Agenda #: 5.3
Meeting Date: October 15, 2024
TO: Honorable Mayor and Members of the City Council
FROM: Daniel Fox, City Manager
TITLE: CONTINUED REVIEW OF FIRST AMENDMENT TO THE
CONSULTING SERVICES AGREEMENT WITH FRJ & ASSOCIATES
FOR THE ADMINISTRATION OF THE CITY'S HOME IMPROVEMENT
PROGRAM.
STRATEGIC
GOAL: Safe, Sustainable & Healthy Community
RECOMMENDATION:
Approve, and authorize the City Manager to sign, the First Amendment to the Consulting Services Agreement with FRJ & Associates to administer the Home Improvement Program and Condominium Home Improvement Program through June 30, 2025.
FINANCIAL IMPACT:
Sufficient funds are included in the FY 24/25 budget in the Community Development Block Grant Fund (Fund 225) and the Permanent Local Housing Allocation Fund (Fund 224). The total not-to-exceed amount per fiscal year set forth in the proposed First Amendment would increase by $130,000 from $120,000 to $250,000. Payments to the Consultant are limited annually to no more than 20% of the approved CDBG and PLHA allocations for the Home Improvement Program and Condominium Home Improvement Program which includes a cumulative amount of $1,250,000.
BACKGROUND:
The City Council continued this item from the October 1, 2024 meeting, requesting additional information as to how the not-to-exceed amount of $250,000 in the proposed First Amendment to the Consultant Services Agreement was determined. The discussion below is provided as a supplement to the attached October 1, 2024 staff report (Attachment 2).
DISCUSSION:
Diamond Bar CDBG Program
The Community Develop Block Grant (CDBG) program is a federal funding source administered through the Department Housing and Urban Development (HUD). Eligible CDBG projects and programs must accomplish one of the following national objectives:
• Benefiting low- and moderate-income persons, disabled persons, and seniors; • Addressing slums or blight; or
• Meeting a particular urgent community development need.
The Home Improvement Program (HIP) is one of the programs that the City’s CDBG allocation has traditionally funded. The HIP offers deferred loans to eligible low- and moderate-income homeowners of single-family detached housing for necessary home improvements, as well as repairs to mitigate building and safety code deficiencies and/or violations. The City’s HIP policies provide interest-free, deferred loans of up to $30,000 to eligible households. Loans become payable when the homes are sold or refinanced. HUD regulations limit HIP loans to owner/occupants of detached singlefamily homes; owner/occupants of duplexes, condominiums, co-ops or any other housing type are not eligible for CDBG-funded home improvement loans.
Under federal law, up to 20 percent of CDBG funds to may be used to cover administrative costs. The City’s contracts with its CDBG consultants limit their billings to this cap so that General Fund monies are not used to cover consultant costs.
Diamond Bar PLHA Program
The Permanent Local Housing Allocation (PLHA) program was enacted by the State Legislature in 2017 to address the affordable housing crisis in California. Unlike CDBG funds, PLHA dollars can be used to fund home improvement loans for a variety of housing types, not just single-family detached residences. As a result, the City was able to establish the Condominium Home Improvement Program (CHIP) in 2023 to offer interest-free, deferred loans of up to $20,000 to eligible condominium households, as well as draw from an additional funding source for the long-established HIP. In August of this year, the City received authorization to begin using PLHA proceeds to fund home improvement loans.
Current Consultant Services Agreement with FRJ & Associates The current five-year Consultant Services Agreement with FRJ & Associates, approved by the City Council on September 1, 2021, authorizes the Consultant to vet CDBGfunded HIP loan applications, and then process the loan paperwork after the City approves the loans. The not-to exceed amount established in the agreement was set at $120,000, based on the assumption that approximately $600,000 CDBG funds would be allocated to the HIP during life of the agreement, of which 20 percent may be used to cover administrative costs. The agreement expires on June 30, 2025.
Proposed Amendment to Consultant Services Agreement with FRJ & Associates Before the City can begin using PLHA funds to pay for associated consultant costs, the City must first amend the Consultant Services Agreement with FRJ & Associates to expressly authorize the use of PLHA funds to pay the Consultant. Diamond Bar has been allocated approximately $650,000 in PLHA funds through calendar year 2025, all of which may be used to implement the CHIP and expanded HIP. As with the CDBG program, no more than 20 percent of the PLHA funds may be used to cover administrative costs, which, in this case, would be $130,000.
The not-to-exceed sum of payments to the Consultant for the processing of CDBG and PLHA-funded home improvement loans would thus be $250,000. The table below summarizes how the CDBG and PLHA allocations would be distributed between HIP/CHIP loans and associated not-to-exceed administration costs payable to the consultant if the First Amendment to the five-year Consultant Services Agreement is approved, and all available funding is exhausted during the term of the agreement:
Total
Allocation
HIP/CHIP
Loans
Not-to-Exceed
Consultant
Fees
CDBG Funding (Original Agreement) $ 600,000 $ 480,000 $ 120,000 PLHA Funding (First Amendment) $ 650,000 $ 520,000 $ 130,000 TOTALS $1,250,000 $1,000,000 $ 250,000
PREPARED BY:
REVIEWED BY:
Attachments:
1. 5.3.a First Amendment to Consultant Services Agreement
2. 5.3.b October 1, 2024 staff report