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HomeMy WebLinkAbout07/06/2010, C2 - RESPONSE TO THE GRAND JURY REPORT, COMMUNITY DEVELOPMENT BLOCK GRANTS AND THE CITY OF SAN LUIS OBIS i council M.-6y j acEnaa RepoRt ' ca- CITY OF SAN LUIS OBISPO FROM: John Mandeville, Community Development Director Prepared By: Michael Codron, Housing Programs Manager SUBJECT: RESPONSE TO THE GRAND JURY REPORT, COMMUNITY DEVELOPMENT BLOCK GRANTS AND THE CITY OF SAN LUIS OBISPO RECOMMENDATION Direct the City Manager to respond to the Grand Jury on behalf of the City Council and implement the recommendations offered in the Grand Jury report, as follows: 1) The Community Development Department should take advantage of training opportunities facilitated by the County of San Luis Obispo regarding the Community Development Block Grant Program. 2) The Community Development Department should immediately implement the changes they proposed to help prevent future Block Grant violations. 3) The Community Development Department should actively monitor current Block Grant activity at Judson Terrace Homes until the current prevailing wage issue has been resolved and the 18 wall heaters have been installed. 4) Recipients of Block Grant funds for specific projects should, when appropriate, be encouraged to communicate project scope and timeline information to potentially affected community members. DISCUSSION Situation On July 22, 2008, the City of San Luis Obispo and Judson Terrace Homes entered into an agreement for use of $81,867 of CDBG funds for maintenance and repair projects. The projects include sidewalk replacement, smoke detector upgrades, replacement of six exterior laundry room doors and replacement of 18 wall heaters. Work on the project began in January, 2009, and by the end of May, 2009, the new sidewalks, smoke detectors and laundry room doors had been installed. Shortly thereafter, City staff discovered that Judson Terrace Homes was unaware that the project, funded by a CDBG grant, was subject to Federal prevailing wage requirements. Response to Grand Jury Report on CDBG Proeram Pane 2 At the time, staff in the Community Development Department was unaware of how to proceed with the restitution process and attended a HUD sponsored seminar on prevailing wage requirements. After the seminar, staff developed a plan to ensure Federal grant requirements were met and worked with Judson Terrace to resolve the issue. The process of working with Judson Terrace Homes to provide restitution pay to the laborers who worked on projects funded by the CDBG grant is now nearly complete. In total, Judson Terrace Homes has drawn down$12,112.98 of their grant to make restitution payments. Staff has been able to verify, through cancelled checks, that $7,368.32 of the restitution pay has been received by the effected laborers. Although the verification process is on-going, Judson Terrace Homes has confirmed that 100% of the required restitution payments have now been made. Resident Concerns Triggered Grand Jury Investigation The Grand Jury investigation was initiated in response to concerns expressed by a resident of Judson Terrace Homes regarding the timeliness of project activities and the use of CDBG funding. The concerns covered a range of issues, including the fact that the installation of wall heaters had not occurred as quickly as other aspects of the project. This was due in part to the fact that once the City discovered that there were wage payment issues associated with the project, Judson Terrace Homes was advised not to incur any additional costs until the issues were resolved. Now that these issues are resolved, the remaining$7,609 in the CDBG account for the project can be used to complete the wall heater replacement project. Judson Terrace Homes will be allocating some of their own funds for this purpose, consistent with their original CDBG application, which identified$5,000 of their own funds for this portion of the project. Although the wall heaters were represented as being "defective" on Judson Terrace Home's CDBG application, an inspection conducted by the City's Building and Safety Division found that only one wall heater unit was actually defective, and the unit was repaired. Staff is still supportive of the project to replace existing wall heaters with new units as a valuable upgrade to the facility, given the age of the existing wall heaters. Grand Jury Findings The Grand Jury's report is included as Attachment 1. The Council should note that the Grand Jury was not investigating prevailing wage issues, but discovered that the City was in the process of requiring restitution to laborers when they interviewed City staff relating to other aspects of the project. One of the key findings in the Grand Jury's report says that the complaint regarding accountability of Block Grant expenditures "appears to be due more to limited communication and a lack of understanding than from improprieties by the City's Community Development Department." The Grand Jury also found that the Community Development Department has addressed the prevailing wage issue and will implement corrective actions to prevent similar problems in the future. The Grand Jury also found that the City responded promptly to resolve the compliance issues once they were discovered. Response to Grand Jury Report on CDBG Program Page 3 Response to Grand Jury Recommendations Required The Community Development Department will be responding to the Grand Jury and the Presiding Judge, as required by Section 933 through 933.05 of the Penal Code, by forwarding this agenda report to them. The City Council is also required to respond, and staff has prepared a response for consideration by the Council (Attachment 2). After meeting with the Grand Jury, staff provided a follow-up letter explaining the actions that would be taken to ensure that future recipients of CDBG funding comply with all program requirements. These actions include amending the City's standard Block Grant agreement to include more specific information relating to Federal prevailing wage and procurement requirements, working with County staff to include notification of prevailing wage requirements on the CDBG application, and updating the City's website with resources for recipients relating to program requirements. These actions have now all been accomplished. FISCAL IMPACTS Carrying out the recommendations of the Grand Jury will provide for better compliance with CDBG regulations. The recommendations will have no impact on the General Fund. ALTERNATIVES 1. The Council may modify the attached response letter to the Grand Jury and presiding judge. 