Text Messages Show Duggan Knew About Demolition Program Suspension Two Months Before City Council
Detroit council presses land bank officials for details
By Ryan Felton
Photo by Kirk Pinho/Crain's Detroit Business Detroit Mayor Mike Duggan, along with Detroit Land Bank Authority General Counsel Mike Brady, on Oct. 17 announces the release of $42 million in federal funding for blight removal efforts after a two-month review of protocols by the Michigan State Housing Development Authority.
Text messages between MSHDA executive director and Detroit Mayor Mike Duggan
Detroit Mayor Mike Duggan learned the city's program to demolish thousands of vacant homes was suspended the day after the decision was made in August by the U.S. Treasury Department, text messages obtained by Crain's show. But Detroit City Council didn't find out until an October news conference.
The news comes two weeks after Treasury released $42 million in funding for the blight demolition program after new protocols were adopted. The program has been under federal and local investigation for several months amid concerns about escalating costs.
At a city council meeting Tuesday, Detroit council members pressed officials from the Detroit Land Bank Authority over why the agency and the mayor's office kept quiet about the suspension for more than two months.
The council's role: It has approved $40 million from the city's general fund for blight removal efforts.
Specifically, Councilman Andre Spivey asked at Tuesday's meeting when Duggan learned about the suspension. Land Bank officials couldn't say.
However, text messages obtained by Crain's show Duggan was told by Michigan State Housing Development Authority Executive Director Kevin Elsenheimer on Aug. 16 that Treasury had suspended the program, while federal officials reviewed a state audit of how it was spending blight elimination money. Duggan said at a news conference last month that the program was halted as of Aug. 15.
The messages, obtained under the Michigan Freedom of Information Act, show Elsenheimer texted Duggan a copy of an email sent by a Treasury employee about the decision.
"As discussed, Treasury is reviewing the information you recently provided concerning your investigation and audit of Hardest Hit Fund expenditures in Detroit, and your plans to address the issues raised thereby," said the email from Danielle Johnson-Kutch, chief of the U.S. Treasury's Office of Financial Stability.
"In order to allow for Treasury's review and evaluation of such information, we are directing the Michigan State Housing Development Authority and the Michigan Homeowners Assistance Non-Profit Housing Corporation (collectively, Michigan) to suspend [the blight removal program] until such time as Treasury notifies Michigan in writing that such activities may resume."
It’s unclear to whom Johnson-Kutch’s email was directed. The text messages obtained by Crain's don’t reveal who was corresponding with Duggan, but the mayor's spokesman John Roach confirmed the messages were sent by Elsenheimer.
A spokeswoman for MSHDA, Katie Bach, said the agency told the mayor's office about the decision to impose, and later lift, the suspension of the blight elimination program, as stipulated its guidelines.
"Per the blight operations manual, [the Michigan Homeowner Assistance Nonprofit Housing Corporation] and MSHDA communicate information regarding the program with the blight partner, which often includes the chief elected officer of the city," Bach said in an email.
"MSHDA is not aware of any efforts to keep the suspension out of the city council or public view," she continued. "At all phases of the MHA/MSHDA investigation, which is still ongoing, it has been and continues to be our practice not to discuss the investigation."
Council members expressed dismay Tuesday that land bank officials didn't notify — at the very least — Council President Brenda Jones that the program was suspended, according to the Detroit Free Press.
In particular, Spivey said he found it "hard to believe the mayor didn't know Aug. 15" about the decision.
"I think the mayor is too close to the land bank," Spivey said.
Messages seeking comment were left for Spivey and Jones.
Duggan spokesman Roach told Crain's that the city felt it wasn't appropriate at the time to disclose the decision.
"Confirming that we were made aware of Treasury's decision on August 16th," Roach said in an email. "We didn't believe it was our place to make this announcement."
The land bank's executive director, Carrie Lewand-Monroe, told council Tuesday that MSHDA directed the agency to remain quiet.
"We were told [by the state] to be very, very quiet about it, and we wanted to make sure we were cooperating and respecting the wishes of MSHDA and not sharing that information publicly," Lewand-Monroe said, according to The Detroit News. "Had we done that, we would have gone crossways with MSHDA and we don't want to do that either."
Craig Fahle, a spokesman for the land bank, declined to comment further.
The land bank oversees a key, quality-of-life initiative in Duggan's administration, which has drawn scrutiny this year over the average cost of demolitions and billings.
The city has received about $258 million in Hardest Hit Funds from the U.S. Treasury for the blight removal program. Since 2014, the program has demolished about 10,700 properties across Detroit, officials said last month, and of those, about 8,000 were paid with federal funds.
Duggan said at the Oct. 17 news conference that a review by MSHDA found numerous internal controls that needed to be fixed, and the city agreed to several changes to jumpstart the program again, including:
The Land Bank established a $5 million escrow account — using the $40 million appropriation from city funds, without council approval, according to the Detroit Free Press — to cover costs that were improperly invoiced for Hardest Hit Funding
Demolition bid packages will be restricted to no more than 50 houses
MSHDA will have two employees housed at the land bank to help oversee the program and assure contracts are bid appropriately
An internal audit released last week found the program had about $1 million in ineligible costs that were improperly billed for reimbursement from the Hardest Hit Fund. The errors stemmed from employees at the land bank shifting money within demolition contracts over a nine-month period from one house to another to stay within a federal cap of $25,000 per home.
