HUD's Review of an Urban Development Action Grant to Wilmington, North Carolina

GAO testified on the findings of its review of the Department of Housing and Urban Development's (HUD) Urban Development Action Grant (UDAG) award to Wilmington, North Carolina to purchase and renovate a crane manufacturing plant located in St. Paul, Minnesota. GAO reviewed HUD procedures in approving the grant to determine if the relocation had a significant adverse economic affect on the St. Paul area and found that HUD: (1) did not adequately identify the inherent relocation possibilities; (2) based its conclusions on information provided by the firm that was planning to manufacture a new product which could not be produced at the old facility; (3) reexamined its original decision that the project was not a relocation under the Housing and Community Development Act's antipirating provisions in response to congressional inquiries; (4) concluded that, to the extent that cranes traditionally produced in St. Paul would now be produced in Wilmington, the project would amount to a relocation; and (5) amended the grant agreement preventing the firm from conducting the same operation at Wilmington that it had conducted in St. Paul. GAO found that the firm was manufacturing the same cranes at both plants. HUD then stopped any further drawdowns against the remaining UDAG funds and referred the matter to the Department of Justice for appropriate action.