$30,000.00	85
DNA People's Legal Services	Housing Legal Assistance	$29,114.00	76

*Infrastructure options for Council consideration include:

1. Arroyo Park Roadway Access Improvements - $80,000-$150,000: Roadway access improvements to the park access road and parking area (currently dirt).
2. Sunnyside Alley Waterlines - $475,000: Replace existing 2” waterline with 8” main in the alley located between Main St. and First St., extending north from Sixth Ave. to Felice Ave. (approximately 1400 l.f.)
3. Sunnyside Sidewalk Infill - $250,000: Construct new sidewalk behind existing curb & gutter along both sides of Spruce Ave. (1,150 l.f.), and both sides of Third St. (1,350 l.f.) between Second Ave. and Fifth Ave.
3. Joel Montalvo Baseball Field Parking Lot - $225,000; A.C. Paving of the existing dirt parking area (290 c.y.) north of the ball field and west of the Old Fire Station #2.

HUD requires that funded activities implement strategies from the Consolidated Plan.  All recommended activities further this goal.  Also important are project eligibility and viability.  CDBG funds must be used to further the CDBG Primary Objective to develop viable urban communities by providing decent housing, a suitable living environment and expanded economic opportunities principally for low and moderate-income persons (80% of the AMI = $49,700 currently for a family of four) in Flagstaff.

HUD has two funding caps with regard to the use of CDBG funds. Public Service Activities are capped at 15% of the allocation and Program Administration is capped at 20% of the allocation. The rest of the available funding can be spent on Housing/Economic Development Activities.

Staff will be bringing the below funding options to City Council for discussion and consideration at the April 9 work session. 

Public Service Funding Recommendation
Federal CDBG regulations do not allow more than 15% of funds to be spent on Public Service Activities; approximately $73,000 estimated for Program Year 13/14. Due to these requirements below is the funding option for the Public Service Category:

Housing/Economic Development Funding Options
There is an estimated $422,205 in CDBG funds available for Housing/Economic Development Activities.  At the January 8 meeting it was unclear if the majority of Council was in favor of the use of CDBG for infrastructure in Target Neighborhoods. For this reason staff is providing two funding options. Option A funds all of the Housing/Economic Development Activities including infrastructure. Option B funds all activities at the requested amounts, but does not fund infrastructure. In addition, Option B leaves $19,205 unallocated to a specific activity. If Option B is chosen, Council may choose to let this money remain unallocated until the next Annual Action Plan cycle in January of 2014, or may choose to allocate it to one of the below Housing/Economic Development Activities (as the Public Service category is already funded to the 15% cap).

Housing/Econ Dev. Activities	Proposal/Project	Request	Option A	Option B
Bothands, Inc.	Financial Assist. & Counseling	$140,000.00	$122,000.00	$140,000.00
Bothands, Inc.	Job Creation (Economic Development)	$70,000.00	$62,000.00	$70,000.00
Catholic Charities	Min Rehab. Of E.Shelt/Trans Hou.	$53,000.00	$43,000.00	$53,000.00
City of Flagstaff	Owner Occupied Housing Rehab.	$140,000.00	$100,000.00	$140,000.00
City of Flagstaff	Infrastructure	$80-$475K	$95,205.00	$0
		Total Avail.	$422,205.00	$403,000.00
		Unallocated	$0.00	$19,205.00

The attached Resolution 2013-07 has been updated to reflect City Council direction after the April 9, 2013 work session.  The 2013/2014 CDBG recommendations are based on an estimated total of $593,205 in available funding and an estimated City of Flagstaff indirect rate of 7.19%. 

• The 2013/2014 estimated allocation is $479.000, a 10% decrease from 2012/2013.  This decrease is due to an overall decrease in Federal CDBG funding.
• In addition to the annual allocation, there is $14,205 available from current year program income and $100,000 in reallocated funds for a total of 593,205 available to allocate. Program income is gathered through the repayment of loans of the Owner Occupied Housing Rehabilitation and Homebuyer Financial Assistance programs. Reallocated funds primarily derive from activities that complete their scope of work but do not spend down all of their funds and have accumulated over the past few years.
• Federal CDBG regulations do not allow more than 15% of funds to be spent on public service activities; approximately $73,000.
• CDBG administration and compliance are limited to 20% of the allocation; approximately $98,000.
  • Of the $98,000, an estimated 7.19% or $34.440 will be required for the City’s indirect allocation, leaving 12.81% or $63,560 to be utilized for compliance and administration associated with the grant. 

CDBG funds, leveraged with other private and public funds over the past 14 years, have resulted in benefits to thousands of Flagstaff residents. 

The Annual Action Plan process has two opportunities for Community Involvement.
Involve - The public participation process is a requirement of the Plan and encourages public involvement.
Collaborate - The ranking committee is an example of public participation at the collaboration level.