To:   HONORABLE MAYOR AND                   From:   Sara L. Hensley

                        CITY COUNCIL

 

   Subject:   SEE BELOW                                               Date:   09-24-03

 

Council District:

Citywide

SNI:

Citywide

                                                                                                                                                                       

SUBJECT:     APPROVAL OF THE PROPOSED SCHEDULE, PROCESS, AND EVALUATION CRITERIA FOR THE FY 2004-2005 COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) APPLICATION CYCLE

 

 

REASON FOR ADDENDUM

 

The CDBG applications are scheduled to be released to the public on October 14, 2003.  City Council approval of the criteria and process, including policies needed to implement the process is required prior to the release of the applications.  The CDBG Steering Committee approved policies for recommendation to the City Council on September 22, 2003.

 

 

RECOMMENDATION

 

1.      Approval of the application process, evaluation and rating criteria, and schedule for the

FY 2004-2005 CDBG application cycle.

 

2.      Approval of funding priority to projects that are included in a Strong Neighborhoods Initiative (SNI) Plan.

 

3.      Approval of an Application Appeals Policy that allows an applicant to appeal staff’s recommendation not to consider a proposed project for funding.

 

4.      Approval of a Use of Fiscal Agents Policy that allows an applicant to use a fiscal agent on a one time basis.

 

 

BACKGROUND

 

On September 15, 2003, the CDBG Steering Committee held a public hearing on the application

process, evaluation and rating criteria, and process for the upcoming FY 2004-2005 CDBG application cycle. This report and attachments provide the Committee’s recommendation and describe proposed changes to the application process and evaluation criteria.  Following City Council approval of the criteria and process, the Committee and staff will solicit and review project applications, hold public hearings, and make an allocation recommendation to the City Council.

 

 

ANALYSIS

 

Application Schedule and Process

The CDBG application process for the FY 2004-2005 is the second year of a Two-Year Funding Plan for public service projects (Contractual Community Services or CCS) and the first year of a Three-Year Funding Plan for housing, economic development, and physical improvement projects (Community Development Improvement or CDI).  Applications will be accepted in only the CDI category.  Because this is the second year of a two-year CCS plan, 100% of the CCS funds for the FY 2004-2005 have already been allocated subject to certain conditions.

Under the Two-Year Funding Plan for CCS projects, FY 2003-2004 funds have been allocated and a statement of funding priority or “placement” was awarded for FY 2004-2005.  Receipt of placement awards is contingent on several factors, including but not limited to receipt of funds from HUD, submission of an audit, and satisfactory compliance with the conditions contained in the FY 2003-2004 agreement to implement the project.

 

Under the Three-Year Funding Plan for CDI projects, applicants may apply for funding for the FY 2004-2005, FY 2005-2006, and/or FY 2006-2007.  Planning over three years provides a stable promise of funding and reduces application efforts.  In the first year of the plan, 100% of the funds are allocated.  In the second year of the plan, funding priorities or “placements” are awarded to projects for approximately 75% of the funds projected to be available for the second year.  The remaining 25% will be available for allocation to new projects.  In the third year of the plan, placements are awarded to projects for approximately 65% of the funds projected to be available for the third year.  The remaining 35% will be available for allocation to new projects in the third year.  This allocation plan allows flexibility to address new or emerging needs or new priorities.  Receipt of placement awards is contingent on several factors, including but not limited to receipt of funds from HUD, submission of an audit, and satisfactory compliance with the conditions contained in the FY 2004-05 agreement to implement the project or other conditions stipulated in the placement allocation.

