Title
Approval of the Community Development Block Grant Program Year 2025 Annual Action Plan
Recommended Action
Committee Recommendation:
On May 28, 2025, the Community Livability and Public Safety Committee recommended to forward to the full City Council for approval staff recommendations for allocation of new Community Development Block Grant (CDBG) Funds for Program Year 2025.
City Manager Recommendation:
Move to approve the CDBG Program Year 2025 Annual Action Plan.
Report
Issue:
Whether t o approve the CDBG Program Year 2025 Annual Action Plan.
Staff Contact:
Anastasia Everett, Sr. Housing Program Specialist, Community Planning and Economic Development, 360.233.6197
Presenter(s):
Anastasia Everett, Sr. Housing Program Specialist, Community Planning and Economic Development
Background and Analysis:
The City of Olympia is an entitlement community for the U.S. Department of Housing and Urban Development’s (HUD) CDBG Program. As an entitlement community, the City receives a direct award from HUD annually that must be used to benefit Olympians within the City limits. The CDBG Program is a formula award that supports community development activities to build stronger and more resilient communities. The CDBG Program is a tool for the City to meet strategic goals outlined in plans such as the One Community Plan, Housing Action Plan and Olympia Strong. CDBG also is leveraged to meet Olympia’s climate goals. The City is required by HUD to hold a public hearing and a 30-day public comment period to allow the public opportunities to review the upcoming Program Year’s activities and funding allocations outlined in the Annual Action Plan. Public testimony received during the public hearing and comment during the comment period is an important way to incorporate public opinion on the City’s activities and is incorporated into the Annual Action Plan before the plan is submitted to HUD in July.
CDBG is a flexible grant that can be used for a variety of activities that primarily support low-income households. Eligible activities include the acquisition of real property, public facilities and improvements, public services, homeowner and rental rehabilitation, code enforcement, special economic development activities, microenterprise assistance, planning and capacity building, and program administrative costs, among others. The authorizing statute of the CDBG program requires that each activity funded, except for program administration and planning activities, must meet one of three national objectives established by HUD:
• Benefit to low- and moderate-income (LMI) persons;
• Aid in the prevention or elimination of slums or blight; and
• Meet a need having a particular urgency (referred to as urgent need).
Federal CDBG regulations require entitlement communities use at least 70% of non-administrative funds to meet the benefit to low- and moderate-income persons national objective (LMI). The requirements for meeting the LMI national objective for the CDBG program is that a beneficiary’s income must not exceed 80% of the area median income, adjusted for household size. The 2025 HUD area median income for the Olympia-Lacey-Tumwater metropolitan service area is $116,700.
The Program Year 2025 allocation is $341,583.
Request for Proposal and Annual Action Plan Processes
As a requirement to receive federal CDBG funding, the City must prepare and submit a Consolidated Plan to HUD. The Consolidated Plan is designed to help states and local jurisdictions assess their affordable housing and community development needs and market conditions, and to make data-driven, place-based investment decisions. The consolidated planning process serves as a framework for a community-wide dialogue to identify housing and community development priorities that align and focus funding for the CDBG program. The process involves extensive stakeholder and public engagement to set goals and objectives.
The City completes a Consolidated Plan on a 5-year cycle in partnership with our consortia members, Thurston County and the City of Lacey. The Consolidated Plan is then carried out in each consortia member community through the preparation and execution of an Annual Action Plan (AAP), which provides a concise summary of the actions, activities and the specific federal and non-federal resources that will be used each Program Year to address the priority needs and specific goals identified by the Consolidated Plan. The City’s Program Year begins September 1 and ends August 31, annually.
The most recent Consolidated Plan was completed in 2023 and will guide the City’s AAPs until the fifth year, 2027. The upcoming Program Year 2025 is the third year of our Consolidated Plan. The priorities outlined in the Consolidated Plan identify Housing as the highest community need. Housing related activities which can be supported by CDBG funds include increasing affordable housing supply, including permanent supportive housing for persons previously homeless; preserving and improving existing affordable housing; and making housing more resilient to climate change. Additionally, Community and Economic Development has been identified as a high priority. Activities which can be supported with CDBG funds to address this priority include improvements to public facilities and infrastructure which support housing for low-income households and neighborhoods and assistance to small businesses.
