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SuspeIISion 2/03/2010 Council File # 10-134
Green Sheet # 3097776
RESOLUTlON
j � ^ C OF SAINT PAUL, MINNESOTA
Presentedby �� l,h `� A1�,'tti
1
RESOLUTION APPROVING AND AUTHORIZING EXECUTION
OF VOLUNTARY COMPLIANCE AGREEMENT
WHEREAS, City staff has been negotiating with the U.S. Depamnent of Housing and Urban Development ("HUD") a
Voluntary Compliance Agreement ("VCA") with respect to the City's obligations, as a recipient of communiry development
assistance from HiTD, to complq with Section 3 requiremenu; and
WHEREAS, staff is recommending that the City Council approve the VCA in the form submitted for consideration, and
WAEREAS, the City is Pumly committed to meeting all of its obligations under Section 3 and to achieve the Section 3
employment and conh�acting goals;
NOW, THEREFORE, BE IT RESOLVED, by the Council of the City of Saint Paul, Minnesota as follows:
I. The City Council hereby approves the VCA in substantially the form submitted and the appropriate City
officials are authorized and directed to execute the VCA on behalf of the City.
2. The Dixedor of the Deparhnent of Planning and Economic Development is authorized to negotiate and a�'ee
to any amendments to the VCA which do not substantially change the rights or obligations of the City,
provided that such amendments are acceptable in form and substance to the City Attorney.
3. City staff and legal counsel aze directed and authorized to take all actions necessazy to implement this
Resolution.
Bostrom
Carter
Harris
Helgen
Yeas I Navs I Absent
by
of:
Stazk
Thune
Adopted by Council: Date
Adoption / ifie oi cil Se tary By:
BY ' --
Approve b or: Date �.S GD
By:
By: �"�
Approved k3�fi�te�
B y : _�—
Approved by City
BY — _
to Council
�
Green Sheet Green Sheet Green Sheet Green Sheet Green Sheet Green Sheet
10-134
�
Depar6nentlOfficelCouncil: Date Initiated:
PE _Planning&Economic 02FE62010 Green Sheet NO: 3097776
Development
Contact Person & Phone: Deoartrnent Sent 7o Person InitiallDate
CBCiIB Bedof � 0 lanuiu & Ecouomic Develo me 0�
266-6628 1 lannin & Ecauomic Develo me De artment Director
A55ign 2 i Attorue Ci Attorne _/�,_
Must Be on Council Agenda by (Date): Number � �
03-FEB-10 For 3 a or's Oifice Ma odASSisffiot
Routing d ioancial Services FSnance Director
Doc. Type: RESOLUTION Order 5 ouncil Councii President Lau
E-Document Required: Y
Document Contact: Laura Eckert
Contact Phone: 266-6633
Total # of Signature Pages _(Clip All Locations for Signature)
Action Requested:
Sigiahue on resolution approving and authorizing execution of Voluntary Compliance Agreement with HUD.
Recommendalions: Approve (A) or Reject (R): Personal Service Contracts Must Answer the Following Questions:
Planning Commission 1. Has this person/firm ever worked under a contract for this department?
CIB Committee Yes No
Civil Service Commission 2. Has lhis person/firm ever been a city employee?
Yes No
3. Does this personlfirm possess a skill not normally possessed by any
current city employee?
Yes No
Explain all yes answers on separate sheet and attach to green sheet.
Initiating Problem, Issues, Opportunity (Who, What, When, Where, Why):
City staff has been negotiating with HLJD, a Voluntary Compliance Agreement with respect to the City's obligations, as a recipient of
community development assistance from HUD, to comply with Secrion 3 requirements.
Advantages If Approved:
City will be firmly committed to meeting all of iPs obligaUOns under Section 3.
Disadvantages If Approved:
Non
DisadvanWges If Not Approved:
City wili not be meeting its obligations as it relates to Section 3.
ToWI Amount of
Transaction: CostlRevenue Budgeted:
Funding Source: Activity Number:
Financial Information:
(Explain)
February 2, 2090 2:23 PM Page 1
10-134
Voluntary Compliance Agreement
Section 3 of the Housing and Community Development Act
(12 U. S. C. 1701 u)
between
U. S. Department of Housing and Urban Development
.F1iT.7
The City of Saint Paul, MN
Section 3 Compliance Review Conducted May 2009
Page i February 2, 2010
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Table of Contents
Introduction...........................................................................................................3
Defin itions ..............................................................................................................5
Termsof Agreement ...............................................................................................8
EffectiveDate .........................................................................................................9
GeneralProvisions ..................................................................................................9
SpecificProvisions ................................................................................................10
Reporting, Monitoring and Recordkeeping ..............................................................15
Duration..............................................................................................................16
Effect of Noncompliance with this Agreement .........................................................17
Signatu res ............................................................................................................18
Page 2 February 2, 2010
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Introduction
The city of Saint Paul, Minnesota ('�City" or °recipienY� is a Community Development
Block Grant (°CDBG'� entitlement community and a HOME program participating
jurisdiction. As such, it is a recipient of financial assistance from the U. S.
Department of Housing and Urban Development ('�HUD" or the ��DepartmenY�.
Certain projects carried out by the City utilizing HUD funds constitute "Section 3
covered projects" as defined in 24 CFR 135.3. Between 2006 and 2008, the City
received HUD funds in the following amounts:
2006
2007
2008
CDBG $8,211,748
CDBG $8,225,675
CDBG $7,941,344
HOME $2,291,390
HOME $2,277,962
HOME $2,202,555
On June 23, 2008, Fredrick Newell filed a complaint alleging that the Saint Paul
Housing and Redevelopment Authority (`�Saint Paul HRA'�, an agency of the City,
failed or refused to comply with the requirements of Section 3. On June 24, 2008,
Mr, Frederick Newell filed a second complaint alleging that the City failed or refused
to comply with the statutory and regulatory requirement of Section 3 of the, Housing
and Community Development Act of 1968-12 U.S.C. 1701u and 24 CFR § 135. Given
the functional relationship between the HRA and the Ciry, the twn complaints were
consolidated for the purposes of investigation.
During the course of the investigation, HUD staff discovered that the City had not
submitted annual reports (HUD Form 60002) documenting Section 3 activities as
required by 24 CFR 135.90 for the last several years. In light of Saint Paul's failure
to submit the annual reports as required, HUD chose to incorporate the investigation
of Mr. Newell's complaints into a general review of the City's compliance with the
contracting provisions of Section 3.
'Section 3 applies to the following HUD assistance received by the City...community development assistance tFiat is used for the
following projects (i) housing rehabilitation (ii)housing construction and (iii) other public mnstraction. The requirements apply to
redpients of community development assistance for a Section 3 covered project(s) Eor which the amount of the assistance exceeds
$200,000. The requirements apply to contractors and sub contractors performing work on Section 3 covered project(s) for which
the amount of ffie assistance exceeds $200,000; and the contract or sub con4act exceeds $100,000. . _.
� See http://www.hud.gov/officesJcpd/about/budget/budget06
' See http://www.hud.gov/offces/cpd/about/budgeUbudget07
° See http://www.hud.gov/o�ces/cpd/about/budgetJbudget08
' Each recipient that receives directly from HUD finanaal assistance that is subject to the requirements of this part shall submit to
the Assistant Secretary an annual report in such form and with and with such informatlon as the Assistant Secretary may �request,
for the purposes of detertnining the effectiveness of Section 3. - '
6 See 24 CFR 135J4 (�.
Page 3 February 2, 2010
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During the week of May 19, 2009, HUD conducted a limited review of the City's
compliance with Section 3, focusing on contracting opportunities and obligations.
Data and documents were examined in advance of the on-site review. Key staff were
interviewed and selected construction project files were reviewed on-site.