 

The schedule for the FY 2004-2005 CDBG application cycle is incorporated in this report as Attachment A.  It reflects the elements of the adopted Citizen’s Participation Plan (CPP) for the City’s CDBG Program.  In accordance with the CPP, the application cycle began with a Public Hearing on September 15, 2003, to solicit public input on the funding process.  The City will release the CDBG applications to the public on October 14, 2003.  CDBG proposals are due to the City on Tuesday, December 9, 2003.  This deadline is recommended in response to input from participating agencies to set the deadline for submission of proposals before the holidays.  The schedule allows agencies nine (9) weeks to complete their applications.  As with prior funding cycles, proposals will be reviewed and analyzed by both staff and the CDBG Steering Committee.  Staff will provide the Committee with copies of the proposals and an analysis of the proposed project.  The Committee will hold hearings on the proposed projects to give applicants the opportunity to present their project, and for the Committee to clarify information.  After the hearings, staff will present the Administration’s Funding Recommendation to the Committee; in turn, the Committee will formulate its own funding recommendation.  Committee recommendations for funding will be presented to the City Council for approval in April 2004. 

 

FY 2004-2005 Evaluation Criteria and Rating Scale

For the FY 2004-2005, the CDBG Steering Committee recommends continued use of six evaluation criteria to evaluate project proposals.  The first five criteria are used to evaluate non-construction CDI projects.  In addition to the five, a sixth criterion, Feasibility, is added to evaluate construction projects.  The evaluation criteria are as follows:

1.      Needs and Target Population

2.      Outcomes

3.      Leverage

4.      Capacity to Achieve Results

5.      Operational Performance

6.      Feasibility (construction projects only)

 

Proposed changes for the FY 2004-2005 are described below.  The actual wording for the proposed FY 2004-2005 criteria is included as Attachment B to this memorandum.

 

Rating System

The CDBG Steering Committee recommends the continued use of a dual rating system:

1.      a 5-point Likert Scale ranging from Very High to Very Low, and

2.      a 3-point scale consisting of “Yes,” “No,” and “Conditional.”

 

The 5-point Likert scale is a graduated scale consisting of Very High, High, Medium, Low, and Very Low.  This rating system would be used to evaluate the Needs and Target Population, Outcomes and Leverage criteria.  The use of the Likert Scale to evaluate these three criteria allows greater flexibility in the review and rating.  It enables a rater to consider multiple factors and provides an opportunity to better define the differences between the level of scores in each criterion.

 

Although the Likert Scale was effective overall, some elements are not adequately measured on a graduated scale.  Some elements such as Feasibility (a project’s readiness to be implemented in the year funding is requested) and an applicant’s capacity and structure to effectively implement the proposed services (Capacity to Achieve Results and Operational Performance) are critical to the decision whether or not to fund the project.  The Committee recommends the use of a 3-point scale to evaluate these elements.  The 3-point rating scale consists of “Yes,” “No,” and “Conditional.”  A “Yes” rating indicates that the proposed project is feasible and the applicant has the capacity and structure to implement the project.  A “No” rating indicates that the project is not ready to be implemented or the applicant does not have the capacity to successfully implement the project.  Projects that receive a “No” rating will not be recommended for funding.  A “Conditional” rating indicates that there are certain requirements that need to be addressed and that these requirements can be resolved prior to City Council approval of funds.  Recommendations for projects that received a “Conditional” rating will be conditioned on the applicant’s ability to supply/resolve these requirements prior to City Council approval of funds.

 

TO BE RATED ON A 5-POINT SCALE

·        Needs and Target Population

When assessing the needs of a community served, it is necessary to identify and describe the population to be served in conjunction with why the proposed services are needed.  Elements proposed to be included under this criterion are: 1) proposed services directly contribute to the program goal, 2) the need is documented in a City Council adopted Master Service Plan or document, 3) applicant provides services to an at-risk or under-served population, and 4) the target population or community is involved in designing and/or evaluating the project.

 

In identifying the need for services, it is necessary to demonstrate that the need has been identified as a City priority.  As such, the need should be identified in a City Council adopted Master Plan or report as a need.  Placing an emphasis on services to an at-risk or under served population assigns greater importance to projects that serve populations with the greatest needs.  In addition, involving the target population or community in the project design and/or evaluation rewards projects soliciting community or client input.

