City officials are asking the federal housing agency to back off its demand that the city return an $8 million grant given to controversial Wahiawa nonprofit ORI Anuenue Hale and instead accept a $1.88 million “reimbursement” for land the city intends to take over.

The request is detailed in a letter that city Managing Director Ember Shinn had hand-delivered late Thursday to Mark Chandler, Honolulu field office director for the U.S. Department of Housing and Urban Development.

Thursday was the deadline for the city to respond to Chandler’s June 3 demand that $8 million in Community Development Block Grant funds be returned to HUD because of a series of improprieties.

A HUD spokeswoman confirmed receipt of the city’s response and said the agency would not comment until it had a chance to review it.

"At this point, HUD has made no decisions regarding the document," said Gene Gibson, HUD regional public affairs officer.

At the center of HUD’s concerns is the $7.9 million grant issued by the city to ORI in 2003 to develop the Aloha Gardens Wellness Center and Camp Pineapple 808 ostensibly to serve elderly and disabled persons on acreage next to Dole Plantation and ORI’s own Helemano Plantation.

Chandler said both the wellness center and camp have been used improperly and failed to comply with eligibility requirements tied to accepting the grant. He was also highly critical of the city’s failure to correct the improprieties despite HUD warnings.

Honolulu Mayor Kirk Caldwell’s administration is proposing that the city be allowed to take over Camp Pineapple 808 and reimburse HUD $1.88 million for that facility while it works with ORI Anuenue Hale to get the wellness center into compliance.

Another concern raised by Chandler’s letter was the city’s decision, separately, to forgive nearly $1.2 million in CDBG loans in 2010. HUD said the decision to forgive the loans was made primarily by city employees running for office and suggested that the move may have been made in exchange for political contributions.

Shinn, in her letter Thursday to Chandler, acknowledged that city officials have received political contributions from ORI Anuenue Hale and its officers and that, while an internal investigation found no evidence of quid pro quo, the matter was referred to the city Ethics Commission.

Shinn also said that since HUD first raised questions about the loan being forgiven, the city has instituted policies to safeguard against political influence in such decisions.

Caldwell last month removed himself from the city’s internal investigation on the ORI Anuenue Hale issue, noting he himself received a $500 contribution for his unsuccessful 2010 mayoral campaign from ORI Anuenue Hale president Susanna Cheung. Other key city politicos receiving contributions were former Mayor Mufi Hannemann and now-City Council Chairman Ernie Martin, who headed special projects for the city’s Department of Community Services and was running for Council as the loan was being forgiven.

Chandler had also raised questions about a possible kickback that Cheung asked of a Pearl City contractor on the project. The contractor last month told the Star-Advertiser that while she never made such a payment, she did forgive the remaining $20,000 due to her company by ORI at the nonprofit’s request.

Shinn said that matter was referred by former Mayor Peter Carlisle to the U.S. Attorney’s Office in 2012.

Cheung and ORI Anuenue Hale officials have insisted that they have done what they can to abide by a gray set of rules.