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New report blasts Detroit demolition program, but officials say it's "full of errors"

Mar 23, 2017

A special report from Detroit’s auditor general says the city’s sweeping demolition program is still riddled with problems.

But the Detroit Land Bank Authority, the agency that runs program, calls that report “full of errors and misinformation.”

Detroit’s massive blight program, touted as one of Mayor Mike Duggan’s major accomplishments, had its federal funding briefly suspended last year because of concerns about questionable bid practices and cost overruns.

Federal funding was restored after the DLBA and city agreed to new protocols and oversight. But this new report suggests those types of problems haven’t gone away.

Auditor General Mark Lockridge cites four major “areas of concern” with the program.

The report questions why the land bank dissolved an “approval committee” tasked with making sure demolition costs are properly accounted for across properties. An internal agency review last year found the agency had used “cost smoothing,” redistributing costs within contracts to make demolitions that exceeded federal spending limits look cheaper.

The report suggests the timing is suspicious: the committee was dissolved in response to a lawsuit that accused it of violating the Open Meetings Act. After a judge granted a temporary restraining order, the DLBA dissolved the committee, putting that responsibility in the hands of its executive director.

“Processes are changing rapidly as a result of Land Bank/Detroit Building Authority reactions to pressures or events” such as government oversight and lawsuits, Lockridge wrote. He added that the Building Authority, which conducts most of the actual demolition process in coordination with DLBA, was apparently unaware the committee had been dissolved.

The report also questions why the agencies have apparently split up different parts of the demolition process, requesting contract bids only for “back end” processes like “debris removal, open hole completion, and site finalization.”

It pointed at least 19 properties where that post-demolition remediation is still incomplete, presenting “a clear and present danger to the community.”

“This is clear evidence of non-compliance with contract and program requirements,” the report said, adding: “This demonstrates a lack of oversight and good program management.”

The report also cites a lawsuit filed by a program contractor, resulting in a March 13 court order that prevents the DLBA from soliciting bids on 153 properties. And it it notes “preliminary findings” that show escalating administrative costs, weak internal financial controls, and inadequate program management at both the Land Bank and Building Authority.

“We question the ability of the Land Bank and DBA, as it relates to demolition program activities, to be self-sustaining in the short and long term,” the report concludes, claiming that the Land Bank, a quasi-public agency apart from city government, has received more than $20 million in subsidies from the city’s general fund, as well as other city funds and an interest-free loan.

But Land Bank officials quickly shot back at the report, calling it “full of errors and misinformation.”

Board chair Erica Ward Gerson says the agency was blindsided by the report. “It is normally the process of an auditor general to give a draft response to the department for this very reason  to avoid obvious factual inaccuracies. Unfortunately, the auditor general inexplicably failed to do that in this case,” she said in a statement.

Ward Gerson says any recent “clarification in policy” was made with the approval of state agencies monitoring the Land Bank. She maintains that the examples cited in the report, such as the 19 properties where the demolition process remains unfinished, are in fact evidence of “vigorous compliance” with new procedures meant to correct past lapses.

As for any increased costs, “They are necessary to assure full compliance with all city ordinances, state and federal laws and regulations,” Ward Gerson said. “The Land Bank and Building Authority have made an absolute commitment to full compliance with all laws, and are staffing to a level needed to accomplish that.”

The Land Bank board plans to “release a more detailed response in the coming days.”

A spokesman for Detroit Mayor Mike Duggan referred all questions to the Land Bank. In the past, Duggan has blamed problems with the demolition program on its quick ramp-up, as the city undertook an unprecedented blight-fighting campaign that has demolished more than 10,000 properties since 2013, largely with the help of nearly $260 million in federal money.

The Land Bank's Executive Director, Carrie Lewand-Monroe, resigned this week. But agency officials insist that has nothing to do with the report, which they say the office only received after it was publicly released.