The Detroit land bank will pay the federal government $1.5 million to resolve allegations that the authority failed to secure proper documentation from demolition contractors to support what they were charging the federal government for dirt used to fill demolition sites.
The settlement was approved Friday by the land bank’s Board of Directors and stemmed from spending questioned by a federal watchdog agency as part of Detroit’s Hardest Hit Fund demolition program. The agreement refunds a small portion of the administrative fees the land bank received under HHF and closes the investigation that dates back to 2019, the land bank said in a news release.
“While the DLBA maintains that it provided all documentation requested and required for grant reimbursement under the program, the parties agreed that a settlement would avoid the delay and expense of litigation,” the release notes.
The agreement specifically resolves a claim made on June 28, 2021, by the Special Inspector General for the Troubled Asset Relief Fund (SIGTARP) that approximately $13 million in payments made to the land bank between 2017 and 2019 were for “unsubstantiated costs.” The review revealed that in an audit of 100 reimbursements submitted from contractors in Detroit’s program none contained invoices that showed what the contractors paid for backfill dirt.
SIGTARP’s investigation ultimately didn’t result in civil or criminal charges, lawsuits or complaints against the land bank, the news release adds. A spokesperson for SIGTARP couldn’t be immediately reached Friday for comment.
Detroit Land Bank CEO Tammy Daniels said in a statement that demolition was run as an “independent program,” that kept field and contractor expenses separate from the land bank’s general operating budget and annual city subsidy.
“The City and its residents can rest assured that this investigation did not call into question the safety or effectiveness of the land bank’s demo program in eliminating blight, and this settlement will not be funded by any City tax dollars,” Daniels said.
The U.S. Department of Treasury awarded Detroit more than $265 million for demolition work over five rounds under the HHF program.
Detroit’s federal demolition work got underway in the spring of 2014, but the following year it fell under scrutiny amid a spike in costs and concerns over bidding practices. Those issues and others prompted multiple federal, state and city reviews and investigations.
A 2019 investigation by The Detroit News found contractor billing for backfill dirt at Detroit’s demolition sites was essentially unregulated for more than two years. Spending on dirt was unchecked because there weren’t rules in place to limit those costs.
Overall, the city razed more than 15,000 blighted homes under the federal effort jointly run by the land bank and Detroit Building Authority. The final federal demolition in Detroit took place in August 2020 and closed out the HHF program in July 2021.
Oversight of demolition work has since shifted in-house under Detroit’s Demolition Department. The department is heading up Proposal N, a voter-approved, bond funded initiative aiming to tear down thousands more blighted homes in Detroit and to stabilize thousands of others.