U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
OfficeofCommunityPlanningandDevelopment
RegionIXOffice
OneSansomeStreet,Suite1200
SanFrancisco,CA94104-4430
CPD MONITORING REPORT
October28,2021
CityofMerced
StevenS.Carrigan,CityManager
678W18thStreetMerced,CA95340-4708
DearMr.Carrigan;
SUBJECT: On-SiteEnvironmentalMonitoringoftheCityofMerced’sCommunityDevelopment Block GrantandHOMEInvestmentPartnershipsprogramsforPlan Years2014to 2018.
FromJanuary13thtoJanuary16th,2020,thisOfficeconductedanon-sitemonitoringofthe Community Development Block Grant and HOME Investment Partnerships programs in order to assess your organization’s performance and compliance with applicable Federal requirements.
Programperformancewasassessedthroughareviewofoperations,filedocumentation,interviews, and drive-by inspections of selected projects. The purpose of this letter is to transmit HUD’s monitoringreport,whichprovidesthedetailsofourreview. HUD’sreviewoftheseareasofprogram performancemayresultintheidentificationofFindings,Concerns,orexemplarypractices.
A Finding is a deficiency in program performance based on a violation of a statutory or regulatoryrequirement. AConcernis adeficiency inprogramperformancethatis notbasedona statutoryorregulatoryrequirementbutisbroughttothegrantee’sattention. CorrectiveActionsto address the noncompliance are identified for all Findings. Recommended Corrective Actions are identifiedforConcerns.
TheenclosedreportcontainstwoFindingsandnoConcerns. Within30daysfromthedate ofthisletter,youhavetheopportunitytoprovideadditionalinformationdemonstratingthatyouhave mettherequirementsof eachFinding. Ifyoufailto respondwithin30days,or iftheresponseis unsatisfactorytoHUD,youmustundertakecorrectiveactions. Similarly,ifyoudisagreewithanyof HUD’sdeterminationsorconclusionsinthismonitoringletter,pleaseaddresstheseissuesinwriting tothisDepartmentwithin30daysofthedateofthisletter. Yourwrittencommunicationshouldeither providesupportinginformationtodemonstratetherequirementhasbeenmet,orexplainyourreasons whyyoudisagree,alongwithsupportingevidence. WhilearesponseisnotrequiredforConcerns, wewouldappreciateanyinformationyouwouldliketoprovide. Writtenresponsesshouldbesentto theaddresslistedbelow.
Iwouldliketothankyouandyourstaffforyourprofessionalismandcooperationduringthe review. The City of Merced is carrying out valuable programs that are successfully supporting housingandcommunitydevelopmentactivities. YourHUDrepresentative,StanleyW.Toal,Field EnvironmentalOfficer,isavailabletodiscusstheresultsofthismonitoringreportorprovidetechnical assistance, if requested, and can be reached [email protected] 415-489-6668. All written communication should be sent to theCovid email addressCPD_COVID-19OEE- [email protected].
Sincerely,
KimberlyNash,CPDDirector
OfficeofCommunityPlanningandDevelopment
Digitallysignedby:KIMBERLYNASH
DN:CN=KIMBERLYNASHC=US
O=U.S.GovernmentOU=
DepartmentofHousingandUrban
Development,OfficeofAdministration
Date:2021.11.0313:02:55-07'00'
KIMBERL
YNASH
City of Merced, California
1 U.S. Department of Housing & Urban Development
Region IX San Francisco, CA
Environmental Monitoring Report
Community Development Block Grant Program (CDBG)
HOME Investment Partnerships Program (HOME)
City of Merced, CA
Monitoring Dates: January 13 to 16, 2020
OGC Final Review Date: July 22, 2021
Monitoring Report Date: October 28, 2021
City of Merced, California
2 OVERVIEW:
Monitoring is the principal means by which the US Department of Housing and Urban Development (HUD) ensuresthat programsandtechnicalareasarecarriedoutefficiently,effectively,andthat theprogramscomply with related regulations, laws, and authorities. It is an opportunity to provide technical assistance focused on improving the quality of the environmental review, to inform the Responsible Entity (RE) of new guidance regardingthesubstantivereviewfortherelatedregulations,laws,andauthorities,and/ortorecommendstrategies thatmayassistwithmakingtheenvironmentalreviewprocessmoreefficient. ItassistsREsinimprovingtheir performance, developing or increasing capacity, and augmenting their management and technical skills.
MonitoringprovidesHUDamethodforstayingabreastoftheefficacyoftheOfficeofCommunityPlanningand Development (CPD) administered programsand technical areas withinthecommunities HUD programs serve.
Monitoringisnotlimitedtoaone-timereviewbutismeanttobeanongoingprocessthatassessesthequalityof aRE’sperformanceoveraperiodinvolvingcontinuouscommunicationandevaluation.
Specificsrelatingtothisreviewareasfollows:
Date(s)MonitoringConducted: January13to16,2020
TypeofMonitoring: On-Site
ProgramsReviewed: CDBGandHOME
HUDReviewer(s): StanleyToal,EnvironmentalProtectionSpecialist EntranceConferenceDate: January13,2020
ExitConferenceDate: January16,2020
CityManagementandProgramRepresentatives:
ScottMcBride,DirectorofDevelopmentServices
KimberlyNutt,HousingProgramSpecialistI
DawnMendonca,HousingFinanceSpecialist
StephanieDietz,AssistantCityManager
PROGRAM AREAS:
TheCityofMerced(City)istheREfortheHUDentitlementprograminMerced. TheHousingDivisionisthe agencyresponsiblefor preparing andimplementingtheConsolidatedPlanandadministering theCity’sCDBG and HOME programs. The City was not active in the NSP3 program during the program years of the environmentalmonitoring.
