NEW ULM - The New Ulm Economic Development Authority (EDA) turned down participation in a lawsuit against the federal government over changes to its subsidy funding methods on Tuesday.
When the EDA started its Public Housing Program, the EDA entered into a contract with the Department of Housing and Urban Development. The contract determined the subsidies for the program through a calculation of the rental revenues and utility expenses for the prior year.
As part of budget-cutting legislation in 2011, HUD enacted a new policy that withheld subsidies from EDA programs with reserve balances above $100,000 and gave the regular subsidies to EDA programs below $100,000 in reserves. Programs like the New Ulm EDA, which had built up $600,000 in reserves, were told to spend down their reserves. The change was targeted for just 2012, though the federal government may chose to continue the practice.
The New Ulm EDA received a letter from the Minnesota branch of its lobbying organization, the NAHRO, last May and again in August. The letter detailed its lawsuit against the federal government over the change in policy, which it called a breach of contract with all the EDA programs. Only EDA programs that join the lawsuit with a $2,000 cost of participation would be eligible for a $60,000 award to each EDA program - if the lawsuit is successful.
In a six-to-one vote, the New Ulm EDA turned down participating in the lawsuit. City officials stated that they felt all the EDA programs affected by the changed policy would likely be awarded damages. The consensus by the commissioners was that there was no need to get involved, even though they opposed the new policy. The common complaint against the new policy was that it seemed to inherently punish EDA programs that had been successful.
(Josh Moniz can be e-mailed at firstname.lastname@example.org)