A letter penned by HUD Community Planning and Development director Keith Hernandez referred to the project as a "conflict of interest" and therefore ineligible for federal funding.

"There has been no national objective met with the rebuilding of a retaining wall on private property," Hernandez said in the letter.

The city failed to disclose to HUD that McGinty, Hitch, Person, Yeadon & Anderson, a law firm at 601 Abbot Rd., at which then-city attorney Tom Yeadon was a partner, would benefit from the project.

Although Yeadon's firm was located along that stretch of Abbot, city manager George Lahanas said in a press release that improvements were made with pedestrian safety — not the properties' benefit — in mind.

"The city has acknowledged that a conflict of interest determination should have been requested; however, officials did believe that the project was eligible for (federal) funds at the time of construction," the release read. 

East Lansing officials are also disputing HUD's claim that the wall was built on private property. The city claims it obtained permanent easements — the right to use someone else's land for a specified purpose — from property owners in order to widen the sidewalk.

"Their property value might go up, but when they give us easements, there's a certain amount of property that they're agreeing into perpetuity that they can't use again for their own purpose," Lahanas said. 

The $134,330 came from a Community Development Block Grant. The HUD letter indicated that these funds would still be available to the city for eligible projects until they expire.

Given the city's freedom to reuse the funds despite its error, Lahanas said there likely would be no challenge against HUD's ruling.

"It was honestly disappointing because we did believe it was the right project, but considering how it was handled and that we have the money to spend elsewhere, it's difficult to say that there was really a harm to the city in that respect," Lahanas said. 

Lahanas said he was "certain" the returned money would be reused before it expired. Streets, sidewalks and efforts to make infrastructure more friendly to handicapped residents are among the projects eligible for the grant funding.

This is not the first issue the city has faced as a result of these sidewalk repairs. In late 2017, the city settled a lawsuit brought by a former resident accusing East Lansing of failing to disclose the conflict of interest for $20,000.