The city of St. Paul will pay $1 million over four years into a fund that will be used to improve its training, hiring and outreach efforts for low-income residents and the businesses that hire them as part of an agreement with a federal agency.

The resolution should free up $18 million in foreclosure relief money the U.S. Department of Housing and Urban Development was withholding after it determined the city wasn't following the agency's rules for providing economic opportunities to the poor.

The St. Paul City Council approved the agreement Wednesday.

Cecile Bedor, the city's planning director, said she received word from HUD that it approved the agreement. Both sides still need to sign the document.

In August, HUD determined the city wasn't following so-called Section 3 rules. Those rules require agencies that receive certain HUD funds to make an effort to "the greatest extent possible" to provide job training, employment and contract opportunities for low-income residents and businesses on construction projects using at least $200,000 in assistance.

City officials said they had been making such effort, just not in the way HUD wanted it reported. They voluntarily agreed to bargain a resolution.

Bedor said the city wants to work with the agency and is pleased there's an agreement.

"It's a good step that HUD is making the city enforce this law. ... We hope St. Paul moves to become a model city for living out this program with the job training and small business development mentioned in the compliance agreement," said a statement from the Black Ministerial Alliance and ISAIAH, a coalition of 90 churches.

HUD sent letters to more than 3,000 state and local agencies last fall, telling them to document how they were complying with Section 3. HUD is beefing up its monitoring of the program and will use sanctions and other enforcement actions to get compliance.

In its review of St. Paul, the federal agency found the city:

• Hadn't submitted an annual report of its Section 3 dealings in several years.

• Wasn't notifying contractors about the requirements.

• Didn't enable the training, employment or awarding of contracts for the poor.

Chris Havens • 612-673-4148