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Home My WebLink About02/27/23 BUDGET FINANCE ECONOMIC DEVELOPMENTV BAKERSFIELD 23FEB21; ;';i11:15 THE SOUND OF 5aw1e(lgGtvf�al(er 11, . _, : _A Staff: Committee Members: Scott Andrews, Assistant City Manager Councilmember, Andrae Gonzales - Chair Mario Orosco, Budget Officer Councilmember, Ken weir Councilmember, Eric Arias Regular Meeting of the Budget, Finance and Economic Development Committee of the City Council - City of Bakersfield Monday, February 27, 2023 12:00 p.m. City Hall North, First Floor, Conference Room A 1600 Truxtun Avenue, Bakersfield CA 93301 AGENDA ROLL CALL 2. PUBLIC STATEMENTS a. Agenda Item Public Statements b. Non -Agenda Item Public Statements 3. ADOPTION OF THE JANUARY 30, 2023, AGENDA SUMMARY REPORT 4. NEW BUSINESS a. Annual CDBG Action Plan (Saldana/Eaton) b. Section 108 Loan Program (Saldana/Eaton) c. Committee Discussion and Recommendations Regarding Sewer Connection Fee Rate Study Results: Proposed Increase in Connection Fees (Roldon) 5. COMMITTEE COMMENTS 6. ADJOURNMENT Staff: Scott Andrews, Assistant City Manager Mario Orosco, Budget Officer V Committee Members: Councilmember, Andrae Gonzales - Chair Councilmember, Ken Weir Councilmember, Eric Arias Special Meeting of the Budget, Finance and Economic Development Committee of the City Council - City of Bakersfield Monday, January 30, 2023 12:00 p.m. City Hall North, First Floor, Conference Room A 1600 Truxtun Avenue, Bakersfield CA 93301 AGENDA SUMMARY REPORT ROLL CALL Committee Members Present: Councilmember Andrae Gonzales - Chair Councilmember Eric Arias Committee Members Absent: Councilmember Weir City Staff Present: Christian Clegg, City Manager Gary Hallen, Assistant City Manager Paul Saldana, Economic Development Director Mario Orosco, Budget Officer Julie Drimakis, City Clerk Juan Heredia, Administrative Analyst (CMO) Anthony Valdez, Assistant to the City Manager Kristin Muir, Administrative Analyst (ECD) Josh Rudnick, Deputy City Attorney Randy McKeegan, Finance Director Joe Conroy, Public Information Officer Michelle Cruz, Management Assistant (CMO) 2. PUBLIC STATEMENTS a. Agenda Item Public Statements None b. Non -Agenda Item Public Statements None 3. ADOPTION OF THE January 30, 2023, AGENDA SUMMARY REPORT Motion by Committee Member Arias and seconded by Committee Member Gonzales for approval of minutes. Motion approved with Councilmember Weir absent. 4. NEW BUSINESS a. Discussion and Committee Review of Economic & Community Development Department upcoming items City Manager Clegg made verbal report and showed the items currently scheduled for the Committee and asked the committee what priorities should be. Following Committee discussion the priorities were determined to be the following: Annual CDBG Action Plan, Section 108 Loan Program (Referral(, Development fee Review to incentive targeted economic development, EOA Program Review (Referral(, Infill Development Impact Fee Program (Referral), Affordable Housing Trust Fund NOFA Review, ARPA Infill Program, Vacant Property Purchase Program, Economic Development Strategic Plan Updates, Downtown Redevelopment; Chester Redevelopment Plan (precursor to eminent domain), Insurance Rates and Self -Insurance Fund Review, Pension and Budget forecast, Rate Study Review, Audit Reports, Criteria for use of city reserves (Referral(, Disadvantaged neighborhoods redevelopment (Prosperity Neighborhoods), Economic Development Ordinance: Restoring Functions of RDA (Referral(, Economic Incentives (including potential projects), Kaiser Sports Village Commercial Property Development Plan (Referral), Procurement Authority (Referral). U. Approval of the 2023 Committee Calendar Motion by Committee Member Arias to adopt 2023 Calendar. Motion approved with Councilmember Weir absent. S. COMMITTEE COMMENTS Councilmember Gonzales made comments regarding adding Economic and Community Development to Committee subjects. 