§ 68. State/city allocations of permanent housing projects for homeless families. 1. No contract shall be entered into by the agency or its designee in connection with the administration of projects, including the payment of project costs, unless the agency is assured to its satisfaction that the city has provided or will provide fifty percent of such costs to the agency or its designee. Moneys received from sources other than the city or the state may, at the agency's discretion, be expended without regard to such limitation. Notwithstanding any other provision of law, payments, grants and loans may be deposited by the agency directly with a lending institution at or before the time of initial loan closing pursuant to an escrow agreement satisfactory to the agency.

2. Moneys expended by the agency for the purposes of this article shall not substitute for locally funded operating or capital expenditures which the city would have allocated through its normal budgetary process to programs that provide permanent housing for homeless families in the absence of the funds provided for this program. All such moneys shall be used to increase locally funded operating or capital expenditures for permanent housing for homeless families to a level which is greater than the level which would have existed if such moneys had not been provided by the state. Nothing in this subdivision shall require the city to allocate funds for housing programs if in the city's judgment such allocation would require an increase in taxation or a reduction in other city services.