Detroit erases $1.3M in debt, fines in deal with controversial landowner

Detroit — Records show the city made a deal with a controversial landowner this spring to forgive nearly $1.3 million in property tax debt and fines, along with likely thousands more in blight tickets the city maintained he owed for land needed for Fiat Chrysler Automobiles NV’s $1.6 billion expansion on the city’s east side.

Michael G. Kelly, the city and the Detroit Brownfield Redevelopment Authority brokered the agreement in May, in which Kelly and his companies transferred five of his properties to the authority. In exchange, the city gave Kelly 15 parcels of city-owned land elsewhere in the city, including near the Detroit riverfront.

Detroit officials also agreed to forgive any property taxes, interest and other related debt Kelly, or his companies, owed the city prior to 2016, along with any pending blight violations. WXYZ-TV (Channel 7) first reported the agreement Thursday. All of the debt the city alleged Kelly owed was on land that was foreclosed and sold at auction.

The city has sued hundreds of large property owners, including Kelly, starting in 2016 to recover unpaid property taxes and other expenses including demolition costs.

Five lawsuits against Kelly and his affiliated companies were dismissed under the FCA deal, according to city officials.

"The city needed those in order to complete a 200-acre land acquisition that would allow for a new FCA plant and the creation of nearly 5,000 new jobs in Detroit," Detroit's Corporation Counsel Lawrence Garcia said in a statement. "Every transaction requires a willing seller and a willing buyer."

David Viar, Kelly's attorney, did not return a call for comment.

Michigan does not allow private property to be taken by the government for private use, like a new auto plant.

Kelly of Grosse Pointe Woods is a well-known Detroit speculator who, along with companies he's affiliated with, amassed hundreds of properties from the Wayne County tax auction. He is being sued in federal court by homebuyers, accused of selling predatory land contracts that violate state and federal laws.

Three of the properties Kelly turned over in the deal, which was approved by the Detroit City Council, are on St. Jean between Warren and Mack on the city's east side near the site of the new Fiat Chrysler plant. It is scheduled to open in late 2020.

The fourth property is on Winslow near the Jeffries Freeway and McGraw on the city's west side, and the fifth is on Richardson near Mt. Elliott and Huber on the east side.

County records show Kelly's company let the Richardson property go into foreclosure in 2010 over $7,400 in delinquent taxes. Kelly's company bought it back the same year for $500 at the foreclosure auction under a similar company name.

In return, the city gave Kelley 15 properties near East Jefferson and Alter along the riverfront. The bulk of the properties are located on Ashland, and one is on Harbor Island, according to the documents. Because the properties were city-owned, they don't have a city assessment so it's difficult to say how much the properties currently are worth.

It's the second time Kelly made a property deal with the city in exchange for dropping lawsuits.

In 2018, the city dropped 18 lawsuits and 17 blight cases against Kelly in exchange for 38 properties he gave to the brownfield authority and another 23 he transferred to the Eastern Market Corp.

Kelly and his companies were sued last year in U.S. Detroit Court in Detroit by home buyers who accuse him of violating the federal Truth in Lending Act, Homeownership Equity Protection Act and the Michigan Consumer Protection Act. Kelly has denied the allegations in court, arguing the rent-to-own contracts are not subject to federal rules.

The lawsuit alleges purchasers believed they were buying their homes and were encouraged “to keep paying the monthly payments and to repair the dilapidated properties,” all while paying a 10 percent interest rate and property taxes.

Then if payments were missed, Kelly and his companies would try to evict them as tenants without the normal protections provided homeowners, according to the lawsuit.

In 2011, The Detroit News reported that Kelly was the city's largest private property owner. At the time, The News reported that he used tax auctions to build a portfolio of more than 1,152 parcels on which nearly $100,000 in blight fines were owed going back six years, according to The News investigation.