6. ADJOURNMENT Meeting was adjourned at 12:42 p.m. Budget, Finance and Economic Development Committee Special Meeting January 30, 2023 Agenda Page 2 ANDRAE GONZALES, CHAIR BUDGET AND FINANCE COMMITTEE ATTEST: JULIE DRIMAKIS, MMC CITY CLERK and Ex Officio Clerk of the Council of the City of Bakersfield Budget, Finance and Economic Development Committee Special Meeting January 30, 2023 Agenda Page 3 PROPOSEDD:2023-24 Description of2324 9].9a wars Requested -eea CDBG Entitlement 3,805990,.Program Income tProlec'edj 8,000TotalAvallable Resources 3,5D,010tall ;;; vt,Adminlstratlon(not to exceed 20%) 761,198Section 108 Loan Payment on$4. IM -...Section 108 Loan Payment on$800K 61,054 Total Admin and Debt Payment 623,052 110,052 '�45 sv Total Resources minus Admin and Debt Payments 2,990,938 2,91 7118451 Fair Housing Program Services Iol 100.000 .. All Bakersfield Senior Center Support Services 90,000 901" 1 HODllat for Humanily Workforce Developmenl SUM 501000 All Weed, Boost Protect 1,194,000 All total Public Service Projects 1.430A00 230,000 Home Access Rehabilitation 50000 50.0W All Alto Vista Area'. Curb, Gutter, Sitlewalk. Drainage. Accessibility Imprv. 700000 900.000 3 Benton Area. Curb. Gutter, Sitlewalk. Drainage, Accessibility Imp, 350000 350.000 1 East Truxton Area. Curb, Gutter, Sidewalk Drainage, Accessibility Imprv. 390.000 390,000 2 Cloaca., Area'. Curb, Gufiec Sitlewalk, Drainage. Accesslbl0ty Imprv. 200.000 2D0.0D0 2 Sunset Area Lighting Upgrade 738,000 410,938 2 Hope, Read Lighting Protect 650.000 3,078,0001 650.000 2.950,9311 21 'a <y3 2 total Public facilities Totol Requests for Pubic Services+Projects 1 4,512.0001 2,990,938 ef:J PROPOSED HOME BUDGET1 • Description FY 23-24 FY23-24 FY 22-^_3 Re uested Proected iurd,d HOME Ent i Element $ 1,668,021 $ 1,668,02I : _..... Program Income $ 80,000 $ 80,000 Total Available Resources $ 1,748,021 1,748,021 S 1,748.021 AdminishaHan (not to exceed l0%) $ 166,802 $ 166,802 k. Total Resources minus Admin $ 1,581,219 $ 1,581,219 ; 1,581,219 CHDO Set Aside(15%) $ 225,893 $ 250,203 ",: _..., ,. Ac q u,ution/Construction/Rehabilitation/Down payment $ - $ 1,331,016 ; GEAHI 114th Street Senior Apartments' $ 1,259,919 CopK Tenant Based Rental Assistance $ 1,908,840 Total All Re uesh $ 5893 $ 1,581,279 $ 7.581,904 'GEAHI II 4th Street Senior Apartments will be funded with pnor year fondinq. PROPOSED /2023-24 Description FY 23-24 it 23-24 FY 2223 Re uested Proected Funded ESG Entitlement $ 332,887 $ 332,887 Administration (not to exceed 7.5%) $ 24,967 24,967 S Total Resources minus Admin $ 307,920 307,920 307 920 Flood Ministries - Street Outreach" $ 25,000 $ 25,000 r The Open Door Network -Shelter' $ I80,000 $ 70,000 ., The Open Door Network - Rapid Rehousing 8 Prevention' $ 200,000 $ 108.420 The Mission at Kern County - Shelter' $ 97,500 $ 70,000 The Open Door Network (AAFV) - Shelter $ 42,800 $ 34.500 Total All Requests) $ 545,300 307,920 3oi,92o PROPOSED HOPWA BUDGET FY 2023-24 Description FY 23-24 -24 FY 22-23 Re uested Proected wntled HOPWA Entitlement $ 9 1,450 $ 931,450 Administration (not to exceed 3%) $ 27,944 $ 27,944 ; Total Resources minus Admin $ 903,507 903,507 S 40350i Kern County Public Health $ 903,507 903,507 $ 903,507 Total All Rearrests)a903,507 908 07 5 903, Sm 2/24/2023 2020-2025 CONSOLIDATED PLAN GOALS • Increase and preserve affordable housing for low - and -moderate income households Prevent homelessness. and reduce uru4oeaiF a:wa: • Improve public infrastructure and facilities to promote safe and vibrant communities. • Foster community and economic development. • Enhance facilities and services forthe non -homeless special needs population. 