Ann Arbor failed to meet conditions of grant for demolition of North Main houses, state says

Editor's note: This story has been updated with comments from City Administrator Steve Powers.

The city of Ann Arbor failed to meet conditions of a grant agreement for demolition of six boarded-up houses on North Main Street, and the $96,000 award has been rescinded, a spokeswoman for the Michigan State Housing Development Authority said.

Katie Bach, media affairs manager for MSHDA, on Monday provided a more detailed explanation of the issues surrounding the Neighborhood Stabilization Program grant and why it went unused.

Mayor John Hieftje put the blame on MSHDA last week when asked why the houses weren't taken down by a March 15 deadline to qualify for demolition grant funding.

"They told us we needed to get the houses down by March 15, and a check was coming," Hieftje said. "Since then, we've had very little communication with them. They're not getting back to us."

According to a timeline provided by MSHDA, the city was awarded a $116,000 increase on Sept. 28 to a previous grant, bringing the total award to $966,000.

From the additional NSP funds, $20,000 was for demolition of blighted structures located at 512 Felch and $96,000 was for the houses at 720-735 N. Main.

According to the grant conditions, all funds had to be spent by March 15 and no NSP funds would be available for expenses incurred after March 15.

All invoicing had to be submitted to MSHDA by April 15, and only work completed prior to March 15 would be reimbursed with NSP funds, according to the agreement.

MSDHA's timeline shows the grant was decreased by $20,000 on Nov. 20 after it was decided NSP funds wouldn't be used for the demolition of 512 Felch.

And after the March 15 deadline lapsed and the North Main houses had not been demolished, MSHDA took back the other $96,000 on March 18.

"The problem was that the city's procured contractor could not actually complete the demolitions within the NSP1 expenditure timeframe of March 15," Bach said.

City Administrator Steve Powers said the city did not overlook the March 15 deadline. He said staff made a judgment call that the demolition work would not be completed by the NSP deadline.

"I have asked staff for a recommendation on using MSHDA funds or the city's dangerous building fund," Powers wrote in an email on Monday.

Bach said the city still could have elected to proceed with the demolitions and finance any costs incurred before March 15 with NSP funds and any costs incurred after March 15 with a different funding source. She said the city shouldn't have been waiting for a check from MSDHA.

"NSP1 funds are not advanced, but instead are reimbursed on an invoice basis," she said, adding the city would not have received a check prior to the work actually taking place.

Bach said last week Ann Arbor still might be able to demolish the homes with NSP funds, because there will be a reallocation window opening soon, and the city can reapply.

"There are no guarantees, though, because it is a competitive process," she said.

Hieftje said if the issue doesn't get resolved soon, the city will just go ahead with demolishing the houses using its own money.

Ryan J. Stanton covers government and politics for AnnArbor.com. Reach him at ryanstanton@annarbor.com or 734-623-2529. You also can follow him on Twitter or subscribe to AnnArbor.com's email newsletters.