Detroit gives $30K to city workers' firms despite aid ban
Detroit — Three city workers received subsidies under a Duggan administration entrepreneurship program despite guidelines barring them, raising new questions about an initiative that's already under federal review over record-keeping and spending problems.
Motor City Match launched in the spring of 2015 with the aim of lending federally funded cash grants and other resources to help start small businesses. The eligibility rules — last updated in the summer of 2016 — indicate that it's not open to city workers.
But $29,694 in federal money has been spent providing services to three businesses owned by a city firefighter, building department staffer and information technology manager.
Motor City Match has been funded with federal Community Development Block Grant funds and city money. The Detroit Economic Growth Corporation, a quasi-public development agency, manages the program with oversight by the city's Economic Development Corp., a public authority mostly controlled by Mayor Mike Duggan's appointees.
"Of the more than 1,300 MCM awardees, we are aware of three City of Detroit employees that have been awarded Motor City Match assistance," DEGC Small Business Services Vice President Pierre Batton said in a statement. "It has been determined that none of these individuals have any oversight or connection to the MCM program — and were therefore approved."
The program's online rule book notes building and business owners who are "employees, elected officials or appointed officials or officers of the City of Detroit Government" aren't eligible to apply.
But program officials told The Detroit News that the guidelines provide "sufficient flexibility" and legal authority to waive the ban when they deem appropriate.
Batton pointed to a section of the guidelines that notes the Economic Development Corporation "reserves the right to make the final determination of any person's or organization's eligibility" and program benefit allocations. It is at the end of the guidelines in a "disclaimer" section.
"It’s not uncommon for programs to have general guidelines and to have a mechanism by which the program manager may use their discretion to allow for variances," Batton said. "We are comfortable that in each of these cases the variances were justified because there is no conflict with these individual employees."
Wayne State University law professor Peter Henning noted there are "exceptions to every rule" and he doesn't view the participation of city employees as a conflict, as long as it has been disclosed.
"The key is disclosure. You don't want anything like this kept secret," Henning said.
The DEGC informed The Detroit News of awards given to an IT manager and building department staffer after the newspaper asked about the money awarded to firefighter Teresa Singleton.
The participation by city employees in Motor City Match is not part of an ongoing federal review of community block grant money, said James Cunningham, deputy regional administrator of the U.S. Department of Housing and Urban Development's regional office based in Chicago.
"However the department will review any potential conflicts of interest in the CDBG program," Cunningham wrote in an email.
City employee involvement
Singleton, the city fire union's former vice president,is featured prominently on the program's website. The Detroit firefighter was lauded in a 2016 Twitter post by Duggan's Chief of Staff Alexis Wiley as a Motor City Match winner.
Singleton was selected for a $75,000 cash award to help open a storefront for her upscale consignment and resale boutique, "Tiki's Treasures."
"The EDC staff determined that Ms. Singleton’s employment as a Detroit firefighter did not create an actual conflict of interest that would disqualify her from a MCM award, because Ms. Singleton has no oversight or influence on the MCM program," Batton said.
Singleton told The News she has long been part of a small business networking pool and learned of the program as well as others geared toward minority- and women-owned companies as she evaluated how to get money to get her project off the ground.
She said she was a "good candidate for what was being offered" and no questions had ever been raised about her participation.
"I didn't select myself. I felt I was eligible and was never ever told otherwise," said Singleton, who also was given technical assistance as a "design awardee" in the second round of the program in its first year.
EDC staff ensures program rules are followed and that applicants are eligible, Batton said. Awardee recommendations are made by EDC staff to the development corporation's mostly Duggan-appointed board. The board then makes the final approval.
Wiley said she attended the Motor City Match event in 2016 and posed with Singleton for the photo, but stressed she has no involvement in how the program operates or awards grants.
"My understanding is that she was honest about the fact that she was a Detroit firefighter from the very beginning, and the EDC determined that her years of service to the city should not be used to bar her from pursuing this opportunity," Wiley said.
Two other city employee participants were revealed after The News' inquiry.
Detroit building department staffer Dhafir Hasan was granted $25,000 last winter for Krispy Addicts, a men's clothing shop on Livernois. Detroit Gourmet Salt Co.'s Amber Easton, who works for Detroit's Department of Innovation and Technology, was a business plan awardee in the fall.
Hasan, who works in the city's property maintenance division, and Easton, who is identified as a technology services manager on her LinkedIn page, did not return calls seeking comment.
