The U.S. Department of Housing and Urban Development has denied a request by Roanoke to grant city Councilman Alvin Nash an exemption from the federal conflict of interest law.

Nash is the president and chief executive officer of Blue Ridge Housing Development Corp., which receives federal grants administered by the city. But HUD prohibits members of elected boards that administer the grants from receiving the federal funding.

Nash said he will announce this morning whether he'll resign from the city council, resign from Blue Ridge or not receive those funds while he's on the council.

"First thing in the morning I think I'll inform council, and I guess everybody else will know," Nash said.

As head of Blue Ridge Housing Development, Nash currently receives both Community Development Block Grants or HOME Investment Partnerships Program subgrants. He said the nonprofit corporation has received an average of about $500,000 a year for the past 12 years.

HUD has a procedure for allowing exemptions to its conflict rules, and the city filed an application for it. Sometime last week, however, HUD sent a letter denying the city's request.

According to the letter, HUD considered half a dozen factors, but "[a]fter careful review, the department has determined it cannot grant an exception in this instance because it is not justified under the conflict of interest provisions referenced above."

The letter continues to state that there's no evidence an exception would not provide "an essential degree of expertise that would not be available otherwise;" that the council ultimately makes the decision to allocate CDBG and HOME grants; that the state conflict of interest law doesn't prohibit a person from informally participating in or influencing matters in which he has a personal interest; that any potential hardship suffered by Nash would be outweighed by the "compromised integrity" of the grant programs; and "the exception does not remove the potential for program abuse."

Now that HUD has made its decision, Nash said, "it comes down to my decision."

If Nash remains on the council, he must not only give up his ability to receive the grants on behalf of his agency, but he'd also be prohibited from receiving them for one year after his tenure, according to the HUD letter.

"The ball's kind of in his court," Roanoke City Attorney Bill Hackworth said. "I know it won't be an easy decision for him, no matter what."

Nash has already removed himself once from consideration of a matter involving HUD funds. On Thursday, when the council held its public hearing on the HUD budget, Nash cited his conflict and stepped down from the dais.

The HUD letter, which bears no date, apparently arrived on either Thursday or Friday, Nash said.

"I asked the city attorney to give me some time to figure out what I was going to do," he said.

Hackworth said he had done that. "I think we owe him that," he said.

The council appointed Nash 6-0 on March 30 to fill the remainder of former Councilman Alfred Dowe's term, which ends in June 2010. Dowe resigned in February amid allegations he double-billed state and city taxpayers for travel costs.

The other three finalists to replace Dowe were Rupert Cutler, who served on the city council from 2002 to 2006; Earl Reynolds, the director of housing and community development for Total Action Against Poverty; and Vivian Sanchez-Jones, school liaison for Refugee and Immigration Services.

In December 2006, Councilman Bev Fitzpatrick said he would abstain from discussion in matters pertaining to the Roanoke Redevelopment and Housing Authority. His decision came after a federal audit of the authority that cited conflict-of-interest issues involving Fitzpatrick's dual roles in the past as a housing authority board member and later as a councilman, while he was also working for a Roanoke consulting firm that had $1 million in contracts with the authority.