A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, ACCEPTING THE RECOMMENDATION OF THE FINANCE AND CITYWIDE PROJECTS COMMITTEE TO UTILIZE FUNDS AWARDED TO THE CITY BY THE U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT (HUD) TO FUND THE CAPITAL NEEDS AT CITY- OWNED RESIDENTIAL PROPERTIES AND TO PROVIDE ONGOING FUNDING TO EXISTING PUBLIC SERVICES PROJECTS IMPLEMENTED BY BOYS AND GIRLS CLUBS OF MIAMI, UNIDAD OF MIAMI BEACH, AND THE CITY; AND FURTHER AUTHORIZING THE CITY MANAGER TO EXECUTE ALL NECESSARY DOCUMENTS OR AGREEMENTS TO ENSURE COMPLIANCE WITH HUD RULES AND REGULATIONS.

The Administration recommends accepting the Finance Committee's recommendation to approve the resolution.

BACKGROUND

The City is an entitlement community designated by the U.S. Department of Housing and Urban Development (HUD) and as determined by the decennial census information on population growth lag, age of housing stock, and poverty. As an entitlement community, the City receives an annual allocation under HUD funding through the Community Development Block Grant (CDBG) and HOME Investments Partnership (HOME) programs. HUD requires entitlement jurisdictions to submit a Five-Year Consolidated Plan, which establishes the strategic framework upon which the City utilizes its funds. The Consolidated Plan is augmented and refined by the City’s annual submission of a One-Year Action Plan, which delineates the specific projects and activities funded by each year’s HUD allocation.

The annual allocations have fluctuated from year to year and have been reduced by more than two-thirds since their peak.  The chart below identifies the amount and year of the City’s peak allocation for each program as well as the current award and projected amounts for FY 18/19:

Please note that the number of City staff available to administer these compliance-heavy programs has been reduced over time (including the elimination of one full-time position last budget cycle) resulting in only one full-time staff person per program.

CDBG Program

The CDBG program supports programming that benefits low-income persons through direct public services and capital improvements. The program has the following expenditure limitations:

• Administration Cap: 20% of award

• Public Services Cap: 15% of award (Please note that public services are inclusive of all direct services benefiting low-income persons that does not include capital projects. i.e. groceries for the elderly, youth services, rent assistance, homeless services, etc.)

The City currently funds a variety of Public Services including:

• Elder services and referral (UNIDAD of Miami Beach)

• Grocery delivery for elderly  and rent/utility assistance (Housing and Community Services)

• After school youth programming (Boys and Girls Club of Miami – Flamingo Park)

Within the last three years, the City had awarded CDBG funds to several non-profit community providers who subsequently declined the awards because they deemed the documentation and compliance requirements too onerous. The providers included:

• Little Havana Activities and Nutrition Center

• Jewish Community Services of South Florida

• Food for All

• Empowering Youth

It should be noted that the City undertook an overhaul of its Sub-Recipient Guidelines in 2013 through 2015 in response to an audit by HUD’s Office of the Inspector General and internal reviews. Many of the audit’s findings were as a result of the City failing to obtain required documentation of service and expenditure from its Sub-Recipients. To ensure compliance, the City revised its Sub-Recipients contracts, reporting forms, and compliance guidelines. In addition, it sponsors an annual compliance workshop and schedules one-on-one meetings with Sub-Recipients to review contracts and documentation requirements.

For the past two years, the City has prioritized CDBG capital funds to address significant needs in its residential portfolio acquired from Miami Beach Community Development Corporation (MBCDC). The City is currently rehabilitating the Lottie Apartments (including roof replacement, lead abatement, new floors, ADA accessibility, and building envelope). The City has projected expending $1,423,687 for the current phase of rehabilitation.

The City has also begun to rehabilitate bathrooms at the Neptune Apartments as they were completed by MBCDC without shower pans resulting in severe water damage throughout the building. The Neptune Apartments full rehabilitation is estimated at $2,186,240 and includes extensive work including: roof replacement; termite treatment; building envelope and facade restoration; replacement of HVAC; electrical work; and floor replacement; among others. The City’s funding gap remains at $710,300 for Phase 1 of this project. This project, like the Lottie Apartments, will need to be completed in phases to ensure compliance with the Building Department's 50 percent renovation rule.

HOME Program

The HOME program supports the creation and retention of affordable housing to benefit low-income persons. The program has the following expenditure limitations:

• Administration Cap – 10% of award

• Community Housing Development Organization (CHDO) Cap – 15% of award

CHDO’s are affordable housing development organizations that request certification from the City annually to become eligible to receive HOME funds for qualified affordable housing projects that serve households earning up to 80 percent of Area Median Income (AMI).

Unlike CDBG, the HOME program requires the City to provide a 25 percent non-federal match. The City utilizes its State Housing Initiatives Program (SHIP) allocation, its salary match from the General Fund (as HOME does not generate sufficient funds to fully fund its administration requirements) and a running carryover from the City’s Redevelopment Agency (RDA) acquisition of three affordable housing properties in 2007 (the Allen Apartments, Barclay Plaza Apartments and London House Apartments). The current match carryover is $2,529,800.

Up until 2013, the City awarded its HOME funds exclusively to Miami Beach Community Development Corporation (MBCDC).  However, a litany of compliance violations led the City to withhold CHDO status and federal funding to the agency since 2013. MBCDC applied for CHDO designation in March 2018 but has been unable to provide requested financial documentation to complete the application review and has several outstanding audit findings that undermine the agency’s capacity to undertake any further projects.  In fact, Miami-Dade County issued MBCDC a notice of default and foreclosure proceedings on April 27, 2018 for compliance issues at the Crespi Park Apartments.

