HomeMy WebLinkAboutAGENDA REPORT 1992 0617 CC REG ITEM 09DITEM 9 D.
MOORPARK
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799 Moorpark Avenue Moorpark, California 93021 (805) II Meerrg
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ACTION:
TO: The Honorable City Council
FROM: Donald P. Reynolds Jr., (Management Analyst
DATE: June 10, 1992
SUBJECT: Consider Exchange of Community Development Block Grant
("CDBG ") Funds (program Years 1988/89 and 1989/90) for
other City Funds in Support of the Boys and Girls Club
.( "Club ") Gym Acquisition
The following report will summarize the need to exchange funding
resources in support of the Club acquisition.
Staff's recommendation is to appropriate $50,000 as a loan of Gann
funds from street improvements to be repaid by CDBG, $50,000 as a
loan from the General Fund reserve, and $50,000 repaid by the Boys
and Girls Club and exchange these funds for CDBG contributions
arranged last year for the Club, and reprogram the CDBG funds as
$50,000 for Charles Street improvements and $100,000 for affordable
housing land acquisition.
Background
In April 1991, the City re- programmed 1988 and 1989 CDBG funds to
be used by the Boys and Girls Club for a downpayment on the Casey
Road Gym facility.
Working towards an agreement between the Club and the City that was
within the HUD guidelines, staff received input from the County of
Ventura regarding the use of the facility and its eligibility as a
low and moderate income benefit to Moorpark. To justify the gym's
eligibility, 370 eligibility questionnaires were completed, showing
that 700 of the children using the Club's facility currently
located at Chaparral Middle School are of a low and moderate income
status.
The County expressed that because the entire City is not low and
moderate income, that the gym would have to be established as a
satellite facility, with two other facilities in Moorpark serving
the Campus Park area and the Mountain Meadows area. Furthermore,
the County defined eligibility records for the gym to include all
uses of the gym, not just the Club's use of the gym.
The City's CDBG contribution was originally established as one part
loan of $100,000, and a second part of $50,000 to be grant. Legal
opinions reflected that a two part designation of the funds
prohibited the City from securing all parts with a second deed of
PAUL W. LAWRASON JR. JOHN E. WOZNIAK SCOTT MONTGOMERY BERNARDO M. PEREZ ROY E. TALLEY JR.
Ma,or Mayor Pro Tom Councilmember Councilmember Councilmember
_ trust. In July of 1991, the Council then changed the grant portion
of the contribution to be a loan also, which upon satisfactory
completion of the repayment of the $100,000 portion, ($50,000 due
in September 1992 and $50,000 due in September 1993), the City
would forgive the remaining balance of $50,000, turning it
essentially into a grant.
With the HUD and City /Club arrangements in place, the City
requested the CDBG funds and received them on July 12, 1991. These
funds were sent directly to the escrow company, and the closing of
the escrow began.
Closing escrow required that the City and the Club, the Club and
Moorpark Unified School District, ("MUSD"), and the City and MUSD
had to come to a common understanding about the facility,
applicable HUD regulations, and the use of the site. This process
lasted until November, 1991. The deed of trust was recorded on
December 11, 1991.
In October 1991, the Club's Executive Director resigned. The
position remained vacant until March of this year. The Club
originally planned to occupy the site in March, but postponed the
move until June of 1992. During this period, the Club and MUSD
had an agreement in place where the Club would be able to use the
gym for certain specific programs, and MUSD would continue to
maintain it and insure it. Persons using the gym between December
and today consist primarily of City sports leagues, Club classes
and sports leagues and an occasional rental.
The County monitored the City, reviewed Club records on April 21,
1992, and expressed concern that proper eligibility monitoring
mechanisms had not been put into place. This is because, in
staff's opinion, the Club was not occupying the site. Staff could
not verify that the satellite facilities were in operation, and
later learned that only one of two were functioning. The County
stated that if the City moved towards implementing a tracking
procedure and could provide some evidence that the satellite
facilities were functioning, that this would be sufficient to meet
the future tracking requirements of HUD. They noted that the Club
was in violation of the City's agreement because sufficient records
were not being maintained. On Thursday, April 23, staff met with
the Executive Director of the Club, arranged a system for tracking
eligibility, and sent a letter to the County expressing the
establishment of this system.
