Mayor Emanuel announced the move, intended to cut down on youth homelessness, in an Aug. 23 press conference.

"If you can cut somebody off at a younger age who's homeless, get them the jobs and get them the education, they won't be an adult statistic," Emanuel said.

According to the mayor, the deal will save the city $1.7 million, to be funneled back into homeless services. The result, he said, will be a 40 percent increase in the number of shelter beds.

Catholic Charities will take over the city's program that offers late-night rides to homeless shelters, operating 12 vehicles and employing 50 workers.

But many LGBT people questioned the move, as Catholic Charities in Illinois and the Archdiocese of Chicago have taken high-profile stances against LGBT rights in recent years.

"It just raises a lot of red flags in my mind," said Joe Murray, executive director of Rainbow Sash Movement, an LGBT Catholic organization. "Catholic charities, one, does not recognize us [LGBT people] and two, believes we are morally disordered."

Chicago Catholic Charities is an arm of the Archdiocese of Chicago, headed by Cardinal Francis George, who sparked outrage last winter when he compared the Pride Parade to a Ku Klux Klan gathering.

Responding to a Lakeview church's request to alter the Pride Parade plans to allow parishioners to attend Sunday mass, the Cardinal repeatedly stated that parade was at risk of turning into a KKK gathering.

"You don't want the gay liberation movement to morph into something like the Ku Klux Klan, demonstrating in the streets against Catholicism," he told Fox News Chicago.

George later apologized for the remarks.

But Illinois Catholic Charities have also come under fire in recent years for other anti-gay stances. Last year, a group of Illinois Catholic Charities refused to place foster children in same-sex households after civil unions went into effect. The state pulled the charities' contract over the refusal, and the charities unsuccessfully sued to keep the contract while turning away LGBT parents.

Chicago Catholic Charities was not a party in the suit, but George oversees all of the state's six dioceses.

"Catholic Charities are the same in every diocese no matter where you're at," explained Chris Pett, president of LGBT Catholic organization Dignity/Chicago. "Now the city will layoff workers and shift the service to an organization that is known to be anti-gay."

Ed Flavin, a spokesperson for Chicago Catholic Charities confirmed that the organization's stance on LGBT parents is the same as the other charities, but he said there was no connection between the foster care dispute and homeless services.

"We've never discriminated against anyone, period," Flavin said.

Flavin noted that he personally "is a major advocate of assisting that community."

According to Matt Smith, a spokesperson for Chicago Department of Family and Support Services (DFSS), all agencies contracting with DFSS are contractually required to follow federal, state and local anti-discrimination laws and policies.

In addition, Smith said, Catholic Charities provided the city with its own anti-discrimination policy.

"Catholic Charities maintains a policy of non-discrimination on the basis of race, color, national origin, disability, marital status, age, gender including pregnancy, sexual orientation, status as a Vietnam-era or special disabled veteran or any other basis prohibited by federal, state, or local laws in all matters relating to employment with the Agency, including hiring, training, promotion, demotion, transfer, recruitment, help wanted advertising, layoff, termination, compensation, and other terms and conditions of employment," the statement reads.

Finally, the newly released "Plan to End Homeless, 2.0" includes recommendations on better serving LGBT people, said Smith.

That inclusion comes in the form of a mention of LGBTQ people among "special populations" that also include families, youth, victims of domestic violence, seniors, people who have been convicted of a crime, persons with a disability, people who are chronically homeless, people with HIV/AIDS, undocumented people and people with limited English proficiency.

One openly gay person who supports the deal is Jim LoBianco, who headed up homeless services under Mayor Daley and currently serves as executive director of Streetwise.

LoBianco contends that because "human service worker" is one of the lowest titles in Chicago government, homeless services had become a dumping ground for demoted employees who were trained in other careers.

"They never wanted to work with the homeless," he said, adding he felt the way some workers treated clients was unacceptable.

LoBianco pointed out that Catholic Charities has received city contracts for decades. During his time heading homeless services, he said, LGBT-specific complaints were filed with the city, but Catholic Charities never received a complaint.

"There are not a lot of agencies committed to doing this work, and of those, Catholic Charities is the best," LoBianco said.

Openly gay Ald. James Cappleman expressed similar feelings.

Cappleman is a longtime member of Dignity/Chicago and a former social worker. Overall, he said, he was not concerned about the deal. He never witnessed homophobia from Catholic Charities when he was doing social work.

Asked if he worried about the image of the city contracting with Catholic Charities, he said, "I'm mostly focused on making sure that people are who experience homelessness are getting the best possible care."

Contributed reporting: Bill Healy