CDBG activities may be carried out by the City as a grantee, or sub-awarded through subrecipients. The City lacks the organizational capacity and specialization to directly implement most CDBG funded activities supporting priorities in our Consolidated Plan, such as housing rehabilitation. To plan and implement activities in a timely manner, the City partners with local nonprofits and other eligible organizations through subrecipient awards. These awards are made available through the issuance of a Request for Proposals (RFP) to the community.
Local service providers and other eligible organizations can submit project proposals with accompanying funding requests for inclusion in the upcoming Program Year’s AAP. This year, the RFP was launched March 3rd and was open until March 24th. The allocation for the City of Olympia CDBG Program Year 2025 award was not known at the time of the RFP issuance and was estimated based on the Program Year 2024 award of $347,000. This is common practice in Olympia and other entitlement communities and allows Olympia to meet HUD’s public engagement and AAP submission requirements and deadlines. The City has since received notice of its 2025 allocation of $341,583 and made funding recommendations based on our known allocation.
The City can use up to 20% of the annual allocation for program administration and up to 15% for public services. Based on the Program Year 2024 estimation, City staff advertised an estimated amount of $277,600 of CDBG funding to be available in the RFP, with $50,000 designated for public service activity applications. The maximum amount of $69,000 was set aside for program administration which supports City staff managing the CDBG program.
The CDBG regulations allow the use of grant funds for a wide range of public service activities, such as services for seniors, employment services, services for homeless persons, and welfare services. CDBG regulations state that public service activities must not exceed 15 percent of the City’s yearly allocation plus 15 percent of program income received. Through engagement with local service providers and other jurisdictions, staff received feedback concerning the decline of available state funding that is typically relied upon in our community for public services. To expand the program’s reach and increase the number of beneficiaries served in Olympia, staff advertised public service funding in this year’s RFP.
Project and Funding Award Recommendations for PY25 AAP
The City received 13 project proposals, nearly doubling last year’s seven. The total funding requested equaled over $1.1 million. Following the closure of the RFP, CDBG staff completed a risk assessment and eligibility review for each application. Two applications were unable to move on to the scoring process due to ineligibility determinations.
CDBG staff formed a scoring team of City staff from the Housing and Climate teams to review the eligible applications and score in accordance with the following factors:
• Documentation and justification of the need for the activity
• Consolidated Plan priority
• Narrative quality and responsiveness
• Application completeness
• Risk assessment results
• Project spend down timeline
City staff presented the funding recommendations for inclusion in the Annual Action Plan to the Community Livability and Public Safety Committee on May 28, at which time action was taken to forward the staff recommendations to the full City Council.
Description of Projects
Rebuilding Together Thurston County ($60,000) - Funding will support their critical home repair program. The estimated accomplishment for this project is between 5 and 8 homes rehabilitated. Funding supporting Rebuilding Together Thurston County’s Critical Home Repair program serves low-income homeowners with the following eligibility criteria: homeowners must live in Olympia, must meet income requirements, must be unable to do the work on their own, and must either have a disability, be a senior citizen, military veteran, or a family with young children. Rebuilding Together Thurston County consistently spent down prior year critical home repair awards within the period of performance and has shown capacity to administer a large level of funds.
Enterprise for Equity ($50,300) - Funding will support for their Microbusiness Development Program. Enterprise for Equity is intending to provide specialized training for over 40 low- and moderate-income local entrepreneurs.
Interfaith Works (Sandy’s Flats, $24,570) - Funding will support the installation of a security fence at the permanent supportive housing, Sandy’s Flats. Residents of this housing complex are individuals who have recently experienced significant episodes of homelessness with co-occurring disabilities. The fence will restrict access to the property from the alley, preventing burglaries, unsafe access, and property damage to the three abutting buildings. Sandy’s Flats has 26 units.
