Detroit may need to return up to $2.7 million, or nearly a third, of the federal grant money it got for Motor City Match, its flagship entrepreneur-funding project. But it expects to get it back.
When the city ultimately gets back the money it returns, it will come with a warning to use it properly this time, meeting the guidelines for the U.S. Housing and Urban Development Department's Community Development Block Grant program that gives annually to states and localities to help with housing and economic opportunity. Detroit officials maintain the final number will likely end up lower, though.
Detroit's government has been overhauling its business-boosting program's record-keeping and policies with HUD's help following concerns about documentation that didn't show if Community Development Block Grant dollars were used properly.
Many of the federal department's questions seem to be wrapping up after they first emerged in 2018. Most recently, HUD said June 3 that the city could resume using HUD funding for small-business development, after being asked to halt that spending while feds reviewed the grantmaking programs in question: Motor City Match and its smaller sister program Motor City Re-Store.
HUD laid out problems the city needed to solve in order to get that money flowing again. The city's Housing and Revitalization Department on March 23 handed over a 70-page response, obtained by Crain's through the Freedom of Information Act.
The letter by Detroit housing director Donald Rencher laid out new policies and procedures for reporting how it spends those block grant funds — more closely meeting HUD's reporting standards and incorporating more government oversight over the program.
The new policies and procedures aren't in use yet and are still being worked out with technical assistance from HUD, according to Nicole Wyse, the city's associate director of community development.
Motor City Match makes matching grants and provides in-kind design and business plan support to entrepreneurs in a bid to fill vacant storefronts along Detroit commercial corridors. It's administered by contractor Economic Development Corp., which is staffed by the more well-known, quasi-public economic development agency Detroit Economic Growth Corp.
"(HUD supports) the use of (Community Development Block Grant money) for these types of programs going forward and we're looking forward to continuing to use that as a resource for our small businesses," Wyse said.
Detroit had replaced the federal funding source that halted in February 2019 with its own general fund. The city handed Motor City Match $5.8 million. The program hasn't used all of it, though, according to the city, with a $1.1 billion general fund budget this fiscal year.
The 5-year-old program has also used $8.9 million in federal Community Development Block Grant dollars and $5.5 million in philanthropy since its inception, according to the city.
In HUD's original complaints, it said Detroit hadn't created procedures to adequately document how all of its Motor City Match spending was eligible for the Community Development Block Grant funding — it needs to follow specific reporting requirements, as well as meet goals on serving low-income business owners and residents.
The city reviewed years of expenditures. Spending that didn't qualify would need to be returned to the federal government out of Detroit's general fund. However, Rencher said, the city will ultimately get the same amount back to use for Community Development Block Grant-authorized purposes.
"We do get that money returned back to us in whole," Rencher said. "They're like, 'OK, try it again.'"
The city estimated in March it could need to pay back up to $2.7 million of the nearly $9 million it got. The city has asked HUD to review the figure, and told Crain's it expects it to end up lower.
The city also said in the March letter that it found no "misuse" of funds for purposes outside Motor City Match and Re-store — all of it was used for the programs, but not always in a way that conformed with the Community Development Block Grant standards.
"I know we are looking forward to figuring out how we continue to help fund small businesses ... and doing it in a way that's eligible" for the Community Development Block Grant program, Rencher said.
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Detroit gets the go-ahead to use federal funding for Motor City Match again - Crain's Detroit Business
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