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Federal watchdog to update audit of Detroit's demolition program

Melissa Nann Burke
The Detroit News
Democratic U.S. Reps. Brenda Lawrence of Southfield and Rashida Tlaib  had written to state officials in April seeking more robust oversight regarding potentially contaminated soil used in the demolition program.

Washington — Federal officials plan to audit federally funded demolition activities for the risk of contaminated soil in Michigan and Detroit. 

The Special Inspector General for the Troubled Asset Relief Program, or SIGTARP, announced that it plans to update a 2017 review of oversight and technical requirements in Michigan's program at the request of Democratic U.S. Reps. Brenda Lawrence of Southfield and Rashida Tlaib, who represent Detroit in Congress. 

Lawrence and Tlaib had written to state officials in April seeking more robust oversight regarding potentially contaminated soil used in the demolition program.

They urged the state to implement recommendations that SIGTARP made in 2017 regarding the risks posed by asbestos exposure, illegal dumping and contaminated soil from housing demolitions in Detroit, Flint and other cities. 

SIGTARP previously launched a separate criminal investigation into Detroit's demolition program years ago after concerns were raised over bidding practices and spiraling costs.

Two months ago, the U.S. Department of Justice said officials do not expect to bring any more charges against public officials for wrongdoing in Detroit’s federally funded demolition program.

Michigan has the highest number of demolitions funded by the Troubled Asset Relief Program among the states with 17,633 as of March 31 at a cost of $280.4 million, with $100 million left to spend, according to SIGTARP. 

And Detroit has the highest number of federally funded demolitions of any city at 11,283 demolitions at a cost of $186.6 million, with $72 million left to spend.

SIGTARP in November 2017 found that demolitions could expose residents to asbestos and other hazards, as well as contaminated soil and illegal dumping.

It recommended boosting agency oversight and installing safeguards to ensure best practices including proper removal and storage of hazardous materials and filling in demolition holes with only clean soil from approved sources.

SIGTARP said its new review of Michigan and Detroit's program will evaluate how state and federal officials handled its earlier recommendations and "whether there are program risks and, if found, how to mitigate them."  

Working with the U.S. Army Corps of Engineers, the inspector general also plans to probe demolition activities in process, as well as completed demolition activities in Wayne County. 

SIGTARP in January issued subpoenas seeking two years' worth of documentation from certain contractors over dirt used to fill holes for homes torn down under the blight removal effort. 

The feds demanded that demolition firms produce receipts and records that reveal where their backfill dirt was coming from, who trucked it to sites in Detroit and where it was dropped off.

Housing officials say they've instituted additional controls to the system. In 2016, the state asked the U.S. Treasury to temporarily suspend Detroit’s program while processes and procedures were put in place to address audit concerns.

"The Michigan Homeowner Assistance Nonprofit Housing Corporation has consistently shared information with SIGTARP over the course of the demolition program," spokeswoman Katie Bach said.

"We welcome this current evaluation and intend to fully cooperate by providing all requested materials."

After environmental and health and safety concerns were raised recently, the Michigan Housing Authority added measures include increased site inspections, more contractor training and dirt testing, officials said.

“Removal of dangerous vacant buildings in our neighborhoods is one of our city’s most urgent priorities and we always have made health and safety a centerpiece of our blight removal program through an ongoing process of continual improvement," Arthur Jemison, chief of services and infrastructure for Detroit, said in a statement.

"We welcome all reviews of our work and look forward to working with SIGTARP and the Army Corps of Engineers to review the processes we have in place and to identify potential areas of further improvement."  

Jemison said the city recently worked with state and land bank officials to address concerns raised over soil delivered without contractually required documentation on its source, and the failure to remove foundations or other concrete and debris from demolition sites.  

All sites tested and reviewed by the city were determined to have clean fill that met state environmental standards for residential use, a city of Detroit official said.

With the exception of Chicago-based McDonagh Demolition, basement foundation material was not left behind by contractors, according to the city. The state does not require foundational material to be removed, according to the city.

Detroit's Building Authority issued stop-work orders to two demolition contractors until they came into full compliance, according to the city.

The city found a third contractor, McDonagh, had not fully excavated demolition debris such as basements, walls and footing at multiple sites before adding dirt on top.

McDonagh was terminated from the demolition program and agreed to a settlement resolving the claims that involves McDonagh digging up all 90 of the sites in question and removing any hard fill material that remained.

As of Monday, all but 13 of these sites have been completed, according to the city. McDonagh also lost approximately $15 million in contracted demolition work it had not yet begun.