Joe Guillen

Detroit Free Press

Despite new oversight procedures and recent reassurances from Mayor Mike Duggan that the city’s demolition program is on the right track, a special report released today portrays it in disarray, hampered by poor management while administrative costs rise.

The report, from Detroit Auditor General Mark Lockridge, highlights recent problems, including the discovery last week of at least 19 demolition sites left unfinished since July — some with partial fencing and open holes, all of which pose a “clear and present danger to the community.”

“This is clear evidence of non-compliance with contract and program requirements,” the report states.

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The release of the brought swift reaction from the Detroit Land Bank Authority, whose chairwoman called the audit "full of errors," and chided the auditor general's office for not presenting a draft of the report to the authority before Wednesday.

"I am very disappointed that the auditor general’s report today was full of errors and misinformation," said DLBA Board Chair Erica Ward Gerson. "It is normally the process of an auditor general to give a draft response to the department for this very reason — to avoid obvious factual inaccuracies. Unfortunately, the auditor general inexplicably failed to do that in this case."

Another red flag in the report involves the Detroit Land Bank Authority’s elimination of an “approval committee” whose function was to decide whether to include certain properties in demolition contracts.

The Land Bank’s partner in managing the city’s demolition program, the Detroit Building Authority, did not know about the committee’s elimination when questioned about it two days after its dissolution. “DBA emphatically responded that the committee was very much intact, still in force, and that they would continue to meet and review funding for properties whose costs exceed thresholds,” the report states.

The lack of communication was concerning. The Detroit Building Authority — which plays a critical role in designing contracts and estimating demolition costs — “was unaware of a change to a vital process that was established to ensure demolition costs were appropriate and properly funded,” the report said.

The report comes amid an ongoing federal investigation into the city’s demolition program and one day after the Land Bank’s executive director, Carrie Lewand-Monroe, announced her resignation to work as a consultant.

The report is part of the auditor general’s ongoing audit of the city’s demolition activities, which City Council President Brenda Jones requested in October 2015 amid revelations that demolition prices under Duggan’s administration had increased dramatically.

Duggan shouldered some of the blame earlier this year for the demolition program’s problems when a state review found that the program received more than $7.3 million in improper payments from federal blight-remediation funds. The city only admitted that about $1.3 million of that was improperly reimbursed with federal funds. The difference will be decided in arbitration.

At his State of the City speech a month ago, Duggan touted new oversight procedures in place and declared the demolition program will operate in full compliance with all state and federal laws.

“Now we have a joint team of state employees and Land Bank employees on every single contract with new finance oversight, new operations oversight, new compliance oversight and we believe that at the rate we’re ramping up, we are going to be able to take out 10,000 abandoned houses in this city over the next two years,” Duggan said then.

Part of the auditor general’s report focused on contracting decisions that resulted in the 19 unfinished demolition sites. The homes on those sites were knocked down in July, according to the report.

The explanation demolition officials gave the auditor general’s office for the start-and-stop demolition work is different than answers provided to the Free Press in recent days to questions about the same properties.

Curiosity about the properties piqued last week when the Detroit Building Authority publicly released a contracting request for proposals to handle debris removal and site finalization at those locations.

In a statement to the Free Press on Monday, Detroit Building Authority Director Tyrone Clifton said the contract for site finalization is needed because the original demolition contractor, Rickman Enterprise Group, started the work without proper authorization and was pulled off the job.

“The RFP is necessary because the contractor that demolished these 19 houses did so prior to being authorized to do so,” Clifton said in his statement. “The contractor will not be paid for the initial demolition and the remaining work will not be charged to the HHF (Hardest Hit Fund) program ... the site cleanup and restoration will be paid for (with) city funds.”

But answers given to the auditor general’s office suggest demolition work at the 19 properties was intentionally divided into two contracts rather than the result of a botched job.

According to the report, management for the Detroit Building Authority “informed us (on March 16) that this is a ‘pilot program’ to see if cost and time efficiencies could be gained by decoupling the back end of demolition from the front end,” which could involve awarding two separate contracts — one for demolition and the other for debris removal.

The report does not indicate the auditor general’s office was told that Rickman Enterprise Group was pulled off the job for improperly starting the work.

Roderick Rickman, chairman and CEO of Rickman Enterprise Group, has not returned messages seeking comment.

In response to the report's criticism of that project, Gerson issued a statement that reads: "Rickman demolished the properties without a notice to proceed in violation of MSHDA rules. The Land Bank discovered it and issued a stop order and denied payment to Rickman for those demolitions. The balance of the demolitions were put out for bid. This is an example of the Land Bank compliance process working entirely properly and appropriately."

The report questions the Detroit Building Authority’s ability to manage the city’s demolition program.

“To date, there is a lack of evidence that DBA as complied with or adequately fulfilled their role as the program manager, and there is a clear lack of oversight for citywide demolitions,” the report reads.

At the same time, administrative costs for the demolition program have risen.

Salaries at the Land Bank have almost doubled from $2.6 million in 2014 to more than $5 million as of last summer, according to the report.

In her response, Gerson cited the need for more oversight and that costs have not been excessive.

"An exhaustive auditing process by MSHDA found no cases of DLBA/DBA charging excessive administrative fees. In an effort to dramatically upgrade compliance and oversight activities, DLBA and DBA have increased oversight. These costs are not only proper and appropriate, they are necessary to assure full compliance with all city ordinances, state and federal laws and regulations," she said in her statement. "The Land Bank and building authority have made an absolute commitment to full compliance with all laws and are staffing to a level needed to accomplish that."

Contact Joe Guillen at 313-222-6678 or at jguillen@freepress.com