December 20, 2005

SUBJECT:      Request Approval to Amend the FY 2005/2006 Action Plan and Approval of Budget Modification No. 13 to Appropriate Funds from Two Existing Community Development Block Grant Capital Projects to the Upper Borregas Sewer Repair Project

REPORT IN BRIEF

Approval is requested to amend the FY 2005/2006 Action Plan for submittal to the Department of Housing and Urban Development (HUD) and approval for Budget Modification No. 13 to defund two Community Development Block Grant (CDBG) - funded capital projects, and re-appropriate $526,990 from those projects plus an additional $523,010 from the Wastewater Management Fund Rate Stabilization Reserve to a new infrastructure project entitled Upper Borregas Sewer Repair Project.

BACKGROUND

The City’s FY 2005/06 Budget includes two CDBG-funded capital projects (Murphy/Evelyn Avenues Sewer Infrastructure Improvements and Manhole Reconditioning) that would make infrastructure improvements in areas close to downtown.  The two projects were part of the FY 2005/2006 Action Plan for funding of CDBG and Home Investment Partnership Program (Home) funds approved by Council on May 10, 2005.

On December 11, 2001, City Council approved CDBG reallocation guidelines, which provide for the transfer or reallocation of CDBG funds from one project to another.  Under Section II A, Funds Transfer Process (it states):

1) During the program year, the Housing Officer, the Director of Community Development or the City Manager may see a need to transfer funds from one project to another.  The procedure for such transfers is as follows:

For Fund transfers not deemed Substantial under I.C.1; a staff report and/or Budget Modification will be prepared and submitted to the City Manager.  Reallocations of funds require approval of City Council.  The Housing Officer will notify HUD of all reallocations.

2) Substantial amendment to the Action Plan resulting in transfers and/or project changes that meet the criteria of I.C.1; Housing Division staff will review and evaluate all transfers, a staff report will be prepared at least thirty days prior to the public hearing at City Council.  The thirty-day period will be to receive comments from the public.  A summary of the amendment will be published in the SUN, local newspaper, and copies of the amendment will be made available for public review.

3) During the review period of the proposed amendment to the Consolidated Plan two public hearings will be held – one with the Housing and Human Services Commission and one at City Council.

Please note that a substantial amendment is one that includes an increase or decrease in the original allocation mix greater than 15% of the total grant.  For FY 2005/06 the CDBG grant allocation was $1,818,817 including anticipated program income.  Since CDBG funds exceed $272,822 (15% of the original allocation mix,) this proposed action triggers the requirement to follow substantial program amendment procedures.

The CDBG Action Plan, approved by City Council on May 10, 2005, provided funding for two projects, the Murphy/Evelyn Avenues Sewer Infrastructure Improvements and the Manhole Reconditioning capital projects, that would rehabilitate old sewer infrastructure in two areas that have been identified as eligible for CDBG funding.  Eligibility is based upon the number of low- and very-low income households located in a census tract, or census tract block.

During the hearing at the May 10, 2005, City Council meeting, some concerns were raised by Council regarding the limited number of private homes in the area of the proposed Murphy/Evelyn improvement.  Due to this concern, staff reconsidered the two projects that had been originally targeted for CDBG funding, rejected them for various reasons and found one possible project that would benefit an area containing a significant number of lower income households.

The project selected involves beneficial repair of the sewer trunk line in Borregas Avenue between Maude Avenue and Ahwanee Avenue.  Repairs are proposed to protect against both infiltration into and exfiltration out of the existing 27” diameter sewer main.  This proposed project is located in a residential neighborhood that has been identified as meeting the CDBG targeted benefit to areas with concentrations of lower income households.

DISCUSSION

This project, entitled Upper Borregas Sewer Repair Project, had not been originally selected due to concerns regarding possible high costs of the repairs, depending on the condition of the sewer infrastructure.  The project involves work to repair-in-place 4,445 lineal feet of a 27”-diameter sanitary sewer trunk line and to rehabilitate 12 manholes.  Repair-in-place can take a number of different forms, including spot repairs, joint sealing, relining a pipe with a resin impregnated cloth material that hardens in place, or other techniques.  In general, all repair-in-place techniques are more cost-effective (one-third to half the cost) than complete replacement of the pipeline.  The pipeline in the area involved, Borregas Avenue from Maude to Ahwanee, has been in service for approximately 50 years.  Some emergency repairs to the line have already been made, but the line needs complete rehabilitation or it will come to the point where replacement will be required.  Rehabilitation of the line will improve sewer flow and stop degradation of the pipe in this segment, which is one of the three major trunk lines to the Water Pollution Control Plant.

This project is not specifically called out in the Sewer Infrastructure Budget, and would ordinarily be included in the pipe replacement program.  The appropriateness for requesting approval for this specific project at this time is based upon:

• A previous repair, made in 2004 on this portion of Borregas, first identified there were problems in this line
• This project’s location just upstream from the recent Borregas Truck project between Highway 237 and the Water Pollution Control Plant
• The results of recent video inspection identifying the extent of the deficiencies in this section of sewer main
• The availability of funds (CDBG) that can be applied only to projects of certain types benefiting certain neighborhoods within the City

The video inspection of the referenced sewer line indicated that, in addition to pipe lining or joint sealing, there is a need for some isolated, structural point repairs, where the existing pipe line is cracked significantly.  Based on these findings, staff has concluded that this project must include these repairs, either prior to or in conjunction with joint sealing or any lining work. This Borregas repair project will replace the two original projects, but the higher total cost will require supplementing the available CDBG funds with funds from the Rate Stabilization Reserve of the Wastewater Management Fund.

