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DISCUSSION
City of San Bernardino
Request for Council Action
Date: October 15, 2025
To: Honorable Mayor and City Council Members
From: Gabriel Elliott, Director of Community Development & Housing Department: Community Development & Housing
Subject: Approve Funding Commitment for Lutheran Social Services San Bernardino Community Wellness Campus with Lutheran
Social Service of Southern California and Dignity Moves (All Wards)
Recommendation
It is recommended that the Mayor and City Council of the City of San Bernardino, California:
1. Approve a waiver of eligible City-imposed development and permit fees for the San Bernardino Community Wellness Campus, in an amount not to exceed $134,319, limited to City-controlled fees; and
2. Approve a Regulatory and Loan Agreement with Lutheran Social Services of Southern California, a Nonprofit Corporation, and DignityMoves, a Nonprofit Corporation, to ensure project completion and protect the $34,944,702 Homekey investments; and
3. Adopt Resolutions No. 2025-377 authorizing the Finance and Management Services to amend the Fiscal Year 2025/2026 operating and capital budget by $1,798,969, appropriating $1,798,969 in 2021-2023 Permanent Local Housing Allocation funds to fund the final construction cost to complete the San Bernardino Community Wellness, and $261,539.40 of PLHA for administration; and
4. Authorize the City Manager or designee to execute all regulatory agreements, loan agreements, and amendments with LSSSC and DignityMoves after review and approval by the City attorney and take any further action necessary to carry out the terms and objectives of the resolution and agreement.
City Manager Comments
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The City Manager recommends that the City Council approve the $1.7 million in PLHA.
If San Bernardino County (County) does not approve the approximate $1.4 million, there will still be a shortfall. The City Council could additionally authorize the $1.4 million from General Fund reserves in the event the County does not approve.
Executive Summary
The San Bernardino Community Wellness Campus (SBCWC) is a 140-unit Homekey
3.0 interim housing project for unhoused men led with Lutheran Social Services of Southern California (LSSSC) and DignityMoves in partnership with the City, faces a $3,412,885 construction shortfall driven by cost escalation and unforeseen solar and fee expenses. The campus is 69% complete under a State of California’s Housing and Community Development (HCD) approved extension with a construction deadline of December 31, 2025, and 90% occupancy due by March 31, 2026. Without immediate local funding, work is projected to halt, risk default, potentially claw back the $34.9M Homekey award, expose the City to legal and financial exposure, and reduce eligibility for future State housing grants.
To prevent delay and protect prior investments, staff recommend a gap-closure financing allocating $1,798,969 in 2021–2023 PLHA funds, and City Council consider whether to conditionally commit up to $1,479,597 in General Fund (subject to County participation). This package will be coupled with a Regulatory & Loan Agreement with LSSSC/Dignity Moves to establish enforceable milestones, reporting requirements, and eligible uses, as well as allow prioritization of up to 24 reserved beds for City referrals (e.g., outreach and PEACE teams). Council action would authorize related budget amendments (totaling approximately $3,500,105.40), to preserve this critical shelter expansion, and maintain the City’s competitive standing for future State funding.
Background
The City is partnering with LSSSC on a State of California Homekey Project to develop a 140-bed, non-congregate interim housing unit for men.
The project will be called the San Bernardino Community Wellness Campus (SBCWC), and is being constructed using prefabricated modular units. The need for a campus of this nature is significant as homeless men in the City outnumber homeless women by two to one. The Community Wellness Campus will assist some of the City’s most vulnerable residents with housing, jobs and health services while generating revenue for the City with its retail market.
According to the 2025 Point-in-Time Count, the City of San Bernardino accounts for 40% of the County’s homeless population, the highest share of any jurisdiction in the region. While the City is actively partnering with affordable housing developers to grow its long-term housing inventory, increasing shelter capacity remains essential to helping its most vulnerable residents stabilize and transition out of homelessness.
On October 27, 2022, the City held a Homeless Workshop. The Mayor and City Council agreed that there was a great need to expand shelter bed capacity and services for those experiencing homelessness within the city.
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On December 7, 2022, the Mayor and City Council allocated $5 million in American Rescue Plan Act (ARPA) funds to LSSSC to increase shelter bed capacity and services. They also authorized the City to submit a joint Homekey 3.0 application with LSSSC to expand shelter bed capacity via interim housing.
On February 1, 2023, The Mayor and City Council adopted Resolution No. 2023-028, declaring a Homelessness State of Emergency.
On December 19, 2023-The City, in partnership with LSSSC and Dignity Moves, was awarded $34.9 million in Homekey 3.0 funds to develop the SBCWC.
On September 4, 2024, the Council adopted Resolution No. 2024-201, reaffirming the Homelessness State of Emergency and granting the City Manager authority to pursue contracts and funding.
