Feds direct $100M in grants to help broke Detroit
DETROIT (AP) — The U.S. government directed more than $100 million in grants Thursday to help bankrupt Detroit tear down vacant buildings and spur job growth, but the help falls far short of the wider bailout some city leaders had sought.
Gene Sperling, chief economic adviser to President Barack Obama, said the administration scrounged through the federal budget and found untapped money that “either had not flowed or had not gotten out or not directed to the top priorities for Detroit.”
But considering the Motor City is at least $18 billion in debt, it will take a far larger infusion of cash or historic deals with bond holders, insurance companies and other creditors to correct the problem.
Sperling will join on Friday in Detroit three other top Obama aides — U.S. Attorney General Eric Holder, Transportation Secretary Anthony Foxx and HUD Secretary Shaun Donovan. The closed meeting also will include city and state leaders, and the emergency manager leading Detroit through the largest municipal bankruptcy in U.S. history.
The Obama administration repeatedly has signaled it won’t offer a massive federal bailout like the one credited with helping rescue Chrysler and General Motors.
“There is not going to be a bailout,” Democratic U.S. Sen. Carl Levin told The Associated Press on Wednesday. “We have enough problems with the federal deficit. We need to be creative and look at existing programs. There are still some funds there.”
The funding announced by Sperling will include $65 million in Community Development Block Grants for blight eradication, $25 million in a public-private collaboration for commercial building demolition and nearly $11 million in funds to ensure working families can live in safe neighborhoods.
Holder will announce $3 million that, in part, will be used to hire new police officers. About $25 million also will be expedited to Detroit to hire about 140 firefighters and buy new gear.
“It wasn’t enough to try and free the resources,” Sperling said. “We had to make sure they are well-used and targeted.”
In addition, Kevyn Orr, the city’s emergency manager appointed by Gov. Rick Snyder, has told the city’s two municipal retirement systems he wants to freeze Detroit’s pension plans and move to a 401(k)-style system.
The gathering follows a series of meetings with the White House to plot ways to pull Detroit from a fiscal pit that this summer made it the largest U.S. city to file for bankruptcy protection.
Detroit has had a poor record in making sure grant money is used properly and even spent at all.
In 2011, Mayor Dave Bing fired the director of the city’s Human Services Department after an internal investigation revealed $200,000 intended for poor residents was spent on office furniture for staff members.
The following year, his office had to scramble to use about $20 million in grants that had been left sitting for demolitions of thousands of vacant houses. The city’s Police Department also allowed a $400,000 grant to lapse for a new armored vehicle.
The grant troubles have rankled Orr, who has said Detroit is so poor that it can’t afford to lose out on any resources.
Grants only can pay for things the city otherwise couldn’t afford. Several businesses even pitched in $8 million earlier this year to help pay for a new fleet of emergency vehicles, including 23 EMS units and 100 police cars, to boost public safety and reduce response times.
Police Chief James Craig said Thursday that he was in Washington a few weeks ago in search of federal resources for his department.
“Our work together is critical in achieving our goals of making Detroit a safe city and providing the necessary resources in raising the morale of our most valuable asset, our people,” Craig said.
Detroit is in bad shape and even millions in federal grants “probably will not be enough to help fix things,” said Bridgette Shephard, 47, a social worker who lives in Detroit.
“But something is better than nothing,” she said. “A bailout would have been better, but if we can sustain some of our needs with grants that would be a start. Let’s take it. Whatever kind of money it is to benefit the city, I’m all for it.”
The Obama administration is trying to show its support without trying to send any message about a bailout, said Peter Henning, a Wayne State Law School professor.
Officials, especially those from HUD and Transportation, can commit funds for infrastructure projects, while Holder can chip in resources for fight Detroit’s high violent crime rate, Henning said.
“So these are back door ways to provide federal funding and support without having to seek a bailout, which would be dead on arrival from both parties,” he said. “The goal is to strengthen Detroit, but only indirectly. This is at best a muted commitment because what Detroit really needs is dollars and not just support that might be beneficial in three to five years. But any hope of that is a pipe dream.”