Interfaith Works (Sergio’s, $12,500) - This public service funding will support the services available at the daytime resource center, Sergio’s. The resource center connects people with hygiene services and vital social services such as medical and mental health care. In 2024, Sergio’s served more than 1,325 unique individuals. Similar accomplishments can be expected with the recommended PY25 award.
Together! ($12,500) - This public service activity, Host Homes, will support safe housing for unaccompanied youth in Olympia. This program aims to support youth not connected to the foster care system nor under state supervision, mainly young people who have aged out of child welfare intervention. The program accepts referrals from the Olympia School District’s McKinney-Vento liaison. Funding will be used for case management, client supplies, host family outreach and training as well as transportation assistance. Together! Anticipates serving approximately 28-36 youth with the recommended PY25 award.
Mercy Housing Northwest ($12,500)- Funding recommended will support the public service activity Resident Services at Evergreen Vista. Funding would be used to support salary and benefits for program staff, as well as program operating costs. The CDBG funding support will allow Mercy Housing Northwest the capacity to expand its on-site food pantry services, mental health services, life skills development programs, and Out-of-School Time initiatives. Evergreen Vista I & II are home to 462 residents, 47% of whom are youth under 18. All residents of the multifamily apartment complex are low- and moderate-income, restricted to below 60% of area median income. Mercy Housing Northwest anticipates 291 residents reached with CDBG funded services during the program year.
Senior Services for South Sound ($12,500) - Funding will support the Home Share Program a match-making service, where home providers who have an extra room in their home are matched with home seekers needing affordable housing. The program provides a unique, cost-effective solution to housing insecurity among the senior population of Thurston County. Participants in the Home Share program pay an average rent of only $636 monthly. Senior Services for South Sound anticipate 50 seniors will receive assistance in PY25 with support from this program.
South Puget Sound Habitat for Humanity (Critical Home Repair, $40,000) - Funding is recommended for the Critical Home Repair program. Examples of home repairs include mold remediation, roof repair or replacement, and bathroom accessibility improvements. An estimated 3-5 low- and moderate-income households will participate in the Home Repair program in the upcoming program year. South Puget Sound Habitat for Humanity’s Critical Home Repair Program is available for eligible low-income homeowners that meet program criteria, including a documented need, ability to contribute financially towards a small percentage of their repair costs, and willingness to partner with sweat equity requirements.
South Puget Sound Habitat for Humanity (Energize Thurston, $48,397)*- Funding will go towards the fully subsidized installation of energy efficient heat pumps for low-income Olympia homeowners. Available grant funding for subsidized installations has already been exhausted, with at least 16 households on the waitlist currently in Olympia. The recommended funding for this project will install heat pumps in approximately 3-5 homes. Subsidized installations are managed by subrecipient South Puget Sound Habitat for Humanity.
*This is a contingency project that is being recommended for funding in the AAP due to one applicant withdrawing their application after staff had already identified the project for a Program Year 2025 award. All other selected applicants had been notified of award at or above their requested minimum amount. The Energize Thurston program is supported by the City’s Climate team, and though South Puget Sound Habitat for Humanity did not directly apply for this funding, this program has been identified as a contingency project in the past and there is a demonstrated need for funds for Olympia homeowners. Contingency projects are funded in the case of program income being received or cancellation of another project identified for inclusion in the AAP. Additional information on contingency projects and the project selection process can be found below.
Planning and Administration Costs (City, $68,316) - Costs for City staff salary and benefits for administering the CDBG program
Total Program Year 2025 recommended funding: $341,583
CDBG funding for Program Year 2025 is estimated to achieve the following accomplishments:
• Rehabilitation of 11 to 18 single family homes for low- and moderate-income homeowners
• Security improvements benefiting 26 apartment units
• 40 small businesses receiving technical assistance
• 1,600 individuals to receive benefits from public services
In accordance with the priorities identified in the Consolidated Plan, the majority of our programmatic funding available is being recommended for activities related to the creation and preservation of affordable housing. Additionally, all four recommended public services are housing or homelessness related activities.
