City Council Meeting Date: January 6, 2026
To: Mayor and City Council
City Administrator
From: Melissa Hanson, Housing Coordinator
Title
Community Development Block Grant - Consider Adopting Resolution in Support of Fiscal Year 2026 Allotment of Program Funds.
Body
Action Requested:
The Northfield City Council is asked to consider approval of the attached Resolution in support of fiscal year (FY) 2026 (July 1, 2026 - June 30, 2027) program allotment for Community Development Block Grant (CDBG) funds.
Summary Report:
Community Development Department staff coordinated with City Administration and with the Housing and Redevelopment Authority to identify potential CDBG uses of funds, going forward. Staff is recommending the City Council adopt a resolution in support of utilizing FY 2026 CDBG for Down Payment Assistance and updates to the Land Development Code. The allocation will provide $47,266 for Down Payment Assistance and $5,250 for updates to the Northfield Land Development Code. This is NOT a change from FY2025.
Housing Availability is a strategic priority of the City under the 2025-2027 Strategic Plan. The Down Payment Assistance program is an initiative whose outcome is intended to expand homeownership access to low- to moderate-income households.
Background
The CDBG program authority began under Title I of the Housing and Community Development Act of 1974. This Act consolidated eight categorical grant programs including Open Space, Urban Renewal, Neighborhood Development Programs, Historic Preservation, Model Cities supplemental, and Neighborhood Facilities, Water and Sewer and Public Facilities loans.
The Title I Housing and Community Development Act of 1974 objective is to develop viable urban communities that provide decent, safe and sanitary housing, a suitable living environment and expanded economic opportunities primarily for persons of low and moderate income. The U.S. Department of Housing and Urban Development (HUD) administers the CDBG program and provides funds, or grants, to state and local governments, or grantees or recipients.
Dakota County participates in the CDBG program as an Entitlement County and receives funds each year directly from HUD. The Dakota County Community Development Agency (CDA) is considered a subgrantee or administrator of CDBG funds. Dakota County has several participating cities and townships that receive CDBG funds and implement CDBG activities. The City of Northfield is an eligible and participating city to receive CDBG funds as a portion of the city resides in Dakota County. The City of Northfield does not receive federal CDBG funds via Rice County as the county is not eligible to receive a direct allocation.
The City of Northfield has a three-year cooperation agreement with the CDA to conduct and promote housing and other community enhancing programs using CDBG funds. Each year the City of Northfield can apply for CDBG funds to use for various HUD-approved programs. The estimated allocation for the City of Northfield for FY 2026 is $52,516.
The City Council is the authority responsible for determining the use of allocated CDBG funds. CDBG funds can be used for the following activities:
• Acquisition/Disposition
• Demolition/Clearance
• Economic Development Activities
• Rehabilitation
• Relocation
• Public Facilities/Improvements
• Public Services
• Planning
• Homeownership Assistance
The City of Northfield Community Development Department has assumed administrative responsibility for managing the CDBG program funds and coordinating with Dakota County CDA on behalf of the City. In the past, the City of Northfield has used some of the CDBG funds for park improvements, funding the Northfield Community Resource Center (NCRC) and commercial building rehabilitation improvements. In recent years, CDBG funds have been used exclusively for affordable housing related activities, including home rehab and down payment assistance programs for income qualifying households.
Alternative Options:
The City Council could explore alternative uses outside of housing-related activities for CDBG fund allocation. If this is of interest this item should be removed for separate discussion. However, it should be noted that the application deadline is January 16 so any alternate funding should be approved this meeting of January 6, 2026.
Financial Impacts:
Dakota County receives an annual allocation of Community Development Block Grant (CDBG) funds, which is a federal program administered by the Department of Housing and Urban Development (HUD). The program is designed to assist local governments with various community development projects and programs that primarily aid low- and moderate-income residents. Dakota County is considered an “Entitlement County”, and, as such, receives an annual allocation of federal CDBG funds. The Dakota County Board of Commissioners has chosen to allocate the CDBG funds amongst the various cities and townships in the County, as well use the funds for certain County programs. The Dakota County Community Development Agency (CDA) administers this program on behalf of Dakota County.
Each year, the city’s CDBG allocation is rebalanced to account for updated information in the American Community Survey provided by the Census Bureau for each city. Per HUD rules, the CDBG allocation is based on three factors: a community’s population, the number of people in poverty, and the number of overcrowded housing units. Each city receives a percentage of the annual Dakota County CDBG allocation based on the three factors. Because these factors change over time, the allocation each city receives will change over time.
The CDBG allocation Dakota County will receive for Program Year 2026 is not yet known and won’t be known until Congress passes and the President approves the Federal Fiscal Year 2026 federal budget. However, we believe it is prudent for each city to anticipate that the County will receive a similar amount to what was received for Program Year 2025, which was $1,893,442.
The final Dakota County CDBG allocation affects the amount each city will receive for Program Year 2026. This amount may be more or less than what your city received for 2025. With that in mind, the estimated allocation for Northfield for Program Year 2026 is $52,516.
CDBG funds are accessed by the City of Northfield through a reimbursement process. The Dakota County CDA reimburses loans/grants made by the City of Northfield through the HRA for preapproved activities such as down payment assistance. There is no financial impact to the City of Northfield, unless Dakota County CDA receives less than what is projected from HUD. In which case, the HRA or City would use funds from reserves to bridge the gap between projected and actual funds available to the City of Northfield through CDBG.
The City of Northfield’s participation in the CDBG program through Dakota makes us ineligible to receive funds through the State’s Small Cities Development Program.
Tentative Timelines:
The FY 2026 CDBG application deadline is January 16, 2026.
FY 2026 CDBG funds will be available after July 1, 2026 for allocation and available for reimbursement October 1, 2026.