An amendment to the FY 2005/2006 Action Plan is required since the proposed project is a significant change in location and beneficiaries.  The public hearing process is required to provide notice and involve residents in the Citizen Participation Process (described in the Consolidated Plan) and since this modification will result in a significant amendment to the original allocation of CDBG funds.   One public hearing was held by the Housing and Human Services Commission (HHSC) on November 16, 2005.  At the hearing, HHSC approved the redirection of CDBG funding to the Upper Borregas Sewer Repair Project.  City Council’s hearing to consider this budget amendment will serve as the second hearing related to this redirection of CDBG funds.

FISCAL IMPACT

The adopted FY 2005/2006 Budget includes $526,990 for two CDBG-funded projects: $215,000 budgeted for Murphy/Evelyn Avenues Sewer Infrastructure Improvements (825830) and $311,990 budgeted for Manhole Reconditioning (825840).

Staff estimates that approximately $1,050,000 will be required in order to complete the proposed Upper Borregas Sewer Repair Project.  Therefore, an additional $523,010 will be required to supplement the CDBG funds.  Staff proposes to appropriate this money from the current Wastewater Management Rate Stabilization Reserve. 

Currently, the Wastewater Fund is in better than anticipated condition as a result of higher than anticipated revenues for FY 2004/2005 and the return of approximately $1.1 million in previously appropriated funds from the project carryover process. As a result, this project can be funded with no net impact on current or projected wastewater rates.

Staff is recommending approval of Budget Modification No. 13 to defund two CDBG-funded capital projects, and re-appropriate $526,990 from those projects plus an additional $523,010 from the Wastewater Management Fund Rate Stabilization Reserve to a new infrastructure project entitled Upper Borregas Sewer Repair Project.

BUDGET MODIFICATION NO. 13

FISCAL YEAR 2005/2006

PUBLIC CONTACT

The Consolidated Plan regulations require that the residents of Sunnyvale be provided information on amendments to activities that will be financed with HUD funds.  The regulations specify a 30-day public comment period on any substantial amendments to the Action Plan.  A public notice was printed in the Sunnyvale Sun newspaper on November 9, 2005, indicating the start of a review and comment period. A draft copy of the amendment to the Action Plan was made available for public review at the One Stop Counter at City Hall and at Sunnyvale Library.

Part of the public comment process includes a review by the Housing and Human Services Commission (HHSC).  The HHSC held a meeting on November 16, 2005. The HHSC received a presentation from staff concerning the newly proposed project and the reasons for the proposed change.  There were no comments by the public at the hearing.  After discussion of the subject projects, the intent of CDBG funds, and the issue of increasing the number of benefited, qualifying residents by substituting the Upper Borregas Sewer Repair Project, the HHSC recommended the proposed amendment to the Action Plan for approval by the City Council.  Attachment B includes the draft minutes of the HHSC for the November 16, 2005 meeting. 

Notice has been provided through the publication and posting of the City Council Agenda.  In addition, all Reports to Council are available in the Library and on the City’s Internet home page.

CONCLUSION

Staff has identified an important infrastructure repair known as the Upper Borregas Sewer Repair Project as a worthy project to replace two previously approved projects for funding from Community Development Block Grant.  It is located in a neighborhood that qualifies for CDBG funding.  This substitution has been supported by the Housing and Human Services Commission.  Staff also has identified that the Sewer Reserve funds are sufficient and available to be partially expended to cover the additional costs of this more expensive, but important project.

ALTERNATIVES

That City Council:

1.     Approve an amendment to the FY 2005/2006 Action Plan and Budget Modification No. 13 to defund two CDBG-funded capital projects, and re-appropriate $526,990 from those projects plus an           additional $523,010 from the Wastewater Management Fund Rate Stabilization Reserve to a new infrastructure project entitled Upper Borregas Sewer Repair Project.

2.     Do not approve an amendment to the FY2005-2006 Action Plan and Budget Modification No. 13 as outlined in the Fiscal Impact section of this report, and direct staff to continue implementing the original two projects.

RECOMMENDATION

Staff recommends Alternative 1:  Approve an amendment to the FY 2005/2006 Action Plan and Budget Modification No. 13 to defund two CDBG-funded capital projects, and re-appropriate $526,990 from those projects plus an additional $523,010 from the Wastewater Management Fund Rate Stabilization Reserve to a new infrastructure project entitled Upper Borregas Sewer Repair Project. 

This alternative is recommended based upon:

·         the increased number of qualifying residences that would benefit from this project as opposed to the Murphy/Evelyn project, in response to questions that had been raised at the Council hearing of May 10, 2005

·         the location of the project in a qualifying neighborhood, and upstream of the recently completed Borregas Trunk Replacement Project north of Highway 237

·         the identification of this project as being critical for protection of sewer infrastructure and its impact upon the health and well-being of residents along the route of the sewer main requiring repair

·         the availability of sewer reserve funds to cover the gap between the cost of the project and the available grant funds

·         the support of the Housing and Human Services Commission for this project.

Reviewed by:

Robert Paternoster, Director, Community Development

Prepared by: Annabel Yurutucu, Housing Officer

Mary Bradley, Director, Finance

Approved by:

Amy Chan

City Manager

Attachment

A.                 November 16, 2005 Draft Minutes of the Housing and Human Services Commission