In addition, materials produced pursuant to a federal lawsuit� filed by Mr. Newell
against the City were also reviewed. In his lawsuit, Mr. Newell alleged the City failed
to comply with Section 3 in numerous ways including (1) failure to award a su�cient
percentage of contracts to Section 3 business concerns; (2) failure to exercise
oversight over contractors hired with Section 3 funds to assure that the contractors
provide training, employment, and contracting opportunities to Section 3 persons
and business concems; (3) failure to meet Section 3's reporting requirements; (4)
failure to seek out and identify Section 3 business concems about contracting
opportunities; and, (5) failure to file form HUD-60002. These are essentially the
same allegations contained in Mr. Newell's HUD complaint. The lawsuit was
ultimately dismissed on summary judgment because the court determined that
Section 3 does not provide a right of private action.
The DepartmenYs review revealed a number of deficiencies related to .the City's
compliance with Section 3. Specifically, the City is not in compliance with the
statutory and.regulatory requirements of Section 3. Thece is no written or unwritten
Section 3 plan maintained. The City cannot document compliance with the greatest
extent feasible requirement of Section 3 by meeting the numerical go�ls set fortti in
the regulations. There are no procedures in place to: 1) notify Section 3 �esidents
about training and employment opportunities generated by Section 3_`covered
assistance and/or Section 3 business concerns about confracting opportuni�ies; 2)
notify potential contractors about the Section 3 requirements ancl ensure their
compliance and their subcontractors' compliance with Section 3 requirements, 3)
incorporate the Section 3 clause in all solicitations and contracts; 4) facilitate the
training and employment of Section 3 residents and the award of contracts to
Section 3 business concerns; 5) document the actions taken to comply with the
Section 3 requirements, the results of the actions and impediments, if any; and 6)
refrain from entering into agreements with contractors that have violated the
requirements of Section 3 Further, the Ciry has not submitted the HUD form 60002
annually as evidence of its efforts to comply with Section 3, as stipulated.at 24 CFR §
135.90. On August 25, 2009, HUD issued a Letter of Finding of Noncompliance (LOF)
' Nails Construction Comoanv et al v. The CiN of Saint Paul. 2007 WL 423187 (D.MinnJ
e See 24 CFR 13532
Page 4 February 2, 2010
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against the City for failing to ensure compliance with the requirements of Section 3
in its own operations and those of its covered contractors attached as Appendix A.
The City agrees to enter into this Voluntary Compliance Agreement in order to
address the issues raised in HUD's August 25, 2009, Letter of Findings and to comply
with its responsibilities under Section 3 of the Housing and Urban Development Act
of 1968. This Voluntary Compliance Agreement will and hereby does fully and finally
resolve Mr. Newell's pending Section 3 administrative complaints against the City and
the St. Paul HRA without any further action. This Voluntary Compliance Agreement
does not release the Ciry from any claims, damages, penalties, issues, assessments,
disputes or demands arising under the False Claims Act, 31 U. S. C. sections 3729 to
3733, or any other statutory, administrative, regulatory or common law claims.
Additionally, this Voluntary Compliance Agreement and any payments made in
connection with this Voluntary Compliance Agreement cannot be used to offset or
reduce any claims, damages, penalties, assessments, or demands arising under the
False Claims Act or any other statutory, administrative, regulatory or common law
claims.
Definitions
The following definitions will be used in the interpretation and. implementation of the
terms of this Agreement.
Applicant means any entiry which makes an application for Section 3 covered
assistance, and includes but is not limited to any State, units of local government,
public housing agency, Indian housing authority, Indian tribe or other, public body,
public of private, nonprofit organization, private agency or institutian, mortgage
developer, limited dividend sponsor, builder, property manager, community housing
development corporation, resident management corporation, resident council or
cooperative association.
Business concern means a business entity formed in accordance with State laws and
which is licensed to engage in the type of business activity for which it was formed.
Contractor means any entity which contracts to perform work generated by the
expenditure of Section 3 covered assistance, or for work in connection with a Section
3 covered project.
Emp/oyment opportunities generated by Section 3 covered assistance means all
employment opportunities generated by the expenditure of Section 3 covered public
and Indian housing assistance (i.e., operating assistance, development assistance
and modernization assistance, as described in § 135.3(a)(1)). With respect to Section
3 covered housing and community development assistance, this term means all
employment opportunities arising in connection with Section 3 couered projects (as
s The original compliance review reviewed the City and the Housing and Redevelopment Authority. Since the City is the direct
reapien[ oP Sectio� 3 covered assistance, it bears the uldmate responsibiliry for ensuring Section 3 compliance m their own
operations/departrnents and those of their contractore/subcontradore. (see 24 CFR § 135.32)
Page 5 February 2, 2010
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described in § 135.3(a)(2)), including management and administrative jobs
connected with the Section 3 covered project. Management and administrative jobs
include architectural, engineering or related professional services required to prepare
plans, drawings, specifications, or work write-ups; and jobs directly related to
administrative support of these activities, e.g., construction manager, relocation
specialist, payroll clerk, etc.
Housing and community deve%pment assistance means any financial assistance
provided or otherwise made available through a HUD housing or community
development program through any grant, loan, loan guarantee, cooperative
agreement, or contract, and includes community development funds in the form of
community development block grants, and loans guaranteed under section 108 of
the Housing and Community Development Act of 1974, as amended. Housing and
community development assistance does not include financial assistance provided
through a contract of insurance or guaranty.
Low-income person. See the definition of °Section 3 residenY' in this section.
Metropolitan area means a metropolitan statistical area (MSA),,as established by the
Office of Management and Budget.
Neighborhood area means for HUD community development programs, the
definition, if provided, in the regulations for the applicable community development
program, or the definition for this term in 24 CFR 570.204(c)(1).
New hires mean full-time employees for permanent, temporary or seasonal
employment opportunities.
OtherHUDprogramsmeans HUD programs, other than HUD public and Indian
housing programs, that provide housing and community development assistance for
°Section 3 covered projects," as defined in this section.
Pub/ichousing residenthas the meaning given this term in 24 CFR § 963.
Recipient means any entity which receives Section 3 covered assistance, direct�y
from HUD or from another recipient and includes, but is not limited to, any State,
unit of local government, PHA, IHA, Indian tribe, or other public body, public or
private nonprofit organization, private agency or institution, mortgagor, developer,
limited dividend sponsor, builder, property manager, community housing
development organization, resident management corporation, resident council, or
cooperative association. Recipient also includes any successor, assignee or transferee
of any such entity, but does not include any ultimate beneficiary under the HUD
program to which Section 3 applies and does not include contractors.
Page 6 February 2, 2010
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Section 3 means Section 3 of the Housing and Urban Development Act of 1968,
as amended (12 U.S.C. 1701u).
Section 3 business concern means a business concem, as defined in this section (1)
That is 51 percent or more owned by Section 3 residents; or (2) Whose permanent,
full-time employees include persons, at least 30 percent of whom are currently
Section 3 residents, or within three years of the date of first employment with the
business concern were Section 3 residents; or (3) That provides evidence of a
commitment to subcontract in excess of 25 percent of the dollar award of all
subcontracks to be awarded to business concerns that meet the qualifications set
forth in paragraphs (1) or (2) in this definition of "Section 3 business concern."
Section 3 c/ause means the contract provisions set forth in 24 CFR § 135.38
Section 3 cove�ed assistance means assistance provided under any HUD housing or
community development program that is expended for work arising in connection
with: (i) Housing rehabilitation (including reduction and abatement of lead-based
paint hazards, but excluding routine maintenance, repair and replacement); (ii)
Housing construction; or (iii) Other public construction project (which includes other
buildings or improvements, regardless of ownership).
