Detroit's Federal Blight Funding Resumes

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DALLAS -- Detroit will get a fourth round of federal funding for its ongoing blight demolition program after a two -month suspension due to procedural errors.

The city will receive $42 million in funds from the U.S Department of Treasury's Hardest Hit Funds program for Detroit's blight removal program, Mayor Mike Duggan said this week. It is the first installment of a new $130 million blight allocation for the city. This latest round of funding was part of the Omnibus spending bill passed by Congress last December.

Duggan said that the latest installment of funds for the city's demolition program was suspended by Treasury for two months after a review found that internal controls needed improvement.

"They said we are going to put a hold on new contracts until you get as set of protocols and procedures that we find effective," Duggan said at a press conference. The suspension, Duggan said, was lifted on Oct. 14 as a result of new procedures.

The new procedures require that two state housing officials be onsite working with the Land Bank and Detroit Building Authority to watch over operations. Michigan State Housing Development Authority staff will provide real time compliance support, input on process improvement, and onsite assurance that all contracts are bid appropriately.

The state will conduct quality control audits.  Demolition contractors can only bid up to 50 houses at a time and contractors will be required to disclose the names of all subcontractors and markups on their work are limited to 10%. The Land Bank has also established a $5 Million escrow account fund to assure payment of demolition costs not eligible for HHF funding.

HHF was first announced by Treasury in 2010 in response to the housing crisis that led to unprecedented home price declines. The funding from the 2010 allocation is winding down.

Over the past three years, more than $128 million in HHF have been awarded to Detroit for the blight removal program. The city has completed 10,666 demolitions throughout Detroit as of October 14th. Of those completed demolitions, just under 8,000 were paid for through the Federal HHF program and approximately 6,226 have received state reimbursement. The city exited Chapter 9 bankruptcy in December 2014.

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Michigan
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