American Atheists v. City of Detroit involves a program that "reimburse[d] up to 50% of the costs of refurbishing the exteriors of downtown buildings and parking lots" "in a discrete section of downtown Detroit," and "covered all property in that area, including property owned by religious organizations." The program was apparently prompted by the city's desire to put on a good face for the then-upcoming 2006 Super Bowl, which was to be held in a city-built stadium.
"Of the $11.5 million allocated for completed and authorized projects, 6.4% ... went to [three] churches" in the area, but the court found that this was not a problem, chiefly because of the evenhanded nature of the funding program. Seems exactly right to me, as a matter of basic principles, namely that equal treatment is not establishment. Given the messy state of current Establishment Clause law (compare Mitchell v. Helms with Rosenberger v. Rector and Zelman v. Simmons-Harris), the result is not doctrinally obvious, but I think the panel makes a very good argument that it is correct even under the splintered Mitchell decision.
And as the court put it,
Excluding the churches from taking part in the program, by contrast, would send a far stronger message [than the alleged message of endorsement of religion sent by the inclusion of the churches -EV] — a message not of endorsement but of disapproval. It may be that the First Amendment did not compel Detroit to include religious groups in this downtown revitalization project, cf. Locke v. Davey, 540 U.S. 712, 719--21 (2004), but neither did it prohibit Detroit from including these groups in the project — either to enhance the success of the program (by revitalizing all of downtown) or to avoid sending a message of hostility to people of faith.
I agree with the dissent in Locke v. Davey, and think that discriminatory exclusion of religious people or institutions from generally available funding programs should be seen as unconstitutional. But even given the Court's contrary ruling in Locke, the Sixth Circuit's logic in the paragraph I quoted (and in the rest of the opinion) strikes me as quite right.
I should note, of course, that there are lots of good libertarian reasons for opposing government construction of stadiums, or government funding for refurbishing private buildings and parking lots. But if such funding is to take place, it's not necessary (and in my view, not proper) to discriminatorily exclude religious institutions from such evenhanded funding programs. Thanks to How Appealing for the pointer.