 

·        Outcomes

This criterion assesses the project’s intended results and how the project sponsor will measure those results.  No change is being proposed on this criterion.  The Committee recommends to continue assessing how well the proposed services align/connect with the needs that are being addressed by the proposed project and with the change that is anticipated to occur among target recipients of the services.  The criterion will determine whether the applicant proposes intermediate outcomes (i.e. outcomes that link initial outcomes to longer-term outcomes) that are quantifiable and demonstrate a clear alignment or connection between the needs that are proposed to be addressed, the services to be provided, and the intended results.  It will also determine whether a valid method of evaluating intended results is being proposed.

 

In analyzing project proposals, staff will de-emphasize how the outcome measure is constructed and instead focus on 1) whether the applicant proposes to measure change in participants as a result of services received, and 2) ensuring that there is a clear alignment or connection between the needs to be addressed, the services to be provided, and the intended results.

 

·        Leverage

This criterion measures the leveraging of both funding and people.  It assesses the applicant’s relationships with other agencies and how these relationships improve the efficiency and effectiveness of the proposed services.  Collaboration is encouraged.  No change to this criterion is proposed.

 

TO BE RATED “YES,” “NO,” OR “CONDITIONAL”

·        Capacity to Achieve Results

This criterion assesses the potential of the program to produce positive results.  It considers an agency’s ability to deliver services and achieve the intended results for the participants of the program.  It assesses the proposed program’s service delivery method and focuses on results and continuously improving services to achieve the desired results.  For the FY 2004-2005 process, the Committee recommends continuing to:

1)      Focus on the completeness and appropriateness of the budget to support the proposed services rather than considering minor budget errors as an indication of a reduced ability to manage a budget.

2)      Assess agency expertise and staff experience.

3)      De-emphasize prior performance as an indicator of the capacity to achieve intended results for the proposed project.  Instead, the focus will be on having adequate project management for the proposed project.  As a result, new projects will be able to compete with tried and tested projects on a more even playing field.

4)      Ensure that a proposed work plan demonstrates the steps and timelines that will be followed to ensure that the intended results are achieved.

 

To demonstrate the steps that will be followed to ensure that the intended results are achieved, the applicant would also need to include a discussion on how the proposed project proposes to achieve its results and state whether it utilizes innovative approaches or best practices to achieve program results.  For purposes of this criterion, innovation is defined as the introduction of new or non-traditional service delivery methods to achieve program results and a discussion of projected effectiveness of the proposed method.  To demonstrate best practices, an application needs to show that it has analyzed its service delivery processes, identified challenges, developed and implemented a solution(s) to the challenges, and verified the effectiveness of the solution(s), or is proposing a project that is replicating one that has received recognition for best practices.

 

It is critical to demonstrate that a project can actually achieve its intended results before it is considered for funding.  The Committee recommends that this criterion be rated using a 3-point rating scale consisting of “Yes,” “No,” and “Conditional.”  A “Yes” rating indicates that conditions to demonstrate capacity to achieve results have been satisfied.  A “No” rating indicates that conditions to demonstrate capacity to achieve results have not been satisfied.  Applications that receive a “No” rating will not be recommended for funding.  A “Conditional” rating indicates that some elements to demonstrate capacity to achieve results need to be completed and there is a likelihood that these elements can be completed prior to City Council funding approval.  Applications that lack the necessary elements to obtain a “Yes” rating but can provide these elements prior to City Council funding approval will be given an opportunity to do so.  Deficiencies to be addressed prior to a change from a “Conditional” rating to a “Yes” rating will be communicated to the applicant.

 

·        Operational Performance

This criterion assesses the applicant’s capacity to provide services and stay in business.  It assesses the fiscal and administrative effectiveness of the applicant and evaluates program performance.  The Committee recommends that the following elements be included in evaluating an agency’s Operational Performance: 1) an evaluation of the applicant’s ability to meet goals and contractual requirements and 2) an evaluation of the agency audit, a requirement to be eligible to apply for CDBG funds.  Agencies that are previously or currently funded by the City will also be evaluated on how well they meet goals and contract requirements.  This criterion is recommended to ensure that agencies will have the capacity and structure to implement the proposed project.

