Consultants who helped former New Orleans Mayor Ray Nagin secure $75 million in federal Katrina recovery grants for the construction of a new Veterans Affairs Medical Center in Lower Mid-City initially questioned the legality of using federal disaster recovery grants for a project that would not be complete until seven to 10 years after the storm, newly obtained e-mails between project planners show.

The e-mail dialogue (pdf) spans the month leading up to the March 2009 approval of the largest single-project appropriation of Katrina recovery dollars to date. Consultants hired by the city and state to shepherd recovery projects raised doubts about whether the new VA Hospital could be legitimately classified as an “urgent need” eligible for funding from the city’s $411 million pot of Disaster Community Development Block Grants.

“Are there other cases where the ‘urgent need’ national objective has been successfully used for projects that were not brought on-line for up to a decade after the disaster?” Frederick J. Marc-Aurele Jr., a manager for Louisiana Solutions LLC, asked in an e-mail to colleagues sent a few weeks before the application went to HUD.

Marc-Aurele’s concerns were eventually overridden, with consultants concluding that the new VA met the criteria laid out by the U.S. Department of Housing and Urban Development and successfully submitting the application for approval in Washington. Still, the e-mail dialogue raises questions Gov. Bobby Jindal’s administration will soon be reconsidering in light of an administrative complaint submitted to HUD on behalf of residents whose homes will be torn down to make way for it.

The complaint (pdf) filed by civil-rights attorney Mary Howell says that state offices and HUD improperly approved a “deeply flawed application.”

“The City’s application and documents submitted in support of its application contained material misrepresentations and omissions and were significantly and materially altered with no apparent authorization. It is submitted that this project fails to meet the criteria of “urgent need” yet it was nevertheless approved,” wrote Howell, whose office sits just outside the footprint of the new medical center.

HUD rules require all CDBG-funded projects to fulfill one of the three following national objectives: providing benefit to “low- and moderate-income persons;” preventing or eliminating slums or blight; or meeting an “urgent need.” A first application (pdf), signed by Nagin and recovery chief Ed Blakely, classified the hospital project as meeting the agency’s national objective of blight elimination or prevention.  By the time the second application (pdf) that would ultimately be approved by HUD was written, the objective had changed to “urgent need,” defined as an action “designed to alleviate existing conditions which pose a serious and immediate threat to the health and welfare of the community, which are of recent origin or which recently became urgent.”

The records do not explain why the change was made. It could be that city officials realized it would have to make the case for blight when the city itself could have been seen as contributing to that condition: The city had imposed a building moratorium within the boundaries of the proposed project, so residents couldn’t improve their properties.

The complaint argues that the city and state made a case that the need for the new hospital fit the criteria for the “urgent need” classification by providing federal authorities with “misleading, false and out-dated information,” such as a two-year-old news clipping describing a skeletal health care infrastructure that had since developed.

“There is no information provided about the state of the recovery as of the date of the application, although dramatic changes had taken place during that time period, a fact that was well known or should have been well-known to those involved in this application,” the complaint states.

HUD spokesman Brian Sullivan said Monday the federal housing agency was passing the administrative complaint to the state Office of Community Development that oversees all CDBG disbursements.

Sullivan deferred all complaint-related questions to the state. He said that while HUD “looks into all citizen complaints,” the agency determined that in this case the state should respond.

Reached by telephone this week, Howell said that news that HUD planned to transfer the complaint to the Office of Community Development presented a failure on the part of the federal agency to properly monitor the recipients of its grants.

“To send a complaint about this application back to the same agency that had earlier approved it seems completely inappropriate,” she said.

In the five years since Katrina, neither the state nor the federal agency have forced New Orleans to return  any of its project grants.  This complaint is not likely to change that pattern.

“The state stands behind the actions and decisions of the City, the Office of Community Development and the LRA and maintains that all the necessary processes of review and approval were satisfied, including an environmental review that satisfied HUD requirements,” state spokeswoman Christina Stephens said in an e-mail, adding that the city participated in the environmental and historic processes required under federal law for the VA project.

“The public was invited to participate in the environmental and historic review processes, and well over a dozen community meetings and consultation forums were held over a three-year period,” Stephens said.

Mayor Mitch Landrieu’s spokesman declined to comment on the complaint. Ryan Berni said that the $75 million grant will be used to move historic homes from the VA footprint, in addition to other uses.

“Mayor Landrieu is committed to moving forward on the proposed VA Hospital in Mid City,” he said.