ATTLEBORO - In a stunning turn of events, the city was barred Tuesday from using Community Development Block Grant money for economic development projects just as it was about to resume a bitter battle over $175,000 of the grant set for economic development.

The ban came in a letter from the U.S. Department of Housing and Urban Development and was effective Tuesday.

Redevelopment officials lambasted the HUD order, saying it was based on false information, but the letter put city council action on the block grant budget battle on hold until the situation is resolved.

HUD claimed the city has failed to meet job creation requirements over the past seven years of CDBG spending on economic development.

Robert Paquin, HUD director for Massachusetts, said the city has spent $1.2 million of the money with slim results. "To date the city has little to show for this significant investment," Paquin said in a letter addressed to Mayor Kevin Dumas.

To make matters worse, the city could be forced to repay the money, Paquin said.

City officials said HUD is flat-out wrong.

Mayor Kevin Dumas said he knew the letter was coming Monday and that it appeared to result from an annual audit HUD does on all programs it funds.

He met with Attleboro Redevelopment Authority Executive Director Michael Milanoski for more than three hours Tuesday morning to work out a response to the sanction.

ARA officials said the HUD action was based on clerical errors and is easily correctable.

Among other things, the HUD documents indicated the city had promised to create more than 8,000 jobs, which is more than the number of jobs in the entire city, according to a report on the matter by ARA Chief Financial Officer Meg Ross.

Vice-Chairman of the ARA board Max Volterra said HUD officials did not know about the local agency's mega project to reuse the former Swank Building, which took three years to cobble together among local, state and federal officials and which has already created jobs.

He lambasted the federal agency for describing the industrial business park and the downtown urban renewal project as "speculative."

"They are way off base. Where are they getting their information? They are just plain wrong," he said. "Somebody is giving them bad information." Ross said the Cookson project has already created 150 jobs and Milanoski said a North Attleboro company intends to move into the second floor of the Swank building in six months, bringing another 100 jobs.

HUD also confused the Attleboro Industrial Park, which has been in existence for decades, with the new Industrial Business Park, currently under construction and which has two tenants lined up.

One, is Needletech, a city company which is growing at about 15 percent a year.

A public hearing on the block grant money was continued for one more week while officials sort out the confusion.

Milanoski said the problem can be resolved quickly.

"I think it will only take a few days," he said.

Community Development Director Sal Pina said it could take longer because the city is lacking a key report from HUD which could take two weeks to get.