KALAMAZOO, MI -- A Michigan State Police investigation into the Kalamazoo County Treasurer’s office seeks to settle questions about whether the treasurer acted illegally while financing property redevelopment through the foreclosure process.

The investigation documents, released to MLive/Kalamazoo Gazette through the Freedom of Information Act, show Republican Treasurer Mary Balkema paid a single contractor almost half a million dollars for work on properties since 2011, allowed contractors to avoid paying sales tax by using county credit accounts and used proceeds of property sales to buy thousands of dollars in outdoor furniture, clothing and transportation to a conference in Wisconsin.

Questions have also been raised about the transfer of properties to Balkema’s church and a nonprofit that employs a county commissioner.

The nearly 800 pages of documents include receipts from purchases made through the county’s tax reversion fund, records of property transfers from the treasurer’s office to outside groups and individuals and more than 100 pages of receipts showing tens of thousands of dollars in purchases from Lowe’s made by her staff.

On Sept. 7, 2018, Kalamazoo County Corporation Counsel Elizabeth White met with Michigan State Police in Prosecutor Jeff Getting’s office to discuss financial transactions involving the treasurer’s office and county land bank. State police opened an investigation after White provided records of home foreclosures, auctions and county expense accounts.

Michigan State Police Lt. Chuck Christensen said police are focused on “accounting abnormalities” in the treasurer’s office, but did not provide more details about the scope of the ongoing investigation.

Police documents show MSP provided a general briefing of the situation to the Michigan Attorney General’s Office in October 2018 after obtaining records from White. Christensen said on Jan. 21 the investigation is likely a few months away from being finalized.

“I can tell you the treasurer has been cooperative,” Christensen said.

Commissioner Michael Seals, a Democrat and the board’s longest-serving member, said two colleagues began raising questions about the treasurer’s practices after Kalamazoo Township sued Balkema in June 2018. Commissioners also raised questions about a property transfer between Balkema and Mothers of Hope, a nonprofit that employs County Commissioner Stephanie Moore and is run by her mother.

Moore was chair of the county board at the time of the property transfer. Balkema spent more than $46,000 to renovate the property before it was transferred to Mothers of Hope.

Balkema said concerns about her actions are misplaced. State law provides the treasurer exclusive powers, as the county’s foreclosing governmental unit, to repair and distribute properties that go unsold at foreclosure auctions.

“The county does not own these properties, the county treasurer does as the foreclosing governmental unit,” Balkema said. “I do everything according to the law. There’s no fast and furious transactions going on here to people that don’t need them, deserve them or are cleaning up the tax base. That’s just not happening.”

Seals said members of the county board are concerned Balkema is entangled in conflicts of interest. He said it appears there is “a lot of nepotism going on” in the treasurer’s efforts to return properties to the tax base.

“The important thing is that none of (the elected officials) understand what is happening or why,” Seals said.

Republican Commissioner Roger Tuinier said he isn’t sure whether there is evidence of wrongdoing. Tuinier is reserving his judgment until police finish their investigation.

“I told Mary (Balkema), ‘Let it play out,’” he said. “If there’s nothing wrong, then so be it.”

White said she reviewed county records and brought her concerns to Getting, who referred her to Michigan State Police. White declined to speak further about the investigation.

“My obligation is to determine if concerns referred to me by commissioners have a factual basis and if so, to report them to law enforcement,” White said in an email to MLive when asked to comment on why she sought a police probe.

Communications between White, Balkema and other county staff were redacted in documents provided to MLive by police. Memos White sent to Christensen after the initial meeting in September were also redacted.

County Administrator Tracie Moored was notified after the matter was turned over to state police. In response to questions from MLive, Moored deferred to White.

White advised commissioners not to discuss the investigation with the media, Board Chair Julie Rogers said.

Spending scrutinized

Purchases made through the county’s tax reversion fund were highlighted in the documents White gave to police.

Balkema said the fund is comprised of foreclosure fees and proceeds from property sales. As Kalamazoo County’s foreclosing governmental unit, state law allows Balkema to direct the investment of the account to cover costs incurred in maintaining the property and reimburse taxes and fees owed on the property.

Receipts included in the documents given to police identify $900 in purchases including Adirondack chairs, barbecue grills and security alarms.

Balkema said the items supported a project to enhance a neighborhood hangout on the corner of Burdick and North streets. A staff member mistakenly paid for the items with her county expense account, Balkema said, and the spending was reimbursed by Vibrant Kalamazoo, a nonprofit established to support the Land Bank.

