REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Travis Hopkins, City Manager
VIA: Travis K. Hopkins, City Manager
PREPARED BY: Steve Holtz, Deputy Director of Community Development; Jessica Kelley, Homeless Services Manager
Subject:
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Approval of Agreement with Mercy House to Operate the City's Homeless Navigation Center
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Statement of Issue:
The City of Huntington Beach's Homeless Navigation Center is a 24/7 shelter that provides unhoused adults with a safe place to stay, along with meals, case management, and support services designed to help them transition off the streets and into stable housing. The program is voluntary and structured, with clear behavioral expectations and individualized housing-focused plans for every participant. Residents must have a verifiable connection to Huntington Beach, such as prior residency, employment, or family ties. Individuals who are homeless in Huntington Beach but do not have local ties are referred by the City's Homeless Outreach Team to alternative shelters in Orange County.
Since opening in 2020, the Navigation Center has served 990 individuals - equivalent to more than 35 people per square mile in Huntington Beach over the past five years. The facility has operated near capacity, averaging 158 residents per day in 2024, with a peak census of 168. Without this resource, many of those individuals would likely have remained unsheltered in vehicles, parks, or other public spaces, increasing emergency response demands and placing added strain on public safety staff and community services.
To ensure continuity of services and align with the City's updated performance and fiscal expectations, staff recommends entering into a new agreement with Mercy House, the current shelter operator. The agreement was competitively procured through a Request for Proposals (RFP) and incorporates key programmatic and cost-saving adjustments designed to strengthen service delivery and long-term sustainability. The proposed contract will begin October 1, 2025, and is funded within the City Council-approved FY 2025-26 Navigation Center budget.
Financial Impact:
Mercy House's proposed contract totals $2,528,715.13 for the 9-month period of October 1, 2025 to June 30, 2026. The cost is fully funded in the FY 2025-26 adopted budget through the City's General Fund.
Recommended Action:
recommendation
Approve and authorize the City Manager to execute a "Service Agreement between the City of Huntington Beach and Mercy House Living Centers for Operations and Management of a Temporary Shelter," in a not-to-exceed amount of $2,528,715.13 for the period of October 1, 2025 through June 30, 2026, with the option to extend for up to two additional one-year terms, subject to future City Council budget approval, to operate the City's Homeless Navigation Center.
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Alternative Action(s):
1. Direct staff to reissue the RFP and seek new proposals.
2. Direct staff to renegotiate terms with Mercy House.
3. Do not approve the agreement and provide alternative direction.
Analysis:
Shelter Overview and Accomplishments
The City's Navigation Center opened in 2020 with 174 beds to provide structured shelter, case management, and wraparound support for unhoused adults in Huntington Beach. Located at 17642 Beach Boulevard, the facility is operated by Mercy House and provides three meals daily, safe sleeping areas, transportation, health care coordination, mental health and substance use recovery services, job and life skills support, and individualized case management focused on housing placement.
Since opening, the Navigation Center has served 990 individuals, helping more than 200 transition into permanent or temporary housing. While this represents about one in five clients, the outcome is consistent with regional benchmarks for shelters serving highly vulnerable populations. For those not yet housed, the shelter provides stabilization, daily structure, and critical connections to supportive services that lay the groundwork for future housing opportunities.
In 2024 alone, the shelter served 82 seniors and 18 veterans, and maintained an average occupancy rate of 91%, with daily occupancy averaging 158 and peaking at 168. Based on utilization trends, the bed count was reduced from 174 to 164 in July 2025 to better align capacity with demand. This adjustment supports the City's efforts to manage expenses responsibly while ensuring continued access and high-quality service delivery.
The Navigation Center serves a population with high service needs, which makes its performance outcomes even more notable. Since opening, 80% of guests have had a disabling condition, with 61% reporting two or more such conditions. This includes:
* 53% with a mental health disorder
* 43% with a chronic health condition
* 42% with a physical disability
* 20% with a developmental disability
Additionally, 63% have been chronically homeless, and 10% have been seniors age 65 and older. While employment rates average 10-11%, the program offers ongoing support to increase income stability through employment assistance and benefit acquisition services.
The facility serves as a key tool to reduce homelessness and improve public safety by offering clients an alternative to living in public spaces. Participants agree to behavioral rules and receive case management with a focus on long-term stability and community reintegration.
Key service accomplishments include:
* High utilization and efficiency: The shelter maintained an occupancy rate above 90% in 2024, indicating consistently strong demand and successful operations. With an average daily occupancy of 158 (out of 174 beds), the facility operated at over 90% capacity throughout the year, confirming its essential role in keeping people off the streets and out of crisis.
* Streamlined transitions to housing: Clients stay for an average of 4.4 months, a relatively short timeframe that reflects both active case management and regular turnover. For those who do transition into housing (more than 200 since the shelter opened), this efficiency creates opportunities for successful exits while continuing to make beds available for others in need.
* Robust service engagement: Over 800 supportive service connections were made in the past year, including medical care, mental health counseling, job referrals, and life skills training. High levels of service engagement show that clients are actively participating in their case plans and receiving tangible support.
* Health and recovery services: Behavioral health and medical services are provided through partner agencies, ensuring that clients receive care for chronic conditions, medication management, and addiction recovery. These services improve stability, reduce costly emergency visits, and promote long-term health outcomes.
* Skill-building and community reintegration: On-site programming includes recovery groups, budgeting classes, job readiness workshops, and fix-it clinics. These services support stability and independence, helping clients prepare for life beyond the shelter and reintegrate successfully into the community.
* Housing coordination: Case managers partner with regional housing providers and landlords to place clients into available units, contributing to more than 200 housing outcomes since the shelter opened. This demonstrates the program's role as a critical bridge from homelessness to greater stability.
