U.S. Rejects Request for Shelter Grant : West Hollywood: The $3 million would have helped pay for counseling programs at the 70-bed facility, which is scheduled to open in November.

The West Hollywood Homeless Organization was dealt a financial blow last week when the U.S. Department of Housing and Urban Development turned down its request for a $3-million grant to help pay for counseling programs at a 70-bed shelter that the group is scheduled to open in November.

News of the rejection began circulating after the controversial West Hollywood shelter’s name did not appear on a list of about 143 projects announced by HUD on Tuesday. The projects will share $119.5 million intended to help homeless people make the transition from the streets to independent living.

Lloyd Long, West Hollywood’s director of Human Services, was reluctant to comment on the decision until he received official word of HUD’s decision. But he did say the Homeless Organization would probably appeal.

Bob Erlenbusch, the shelter’s executive director, said there were some encouraging signs within the discouraging news.

“We were told that we were the first alternate on the list,” he said. “That is excellent for a program that hasn’t opened yet and is without a track record.”

On West Hollywood’s east end, where neighborhood groups have been fighting the proposed shelter, word of HUD’s decision was well-received.

“I’m glad they didn’t get it,” said Ed Riney, a spokesman for Eastend Community Action. “Maybe this will force them to forget the idea of a vagrant shelter and focus on a program that will help people with AIDS and the seniors.”

The West Hollywood Homeless Organization had planned to use HUD grant money--which was to be paid out over five years at $600,000 a year--to provide for a full-time job counselor, substance-abuse counselor and housing coordinator.

“What it means now is that we will have to phase in different aspects of the program as we identify additional funding,” Erlenbusch said. “And in the meantime, we will spread some of the work around to different people.”

The city established the nonprofit homeless organization last year for the purpose of opening a shelter, and also provided nearly $1 million to renovate a building on La Brea Avenue that is to be used for the facility. City officials have provided $574,000 for the first year of operation, and they expect the city’s annual obligation to the program to level off at about $300,000.