Section 3 covered contract means a contract or subcontract (including.a professional
service contract) awarded by a recipient or contractor for work generated, by the
expenditure of Section 3 covered assistance, or for work arising in connection with a
Section 3 covered project. "Section 3 covered contracts" also do not include
contracts for the purchase of supplies and materials. However, whenever a contract
for materials includes the installation of the materials, the contract constitutes a
Section 3 covered contract. For example, a contract for the purchase and installation
of a furnace would be a Section 3 covered contract because the contract is for work
(i.e., the installation of the furnace) and thus is covered by Section 3.
Section 3 cove�ed projectmeans the construction, reconstruction, conversion
or rehabilitation of housing (including reduction and abatement of lead-based paint
hazards), other public construction which includes buildings or improvements
(regardless of ownership) assisted with housing or community development
assistance.
Section 3joint venture means an association of business concems, one of
which qualifies as a Section 3 business concern, formed by written joint venture
agreement to engage in and carry out a specific business venture for which purpose
the business concerns combine their efforts, resources, and skills for joint profit, but
not necessarily on a continuing or permanent basis for conducting business
generally, and for which the Section 3 business concern: (i) Is responsible for a
' See Appendix 2
Page 7 February 2, 2010
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clearly defined portion of the work to be performed and holds management
responsibilities in the joint venture; and (ii) Performs at least 25 percent of the work
and is contractuaily entitled to compensation proportionate to its work.
Section 3 �esident means (1) A public housing resident; or (2) An individual who
resides in the metropolitan area or nonmetropolitan county in which the Section 3
covered assistance is e�cpended, and who is: (i) A/ow-income person, as this term is
defined in Section 3(b)(2) of the 1937 Act (42 U.S.C. 1437a(b)(2)). Section 3(b)(2)
of the 1937 Act defines this term to mean families (including single persons) whose
incomes do not exceed 80 percent of the median income for the area, as determined
by the Secretary, with adjustments for smaller and larger families, except that the
Secretary may establish income ceilings higher or lower than 80 percent of the
median for the area on the basis of the Secretary's findings that such variations are
necessary because of prevailing levels of construction costs or unusually high or low-
income families; or (ii) A very /ow-income person, as this term is defined in Section
3(b)(2) of the 1937 Act (42 U.S.C. 1437a(b)(2)). Section 3(b)(2) of the 1937 Act (42
U.S.C. S437a(b)(2)) defines this term to mean families (including single persons}
whose incomes do not exceed 50 percent of the median famify income for the area,
as determined by the Secretary with adjustments for smaller and larger families,
except that the Secretary may establish income ceilings higher or lower than 50
percent of the median for the area on the basis of the Secretary's findings that sucF�
variations are necessary because of unusually high or low family incomes. (3) A
person seeki�g the training and employment preference provided by Section 3 bears
the responsibility of providing evidence (if requested) that the person is eligible for
the preference.
Service area means the geographical area in which the persons benefitting from the
Section 3 covered project reside. The service area shall not e�end beyorid tlie unit
of general local government in which the Section 3 covered assistance is expended.
Su6contractor means any entity (other than a person who fs an employee of the
contractor) which has a contract with a contractor to undertake a portion of the
contractor's obligation for the pertormance of work generated by the expenditure of
Section 3 covered assistance, or arising in connection with a Section 3 covered
project.
Very/ow-income person see the definition of "Section 3 residenY' in this section.
Terms of Agreement
This Voluntary Compliance Agreement ��Agreement" or °VCA'� shall govern for a
period of four (4) years from the effective date of the Agreement.
Page 8 February 2, 2010
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Effective Date
This Agreement shall become effective on the date that it is executed by the Assistant
Secretary for Fair Housing and Equal Opportuniry or his designee.
General Provisions
a) This Agreement applies to the following HUD assistance received by the
City...community development assistance that is used for the following projects
(i) housing rehabilitation (ii)housing construction and (iii) other public
construction. The requirements apply to recipients of community
development assistance for a Section 3 covered project(s) for which the
amount of the assistance exceeds $200,000. The requirements apply to
contractors and sub contractors performing work on Section 3 covered
project(s) for which the amount of the assistance exceeds $200,000; and the
contract or sub contract exceeds $100,000. Community development
assistance includes, but is not limited to Community Development Block Grant
funds (CDBG), HOME funds, Emergency Shelter Grant (ESG) funds,
Neighborhood Stabilization Program (NSP) funds, and Housing for Persons with
AIDS (HOPWA) funds.
b) This Agreement does not increase or diminish the ability of any person or class
of persons to eacercise their rights under Section 3. Individuals or classes.of
persons who may have rights under the aforemenfioned statute or regulation
are not parties or third party beneficiaries of this Agreement. Nothing in this
Agreement shall be construed as creating any right in a third party to enforce
any provision of this Agreement or to assert any claim against the City or HUD.
c) This Agreement is a public document. A copy of this Agreement shall be made
available to any person for his/her review in accordance with HUD's and the
City's obligations under the Freedom of Information Act or any other law.
d) To the extent that any prior or contemporaneous HUD guidance (written or
oral) in the form of letters, opinions or similar guidance regarding the City's
obligations, responsibilities, or responsibilities under Section 3 of the Housing
and Urban Development Act of 1968, as amended, conflicts with this
Agreement, this Agreement is the controlling document from the effective date
of the A9reement.
e) The City shall refrain from retaliating against any perso� who has: 1) exercised
or will exercise his/her legal rights under Section 3; 2) participated in or will
participate in any manner with a Section 3 compliance review; or 3)
Page 9 February 2, 2010
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participated in any manner in protecting the rights of Section 3 residents or
businesses.
� HUD will monitor the City's implementation of and compliance with the terms
of this Agreement. HUD may conduct on-site monitoring reviews of the Ciry's
compliance with the provisions of this Agreement. The City wili grant HUD
access to its premises, records and personnel for the reviews.
g) This Agreement is a compromise of disputes,
deemed or construed to be an admission o
whatever on the part of the City.
Specific Provisions
In addition to all regulatory requirements, the City shall:
and nothing herein shall be
r concession of any liability
a) Within sixty (60) days of the effective date of this Agreement:
Hire or appoint appropriate personnel to oversee compliance with the
provisions of the Agreement and forward that person's name(s) as well as a
copy of the position description(s) to HUD.
ii. Develop a system to ensure that all covered contracts include the Section 3
clause found at 24 CFR § 135.38.
iii. Obligate a total of $650,000 to be placed into a Section 3 Implementation
Fund for years one (1) and two (2) of this Agreement to fund the various
Section 3 initiatives herein detailed. Seesections (b) and (c), below.
The penalties paid by developers, contractors, subcontractors and sub-
recipients under the ��Penalties" section, (d)(v)(1)(b) of this section, below, for
failure to achieve the Section 3 numerical conU and employment goals,
will be placed into this Fund for each year thaE the Agreement is in effect. In
addition, for years three (3) and four (4) of this Agreement, City staff will
annually submit a request to the City Council for funding of the Section 3
Implementation Fund, to fund the various Section 3 initiatives herein detailed,
in an amount equal to the difference between $175,000 and the penalties
collected under section (d)(v)(1)(b) of this Section, below. In the event that
in years three (3) and four (4) of this Agreement, the City does not allocate
sufficient funds to bring the total deposit to the Section 3 Implementation
Fund to $175,000, the Agreement will be suspended to allow HUD to
conduct a Section 3 compliance review to determine, in particular but not
limited to, whether the City is meeting the "safe harbor" numerical
requirements. In the event that the compliance review determines that the
Page 10 February 2, 2010
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City is meeting the "safe harbor" numerical requirements and is othervvise
complying with Section 3, the Agreement will terminate; however, the City
will continue to make semi-annual reports to HUD until the Agreement has
expired. However, in the event that the compliance review determines that
the City is not meeting the ��safe harbo�" numerical requirements, and/or
the City is not complying with Section 3 to the greatest extent feasible,
and/or is not otherwise complying with Section 3, HUD will find the Ciry in
noncompliance and the procedures and remedies contained in the section
of this Agreement entitled "Effect of Noncompliance with this Agreement"
will apply. Provided, however, HUD will give the City a reasonable
opportunity to meet the ��safe harbor" numerical requirements before
implementing the procedures and remedies contained in the section of this
Agreement entitled "Effect of Noncompliance with this Agreement."