Investigations into the program by MSHDA and the Office of the Special Inspector for the Troubled Asset Relief Program remain ongoing.
By Ryan Felton
Photo by Kirk Pinho/Crain's Detroit Business Detroit Mayor Mike Duggan, along with Detroit Land Bank Authority General Counsel Mike Brady, on Oct. 17 announces the release of $42 million in federal funding for blight removal efforts after a two-month review of protocols by the Michigan State Housing Development Authority.
Text messages between MSHDA executive director and Detroit Mayor Mike Duggan
Detroit Mayor Mike Duggan learned the city's program to demolish thousands of vacant homes was suspended the day after the decision was made in August by the U.S. Treasury Department, text messages obtained by Crain's show. But Detroit City Council didn't find out until an October news conference.
The news comes two weeks after Treasury released $42 million in funding for the blight demolition program after new protocols were adopted. The program has been under federal and local investigation for several months amid concerns about escalating costs.
At a city council meeting Tuesday, Detroit council members pressed officials from the Detroit Land Bank Authority over why the agency and the mayor's office kept quiet about the suspension for more than two months.
The council's role: It has approved $40 million from the city's general fund for blight removal efforts.
Specifically, Councilman Andre Spivey asked at Tuesday's meeting when Duggan learned about the suspension. Land Bank officials couldn't say.
However, text messages obtained by Crain's show Duggan was told by Michigan State Housing Development Authority Executive Director Kevin Elsenheimer on Aug. 16 that Treasury had suspended the program, while federal officials reviewed a state audit of how it was spending blight elimination money. Duggan said at a news conference last month that the program was halted as of Aug. 15.
The messages, obtained under the Michigan Freedom of Information Act, show Elsenheimer texted Duggan a copy of an email sent by a Treasury employee about the decision.
"As discussed, Treasury is reviewing the information you recently provided concerning your investigation and audit of Hardest Hit Fund expenditures in Detroit, and your plans to address the issues raised thereby," said the email from Danielle Johnson-Kutch, chief of the U.S. Treasury's Office of Financial Stability.
"In order to allow for Treasury's review and evaluation of such information, we are directing the Michigan State Housing Development Authority and the Michigan Homeowners Assistance Non-Profit Housing Corporation (collectively, Michigan) to suspend [the blight removal program] until such time as Treasury notifies Michigan in writing that such activities may resume."
It’s unclear to whom Johnson-Kutch’s email was directed. The text messages obtained by Crain's don’t reveal who was corresponding with Duggan, but the mayor's spokesman John Roach confirmed the messages were sent by Elsenheimer.
A spokeswoman for MSHDA, Katie Bach, said the agency told the mayor's office about the decision to impose, and later lift, the suspension of the blight elimination program, as stipulated its guidelines.
"Per the blight operations manual, [the Michigan Homeowner Assistance Nonprofit Housing Corporation] and MSHDA communicate information regarding the program with the blight partner, which often includes the chief elected officer of the city," Bach said in an email.
"MSHDA is not aware of any efforts to keep the suspension out of the city council or public view," she continued. "At all phases of the MHA/MSHDA investigation, which is still ongoing, it has been and continues to be our practice not to discuss the investigation."
Council members expressed dismay Tuesday that land bank officials didn't notify — at the very least — Council President Brenda Jones that the program was suspended, according to the Detroit Free Press.
In particular, Spivey said he found it "hard to believe the mayor didn't know Aug. 15" about the decision.
"I think the mayor is too close to the land bank," Spivey said.
Messages seeking comment were left for Spivey and Jones.
Duggan spokesman Roach told Crain's that the city felt it wasn't appropriate at the time to disclose the decision.
"Confirming that we were made aware of Treasury's decision on August 16th," Roach said in an email. "We didn't believe it was our place to make this announcement."
The land bank's executive director, Carrie Lewand-Monroe, told council Tuesday that MSHDA directed the agency to remain quiet.
"We were told [by the state] to be very, very quiet about it, and we wanted to make sure we were cooperating and respecting the wishes of MSHDA and not sharing that information publicly," Lewand-Monroe said, according to The Detroit News. "Had we done that, we would have gone crossways with MSHDA and we don't want to do that either."
Craig Fahle, a spokesman for the land bank, declined to comment further.
The land bank oversees a key, quality-of-life initiative in Duggan's administration, which has drawn scrutiny this year over the average cost of demolitions and billings.
The city has received about $258 million in Hardest Hit Funds from the U.S. Treasury for the blight removal program. Since 2014, the program has demolished about 10,700 properties across Detroit, officials said last month, and of those, about 8,000 were paid with federal funds.
Duggan said at the Oct. 17 news conference that a review by MSHDA found numerous internal controls that needed to be fixed, and the city agreed to several changes to jumpstart the program again, including:
The Land Bank established a $5 million escrow account — using the $40 million appropriation from city funds, without council approval, according to the Detroit Free Press — to cover costs that were improperly invoiced for Hardest Hit Funding
Demolition bid packages will be restricted to no more than 50 houses
MSHDA will have two employees housed at the land bank to help oversee the program and assure contracts are bid appropriately
An internal audit released last week found the program had about $1 million in ineligible costs that were improperly billed for reimbursement from the Hardest Hit Fund. The errors stemmed from employees at the land bank shifting money within demolition contracts over a nine-month period from one house to another to stay within a federal cap of $25,000 per home.
Investigations into the program by MSHDA and the Office of the Special Inspector for the Troubled Asset Relief Program remain ongoing.
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