SCOPE OF ENVIRONMENTAL MONITORING:
ThisreportisbasedontheOfficeofEnvironmentandEnergy’s(OEE)interviewsanddiscussionswithprogram staffaswellas post-monitoringcommunications,areviewofrecordsintheIDISreportingsystem,areviewof activitiesdescribedintheConsolidatedPlan,ConsolidatedAnnualPerformanceandEvaluationReports,Annual ActionPlans,andanexaminationoftheEnvironmentalReviewRecords(ERR)fortheprojectslistedattheend ofthisreport.
CDBGandHOMEprogramsadministeredbytheHousingDivisionwereunderthesupervisionofMark Hamilton,HousingProgramSupervisor,whoreportedtoScottMcBride,DirectorofDevelopmentServices. Prior tothemonitoring,Mr.HamiltonlefttheCityandMr.McBridereplacedFrankQuintero,DirectorofEconomic Development. InadditiontoMr.Hamilton,staffthatconductedenvironmentalreviewsincludedSamKuykendall, HousingDivisionSpecialist,whoalsolefttheCity,andKimberlyNutt,HousingProgramSpecialistI. Ms.Nutt attended the environmental review training (Foundations in Environmental Review: National Environmental PolicyActand24CFRPart 58 EnvironmentalReviewProcedures for EntitiesAssumingHUD Environmental Responsibilities)heldJune18to20,2019attheSanFranciscoRegionIXOffice. Duringthemonitoring,OEE workedcloselywithMr.McBride,Ms.Nutt,andDawnMendonca,HousingFinanceSpecialist.
City of Merced, California
3 Environmental consultants are secured to prepare and review environmental studies, including the California Environmental Quality Act (CEQA) documents and Environmental Assessments (EA), for private developmentprojectsprocessedbytheCity. ChristinaAlleyofCentralValleyCoalitionforAffordableHousing (CVCAH)assistedOEEby providingbackground information ontheGatewayTerraceandproposed Gateway Terrace II apartment projects. The CVCAH is a key development partner for the City. Sierra Saving Grace HomelessProject,MercedRescueMission,andHabitatforHumanityaremainsubrecipients. StephanieDietz, Assistant City Manager, and Mr. McBride met with OEE during the monitoring to discuss the Childs Court ApartmentsEnvironmentalAssessment(EA)anddepartureofMr.Hamilton.
The ERRs were evaluated to assess procedural and technical compliance with the provisions of the National Environmental Policy Act (NEPA);1the Council of Environmental Quality (CEQ) regulations implementingNEPA;2and,HUD’senvironmentalregulationsat24CFRPart58(Part58)aswellasotherrelated regulations,laws,andauthorities. NEPAandHUD’senvironmentalregulationsunderPart58 arecrosscutting requirementsthatapplytomanyDepartmentprogramsanditsfederallyfundedactivities.
SUMMARY OF RESULTS AND CONCLUSIONS:
TheREmustensurethatactivitiesthatareHUD-assisted,intotalorinpart,areincompliancewithNEPAand Part 58 regulations. This means creating a written ERR for every activity regardless of the level of review (§58.38). TheREisrequiredtomaintaintechnicalandadministrativecapabilitytoensurecompliancewithNEPA andPart58isachieved(§58.12).
Regarding technical capability, the RE’s staff needs to have sufficient knowledge of the related regulations,laws,andauthorities, as well asa specificunderstanding of Part 58requirementsinorderto make informeddecisionsaboutwhether:•Appropriatelevelofreviewhasbeencompleted;•CompliancewithNEPA andFederalregulations,laws,andauthoritieshasbeenachieved;•Publicnotificationrequirementshavebeenmet (ifrequired):•WhenDepartmentapprovalisnecessary;and,•Mechanismsareinplacetoensureprojectfunds arenotcommitted or spentprior to theenvironmental review process having been completed. And,regarding administrative capability, the RE’s staff needs to have sufficient knowledge about Part 58 procedures to understand:•Whenfundsmaybecommittedandspent;•Timeperiodsforthepublicnotificationandreleaseof fundsprocess;and,•MinimumcontentoftheERR.
HUD has determined that the City in its capacity as the RE has at the minimum ensured that the environmentaleffectsofeachactivitycarriedoutwithCDBGandHOMEfundscompliedwiththeprovisionsof HUDregulationsimplementingNEPAandtheapplicableenvironmentallaws,ExecutiveOrders,andotherrelated requirements listed in HUD’s implementing regulations at 24 CFR Part 58. The results of the review were summarized during an exit conference on January 16, 2020 attended by Mr. McBride, Ms. Nutt, and Ms.
Mendonca. OEEhasidentifiedtwo Findingsthatrequirecorrectiveactionandno Concerns.
Throughout the monitoring, OEE discussed the initial monitoring observations, addressed the City’s questions,andprovidedmorespecifictechnicalassistancewithregardstowetlandsprotectionincludingRiverines andMercedirrigationcanals,noiseabatementandcontrolguidelinesanddocumentationrequirements,guidance onoptionsandconditionalcontractsforpurchaseofrealestateforenvironmentalreviewsconductedunderPart 58, best practices for reducing near-road air pollution exposure, project aggregation, historic preservation, thresholddistancesforevaluationofcontaminationandtoxicsubstances,supportivedocumentationforthe20% thresholdunder§58.35(a)(1),and§58.6Other requirementsastheypertaintoExemptandCategoricallyExcluded Not Subject To levels of environmental review. Although deficiencies were noted by the Findings discussed below, the Childs & B Street TOD Affordable Housing Project EA prepared by the City’s Environmental 142U.S.C.§4321etseq.
240CFRParts1500-1508(2005)
City of Merced, California
4 Consultant,isagoodexampleofanexemplaryERR. TheEAshouldberetainedbytheCityforfuturereference andtraining.OEEalsocommendstheCityonmaintainingwellorganizedERRs.
