Take away PHA's management of federal rent subsidies and assign the task to an outside contractor.
And the worst option for Philadelphia: HUD could go to federal court to put the agency into receivership, with the government temporarily assuming total control. It happened in Miami in 2007.
"HUD has the authority to come in and say, 'You're done,' " said Orlando Cabrera, HUD's assistant secretary of public and Indian housing from 2005 to 2007.
Cabrera said PHA's five-member board - led by former Mayor John F. Street - could challenge such a takeover in federal court. But he added, "I have enough faith in Mayor Street that he knows that that is not a place he wants to go - choosing to go to court, spending more legal fees to defend this situation."
On Tuesday, HUD Secretary Shaun Donovan is likely to face tough questions about the situation in Philadelphia during a budget hearing before the House Financial Services Committee. HUD, like all federal agencies, is facing budget cuts next year, and the Philadelphia agency has gained national attention for out-of-control spending.
Darren Smith, a spokesman for U.S. Rep. Michael Fitzpatrick (R., Pa.), who sits on the committee, said recent media reports "have made it clear that there were serious problems at the Philadelphia Housing Authority."
He said the committee would expect "a full and frank discussion about how these problems occurred and how they can be prevented in the future."
PHA was once a star of public housing, but its reputation began to unravel after September's departure of Executive Director Carl R. Greene. The board fired Greene after discovering that PHA secretly settled three sexual-harassment complaints against him for $648,000 and had begun negotiations to put to rest a fourth.
