Contractor penalized in Detroit demolition program under new scrutiny

Christine Ferretti
The Detroit News

Correction: This story has been updated to reflect revised figures provided by the Detroit Land Bank Authority.

Detroit — A contractor penalized for violating rules in Detroit's federally funded demolition effort is under new scrutiny and preventing the city from closing out its participation in the federal Hardest Hit Fund program. 

The Detroit Land Bank Authority on Thursday sent a corrective action plan to Chicago-based McDonagh Demolition, ordering the firm to replace soil at 16 demolition sites after testing revealed dirt used to fill holes where homes once stood exceeded acceptable levels of mercury, chromium and lead.

Chicago-based McDonagh Demolition was ordered in 2019 to excavate this site in the 13000 block of Maiden Street in Detroit after it was discovered that some demolition materials there had not been properly removed.

McDonagh is being ordered by the land bank to remove and replace the soil by April 2. 

The company in a statement late Thursday said despite obtaining the soil for the sites from a "commonly used" city supplier two years ago, "McDonagh is prepared to take appropriate action in concert with the city."

"Throughout McDonagh’s work, the city was fully aware of McDonagh’s topsoil supplier, and provided McDonagh with all necessary approvals where that topsoil was used at these sites," the statement said. 

The Detroit News is running a great deal right now for our new subscribers. Sign up here for just $1 for 6 months.

Land bank officials however said it was discovered last summer that McDonagh failed to submit topsoil invoices for a handful of homes it tore down. The missing paperwork sparked an internal investigation into the source and safety of the soil that the firm used.

Detroit's federal program has a history of controversy and in recent years some city, state and congressional lawmakers raised concern over the potential of environmental contaminants in the dirt used at city demolition sites following a number of high-profile contractor violations, including by McDonagh.

Detroit News investigations have exposed a disjointed record-keeping process for the backfill used for demolitions in Detroit and a lack of controls in the program early on.

"Given that we have this history where people are questioning 'Is there good dirt in the ground?' it's important for us to let people know that in those instances when we remotely question, we take action and we remediate," Tammy Daniels, deputy executive director of the land bank, told The News. "In this particular case, we've erred on the side of caution. It is important that the citizens of Detroit know that we are holding contractors accountable."

Daniels said McDonagh has until the close of business Friday to respond to the order.

If McDonagh declines to address the remediation, a portion of $223,000 in federal demolition dollars earmarked for the firm will be used to contract with a third-party to do the work as well as cover costs associated with site testing, Daniels added. 

The land bank, in consultation with state regulators, determined the dirt in question presents "No near-term health risk." Still, outside environmental experts were consulted to determine the best course to ensure the health and safety of Detroiters is protected.

An assessment of McDonagh's entire inventory of 89 demolition sites concluded dirt at eight of them exceeded acceptable limits. The results from another eight sites were inconclusive, Daniels said. 

The soil at the majority of McDonagh's sites, or 66 locations, appeared to comply with environmental and contract standards, officials said. 

The troubles are the latest for McDonagh which first had its projects in Detroit halted in February 2019 over claims it violated rules for filling holes at a handful of other sites. 

The company at that time was issued a stop-work order by the city's building authority for all demolition and backfill work after it was discovered McDonagh did not fully removed demolition debris before adding fill dirt at several sites. 

McDonagh has called the past violation an "isolated issue" and said it did not "Reflect the integrity, value and operating practices of McDonagh Demolition."

McDonagh was at risk of having its contract terminated but ultimately reached a settlement. The company, however, was barred from taking part in any other demolition projects in Detroit paid for with federal Hardest Hit dollars. 

The corrective work for the McDonagh sites delays the final reimbursements coming to Detroit under the federal program. The city has a June deadline to close the program and Daniels said officials remain confident that deadline will be met. 

Tammy Daniels, Detroit Land Bank Authority Deputy Executive Director, talks about demolitions in Detroit.

"It has been the land bank's and my personal goal that we would not give back one dime," Daniels said. "Detroit is not a city in a position to turn down grant money."

The final blighted house under the federal program was knocked down in August.

The initiative, jointly overseen by the land bank and Detroit's Building Authority, took down 15,084 blighted houses in the city with $265 million in federal Hardest Hit funds beginning in the spring of 2014.

The program was controversial for years after it fell under scrutiny in the fall of 2015 over bidding practices and soaring costs. It later became the subject of city, state and federal reviews and investigations. In spring 2019, two men involved in the program pleaded guilty to rigging bids and accepting hundreds of thousands of dollars in bribes. 

In January 2020, Detroit created a new, city-controlled demolition department to oversee demolition work going forward. The shift marked the first time in six years that the city had control of the process.

Detroit voters overwhelmingly approved a $250 million blight bond in November to fund the demolition of thousands more houses and rehabilitation of thousands more.