The opinion of the court was delivered by: DAVIS
JOHN MORGAN DAVIS, District Judge.
Plaintiff, North City Area Wide Council, Inc. (AWC), is a non-profit corporation with its principal place of business in Philadelphia, Pennsylvania. AWC's principal function was to represent the residents of the Model Cities target area during the planning of the Philadelphia Model Cities Program, and to provide citizen participation in the Program. The individual plaintiffs are residents of the target area
of the Philadelphia Model Cities Program. Plaintiffs bring this action on their own behalf and on behalf of all those similarly situated pursuant to Rule 23(b)(2) of the Federal Rules of Civil Procedure.
Defendants are George W. Romney, Secretary of Housing and Urban Development; the Department of Housing and Urban Development (HUD); James H. J. Tate, Mayor of the City of Philadelphia; the City of Philadelphia (the City); and Goldie E. Watson, Model Cities Administrator of the City of Philadelphia.
Plaintiffs have brought this action for mandatory and injunctive relief pursuant to 28 U.S.C.A. §§ 1331, 1361, and the Administrative Procedure Act which provides that "Agency action made reviewable by statute and final agency action for which there is no other adequate remedy in a court are subject to judicial review." 5 U.S.C.A. § 704. The parties have agreed that this hearing shall be considered as a final hearing on the merits as well as hearing on the Preliminary Injunction.
Plaintiffs have presented this Court with issues pertaining to (1) the application of that section of the Demonstration Cities and Metropolitan Development Act of 1966, 42 U.S.C.A. § 3301 et seq. (Model Cities Act), which provides that to be eligible for Federal aid, a "comprehensive city demonstration program," must "provide * * * widespread citizen participation in the program" and the Secretary of Housing and Urban Development must "emphasize local initiative in the planning * * * [of it]." 42 U.S.C.A. §§ 3303(a)(2), 3303(b)(1); and (2) whether the AWC should be reinstated as the citizen participation unit of Philadelphia's Model Cities Program.
In accordance with the direction of the Third Circuit Court of Appeals, which remanded this case to us, North City Area Wide Council, Inc., et al. v. Romney, et al., 428 F.2d 754 (C.A. 3rd, 1970), a trial was held on the merits of plaintiffs' claim that the AWC should be reinstated and that certain actions taken by HUD, the City, and the Model Cities Administrator were illegal. For the reasons stated below, this Court finds that Philadelphia's Model Cities Program is being operated in accordance with the Model Cities Act, and this Court should not compel AWC's reinstatement as Philadelphia's citizen participation unit.
In 1966, Congress recognized the need for an extensive effort to aid urban residents in coping with the massive problems in America's cities and in improving the quality of urban life. In an attempt to meet this need, Congress passed the Model Cities Act. The purposes of the Model Cities program are "to provide additional financial and technical assistance to enable cities of all sizes * * * to plan, develop, and carry out locally prepared and scheduled comprehensive city demonstration programs containing new and imaginative proposals * * * to improve living conditions for the people who live in such areas * * *" 42 U.S.C.A. § 3301.
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.
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. ...