A resolution to a long-running dispute between the city and federal housing officials over nearly $8 million in questionable grants the city gave to the Wahiawa nonprofit ORI Anue nue Hale could be on the horizon.

City officials have told local representatives with the U.S. Department of Housing and Urban Development that they are working with ORI on accepting the agency’s latest proposal, which calls for repaying HUD $2.88 million and agreeing to other, nonmonetary conditions related to compliance with strict Community Development Block Grant requirements.

The city’s latest position is contained in an Oct. 18 letter from city Managing Director Ember Shinn to Mark Chandler, HUD’s Hawaii director of community planning and development, which the city released to the Hono lulu Star-Advertiser late Friday.

After discussions with ORI attorneys, Shinn said in her letter, "We believe this consideration significantly enhances the prospects for a resolution."

HUD had initially sought a full reimbursement of the $7.9 million, first issued to ORI in 2003, citing violations based on how the money was used. Last summer the city countered by offering to pay back $1.88 million.

Chandler, in a Sept. 27 letter to the city, said his agency is now willing to accept $2.88 million "to bring the financial issues related to this monitoring to a close."

At the core of HUD’s concerns is that the money was used to develop the Aloha Gardens Wellness Center and Camp Pineapple 808, which Chandler believes were both operated improperly and failed to comply with eligibility requirements of the grants. Chandler has also been critical of the city’s failure to correct the improprieties despite HUD’s warnings.

The two properties are located next to each other near the Hele mano Plantation, a for-profit enterprise that ORI operates.

Chandler’s letter said HUD is "willing to consider" the city’s plan to separate out and purchase the Camp Pineapple 808 site, thus allowing ORI to continue to operate it without being bound by CDBG restrictions — such as the number of seniors and disabled who use the camp’s cabins on a monthly basis — that the nonprofit’s officials say are impossible to comply with.

Such a deal, however, would be contingent on assurances that the wellness center would comply with CDBG restrictions, Chandler said.

Shinn’s Oct. 18 letter said while HUD’s latest proposal is "reasonable," the city is still in negotiations with ORI and therefore not able to say definitively whether an agreement with the nonprofit can be reached or when payment can be made.

Jesse Broder Van Dyke, a city spokesman, said in a written response to questions from the Star-Advertiser that "the roadblock to resolving this matter with HUD has been (ORI’s) unwillingness to agree to a repayment plan for the funds which the city may repay to HUD."

HUD spokeswoman Gene Gibson said the housing agency "is willing to allow ORI to continue participation under the CDBG program for the wellness center subject to CDBG compliance requirements."

A separate issue raised by HUD involved the city’s decision in 2010 to forgive a separate $1.2 million in CDBG loans granted to ORI, decisions that involved city employees running for office who received campaign contributions from ORI.

City officials acknowledged that its policy prior to 2010 was not to forgive such loans but disagreed with HUD’s conclusion that a conflict of interest resulted from the decisions made by those running for elected office and receiving ORI campaign contributions.

Those receiving contributions were Mayor Kirk Caldwell, former Mayor Mufi Hannemann and City Council Chairman Ernie Martin, who at the time was an appointed official with the city’s Department of Community Services, which deals with CDBG funds. All city officials involved who have spoken to the media, including those who did not receive ORI contributions, said the decisions were made in the best interest of the city and taxpayers, not for ORI’s benefit.

Chandler, in his Sept. 27 letter, said "the city’s failure to comply with HUD’s conflict of interest requirements is an ongoing problem" and that "the city needs to implement policies that will ensure compliance."

The city Ethics Commission is investigating the forgiveness of the loans at the request of the administration and others, commission Executive Director Chuck Totto said Friday.