Detroit small business grant program under scrutiny, but one owner says it helped | Michigan Radio
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Detroit small business grant program under scrutiny, but one owner says it helped

Jan 11, 2021

The Detroit Office of Inspector General (OIG) has released a report on excessive spending in Motor City Match, a small business grant program championed by Mayor Mike Duggan. The Duggan administration disputes some of the OIG's findings, says Detroit Free Press reporter Joe Guillen, who's been covering the story.
Credit City of Detroit

  

Motor City Match, a program championed by Detroit Mayor Mike Duggan, was launched in 2015 to support small and emerging businesses in the city with federal funding. But after investigating the program, the Detroit Office of Inspector General released a report January 4 that revealed concerns about Motor City Match’s spending and administration.

“[Motor City Match] was a way for the city to spur small business growth by putting money in small business owners’ pockets to start the business,” said Joe Guillen, a reporter for the Detroit Free Press who’s been covering the story.

He says Inspector General Ellen Ha’s office started investigating the program after a former city employee filed a complaint stating Motor City Match spent too much money on consultants, compared with the funds allocated to the Detroit entrepreneurs seeking help from the program.

“The consultants got millions of dollars,” he said. “Overall, coupled with other administrative costs, over 75% of the money, $6.5 million total out of $8 million, went to these administrative costs, consultants, and other fees that didn’t end up in the business owners’ pockets.”

The COVID-19 pandemic has brought challenging effects for many Michigan entrepreneurs, and some small businesses have closed permanently. But Ha’s investigation of Motor City March did not review spending during 2020. It only covered late 2014 to 2018, says Guillen. And the inspector general’s office found that 76.5% of the over 1000 businesses that Motor City Match supported have failed.

But Mayor Duggan’s administration disputes that number. They argue that some of the businesses included in the calculation are in fact still working to open up, Guillen says. But, he adds, they don’t provide a clear number of businesses that are still in this in-between phase.

“There’s probably a middle ground there, where maybe the inspector general classified some businesses in a middle stage as having failed. But I think if the city had a stronger rebuttal, they would have given a specific percentage that they found,” he said.

It takes a lot for a business to be ready to open, says Amina Daniels, owner of the Detroit-based cycling and yoga studio Live Cycle Delight. A recipient of Motor City Match’s support, Daniels has worked with a number of business incubators and programs that support entrepreneurs. She says that as she was developing her studio, many people told her there wasn’t enough interest for a cycle studio in Detroit.

“Even the peers that I had, or the people that I was pitching to, they were like, ‘Nobody’s going to want a cycling studio or group fitness of that kind in Detroit,’” she said. “Five years later, not only do they want group fitness, but there have been four other cycle studios in Detroit that have opened after I opened, and a lot more opportunities in the offerings of group fitness.”

Daniels says she was rejected from 91 properties before Motor City Match helped her secure Live Cycle Delight’s location in 2016, and she praised some of the program’s directors.

“I think that they were doing the best job that they can do,” Daniels says of the program. “I do think that you can have too many hands in the cookie jar, so to speak, and I do also know that if you don’t have enough people that have experience in running small businesses, then you don’t necessarily have the right blueprint for small businesses.”

Guillen says the U.S. Department of Housing and Urban Development (HUD) has also been monitoring Motor City Match.

“Federal dollars that the city gets for community development—that’s the funding source for this program,” he said. “Federal money comes with restrictions and regulations, and HUD has been watching the city to make sure that those restrictions and regulations are being followed.”

This post was written by Stateside production assistant Nell Ovitt.