Community Development:

HUD Review of Urban Development Action Grant to Wilmington, N.C.

RCED-86-73: Published: Feb 12, 1986. Publicly Released: Mar 3, 1986.

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Pursuant to a congressional request, GAO reviewed the Department of Housing and Urban Development's (HUD) decision to award a $4 million urban development action grant (UDAG) to the city of Wilmington, North Carolina for the purchase and renovation of a vacant industrial plant, specifically with respect to the antipirating provision of the Housing and Community Development Act of 1974.

GAO noted that: (1) the antipirating provision permits HUD to fund a project involving the relocation of industrial or commercial plants from one area to another if the Secretary finds that the area is not significantly and adversely affected; and (2) HUD concluded that, except for the transfer of 25 supervisory positions, the Wilmington project was not a relocation within the context of the antipirating provision and, therefore, a significant and adverse impact analysis was not required. GAO found that: (1) since the developer was manufacturing the same mid-sized cranes at the Wilmington plant as it traditionally had at a St. Paul, Minnesota plant, the project was relocated within the context of act; (2) during its review of the UDAG application, HUD had information which showed that the manufacturer was transferring almost all usable manufacturing equipment from the St. Paul plant to the UDAG project site; (3) HUD did not adequately identify the inherent relocation possibilities of the project when it approved the grant; (4) the grant amendment, which attempted to prevent the manufacturer from conducting its principal St. Paul plant operation at the Wilmington plant, did not achieve its intended purpose; and (5) prior to approving the grant, HUD should have examined the application in greater detail to ensure that a relocation would not occur or to determine whether the relocation of the facilities would have a significant and adverse affect on the St. Paul facility economic base.

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