Discussion
The Urgent Need for Additional Shelter Beds
To meet the urgent and growing need for shelter and supportive services, the City must act to ensure the completion of the SBCWC, which will significantly expand interim housing capacity for unhoused men. The project is located at 1354 N G St, San Bernardino.
Without additional City investment, this transformative project risks stalling, jeopardizing critical state funding and its ability to provide safe, service-rich housing for its most vulnerable residents. The SBCWC will triple the current shelter capacity provided by LSSSC. This expansion is critical as unhoused men in the City outnumber women by more than two to one. The following supportive services will be offered on campus:
On-site medical clinic;
Comprehensive social services addressing educational, physical, mental health, and social needs;
Workforce development training;
Services to both campus residents and the surrounding community Campus residents can stay for up to 180 days, during which no rent will be charged.
This will enable participants to stabilize and work toward transitioning into permanent housing. Each unit will include a bed, underbed storage, a desk, and a wall rack for coats and personal items. A two-story building is being constructed with prefabricated modular units, approved by HCD, and is currently 69% complete. Its targeted completion date is November 27, 2025.
The State initially set a 12-month full occupancy deadline of March 19, 2025, for the project. Following a formal request, the State granted a one-time extension, revising the deadline to March 31, 2026.
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Performance
Milestone
Per Standard
Agreement
Requested
Extension
Dates
APPROVED EXTENSION
Construction/Rehab 12/19/2025 12/31/2025 12/31/2025
Full Occupancy
(90%+)
3/19/2025 12/31/2025 3/31/2026 90 days after
construction
completion
deadline.
Despite this extension, the project has experienced financial setbacks due to rising construction material costs and unforeseen expenses related to solar requirements. As a result, the project is facing a funding shortfall of $3,238,555. Without additional financial support from the City to close this gap, the project is at serious risk of missing its revised deadline, which could result in substantial consequences, including potential State enforcement actions and loss of funding.
Risks of Non-Performance Under Homekey Grant Terms
If the City fails to meet the revised completion deadline or fails to deliver the promised housing units and services outlined in its grant agreement, the California Department of Housing and Community Development (HCD) could declare the City and its partners in default of its Homekey grant terms. This could result in:
Claw back of funds: The City could be required to return all or part of the awarded Homekey funds.
Legal and financial liability: The City may incur further liability if state auditors or oversight bodies determine that public funds were misused or improperly accounted for.
The most immediate long-term consequence of non-completion is likely:
Disqualification from future Homekey funding opportunities:
oIneligibility for Homekey 4.0 and beyond.
oReduced competitiveness in other State housing and homelessness- related grants, as past performance is a critical scoring criterion in state evaluations.
The State has explicitly stated in Homekey Notices of Funding Availability (NOFAs) that project performance and timely delivery are essential to remaining in good standing for future funding. To avoid these outcomes, the City could consider the following:
Identify and commit local funding.
Establish a new Agreement that would require LSSSC to earmark 24 beds from SBCWC specifically for the City of San Bernardino, to be used by the City’s homeless outreach teams and the police department’s PEACE (proactive enforcement and community engagement) team.
By identifying and committing to the following actions, the City can ensure the on-time
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completion of SBCWC.
1. Reallocation of 2021-2023 Permanent Local Housing Allocation (PLHA) Funds- $1,798,969
The City’s FY 2021–2023 PLHA funds had initially been designated to supplement the operations of the SB HOPE Campus, in combination with $2 million in General Funds (beginning in FY 2026–2027). However, a total of $1,798,969 in 2021-2023 PLHA funds could be reallocated to help cover the construction completion costs for the SBCWC.
The City’s SB HOPE Campus is not scheduled to be completed and operational until November 2026. As a result, future PLHA funds can be allocated toward its operations. Specifically, the next PLHA five-year allocation cycle (2024–2028) is expected to open its NOFA in October of this year. Based on the 2019–2023 allocation, the City anticipates receiving approximately $9.3 million in PLHA funds, which may be used to help sustain operations at the SB HOPE Campus.
2. General Funds $1,479,597
While the Mayor and City Council can alleviate a portion of the $3,412,885 funding gap by allocating $1,798,969 in existing PLHA funds, a remaining balance of $1,479,597 must still be addressed. LSSSC and the City are in ongoing discussions with the County to explore whether the County can cover this remaining gap.
The City Council could conditionally commit $1,479,59 if the County does not provide funding. This fiscally responsible approach safeguards the project timeline, upholds prior public commitments, and ensures the timely delivery of urgently needed housing for our community’s most vulnerable residents.
3. Allocation of 2021-2023 PLHA Administration Funding - $261,539.40 The PLHA funding allocation permits the City to use up to 5% of the total award for administrative purposes. These funds will support city staff salaries, legal services, consultant services for technical assistance, regulatory compliance, reporting, and other costs related to the administration of PLHA- funded projects.
