The city yesterday dropped its suit against the U.S. Department of Housing and Urban Development after the federal government said it was not going to freeze $5 million to $6 million in Community Development Block grants used to pay the salaries of some 360 city employees.
The city had gone to court Tuesday after housing officials received a letter from the local HUD office saying that the city's recordkeeping was inadequate and that the federal agency would have to stop the block grant funding.
Concerned that the cutoff in funds would result in the city having to lay off the 360 workers, city attorneys filed suit in U.S. District Court Tuesday seeking an injunction that would have prevented HUD from freezing the city's grants.
At a brief hearing before federal Judge Herbert F. Murray yesterday, Assistant U.S. Attorney Jeffrey Getty explained that a letter that HUD sent to the city did not threaten to cut off grants.
Instead, the letter warned the city that unless it developed a recordkeeping system that satisfied HUD, it could lose money from future grants.
Mr. Getty said HUD is still not satisfied with the city's recordkeeping system and that the city runs the real risk of losing future grant money.
However, he said that if that were to happen, there would be an administrative hearing where the city could present its side of the story.
"We don't view this as a victory for the U.S. government and a defeat for the city," said U.S. Attorney Richard D. Bennett.
"This is one of those cases where both sides emerge happy."
City officials are not totally pleased, however.
"We have complied with their regulations, and we will continue to do so," said Harold Perry, the city's deputy housing commissioner. "We have improved our recordkeeping, and it far exceeded the forms we have seen from other cities."