Pathways and Future Planning
In June 2024, the City Council approved a partnership with Jamboree Housing Corporation to develop Pathways, a permanent shelter on the City-owned Navigation Center property. Jamboree is currently pursuing funding sources to finance construction of the facility. Once all necessary funding has been secured, Jamboree will return to the City Council for final approval before submitting plans for permits and construction. During this development period, the current Navigation Center will remain the City's primary homeless services facility. The proposed agreement with Mercy House ensures service continuity, operational stability, and consistent support for clients as the City transitions to the future permanent shelter.
Updated RFP Process and Contract Structure
The City issued an RFP in January 2025 to identify a Navigation Center operator for the next contract term. Although only Mercy House submitted a proposal, the City paused award due to a projected budget shortfall.
Staff revised the RFP to reduce costs and enhance accountability, and reissued it in March 2025 with:
* A reduced bed count (174 to 164): Aligns shelter capacity with actual utilization trends, reducing costs while maintaining access for those in need.
* Stronger performance targets: Clarifies expectations for housing placements, service engagement, and successful exits, ensuring more measurable results.
* Enhanced expectations for cleanliness, safety, and reporting: Strengthens day-to-day operational standards, improves transparency, and reinforces a safe, respectful environment for clients and staff.
* Greater clarity on staff training and policy enforcement: Ensures shelter staff are better equipped to address client needs and maintain consistent enforcement of behavioral expectations and safety protocols.
* A strong recommendation to develop a fundraising plan: Encourages the operator to supplement City funding by seeking private contributions, grants, and other sustainable sources.
All regional homeless shelter providers were contacted directly and invited to apply. Mercy House again submitted a responsive proposal, meeting all updated criteria.
Contract Phasing and Budget Alignment
To allow time for staff and Mercy House to complete contract negotiations and incorporate necessary operational changes, the existing agreement was extended through September 30, 2025.
The subsequent agreement proposed in this report will begin October 1, 2025, and continue through June 30, 2026, aligning with the City's fiscal year and establishing a consistent contract cycle for future renewals.
The City Council-approved FY 2025-26 budget allocates $3,394,800 for Navigation Center operations. This total includes funding for both the prior 3-month extension and the proposed 9-month agreement and reflects the full anticipated cost for the program in FY 2025-26.
Budget Negotiation and Adjustments
Following the release of the revised RFP, staff worked closely with Mercy House to revise their original cost proposal and bring it within the City's adopted budget. This required several significant adjustments, including:
? Bed count reduction from 174 to 164: Already incorporated in the RFP, this change aligns capacity with actual utilization and provides foundational cost savings without limiting access.
? Elimination of one shuttle vehicle and associated staff: The Navigation Center previously operated two shuttles, but the revised agreement provides funding for only one. Shuttle frequency and routes will be adjusted accordingly, with Mercy House prioritizing access based on client needs and proximity to public transportation.
? Staffing and administrative cost adjustments: Mercy House restructured portions of its staffing plan to improve efficiency and reduce overhead.
? Improved food service coordination: Meal planning will now be tied more directly to actual occupancy, improving efficiency and controlling costs.
These negotiated reductions reflect a continued effort to control shelter costs while preserving essential services and improving accountability.
Key Contract Enhancements
The proposed agreement incorporates several updates to strengthen performance monitoring, clarify expectations, and support long-term program success:
* Updated Management, Operations, and Public Safety Plan (MOPS), subject to City approval: Provides a comprehensive framework for daily operations, site safety, and emergency preparedness, aligned with City standards.
* Clear performance accountability tools: Includes provisions for corrective action and payment adjustments when needed, supporting shared goals of service quality and consistency.
* Quarterly outcome and service reporting: Establishes a regular schedule for reviewing program performance and client progress.
* Real-time exit and termination tracking: Offers the City improved visibility into shelter activity to support coordination and transparency.
* Quarterly client feedback surveys: Promotes ongoing service improvement by incorporating client perspectives.
* Individualized participation tracking: Enhances the ability to tailor support and measure client engagement in services and programs.
* Refined safety and policy protocols: Reinforces consistent enforcement of behavioral expectations to ensure a secure and stable shelter environment.
* Staff parking adjustments: Moves staff parking off-site to ensure available spaces for clients and reduce access barriers.
* Streamlined reporting in City formats: Simplifies and standardizes data and financial submissions to improve coordination and oversight.
Regional Comparison and Operational Efficiency
Compared to other Orange County shelters, including Anaheim, Santa Ana, and Costa Mesa, the Huntington Beach Navigation Center delivers comparable or more comprehensive services at a lower per-bed cost. Regional programs average $60-$85 per bed per night. Huntington Beach's cost of $56.68 per bed includes full wraparound services and has yielded measurable outcomes, including more than 200 housing placements since opening, an average occupancy rate above 90%, and over 800 service connections provided in 2024 alone. These results demonstrate that the program not only operates cost-effectively but also delivers meaningful progress toward housing stability and client engagement.
Community Benefit
The Navigation Center is a vital component of Huntington Beach's strategy to reduce homelessness, lessen the strain on emergency services, and create safer, healthier spaces for the entire community. At the same time, it provides residents experiencing homelessness with structure, stability, and a pathway toward housing and independence. The proposed agreement with Mercy House ensures this balance of public benefit and individual support continues uninterrupted during the transition to the Pathways facility. Approving the agreement reaffirms the City's commitment to a homelessness response that is fiscally responsible and focused on long-term community wellbeing.
Environmental Status:
This action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly.
Strategic Plan Goal:
Non Applicable - Administrative Item
For details, visit www.huntingtonbeachca.gov/strategicplan.
Attachment(s):
1. Contract between Mercy House and the City of Huntington Beach
2. Staff Presentation