2/24/2023 ANTICIPATED RESOURCES 2023-24 Action Plan Admin: Admin: Admin: Admin: $761,198 $166,802 $24,967 $27,943 (Section 108 $61,854) Projects: Projects: Projects: Projects: $2,990,938 $1,581,219 $307,920 $903,507 2023-24 ACTION PLAN Recommended CDBG Budget ■ Curb, Gutter, Sidewalk, ADA and Lighting Projects ■ Public Services ® Home ADA Improvements 2/24/2023 CURB, GUTTER, SIDEWALK & ADA IMPROVEMENTS ;77 5 • Alta Vista Area: $700,000 (Ward 3) • Benton Area: $350,000 (Ward 1) • East Truxtun Area: $390,000 (Ward 2) • Oleander Area: $200,000 (Ward 2) LIGHTING UPGRADE PROJECTS • Sunset Area: $410,938 (Ward 2) • Holtby Area: $650,000 (Ward 2) 0 2/24/2023 HOME ACCESS ADA IMRPOVEMENTS • $50,000 • City -Run Program • Low-income • $4,500 Grants • Goal: 11 Households 7 PUBLIC SERVICES - $240,000 • Bakersfield Senior Center Support Services - $90,000 • GBLA Fair Housing: $100,000 • Habitat for Humanity Workforce Development Program $50,000 IFair Housing �GBL.I�j _Law Project s 4 2/24/2023 2023-24 ACTION PLAN Recommended HOME Budget ■ CHDO Set -Aside ■ New Construction 2023-24 ACTION PLAN Recommended ESG Budget ■ Rapid Rehousing / Prevention ■ Homeless Outreach m Shelter Operations 10 2/24/2023 2023-24 ACTION PLAN Recommended ESG Budget • Flood Outreach - $25,000 • The Open Door Network Shelter - $70,000 • Mission Shelter - $70,000 • AAFVSA Shelter - $34,500 • Open Door RRH & Prevention: $108,420 11 ANTICIPATED TIMELINE 2023-24 Action Plan • Budget & Finance Committee Meeting • Draft Action Plan Complete • Action Plan Public Notice Period • Community Meeting • Public Hearing before City Council • Action Plan due to HUD 12 February 27, 2023 March 22, 2023 March 24 - April 26, 2023 April 19, 2023 April 26, 2023 May 15, 2023 3 2/24/2023 13 00 BAKERSFIELD THE SOUND OF5nro0hi4� Re*r MEMORANDUM DATE: February 24, 2023 TO: Budget & Finance Committee FROM: Paul M. Soldono, Economic and Community Development Director BY: Misty Eaton, Community Development Principal Planner SUBJECT: Community Development Block Grant Section 108 Loan Program Overview The Section 108 Loan Guarantee Program (Section 108) provides communities with a source of low-cost, long-term financing for economic and community development projects. Section 108 financing provides an avenue for communities to undertake larger, more costly projects, where they may have limited resources to invest in upfront. Section 108 can fund economic development, housing, public facilities, infrastructure, and other physical development projects. This flexibility of uses makes it one of the most potent and important public investment tools that HUD offers to states and local governments. Section 108 assistance can be deployed in two ways: • Directly by the community or its governmental or non-profit partner to carry out an eligible project, or • Indirectly with a community or its partner re -lending (or, in limited circumstances, granting) the funds to a developer or business to undertake an eligible project The program is authorized under Section 108 of the Housing and Community Development Act of 1974 as the loan guarantee component of the Community Development Block Grant (CDBG) Program. The specific regulations governing the Section 108 Program may be found at 24 CFR 570, Subpart M, Loan Guarantees. The program's flexible repayment terms also make it ideal for layering with other sources of community and economic development financing including, but not limited to, New Markets Tax Credits (NMTC), Low Income Housing Tax Credits (LIHTC), and Opportunity