A bill to amend the Housing and Community Development Act of 1974 to improve the criteria used to select projects for grants under the urban development action grant program, and for other purposes.

Amends the Housing and Community Development Act of 1974 regarding urban development action grant criteria to include the following: (1) the production of goods or services from the applicant's local economy; (2) job retention and retraining; and (3) project location.

Prohibits the Secretary of Housing and Urban Development from awarding such a grant unless: (1) the project will have a substantial physical development and fiscal impact; (2) the project is likely to be accomplished in a timely fashion; and (3) the city or urban area has demonstrated performance in housing and community development programs.

Provides for the use of repaid grant funds. Requires an applicant to provide the Secretary with an annual statement of the projected receipt and use of repaid grant funds and an audited report of any previous fund use.

Requires a report to the Congress by March 15, 1986.