HUD announced a Voluntary Compliance Agreement (VCA) with the City of Long Beach, CA after a 2010 HUD monitoring and compliance review raised shortcomings in the City’s Section 3 Queensway Bay Restitution Plan.
The purpose of Section 3 of the Housing and Urban Development Act of 1968 is to ensure that when HUD assists housing and community development projects, some of the new jobs, training and contracting opportunities created go to low income people and to the businesses that hire them, “to the greatest extent feasible.” For non-housing construction activities the hiring and training goal is 30% of new construction hires, and the contracting goal is 10% of the dollar amount of all construction contracts and 3% of all other contracts.
The VCA calls for Long Beach to provide $3.7 million within the next three years for an incentive program to encourage construction contractors to use Section 3 businesses in future construction projects. The Section 3 Business Incentive Program agreed to in the VCA will reimburse contractors for 10% of the total contract amount subcontracted to Section 3 businesses. For example if a non-Section 3 general contractor with a $1 million Long Beach contract enters into a $100,000 subcontract with a Section 3 business, the city will reimburse the general contractor $10,000 once the subcontract is completed.
A Section 3 business is one which meets one of three tests:
a. At least 51% of the business is owned by Section 3 residents (public housing residents or low income residents of the metropolitan area); or
b. At least 30% of its permanent, full-time employees are Section 3 residents; or
c. Commits to subcontract more than 25% of the dollar amount of all subcontracts to businesses that meet (a) or (b).
Long Beach also agrees to use Section 3 businesses at projects not receiving HUD assistance, such as the $29 million Airport Terminal Project. In addition, the city will apply Section 3 contracting opportunities at projects smaller than those exempted by the regulations: projects that have less than $200,000 in HUD funds and contracts involving less than $100,000 in HUD funds.
The 1995 Queensway Bay Project, previously known as the Rainbow Harbor project, was funded in part through a $40 million Community Development Block Grant (CDBG) Section 108 loan guarantee, which triggered Section 3 obligations. The Queensway Bay Project is a downtown harbor improvement project that includes retail, restaurant, and entertainment facilities, commercial boat tours and an aquarium. The federal loan guarantee was used to construct public infrastructure such as piers, docks fountains, an esplanade and boardwalk, a building for anglers and a lighthouse.
In June 1998, the Legal Aid Foundation of Los Angeles (LAFLA) filed an administrative complaint on behalf of public housing residents. This initiated an investigation by HUD’s Office of Fair Housing and Equal Opportunity (FHEO) which oversees Section 3. FHEO finally concluded in April of 2004 that the city had not fulfilled its Section 3 hiring and contracting obligations, ordering Long Beach to submit a Restitution Plan.
The December 2005 Restitution Plan required Beach to achieve four outcomes within three years
- Provide at least 3,000 hours of work to low income Long Beach residents on city-funded construction projects;
- Train and educate at least 50 local low income participants from a pre-apprenticeship program, with half of the slots for residents of HUD-assisted housing and half from at-risk youth;
- Provide placement assistance for graduates of a construction training program into the Union Building Trade apprenticeship program, and provide each with up to $1,500 to purchase tools and uniforms.
- Implement a $3.2 million Section 3 business incentive program.
According to the VCA, the first three employment outcomes were fulfilled, but the business incentive program was not, resulting in the current VCA
Click here for HUD’s media release.