Zone equity investments. In 2003, the city entered into agreements for two such Section 108 loans for the $4.1M Aquatic Center, Pool Rehabilitations and Southeast Training Facility Project, and the $800,000 Southeast Streetscape and Street Improvements Project. Since that time, the City of Bakersfield has made annual principal and interest payments from its CDBG annual allocation. There is a current balance of $62,708 which is due to be paid on August 11% 2023. Eligibility To determine Section 108 Loan eligibility, the CDBG rules and requirements are consistent with the standard CDBG program. Requirements include but are not limited to the following: • Proposed project(s) must meet one of CDBG's three National Objectives: o Principally (70%) benefit low- and moderate -income persons o Aid in the elimination or prevention of slums or blight, or o Meet urgent needs of the community • Activities must be consistent with ConPlan objectives. Loan Amount Entitlement public entities. An entitlement public entity may apply for up to five times its latest approved CDBG entitlement amount, minus any outstanding Section 108 commitments and/or principal balances on Section 108 loans. Loan Process The Section 108 loan guarantee process is a two-part process, including an application phase and a funding phase. Application Phase: An eligible Community develops and submits an application for a project and the local HUD field office and Section 108 Office at HUD Headquarters concurrently review the application and make a recommendation to the Deputy Assistant Secretary for Grant Programs. Prior to submission of the application eligible communities are required to comply with their local citizen participation plan. Funding Phase: The Community (or its designated public entity( and the Section 108 Office, as well as its Program Counsel, prepare the financing documents necessary to for the project (or the first project under a loan fund) to be guaranteed by HUD. HUD also reviews any documents that are relevant to its security interest in the guaranteed loan at this time. The Community then submits its signed loan documents and its first request for funds to be advanced. Once HUD signs the loan documents and attaches its guarantee, it sends these documents to its Fiscal Agent, which arranges for the advanced funds to be wired to the Community. From this point forward, the Community can begin to access funds on a weekly basis for the project and will start reporting in HUD's Integrated Disbursement and Information System (IDIS(. Underwritina Borrowers must evaluate the suitability of using public funds in a specific way for a specific project. The process ensures that public funds are not substituting for other financing sources and that the project Is not being overly subsidized. The objectives of the underwriting guidelines are to ensure: • Project costs are reasonable (Uniform Administrative Requirements) • All financing is committed • The 108 funds are essential to the project • The project is financially feasible • Return on equity is reasonable • CDBG funds are disbursed on a pro rato basis -not before other financing sources. • Section 108 and the Consolidated Planning Process Loan Term and Rates The maximum repayment period for a Section 108 loan is 20 years. HUD has the ability to structure the principal amortization to match the needs of the project and borrower including periods of interest -only payments. The principal security for the loan guarantee Is a pledge by the applicant public entity of its current and future CDBG funds. Additional security may be required to assure repayment of the guaranteed obligations. The additional security requirements are determined on