Receipts provided to police by White show $4,200 in purchases at Lowe’s using the expense account of a retired county employee. Balkema said she used the account without knowing who it belonged to.

Financial records also show nearly $2,500 was spent on polo-style shirts and other clothing and $350 for ferry tickets to attend a conference in Wisconsin. Balkema said the conference informs her work and that of her staff. She said her staff needed clothing with logos to safely identify themselves when knocking on doors.

Balkema said it is not a problem that the money for these expenses comes from an account dedicated to maintaining properties.

“Big deal, it’s for the tax reversion fund stuff,” Balkema said.

Documents provided to police by White draw attention to the treasurer’s method of redeveloping properties after foreclosure.

Eight addresses rehabilitated with $315,000 from the county’s tax reversion fund since 2016 are identified in the police documents. The Kalamazoo County Land Bank received $465,585 from selling the properties after obtaining them for next to nothing, documents show.

Land Bank Executive Director Kelly Clarke declined to comment on the investigation. State law designates Balkema as chair of the Land Bank board.

Balkema estimated she invested in a handful of the roughly 100 properties foreclosed on last year. Documents provided to police by White show Balkema frequently hires Cutting Edge Property Services LLC to do the work.

The Kalamazoo-based contractor, owned by Darnell Clay, was paid $451,187 since 2011, often on properties later sold by the Land Bank. Clay could not be reached for comment.

Balkema said she is not required to follow the county’s procurement policies or publicly bid contracts. She said some contractors don’t want to work in blighted neighborhoods, so she relies on people she can trust like Clay, who Balkema called her “favorite.”

“When you build capacity in the minority community and it works and the relationship is strong, why change a good thing?” Balkema said. “Many of the parcels are in the minority community and it gives some credence when a trusted member in the community is doing the work.”

Annual reports from the Land Bank feature Clay as “a key player in the Land Bank’s efforts to revitalize the community.”

Clay donated a total of $1,250 to Balkema’s 2012 and 2016 campaigns. Clay is listed as an endorsement on her campaign website.

“I don’t feel right about building his capacity, having him do work for me and then all of a sudden pull the plug because, why, I’ve given too much work to one person?” Balkema said. “Any time I need an emergency board-up or clean-up, he’s right there for me. He’s been good for us.”

Tax-foreclosed properties that are neither accepted by the state nor local units of government nor sold at two public auctions can be transferred from the treasurer to the Land Bank each year. If a property is not claimed by either the Land Bank or the local government unit, it remains in the treasurer’s control.

State law is silent on what Balkema can and cannot do with property held by her office, she said.

Balkema said properties that go unclaimed often have little to no value. Properties are sometimes given away for $1 to “protect the tax base” and clean up blight, she said.

Tax reversion funds pay to board up homes, remove garbage and other selective demolition. Balkema said she strategically invests more if the costs would be recovered from the property’s sale or when redevelopment would increase the taxable value of the surrounding area.

Balkema was unable to say whether she spent tax reversion funds to rehabilitate homes later sold for $1.

Seals expressed concern that the county board does not have oversight of the treasurer’s property transfers.

“When you hear complaints and hear (from the treasurer) ‘I’m in charge, I can do what I want,’ you don’t have anything to stand on,” Seals said. "That’s what we need to have changed in the statute so there are people who can watch what is going on in that account.”

Recipients of property

Documents given to police by White identify two Kalamazoo churches, including Balkema’s, among other property owners who obtained tax-foreclosed properties through quitclaim deeds.

In 2011, the start of Cutting Edge’s partnership with the Land Bank, Clay was sold a four-bedroom home valued at $14,800 for $2,500. He later purchased a vacant lot near his business from the Kalamazoo County Land Bank for $20 in 2017.

“That was really to make the area stable,” Balkema said. “Absolutely, I did that. I’m proud of him and the work that he did for (his) six kids."

In 2017, Netherlands Reformed Congregation obtained properties neighboring the church at 148 and 144 Blanche Ave. for $2. Each vacant property has an assessed valued of $8,600.

Balkema said she attends the church.

Another church, Seasons of Change Ministries, paid $3 for three properties it obtained through quitclaim deeds since 2016.

