Todd Spangler

Detroit Free Press

WASHINGTON — A Michigan-led effort to have $2 billion in federal funds moved into a program that helps Detroit and other cities across the U.S. to tear down decrepit, abandoned buildings paid off Friday, with the state poised to receive as much as $323 million more in the months to come.

Much of that funding — if it comes as expected — is likely to end up in Detroit, where Mayor Mike Duggan is running the nation’s most-aggressive blight removal program, having already taken down more than 7,000 buildings with $130 million committed from the federal Hardest Hit Fund.

It’s not clear at this point exactly how much of the funding Detroit could end up getting. But if Michigan gets the full $323 million and the city continues to receive the lion’s share of funding provided under the fund for blight, it could bring the city closer to Duggan’s goal of tearing down 15,000 buildings by 2018.

“We have the most sophisticated blight removal program in the country,” said U.S. Sen. Debbie Stabenow, D-Michigan, who was key to winning congressional approval in December for moving $2 billion into the Hardest Hit Fund where it can be used for blight programs, as well as other neighborhood and homeowner stabilization efforts. “This is a real shot in the arm.”

As the Free Press previously reported, with funding under the initial $498-million award to Michigan in 2010 drying up, Duggan and others were trying to find cash to keep the blight removal plans going. He, Stabenow and others — a cast that included the Rev. Jesse Jackson, Quicken Loans founder Dan Gilbert and JP Morgan Chase’s Jamie Dimon — put pressure on Congress to secure more funding.

And it worked.

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The Treasury Department, making the announcement Friday, said it would dole out a little under $74.5 million from that new funding to the State of Michigan almost immediately, and the state would get the chance to compete for up to another $249 million in the near future.

Kevin Elsenheimer, executive director of the Michigan State Housing Development Authority, said his agency will send its plan for distributing the first $74.5 million across the state to Washington for approval by March 4. MSHDA then will apply for the additional $249 million by March 11, with much of it, if not all, likely to be committed to blight removal efforts in Detroit and other cities across Michigan.

“We are ready to insert these dollars into cities and continue the positive momentum of eliminating blight so it can no longer stand in the way of neighborhood revitalization,” Elsenheimer said.

"We look forward to the opportunity to compete for this funding based on our track record," Duggan added. "The City of Detroit will fully support the state's application for the maximum $250 million HHF allocation available in the next round."

Sixteen other states and Washington, D.C. — which, along with Michigan, were among the only jurisdictions authorized to receive funding through the $7.6-billion program after it was created in the wake of the 2008-09 housing crisis — will split the rest of the $2 billion in available funding. Only one state, Alabama, which was among the original awardees, was not included because it has spent only about 30% of its initial funding from 2010, far less than the 50% required under Treasury's guidelines to be eligible in the new rounds.

All the other states and Washington, D.C. have drawn down between 57% and 100% of their initial allotments and will now have until the end of 2020 to spend the Hardest Hit Fund amounts they have or will receive. An earlier deadline had required all funds to be spent by the end of 2017 but that was lifted by Congress.

“While the housing market has strengthened in recent years, there are still many homeowners and neighborhoods experiencing the negative effects of the financial crisis,” added Mark McArdle, Treasury’s Deputy Assistant Secretary of Financial Stability. “The additional HHF funds authorized by Congress will allow states to continue their efforts to stabilize local communities and help struggling families avoid foreclosure.”

Under the Hardest Hit Fund, various neighborhood stabilization efforts can be funded, including foreclosure prevention and mortgage assistance programs. But several years ago, Treasury also decided to allow funding to be used for blight removal as a way to improve and stabilize neighborhoods, with Detroit's and other Michigan cities' programs leading the way.

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Almost 90% of Michigan’s original $498-million award has been reimbursed for work done in the state with much of that — $208 million — committed to blight efforts in several cities, especially Detroit and Flint, but others as well.

“Millions of dollars in additional federal funds will make a huge difference in removing blight across Michigan, including in Flint and Saginaw,” said U.S. Rep. Dan Kildee, D-Flint Township, who has long been a proponent of funding efforts to stabilize neighborhoods through blight removal. “Getting rid of blight will help to raise property values, decrease crime and unlock greater opportunity for all homeowners.”

There is evidence Kildee is right: A report released last October by the Skillman Foundation, Gilbert’s Rock Ventures and Dynamo Metrics indicated property values of homes within 500 feet of Hardest Hit Fund teardowns in Detroit had increased more than $209 million. And the increases in values were even higher in areas where there were complementary efforts such as side lots sales and nuisance abatement actions.

Even with an aggressive program to remove blight, however, Detroit still faces a huge task with some estimates saying there are as many as 40,000 blighted structures in the city. Duggan, too, has taken some criticism for increases in the per-property cost of demolitions, though it has still been far less than the amount allowed by the Treasury of $25,000 per property.

Others, however, have credited Duggan with jump-starting a demolition program that could clear out thousands of dangerous, abandoned properties, reducing a load on city services and potentially providing open space which could be redeveloped.

Don't slow Detroit's blight fight

“Blight removal is critical to the resurgence of cities across Michigan,” said U.S. Sen. Gary Peters, D-Mich., who worked with Stabenow to get approval of the $2-billion transfer which was part of a budget agreement reached late last year. “These resources … will build on efforts to improve safety and property values in our communities and attract new investments that will help these neighborhoods continue to recover and grow.”

U.S. Rep. Debbie Dingell, D-Dearborn, called the announcement of the funding "another important step in the (Obama) administration’s effort to help communities and homeowners recover from the depths of the recession and build a brighter future."

As outlined by Treasury, $1 billion of the new funding will be doled out around the country to 16 eligible states and Washington, D.C. up front, including the $74.5 million for Michigan. With that funding being based on population and the percentage of the initial award a state has successfully committed, California will receive the most, at $213 million, to be followed by Illinois ($118 million), Ohio ($97.6 million), North Carolina ($78 million), Florida ($77.9 million) and then Michigan and the others.

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Then, eligible states will be able to compete for a second-round amount worth up to half of their initial 2010 allocations or $250 million, whichever is lower. For Michigan, that means a second-round award of no more than $249 million. Those awards will be based on a state's needs, the programs it already has in place and its track record of successfully utilizing Hardest Hit Fund money, with award announcements expected to be made by the end of April.

Funds that aren't spent or awarded in either of the two new rounds of funding could eventually be doled out to other eligible states, however, making it possible that Michigan could see even more funding in the future.

Stabenow said with Michigan having successfully committed nearly all of its original award and a model blight program, she expect the state to get its full potential allocation.

“We’re the national model (for blight removal),” she said. “We fully expect Michigan will be doing very well.”

Contact Todd Spangler: 703-854-8947 or at tspangler@freepress.com. Follow him on Twitter at @tsspangler.