a case -by -case basis but could include assets financed by the guaranteed loan. In addition to the required pledge of CDBG funds, collateral for Section 108 financing must be described. Most loans are secured by a combination of additional collateral, including: • Liens on real property, machinery, equipment, inventory and accounts receivable • Revenue from other sources, including parking, special taxing districts, or loan portfolios • Personal guarantees from 3rd party borrower Repayment structures may vary depending on the individual project and borrower. The interest rates for Section 108 interim loans are based on the three-month Treasury Auction Bill Rate. Interest rates for loans funded by a public offering are fixed and are based on U.S. Treasury borrowing rates. Although borrowers use CDBG grant funds as collateral for Section 108 guaranteed loans, they do not necessarily use the grant funds to pay off the loans. CDBG program activities related to Section 108 loan repayment represented 1.9%of overall program expenditures in FY2020. In many cases, borrowers use Section 108 project revenues or other local resources to pay these costs. Loan Guarantee Fee The annual loan guarantee fee covers the long-term cost to the Federal Government of a Section 108 loan guarantee. The fee charged to Section 108 borrowers will be a percentage of the Section 108 loan amount. The fee may be paid with (CDBG) funds, Section 108 Loan Guarantee proceeds or other funds. The fee is paid upon disbursement of the loan proceeds. Fees that are paid with CDBG funds must be identified in the Consolidated Plan as part of project costs. FY 2023 Fee Is .94% of the Principal Amount of the loan disbursed for eligible use(s) Proaram Considerations What you should consider before launching a loan fund with Section 108: 1. Does using Section 108 guaranteed financing make sense for this program/project? 2. Do we or our partners have the capacity, experience, and tools (loan processing/underwriting) in place to administer the program successfully? 3. Community Strategy —What are the community's needs? 4. Organizational Arrangements —who is responsible? 5. Approach to Using 108—At what scale? Project Specific or Loan Fund to offer multiple projects? 6. Marketing and Outreach —What's the strategy? 7. Selection and Evaluation—W hat's the process? 8. Fund Management—W hat's the plan? (short-term and long-term) How are you going to ensure compliance? 2/23/2023 0/ BAKERSFIELD CITY OF BAKERSFIELD CONNECTION FEE STUDY • Background • Current Connection Fees • Approach to Calculating Fees • Value of Facilities • Proposed Fees • Residential Connection Fee Comparison z 2/23/2023 What are connection fees? A type of development impact fee, imposed under Cal. Government Code Section 66000 et seq., the Mitigation Fee Act. One-time charge to reimburse the City for costs of providing capacity for growth. Paid at the time of connection and later if additional capacity is required. Fees are not paid on an ongoing basis and revenues are not used to support the operation and maintenance of the City's sewer system. Connection fee revenues reduce capital improvement funding requirements. How are connection fees determined? No legally prescribed formula or methodology Costs must be reasonable and related to facilities that benefit growth Common industry practice is to use utility valuation approaches Recommended methodology: connection fee equals the average cost of capacity 2/23/2023 CONNECTION sewer Connection fees Single -Family Residential $5,000.00 perdwelling unit Commercial $227.00 perfixture unit Flow DOD Ts5 Industrial $1.18 $800.00 $254.00 pergpd per lb daper lb da • Connection fees for Single -Family