City of Newburgh v. Richardson

• Decision Date: 20 June 1977
• Docket Number: No. 77 Civ. 127.,77 Civ. 127.
• Citation: 435 F. Supp. 1049
• Parties: The CITY OF NEWBURGH and James R. Taylor, City Manager, Plaintiffs, v. Secretary of Commerce, Elliott J. RICHARDSON and Assistant Secretary of Commerce, John W. Eden, Defendants.
• Court: U.S. District Court — Southern District of New York

435 F. Supp. 1049

The CITY OF NEWBURGH and James R. Taylor, City Manager, Plaintiffs, v. Secretary of Commerce, Elliott J. RICHARDSON and Assistant Secretary of Commerce, John W. Eden, Defendants.

No. 77 Civ. 127.

United States District Court, S. D. New York.

June 20, 1977.

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Charles D. Conway, Newburgh, N. Y., for plaintiffs.

Robert B. Fiske, Jr., U.S. Atty., for the Southern District of New York, New York City, for defendants, of counsel, Eileen M. Fitzgerald, Asst. U.S. Atty., New York City, Robert S. Fastov, Asst. Chief Counsel, John E. Kennahan, Attorney Advisor, Office of Chief Counsel, Economic Development Administration, Washington, D.C.

LASKER, District Judge.

The City of Newburgh and various of its officials (hereinafter collectively referred to as "the plaintiff") sue the Secretary of Commerce and subordinate federal officials for declaratory and injunctive relief under 28 U.S.C. § 1331. Newburgh claims that its application for assistance under the Local Public Works Capital Development and Investment Act of 1976 ("LPWA" or "the Act"), 42 U.S.C. § 6701 et seq. was improperly denied. Specifically, it asserts that regulations adopted by the Secretary are not in compliance with the statute and moreover that the agency's action is not in compliance with its own regulations. 13 C.F.R. Part 316 (1976). Originally, plaintiff moved for a temporary restraining order and preliminary injunction restraining the Secretary from awarding and disbursing any grant funds under the Act and from enforcing rules and regulations promulgated by the Secretary pursuant to his authority under the Act. On the government's agreement to withhold $3,500,000. of the $2 billion available for grants under the Act until disposition of the motion for a preliminary injunction, the motion for a temporary restraining order was denied. (Endorsement of Jan. 14, 1977). Plaintiff has since informally modified and restricted its request for preliminary injunctive relief and now seeks only to enjoin expenditure of the funds which would be required to grant its application.¹

The purposes of LPWA were to provide employment opportunities in areas of high unemployment through the expeditious construction or renovation of useful public works, and to afford a countercyclical stimulus to the national economy. House Rep. No. 94-1077, 1976 U.S. Code Cong. & Admin. News 1746, 1747; 13 C.F.R. Part 316, Statement of Objectives.

It was of particular importance to Congress in enacting this legislation "to avoid the long lag time sometimes associated with public works programs." U.S. Code Cong. & Admin. News, supra, at 1748. Its intent in this regard is evidenced in three provisions of the Act. Section 107 requires the Secretary to promulgate regulations governing distribution of funds available under the Act within thirty days of its passage. It also provides that any application for assistance which is not rejected within sixty days of its receipt is deemed to have been accepted. Finally, Section 106(d) provides that grants may be made "only for projects for which the applicant gives satisfactory assurances . . . that if funds are available, on-site labor can begin within ninety days of project approval."

The sixty day approval provision of § 107 placed special pressure on the Secretary to act quickly, particularly in light of the number of applications and the limited funds available. October 26, 1976 was designated as the first day on which applications for assistance would be accepted. Within days "it became apparent from the flood of applications then flowing into EDA's Economic Development Administration six Regional Offices that more than enough project applications would be received during the first sixty days to . . . exhaust the two billion dollars appropriated by Congress." Affidavit of George T. Karras, Director of Office of Public Works of EDA, U.S. Department of Commerce, ¶ 12. Thus, the potential beneficiaries were advised that applications would have to be received by early December in order to receive consideration. Nationwide, the agency received over 25,000 applications requesting approximately 23.9 billion dollars in financial assistance. Karras Affidavit, supra, ¶ 13. From this group, within a period of two months, the agency was required to apply statutory selection criteria and designate those projects which would receive the two billion dollars appropriated by Congress.