b) Within sixty (60) days of the effective date of this Agreement, the City will
develop and forward to HUD for review and approval, a written Section 3 Plan
covering Section 3 contracting, employment and training opportunities which
wilL•
i. Establish policies, procedures and practices to ensure that projects fully or
partially funded with Section 3 covered financial assistance comply with
regulatory requirements 24 CFR § 135.
ii. Establish a mechanism to ensure to the maximum extent feasible that a
minimum of 10% of the total dollar amount of all Section 3 covered
contracts for building trades work arising in connection with housing
rehabilitation, housing construction, and other public construction be
awarded to Section 3 business concerns.
iii. Establish a mechanism to ensure to the maximum extent feasiale that at
least 3% of the total dollar amount of all other Section 3 covered contracts
be awarded to Section 3 business concerns.
iv. Require contractors to develop a Section 3 plan detailing how they will
comply with the requirements of Section 3. The plan should include but not
be limited to specific information about the contractor`s current workforce,
plans for hiring additional employees, anticipated subcontracting needs,
and strategies for targeting Section 3 residents and business concerns for
new economic opportunities.
v. Establish a process by which the City will certify Section 3 residents and
business concerns.
Page 11 February 2, 2010
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vi. Maintain a separate list of certified Section 3 business concerns.
vii. Provide a list of Section 3 businesses to all sub-recipients, developers and
successful bidders in an effort to facilitate the award of contracts and
subcontracts to Section 3 business concerns.
viii. Provide annual Section 3 training events for area contractors, sub-
contractors, grantees, sub-recipients and residents.
c) The City agrees to provide its services to Section 3 residents and Section 3
business concerns. The City agrees to submit to HUD for review and approval
a plan to enhance the capability and technical capacity of Section 3 residents
and business concerns. The Plan will fund activities such as:
i. Developing a program which will evaluate the strengths and weaknesses of
potential and/or new Section 3 business owners and will provide specific
services that will develop and improve their potential for success.
ii. Providing training in business consultation, start-up, technical assistance for
business expansion and retention, outreach and advertising services.
iii. Providing training in the Ciry's project development process.
iv. Providing training on insurance and bonding requirements.
v. Helping establish relationships between the business and banking
community.
vi. Providing construction job preparation training both in the classroom and in
the field.
vii. Providing information on tax credits available to contractors for employing
Section 3 residents.
viii. Funding and making available a scholarship fund to be used by Section 3
residents to be used as financial assistance for the payment of items such
as, union initiation fees, dues, tools, equipment a�d work clothing.
ix. Funding and making available a no-interest revolving loan fund for Section
3 business concerns, including start-up Section 3 business concerns.
Page 12 February 2, 2010
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d) Within 180 days of the effective date of this Agreement, the City will revise its
existing contract and procurement policies, practices and procedures as
follows:
i. Provide notice on the City's web site and the Contract Analysis Services
bulletin board, and electronic notice, or written notice where the Section 3
business concern prefers written notice, to all City-certified Section 3
business concerns of upcoming contracting opportunities. This notice shall
be in sufficient time to allow the Section 3 business concerns to respond to
the bid invitations or request for proposals.
ii. For publicly-owned Section 3 covered projects constructed by the Ciry,
arrange solicitations, times for the presentation of bids, quantities,
specifications, and delivery schedules in ways to facilitate the participation
of Section 3 business concerns.
iii. For privately-owned Section 3 covered projects not constructed by the City,
require the developer to arrange solicitations, times for the presentation of
bids, quantities, specifications, and delivery schedules in ways to facilitate
the participation of Section 3 business concerns.
iv. For publicly-owned Section 3 covered projects constructed by the City,
where appropriate, break out contract work items into economically feasible
units to facilitate participation by Section 3 business concerns.
v. For privately-owned Section 3 covered projects not constructed by the Ciry,
require the developer, where appropriate, to break out contract work items
into economically feasible units to facilitate participation by Section 3
business concerns.
(1) Where a contractor, subcontractor, developer or sub-recipient has not
reached the goal that at least 10% of the total dollar amount of all Section
3 covered subcontracts for building trades work arising in connection with
housing rehabilitation, housing construction, or other public construction
to Section 3 business concerns and at least 3% of the total dollar amount
of all other Section 3 covered contracts are provided to Section 3 business
concerns, the City, contractor, developer and/or sub-recipient shall be
required to make additional efforts. Those additional actions may include
but shall not be limited to:
(a) Within 120 days the City will devise and implement Section 3
Procurement Preferences consistent with the Appendix III to 24 CFR
135, Examples of Procurement that Provides for Preference for Section
3 Business Concerns and require the contractor, subcontractor,
Page 13 February 2, 2010
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developer and sub-recipient to comply with the same. The
Preferences will be devised so as to maximize the utilization of Section
3 sub-contractors without economically disadvantaging general
contractors or developers.
(b) Require the contractor, sub-contractor, developer or sub-recipient to
provide other economic opportunities to Section 3 residents and
businesses pursuant to 24 CFR 135.40 as follows. Where at least 10%
of the total dollar amount of all Section 3 covered contracts for
building trades work arising in connection with housing rehabilitation,
housing construction, and public construct+on or at least 3°fo of the
total dollar amount of all other Section 3 covered contracts are not
provided to Section 3 business concerns and/or do not result in the
employment of Section 3 residents, the contractor, sub-contractor,
developer or sub-recipient will be required to contribute the difference
between 10% of the covered contract amount (3% for non-
construction related contracts) and the amount provided to Section 3
business concerns and/or in the employment ofi Section 3 residents
into the City's Section 3 Implementation Fund. The City will enforce
this requirement.
e) Employment and Training: Within one hundred eighty (180) days of the
effective date of this Agreement, the City shall:
i. Complete a review of the City's current full time new hiring practices with
respect to a Section 3 covered project to determine their compliance with
Section 3.
ii. If current hiring practices do not comply with Section 3, then, subject to
the City's obligations under the City's Affirmative Action Program, Civil
Service Rules and current labor contracts and other applicable laws,
regulations and contracts, within 180 days of the effective date of this
Agreement:
(a) Revise full-time new hiring practices to conform and comply with
Section 3 requirements.
(b) Include Section 3 residents as a preference group in the selection
criteria for all full-time and part-time job vacancies.
" New hire means full-time employees fror permanent, temporary or seasonal employment opportunities. See 24CFR § 135.5.
Page 14 February 2, 2010
10-134
iii. Annually, review staffing and hiring needs of the City in connection with
Section 3 covered projecks including management and administrative jobs
connected to Section 3 covered projects. Document any and ali aspects of
the hiring and employment policies that present barriers to complying with
Section 3. Document all actions taken to overcome the barriers (120 days
and on-going).
