REPORT TO COUNCIL
SUBJECT
Title
Action to reallocate Community Development Block Grant funds and to amend the Contribution Agreement with Riverwood Grove Associates to Increase the Not to Exceed Community Development Block Grant (CDBG) Funding Amount From $350,000 to $950,000.
Report
BACKGROUND
On May 9, 2023, City Council approved the 2023/2024 Annual Action Plan (RTC# 23-181) which recommended Community Development Block Grant (CDBG) funding for Riverwood Grove apartments (also referred to as MidPen) for energy efficiency improvements in the amount of $350,000. The Riverwood Grove complex consists of 71 affordable rental apartments. The property manager is planning to eliminate gas usage at the property to conserve energy, reduce environmental impacts, and to improve indoor air quality for residents. This project helps address the City’s Consolidated Plan goals of Improvements to Affordable Housing for the benefit of low/moderate income residents. The project will help eliminate gas usage at the property by making upgrades to the electrical panel systems. This will facilitate switching major heating and cooling systems to electric. This upgrade has been requested by Riverwood Grove management to lower operating costs over time.
On August 27, 2024, City Council approved the Sobrato Family Living Center rehab project (RTC# 24-612) for $843,000. This project was for bathroom, kitchen, windows and balcony rehabilitation. The project experienced delays and some tenants were not willing to temporarily relocate for the rehabilitation process. It became apparent that this project was not viable and that CDBG funds would need to be reallocated quickly. The agreement was not finalized, and staff looked where to pivot the money for timely spending.
Due to slow spending of CDBG funds, the Department of Housing and Urban Development (HUD) required the City to create a CDBG Timeliness Workout Plan. Staff prepared a spending plan, and HUD approved it December 2024. The Sobrato project was a large part of this spending plan. When it was determined that the Sobrato project was no longer viable, staff looked to move funds to another active affordable housing rehabilitation project. It was determined that the Riverwood Grove project was quickly moving forward and in need of more funding above the original $350,000. It is staff’s recommendation that an additional $600,000 be reallocated to the Riverwood Grove project from the Sobrato Family Living Center project. The remaining balance of $243,000 will be redirected to the NCIP home rehabilitation program.
DISCUSSION
The larger electrification project at Riverwood Grove includes two phases. The first phase involves upgrading electrical panels and the second phase involves replacing water heaters, HVAC, and other gas-powered equipment. Initially, Riverwood Grove Associates intended to use CDBG funds together with Silicon Valley Power (SVP) Public Benefit funds via a custom multifamily electrification pilot rebate program to complete phase one. By adding more CDBG funds to phase one for timely spending, SVP has agreed to apply the Public Benefit funds to phase two of the project.
In addition, the scope of work has increased to include a feeder upgrade. If the feeder is not upgraded concurrently with the sub-panel upgrade, it will incur additional costs. It is cost efficient to install these components at the same time. The proposed amendment to the Riverwood Grove Associates agreement is included as Attachment 1 and includes this increased scope of work.
The amount being added to this project exceeds the City Manager’s delegation of authority which is why this is being brought forward for City Council approval. Staff still recommends a delegation of authority to the City Manager to increase this contract amount if legitimate cost increases arise and if capital dollars from CDBG funds are available, although the need for additional funds beyond the proposed amendment is not expected. Any increase to this project budget would come from CDBG capital funds and would not reduce CDBG funding for public service programs.
Moving funds into this project is the most efficient way to spend accumulated CDBG capital dollars. It is critical that these funds are utilized quickly if the City is to achieve the spending goals in the CDBG Timeliness Workout Plan approved by HUD in December 2024.
ENVIRONMENTAL REVIEW
The action being considered qualifies as a Categorical Exemption per the California Environmental Quality Act (CEQA) section 15301 (e)(1), Existing Facilities in that the projects are limited to repairs and upgrades to systems serving existing residential units.
FISCAL IMPACT
This project will be funded using federal HUD CDBG entitlement funds. This project budget was carried over as part of the FY 2023/24 Budget Year-End Report, approved by the City Council on December 3, 2024.
COORDINATION
This report has been coordinated with the Finance Department and City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov>.
RECOMMENDATION
Recommendation
1. Determine the project to be exempt from the California Environmental Quality Act (CEQA) pursuant to the Categorical Exemption set forth in Section 15301 (e)(1) (improvements to Existing Facilities) in that the project is limited to repairs and upgrades to systems serving existing residential units;
2. Approve and authorize reallocation of six hundred thousand dollars ($600,000) of CDBG Funds from the Sobrato Family Living Center project to the Riverwood Grove apartments project;
3. Approve and authorize the City Manager to execute Amendment No. 1 to the Contribution Agreement with Riverwood Grove Associates to increase the not to exceed CDBG Funding Amount From $350,000 to $950,000 and repeal and replace Exhibits A, B, H, I and J, on the terms presented, in final forms approved by the City Attorney;
4. Authorize the City Manager to execute other necessary documents to effectuate this amendment, including the reconveyance of the original deed of trust for $350,000 after execution of the new promissory note and deed of trust for $950,000; and
5. Delegate authority to the City Manager to amend the Contribution Agreement with Riverwood Grove Associates to increase the not to exceed contract amount by up to $250,000 if City staff approved project cost increases arise, and if CDBG capital funds are available in final forms approved by the City Attorney.
Staff
Reviewed by: Afshan Hamid, Director of Community Development
Approved by: Jovan Grogan, City Manager
ATTACHMENTS
1. Amendment No. 1 to Riverwood Grove Agreement
2. Riverwood Grove Associates Agreement