Finding No. 1: HUD program funds committed to a choice-limiting action prior to submission of the Request for Release of Funds and Certification, a statutory violation of Section 104(g)(2) of the Housing andCommunityDevelopment Act of 1974 [42 U.S.C.5304(g)(2)] and/or Section 288(b) [42 U.S.C. 12838] Title II of the Cranston-Gonzalez National Affordable Housing Act [“HOME Investment Partnerships Act”].
Finding No. 2: City failed to retain the written records of the broad-level review, Tier I of its Tiered environmental review approach.
FINDINGS and CONCERNS:
A Finding is identified as a deficiency in program performance based on a statutory, regulatory, or program requirement for which sanctions or other corrective actions are authorized. Required corrective actions are identifiedforallFindings. ThetypeofsanctionsapplicabletoFindingsvariesinspectrumfromadministrative corrections toa requestforrepaymentofFederalfunds. Findingsmust beresponded to within30daysofthis report. AConcernisadeficiencyinprogramperformancenotbasedonastatutory,regulatory,orotherprogram requirement,forwhichsanctionsandcorrectiveactionsarenotauthorized.
The Community Planning Department (CPD) Program Monitoring page, available at https://www.hudexchange.info/programs/cpd-monitoring/#monitoring-overview, provides information and resourcestoCPDgranteesandCPDFieldOfficestafftoassistinpreparingforaDepartmentmonitoringreview, conductingaself-review,ormonitoringsubrecipientsandotherpartners. Exhibit21-2EnvironmentalMonitoring of theCPD Monitoring Handbook 6509.2, was used to guide this specific review. It is available at https://www.hud.gov/program_offices/administration/hudclips/handbooks/cpd/6509.2.
YourOEErepresentative,StanleyToal, EnvironmentalProtectionSpecialist,isavailabletodiscussthe resultsofthismonitoringreportorprovidetechnicalassistance,ifrequested,andcanbereachedat:415-489-6668 [email protected]. IfyoudisagreewithanyoftheOEE’sdeterminationsorconclusions inthismonitoringreport,pleaseaddresstheseissuesinwritingtotheSanFranciscoRegionOfficewithin30days ofthisreport. Yourwrittencommunicationshouldexplainthereasonswhyyoudisagreealongwithsupporting evidence and documentation. All communication should be sent to the Department of Housing and Urban Development,CommunityPlanningandDevelopmentDivision,OfficeofEnvironment&EnergyAttn:Stanley W.Toal,OneSansomeStreet,Suite1200,SanFrancisco,CA94104.
Finding No. 1: HUD program funds committed to a choice-limiting action prior to submission of the Request for Release of Funds and Certification, a statutory violation of Section 104(g)(2) of the Housing andCommunityDevelopment Act of 1974 [42 U.S.C.5304(g)(2)] and/or Section 288(b) [42 U.S.C. 12838] Title II of the Cranston-Gonzalez National Affordable Housing Act [“HOME Investment Partnerships Act”]. In addition, these actions are regulatory violations of 24 CFR Part 58.
TheOfficeofGeneralCounselhasdeterminedthattheCitycommittedstatutoryandregulatoryviolationsforthe followingactivities:
1. IDISActivityID1103HOME|GatewayTerraceII–CVCAH(CHDO):
2. IDISActivityID1102CDBGandHOME|GatewayTerraceII–CVCAH(CHDO):
3. IDISActivityID1063HOME|CVCAH-1820IStreet
4. IDISActivityID1067CDBG|SouthMercedADARampProject#116033
5. IDISActivityID1094CDBG|ADARampandSidewalkModifications#117007 City of Merced, California
5 6. IDISActivityID1095CDBG|RoomattheInn–MercedCountyRescueMission Conditions1&2:
IDISActivityID1103|GatewayTerraceII–CVCAH(CHDO):2017/14/PF-GatewayTerraceIIApartments –CVCAH(CHDO)03C/LMCProgram:HOMERental
ProjectActivity:Developmentof50unitsofaffordablehousing,GatewayTerraceIIApartments,located betweenW12thStandW13thSt,alongKSt,Merced,CA
IDISActivityFunding:TotalFunded:$857,292PaymentVoucher:619406509/27/18$205,101;6201740 10/25/18 $41,020.20; 6289393 07/26/19 $122,060.29; and 6313592 10/12/19 $24,412.06; total drawn $392,593.55.
IDISActivityID1102|GatewayTerraceII–CVCAH(CHDO):2016/17/GatewayTerraceIIApartments– CVCAH(CHDO)Program:CDBG03J–Water/SewerImprovementsandHOME–Rental ProjectActivity:Developmentof50unitsofqualityaffordablehousing. Projectwillalsoreplacesewer &watermainsservingtheprojectsiteandnearbyresidentslocatedwithinadisadvantagecensustract IDISActivityFunding:TotalFunded:$624,708increasedto$899,708post-monitoring[$719,708CDBG and $180,000 HOME] Payment Voucher: 6260687 04/30/19 $38,656.62 and $269,256.78, total drawn $307,913.40. This activity includes $370,590 CDBG funds encumbered by the City Loan Commitment Agreement and $250,000 CDBG funds allocated to the water and sewer main replacement serving the GatewayTerraceIIprojectsiteandnearbyresidentslocatedwithinadisadvantagecensustract.
ACityLoanCommitmentAgreementwasmadeandenteredintoonJuly17, 2017byandbetweenthe City of Merced and Merced Gateway Investors II, LP. A purpose of the agreement was to provide financial assistance to the CVCAH for the construction of a 50-unit affordable housing apartment (Gateway Terrace II Apartments)withoutacquisition. ThefundingsourcesprovidedwereCDBGandHOMEprogramfundsandwere asfollows:$370,590fromCDBG;$514,410fromtheCommunityHousingDevelopmentOrganization(CHDO) requirementoftheHOMEprogram;and,$500,000fromHOME. Theamountofthethreefundingsourcesinthe agreementtotaled$1,385,000and,exceptforCHDOrequirementoftheHOMEprogram,whichisadministered by the State, were commingled under IDIS activities 1103 and 1102. The combined City CDBG and HOME programfundstotaled$1,014,410.