 

As with Capacity to Achieve Results, the Committee recommends that this criterion be rated using a 3-point rating scale consisting of “Yes,” “No,” and “Conditional.”  A “Yes” rating indicates that conditions to demonstrate adequate operational performance have been satisfied.  A “No” indicates that conditions to demonstrate adequate operational performance have not been satisfied.  A “Conditional” indicates that some elements to demonstrate operational performance need to be completed and submitted prior to City Council funding approval.  Appropriate administrative and fiscal systems need to be in place to receive CDBG funds.  Applications that lack the necessary elements to obtain a “Yes” rating but can provide these elements prior to City Council funding approval will be given a “Conditional” rating.  Deficiencies to be addressed prior to a change from a “Conditional” rating to a “Yes” rating will be communicated to the applicant.  Applications that receive a “No” rating indicate that the applicant has not demonstrated the capacity and structure to implement the proposed project and will not be recommended for funding.

 

·        Feasibility (Capital Projects Only)

This criterion assesses an agency’s readiness to implement proposed capital projects.  Feasibility for non-construction projects is assessed in the Capacity to Achieve Results criterion.  No change from the previous cycles is recommended for construction projects.  A project must be able to demonstrate evidence that it has site control for a 15-year period, has adequate financial resources to complete and operate the project upon completion, can comply with City security requirements, and has an adequate construction management plan.

 

An applicant must be able to demonstrate that it can meet ALL of the feasibility criteria.  A

3-point rating scale will also be used to rate feasibility.  A “Yes” rating indicates that all feasibility criteria are in place.  A “No” rating indicates that not all feasibility criteria are in place and that incomplete elements cannot be resolved prior to July 1, 2004.  Applications that receive a “No” rating, indicating that the project is not ready to be implemented, will not be recommended for funding.  A “Conditional” rating indicates that not all feasibility criteria are in place but incomplete elements can easily be resolved prior to July 1, 2004. 

 

Both the evaluation criteria and the rating method will be provided to all applicants as part of the

 Application Packet.  The Committee recommends more intensive technical assistance for the FY 2004-2005 application cycle.  All applicants will be encouraged to present a draft application for staff to critique, to assist the agency in submitting a competitive application.  All clarification of information will be completed prior to submission of the application.  Each applicant will be given the opportunity to review and comment on the project analysis for its proposed project.  Upon applicant agreement with the project analysis, staff will rate the project.  To maintain fairness in the competitive process, no change will be made to ratings based on information beyond that which is contained in the application.

 

Strong Neighborhoods Initiative Priority

 

The Committee recommends that funding priority be given to projects listed in the Strong Neighborhoods Initiative (SNI) plans.  This recommendation is consistent with the CDBG Program’s national objectives of “aiding in the prevention and elimination of slums and blight” and “providing services to low- and moderate-income people.”  It is also consistent with the City’s “Neighborhood-Focused Service Delivery” Corporate Priority.  Special consideration will be given to projects listed in the top 10 of each SNI area’s Neighborhood Improvement Plan.

 

Application Appeals and Use of Fiscal Agents Policies

Due to the challenging economic times and the fact that FY 2004-2005 is the first year of the Three-Year Funding Plan for Community Development Improvement (CDI) projects, the Grants Program staff anticipates receipt of more than the usual number of applications received in past application cycles. This year, the recommended process includes provisions for a staff determination that some projects are not ready to be implemented and therefore will not be heard during the public process.  The Committee recommends two polices that will assist in addressing concerns regarding screening out projects that are not ready to be implemented.

 

Policy 1.    Application Appeals Policy

Applicants are advised in writing that the application is not eligible for consideration including the reason(s) that render the project ineligible.  Applicants may appeal this decision, in writing, to the Director of Parks, Recreation, and Neighborhood Services.  The Director’s decision is final and there is no further appeal.

 

a.   Ineligible Application

All applications are initially screened by staff to determine whether the proposed project is eligible to receive CDBG funds.  This screening process is based on federal regulations.  To qualify for CDBG funds, an organization must:

 

In addition, City policy requires that an applicant submit their most recent audit.  This is required to ensure that the funded agency has appropriate fiscal systems in place.  Federal regulations require that funded agencies submit an audit for every year that they receive CDBG funds.

