Organizers of the state’s $62 million coronavirus relief fund for Black Oregonians will soon resume distributing grant money after agreeing to a settlement with a John Day logging company that challenged the constitutionality of the unique state fund.

Pending court approval, the fund can resume paying out aid to Black Oregonians while the state will pay an undetermined sum to applicants of other races who applied for help from the fund last year.

The Oregon Cares Fund distributed $49.5 million to nearly 15,600 Black individuals, 466 Black-owned businesses and 103 Black-led nonprofits last year before agreeing to suspend operations and hand over their remaining money to a federal court in December amid the ongoing legal challenge.

More than $9 million has been tied up with the legal case ever since.

But the two sides filed a settlement proposal Friday that would enable the fund’s organizers to immediately recoup $5.3 million held by the court. The fund can distribute that money to Black Oregonians and businesses that were approved for aid but never got their money because of the lawsuit.

However, as part of the settlement, the state of Oregon has agreed to use its own funds to pay grants to up to 1,252 non-Black applicants that sought funding through the program before Dec. 8, 2020. The state is setting aside $3.5 million from its risk fund, which is used to cover damages awarded in settlements, to pay the grants. A separate party will determine how much money those newly eligible grantees will receive.

Those non-Black applicants constitute only a small portion of those who applied for grants through the fund, since the application explicitly stated that the money was meant only for Black Oregonians.

The court will retain $3.7 million deposited by fund organizers until the state has paid out those grants. At that point, that money could be released back to fund organizers to distribute to Black Oregonians.

The settlement still needs approval from U.S. Judge Karin Immergut.

The settlement would resolve the legal challenge brought against the fund by John Day logging company Great Northern Resources, which contended in its lawsuit that the state and organizers of the fund were violating the equal protection clause of the U.S. Constitution by distributing government benefits on the basis of race. As part of the settlement, the state will pay Great Northern Resources up to $230,000, depending on the cost of attorney fees.

The lawsuit was funded by the Project on Fair Representation, led by conservative legal strategist Edward Blum. Blum said he couldn’t comment on the possible settlement until it was approved by the court.

The logging company joined with Salem electrical contractor Dynamic Service Fire and Security and its owner, Walter Van Leja, in December to seek class-action status for the suit before seeking a preliminary injunction against the fund. That motion led fund organizers to agree to suspend grants and deposit their remaining money with the court.

The constitutionality of the fund may yet be litigated through a separate ongoing lawsuit brought against the fund by Maria Garcia, the Mexican-American owner of a prominent downtown Portland coffee shop.

Approximately $42,000, the maximum grant that Garcia would have qualified for if she were eligible for a grant through the fund, will continue to be held by the court while that case continues.

Oregon lawmakers voted last July to set aside 4.5% of the federal pandemic relief money received by the state to seed the unique fund. Oregon appears to have been the only state that allocated federal coronavirus relief dollars to individuals and business owners of a specific race.

“In an ideal state, a fund like The Oregon Cares Fund would not be needed,” said Tyler TerMeer, chief executive officer of the Cascade AIDS Project, who helped administer the fund. “The reason it was needed is that we know that systems have discriminated against the Black community, leading to dollars being distributed unevenly and unfairly.”

Organizers knew last July that the fund could be vulnerable to a legal challenge. The legislature’s own lawyers warned that setting aside funds for one race could be unconstitutional without strong data and evidence showing “past discrimination in the economic sphere.”

A competing legal opinion from firm Schwabe, Williamson & Wyatt asserted the fund was constitutional because Black Oregonians were suffering disproportionate harm from COVID-19, while receiving less aid than other groups from existing relief efforts. The firm defended The Contingent against the lawsuits.

“It kept my business alive,” said Alan Bell, who received a large grant from the fund to support his food cart, Hana’s PDX. “It helped me manage the bills I was behind on, kept my family afloat and my business too. It saved my life, to be honest.”

-- Jamie Goldberg | jgoldberg@oregonian.com | @jamiebgoldberg

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