CDBG: California’s Redesign and Public Outreach Moira Monahan CA Department of Housing and Community Development (HCD) Chief, Operations Branch

The Current CDBG Program Annual allocation is about $27 Million for approximately 165 jurisdictions. Funds distributed via an annual competitive NOFA. All activities eligible, including Planning and Technical Assistance: Per CA statute, 51 percent of funds must benefit housing or public improvements in support of housing. Notes California Statute requires 51% percent of CDBG funds to benefit Housing or Infrastructure in Support of Housing 4: The Native American Set-aside is for non-federally recognized tribes

If set-asides are made available but not requested, they may be repurposed for other activities. Required Set-Asides Colonias (required by Section 916 of the National Affordable Housing Act) Economic Development (30% of annual funds)* Non-federally recognized Native American Tribes* Re: Colonias- Only Arizona, California, New Mexico and Texas are subject to the Colonias requirements in Section 916. * Required by State Statute

Current Program Challenges Federal funding uncertainties. California has the slowest expenditure rate. California offers a wide variety of activities without adequate monitoring. Size of California and diversity of needs Approximately half of staff positions will expire June 30, 2017. HCD needs to align program with the 2017 Governor’s Budget. This is where we start with talking points from the outreach – see Background Notes Historic reduction of CDBG funding levels (loss of 34 percent over the last 10 years) Currently faced with federal funding uncertainties California has historically demonstrated a low expenditure rate; (the reality is…) CA is the worst expenditure performer in the nation California does not follow HUD’s general guidance for running the program, especially offering too many activities, which is difficult to operationalize We all recognize that CDBG is a unique funding source that provides a funding vehicle for services, infrastructure and economic development and unlike housing is one of the only available resources for these activities

Current Program Challenges Cont. Governor’s 2017 Budget The Governor’s 2017 Budget states: 180,000 new units are needed annually, but production is below 100,000. Nearly one-third of households spend 50 percent of their income on housing costs. The Governor’s Policy Principles include: Streamlining development of housing Avoiding new fiscal impact to the State General Fund Talking Points continued. Purpose of Meeting: In alignment with the 2017 Governor’s Budget, it is more important than ever for State and local jurisdictions to work together on how to streamline the program while meeting the program’s objectives.

Where do we go from here?

Fundamental Redesign Process Introduce Regulation (or Guideline) changes (e.g., modify regulatory scoring criteria and available activities) Provide opportunity for public input to try to preserve grantees’ preferred activities and distribution method Introduce Legislation to change CA statutory requirements (e.g., required set-asides) Talking points, purpose of the meeting continued: In alignment with the 2017 Governor’s Budget, it is more important than ever for State and local jurisdictions to work together on how to streamline the program while meeting the program’s objectives. So in response to long-standing capacity issues and new challenges, CA is partnering with local jurisdictions and beginning a fundamental redesign process.

CDBG Redesign Process An internal working group is: Identifying deficiencies at HCD and with our grantees; Reviewing other states’ program models; Researching HUD’s and the Government Accountability Office’s guidance on the program; and Hosting public outreach meetings.

CDBG Redesign Public Outreach Public comments until March 23rd Four stakeholder meetings: March 1 – Sacramento (no. central) (included a webinar component) March 9 – Ukiah (no. coast) March 15 – Visalia (so. central) March 23 – Weed (far north)

Potential Redesign Models Based on State capacity issues, public input, federal recommendations and other state models, California may consider: Offering fewer activities; Moving away from a purely competitive NOFA model, toward a need-based formula allocation, or allocation/competitive hybrid.

Potential Redesign Methods Cont. Example 1 – 100% Formula Allocation Method Activities Formula Allocation Public Facilities & Infrastructure Public Services Housing Economic Development Planning   Talking Points Continued – Example CDBG Program Models HCD shared examples by verbally communicating and providing models of other CDBG program designs [verbally walk through these models]. These models are inspired by other states. HCD brainstormed options and clarify that this only an attempt to start the conversation and encourage additional options and tweaks/revisions to the options revealed today [HCD gave attendees time to review the CDBG model handout and discuss other potential options] HCD is sharing this information as a starting point for stakeholder outreach discussions.

Potential Redesign Methods Cont. Example 2 – Competitive, Equal Distribution with Limited Activities Method Activities Competitive Economic Development = 1/3 Infrastructure = 1/3 Housing = 1/3   Talking Points Continued – Example CDBG Program Models HCD shared examples by verbally communicating and providing models of other CDBG program designs [verbally walk through these models]. These models are inspired by other states. HCD brainstormed options and clarify that this only an attempt to start the conversation and encourage additional options and tweaks/revisions to the options revealed today [HCD gave attendees time to review the CDBG model handout and discuss other potential options] HCD is sharing this information as a starting point for stakeholder outreach discussions.

Potential Redesign Methods Cont. Example 3 – 50% Competitive and 50% Formula Allocations Method Activities Formula Allocations and Competitive Housing and infrastructure Planning Public Facilities; Public Services; Very little ED   Talking Points Continued – Example CDBG Program Models HCD shared examples by verbally communicating and providing models of other CDBG program designs [verbally walk through these models]. These models are inspired by other states. HCD brainstormed options and clarify that this only an attempt to start the conversation and encourage additional options and tweaks/revisions to the options revealed today [HCD gave attendees time to review the CDBG model handout and discuss other potential options] HCD is sharing this information as a starting point for stakeholder outreach discussions.

Addressing Long-standing Capacity Issues Even with a redesign, fundamental capacity issues could still remain. Program Income and slow expenditure rates still need to be addressed. HCD needs to also ensure the projects we fund are truly “ready.” This is not included in our talking points

Addressing Long-Standing Program Issues Cont. Grantees primarily spend program income on activities that supplement receipt of an additional grant and additional grant funds. (supplemental activities) California needs a mechanism to offer fewer activities to jurisdictions with a large volume of program income while still helping those jurisdictions spend their program income.

Addressing Long-Standing Program Issues Cont. Funding fewer contracts and funding projects with more readiness could address some of the issues that California faces. Limiting activities and re-designing set-asides may be necessary for these goals.

Path forward Continue Public Outreach. Explore distribution methods that move away from the purely competitive model. Identify changes that will fund more “ready” projects. Identify changes to help grantees use more program income. Complete statutory and regulatory (or guideline) changes as needed.

What is Your Advice? We’d love to hear your suggestions! Thanks! Moira Monahan Moira.monahan@hcd.ca.gov 916 263 1017