The legal dispute between HUD and the Philadelphia Housing Authority - putting at stake more than $40 million in federal funding - took another turn last week when HUD Secretary Alphonso Jackson provided a written reply to questions he had declined to answer at Senate hearings.

Those questions were posed earlier this month by Sens. Bob Casey and Arlen Specter.

PHA and the Department of Housing and Urban Development have been at war since January 2007, when the federal agency determined that Philadelphia was not in compliance with rules regulating handicapped access in public housing and threatened its funding.

Casey (D., Pa.) and Specter (R., Pa.) have tried to mediate, but when they asked Jackson about the details of the dispute - including an e-mail exchange between HUD assistant secretaries that seemed to suggest they took some glee in punishing Philadelphia's housing director - Jackson demurred, saying that the matter was in litigation and that the judge had requested that it "not be tried in the press."

His written response, sent last week, reversed that course.

"I have now been advised that it would be permissible to provide responses to Congress on the matter," Jackson wrote, providing some details, but nothing substantive, about the e-mails.

"I do not know that any action needs to be taken about the e-mails," he wrote, saying he learned about them only two weeks ago.

In his statement, sent to Casey and Specter last Wednesday and made public by Casey's office on Monday, the housing secretary said HUD wanted to bring Philadelphia into compliance but decided - due to lack of cooperation - to terminate PHA's participation in the flexible spending program called Moving to Work (MTW).

Unless something happens to intervene, that termination will take effect Monday.

PHA, which provides public housing for 84,000 tenants, estimates that the termination amounts to a cut of more than $40 million.

PHA insists it is in compliance, and its director, Carl Greene, said in the lawsuit he filed in the matter that HUD's action is retaliatory, aimed at punishing him personally because he refused to approve a proposal presented by a developer with connections to Jackson.

That developer is the R&B producer Kenny Gamble, and the property in question consists of four parcels in South Philadelphia, near 12th and 13th Streets south of South Street.

As part of their effort to defuse the intensifying controversy, Casey and Specter shepherded a nonbinding "sense of the Senate" amendment, passed two weeks ago, that called on Jackson to extend Philadelphia's funding for one year while the litigants try to settle their differences.

Jackson's written statement was accompanied by a cover letter from Mark A. Studdert, HUD's general deputy assistant secretary for congressional and intergovernmental relations.

In it, Studdert said Philadelphia's request for a one-year extension could not be accepted because that would deviate from the agency's general policy of renewing programs only through standard 10-year agreements.

Of about 3,000 public housing authorities nationwide, he noted, only 29 participate in MTW. Proponents of the flexible-spending program say it allows local authorities to use federal funds creatively instead of being micromanaged from Washington by HUD.

Casey and Specter said they would pursue the matter further if need be by seeking binding legislation to force HUD's hand.

In their March 21 letter to Jackson, responding to his written statement, the senators expressed their displeasure with his handling of the matter.

Citing several short-term renewals by other housing authorities, they challenged Studdert's assertion that HUD renews MTWs only through standard, 10-year agreements.

They reminded Jackson that in failing to grant Philadelphia its requested extension, he was ignoring the sense of the Senate amendment passed March 13.

And they poked him again about the e-mails, in which one assistant secretary wrote to another assistant secretary about Greene: "Would you like me to make his life less happy? If so, how?"

"Take away all his federal dollars" was the reply, which ended with a smiley-face emoticon.

"We had asked, in light of the revelation of seemingly retaliatory e-mails," that HUD grant the one-year extension, the lawmakers wrote. "We are extremely disappointed that you have yet again denied this request and that your reasoning seemed arbitrary at best, and contradictory at worst."

Kendra Barkoff, press secretary for Casey, said that so far the senators had received no reply from HUD.

Contact staff writer Michael Matza at 215-854-2541 or mmatza@phillynews.com.