St. Paul City Council members questioned Wednesday why $3.7 million in grants and loans to community projects went untouched while the city is doing the municipal equivalent of shaking sofa cushions to pay for such services as police protection and snow plowing.

"We're dying for money, and there's $3.1 million in cash sitting there," council President Kathy Lantry said to Planning and Economic Director Cecile Bedor at a budget hearing.

Lantry was referring to money designated but unspent in the St. Paul Sales Tax Revitalization (STAR) program. An additional $621,000 initially used as collateral for STAR loans also is available, bringing the figure to about $3.7 million.

The program was established by the Legislature in 1994 to disperse a percentage from the city's half-cent sales tax. The funding directives have been tweaked over the years with some $15 million now coming annually from the tax. Sixty percent goes to STAR program projects with the remainder to debt service on the RiverCentre.

The Pan Asian Village at University Avenue and N. Dale Street, with $950,000 in untouched STAR funds, is at the top of a list of dead projects with cash balances.

As unveiled in 2005, it was to be an Asian arts and cultural center with a theater and educational organizations, but what remains is the Unidale Mall with its thrift shop and cut-rate stores. The planned village was the largest of several dozen projects with cash balances that make up the $3.1 million. Council members seemed astounded at the amounts and the lack of oversight.

Council Member Pat Harris called for "zero tolerance" and for the funds for dead projects to be pulled.

Lantry repeatedly said STAR guidelines aren't being followed by the planning department, that when money goes unused for six months, the project should be brought publicly to the council for reconsideration or recension.

"We have to have a process that's public, not 'I slipped a note under Kathy's door,'" Lantry said.

Bedor said the agency needs "guidance" because STAR guidelines say the money "may" be returned, but isn't required to be. Lantry disagreed, repeatedly saying a public council action should be taken on unused funding.

She and Harris also emphasized that the money was given to groups for specific projects and it can't be redirected to something else if the original plans shift.

Council Member Dave Thune, however, said, "Frankly, projects do evolve and change. I don't think we should have some rigid policy."

The five council members in attendance -- Dan Bostrom and Melvin Carter were absent -- agreed on the need for another meeting to develop a plan to get better control over the money.

Rochelle Olson • 651-925-5035 Twitter: @rochelleolson