2. The Council may continue consideration of the item until July 20, 2010, if more information is needed. However, the response to the Grand Jury must be provided by August 4, 2010. ATTACHMENTS 1. Grand Jury Report—CDBG and the City of San Luis Obispo 2. City Council response to the Grand Jury's report G:\CD-PlAN\MCODRON\Housing\CDBG\CARs\grandjuryreport.DOC �a -� r Attachment 1 COMMUNITY DEVELOPMENT BLOCK GRANTS AND THE CITY OF SAN LUIS OBISPO SUMMARY The San Luis Obispo Grand Jury received a citizen complaint regarding expenditures of Community Development Block Grant funds at-Judson Terrace Homes,a low-income senior housing complex in the City of San Luis Obispo. The complaint also questioned whether certain portions of funded projects were completed. The City of San Luis Obispo Community Development Department has oversight responsibilities for Community Development Block Grants that are awarded for projects within the city. The Grand Jury investigation determined that the grant oversight procedures implemented by the City of San Luis Obispo are generally satisfactory. However, the city's supervision regarding contractor activities and responsibilities on the Judson Terrace Homes project could have been better. METHOD As part of its investigation, the Grand Jury: ■ Reviewed the rules and regulations concerning the Community Development Block Grant Program • Reviewed contracts and invoices between Judson Terrace Homes and their contractors and sub-contractors for the projects in question ■ Reviewed Title 24: Housing and Urban Development, Block Grant eligible activities ■ Reviewed the Judson Terrace Homes block grant application that was approved in 2008 ■ Inspected Judson Terrace Homes and projects funded by the block grant in question 2009-2010 San Luis Obispo Grand Jury Ca , Page 1 Attachment 1 ■ Interviewed the complainant, a resident of Judson Terrace Homes ■ Interviewed staff of the City of San Luis Obispo Community Development Department Interviewed the Judson Terrace Homes administrator NARRATIVE The Community Development Block Grant (Block Grant) Program is one of the longest-running programs funded through the Department of Housing and Urban Development(HUD). Under this program, the Federal Government funds local community development activities such as affordable housing. The City of San Luis Obispo's Community Development Department is responsible for overseeing the Block Grant Program. Located in the City of San Luis Obispo, Judson Terrace Homes is a low-income; affordable housing community that serves the elderly. This low-income housing community is comprised of 107 apartments where all residents are at least 62 years of age and whose primary incomes are from Social Security. On October 30, 2006, Judson Terrace Homes submitted a Block Grant application to the City of San Luis Obispo requesting 2007 funds in the amount of$81,867 for four projects which included:. 1. Replacement of 6 laundry doors 2. An upgrade to a more sophisticated smoke detection system 3. Repairs to portions of the sidewalk that presented a potential tripping hazard to the elderly residents 4. Replacement and installation of 18 wall heaters The application stated that the benefits of the projects were "health, safety and security" for the residents. The application went through the city's review process which included approval by the city council. An agreement between the city and Judson Terrace Homes providing Block Grant funds for the four projects was signed on July 22, 2008. The laundry door and smoke detector projects were completed in May 2009.. 2009-2010 San Luis Obispo Grand Jury Page 2 Attachment 1 The sidewalk repairs were completed in January 2009. However, the citizen complaint received by the Grand Jury alleged that portions of the sidewalk were not repaired and questioned the City's process in releasing funds for payment to the contractor. Investigation by the Grand Jury determined that the contracted sidewalk repair had been properly completed. Other portions of sidewalks within Judson Terrace are in need of repair, but these areas were not part of the approved project. Additionally, the contractor chosen to do the sidewalk repair utilized a sub-contractor for the cement work. As the result of a HUD audit, it was discovered that the sub-contractor had paid his employees less than the prevailing wage—a violation of Block Grant regulations.' A city planner contacted Judson Terrace officials notifying them of the violation and alerting them that the city would withhold funds for replacement and installation of the 18 wall heaters until the `prevailing wage' issue was resolved. Judson Terrace officials agreed and as a further precaution, Judson Terrace hired an independent labor consultant to insure that proper procedures and protocol were adhered to in paying the affected workers any additional monies owed them. As of April 1, 2010,the `prevailing wage' violation was still in the.process of being resolved and replacement of the 18 wall heaters was still "on hold." An official of the City's Community Development Department stated that the burden of insuring compliance with the `prevailing wage' requirement, also known as the Davis-Bacon and Related Acts (DBRA), falls on the recipient, which in this