To: Honorable Mayor and Members of Town Council
From: David L. Corliss, Town Manager
Matt Gohl, Special Projects Manager
Title
Discussion/Direction: Community Development Block Grant (CDBG) Funding Consideration
Body
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Executive Summary
The Town of Castle Rock was notified by US Department of Housing and Urban Development (HUD) of its eligibility to receive Community Development Block Grant (CDBG) funds beginning in fiscal year 2021 (Attachment A). The 2021 distribution amount is unknown at this time, however, the Town’s allocation of CDBG Funds for fiscal year 2020 was estimated to be $222,000.
Additionally, the Town was notified by Douglas County of its intent to reinstate the CDBG program (Attachment B). In the past, both Douglas County and the Town deferred CDBG entitlement due to provisions for Affirmatively Furthering Fair Housing (AFFH). HUD proposed a rule change to AFFH in January 2020 that addresses, among other things, local government concern of federal overreach and allows localities to AFFH in a manner most befitting the unique area.
In order to receive CDBG Funds, The Town must accept its entitlement status no later than September 15, 2020 in order to participate on its own. The Town can also choose to participate with Douglas County. HUD requires that the Town notify Douglas County by May 15, 2020. Or, the Town can choose to defer its entitlement status and thereby not participate in the CDBG program.
Following is further discussion regarding the CDBG program and the proposed changes to AFFH.
Discussion
The CDBG program is focused on providing benefit to low and moderate income persons in the community. The Town deferred entitlement status in 2015, 2017 and 2019. The 2019 staff memo is included in Attachment C for your reference. Douglas County ended its entitlement status in 2016. The Town and County were concerned with the possibility of reduced local government zoning/planning control. This concern stems from the stipulation that HUD funding recipients certify to Affirmatively Further Fair Housing and the associated federal definition and rules.
The current rule for AFFH was approved in 2015. A proposed rule change to AFFH (Attachment D) was presented by HUD in January 2020 with public comment ending in March 2020. At this time, the proposed rule has not been adopted and the timeline for that is uncertain.
AFFH Rule Change
The proposed rule changes the definition of AFFH, develops comparison metrics and requires jurisdictions to certify that they will AFFH by taking steps over the following five years. This change is proposed because “HUD has determined that the current regulations are overly burdensome to both HUD and grantees and are ineffective in helping program participants meet their reporting obligations.” Justification for the change includes:
1. Under the existing 2015 rule, there was a high failure rate of entities Assessment of Fair Housing (AFH) and duplication of efforts (63% were not accepted or only accepted after HUD required revisions).
2. Administration of the 2015 rule was burdensome to HUD. HUD spent $3.5 million on technical assistance to 49 jurisdictions.
3. The 2015 rule was burdensome because HUD required the same process for all jurisdictions, rather than allowing a customized approach given unique conditions of each locality.
4. The existing rule focused more on planning and process than on results.
5. The AFH required completion of an extensive questionnaire that was difficult to use and did not include all relevant factors.
In order to address these issues, the proposed rule includes changing the definition of AFFH, the AFFH Certification, comparison metrics and a change to annual reporting.
- AFFH Definition
o The current definition of AFFH is “taking meaningful actions that, taken together, address significant disparities in housing needs and in access to opportunity, replacing segregated living patterns with truly integrated and balanced living patterns, transforming racially and ethnically concentrated areas of poverty into areas of opportunity, and fostering and maintaining compliance with civil rights and fair housing laws.’’
o The proposed definition is ‘‘advancing fair housing choice within the program participant’s control or influence.’’
o According to the rule change information in Attachment D, this definition change “avoids a federal government directive for local action that does not align with the statutory directive or that goes beyond the authority of subject jurisdictions.” It allows a more tailored approach for local needs and emphasizes fair housing choice, which is further defined in the proposed rule.
- AFFH Certification
o Current certifications do not specify how jurisdictions will AFFH. Under the proposed rule, jurisdictions need to submit at least three concrete goals to AFFH in the next five years. These goals can be modified in future years if deemed unattainable. This allows for jurisdictions “to act as they deem necessary to achieve their results while allowing HUD to avoid micromanaging localities.” Additionally, the proposed rule states that while HUD views changing zoning laws as a useful and appropriate tool for AFFH, however, no jurisdiction may have their certification questioned because they do not choose to undertake zoning changes.