The Loan Commitment Agreement required the subsequent preparation and execution of various loan agreements, regulatory agreements, subordination agreements, andrelatedloandocuments including notes and deedsoftrust. TheLoanCommitmentAgreementwastobeapartofthedeveloper’sapplicationtotheStateto receivetaxcredits. Thedeveloperwastousethesefunds combinedwithdevelopmentfeesasleverageforthe Federal Low-Income Housing Tax Credit application submitted to the California Debt Limit Allocation Committee and California Tax Credit Allocation Committee. The agreement was contingent on the funding allocationfromtheDepartmentasoutlinedandanticipatedintheagreement. Thefundingsourcescombinedwith SewerandWaterEnterprisefundsinject enough capital to allow Gateway Terrace Development to move forward.
InJune2018,theCouncilauthorizedtheCityManagertoexecutethevariousloans,subordinations,notes,and deedsoftrustnecessarytocompletethefinancingoftheGatewayTerraceIIApartments(Cityfile16-555).
The City failed to conduct the environmental review and submit a Request for Release of Funds and Certification(RROF-C). Specifically,theCityfailedtocomplywithNEPA,andtherelatedauthoritieslistedin HUD’s implementing regulations at 24 CFR Part 58, prior to site-specific commitment and disbursement of CDBG and HOME funds to the project. The City committed a statutory violation of Section 104(g)(2) of the Housing and CommunityDevelopment Act of 1974and Section 288(b) of theHOME InvestmentPartnerships Act. IDISActivity1102hasunexpendedHOMEandCDBGfundbalancesallocatedtotheproject.
City of Merced, California
6 Condition3:
IDISActivityID1063|CVCAH-1820IStreet:2015/7/NewConstructionMulti-FamilyResidential-1820 IStreetProgram:HOMERental
ProjectActivity:Newconstructionwithoutacquisition.
IDISActivityFunding:TotalFunded$269,639.99TotalDrawn$269,639.99with17PaymentVouchers submittedbetween03/16and06/17withdrawamountsrangingfrom$1,569to$69,224.
TheCityandsubrecipientexecutedaloanagreementandrelatedloandocumentswiththeCitydisbursing HOMEfundstotheprojectbetweenMarch2016andJune2017. TheCityfailedtoconducttheenvironmental review and submit a RROF-C. Specifically, the City failed to comply with NEPA, and the related authorities listedinHUD’simplementingregulationsat24CFRPart58,priortosite-specificcommitmentanddisbursement ofHOMEfundstotheproject. CitycommittedastatutoryviolationofSection288(b)oftheHOMEInvestment PartnershipsActandaregulatoryviolationof24CFRPart58.
Condition4:
IDISActivityID1067:2015/14/SouthMercedADARampProject#116033Program:CDBG Project Activity: Scope of the project in general included the removal of existing sidewalk, curb and gutter, cross gutter, related and necessary adjacent pavement, for the complete installation of 6 handicap accessrampsandconnectingsidewalkattheintersectionof9thandOStandtheNEc/NWcoftheintersection of8thandOSt. Restorationoflandscapeandirrigationfacilities IDIS Activity Funding: Total Funded $84,319.56 Payment Voucher: 5958504 08/27/17 $6,350.05 08/27/17;598861712/03/16$67,209.85;and600429801/25/17$10,759.66,totaldrawn$84,319.56.
TheCitydisbursedCDBGfundstotheprojectbetweenDecember2016andAugust2017. TheCityfailed toconducttheenvironmentalreviewandsubmitaRROF-C. Specifically,theCityfailedtocomplywithNEPA, and the related authorities listed in HUD’s implementing regulations at 24 CFR Part 58, prior to site-specific commitment and disbursement of CDBGfunds to the project. City committeda statutory violation of Section 104(g)(2)oftheHousingandCommunityDevelopmentActandaregulatoryviolationof24CFRPart58.
Condition5:
IDISActivityID1094: 2016/5/ADARampandSidewalkModifications-MercedEngineeringDepartment| ADARampandSidewalkModifications#117007Program:CDBG
ProjectActivity:Projectconsistedofremovingtheexistingconcretesidewalkandcurb/gutteratthefour cornersof QStat8thSt andQ St at 9thSt. Each corner wasreplaced withnewsidewalk,curb/gutter,and wheelchairrampswithdetectablewarningstrips. Totalof8intersectioncornersimproved.2315sfofexisting concretesidewalkremoved;280lfofexistingcurb/gutterremoved;830sfofnewconcretesidewalkinstalled; 115lfofnewcurb/gutterinstalled;1800sfofnewconcretehandicapaccessramp;and,8detectablewarning devicesinstalled. NoticeofComplete:02/12/18
IDISActivityFunding:TotalFunded$138,367.13TotalDrawn$138,367.13with11PaymentVouchers submittedbetween09/17and10/18withdrawamountsrangingfrom$6.21to$52,568.16.
The City disbursed CDBG funds to the projectbetweenSeptember 2017 and October 2018. The City failedtoconducttheenvironmentalreviewandsubmitaRROF-C. Specifically,theCityfailedtocomplywith NEPA, and the related authorities listed in HUD’s implementing regulations at 24 CFR Part 58, prior to site- specificcommitmentanddisbursementof CDBGfunds totheproject. Citycommitteda statutoryviolation of Section104(g)(2)oftheHousingandCommunityDevelopmentActandregulatoryviolationof24CFRPart58.