� Annually:
Document the number of employees, newly-hired by the City or its covered
contractors in connection with Section 3 covered projects, during the
previous twelve month period; determine the number and percentage of
Section 3 hires. Document all actions taken to ensure at least 30% of the
newly-hired employees are Section 3 residents.
ii. At the end of 12 months after the effective date of this Agreement, if at
least 30% of the new-hires were not Section_ 3 residents, determine and
document whether the Section 3 Plan for recruiting and hiring was
followed. If the Plan was followed, then, subject to the City's obligetions
under the Ciry's Affirmative Action Program, Civil Service Rules, current
labor contracts and other applicable laws, and regulations, review and
revise the Plan to incorporate the following action: For publicly owned
Section 3 covered projects constructed by the City enter into "first source"
hiring agreements with organizations representing Section 3 residents; and
for privately-owned Section 3 covered projects not constructed by the City,
require the developer, covered contractors and subcontractors, and
subrecipients to enter into ��first source" hiring agreements with
organizations representing Section 3 residents.
g) If at the end of 24 months after the effective date of this Agreement, at least
30% of the newly-hired were not Section 3 residents, determine and
document whether the Section 3 Plan for training, recruiting and hiring was
followed, changes/revisions are needed and strategies for addressing the
barriers in the future are created.
Reporting, Monitoring and Recordkeeping
The City shall keep any and all records necessary to substantiate information
regarding the reports described below for a period of four (4) years from the
effective date of this Agreement unless indicated othenvise; and specifically, the City
shall:
Page 15 February 2, 2010
10-134
a) Ensure that form HUD 60002 is submitted in an accurate and timely fashion
as directed by HUD in accordance with 24 CFR § 135.90. This report shall be
filed annually and as required by law.
b) Submit semi-annual reports to HUD detailing all activity undertaken pursuant
to this Agreement. The report will contain such specific information and be in
such format as will be agreed upon by HUD and the Ciry in advance of the
City's first submission.
c) Every six months after the effective date of this Agreement, HUD will review
the progress the City, its contractors and subcontractors have made in
meeting the minimum numerical goals for employment and contracting.
Thirty days in advance of each semi-annual meeting, the City will provide HUD
with its semi-annual report. The report will identify any of the actions listed in
the Agreement which the City believes have proved ineffective or impractical
and will propose alternative proposals which would achieve the same ends.
d) If after 12 months after the effective date of this Agreement, the numerical or
"safe harbor" goals have not been met, the City and HUD will review this
Agreement to determine what modifications will be made as needed. The
agreed upon modifications shall take effect upon the execution of an
amendment to this Agreement signed by both Parties.
e) If the City meets its "safe harbor" goals, reporting requirements, grantee
requirements, and other Section 3 regulatory requirements under this
Agreement for two consecutive years, the City will be deemed to have
satisfied the terms of this Agreement. However, the City will continue to make
Section 3 progress reports to HUD on a semi-annual basis until the effective
date of the Agreement has passed.
Duration
The duration of this Agreement shall be four (4) years from the effective date of this
Agreement and this Agreement may be amended during such period of time if HUD:
'� Use Appendix 3
" Fach reapient and contractor and subcontractor (unless the wntract or submntract awards do not meet the threshold specified
in § 1353(a)(3)) may demonstrate mmpliance with the requirements of this part by commiqing to award to SecUOn 3 business
mncems:
(1) At least 10 percent of rhe total dollar amount of all Section 3 wvemd contracts for building trades work for maintenance, repair,
modemiution or development of public or Indian housing, or for building trades work arising in wnnxtion with housing
rehabilitation, housing construction and other public construction; and (2) At least three (3) percent of the total dollar amount of all
other Section 3 covered contracts.
Page 16 February 2, 2010
10-134
a) Determines that this Agreement must be revised, or expanded based on
HUD's monitoring review of the City's performance under the Agreement or as
a result of HUD's findings made following a subsequent compliance review of
the City; and
b) Notifies the City of this prior to the expiration date of the Agreement.
Effect of Noncompliance with this Agreement
a) Any act(s) or omission(s) by the City or its representatives, including its
employees, which violate the terms of this Agreement may serve as grounds
for HUD to impose debarment, suspension or limited denial of participation
sanctions pursuant to 2 CFR 2424. HUD will provide the City with notice and a
reasonable opportunity to cure any violations of the terms of this Agreement
before employing the procedures and remedies contained in this section of the
Agreement.
b) Any act(s) or omission(s) that violate(s) the terms of this Agreement may
serve as grounds for HUD to seek specific performance and/or enforce any or
all of the provisions of this Agreement in federal court.
c) A continuing failure or refusal by the City to comply with the regulations in this
part may result in the application of sanctions specified in the contract
through which HUD assistance is provided, or the application of sanctions
specified in the regulations governing the HUD program under which HUD
financial assistance is provided.
d) If, after 24 months following the effective date of this Agreement, HUD
determines, as a result of the semi-annual reviews, that the City is unwilling
or not able to carry out its HUD funded programs in compliance with the
statutory and regulatory requirements of Section 3 and this Agreement, HUD
may, at its option, require the City to engage the services of a consultant or
contractor to perform said duties if HUD, in its sole discretion, determines
that said services would be effective and practical. Such services, if required,
shall be at the City's eacpense. The City will notify HUD of which consultant or
contractor the Ciry is considering and be provided an opportunity to comment
on the selection(s). The City shall determine which consultant to use and the
terms and conditions of the consultant's contract.
e) If after the expiration of the Agreement, the City has met all of the terms of
this Agreement, but has still failed to meet the ��safe harbor" numerical
requirements, HUD will, at its discretion, evaluate the City's compliance with
Section 3 in accordance with 24 CFR Section 135.30(d)(2).
Page 17 February 2, 2010
10-134
Signatures
These signatures attest to the approval and acceptance of this Voluntary Compliance
Agreement:
On behalf of the City of Saint Paul, Minnesota:
Christopher B. Coleman
Mayor
Approved as to form
Assistant City Attorney
Date
Date
On behalf of the U. S. Department of Housing and Urban Development
- ------ - - -_,.--_.,._ .__ ._-:::,.—_. -,-.:.. - — - - - -- -- -
Barbara M. Knox, Director, Date
Region V, Fair Housing and Equal Opportunity Division
Page 18 February 2, 2010
10-134
Appendix 1 will be a copy of the August 20091etter to the City.
Page 19 February 2, 2010
10-134
,a";"'�-. CS DEPaATST:,70FHOCSi\GetiDLRBA\
�� `t DE�'£LOP.�v1E�'f
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��u �aphHMetco:leFede:aiBudEmt .
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�
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om� w r.:. w�unv.m cw+! ooaaw�+:•
August 25, 20G9
Honorabl= Chns Co�eman
Mayor c` Saint Pzui
390 Gy Hzil
15 West Fourth Stree2
Salnt Paul, MN SS1C2
Dear Mayor Coleman:
SU37'cCT': Se�on ? Monr.oring a�d Limi:ed Compliance P,ev�ew
City of Saint Pau' and The Housing anC Redeveiopment Au;honty {HRA)
De.eminztion o` Non-Comal�ante
� ne U.S. Department of Housmg ard Urbar, Qe�reiopmen; (HUD), O�fice of Fair Nousiny
znG Equaf Opoor�un�ty, has com�le:ed a limited on-si:e compliance re�new of tne ci.y of
Szint Paul and the Sam; Paul Ho:uing and Redevelopment Authoriry (HRA)� pursuant to
Sectiort 3 oF the Housing ano U�ban Development RC of 1968�. i'he purpose o` the
review v.�zs to Deter�nine wa�th=r, a�u :; whac extent, the aqf a` Saint PaW arc the
HRA were administering HUD-fundetl proo2n5 in complia�ce with Yhe requiremencs of
S°_�on 3 as specified in 2� CrR §? 35. T7e review was timited to S�tian 3 coniracting
requiremens and therefore the fnd,ngs con�inatl herein do no: add2ss the city's
compliarce with the SeCicn 3 L�aining and employment requiremants.