On May 6, 1992, the County expressed a different opinion about the
Club's continued use of the gym, and recommended that the City
consider removing CDBG as soon as possible. On May 15, 1992, staff
made a request to the County for technical assistance that
describes the procedure to make the change removing CDBG from the
gym project, and to state when HUD would be able to re- credit the
City for the $150,000. The County has expressed on two occasions
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verbally that the HUD turnaround will be approximately 90 days, but
their response in writing did not make this commitment, nor did it
provide any technical assistance. The County did express that
interest would be due to HUD for the $150,000 beginning July 12,
1991.
Discussion
At this time, all staff is certain about is that CDBG has to be
removed from the gym project and the funds returned to HUD with
interest, and that in order to reprogram the funds, a public
hearing has to take place.
Returning the funds requires that the City issue two payments; one
to the County for $150,000, and one to the United States
Treasury /HUD for the interest earned. The interest calculations
from July 12, 1991, to June 18, 1992, equals $5,827.36, (based on
the monthly interest rate average of a 3 month U.S Treasury Bill).
The Club, being in violation of the agreement by failing to keep
adequate records on the use of the facility and failing to maintain
the satellite facilities, could be held responsible for the
interest payment by the City. However, the intent of the Council
was to assist the Club, so staff is recommending only to require
that the Club assist with the HUD repayment by providing 1/3,
($50,000), of the repayment. This requires the Club to advance the
payment that would been due in September, 1992.
The interest due to HUD is being questioned by staff, because the
escrow for the project took 6 months to complete and to calculate
interest beyond the close of escrow does not seem reasonable.
Using the same basis for calculating interest above staff has
identified that between July and December 1991, the interest earned
would have been $3,180.21, and that the interest earned between
January and June 1992 equals $2,647.15. Staff recommends that in
order to avoid delaying the CDBG project funds, that the 12 month
interest be paid, but then proceed in identifying if the City can
appeal the imposition of all or a portion of the interest.
Beginning in December of 1991, the City began using the Gym without
paying the Club rental fees, saving $1,520 during the winter and
spring leagues. This amount of the interest payment can come from
the Recreation Fund.
In summary, the City anticipated receiving 2 loan repayments from
the Club in September 1992 and September 1993, and forgiving the
third portion of $50,000. Staff's proposal at this time is to
repay HUD using one part loan from the Gann fund, one part loan
from the General Fund Reserve and one part repayment from the Club,
leaving one last repayment from the Club to the City scheduled for
September 1993 in the amount of $50,000 to'reimburse the General
Fund loan. By 1993, the Club will have paid the City $100,000, the
City will have used $50,000 of Gann in support of the Club in place
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of the original CDBG grant, and CDBG as described below, could be
reprogrammed to replace the Gann funds originally targeted for
Charles Street.
The termination of the current CDBG agreement and the creation of
a loan agreement will be arranged between staff and the Club.
Reprogramming CDBG
Without knowing when HUD may re- credit the City for the $150,000,
reprogramming the funds is somewhat difficult to plan for. The
original programming of the $100,000 portion of the funds to be
repaid by the Club is for affordable housing land acquisition.
This project is not due to come to fruition in the near future, so
the turn around time is not perceived as being crucial at this
time.
The second portion of $50,000 is recommended by staff to be used to
replace Gann funds appropriated for Charles Street. If the funds
are not re- credited to the City in time for the Phase I work
scheduled to begin within the next two months, then the funds would
not be available until the construction of Phase II.
Recommendation
That the City Council replace CDBG funding to the Boys and Girls
Club gym acquisition project totalling $150,000 with $50,000 of
Gann funds, $50,000 from the General Fund Reserve, and a $50,000
repayment from the Club for repayment to HUD, and reprogram the
CDBG contribution as follows:
1) Move the $100,000 of 1988/89 CDBG program year from the
Gym Acquisition to
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2) Move the $5,266 of 1988/89 CDBG program yea from the Gym
Acquisition to Charles Street Improvements, and;
3) Move the $44,734 from the 1989/90 CDBG program year to
Charles Street Improvements;
4) Appropriate $50,000 in Gann Funds for 1/3 of the
repayment to HUD;
5) Appropriate $50,000 of the General Fund Reserve for
repayment to HUD;
6) Appropriate $1,520 from the Recreation fund and $4,307.36
from the General fund for a total of $5,827.36 to be paid
to HUD from interest earned on the principal amount;
7) Direct staff to investigate City's ability to appeal the
interest payment requirement.
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