City of Merced, California
7 Condition6:
IDISActivityID1095:2016/7/RoomattheInn-MercedCountyRescueMissionProgram:CDBG Project Activity: Acquisition for repair/rehabilitation of a single-family residence to provide housing assistancetoindividualsorfamiliesmeetinglow-andmoderate-incomehousingeligibilityrequirements.
IDIS Activity Funding: Total Funded $188,000 Payment Voucher: 6040627 05/13/17 $18,001.29 and $169,998.71;totaldrawn$188,000.
TheCityandsubrecipientexecutedaloanagreementandrelatedloandocumentswiththeCitydisbursing CDBG funds to the project on 05/13/17. The City failed to conduct theenvironmental review and submit the RROF-C. Specifically, the City failed to comply with NEPA, and the related authorities listed in HUD’s implementingregulationsat24CFRPart58,priortosite-specificcommitmentanddisbursementofCDBGfunds to the project. City committed a statutory violation of Section 104(g)(2) of the Housing and Community DevelopmentActandaregulatoryviolationof24CFRPart58.
Criteria:
Section 104(g)(2) of the Housing and Community Development Act of 1974 [42 U.S.C. 5304(g)(2)]: (g.) Environmental protection measures applicable for release of funds to applicants for projects; issuance of regulations by Secretary subsequent to consultation with Council on Environmental Quality; request and certificationtoSecretaryforapprovalofreleaseoffunds;form,contentsandeffectofcertification.(2)The Secretary shall approve the release of funds for projects subject to the procedures authorized by this subsectiononlyif,atleastfifteendayspriortosuchapprovalandpriortoanycommitmentoffundstosuch projectsotherthanforpurposesauthorizedbysection5305(a)(12)ofthistitleorforenvironmentalstudies, the recipient of assistance under this chapter has submitted to the Secretary a request for such release accompaniedbyacertificationwhichmeetstherequirementsofparagraph(3).TheSecretary'sapprovalof anysuchcertificationshallbedeemedtosatisfyhisresponsibilitiesundertheNationalEnvironmentalPolicy Act of 1969 [42 U.S.C. 4321 et seq.] and such other provisions of law as the regulations of the Secretary specifyinsofarasthoseresponsibilitiesrelatetothereleasesoffundsforprojectstobecarriedoutpursuant theretowhicharecoveredbysuchcertification.
Section288(b)[t42U.S.C.12838]ENVIRONMENTALREVIEWTitleIIoftheCranston-GonzalezNational Affordable Housing Act, as amended [“HOME Investment Partnership Act”]: 288(b) PROCEDURE.-The Secretaryshallapprovethereleaseoffundssubjectto the proceduresauthorizedby this sectiononly if, at least15dayspriortosuchapprovalandpriortoanycommitmentoffundstosuchprojectsthejurisdictionor insularareahassubmittedtotheSecretaryarequestfor*suchreleaseaccompaniedbacertificationwhich meetstherequirementsofsubsection(c).TheSecretary'sapprovalofanysuchcertificationshallbedeemed tosatisfyhisresponsibilitiesundertheNationalEnvironmentalPolicyActof1969andsuchotherprovisions of law as the regulations of the Secretary specify insofar as those responsibilities relate to thereleases of fundsforprojectstobecarriedoutpursuanttheretowhicharecoveredbysuchcertification. 24CFR§58.22Limitationsonactivitiespendingclearance. §58.22(a):Neitherarecipientnoranyparticipant in the development process, including public or private nonprofit or for-profit entities, or any of their contractors,maycommitHUDassistanceunderaprogramlistedin§58.1(b)onanactivityorprojectuntil HUD or the state has approved the recipient's RROF and the related certification from the RE. HUD’s approvaloftherecipient’sRROFandrelatedcertificationistheissuanceoftheAUGF. Inaddition,untilthe RROF and the related certification have been approved, neither a recipient nor any participant in the development process maycommit non-HUD funds onorundertakean activity orproject underaprogram listedin§58.1(b)iftheactivityorprojectwouldhaveanadverseenvironmentalimpactorlimitthechoiceof reasonablealternatives.
City of Merced, California
8 Cause:
TheCityhasnoformalpoliciesandproceduresfortheenvironmentalreviewprocess. Further,althoughthe Cityacknowledgesinitssubrecipientagreementsthatitisresponsibleforensuringallrequiredenvironmental documents are completed prior to disbursement of federal funds into a project, while useful, there is no establishedmanagementoversightandinternalcontrolstoensuretheCityandsubrecipientsdonotobligate ordisburseHUDandnon-HUDfundsbeforethecompletionoftheenvironmentalreviewprocess. Thestated violationsareillustrationsoftheimportanceofestablishingoversightandcontrolstoensuretheCityproperly implementsmandatedenvironmentalrequirementsbeforecommitment,expenditure,and/orreleaseofHUD programand/ornon-HUDfunds.
TheCityfailedtoresolveapriorfindingascribedtotheCity’sHUDfundedprogramswhichproceededfrom OEE’s April 2014 monitoringof theprograms’environmentalcompliance. The2014Monitoring,Finding No.1states…TheCitysometimesfailedtocompletetheenvironmentalreviewprocesspriortosite-specific commitmentofHUDfunds. The2014monitoringreportdescribesseveralprojectswherethisoccurred.
The Department requested in its June 2014 environmental monitoring report that theCity submit assurancesthatthissystematicdeficiencywillnotreoccurandtodocumentthepracticalstepstakentoprevent this reoccurrence. The City’s July 11, 2014 response states …The staff will be implementing the recommended corrective action identified by HUD staff. This finding has been addressed through the realizationtherewasadeficiencyinhowtheenvironmentalprogramwasbeingoverseen. TheCityplansto correctthedeficiencybycreatinganenvironmentalchecklistforprojectsbeingdevelopedinthecommunity thatare fundedwithfederal assistance. Thechecklistwillrequirethe developer to identifytheCity asthe ResponsibleEntityforthedevelopmentandwouldclearlyidentifythatnofederalassistancewillbecommitted untiltheCityhashadtheopportunitytoreviewandtakeactionontheenvironmentaldocumentspreparedfor theproject.