T.�e purpose o` SeRion 3 is to ensure that employment and other emnomic
opportu�ities 9ene2ted by HUD finanaai zssistance for hpusing and commun3y
devalopment prog2ms shail, :o .he grea:est eztent feasible, be directad zo !ow ar,tl
very Ipw-Income persons. Sefio� 3 aaplies te trainine, empioyment, conhacting a�d
other ec000mit opportuni5es arisin� in conne� ion witfi `,he erpendf:ure o` wmmunfy
development zssistance. Mos MU4 prog2rrs 2quire ihe g2n.ee to sign a ce2ifitztiort
s[ating t5at 1t wi(i comply with the requirement of Sectior. 3.
Backorovnd:
The city of Sairt Paul is a Com^�unity D°velopme�rt Btouc Gran* (CDBG) enYitlemen:
' M Svu Pavt Hvusivg »E Rd�.e]opme:: nvumry r, a:etvn mswo� pueLC cnnry and: �oarnat.. Mwvb wwu.�oai nnt Tvaev
Qc.iW�^^�^�acl.;ucxbeWifa'�»Qp'd5un:➢an: ilu-Ss�:?wiC1HCw�wi:mre:siteYP.,16eWC`Wamiwa�:n.
' 10II5{ �tOlc.
uwaAad�o+ mpx+o�uigov
1�
Page 20 February 2, 2010
10-134
coTmuni;y anG a HOME prog2m pa.^.iapating ju�sd�C.ion. As such R is a recipier.t of
HUD fi�yn6a! assistance. Ce ain proje�s carr�ec ou: �y L4e d,ry u51¢ing HllD `ur,ds
conrntute "Secaor 3 covr.ed assisance" as aefin=_d �n 24 CFR 1353 = Between 20D6
and 2008, Yhe aty receivec !-!UD fL�nCs m the f�tiowmg amounts:
2D�5� LD9G 58,21:,7<& HOME 52,29..39�J
2007' CDBG 58,225,675 HOME 52,277,9b2
2008 CDBG $7,942:44 iJME $2,202,555
Or Ju�e 23, 2008, Fredrick Neweii �ctetl a co�nalain: a�iegi�g thai ,�e Saint Paul HRA
�ailed or reP�sed tc pmply witti th_ reGU�remer;� of Section 3. On Ju�e 24, 2QD8, Mr.
Neweli fileo a second comptain[ allegmg that Che ciry of Salnt Pau, `aiieC or refused to
comply wi;h ±he r=qu:�eme.^.ts o` Secbon 3. Gven �e functior,al relatlonship be^xeen
Ghe HRA anC the ciy o` Sain[ °au�, the ;wo complzi�s were consollCa:ed for tiie
purposes of investigacion.
During the course of fne investiga:io^, HUD s'a" discover°d tna, the ci.y o( Saint Paui
had not submi�ted annuai reports (NUD Form 60D02) c` 5=c:ion 3 activRy as reGuired
by 24 CFR 135.90' for th_° la�t several years. In Ifght of Sai�t Paul's Y��lure to submit tfie
annual r�ports as requirod, HUD deternined �o inco�porate the ir.vestiyatior. o` M�.
NewefPS complal.�5 into a generei review o`tne ciry of Saint Paul's compllance with che
contrdCting pro�nsions a.` Section 3.
During the week o` htay _9, 2004, :he Poiiowmg sraf� conaur�ed z iimiteo review ef the
ci,y's compliance wi,h Section 3, Focusing on mrpading apportt:nf�ies and obligztions:
Jaime Pedraza, Erikz Finkler and Lrdine �a�en oi the HIfD t4i�neapoiis Fe4C OFice,
and �aflq Munir of HUD's SAc.iior 3 Hea�quarters office. Datz a�d Cocuments were
eaarninee In a�nce of th= on-site review. Key s�a� wer=_ iaterviewed and seleaed
conSJUCtion project ftles were reviewed on-site. ?eter McCafl, Assistant Gty Attomey,
was present dudng the ent2nce and acit mee:ings and at al( sca� interviews.
In addRion, materials produted pursuan: ?ro a fede2l lawsuiY £ted by Mr. Neweli
agafnst tne ay of Sairn. Paui were a',so rzviewed. In his lawsuit, Mr. Neweli aileged the
city failed to mmply wi[h Sec:ion 3 in numerous ways inciuding (i) failure to award a
su�cient percenbgn of tontracts zo Settion 3 6usiness concems; (2) failure Lo e�cercise
'Seenm 3 vppfiu m �Ec tolbwou HJD aaumnce ..xmmo�u:Y �bP�� wu�^cc tlu: u mc6 fa dc (oUo�noE Pryceu {ii Gaui¢g
rWJ�4num {u?hou�oE cwNe..vocam Cui� roM: Cubh::roc�uv:.iia
' Sac 9" ' G H hv h ^^yc�E
�Stthi+nttwYVMue vlWYttx�eWaMU✓DwizttleaESCe�'
`Sah 'sP� �hM N
' P:T rteipien: �ineb rtea+ei EneeNY � NtfD'iean^u: nnsunu C.�e u mD)a;. a Ne rtGwremeau o(PU par.SNlt mbm�: io eLe Nsuuo:
Scemp erz mw:: rqvn rz wea fmn �AQ witt av .+W: tup �a:wmxe u tl¢ Astuso: 5. � N� m}ucn, fia �hc 9y4'WU af
LnamvinEC\cClm•cncsi o!Swvrn 3
� Su 2a (}R 13:'n;�
'(�tl�: CT.3T%Ym Clv�Hiy c�1 � �=G4y at Snq: Hut 2IXYr wL.'�IC (D Mcn )
Page 21 February 2, 2010
10-134
rnersight wer coYac:ors hire� wi� Set.+nn 3 funds to asswe that ihe :ontractors
provide training, employment, and rnntracOng oppoYainit�� to SeC�on 3 persons and
business concems; (3) failure to meet Sect�on 3's reporting requiremer�ts; (4) failure to
seek aut and identify Sec�on 3 busmess con;xms aho�t contrac5ng opportunities; and,
(S) failure to file torm HUD-600G2. These are essentiaiiy ;�e same allegations corrtained
in Mr. Neweil's HUD complainL The lawsur v.as uftimately dismissed on summary
judgment bea�e the court determined tha: Section 3 does not prowde a right of
prrvrate action.
In iews;
HUD staff condu�ed irrtervieus to tletermine the eX�ent o` knowiedge ary s:aff had of
Section 3. From these interviews it was apparent that the staff had no working
know(etlge nf SeCSOn 3 and was gene2ly unaware of the ci,ry's prog2mmatic
obligations thereto. It appeared that oty ss3fff were confusing Section 3 responsibi)iGes
with Salnt Paul's efforts .o increase partiopa6on by minority and women-owned
bus�nesses In city ccntracts. Projed mana9°rs and g2nts administrators in the aty's
Department o` P(anning and Economit Development (PED) i�tified that poTentiaf
contractors are not noti5ed o` their Section 3 obligations nor tlo bid sotiataGOrs or
contractr reference or incorpo-ate the required "SeRion 3 ctause." Further, they
stated that an e�la�ation of SecGOn 3 requiremenYS is no: intluded in pre-bid or pre-
canstruction wnferences. AI[haugh such conferences are ro:�ne and project managers
review various rnntact compllance issues during the conferences, they acknowiedged
that Section 3 is not one of the mat[ers regularly disa:ssed. Mr. McCall stated that his
office works with PED staff tro dwelop rnntrattti using CDflG and NOME funds bu[ that
he has never advise6 that the Secdon 3 ctause be rncar�2:ed into said corrtraets.