- Comparison Metrics
o HUD will develop a system using publicly available metrics to score and rank CDBG receiving entities with a goal of judging entities with other similar entities considering factors such as job growth and the housing market. This would be further developed as part of the final rule. Additionally, HUD would use data to encourage/incentivize successful programs. The intent is not to punish unsuccessful strategies, but encourage sharing lessons learned across entities.
o Comparisons would be publicly available and would share successful programs to help other jurisdictions.
- Annual Performance Reports/Amendments
o Duplication of efforts would be eliminated by combining AFFH certification with the annual performance review process. HUD believes this would provide them with the necessary oversight without creating undue burden on reporting entities.
Administrative Impact
As previously noted, the proposed rule change would eliminate duplication of efforts with the AFFH certification process. This change reduces the time required to administer the program. Hours needed to prepare the required consolidated plan are expected to increase by about 3% to an average of 320 hours per entity. However, elimination of the previous assessment tool eliminates roughly 182 hours per entity that were required under the 2015 rule.
Budget Impact
The actual award amount, should Town Council accept Castle Rock’s entitlement status for fiscal year 2021, will be determined later in the year. However, the FY2020 estimated award was $222,000 and it is reasonable to assume future allocations would be comparable. Up to 20 percent of grant proceeds can be used toward administrative support of the program. Additionally, funding for this program requires Congressional appropriation and could change in the future.
Recommendation
Town Council has four options for responding to recent CDBG notifications. The Town can accept entitlement status and proceed separately from Douglas County, accept entitlement status and partner with Douglas County, perform additional research or defer entitlement status:
1. If Town Council chooses to accept 2021 entitlement status and proceed independently, the Town must notify the County by May 15, 2020. After notifying the County, the Town would have until September 15, 2020 to accept CDBG entitlement status. Proceeding independently from the County will allow additional time to prepare staff resources and further research reporting and other CDBG requirements. After accepting entitlement status, the Town will be required to submit a Consolidated Plan to HUD between November 15, 2020 and August 16, 2021. The Consolidated Plan includes a housing and homeless needs assessment, housing market analysis, strategic plan action plan and certifications. As noted previously, up to 20 percent of grant proceeds can be used to fund administrative costs.
2. Acceptance of entitlement status and partnering with Douglas County would require development and adoption of an Intergovernmental Agreement (IGA) by June 29, 2020. According to the letter in Attachment B, the IGA “generally stipulates you will participate for the three-year cycle of the program and grants the County the authority to administer the CDBG program within your jurisdiction.” Additionally, the Town would participate in the creation of the Consolidated Plan for Douglas County which would outline how CDBG funds would be spent in the county. This plan would be provided to HUD by August 16, 2021.
3. Town Council can direct staff to conduct further research on this issue and bring back for Council action at a later date. Since the deadline to respond to Douglas County is May 15, 2020, this option would also require notification to the County identifying that the Town will not partner with the County on CDBG efforts.
4. Town Council can choose to defer entitlement status and thereby choose to not receive CDBG grant funding. Notification of deferral needs to be provided to HUD by September 15, 2020.
Staff recommends accepting entitlement status and proceeding separately from Douglas County (Option 1). This option provides community support while allowing adequate planning and preparation time to successfully implement the CDBG program.
Possible Motions
Below are possible motions corresponding with the options outlined above.
Option 1: “I move to direct staff to notify HUD of the Town’s intent to accept entitlement status and to notify Douglas County of the Town’s intent to proceed independently.”
OR
Option 2: “I move to direct staff to notify Douglas County of the Town’s intent to accept entitlement status and proceed with development of an IGA between the Town and Douglas County for coordination and administration of the CDBG program.”
OR
Option 3: “I move to direct staff to conduct further research on this issue and bring information back for later Council action and to notify Douglas County that the Town will not partner with them on CDBG efforts at this time.”
OR
Option 4: “I move to direct staff to notify HUD of the Town’s intent to defer entitlement status.”
Attachments
Attachment A: 2021 Castle Rock CDBG Entitlement Letter
Attachment B: Douglas County Letter
Attachment C: 2019 Staff Memo
Attachment D: AFFH Proposed Rule Change