THE ADMINISTRATION has been trying hard to promote business-government partnerships in the cities. Moon Landrieu's success in doing this while mayor of New Orleans helped make him an attractive choice to take over the Department of Housing and Urban Development. Yet ties that are good in general can create problems in particular cases - and now Mr. Landrieu faces questioning about possible conflicts between his private interests and his past and prospective public jobs.

One set of questions involved Mr. Landrieu's relationship with New Orleans real-estate developer Joseph C. Canizaro.In 1974, Mayor Landrieu helped arrange a land swap through which Mr. Cnaizaro's company gained 3.7 acres of city land that was important to Canal Place, the firm's multi-million-dollar development on the city's riverfront. In May 1978, upon leaving office, Mr. Landrieu was hired by the Canizaro firm. In August, without putting up any capital, he was made a partner there. His 10 percent share was to be paid for out of future profits, he has explained.

The situation should get close Senate scrutiny before Mr. Landrieu is confirmed. He insists that the land exchange and his private dealings with Mr. Canizaro were not related. No evidence to the contrary has come out so far. Indeed, it is quite possible that Mr. Canizaro brought Mr. Landrieu into his company much as a Washington law firm might go out of its way to take on an influential ex-congressman - not to reward him for past favors, but to gain expertise and government contacts that could have great future worth.

That points to the second set of questions that need to be pursued. Public policy and private development have always been intertwined. The Carter administration has encouraged even more ties through its high-visibility program of urban development action grants (inevitably labeled UDAG). Each grant to a city is meant to stimulate several times as much in private investment, a process known as "leveraging." The aid is so attractive, and the competition so intense, that any in-town developer would welcome the aid of someone like Mr. Landrieu who knows how to work all the governmental levers involved.

That was one thing Mr. Landrieu did do with the Canizaro company: He helped it and New Orleans' new city administration work out an application for a $5 million urban action grant - involving, however coincidentally, improvements on the land in the earlier swap. That proposal is still pending at HUD. It turns out, too, that Mr. Landrieu has a 5 percent share in a second, separate project seeking UDAG funds - an $11 million plan by another group of New Orleans investors to renovate and expand the Pier House, a fashionable hotel in Key West, Fla. That proposal, it turns out, was one of a number approved by HUD on July 26, the day before Mr. Landrieu's nomination as secretary was announced. Top HUD officials say they were unaware of Mr. Landrieu's involvement - or appointment - when they approved the grant.

Mr. Landrieu has taken the proper position about these projects. He asked HUD to hold up the Key West grant and has said he will divest himself of his development interests and take no role in considering the UDAG requests. Unless other complicating factors come to light, that kind of separation should set questions about future conflicts of interest to rest. There remain, though, some important questions about the UDAG program itself. It has been criticized from the start for sending considerable federal aid to luxury hotel and housing projects that give developers substantial profits - and that might well have proceeded anyway. The two cases involving Mr. Landrieu also show how much initiative developers have taken in shaping some grants. For instance, three hotel groups in Key West had been seeking UDAG funds; the Pier House nailed down its private financing first - two days before the grant was approved. Does that make it a good public investment? No matter what conclusions are reached about Mr. Landrieu's case, Congress should look again at how these grants are influencing where the urban action is.