Questions surround program
The revelation of a guidelines conflict about city employees comes after the Duggan administration last month suspended the use of federal dollars for its cornerstone match program after a HUD audit suggested it was not adequately targeting low-income to moderate-income areas.
The September 2018 report followed HUD's decision in May 2018 to monitor the records of the city’s Community Development Block Grants.
Duggan has said that the problems were "going to be sorted out quickly."
The DEGC is working with the city and HUD to determine whether a HUD waiver is required for Singleton and other cases where block grant money was involved, Batton said Wednesday.
"On the basis of that submittal and response from HUD, the City and EDC will make any changes necessary to maintain compliance with all CDBG rules," he said.
The Detroit News inquired about the potential conflict on Monday. By Wednesday, city officials talked with HUD staff about the city's plans to request waivers of the conflict of interest rules, Cunningham confirmed.
Under the CDBG program, he said, waivers are allowed to be submitted, and they are not unusual.
HUD will "grant or deny them based on the facts of the case," Cunningham said, noting they are coming after the money was awarded instead of beforehand.
Arthur Jemison, Detroit's chief of services and infrastructure, directed inquires about Motor City Match eligibility to the EDC, adding his department "does not select or recommend winners" and "it never has."
About the HUD audit, Jemison said the city has had multiple meetings with HUD officials in recent weeks and is "making progress" on providing requested documentation.
HUD "is still in discussions with the city on how they can resume using CDBG funds for the Motor City Match program," Cunningham said.
In March, Detroit's City Council continued Motor City Match by approving $800,000 from the city's general fund for the program.
During a January 2016 meeting of the EDC board, Michael Forsyth, a former business development manager at the Economic Growth Corporation, disclosed Singleton's employment with the city as one of "two conflicts of interest." The other one involved Ron Scott, a shareholder in Savannah Blue, which was awarded a $50,000 cash grant even though he was an Economic Growth Corporation and Detroit Economic Growth Association board member.
Scott, the Savannah Blue owner, only received a cash grant from philanthropic money, Batton said Thursday, adding that he doesn't expect it will require a HUD waiver.
Of more than 2,400 applications received by the program, no recipients have been denied an award solely on the basis of their employment status with the city, Batton said.
Firefighter's business journey
For Singleton, the journey began in 2013 when she completed a 30-page business plan under Prosper US Detroit, a Southwest Solutions economic development initiative for entrepreneurs. It was created, she said, "long before there was ever mention of Motor City Match."
In 2014, Singleton purchased a two-story historic building directly across the street from the Motown Museum on West Grand Boulevard with hopes of transforming it into a boutique and bistro.
Singleton said she gutted the property but quickly found it needed more work than anticipated. When Motor City Match started in Detroit, she applied.
"I just kind of progressed through it, round after round," Singleton said. "It took quite some time to get to a point to be a cash awardee."
Singleton said she secured a financial commitment from the Detroit Development Fund, one of six program lending partners, toward the project that she estimates will cost nearly $800,000.
She hoped to open her shop in 2018, but timelines have been pushed back as she's worked to secure a contractor and additional funding. A prospective tenant for the bistro fell through earlier this year.
Singleton said she hasn't received any of the matching grant money. She will have to spend $75,000, she noted, and submit invoices to receive the reimbursement.
Her storefront is marked with a window sticker declaring it a Motor City Match "top property for new business" as it awaits development. Singleton said she has built up a client base through past weekend sales.
"I do have a great following and a lot of people who are being supportive and just sitting back, hoping, like me, that it will manifest here before I am no longer eligible for meeting the time criteria," she said. "I believe I have something good to offer the community."
As of June, the city said it has funded $7 million to businesses through the program, resulting in 57 opened businesses and 85 others in various stages of development.
According to April meeting minutes of the EDC board, Singleton was among a group of cash awardees recommended for a one-year extension on their projects over financing challenges and other unexpected delays. Under the rules, grant winners are required to access their grant funding within a year of the date of the EDC board's approval.
The EDC had awarded cash grants to 159 businesses in the city since June 1, 2015, according to the meeting minutes from late April.
In the first three tracks of the program — business plan, space and design — businesses are awarded technical help including business planning classes, financial planning workshops and architectural services, DEGC spokeswoman Charlotte Fisher said in an email. In some cases, the Motor City Match team facilitates permitting, connections to Detroit builders and financial lenders.
In the final stage, they are eligible for cash grants for their projects. The funds are given to the winners when businesses complete work and provide proof of spending, Fisher noted.
Staff Writer Candice Williams contributed.