case is Judson Terrace Homes. However the official also recognized that the city should not rely solely on the expertise of recipients and that additional safeguards were needed. The community development department has recommended' . the following changes to insure future compliance:. ' Prevailing wages are established,by the Department of Labor& Industries,for each trade and occupation employed in the performance of public work. HUD mandates that all projects funded by the Community Development Block Grant Program must pay wages no lower than the prevailing wage. 2009-2010 San Luis Obispo Grand Jury ` b Page 3 Attachment 1 • Section 21 of the city's standard Block Grant agreement will be amended to include a direct reference to Federal prevailing wage and procurement requirements before any new contracts are approved. ■ The county of San Luis Obispo staff person responsible for reviewing annual Block Grant applications was asked to include the prevailing wage requirement on the application form to alert future applicants. ■ Appropriate portions of the city's website will be updated to include specific information about grant recipient responsibilities relative to Federal DBRA. FINDINGS 1. The complaint regarding the accountability of Block Grant expenditures appears to be due more to limited communication and a lack of understanding than from improprieties by the city's community development department. 2. The community development department has addressed the `prevailing wage' issue and will implement corrective actions to help prevent recurring problems. 3. The community development department responded promptly to resolve compliance issues. RECOMMENDATION 1. The city's community development department should take advantage of training opportunities facilitated by the County of San Luis Obispo regarding the Community Development Block Grant Program. 2009-2010 San Luis Obispo Grand Jury Page 4 Attachment 1 2. The city's community development department should immediately implement the changes they proposed to help prevent future Block Grant violations. 3. The city's community development department should actively monitor current Block Grant activity at Judson Terrace Homes until the current prevailing wage issue has been resolved and the 18 wall heaters have been installed. 4. Recipients of Block Grant funds for specific projects should, when appropriate,be encouraged to communicate project scope and timeline information to potentially affected community members. REQUIRED RESPONSES The San Luis Obispo City Council is required to respond to Recommendations 1, 2, 3 and 4. The responses shall be submitted to the Presiding Judge of the San Luis Obispo Superior Court by August 4,2010. Please provide a copy of all responses to the Grand Jury as well. The San Luis Obispo City Community Development Department is required to respond to Recommendations 1, 2, 3 and 4. The responses shall be submitted to the Presiding Judge of the San Luis Obispo Superior Court by July 5,2010. Please provide a copy of all responses to the Grand Jury as well. The Judson Terrace Homes Administrator is required to respond to Recommendations 3 and 4. The responses shall be submitted to the Presiding Judge of the San Luis Obispo Superior Court by August 4,2010. Please provide a copy of all responses to the Grand Jury as well. The mailing addresses for delivery are: Presiding Judge Grand Jury Presiding Judge Charles S. Crandall San Luis Obispo County Grand Jury Superior Court of California 1050 Monterey Street P.O. Box 4910 San Luis Obispo, CA 93408 San Luis Obispo, CA 93402 2009-2010 San Luis Obispo Grand Jury (D� U Page 5 ������������i�ii��►�IIIIIIIIh����� �����► III Attachment 2 Cityo san l�u�s OBISPO MOMSCommunity Development Department• 919 Palm Street, San Luis Obispo, CA 93401-3218 July 7, 2010 Honorable Judge Charles S. Crandall Superior Court of California 1050 Monterey Street San Luis Obispo, CA 93408 Dear Judge Crandall, On July 6, 2010, the City Council of the City of San Luis Obispo reviewed the Grand Jury's report, titled Community Development Block Grants and the City of San Luis Obispo. Based on the report provided to the City Council by Community Development Department staff, we concur with the findings of the report and believe the recommendations are reasonable and can be implemented immediately. As a result, the Council has directed staff to implement the recommendations made by the Grand Jury. Community Development Department staff has indicated that the changes proposed to ensure future compliance with CDBG regulations have already been made. These changes include amending the standard Block Grant agreement to include a direct reference to Federal prevailing wage requirements, contacting the County staff person responsible for the CDBG program and asking for a notice regarding prevailing wages to be added to the standard application, and updates to the City's website to include specific information about grant recipient responsibilities relative to Federal prevailing wage requirements. We believe these proactive steps will eliminate the potential for similar problems to occur in the future. We appreciate the findings made by the Grand Jury, particularly that the Community Development Department responded promptly to resolve compliance issues once they were discovered. The City takes its responsibilities with respect to wage and labor compliance very seriously and our staff has received the training necessary to continue to carry out the CDBG program in an effective manner. If there are further questions or comments regarding the City's response to the report, please don't hesitate to contact Michael Codron, at 781-7175. Respectfully submitted, Katie Lichtig, City Manager Cc: San Luis Obispo County Grand Jury Ca -9 �� The City of San Luis Obispo is committed to include the disabled in all of its services, programs and activities. Telecommunications Device for the Deaf(805)781-7410.