Time and again, this program escapes ax

Boston, New York, Baltimore. Mayors and chambers of commerce in these cities will be among the first to tout their upbeat economies. They are also at the head of the line to ask for Urban Development Action Grants (UDAGs), which are given to stimulate economies of depressed cities.

Baltimore has used UDAGs for its inner harbor restoration; New York City for its vibrant South Street Seaport project. Mazda and General Motors have built automobile plants with UDAG support. Hyatts, Hiltons, and Marriotts all have foundations built with UDAG money.

Only 18 percent of UDAG projects are employing the number of people they were designed to employ, according to a study this year by researchers at the University of Illinois at Chicago. Instead, the report concluded, developers were the clearest beneficiaries. Many projects were not even in distressed areas.

To receive UDAG funds, developers have to promise the project could not be built without government funds. This is not always the case. Recently, developers in Birmingham, Ala., went ahead with construction of the South Trust Tower and renovating the Steiner Bank building after being turned down for UDAG funds.

UDAG has survived despite White House opposition. Even in Congress there are opponents. This year Sen. William Proxmire (D) of Wisconsin yanked UDAG funding out of the fiscal year 1988 budget. However, the Appropriations Committee restored $225 million anyway. UDAG funding peaked in the Carter administration, when Congress proposed spending $625 million. Since then funding has averaged about $400 million a year.

The reason UDAG has survived, one former HUD official says, is because of support by elected officials from the Northeast and Midwest.

Staffing at UDAG remains about the same. In 1983, when it was sponsoring 455 projects, UDAG had 57 permanent employees and 12 lawyers. Today, 50 permanent employees and 10 lawyers administer 187 projects.