Residential increased from $4,000 per connection to $5,000 per connection. This change occurred over 5 years from 2017 through 2021. • Changes in connection fees are not subject to Proposition 218 procedural requirements Periodic update offers to reflect increased value of the system which benefits growth 1. Identify City facilities that benefit growth 2. Derive the cost of facilities (assets, retired debt service, future CIP) 3. Determine the capacity provided by these facilities • Buy -in methodology assumes the current system is at capacity 4. Determine the unit cost of capacity 2/23/2023 Replacement Cost New (RCN) Original construction cast of each facility, escalated using construction cost inflation. Present day value to construct each facility, Replacement Cost New Less Depreciation (RCNLD) Book value of each facility, escalated using construction cast inflation. Represents the fair market value of the system for purposes of transferring ownership of utility assets. City does not achieve full cost recovery for facilities that are fully depreciated and still in service that continue to provide capacity for growth. Single Family - Proposed Commercial - Proposed RCN RCNID RCN NID RC City's Sewer system Assets Con nection Fee per EDU $6,398.93 $4,161.40 Plant 2&3Assets $890,215,891 $550,6)J,088 Fixtu re UNts pe r E DU 25 25 5 Year Future ClP $45,000.000 $45,Coc )DO ConneRion Fee per Fixture Unit W5.96 $1wes Cash Reserves 535,810,000 $35,830,000 System value S971,015,891 $631,4n,0ae Industrial— Proposed (assumes RCN) urrent EDUs 151,746 151,J46 conneptlon Fee per FDU $6,398.93 $9,161C0 Flow MD a$$ Total System Allocation $.a% 9.2% 55% Total value'. $673,015,691 Total System Assets $829,525,394 W,533,137 $52,957,345) Total Loadings 16,289,299 24,404,605 28,4R,039 Unit Costs $50,92 $3363 $1.86 Units HCAyr lb/ , Ib/ r proposed Unit Cost Conn Fee $24.85 $1,324.12 $679.0 Units $/ pd $/lb/Eay $/lbi 2/23/2023 Sewer Connection Fees Cuml RCN RCNLD Single -Family Residential $5,000.00 $6,398.93 $4,161,40 (per dwelling unit) Commercial $227.00 $255.96 $166.46 (perfixture unit) Industrial Flow ($/gpd) $1.18 $24.85 $16.16 Industrial ROD($/Ib/day) $800.00 $1,324.12 $861.11 Industrial TSS($/Ib/day) $254.00 $678.89 $441.50 " rw m IIIII IS 4% s./x 11. uem5s]LOLs,esL sen, Rs251 va.sns— ssz ss], sc IlmErnev 16, iB9, i93 iq aM, Ns xB 112 o3 mna 55nu N.o SL. uv LxcS/w Slle/vr 511/y [ennedm It. 5tl9E Saz3 It III ItIt yx6/vr 5/Ib/n 5/le/y "a "a Ih/Ery • vm 1YL anear. nin my/L 1OL 1eh/W NLI/w lb/tr Its, Lemlly (n nnenron ree SVLsx flit 5re5 Ssa..ii 5,1, 11 TONI SlgbF—ty G11-111lee gN. 10 2/23/2023 Cullol,l C 000era [oemreera C ..ra O..'a Cueramera G1.1" fuelamerR3 Cuemmera (Current( ("Wed- (Pmmee- (CUMnp (Prom- (Prallond- (Curl (NpMeea- (9mpooee- [mMtgOnha P Wl NCN) RCNW) RCN gC111O NCN Flow Component $L.7 $4010 l;n'. $.,911 $$59W $393,116 $ta,715 $3,fl M $5,953,Ml BOOComponent $9,111 $9,W7 $15,M $1",3M $133,M $.,,. $$,=M $S,H9,U39 $9,4ASH III Component ]131 $L.1 $3,@5 Mm $3 M m]!3WLQ7 M 1 Total C... IM.n fee $11m Wm $51,9W $]Q,31] $46,46 $655,155 $S,®,13i $14Qa191 Qi %Inneose IM 339% I63% 300% m 16l% 11 l� oF 12 L 2/23/2023 • Staff recommends increasing connection fees based on the RCN calculation • RCN methodology allows City to achieve full cost recovery for facilities • Only new customers are affected, or those wanting to purchase additional capacity • Connection fees are not subject to Prop 218 procedural requirements 13 • Update rate model and revenue projections based on committee feedback • May — Provide public notice of intended increase • June - Present to City Council resolution adopting new connection fees • July 1, 2023 — Adopted fees enacted for FY 2023-24 14 2/23/2023 15