Business Agenda Item 3a.
STAFF REPORT
Business Agenda Item
DATE: March 16, 2026
TO: Honorable Mayor and Council Members
FROM: Katey Schmidt, Senior Planner
THROUGH: Amy Nilsen, City Manager
SUBJECT: 2025 NOFA State Community Development Block Grant Application STAFF RECOMMENDATION:
Adopt the Resolution 2026-07 authorizing the submission of a Community Development Block Grant (CDBG) application under the 2025 NOFA
INTRODUCTION:
The Community Development Block Grant (CDBG) program provides annual grants on a formula basis to states, cities, and counties. These grants serve to develop viable urban communities by providing decent housing and a suitable living environment, and by expanding economic opportunities, principally for low- and moderate-income (LMI) persons. The program is authorized under Title 1 of the Housing and Community Development Act of 1974, Public Law 93-383, as amended 42 U.S.C. 5301 et seq.
The State Department of Housing and Community Development (HCD) released the Community Development Block Grant (CDBG) NOFA on December 15, 2025, announcing approximately $27 million in Federal Small Cities CDBG funds. Eligible cities and counties may submit Community Development and Housing applications for CDBG funds under the 2025 NOFA for a maximum aggregated application request of 3,600,000.00, in addition to any Program Income on hand. Under the Community Development Block Grant (CDBG) program, Program Income (PI) is defined as the gross revenue received by a grantee or subrecipient that is directly generated from the use of CDBG funds. These funds are essentially treated as additional CDBG grant money and must adhere to all federal regulations, including meeting a national objective. Jurisdictions are required to “substantially expend” Program Income in order to continue to provide community benefit through recirculation of the funds. Accumulation of excessive amounts of PI (over $35,000) could trigger a requirement to remit excess funds back to the state. The city currently has $910,469 in Program Income on hand, generated from housing rehabilitation loans through previous CDBG programs. In order to avoid a remittance requirement, the city needs to spend down the PI on hand.
Business Agenda Item 3a.
EXECUTIVE SUMMARY:
Community Development Block Grant funds may be used for the following activities:
1. Public service and Planning
2. Programs, specifically Housing Programs, and Economic Development Programs
3. Projects
a) Public Facilities Projects, like sidewalks or parks in LMA areas b) Infrastructure Projects, like sewer and drainage, or utility and broadband lines c) Housing Projects, like affordable housing for senior citizens.
In order to be considered eligible, a suggested project or activity must meet one or more of the three National Objectives listed in CDBG Federal Statutes:
• Benefit to low- and moderate-income persons (LMI) or LMI Limited Clientele (defined as senior citizens, persons with a disability, persons experiencing homelessness, abused children and battered spouses, illiterate adults, persons living with AIDS, migrant farm workers)
• Prevention or elimination of slums and blight; or
• Meeting an urgent community need which pose an immediate threat to the health and welfare of the community (State designates when the “urgent need” objective is allowed for a NOFA).
The benefit to low- and moderate-income persons is the most predominately used National Objective. In order to benefit low- or moderate-income persons, the project must either benefit an area that is comprised of at least 51% low- or moderate-income households, or benefits individually qualified households (i.e., each household is income certified). The City-wide LMI is
49.51%, which falls below the eligibility threshold for city-wide projects. Therefore, each eligible project must benefit a specific LMI population or designated LMA area within the city.
Each jurisdiction may submit up to three (3) applications during this NOFA cycle. • 1 Project +1 Program +1 Public Service or Planning OR • 1 Project + 2 Public Service or Planning OR
• 1 Program + 2 Public Service or Planning
On February 19, 2026, Planning staff held a public workshop to consider projects or programs to apply for CDBG funding. Staff presented background information on the CDBG program, criteria for application funding, meeting National Objectives, and information on possible projects.
Attendees were provided with information on submitting public comments for proposed projects.
Ultimately, staff received requests for funding from two community groups, both in support of Economic Development Loan Programs.
Business Agenda Item 3a.
• Blue Timber Real Estate Company
o Loans to facilitate purchase of blighted or run-down properties in LMA areas or to provide housing for LMI individuals in exchange for donations to LMI organizations.
• Fortuna Theater Foundation
o Acquisition loan to purchase Fortuna Theater and provide jobs for LMI individuals through partnerships with agencies and groups that serve LMI individuals.
Each suggested project is on the surface an eligible CDBG activity. However, the acquisition loan program submitted by Blue Timber Real Estate does not meet the criteria with an application ready proposal. The City has provided feedback to the company to strengthen future proposals under subsequent NOFAs. Alternatively, Fortuna Theater group does have an application ready proposal, with an eligible property, willing seller, and job creation program.
PROPOSED APPLICATIONS:
Staff recommend Council authorize application submittal for the following activities under the Department of Housing and Community Development Community Development Block Grant 2025 NOFA:
Program-Economic Development
Acquisition loan to Fortuna Theater Foundation not to exceed $1,000,000 utilizing existing CDBG PI funds and new CDBG funding. Loan term of 3% simple interest, first 5 years deferred payments (interest accrues but no payments due to the City), then amortize monthly payments over 30 years.
The city would hold a primary lien on the building in case of default. This option provides the city with continual Program Income generation to fund future CDBG activities.
Project- ADA Barrier Removal
City-wide ADA Barrier Removal project (sidewalks, curb ramps, driveways, etc.), not to exceed $1,500,000. The city has successfully utilized CDBG funds in the past to complete ADA barrier removal projects at City Hall and other locations throughout the city.
Potential locations:
• K St. btw 15th and 16th
• City Hall sidewalk
• Monday Club sidewalk
• Newburg ADA Barrier Removal
• Pedestrian walkway_Kenmar to Baxter
• Olsen Ct
• Rohnerville Rd along Ray’s Food Place
• Clifton and Olsen Ct.
• Dog Park ADA parking stall
• Driveways along North Fortuna Blvd south-bound from 572 N. Fortuna Blvd to Newburg Road.
Business Agenda Item 3a.
Planning- General Plan Elements
Funding for eligible portions of the upcoming comprehensive General Plan Update including housing, economic development, and infrastructure planning not to exceed $1,500,000. Because the city is not a LMA jurisdiction, each CDBG funded portion of the General Plan must directly benefit LMI individuals.
CDBG funded portions could include required Elements such as Environmental Justice, Safety, and portions of the Housing Element including studies and inventories.
FINANCIAL IMPACT:
The NOFA allows for grantees to use a total of 17 percent of the allocation for program administration costs. Activity Delivery, costs directly related and necessary to successfully complete a specific project, is covered in the grant award. If awarded, an approved CDBG application is 100 percent grant funded, including the costs to administer the grant.
RECOMMENDED COUNCIL ACTION:
1. Receive staff presentation and review Council questions with staff.
2. Open the public hearing and receive public comment.
3. Close the public hearing.
4. Motion to adopt Resolution 2026-07 and read by title only. Roll Call vote.
ATTACHMENTS:
1. Exhibit A— LMI Mapping
2. Exhibit B—Resolution 2026-07, a Resolution of the City Council Approving an Application for Funding and the Execution of a Grant Agreement and Any Amendments Thereto from the 2025 Funding Year of the State CDBG Program