July 11, 2014 at 7:23 am

Kildee asks U.S. to approve funds for commercial blight removal in Michigan

Kildee (File)

Washington — Rep. Dan Kildee asked the U.S. Treasury Department to allow the state to use “Hardest Hit” funds earmarked for foreclosure relief to be used to tear down blighted commercial buildings.

Last summer, Kildee successfully lobbied the Obama administration to allow Michigan to use $100 million in funds that were part of the $700 billion Troubled Asset Relief Program — the fund used to bailout banks, automakers and insurance companies — to tear down abandoned homes.

Kildee wants Treasury Secretary Jack Lew to let the state use the funds to remove vacant commercial buildings.

“The Treasury Department has already determined that the (2008 law creating the $700 billion bailout fund) allows for the use of (Hardest Hit funds) to demolish abandoned residential properties. Based on this same reasoning — that blighted properties drive down property values in a community and push people out of their homes — I ask that you now allow the use of these same funds to address commercial properties,” Kildee said in his letter sent Tuesday.

Kildee argued in his letter to Lew that Congress wanted to “protect home values, keep homeowners in their homes and shore up the nation’s housing finance system. .... Blighted properties drive down property values in a community and push people out of their homes — I ask that you now allow the use of these same funds to address commercial properties.”

A Treasury spokeswoman didn’t immediately comment.

Last month, Kildee questioned Lew about the issue at a House Financial Services Committee and said that a few million dollars of demolition in Flint “unlocked the value of local properties to the tune of $112 million,” he told Lew.

At the hearing, Lew said allowing the use of the funds for demolition was one of his first decisions after taking office, but he hadn’t considered if the program should be extended to commercial properties. He said he would take a look at the issue.

“If your goal is to keep houses from going underwater or get them from being underwater to being above water, having abandoned properties on the block was something that had a material impact,” Lew said. “It has everything to do with stopping the decline and helping the rebirth of a neighborhood.”

In August, Gov. Rick Snyder announced that Detroit would get $52.3 million in federal funds for blight removal of the $100 million approved by Treasury, with the first funds spent in April, the same time Lew made a trip to Detroit and toured the Marygrove neighborhood, where blighted homes were being torn down.

Advocates have praised the influx of money as a chance for the financially bankrupt city to clear out eyesores, to rid neighborhoods of crime havens and to free up open space for new uses. Sen. Carl Levin, D-Detroit, also has said this redirecting of mortgage aid money for Michigan is an example of how the Obama administration can help the city that filed the largest municipal bankruptcy in U.S. history.

The funds also went to Flint ($20.1 million), Saginaw ($11.2 million), Pontiac ($3.7 million) and Grand Rapids ($2.5 million). Another $10.2 million is being held in reserve to tear town additional abandoned properties.

In Flint, there are 6,035 vacant structures, including 390 commercial buildings, according to the Flint Blight Elimination Report released in March.

Detroit has at least 2,000 vacant and blighted commercial buildings.

A report in May said Detroit may need as much as $2 billion to clear blight, including $850 million to deal with residential blight. The survey of 380,000 parcels found more than 84,000 were blighted or vacant.

In an interview last month, Levin said he has also been working on the issue of freeing up more “Hardest Hit” funds for blight removal.

In April, it emerged that White House and Treasury officials were in talks with the city of Detroit to free up to another $100 million in federal blight funding that could indirectly soften the blow of pension fund cuts and other financial issues. No deal was reached, and the Obama administration has been eager to emphasize it will not provide a bailout for Detroit.

Detroit Emergency Manager Kevyn Orr initially proposed spending $520 million on blight removal during the next five years to combat the city's tens of thousands of abandoned buildings and blighted structures; a city official said in early June the total is now down to about $384 million.

Charlie Beckham, the city's director of neighborhoods, said in June that Detroit's blight fight could be expanded this year to target owners of derelict commercial properties. The effort serves notices on owners of vacant homes, giving them the opportunity to reach deals with the city to rehab them or face legal action.

dshepardson@detroitnews.com

Kildee (File)