The City staff were unfamiliar with the checklist as described in its July 2014 response and none couldbeprovidedtotheDepartment. TheCitywasalsounfamiliarwiththeJune2014monitoringfindings andtheCity’sresponses
Similartothe2014environmentalmonitoringresponse,theCityagainnotedoversightasapotential causeoftheprematurecommitmentoffundsandnon-compliancewith§58.22(a),(c),&(d). Specifically,the CitynotedlackofoversightbytheformerHousingProgramSupervisor,wholastreportedtoScottMcBride, Director of Development Services, as well as staff turnover where Mr. McBride replaced Frank Quintero, DirectorofEconomicDevelopmentwhoformerlymanagedtheHousingDivision. ThepositionofHousing Program Supervisor became vacant prior to the January 2020 monitoring. This is of issue as the former HousingProgramSupervisorwasdirectlyinvolvedinpreparingandsubmittingtheAdministrativeReports totheCouncilforadoptionofLoanCommitmentAgreementsandvariousloans,subordinations,notes and deedsoftrustnecessarytocompletefinancingofprojects.
Citywasunawareoftheuseofconditionallanguage,orsimilarlanguage,asprovidedintheAugust26,2011 memorandumfromHUDAssistantSecretaryforCommunityPlanningandDevelopmentMercedesMarquez titledHUD Memo Guidance on Options and Conditional Contracts for Purchase of Real Property for EnvironmentalReviewsConductedbyaResponsible-Entityunder24CFRPart58. Further,theCityfailed todocumentthattheconditionsdescribedintheAssistantSecretary’smemohavebeenmet. StaffrecommendedactionsandtheadoptingResolutionsbytheCityCouncil,whichunderPart58constitute commitmentstoimplementanyoftheprojectsidentifiedintheActionPlan,failedtoincludeadeclarationby theCertifying OfficerthattheCityhas fullycarried outitsresponsibilitiesforenvironmentalreviewunder therequirementsofNEPAandperHUDregulationspriortoanysuchcommitmentorexpenditureoffederal funds.
Effect:
CommitmentofHUDfundsmustnotbemadeuntilthePart58environmentalreviewprocessiscompleted. HUD regulationsat§58.22placelimitationsonactivitiespendingenvironmentalclearance. Neitherarecipientnorany City of Merced, California
9 participant, including public or private nonprofit or for-profit entities, or any of their contractors, can commit HUDfundsonanactivityorprojectuntilHUDorthestatehas approvedtherecipient’s certifiedRROF. This ensures that actions are not taken that would have an adverse environmental impact or limit the choice of reasonable alternatives. Remedies and sanctions can be imposed when §58.22 is violated and when the environmentalreviewprocessisnotproperlycompleted. Thiscanmeantherecipientmayberequiredtorepay HUDfundsorfinancemitigationmeasuresfromtheirownfunds.
Undertakingphysicalactivities,committingtoaproject,expendingfunds,and/orreleasingHUDprogram fundspriortoproperlycompletinganddocumentinganenvironmentalreviewaswellasprior tosubmissionof theRROF-CorreceiptofanAuthoritytoUseGrantFunds(AUGF)areseriousdeficiencies. Theymaycausethe projecttobecomeineligibleforfederalassistanceforthelifeoftheproject,occupantsmaybeexposedtohuman healthandsafetyhazards,and/ortheremaybeenvironmentaldegradation. Bindingagreementsthatincludeloan commitmentagreements,purchaseagreements,constructioncontracts,andexecutionofvariousloanagreements, regulatoryagreements,subordinationagreements,andrelatedloandocumentsincludingnotesanddeedsoftrust necessarytocompletethefinancingofaparticularprojectpotentiallyforeclosestheopportunityfortheCityto rejecttheproject,chooseanalternativeorimplementmitigation,shouldtheenvironmentalreviewrevealissues thatcouldaffectthehealthandsafetyofpeopleorcausethepropertytobeunusablefortheproposedintended purpose,orresultinsignificantadverseimpactstotheenvironment.
CorrectiveAction:
Section104(g)(2)oftheHousingandCommunityDevelopmentActof1974(42USC5304(g)(2))andSection 288(b) of Title II of the Cranston-Gonzalez National Affordable Housing Act [HOME Investment Partnerships Act] both provide that the Secretary of HUD may not release funds for a project unless the recipienthassubmittedaRROF-Cpriortoanycommitmentoffundstotheproject. HUD’sOfficeofGeneral Counsel has interpreted the word “funds” in the Act to mean HUD funds. Due to the fact that the City obligated CDBG and HOME program funds and/or disbursed CDBG and HOME program funds prior to submission of a RROF-C, a statutory violation has occurred of Section 104(g)(2) of the Housing and CommunityDevelopmentActof1974and/orSection288(b)oftheHOMEInvestmentPartnershipsActand neither the City nor any participant in the development process can use any HUD funding subject to the environmental review requirements of the statute that was violated for the same project. Therefore, IDIS Activity IDs 1102,1103,and 1063 are prohibited fromusingHUDprogram funds associatedwithSection 288of TitleIIoftheCranston-GonzalezNationalAffordableHousingAct. IDISActivityIDs 1102, 1064, 1067,1094,and1095areprohibitedfromusingHUDprogramfundsassociatedwithSection104(g)ofthe HousingandCommunityDevelopmentActof1974. Assuch,bothCDBGandHOMEfundingmaynotbe usedontheseprojectsinthefuture,andanycommitmentsmustbede-obligatedandtheunexpendedCDBG andHOMEfundbalancesfortheprojectsmustbereprogrammed.