Regulatory and Loan Agreement-Shelter Bed Prioritization The City will enter into a Regulatory and Loan Agreement with LSSSC to ensure that the final construction phase can be completed without delay, enforce conditions, performance standards, and reporting obligations, and ensure that public funds are spent solely on eligible and approved construction-related activities. The loan structure may include forgiveness or repayment terms tied to long-term compliance, which balances financial stewardship and support for community services.
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The Agreement also includes provisions for LSSSC to prioritize 24 shelter beds for the City’s homeless outreach teams and the Police Department’s PEACE (Proactive Enforcement and Community Engagement) team. The City had previously awarded LSSSC $5 million in ARPA funds for operations. This regulatory and loan agreement would establish a dedicated referral pathway by contractually requiring LSSSC to prioritize a percentage of its shelter capacity specifically for City-initiated placements, thereby strengthening coordination and ensuring timely access to shelter for individuals encountered through City-led engagement efforts.
The City will ensure that LSSSC and DignityMoves remain accountable partners and fulfill their scopes of work. Funding to complete the project will be connected to the following provisions:
Formalized Agreement: Execute detailed and clear deliverables, timelines, performance benchmarks, and roles for both organizations. Execute a Regulatory Agreement as required by HCD
Milestone-Based Funding: Tie disbursement of to achievement of specific project milestones and deliverables.
Regular Reporting: Require frequent financial and programmatic reporting, expenditure tracking and progress updates.
Monitoring and Oversight: Conduct regular site visits, performance reviews, and compliance audits.
Corrective Action Provisions: Include remediation or funding suspension clauses if partners fail to meet expectations.
These steps will help protect the public investment and ensure timely project completion and service delivery.
2021-2025 Strategic Targets and Goals
The request for a commitment of the PLHA and General Fund aligns with Strategic Target No. 3: Improved Quality of Life, by expanding accessibility to interim housing and services, improving living conditions for the unhoused population, and positively impacting the community.
Fiscal Impact
FINANCIAL
DATA
Current
Fiscal Year:
Next Fiscal
Year:
Total Cost: Ongoing
Cost:
COST $ 3,412,885 $ 0 $ 3,412,885 $ 0
GENERAL
FUND
SHARE
$ 1,439,597 $ 0 $ 1,439,597 $ 0
SOURCE OF FUNDS:
PLHA $1,798,969
Budget Adjustment:
Yes
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Conclusion
It is recommended that the Mayor and City Council of the City of San Bernardino, California:
1. Approve a waiver of eligible City-imposed development and permit fees for the San Bernardino Community Wellness Campus, in an amount not to exceed $134,319,000 limited to City-controlled fees; and
2. Approve a Regulatory and Loan Agreement with Lutheran Social Services of Southern California, a Nonprofit Corporation, and DignityMoves, a Nonprofit Corporation, to ensure project completion and protect the $34,944,702 Homekey investments; and
3. Adopt Resolutions No. 2025-377 authorizing Finance and Management Services to amend the Fiscal Year 2025/2026 operating and capital budget by $3,500,105.40, appropriating $1,798,969 in 2021-2023 , and $261,539.40 of PLHA for administration; and
4. Authorize the City Manager or designee to execute all regulatory agreements, loan agreements, and amendments with LSSSC and DignityMoves after review and approval by the City attorney and take any further action necessary to carry out the terms and objectives of the resolution and agreement.
Attachments
1. Attachment 1: Dignity Moves Fee Waiver Letter
2. Attachment 2: Resolution 2025-377
Ward:
All Wards
Synopsis of Previous Council Actions:
October 16, 2022 Homeless Workshop hosted by the City December 7, 2022 The Mayor and City Council allocated $5 million in American Rescue Plan Act (ARPA) to LSSSC to
increase shelter bed capacity and services. (NOFA) for
the Rapid Rehousing Program under the Encampment
Resolution Fund initiative
December 7, 2022 The mayor and City Council also authorized the City to submit a joint Homekey 3.0 application with LSSSC to
expand shelter bed capacity via interim housing.
February 1, 2023 The Mayor and City Council adopted Resolution No. 2023-028, declaring a Homelessness State of
Emergency.
May 17, 2023 The Mayor and City Council adopted Resolution No. 2023-057 to submit a joint Homekey application with
Lutheran Social Services of Southern California
(LSSSC).
For Fiscal Year: 25/26
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December 19, 2023 The City, in partnership with LSSSC and Dignity Moves, was awarded $34.9 million in Homekey 3.0
funds to develop the SBCWC.
July 5, 2024 The Mayor and City Council adopted Resolution No. 2023-057 to amend the joint Homekey Application to
include LSSSSC and Dignity Moves.
September 4, 2024 Council adopted Resolution No. 2024-201, reaffirming the Homelessness State of Emergency and granting
the City Manager authority to pursue contracts and
funding.
CC: Eric Levitt, City Manager