John Wisely

Detroit Free Press

Mayor Mike Duggan said he's seen no evidence in criminality in the demolition program.

New rules approved for awarding of demolition work.

Feds and state release $42 million after rules were revamped.

State employees will be embedded in the Detroit Land Bank Authority to keep a closer eye on its controversial demolition program, which has prompted a federal investigation, Detroit Mayor Mike Duggan said today.

"There will be two sets of eyes on everything," Duggan said at a news conference.

Duggan also announced that the U.S. Treasury and the Michigan State Housing Development Authority released $42 million for the program to proceed. The money was allocated earlier this year, but the treasury department suspended release of it until the revamped procedures were approved Friday.

State housing development officials were not immediately available to comment on the new procedures or their review.

Duggan said he was disappointed in some of the things he learned from the investigation into the demolition program but that he'd seen no sign of criminal activity. He declined to characterize the kinds of mistakes made.

"The speed at which we went outstripped the controls that we had in place," Duggan said.

Duggan said that the program has generated more than 500,000 pages of documents that had to be reviewed by state officials in Lansing. By having state housing development authority employees working alongside Detroit officials, they can spot problems quicker and provide real-time advice, Duggan said.

Officials from the mayor's office, the Land Bank, the housing authority and the U.S. Treasury have been working cooperatively since Aug. 15 to revamp the Land Bank's procedures for evaluating bidders and paying contractors. In addition to closer oversight from the state, new procedures include:

Quality-control audits to ensure compliance.

A $5-million escrow account established by the Land Bank to cover any costs deemed ineligible by the U.S. Treasury.

A 50-house limit on new bid requests.

A requirement to disclose all subcontractors and cap their markup at 10%.

The Land Bank will use the money, which comes from the federal Hardest Hit Fund, to ramp up a demolition program that has knocked down more than 8,000 houses since 2014. Other demolitions conducted by the city bring to 10,666 the number of buildings that have been demolished in the past two and a half years.

Detroit's program, one of the most aggressive in the country, has prompted a federal investigation into how the city's Land Bank has awarded demolition contracts. In April, the Office of the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP, issued a subpoena for records related to the city's demolition program.

The Free Press reported in August that Jim Wright, a high-ranking Detroit demolition official, resigned amid a federal probe. Last week, the Free Press published records showing that the Land Bank had already spent more than $81,000 on legal bills related to the investigation.

Detroit Auditor General Mark Lockridge is looking into why demolition costs rose from less than $10,000 per property to more than $16,000 at one point. He's also looking into pre-bid meetings reportedly held with handpicked demolition firms who got the bulk of the work.

No state has received more of those funds than Michigan — $381 million — for the removal of abandoned or blighted properties, and no city in the nation has received anywhere near the $260 million committed to demolitions in Detroit.

Contact John Wisely: 313-222-6825 of jwisely@freepress.com or on Twitter @jwisely