Repaymenttothelineofcredit:Citymustrepaythefundsdisbursedfromnon-FederalfundstotheCDBG andHOMEprogramaccountsfortheaboveprojectswhichhadthestatutoryviolationsoftheenvironmental requirementsundertheHousingandCommunityDevelopmentAct,theHOMEInvestmentPartnershipsAct, and24CFR§58.22. TheCitymustprovideOEEanassurancethatitwillnotprovideadditionalCDBGand HOMEprogramfundstoanyoftheprojectsidentifiedinthisFinding. ItispossiblefortheCityoranyparticipantinthedevelopmentprocesstouseHUDfundingthatissubjectto a different statute’s environmental review requirements, but only if the recipient first obtains a waiver of §58.22(a)fortheregulatoryviolation. IftheCitydeterminesthatanyof theprojectslistedabovemightbe eligibleforHUDfundingunderadifferentstatute,theCitywillnotifyHUDsothatitmayshareguidancefor requestingawaiveroftheregulatoryviolation. HUDwillonlygrantsuchawaiverwherethereisgoodcause, theviolationwasinadvertent,andnounmitigatedadverseenvironmentalimpactresultedorwillresult. Note thatapprovingHUDassistancetoaprojectthatincurreda§58.22(a)violationisanextraordinaryaction;there isnoguaranteethatHUDwillapprovetherequesttoprovideassistancetotheproject.
City of Merced, California
10 Asstated above under Cause, the City failedto resolvea prior finding ascribedto theCity’s HUDfunded programswhichproceededfromOEE’sApril2014monitoringoftheprograms’environmentalcompliance.
The2014Monitoring,FindingNo.1states…TheCitysometimesfailedtocompletetheenvironmentalreview process prior to site-specific commitment of HUD funds. HUD requested in its June 2014 environmental monitoringreportandagainrequestunderthecurrentenvironmentalmonitoringthattheCitymustsubmitto OEEassurancesthatthissystematicdeficiencywillnotreoccurandtodocumentthepracticalstepstakento prevent this reoccurrence. Further, the City must submit to OEE a final approved comprehensive environmental review policy and procedure for all HUD-funded projects. At a minimum, the policy and proceduresmust identify thecity department/staff responsible for conducting reviews; coordinationefforts with other city departments to identify projects; coordination and tracking efforts with project sponsors, CHDOs, CBDOs, subrecipients, and other entities that receive HUD program funds to ensure reviews are completed prior to obligating and disbursing funds; documentation requirements; retention and location of documents; on-going staff training; and management review/approval of environmental reviews. The submissionmustincludeanorganizationalchartandanenvironmentalreviewprocessflowchart. CitymustsubmittoOEEcontractlanguagethatcomplieswith§58.22(d)andconsistentwithHUDAssistant Secretary for Community Planning and Development Mercedes Marquez’s HUD memo guidance. The environmental review procedures described above shall specify that this language is incorporated into contractsandotheragreementdocuments,whenappropriate.
Citymust electronically submit thecompleteenvironmental reviewrecord andAUGFtoOEE for thenext two environmental reviews conducted as either environmental assessment per §58.36 or categorically excludedper§58.35(a)subjecttolawsandauthoritieslistedat§58.5andnotcapableofconvertingtoExempt per§58.34(a)(12).
Finding No. 2: The City failed to retain the written records of the broad-level review, Tier I of its Tiered environmental review approach.
IDIS ID 1076: 2015/2/Homeowner Rehabilitation - Brush with Kindness Program CDBG 14A – Rehab; Single-UnitResidential-3168NottinghamAvenue
IDIS ID 1080: 2015/2/Homeowner Rehabilitation - Brush with Kindness Program CDBG 14A – Rehab; Single-UnitResidential–950W8thStreet
IDIS ID 1086: 2015/2/Homeowner Rehabilitation - Brush with Kindness Program CDBG 14A – Rehab; Single-UnitResidential-1710UnionAvenue
IDIS ID 1087: 2015/2/Homeowner Rehabilitation - Brush with Kindness Program CDBG 14A – Rehab; Single-UnitResidential–204W14thStreet
Condition:
Thetieredenvironmentalreviewapproach[see§58.15]isdesignedtobeusedforactivitiesthatareCategorically Excludedper§58.35(a)subjecttothelawsandauthoritiesat§58.5(CEST). Activitiesinthiscategorygenerally includerehabilitation/repairofsingle-family,owner-occupiedhousingunitsonscatteredsites. Assuch,theCity usedtheRehabilitationEnvironmentalReview(RER)/AppendixAtieredformatforitsvarioushousingrepair activities including those generally referred to as Homeowner Rehabilitation - Brush with Kindness Program.
EachoftherespectiveERRsdidnotincludetheRERformthataddressedthefactorsevaluatedfortheentirearea ofconsideration(TierIorbroad-levelreview)anddidnotincludetheassociatedpublicnotice(NoticeofIntent toRequestReleaseofFundsorNOI/RROF),theRROForformHUD-7015.15,andreceiptoftheAUGForform HUD-7015.16.
City of Merced, California
11 Criteria:
24CFR§58.38-Environmentalreviewrecord…Theresponsibleentitymustmaintainawrittenrecordof theenvironmentalreviewundertakenunderthispartforeachproject.Thisdocumentwillbedesignatedthe “EnvironmentalReviewRecord”(ERR),andshallbeavailableforpublicreview.24CFR§58.38(a)-ERR documents …The ERR shall contain all the environmental review documents, public notices and written determinationsorenvironmentalfindingsrequiredbythis partasevidenceofreview,decision making and actionspertainingtoaparticularprojectofarecipient.
TieredERRisoutlinedin24CFR§58.15-Tiering. Itcontainsabroadreview(Tier I),awrittenstrategy, andasite-specificreview(TierII). AllpartsoftheTieredEnvironmentalReviewmustbecompletedbefore committingfundsonanyonesite(24CFR§58.22–Limitationsonactivitiespendingclearance).