The Secretary was directed to consider the following factors in promulgating rules and regulations to carry out the Act: "(1) the severity and duration of unemployment in proposed project areas, (2) the income levels and extent of underemployment in proposed project areas, and (3) the extent to which proposed projects will contribute to the reduction of unemployment." LPWA, § 107. Section 107 also directs that the Secretary's rules "shall assure that adequate consideration is given to the relative needs of various sections of the country," and that in considering the extent of unemployment or underemployment, "the Secretary shall consider the amount of unemployment or underemployment in the construction and construction-related industries."

Section 108 establishes additional constraints and priorities on grant allocation. Section 108(a) requires that no more than 12 ½% and no less than ½% of the total funds appropriated by Congress be spent in each state of the union. Subsection (b) gives priority to public works projects submitted by general local government units.

Subsection (e) permits localities to submit unemployment figures for a proposed project area consisting of a neighborhood within a governmental unit, if the proposed project would reduce unemployment in that neighborhood; subsection (f) permits applicants to designate their project area to include adjoining localities and to use unemployment figures for such areas under some circumstances.

Of particular importance are subsections (c) and (d), which require the Secretary to allocate 70% of the available funds to public works projects submitted by States or local governments "having unemployment rates for the three most recent consecutive months in excess of the national unemployment rate," but also require that the remaining 30% be made available for applicants with unemployment rates below the national average.² In other words, the Act establishes a "70% pot" and a "30% pot" for applicants respectively above or below the national unemployment rate.

To implement these statutory criteria, the Secretary provided by regulation that projects for which funding was requested would be given a "basic rank" as follows: (1) number of unemployed workers in the project area over the most recent three months—30% of the basic rank; (2) the unemployment rate in the project area over the last three months—25% of the basic rank; (3) the labor-intensity of the project, that is, the percentage of labor costs to total costs—30% of the basic rank; and (4) per capita income in the applicant's jurisdiction— 15% of the basic rank. 13 C.F.R. § 316.10(a)(2)(i). After the basic rank was thus obtained, additional or bonus points were awarded to projects which (a) exhibited potential for long-range benefit; (b) were sponsored by a general purpose unit of government; or (c) related to existing approved community development plans. 13 C.F.R. § 316.

All project applications within each state and within the relevant "pot" (i. e. 70% or 30%) were then ranked in order of their scoring.³ The unemployment figures and rates were adjusted by a logarithmic formula designed to equalize the positions of large and small communities, so as to enhance the prospects of smaller communities (with fewer absolute numbers of persons unemployed) receiving grants. When all the projects were ranked in final order, the Secretary made the final selection of programs to be funded in order of ranking. Certain projects in counties which had already received what was determined to be their fair share of the funds available for the state were "skipped" over and awards made to the next highest ranking project.

Applicants in New York were required to submit their applications to the Atlantic Regional Office of the Economic Development Administration (EDA) of the Department of Commerce. The regional EDA office received more than 1,654 applications for financial assistance from the state or local governments in New York State; these applications were for the aggregate sum of $1,712,077,142. The New York State allocation of funds, the maximum permitted by law, was only $231,000,000. Affidavit of George T. Karras, supra, ¶ 13. Among the applications for assistance under the Act received by the EDA was the City of Newburgh's application for a grant of $3,516,478. for the "Renovation and Enlargement of the Washington Lake Filter Filtration Plant." Newburgh identified its "project area" as being that of "Orange and Ulster" counties. That designation was accepted by EDA and Newburgh's application evaluated on the basis of the 9.25% average unemployment rate for the two counties certified by New York State. Newburgh also received the maximum number of bonus points.

Newburgh's application was received by EDA on November 10, 1976. On January 6, 1977, Newburgh was advised in writing that its project would not be funded. Out of the 1,379 New York applications for grants which were accepted by EDA, Newburgh's application ranked 1,169. The lowest ranking project in the 70% pot to be selected for funding in New York State ranked 261; only 106 applications in the 70% category from New York State received grants.

II.

The government argues that since "plaintiffs are at the bottom of the list of projects in New York State, the possibility that the Court will order sufficient amendments to the administration of the Act to move plaintiffs' application into the realm of possible funding is `so tenuous as to approach...