Land Bank will no longer oversee beleaguered Detroit demo program

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| Updated 2:36 p.m. ET March 7, 2019

The Detroit Land Bank Authority will no longer oversee the city’s demolition program by the end of this year, Mayor Mike Duggan announced Thursday during his annual budget presentation, saying demos will transition to being fully administered by the city.

The move represents a major shift for the beleaguered program, which has faced intense scrutiny in recent years for its practices.

The program has been fueled by more than $250 million in Hardest Hit Fund dollars from the U.S. Department of Treasury and is currently jointly overseen by the Detroit Building Authority and Land Bank. So far, more than $176 million has actually been spent but Duggan said the remaining dollars have been contracted out.

A timeline of the transition period wasn’t immediately clear.

“The Land Bank will be out of the demolition business,” Duggan said, while addressing the City Council. “At this point, all of Detroit’s HHF money is contracted; we’re done.”

Duggan said the entity was never “well-suited” to be running a demolition and compliance program. It’s unclear what role the the building authority will play in the future.

More: Was contaminated dirt used to fill Detroit demolition holes? Feds ask

More: A company tore down homes in Detroit. Then it hid debris in the holes.

To replace the stream of federal funding, which was set to be exhausted by the end of this year, Duggan’s proposed 2020 budget would allocate $50 million in city dollars to continue blight remediation across Detroit. According to Duggan’s presentation, the budget proposal is aligned with Detroit’s bankruptcy Plan of Adjustment.

The proposed $50 million is part of the mayor’s overall $2.4 billion budget, which also included a $10 million increase in public safety funding to hire more detectives and expand the city’s real time crime monitoring.

The mayor’s presentation also hinted at “increased city oversight for demo,” using funding from the city’s Housing and Revitalization Department.

Detroit’s demolition program, which has been a cornerstone of Duggan’s administration since he began his aggressive blight remediation effort in 2014, has been mired in controversy and a federal investigation.

The Free Press reported in February that the federal probe into the program had widened to investigate whether contaminated dirt had been used to fill demolition sites across the city.

And last week, a Free Press investigation revealed that a Chicago-based contractor stands to lose more than $17 million in awarded demolition work after it demolished homes and buried the debris in an alleged cost-cutting scheme.

The investigation and incident with the Chicago contractor have sparked calls for more oversight and led to requests for state and federal hearings to discuss the program.

Regarding questions about the oversight of the blight removal program, Duggan defended the city’s protocols during his State of the City address Tuesday and said that in the last five years, it has terminated at least four contractors for violations.

“I won’t tell you we aren’t ever making mistakes,” Duggan said, before disagreeing with anyone who suggests the city “should slow down” the demolition program. “We are going to continue moving on demolition in a responsible way.”

The move also would give the City Council more control because all of the contracts would have to be approved by the body. Under the current structure, the council does not approve Land Bank contracts, only city-funded demolitions.

Council President Pro Tem Mary Sheffield said that if the program does eventually transition back to being fully controlled by the city, she hopes more mechanisms are put in place to ensure Detroiters have access to the lucrative contracts and jobs.

“We really have lost a large opportunity to employ Detroiters” in the Hardest Hit Fund program,” Sheffield said. “If we do in fact move demo in-house … I would like to see more requirements attached to that.”

A Free Press investigation in June found that of the hundreds of millions in federal dollars spent to remove blight across Detroit, only 26 percent of the work had gone to minority-owned companies and just 16 percent went toward black-owned companies. Critics have argued that at least half of the contracted work should be performed by Detroiters.

Duggan said regulations on the use of federal dollars prevent the city from giving geographic preference to companies based in Detroit, . Geographic preferences are still allowed to be used on city-funded work.

Duggan said the city has to “find the right balance” between ensuring local Detroit contractors can win work and the overarching need to get blighted homes torn down.

Critics and organizations like the Michigan Minority Contractors Association have previously said there are dozens of minority-owned companies in the city that can perform the work, including 28 members of the organization.

But officials have countered that it’s been hard to get companies involved in the program and that some don’t have the capacity to perform the work.

“If you just look at our track record, we have significantly higher Detroit and minority participation for demolition” on city-funded projects, Duggan said. “We’re moving in the right direction … We have an outstanding company, Gayanga, whose probably gotten $9 million in work. It was a contractor who … grew successfully.”

Gayanga,a Detroit-headquartered company, has a workforce that is heavily made up of Detroiters. The company has grown rapidly since 2016 and has become one of the top firms performing demolition work for the city — jumping from $450,000 in revenue in 2017 to being awarded more than $9 million total in city-funded work by this year.

Duggan noted the company was able to grow on the city-side after it wasn’t allowed to participate in the federally funded work due to a change in program requirements.

The city plans to host a construction contractor fair Saturday to help grow its pool of small businesses seeking construction and demolition work.

Councilman Andre Spivey said he hopes the $50 million is awarded to local companies. Spivey raised concerns about contracts he’s observed that were awarded to companies as far away as Bay City,

“I think that’s too far to be sending our money,” Spivey said. “If we have companies, I hope” Procurement Director Boysie Jackson “can be diligent about building capacity so the $50 million stays in Detroit.”

kstafford@freepress.com Kat Stafford, Detroit Free Press Published 2:32 p.m. ET March 7, 2019

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