HtSD sequires CDBG eatiUement cammunities ta submiT an annuak repofi ta determine
the effectiveness of Section 3, The annual report is to be electroniqily submiKed on
Fo�n 600�2 with or at �e same Ume the entitfemen: canmunity submi� iis
tonsolidat�ed Annuai Pertormance and Evaivatior Report (CAPEft}. City staff stated that
they were unaware of this requirement and ihat, to their knowle6ge, the 6ty has never
submitted a Section 3 repoK to HUD.
Rona{d Ross, PED Gcants Administrato�, stateG that the aty does submit �e required
Con.ract and Subcontraet Activity Report to HUD annualiy.= This report is submitted
pursuant b fxe�vt�ve Order 2516 which requires that all federal agencies develop
Minority 6usi�ess Development Plans. Fortn 25?6 is designed to provide HUD with
suffiaent Information to evaluate a grarrtee's performance towards meeting its Minority
Business Enterprise {MSE) goals. Whfle Form 2516 does indude a f,eid for reporqng on
Section 3 wntract acbvity, fi6ng r'ottn 2516 dces r.ot o5tiate Lhe redpienYs obligation
'° �CFA 5353: Eu4raipiva Mx Nc rci�tt3iMtuy w eompg amri Smnm 3 �x fet a.a apenuoas. aq qmrc wreptms u peoperadaw oF
�¢ ca+o-anm mG mtrewmvm. iTu >arymrh4ry mGuEes.. eohfpe5 pasnw. caottacm�s fm Smuan 7 mweG DroJaa oC Wc
:cqmmtuabofmitpet,aeE��Da+��BSrSCwn:cuux. ioaueW'sso�avsaLeavun
.' (ii'.p: am t5]d fmma nad $akwesz Acc�ity
Page 22 February 2, 2010
10-134
to file Form 60002.
Form 2516 was no. Cesigne� :o fu;ly capti� a red��enCs Seaior 3 cort2c+3ns
acbvicies. However, even i,' w were, the a.y's m?M�oO of daYa c�ll�t;or w�uid 'nave
renaered is eiforts fn �is regarG as irsu`fidenc This is oemons*.ra*ed by a review o`
the Forms 2516 submMeG by :h° a'y �r 2005, 2006 and 2007. In pro, � rep�rts for
P.zCt; of Lhe three ye3rs, h°re a'e oumerous if�*.arc25 �.vhere a contrd�Or is iden�`ed
zs 5°_�tion 3 business m o�e report bu: na �^ ano�er. When zsiceC about this
dis�epan.ry, Mr. Ross statec tt at wher fifling o�t Form 25? 6 h= relies exciusive�y upon
informatton proviGed to him Sy tn_= a:�s ti2 su�-r°cipiens. He said ;hat upon
recel�[ of said irrtonra;ion ne encers i; or.to a Fo�m 25i6 which he the� tranrris :o
NUD annually. CorsequenNy in those insCances wnere a sub-reapient working on a
projed asserts �at a given con.raROr is a 5°r.ior 3 busin�s antl ano:her sub-recipient
wo*king on a differen: pro}ea does not so ce�ay, the ciy simp+y fon^+arCS .he
con;radictory informaGO� to HUD. Further, as Mr. Ross acknowledged, the ciry does not
hzve a procedure in plarn `or certiyi�g Section 3 businessr+s. Therefore :here is no
mechanism 4y whi� the aty couid have i�dependen'.iy evaiva4.�G a suh-recipienYs
assertion conceming a business's SeCion 3 status.
Fii? review:
Based on inforria�on gzu ered be`ore :he on-s'ste revi<�,��, five camm�n:y developmen;
projeCS were seiec:ed far reviewl`. The projec5 were selected b?tause, per ;he
redpfent, .hey meY the Sedion 3 funding thresholC�'. HUD s*.aff re�ewetl [he contraR
ris mainiairted �y :he P'eD and the H�mnan RigFts an� Equal Economic Oppor:uniiy
Depzr�ment The reviewers were examining'�e fites ;or aocuanentat,on of campGance
w¢h Sec[ion 3. None of the contracts examined co�tained the required "SecGOn 3
da;;se." z4 Furtner, n:itier tne pro;ect bic s01ic at3or,s nor;he offi�idl minutes of �re-bid
and pre-construct?on rnnferences con:aineC am/ reference to Secaon 3
ihe �ME Re�vment ±oar Aa�eemen's `or ;he Winnipeg Apartmen�, Boc*h Srown
Manor and `or the Detancey/Sefby STOne ApaRmens �id rnnta{n a paragraph on
SeRion 3, but i[ incorrec;ly s:ated tha: part�ipaUoa in tne city's Vendor Outreach
Program and Afflrmatlw Action Prog2m are requir?d efemen25 0` SecUOn 3 tompliance.
Nor did these documen� indude or reference �e �equire� Se�on 3 clause but raGher
recommended that sub-grante>s u:itixe businesses Icca:ed m, or awned by peopie living
w'�thin, the seven tounry metropofiYen area.
1'he REOUest 4ar uaf�ficati�ns fo� the Detant>.y;Selay Sto�e Apar.cnenl5 renouation
' i1v p.�wcs xkcva wnt Hxtk Hro.-e Ma2r., tomau.-:� Ap�ttmn:s. Pc'.aetty/SdDy Saoe ;WUC m¢. �tq;i«ue mC Aia-W�nape[
wptzmeL^.
" 2+ CFR US J(aK7H�U(B7 TEt «5u��emce�s N, �h�> Wn app:y w cdivx�us sntl �uttxtYChe yvfarn�ag �al, w Sz.�oe J ecxs
�soi+n(»:-�M'�'� � omounf o; hs ass���t:: sxcxas 52W.00p.>� iM ctmvucor s�o[antncc ezosdf S1dC.�C
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Page 23 February 2, 2010
10-134
project did s�te :ha: Secion 3 requremen� aDpiy. However, :he kcknowledoment of
Recaiat of Co'mliance D�cumen5 for tiis pro7ec: di0 �o: id>�tify any su�sequent
compl:arce wdh SeCSOn 3.
Testimonv or OkheL �dence:
HUD s�ff reviewed materials deveioped Gursuant to Mr. Neweil's fede2l civtl sud
zgainst the city o` Saint Paui. This matenal is cenerally consis:ert with the information
developed during ti�e on-site compliance 2view. Robert Hamm°r, Director of Finance
and AdminiS�raYive Services for ttie city o` Saint ?aul, provided a sworn affidavit filed
wIth the United S�tes Distric[ Cou�` in which he s�.�tMd tha: the ciiy of Saint Paul had
never irtsdtuted, nor nad m p�ace at :he time, a SecGOr. 3 certifiq;ion and tracking
prog2m. Further, Mc Hammer affirmed .na: :he city had never suomiCed a Porm
60002 to HUD nor was he fa^�i0ar wiGh a reouirement to do so.
Find�nns and Conciusions;
The dty of Saint Pzul (induc�ng :he Szin: Pa�l HRA) is not in compliance with the
reqwrements of the Section 3. I t canno; document compliance with the "grea*.est e�er.t
9eas)bie rzquirement of Section 3 by d°mons:ratinq that its co�tracting activities meet
the numericai goals as s°: forth in the reguiation. has it Impiemented any of the
spectflc activi7es defined by the regula5on as recipient re>ponsiailities. There zre na
procedures in place to: 1) notify Sedion 3 res�dents abcut training and employment
opportunities �ener�ted by Seci�n 3 cevered assis,ancx and Section 3 busi�ess
opportunitles;� 2) nocry po:ential mn :raCOrs a�out the Secbon 3 requiremen5 and
ensure their compiCa�ce and their subcontraetors' ro^�pl+ance widt Sectian 3
reqwrements; 3) inmrpora[° 2he Section 3 ctause in a!I solicitaYions and
contracs;' 4) fatilitate the training and empieymen; of Section 3 residenis and th°
award o` contaets ta Section 3 busines con�erns; or 5) document the adlons taken
to compty with tbe Sedion 3 2quiremens, the results of t`�e actions and impediments,
If any.Z Furthermore, the recipien± has not submi;ted the Form 60002 annually as
required by the regulaGons.
