ESCONDIDO — The city could lose millions in future federal dollars if it fails to meet requirements dictating the timely spending of funds.
Each year, Escondido receives a Community Development Block Grant and HOME Investment Partnership funds from the U.S. Department of Housing and Urban Development.
The federal agency’s overarching goals are to benefit low- and moderate-income households, prevent or eliminate slums or blight, and address urgent community needs in cities nationwide. In return, HUD requires cities to complete projects using the provided funds within a certain timeframe. Recipient cities cannot have more than 1.5 times their annual allocation by May of each year.
Known as a “timeliness test,” Escondido has had difficulty passing the test since 2020. HUD waived the test in 2020 and 2021 due to the COVID-19 pandemic, but those exceptions are no longer in place.
“This is the third year in a row that the city has not met this requirement,” said Housing and Neighborhood Services Manager Danielle Lopez at the May 8 council meeting. “We’re just missing it, but we’ve been at that threshold for the last three years.”
This year, the city expects to receive approximately $1.4 million in CDBG entitlement funds and $700,000 in HOME entitlement funds.
According to Lopez, staff have met with HUD and do not expect the city’s funding to be cut this year; however, if the city fails to fix things this year, HUD will likely reprimand it through a formal meeting or cut CDBG and HOME funding next year.
“If we do not rectify the situation this fiscal year, we would likely face cuts to our 2025-2026 funding,” Lopez said.
According to Lopez, several challenges are behind the city’s untimeliness of spending, including staff turnover and vacancies in the Neighborhood Services Division (particularly in the CDBG area), an influx of one-time COVID relief dollars and American Rescue Plan Act funding, and only partially funding projects over several years.
Still, Lopez said staff had made progress by completely funding two major upcoming projects: upgrading street and walkway lights within the Old Escondido neighborhood, which will cost approximately $1.02 million, and installing new playground equipment at three existing parks, which will cost $775,000. The playground equipment alone will cost the city approximately $521,000.
The city is also only just below the threshold. Once those two projects are completed, the city will pass its timeliness test.
The city has also accomplished hiring one CDBG and one HOME program management analyst and has already offered the remaining two vacancies to candidates. Neighborhood Services is expected to be fully staffed by mid-May, which could help the city meet its timeliness test in the future.
To maintain eligibility for HUD funding, each city must have a five-year consolidated plan outlining its project priorities using these funds.
For CDBG funding, those priorities include homelessness services, basic needs, health and human development, neighborhood revitalization, economic development and public safety.
The HOME program focuses on creating and preserving affordable housing and conserving and expanding affordable homeownership.
HUD also provides some cities with Emergency Solutions Grants, which are to be used for homelessness prevention, emergency shelter, essential services in the shelter, homeless outreach and rapid re-housing. Escondido previously received ESG funds to address the pandemic’s impact on residences but has not received ESG funding for the last three years.
As the city enters its fifth and final year of the consolidated plan, staff will begin working on a new plan to present to the City Council in the future.
The city must also create a one-year action plan dictating what projects will receive funding in the upcoming year. Staff expects to bring the action plan before the Council for final approval in July.
Councilmember Consuelo Martinez urged staff to prioritize preserving what affordable housing currently exists within the city. She noted that she has seen several affordable apartment complexes purchased and flipped into market-rate, unaffordable homes.
“We’re losing a ton of naturally affordable housing,” Martinez said.
Martinez suggested creating a program that would involve the city purchasing or rehabilitating a housing complex to maintain its affordability and prevent residents’ displacement.
