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2025-040 Lift Grant Pause April 11, 2025 Report No. 2025-040 INFORMAL STAFF REPORT TO MAYOR AND CITY COUNCIL SUBJECT: Partial Removal of HUD-Funded Activities (CDBG and HOME) Grant Pause EXECUTIVE SUMMARY: On January 27, 2025, the Office of Management and Budget (OMB) issued memo M-25-13, directing a pause on the obligation or disbursement of federal financial assistance. This was lifted shortly after OMB memo M-25-14 was issued on January 29,2025.While the City of Denton took proactive steps to protect financial risk by pausing all federally funded infrastructure and housing- related activities, staff now recommends lifting the temporary pause on all Housing and Urban Development (HUD) funded activities, specifically those under the Community Development Block Grant(CDBG) and HOME Investment Partnerships (HOME)programs. Resuming a portion of these activities will maintain federal compliance, meeting contract deadlines, avoiding repayment liability, and ensuring the City's performance aligns with HUD's Timeliness Test. Due to continued federal uncertainty, staff recommends continuing the pause on all other infrastructure projects not funded by HUD until further federal guidance is received. DISCUSSION: While uncertainty remains, some programs are actively reimbursing participants for costs under previously approved federal programs. With this in mind, staff recommends avoiding the risks listed below and resuming those activities for which federal reimbursement is expected to be received. Potential risks of continuing the pause on programs that appear to be receiving reimbursement include the following: 1. Contractual Deadlines: Subrecipients are required to meet completion dates outlined in their funding agreements. Delays could trigger the need for Council-approved extensions or result in default, such as Interfaith Ministries' demolition and Habitat for Humanity's Village project. 2. HUD Reporting Requirements: HUD requires accomplishment data to be reported within 12 months of the last draw.Projects that have already expended funds, such as Denton County Friends of the Family Justice Center project, is approaching critical reporting deadlines. Failure to report timely could result in required repayment of grant funds. 3. Timeliness Test: The City must expend a significant portion of CDBG funds. The city must spend $635,203.79 by August 2, 2026, to avoid failing the 1.5x Timeliness Test. Further delay in spending jeopardizes our compliance and future allocations. April 11, 2025 Report No. 2025-040 4. Upcoming Allocation(Estimated May 2025): The new program year allocation will impact our timeliness ratio.Delays in launching these projects could further complicate fund management and compliance. Due to the changing federal environment, the Grants Division will implement the following operational oversight in addition to the city's standard grant operations: • Weekly check-ins with Community Services staff to monitor project status. • Frequent draw submissions to reduce federal cash-on-hand and stay on schedule. • Prioritized oversight on subrecipient compliance,project milestones, and documentation. These additional measures will support timely performance, help avoid costly corrections, and keep the City aligned with HUD's expectations. The focus on timeliness and compliance is critical to protecting program integrity. Staff will continue to closely monitor changes at the federal level which may affect this or other city funding. At this time, the City will: • Resume all HUD-funded (CDBG and HOME) activities immediately, including those currently under contract or ready for launch. • Maintain a pause on all infrastructure and park-related projects not funded by HUD until further notice. • Implement weekly monitoring protocol and expedited drawdown processing. • Reinforce compliance oversight for all new construction and installation activities to avoid federal ineligibility. • Monitor changes as they occur. CONCLUSION: The following Projects will resume: CDBG: • Carl Young Park Improvements • DCFOF Public Facility Project(Friends of the Family) • Denia Park Improvements • Interfaith Ministries Demolition Project • Landlord Repair Program • Minor Repair Program • Habitat for Humanity Minor Repair Program HOME: • Habitat for Humanity Village Project(Vertical construction of 4 homes) • HOME-ARP Tenant-Based Rental Assistance (TBRA) and Social Services April 11, 2025 Report No. 2025-040 The following non-HUD projects remain paused until further notice: • TPWD Local Parks 2022—Villages of Carmel Park construction • TPWD Local Parks 2023 —Bowling Green Park renovation • TPWD Local Parks 2024—Briercliff Park renovation • TPWD Local Parks 2025—Lily Cantu Inclusive Playground • TPWD Boating Access 2023 —Kayak launch planning. • Transportation Alternatives 2023 —Pecan Creek Trail construction • Safe Streets and Roads for All—Vision Zero Safety Action Plan Jessica Williams, CFO Jessica.JWilliamsgcityofdenton.com Gary Packan, Director of Parks &Recreation GM.packan(c�r�,cityofdenton.com STAFF TIME TO COMPLETE REPORT: 2 hours PARTICIPATING DEPARTMENTS: Finance, Community Development, Parks &Recreation