Capitol Heights and Hyattsville officials are forming an agreement to apply for a U.S. Housing and Urban Development Department grant for a project that could bring 130 jobs to the two municipalities.

The cities are planning to renovate the Hyattsville armory and use it as a commercial center, using funds from an Urban Development Action Grant (UDAG). To qualify for such a grant, a town must be "very bad off, economically," according to Capitol Heights assistant town manager Ralph Lang.

The department uses six criteria of poverty and distress to determine UDAG eligibility, and Capitol Heights qualified to apply for the grant. Hyattsville is not eligible for the grant, but UDAG money can be used outside the boundaries of the town that receives it, Lang said. The town will probably apply for $450,000 in UDAG funds, but that figure "will probably change," he said.

Capitol Heights will have the first choice of jobs to provide for its residents since it will receive the funds if they are approved. But Hyattsville will also receive some jobs, along with the tax revenue from the commercial use of the building. Capitol Heights will receive equal payment from the developer of the property instead of taxes.

"It benefits both towns," Lang said.

The cities are planning to build a performing arts theater, office space and a restaurant in the armory, which was built in 1918. The building looks like a miniature Windsor Castle, but needs major renovation and has not been used in years, Lang said.

The grant would be lent by Capitol Heights to a developer at a low interest rate to keep the cost of the project down, Lang said. Capitol Heights and Hyattsville must each hold two hearings to answer questions about the project. The first hearings were held last week, with little or no opposition from residents. The second set of hearings will be Monday.