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Experts say Mayor Rudolph Giuliani’s decision to withhold city budget money from local nonprofits is illegal, but the City Council won’t challenge him in court anytime soon, City Limits has learned.

And that means dozens of local nonprofits may face months of deep financial hardship–and, in a few cases, extinction.

In June, the City Council overrode the mayor’s veto of an earlier budget that progressive and neighborhood groups hailed for its generosity. Despite the speaker’s apparent victory, Giuliani announced he would block money to programs he didn’t like. Vallone, who is running for the Democratic gubernatorial nomination this fall, claimed the mayor’s plans violated the city charter, and he vowed to sue.

Since the beginning of the city’s new fiscal year in July, the dozens of nonprofits Giuliani targeted for cutbacks have held out hope that Vallone’s lawsuit would save them.

Now Vallone’s people are saying that such a suit may be months away because the mayor has never formally announced which programs he plans to defund. That maneuver, they say, has forced the speaker to be much more careful–and slothful–in assembling evidence for the lawsuit.

“I’ve drafted my litigation papers, and I’m just waiting to fill in the details,” said Richard Weinburg, Vallone’s legal counsel. “But, ironically, you don’t have a lawsuit unless people are hurt and we’re still waiting for people to come forward. And that’s not going to happen until people start feeling the pain.” Another Vallone aide said the pain will begin in “October, maybe November”–the time when the city usually inks its checks to the affected groups.

But some groups are hurting now. The Harlem Neighborhood Defenders Service, which lost $2 million in city money used to defend indigents in criminal cases, has already had to lay off 20 of its 33 employees and may be forced to move out of its headquarters next month. “By the time they get their sufficient basis for facts in their lawsuit it might be too late for us,” said director Leonard Moisette. “What appears to be happening is the council is being very cautious about filing this suit. But if this continues I’m afraid we’ll just never be able to make it back.”

The City-Wide Task Force on Housing Court is in similar straits and the West Side SRO Law Project has been forced to borrow money from its parent nonprofit, Goddard Riverside Community Center, to stay afloat. Many other groups will be facing shortfalls in the early fall.

Both council sources and advocates say their best hope now is a new negotiation with Giuliani, who is also locking horns with the speaker over whether to raze or rebuild Yankee Stadium. Still, back-channel negotiations between council staff and Giuliani aides has reportedly begun.

“Right now both sides want to step back from the fight,” said a high-ranking Vallone aide, who pointed out that two of the main negotiators–the council’s finance chief Tom McMahon and the mayor’s new budget boss Robert Harding–are old friends.

“We’re talking,” the official added. “But I don’t want to give anyone the impression that we’re near a breakthrough.”

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