�'Sxon: aYEan: ofpnber. Harsrtm: Caet Aybc�?.240G
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° Sa 3<CFA $ 11','_vCl
" Sa 2a CR1 y;35 3:;c)
p $tt id �'�$'. d S!t'�?(C)
Page 24 February 2, 2010
10-134
The ciy ass°rts t`ai r.O:t�^:�^.S,a.^.d:ng i`S inabiiity ;.o cacun=ti Conphance wrth ;ne
. 'g - ea:st ex:en[ fezsi�e" �equ,rer�e�t, :o IT.pi2T:.;1. 2t7)' D` �5 eefined prcogram
res�nsibi;iGe;, or ro fiie Form o00C2 znnuaJy, c adnms;ers i5 communf,y
devefopmea: programs in compiiance wCh Se�h�or 3�ecuireme^�. The ciry offers in
suppoR of this ass�or. the fact ;,hat HUD's Office o` Communi,y Planning ar.d
Develo�me^; (CPD; 2views is ccmmunity developmen: a[:ivi6es znnualty to de:e�mine
compliance with app!icaCle iaws a�� re^ and tnat the ay ro��;nery 2ceives high
ratiny from CPD. However, Sec6on 3 compiia�ce is not ar, e�=m=_nt of a CPD annral
review. NihougF HUD may penodically cond�C SeCion 3 mmpliance reviews o`
select,.°d redpi°n�, i; relies anmadly on a r°cipienYs self-certificaGOn i� th�s �egard.
Absent reason to �lieve to the con:ra.ry, HUD zcceps a redpi>v;`s self-cerd5catio� as
su�tieni evidznw fiat Me r��w�c is qrrying ou, its :or�nunity 0=_v<lop.me�,
activi[ies in co�npGarte �nth Section 3. The SecSor ; self-c�tifi:a:ion o` comphance is
Included In eve•y application for new or continued HUD funding.
Given this indmg oF noncomp!�ance, the Assistant Secre;ary `or Fa�r Housing anG Eaaal
Oppo�turi.y wlll Eake informal st°_os � b^ng this marter to a voluntary and just
resolNJOn in atcotiattce with 24 CF"?i 135J5;f}{2) � Where attemps to informaliy
re5olve th�s +ssue fail, [he Asststant S°cretay wiii impose a 2saJut�on. My resolutlon
imposed by the Assistant Secretary will be ir. accordance with the regulations governl,�g
the pa;ticu4ar HUD prog'am;s) in nues:ton anC t�ray resul¢ in tbe rmposiYion of program
san:vors if appropnate. Pieas� De zdvised tha� you have � e right ro aDp°-�' thts
deas�on w�th fifteen (;5) days of t�e receipt of this nocifrcadon by requesting a
remnsitle2tion of ;his aaion. Any reques: for !econsideration should specify the
reasons why !his Gecision should 5e retonsidered. Your 2quest shoutd be mailed
directly to Vre Assis:�nt Ser:e�y for Fair Housing and "cGuai O�po'tunity a".:
U.S. DeA���nt c` Hovsir,g anC Urban De�lelo�ment
Office o` �air Housing and Equai Opoortuni,y
S51 Seventh Street, SW
Sulte S1��J VJashingtyi, D.C. 20410
If an aapeal is not su6mi;ted tluring the indicated �me above, you will be contactzd 6y
a staff pesson to begin Lhe vciuntary f°�ivaon pro�ess. I� you hzve any questions
" Gawiy GeGe_c Cseamr.p;un e=� `�e �y �ayY a mc,p�m¢m,e. �x-nam;uneu;v-1<L?X 2�� ^c i�; Hn.z�e, smc
v�+ecempua:�:rnnrtsa�s:[rwcaenu+::^u.:irn:.p;vn::n[AUiaW�tSz�uryk L•eum.sctto:�tw�t;�»maartmr�:mmacdr5:tw
abo�t.
Page 25 February 2, 2010
10-134
.. �r =_cc �c_._ ^
regardng arry zspec: of this review, aease con`ad Ms. Jaime P�raza at 612-370-3000
xt 2130. Thank you fnr your cooperation.
Siocereiy,
/���� �
Barbara M. Knox, Dire: or
Office Fair Housi�g & Equal Opportunfty
Region V
�c: CeGie Beda, PED
Robert Hammer, administrative7eam Leader
Fredrick N<_vueli
pex[er Sidney, Fie(C Off+ce Direcbr
Michele Smith, CPD Director
Jaime D. Pedaza, FHEC Direaor
Page 26 February 2, 2010
10-134
Appendix 2
§ 135.38 Section 3 Clause.
All Section 3 covered contracts shall include the following clause (referred to as the
Section 3 clause):
a) The work to be performed under this contract is subject to the requirements of
Section 3 of the Housing and Urban Development Act of 1968, as amended, 12
U.S.C. 1701u (Section 3). The purpose of Section 3 is to ensure that employment
and other economic opportunities generated by HUD assistance or HUD-assisted
projects covered by Section 3, shall, to the greatest extent feasible, be directed to
low- and very low-income persons, particularly persons who are recipients of HUD
assistance for housing.
b) The parties to this contract agree to comply with HUD's regulations in 24 CFR part
135, which implement Section 3. As evidenced by their execution of this contract,
the parties to this contract certify that they are under no contractual or other
impediment that would prevent them from complying with the part 135 regulations.
c) The contractor agrees to send to each labor organization or representative of
workers with which the contractor has a collective bargaining agreement or other
understanding, if any, a notice advising the labor organization or workers'
representative of the contractor's commitments under this Section 3 clause, and will
post copies of the notice in conspicuous places at the work site where both
employees and applicants for training and employment positions can see the notice.
The notice shall describe the Section 3 preference, shall set forth minimum number
and job titles subject to hire, availability of apprenticeship and training positions,
the qualifications for each; and the name and location of the person(s) taking
applications for each of the positions; and the anticipated date the work shall begin.
Page 27 February 2, 2010
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d) The contractor agrees to include this Section 3 clause in every subcontract subject
to compliance with regulations in 24 CFR part 135, and agrees to take appropriate
action, as provided in an applicable provision of the subcontract or in this Section 3
clause, upon a finding that the subcontractor is in violation of the regulations in 24
CFR part 135. The contractor wiil not subcontract with any subcontractor where the
contractor has notice or knowledge that the subcontractor has been found in
violation of the regulations in 24 CFR part 135.
e) The contractor will certify that any vacant employment positions, including training
positions, that are filled (1) after the contractor is selected but before the contract is
executed, and (2) with persons other than those to whom the regulations of Z4 CFR
part 135 require employment opportunities to be directed, were not filled to
circumvent the contractor's obligations under 24 CFR part 135.
� Noncompliance with HUD's regulations in 24 CFR part 135 may result in sanctions,
termination of this contract for default, and debarment or suspension from future
HUD assisted contracts.
g) With respect to work performed in connection with Section 3 covered Indian
housing assistance, section 7(b) of the Indian Self-Determination and Education
Assistance Act (25 U.S.C. 450e) also applies to the work to be performed under this
contract. Section 7(b) requires that to the greatest e�ent feasibfe (i) preference
and opportunities for training and employment shall be given to Indians, and (ii)
preference in the award of contracts and subcontracts shall be given to Indian
organizations and Indian-owned Economic Enterprises. Parties to this contract that
are subject to the provisions of Section 3 and section 7(b) agree to comply with
Section 3 to the maximum extent feasible, but not in derogation of compliance with
section 7(b).
Page 28 February 2, 2010