 

After the application period has closed, CDBG staff screens each application for eligibility.  Each application is reviewed to determine that all entry criteria mentioned above have been met.  Applicants are advised in writing that the application is not eligible for consideration including the reason(s) why it is not eligible.

 

b.   Applications with a “No” Rating

The proposed FY 2004-2005 application process indicates that projects with a “No” rating in Capacity to Achieve Results, Operational Performance, or Feasibility criteria will not be recommended for funding. 

 

The Capacity to Achieve Results criterion assesses the potential of the program design to produce positive results.  Factors to be assessed include the proposed project budget, staffing for the project, and work plan.  Operational agreements and the location for service delivery are two elements that should be in place or should be included in the work plan.  A “No” indicates that an applicant presents little capacity to successfully implement the proposed project as demonstrated by: overall little or no agency expertise, staff experience, incomplete work plan, and inadequate budget.  Since there is little likelihood that an applicant will be able to correct this deficiency by the time funding decisions are made, there is little reason for the project to be heard. 

 

The Operational Performance criterion assesses the applicant’s fiscal and administrative capacity to provide the program.  Factors include the ability to meet contractual obligations, and financial and administrative management of the agency as demonstrated by an audit or other fiscal systems.  Applicants must submit a copy of the most recent agency audit.  A “No” rating indicates a serious or habitual failure to meet contractual obligations and/or serious audit or financial management issues.  HUD requires the City to be fiscally responsible for all funds it administers.  An applicant with severe fiscal problems puts the City at-risk for returning funds that the City cannot demonstrate have been used in accordance with CDBG regulations.  The proposed projects will not be recommended for funding and do not need to be heard.

 

The Feasibility criterion assesses the agency’s readiness to implement a proposed physical improvement project.  To be considered for funding, a project must be able to demonstrate that it can meet ALL feasibility criteria, which demonstrate a project’s readiness to begin and viability through completion of the project.  A “No’ rating indicates that there is a major impediment to the implementation of the proposed physical improvement project.  Since the proposed project is not ready to proceed, there is no need to hear the project.

 

The City’s continued funding from HUD depends on our ability to complete projects in a timely manner.  Because the City has been successful in choosing projects that are ready to proceed, we have been lauded by HUD for the City of San José ’s timely expenditure of funds.

Applicants will be advised in writing of any “No” rating and the specific reasons will be cited.  Applicants may appeal the “No” rating in writing to the Director of Parks, Recreation, and Neighborhood Services.  The Director’s decision is final and there is no further appeal.

 

Staff will provide a report to the Committee on all applications with “No” ratings and the reasons for the rating.  The report will be provided at the first hearing on January 26, 2004.

 

Policy 2.    The Use of Fiscal Agent

Applicants will be allowed to use a fiscal agent one time only.

 

From time to time an applicant does not meet the CDBG entry requirements, but has another eligible organization that is willing to administer the project for the applicant.  The Committee recommends that an applicant be allowed to use a fiscal agent one time only.  This one year time period should be sufficient to allow the applicant to build its capacity to become a fully eligible organization.  It has been staff’s experience that organizations most frequently use a fiscal agent because they do not have an audit.  An annual audit of all funded projects is a HUD requirement.  Organizations that are unable to comply with this requirement put the City of San José  at risk for noncompliance with federal requirements.

 

 

PUBLIC OUTREACH

 

The CDBG Steering Committee held a public hearing on September 15, 2003, to solicit input on the proposed application process and criteria for FY 2004-2005.

 

 

COORDINATION

 

This memorandum was coordinated with the City Attorney’s Office.

 

 

COST IMPLICATIONS

 

The recommendations contained in this memorandum have no negative impact to the General Fund.  The CDBG program is funded by Federal funds.

 

 

CEQA

 

Not a project.

 

 

SARA L. HENSLEY

Director of Parks, Recreation

and Neighborhood Services