Program Income
Annually, the City receives Program Income (PI) from projects or programs funded in previous program-years. Program income must be allocated in the AAP as well as the current program-year funding. The City receives PI from repayments of existing home rehabilitation loans made from the Rental Rehabilitation Program. Rental rehabilitation PI is routed to the Revolving Loan Fund (RLF), which is reloaned to new rental rehabilitation projects. Rental rehabilitation loans are available to landlords operating affordable housing to make health and safety related improvements to their rental. Staff are working currently on the rehabilitation of a 12-unit multifamily property, which is expected to be completed by summer 2025. There is approximately $214,000 available in the RLF to be used for rehabilitation projects. This funding is outlined in the Annual Action Plan as prior year resources.
Single family homeowner PI is generated through the repayment of existing single-family homeowner CDBG loans. The City had these loans available in the past for low-income homeowners, but the program is no longer active. This PI is treated as entitlement funding and can be programmed to any eligible activity. City staff recommend that any PI received from single-family homeowner loans during Program Year 2025 be allocated to critical home repair activities.
Contingency Projects
Contingency projects are identified during the AAP process to reduce the administrative burden of preparing Substantial Amendments to the Consolidated Plan, which require a 30-day public comment period and public hearing. In the event of a canceled project or receipt of program income, that funding is routed to projects identified in the AAP as contingencies. The staff recommendation is to award non RLF PI to subrecipients South Puget Sound Habitat for Humanity’s Critical Home Repair and Energize Thurston programs and Rebuilding Together Thurston County’s Critical Home Repair program, to be determined based on Program Year 2025 subrecipient spenddown of funds and documentation of need. These projects have been identified as contingency projects in prior program years, with both subrecipients having the capacity and expertise to utilize the funds compliantly and efficiently.
Federal Funding Risks
This year’s CDBG award may be at risk. The City typically receives its CDBG grant funds in late summer. The AAP must first be submitted to and reviewed by HUD and a grant agreement between the City and HUD must be executed. Staff were made aware in May that the PY25 AAP will be reviewed for consistency with Executive Orders by HUD Headquarters. Executive Order 14287, signed April 28, 2025, identified consequences for Sanctuary Cities to include the potential suspension or termination of federal funds.
Additionally, the City of Olympia, Thurston County, and the State of Washington have been identified as Sanctuary Jurisdictions by the U.S. Department of Homeland Security in response to Executive Order 14287. HUD has released communication to CDBG professional organizations that indicates any CDBG grant agreement will require compliance with that Executive Order. Staff anticipate that, should our AAP be approved, the City may receive an agreement for funds that includes language that does not align with the City’s Sanctuary City status and commitment to protections for residents regardless of immigration status.
In the event that the CDBG award for Olympia is terminated, the City would not receive CDBG funds necessary to support approximately 60% ($68,316) of one housing full-time employee and the recommended projects for inclusion in the AAP would not be funded without the City identifying an alternative funding source. Should CDBG funds, or other local funds in the absence of CDBG funds not be available, the impact on local service providers would be significant, and many existing programs would risk losing the capacity to provide services to Olympia residents. The City has not executed any contracts with subrecipients for Program Year 2025 CDBG funding and the contracts will not be executed until the City executes a grant agreement with HUD for the upcoming program year or identifies an alternative funding source in the absence of CDBG funds. Additionally, the RFP included language that made clear the funding was based on estimates from prior allocations and is subject to change.
Staff have communicated with subrecipients on the risk of the City not receiving its Program Year 2025 award from HUD. Staff will continue to provide transparent communication with upcoming program year subrecipients as more information is received regarding the Program Year 2025 award.
Timeline and Next Steps
The public comment period for the Annual Action Plan was open from May 30 - June 30. The City held a Public Hearing on June 17. Public testimony was received from four Olympia residents, and a description of the comment is included as an attachment to this report. No written comment was received.
Following the approval of the resolution, staff will submit the Annual Action Plan to HUD no later than Friday, July 18. HUD has 45 days to review the Annual Action Plan for approval. Should the Annual Action Plan be approved, the City will receive a grant agreement before receiving any funds.
Staff will submit the grant agreement to the Legal Department for review to ensure the City is able to be compliant with any requirements outlined in the grant agreement.