The church obtained a property valued at $19,500 on Lane Boulevard and two parcels on Hays Park Avenue with an assessed value of $16,100 and $2,600, respectively. Seasons of Change also obtained another property on James Street in December 2018 through a $100 quitclaim deed. It has an assessed value of $25,600.

Balkema said the homes are used to reintegrate formerly incarcerated people.

Sometimes redeveloped properties are put up for auction and sometimes they are given to a neighbor or investor who expresses interest, Balkema said. Her office works with neighborhood associations and other partners to steer property to the best use, Balkema said.

Commissioner Mike Quinn, a Democrat, raised concerns after Balkema transferred 603 Ada St. to Mothers of Hope through a quitclaim deed in February 2018. Balkema invested $34,326 and another $12,500 in repairs were paid by the county’s insurance provider.

Before obtaining the property, Mothers of Hope was given a $10,000 grant from the Local Initiatives Support Coalition. Balkema is chair of the LISC local advisory board but abstained from the vote.

An invoice shows Mothers of Hope paid $7,500 for maintenance one month after Balkema signed a quitclaim deed to give the property to Mothers of Hope for $1. The organization runs programs for youth and recovering drug addicts out of the home.

Contractors avoid sales tax

In October 2016, the county’s buildings and grounds department found Balkema let contractors use county expense accounts to avoid paying sales tax on materials.

State law requires contractors to pay sales taxes on equipment, supplies and materials.

According to emails included in police documents, there was a “considerable growth” in the number of invoices and dollar amount of purchases made by Balkema at supply stores like Lowe’s.

While contacting supply stores to let them know about the change, documents show, the county discovered contractors were using the Buildings and Grounds Department’s account without authorization. This allowed the contractor to avoid paying sales tax on items being purchased, Balkema said.

More than 100 pages of receipts included in the police report show tens of thousands of dollars in purchases from Lowe’s made by staff in the treasurer’s office. Some receipts included addresses matching properties conveyed to and rehabilitated by the Land Bank.

The purchases included building materials, cabinets, indoor appliances, flooring tile, paint and primer, carpeting and other items. Receipts show spending of as little as $11 in one visit to Lowe’s, while more than $5,000 was spent to purchase hundreds of items during another visit.

Balkema said her office tries to work with minority businesses and contractors with past felonies to benefit neighborhoods where rehabilitation work is being done. They often don’t have strong credit to make large purchases needed, so Balkema allowed some contractors to use county accounts.

Emails included in the state police investigation show Clay and two other unauthorized people used the county’s building and grounds expense account at Johnstone Supply and Lowe’s.

Buildings and Grounds Director Eric McNamara’s written account of an October 2016 meeting with Balkema is included in police documents. McNamara declined to comment for this story, redirecting questions to White.

“I told her it is not OK for our department to purchase this way and I need separation from her using my set up accounts in (buildings and grounds),” McNamara stated in his written account, included in documents provided to police by White. “She said that she didn’t know what the big deal was and why my knickers were all in a wad about it."

Balkema said she didn’t think she did anything wrong but stopped the practice after McNamara raised concerns.

Lawsuit raises questions

The police investigation is not the first time Balkema’s office has faced criticism for how it operates.

A lawsuit filed by Kalamazoo Township in 2018 alleged Balkema unlawfully took $140,000 from the township’s delinquent tax revolving fund to demolish a blighted property. Graphic Packaging paid $188,000 in additional demolition work then bought the property for $1.

The revolving fund ensures taxing jurisdictions receive property tax payments on time. The treasurer loans the expected amount to jurisdictions like cities, townships, libraries and schools then collects late payments from property owners.

The township’s lawsuit alleges Balkema unlawfully covered half of the demolition cost with money that should have gone to the township. Kalamazoo Township stated in court documents that it did not sign off on paying for the demolition, and called Balkema’s actions an “abuse of power.”

“Unless an injunction is entered, the (treasurer’s) authority over the delinquent tax revolving fund will remain unchecked,” the lawsuit stated. “She will be free to demolish and deduct from any local unit of government without prior assent and/or approval."

Township Manager Dexter Mitchell said the lawsuit was settled and Balkema repaid the $140,000 in taxes. Balkema declined to comment on the settlement.

Seals said the lawsuit was a red flag for the Kalamazoo County Board of Commissioners.

Balkema is adamant that White made a mistake in requesting the police probe.

“If the charge is that I have demo’d properties, protected the tax base, invested monies in tax foreclosed properties and put them back into productive use, then I stand guilty,” Balkema said.