Cause:
TheCitystaffdidnotunderstandthatallTieredenvironmentalreviewrecordsmustberetainedbytheCity. This deficiency has been corrected for another andmore recent group of Tiered environmental reviews which have beenenteredtoHEROSunderthesystem’sTierEnvironmentalReviewapplication.
Effect:
The ERR must contain awell-organized written record of the process anddeterminations made under Part 58.
MaintaininganorganizedERRisespeciallyimportantwithrespectstoTieredEnvironmentalReviews,asTiered ERRs arenot complete without both thebroad-level and site-specific tieredreviews. All site-specific reviews must identify the corresponding broad-level review and should be filed together. The ERR is the City’s administrativerecordforenvironmentalcomplianceandissubjecttoreviewbythepublic,thecourts,andHUD.
Intheabsenceofproperlydocumentedandreadilyreviewablerecords,theadequacyoftheCity’senvironmental reviewdeterminationsanddecision-makingprocessisexposedtopotentiallegalchallengesandHUDpenalties andsanctions,includingrepaymentoffunds.
CorrectiveAction:
AsstatedunderFindingNo.1,theCitymustsubmittoOEEafinalapprovedcomprehensiveenvironmental reviewpolicyandprocedurefortheprojectsfundedundertheCity’sentitlementprograms. Thepolicyand proceduresmustidentifythestepstoensurecompliancewith§58.38requirementsapplicabletoretentionof locationofdocuments.
Citymaynotperformanyadditionalsite-specific,TierIIreviewsfortheBrushwithKindnessHomeowner Rehabilitationprojectwhilethebroad-level,TierIreview(RER)andtheassociatedpublicnotice,RROF-C, andAUGFremainunlocated. IfthecityproposesadditionalBrushwithKindnessprojectsmovingforward, itmustconductanewbroad-level,TierIenvironmentalreview(withassociatedRROF-CandAUGF)and thensite-specific,TierIIreviewsforthespecificsites.
***END***
City of Merced, California
12 City of Merced
IDIS Activity Program Year/IDIS Project ID/Project Title Activity Name 2019
Combined Public Notice of the Availability of the Environmental Assessment and Notice of FONSI, Final Notice and Public Explanation of Proposed Activities in a 100-year Floodplain, and Notice of Intent to Request Release of Funds. February 7, 2019
Childs Court Apartments, Merced – transfer, construction 119-unit apartment, construction multi-modal transit
stop, and construction of street improvements. NWc @ B
Street and East Childs Avenue, City of Merced.
2018 1132 2018/20/Continuum of Care - Collaborative Applicant - Merced County Continuum of Care - Merced County
1131 2018/6/PS -Neighborhood Clean-up - Restore Merced -05V/LMA Restore Merced / Neighborhood Clean-up 1126 2018/14/Acquisition of Property Sierra Saving Grace Homeless Project 1125 2018/11/Acquisition of Property - Merced Rescue Mission Merced Rescue Mission - Hope for Families 2017 1118 2017/15/INF-West 25th & 26th Streets (John Muir School) ADA Ramp & Sidewalk Improvements-03L/LMA ADA Ramps & Sidewalk Improvements #118028 1117 2017/6/INF-Buena Vista & G Street (Rivera School) ADA Sidewalk/Ramp Improvements-03L/LMA ADA Sidewalk/Ramp Improvements #118027 1114 2017/16/Habitat for Humanity - Homeowner Rehabilitation and New Construction Program
Habitat for Humanity - Homeowner Rehabilitation and
New Construction Program
1113 2017/18/Acquisition of Property for Permanent Supportive Housing Sierra Saving Grace Homeless Project 1106 2017/1/Administrative Costs FY 2017/18 Direct Administration Expenses 1103 2017/14/PF - Gateway Terrace II Apartments - Central Valley Coalition for Affordable Housing (CHDO) 03C/LMC GATEWAY TERRACE II - CVCAH (CHDO) 2016 1102 2016/17/Gateway Terrace II Apartments - Central Valley Coalition for Affordable Housing (CHDO) GATEWAY TERRACE II - CVCAH (CHDO) 1100 2016/9/Brush with Kindness - Habitat for Humanity Stanislaus CountyBrush with Kindness - Habitat for Humanity Stanislaus County
1097 2016/8/Homeless Project - Sierra Saving Grace Homeless Project - Sierra Saving Grace 1095 2016/7/Room at the Inn - Merced County Rescue Mission Room at the Inn - Merced County Rescue Mission City of Merced, California
13 1094 2016/5/ADA Ramp and Sidewalk Modifications - City of Merced Engineering Department ADA Ramp and Sidewalk Modifications #117007 1084 2016/2/Rehabilitation of Foreclosed Property 241 E. Main Street / Rehab 1079 2016/22/Administration FY 2016/17 Direct Administration Expenses 1078 2016/1/HUD 108 Loan Payment HUD 108 Loan Payment
2015 1101 2015/21/CVCAH (CHDO) - GATEWAY TERRACE II GATEWAY TERRACE II - CVCAH (CHDO) 1087 2015/2/Home Owner Rehabilitation - Brush with Kindness Program 205 W. 14th Street / Rehab 1080 2015/2/Home Owner Rehabilitation - Brush with Kindness Program 950 W. 8th Street - Rehab 1067 2015/14/South Merced ADA Ramp Project #116033 SOUTH MERCED ADA RAMP PROJECT #116033 1063 2015/7/New Construction Multi-Family Residential - 1820 I Street CVCAH-1820 I STREET 1061 2015/6/Administration FY 2015/16 Direct Program Administration 2014 1054 2014/17/Water Main Replacement T & 7th Street Water Main Replacement T & 7th Street