Detroit, state reach $100K settlement over alleged demo violations

Lansing — Detroit must be more transparent about its heavily scrutinized residential demolition program and will pay a $100,000 settlement or complete an environmental improvement project as part of an agreement with the state over alleged asbestos violations.

Demolition of an unoccupied house at 9848 Hayes in Detroit, Michigan on May 19, 2016.

Officials from the administrations of Gov. Rick Snyder and Mayor Mike Duggan signed a consent agreement in mid-December, according to a court document released Friday by the Michigan Department of Environmental Quality.

The department alleged the city, the Detroit Building Authority and the Detroit Land Bank Authority violated state and federal air quality rules by demolishing residential buildings without properly disposing of regulated asbestos materials.

The city maintains that any violations were the responsibility of contractors and intends to cover the settlement using payments withheld from those firms.

“Asbestos is a known carcinogen that must be addressed prior to demolition work,” DEQ Director Heidi Grether said in a statement. “We appreciate the City’s willingness to work with the DEQ to reduce the risk to citizens who continue to live and work near these abandoned structures.” 

The agreement will require the city to comply with all state and federal rules moving forward and requires the Detroit Building Authority to conduct additional inspections prior to demolitions.  Any future violations will be subject to a $3,500 fine.

Under the deal, Detroit will be required to pay $10,000 to the DEQ within 30 days, $45,000 within one year and another $45,000 within two years. But the city can reduce its total penalty of $100,000 if it proposes an environmental project approved by the state.

"No dollars are being diverted from any demolitions or the city's general fund for this, only from contractors who failed to properly protect our citizens," Detroit Corporation Counsel Lawrence Garcia told The Detroit News in a statement.

The city's demolition program, a centerpiece of the Duggan administration, came under scrutiny in fall 2015 amid concerns over bidding practices and spiraling costs. It has since been under the scrutiny of state and local probes as well as a federal grand jury.

The new agreement specifies that city defendants “do not admit” wrongdoing and maintain that contractors who performed the work are liable for any asbestos violations.

Detroit signed the consent agreement “solely to settle disputed claims without incurring the time and expense of contested litigation,” according to the order issued by Ingham County Circuit Court Judge Richard J. Garcia.

"The city always has been committed to the highest environmental standards in its demolition program," Lawrence Garcia said. "We look forward to building on the extensive safety protocols we have implemented since these contractor violations occurred in 2016.  We appreciate the partnership of the MDEQ in bringing a resolution to this matter."

The deal, which will last at least three years, will require Detroit to post asbestos inspection reports and waste shipment records on its website for public review.  

Between February 2016 and May 2017, the state environmental department issued 28 individual notices to the city alleging state and federal violations related to residential buildings that contained asbestos materials.

The judgment notes that within 30 working days after the effective date of the agreement, the building authority must retain asbestos inspectors, bear all associated costs and provide the inspectors with access to all records, employees, contractors, and property that the inspectors “deem reasonably necessary.”

Each inspector, the judgment notes, shall be an independent third party with no financial relationship to any of the people participating in the demolition program, “and who has no financial stake in the outcome of the asbestos inspections.”

The inspectors shall perform the asbestos inspections at a minimum of 50 percent of the facilities to be demolished each month under the demolition program, except at facilities for which the city has issued an emergency demolition order.

The agreement notes the Detroit Building Authority has already taken several steps to prevent future violations, including creation of a contractor database, ensuring contractor compliance and performing inspections after asbestos removal work.

Detroit’s Office of Inspector General released a 26-page report this month concluding that controversial meetings between city officials and specific contractors to discuss federally funded demolition work before public bidding didn't violate written rules, but they weren't transparent and gave the impression of "preferential treatment."

The inspector general's office, in its investigation, sought to determine whether the land bank had engaged in waste, fraud, abuse or corruption by holding the large-unit contractor meetings prior to the official release of the request for qualifications. 

The investigation found there was no evidence of an "unfair awarding" of the contracts, nor evidence of "kickback," but all city business should be conducted transparently.

The U.S. Department of the Treasury, through its Troubled Asset Relief Program, approved blight elimination funding in June 2013 that allowed Hardest Hit Funding to be used for demolition.

Under the effort, the Michigan State Housing Development Authority was approved to allocate funds under the state's Homeowner Assistance Non-Profit Housing Corp. to eligible Michigan cities. 

Since spring of 2014, Detroit has torn down 16,400 blighted homes and has been awarded about $258 million.

Two years later, U.S. Treasury temporarily suspended the federally funded program in summer 2016 to address "mistakes" and "errors." Officials then developed a new set of practices, which were adopted by treasury in October of that year.