For the past two years, the City has been prioritizing the use of HOME funds to address the significant capital needs at its residential properties acquired from MBCDC including the Lottie Apartments and Madeleine Village Apartments. Please note that the City did not access General Fund or other City monies to acquire or rehabilitate any its residential properties. HUD funds have been solely used to fund the acquisition and necessary rehabilitation of these properties.

It should be noted that questions have been raised about providing additional funding for MBCDC and Carrfour Supportive Housing.  The City awarded MBCDC $135,464 in State Housing Initiatives Program (SHIP) funds from multiple fiscal years, via Resolution No. 2016-29358, for the rehabilitation of the Jefferson Apartments, a 27-unit housing project serving low-income, elderly tenants. Funds were awarded to replace urgent repairs including: roof replacement; replacement of a roof-top air conditioning unit; and upgrades and repairs to nine (9) units located which were in poor condition.

 The SHIP program does not allow advance payment of its funds. MBCDC management had expressed that they had limited funds to undertake the project so the City agreed to an expedited reimbursement process to enable MBCDC to undertake the project while safeguarding program funds. Rather than the typical 30-day reimbursement protocol, the City agreed to process reimbursement payments within 10 days. MBCDC expended $83,370 to replace the roof and HVAC units before their expenditure deadline of May 31, 2017 but  MBCDC was unable to complete the kitchen rehabilitation by May 31st. This triggered the City to issue an amendment to enable an extension of expenditure timeline. The amendment was submitted to the City Attorney’s Office in June 2017. It was returned with form approval in April 2018. The City was notified by MBCDC on May 10, 2018 that the agency did not have the financial capacity to draw the remaining funds of $52,094 because its funds for the year were committed. Please note that staff requested an obtained a 90-day extension from the State for the expenditure of these funds.

Carrfour Supportive Housing was the City’s sole Community Housing Development Organization (CHDO) from 2014 through 2017. Carrfour has not submitted CHDO recertification documents since its expiration. Carrfour’s sole active housing project within City limits is Harding Village Apartments, a 92-unit housing project located at 8500, 8520 and  8540 Harding Avenue.  

In 2013 and 2016, the City awarded funds for the rehabilitation of Harding Village via Resolution 2013-28292 and 2014-28536, respectively, expiring April 30, 2017. The rehabilitation scope included: roof replacement of 8500 Harding Avenue; drywall repairs; exterior painting of the three buildings; and a plumbing study. As a result of the use of HOME funds, 70 units were designated as HOME units triggering a 30-year affordability period.

Carrfour expended $144,425 from its FY 13/14 agreement and $66,147 from its FY 15/16 Agreement completing the project scope. The remaining funds, $110,980, were not expended prior to the April 30, 2017 expiration date and were subject to recapture. The City notified Carrfour that it could access the remaining funds if it submitted a revised scope of work and budget. Carrfour staff were advised of this opportunity multiple times since April 2017 including a formal meeting between Carrfour’s Executive Director Stephanie Berman-Eisenberg and Assistant City Manager Kathie Brooks on July 27, 2017. To date, Carrfour has not submitted a project scope or budget despite HOME rules requiring this. The City was notified by HUD on May 11, 2018 that $26,738 of the remaining Harding Village HOME funds were formally de-obligated by HUD. 

 As you can see, both MBCDC and Carrfour were awarded funds by the City that were not expended in a timely manner and in compliance with HUD rules and regulations. MBCDC currently advises that they do not have the financial capacity to accept any further development funds. Carrfour has failed to advise of any additional scope for its sole property within City limits and is hereby prohibited by HUD from accepting any further HOME funds for the Harding Village project until the expiration of its current affordability period which ends in 2048. Please further note that neither CDBG or HOME funds cannot be used for general operating support.

Awarding HUD Funds

The City’s Consolidated Plan provides a variety of ways for the City to award its HUD funds including:

·        The City may issue a simplified or limited application with grantee follow-up;

·        The City may survey qualified organizations via a direct solicitation;

·        The City may respond to unsolicited applications after review of eligibility; or

·        The City may review the performance of existing sub-recipients before renewing their ongoing programmatic participation.

For the past two years, given the delay in HUD issuing awards and the need to submit the Annual Plan in August while complying with all noticing requirements, the City has awarded its Public Services funds to existing providers with the capacity and willingness to provide ongoing services in compliance with HUD regulations while ensuring the maximum number of people served. As noted previously, some of the previously funded agencies declined HUD funds because of the high documentation and compliance standards for use of federal funds.

The City has prioritized its capital funds for the rehabilitation of its residential housing properties to ensure meeting HUD’s decent, safe and sanitary housing standard. The City, which acquired its residential properties without General Fund monies, operates the properties solely from rental income which funds all staffing, operational and maintenance expenses. The City also established its security deposits fund account and operating reserves from rental income collected.

Finance and Citywide Projects Committee

It should be noted that Monica Matteo-Salinas, the Chair of MBCDC's Board of Directors, acknowledged at the Finance and Citywide Projects Committee meeting that MBCDC had various audit findings that had yet to be addressed and that the agency did not currently have the capacity to undertake capital projects. Ms. Matteo-Salinas appeared before the Committee to seek operating support as the agency was operating at a deficit of about $9,000 per month. Neither public service nor capital funds may be used for general operating expenses. Please further note that MBCDC's fiscal challenges pose an impediment to securing CHDO status for operational support.

The City is finalizing a closeout package for the Jefferson Apartments and will return to Commission in June to allocate the remaining funds to another eligible project, as delineated in the Local Housing Assistance Plan.