which said that "* * * improving the quality of life of the residents of a model neighborhood can be accomplished only by affirmative action of the people themselves. This requires a means of building self-esteem, competence and a desire to participate effectively in solving the social and physical problems of their community." City Demonstration Agency Letter No. 3 (Oct. 30, 1967) (Plaintiffs' Exhibit 5).
Under the terms of the Model Cities Act, the Secretary is authorized to make grants and provide technical assistance to enable city demonstration agencies
to plan, develop and carry out comprehensive city demonstration programs. 42 U.S.C.A. § 3302. One of the criteria for funding under the Model Cities Act is "widespread citizen participation in the program." 42 U.S.C.A. § 3303(a)(2). The Secretary must review each city demonstration program and he must find that each program meets the criteria of 42 U.S.C.A. § 3303 before funds will be allocated. 42 U.S.C.A. § 3305(a).
On March 3, 1967, the City of Philadelphia applied for a grant to plan and develop a Model Cities Program for Philadelphia. Shortly thereafter AWC was organized from a number of existing organizations and entered into a contract with the City to act as the local citizen participation unit for the Philadelphia Program.
After several re-executions and extensions of the contract, it terminated on June 30, 1969, when negotiations for a new contract reached an impasse. AWC ceased to function as the citizen participation unit and a new organization was established to take its place.
After negotiations on the new contract failed, AWC brought suit to compel its reinstatement, alleging that certain provisions in the proposed new contract were illegal. The Court of Appeals found that the provisions which the AWC found objectionable contained major policy changes in the Model Cities Program in that they contemplated a reduced involvement in the Program by the citizen participation unit, AWC. North City Area Wide Council v. Romney, supra, at 758. The Court of Appeals also found that the policy changes were made without the required citizen participation. North City Area Wide Council v. Romney, supra, at 758. The Court of Appeals found that the Secretary had violated the Model Cities Act by accepting the new policies without citizen consultation. The Court of Appeals, however, declined to consider whether or not all actions taken by the HUD and the City since the institution of the "new" policy have been illegal.
The decision of this Court rests upon the complex set of facts which were elicited at the trial, many of which were not before the Court of Appeals when it ruled on the issues. Those facts must be set forth here in order that the position of this Court and each party may be fully understood.
The initial contract between the City and AWC was signed August 21, 1967. Under the contract, the AWC was to be an organization which consisted of 16 "Hubs." Each Hub covered a geographic unit in the Model Cities target area. AWC was to have a board consisting of 92 members, and an executive committee. In the contract, the AWC agreed to conduct planning under the Model Cities Program and provide general administrative and operational supervision. AWC was to maintain proper fiscal records and report to the Model Cities Administrator on its work. The contract was also made subject to the terms of the Philadelphia Home Rule Charter.
In 1967 and 1968, the Model Cities Program was in the planning stage, and HUD, under its statutory mandate, issued a number of policy statements dealing with various aspects of the program. These are known as CDA Letters (City Demonstration Agency). The CDA letters indicate that the citizen participation units are to be used to plan, monitor and evaluate programs.
They are not to be program operators. (Healy, NT 634-635). Citizen participation as defined by HUD means that the citizen component of the Model Cities Program must have access to and an opportunity to influence the decision-making process ultimately entrusted to the local government.
"The City Demonstration Agency is not meant to be a multi-functional operating agency."
On February 5, 1969, a Regional Inter-Agency Coordinating Committee meeting was held in Philadelphia to review with the City and AWC Philadelphia's 1968 submission for Model Cities funds. The meeting was attended by representatives of HUD and the Philadelphia CDA (the City and AWC). At that meeting, the conflict of interest issue was raised. By conflict of interest, HUD meant the problems which might arise if the same citizen participation unit which was planning and evaluating the Model Cities Program, namely AWC, was also to operate the program. Mr. William Meek, Executive Director of the AWC, attended the February 5th meeting and was aware of the HUD policy. (Meek NT 145-147; Healy NT 633).
On March 19, 1969, Mayor James H.J. Tate received a letter from Floyd H. Hyde, Assistant Secretary, Department of HUD. The letter was similar to those sent to mayors of all other Model Cities and was the clearest expression of HUD citizen participation policy to date. That letter stated:
"* * * HUD's policy is that local City Demonstration Agencies (and their Model Cities staff and citizen participation arms) are not intended to serve as program operators. CDA Letter Number 6 specifically states that 'The CDA is not meant to be a multi-functional operating agency.' CDA's are expected to coordinate the activities of the various existing agencies whose new or existing functions impact on the model neighborhood. CDA's are expected to use their supplemental funds to influence and persuade these existing agencies to modify present practices, priorities and programs identified and goals established as a result of Model Cities planning.