Handling of aid effort pits St. Paul against feds

A federal agency is withholding $18 million in foreclosure relief money from the city of St. Paul until the two sides resolve an issue over how the city manages a longtime program intended to help low-income residents and businesses.

That resolution could come soon if negotiations scheduled Friday between U.S. Department of Housing and Urban Development (HUD) officials and city leaders go well.

Social justice groups, however, say the city has denied low-income residents economic opportunities and should have to make money available for restitution. The city says it was trying but didn't report its efforts the way HUD wanted.

In August, HUD determined that the city wasn't complying with 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.

The city received about $41 million in applicable HUD money between 2006 and 2009. Various percentages of that yearly money are to be used for the Section 3 program.

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

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

• Didn't enable the training and employment of low-income people or the awarding of contracts to low-income businesses.

"We believe we were in compliance," said Cecile Bedor, director of the city's department of Planning and Economic Development. That said, the city did not appeal the HUD findings. "We don't have an interest in fighting HUD, we have an interest in moving forward," Bedor said. She said the city has since made extensive efforts to improve its Section 3 management.

The HUD review is part of a larger, nationwide crackdown. "We're making a special effort to make sure communities across the country comply with their obligations under Section 3," said HUD spokesman Brian Sullivan. "My limited understanding is this department hasn't made a forceful effort to get communities to comply -- and now we are."

A draft of the St. Paul agreement says the city would put $300,000 per year for up to four years into Section 3 programs. The city would also have to submit a plan detailing how it would comply with Section 3 requirements and come up with a plan to improve training for Section 3 businesses and residents.

Meanwhile, social justice groups are demanding that HUD officials require the city to pay restitution. "After years of diverting money intended to go to the low-income community, it is not enough to simply ask the city to start following the law," said Lonnie Ellis, social justice minister at St. Thomas More Catholic Community.