Climate Analysis:
CDBG is a flexible grant that can be used to support the City’s climate goals. In 1980, the U.S. Congress gave the CDBG program a mandate to support energy efficiency and renewable energy technologies in property rehabilitation.
Typical energy efficiency activities funded by CDBG nationally include design features to public facilities improvements promoting energy efficiency. Activities may also include public energy conservation services, assistance to neighborhood-based organizations undertaking energy conservation projects, and the development of energy use strategies to achieve maximum energy efficiency.
The City’s CDBG program can be used to reduce our community’s greenhouse gas emissions and build our climate resilience. The City of Olympia has invested a significant amount of CDBG funding into energy efficiency projects in the past several years. Examples of prior projects include solar installation, home weatherization, home electrification and energy-efficient heat pump installation. In past years, the City has funded the Energize Olympia campaign to install fully subsidized electric heat pumps to low- and moderate-income homeowners. Program Year 2025 funding is recommended to support the Energize Thurston campaign.
Equity Analysis:
CDBG funds must primarily benefit 80% or under Area Median Income (AMI) persons. There are statistically major disparities in income that are tied to marginalized groups in our community. Poverty is more prevalent in some races and ethnicities in Thurston County. 15.5% of Black or African American residents are below the poverty level, compared to 9.1% white residents, according to the City’s Assessment of Fair Housing.
CDBG funding can be used in a variety of activities to improve accessibility for residents with disabilities in our community. Eligible activities include reconstruction of sidewalks to install ramps and rehabilitation of homes or public facilities to include the removal of architectural barriers to accessibility. Examples of projects funded in prior program years and recommended for funding in PY25 include critical home repair by our subrecipients, Rebuilding Together Thurston County and South Puget Sound Habitat for Humanity. Critical home repair projects funded include installation of handrails, wheelchair ramps and safety equipment in the home.
Program Year 2025 funding is recommended to support Senior Services for South Sound, an organization specializing in senior care. Seniors are an often-overlooked demographic frequently experiencing poverty. Services provided by Senior Services for South Sound support vulnerable seniors at risk for homelessness.
CDBG funds can also be used to provide energy efficiency upgrades to low- and moderate-income persons in the community, which for many years have been inaccessible to many families as the cost of energy improvements can be significantly higher than what is affordable. This use of funds helps close the disparity in who can benefit from high efficiency heat pumps or solar installation. Energy efficiency upgrades also often lower the cost of electricity for the homeowner or tenant, which reduces the utility burden on households.
Neighborhood/Community Interests (if known):
CDBG funding is used to support Olympia residents at or below 80% AMI. CDBG funding priorities align with the 5-year HUD Consolidated Plan, and more specific goals are targeted annually in the AAP. Supporting low-moderate income Olympia residents is a high priority for the community, and CDBG funded projects help meet many of the City’s goals outlined in the One Community Plan, Housing Action Plan and Olympia Strong.
Financial Impact:
The amount available to allocate for Program-Year 2025 is $341,583. The CDBG program can anticipate collecting between $50,000 and $250,000 in Program Income during the program year, increasing the funding available for proposed contingency activities as well as the revolving loan fund. The existing revolving loan fund balance is $214,000.
If the City does not receive a Program Year 2025 award and an alternative funding source is not identified, the activities outlined in the Annual Action Plan amounting to $341,583 will not be funded.
Over the past several years, staff have worked diligently alongside our federal lobbyist to highlight the merit of the CDBG program and its impact on the community. Unfortunately, the program continues to receive appropriation cuts and does not reflect the rising inflation rates. Impacts to decreased funding include reduced capacity for grant administration and fewer beneficiaries served annually.
Options:
1. Approve the decision to authorize the submittal of the Program Year 2025 Annual Action Plan and required forms and certifications.
2. Direct staff to amend the Annual Action Plan and then approve the decision to authorize the submittal of the amended Program Year 2025 Annual Action Plan.
3. Take another action.
Attachments:
Recommendations for Funding - Program Year 2025
Program Year 2025 Annual Action Plan
Summary of Public Testimony and Comments Received