STAFF REPORT
Meeting Date:
April 14, 2026
CONSENT
13 SUBJECT: AUTHORIZATION TO EXECUTE THE THIRD AMENDMENT TO THE
MEMORANDUM OF UNDERSTANDING WITH THE COUNTY OF ORANGE
FOR THE COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) PROGRAM RECOMMENDATION: It is recommended that the City Council:
1. Authorize the City Manager to execute the Third Amendment to the Memorandum of Understanding with the County of Orange for the Community Development Block Grant Program, extending the term through June 30, 2027, and secure $140,326 to offset operational costs at the City’s Alternative Sleeping Location in Fiscal Year 2027; and
2. Find that the proposed action is not a “project” under the California Environmental Quality Act pursuant to CEQA Guidelines Section 15378(b)(4) and (5).
SUMMARY OF THE MATTER
The City participates in the Community Development Block Grant (CDBG) program through an agreement with the County of Orange that provides funding to support operations of the Alternative Sleeping Location (ASL) emergency shelter. Because Laguna Beach is a non entitlement jurisdiction under the federal CDBG program, the City receives access to these funds through the County rather than directly from the U.S.
Department of Housing and Urban Development (HUD). This Third Amendment extends that funding partnership through Fiscal Year 2026 to 2027.
The proposed Third Amendment would maintain funding for ASL operations. Key provisions include:
• Extends the term of the Memorandum of Understanding through June 30, 2027 • Allocates an additional $140,326 for Fiscal Year 2027 • Maintains funding for emergency shelter operations at the ASL All other terms and conditions of the original Memorandum of Understanding remain unchanged and in full force and effect.
DISCUSSION
The CDBG program is a federal funding source administered by the U.S. Department of Housing and Urban Development to support local programs, facilities, and services that principally benefit low and moderate income persons and address community development needs.
Non Entitlement Structure and Flow of Funds
Under the federal CDBG framework, larger jurisdictions receive funding directly from HUD and are referred to as entitlement communities. Jurisdictions that do not meet those thresholds are classified as non
AUTHORIZATION TO EXECUTE THE THIRD AMENDMENT TO THE MEMORANDUM OF
UNDERSTANDING WITH THE COUNTY OF ORANGE FOR THE COMMUNITY
DEVELOPMENT BLOCK GRANT (CDBG) PROGRAM
April 14, 2026
entitlement communities. The City is a non-entitlement jurisdiction and does not receive a direct annual allocation from HUD.
Instead, Laguna Beach participates in the Orange County Urban County CDBG program. Under this structure, HUD allocates funding to the County of Orange, which then administers the program and distributes funds to participating cities, including Laguna Beach. The City must enter into agreements with the County to access and use these funds.
How Funding Is Determined
For participating cities, CDBG funding is generally distributed by the County using a formula based on factors such as population, housing characteristics, and measures of community need, consistent with federal guidelines. As a result, the City’s annual funding amount is not purely competitive, but it is also not a guaranteed fixed allocation. The amount may vary year to year based on the County’s total allocation from HUD and any programmatic adjustments made by the County.
Local Control and Eligible Uses
While the County administers the program, participating cities retain discretion to propose how their allocated funds will be used, provided that the proposed activities meet federal eligibility requirements and are approved by the County.
Eligible uses include public services, public facility improvements, housing related activities, and programs that address homelessness or other community needs. All funded activities must meet at least one federal national objective, most commonly providing a benefit to low and moderate income persons.
The City has consistently directed these funds toward emergency shelter operations at the Alternative Sleeping Location, as this program meets federal eligibility criteria and addresses a defined community need.
Administrative Allowance
Federal regulations allow up to 20 percent of a CDBG allocation to be used for planning and administrative costs at the grantee level. Within the Orange County Urban County program, the County retains a portion of the overall allocation for program administration and oversight. Participating cities may receive a limited administrative allowance for eligible grant related activities.
Since FY 2015-16, the City has prioritized applying its CDBG funding toward direct service delivery, specifically the operation of the ASL emergency shelter, rather than allocating a portion of funds toward administrative costs.
Local Application of CDBG Funding
On May 23, 2023, the City and County executed a Memorandum of Understanding governing the use of these funds. The agreement has been modified through subsequent amendments as follows:
AUTHORIZATION TO EXECUTE THE THIRD AMENDMENT TO THE MEMORANDUM OF
UNDERSTANDING WITH THE COUNTY OF ORANGE FOR THE COMMUNITY
DEVELOPMENT BLOCK GRANT (CDBG) PROGRAM
April 14, 2026
• Initial Memorandum of Understanding: $545,437, inclusive of CDBG and CDBG CV3 CARES Act funding (Attachment 4)
• Amendment No. 1: Removed CARES Act related responsibilities and extended the term to June 30, 2025 (Attachment 2)
• Amendment No. 2: Extended the term to June 30, 2026 (Attachment 3) The proposed Third Amendment would extend the term of the agreement through June 30, 2027 and provide an additional $140,326 in CDBG funding for continued ASL emergency shelter operations.
FINANCIAL ANALYSIS
The proposed General Fund budget for the ASL in Fiscal Year 2027 is $500,000, pending City Council approval. A third amendment to the agreement with the County will provide $140,326 in grant funding, which will directly offset a portion of the ASL’s operating costs.
ENVIRONMENTAL ANALYSIS
The execution of this amendment is not a “project” under the California Environmental Quality Act (CEQA) pursuant to State CEQA Guidelines Section 15378(b)(4) and (5), as it involves government fiscal and administrative activities that do not commit to a physical change in the environment.
ATTACHMENTS
1. Proposed Third Amendment to the MOU (Pgs. 3-5)
2. Amendment No. 1 to the MOU (Pgs. 6-9)
3. Amendment No. 2 to the MOU (Pgs. 10-12)
4. Original Memorandum of Understanding (Pgs. 13-38)
Submitted By: . Approved: .David A Kiff
Jeremy Frimond, Assistant City
Manager
Dave Kiff, City Manager
Report Prepared By: Coordinated With:
Louie Lacasella, Senior Management Analyst