by Cynthia Price
Legal News
Believing that the trend to increasing numbers of tax-foreclosed properties will continue, Kent County Treasurer Ken Parrish has been talking about creating a land bank for a while.
Now that idea has become real. All the authorizations are in place, and the Board of Commissioners will start appointing members to the land bank governing board in March.
A land bank, in this sense, involves a governmental unit holding properties for varying lengths of time in order to maximize some public good concerning their sale.
One of the main public welfare advantages over selling tax-foreclosed properties the traditional way, which is at auction, is that the property transfers may bring in more money for the county and local governments in the long term. Any “profits” from sales would go back into the land bank, but the land bank can be a tool for redevelopment, which is likely to increase property tax income.
Related benefits include greater flexibility in control over vacant properties and their negative impacts on neighborhoods, and the ability to incentivize desired types of development in designated areas. Properties in the land bank are not subject to the whims of speculators, who may purchase land and leave it vacant for long periods of time pending realization of
a profit.
Parrish had long been intrigued by the government-held land bank concept, which has been around in this country for over a decade. But, he says, “I’ve been real slow to drive the process here in Kent County; I don’t like being on the bleeding edge of anything. I like to be progressive, but I also want to learn from other people’s mistakes whenever I can.”
Among Parrish’s first moves was to contact Genesee County Treasurer Dan Kildee. Genesee, where Flint is located, is the poster child for land banks, statewide and nationally. An article in USA Today last year focused on Genesee’s eight-year-old program, and Harvard's Kennedy School of Government gave the Genesee County Land Bank an Innovations in Government Award in 2007.
Since its founding, the Genesee land bank has sold 1600 properties, which raised $6.4 million to be returned to the fund.
Genesee County originally started the land bank to address what its web site (www.thelandbank.org) calls “a tax foreclosure process that hopelessly mired tax reverted properties in a legal limbo,” contributing to decline and blight in the inner cities and keeping properties “off of the tax roll and out of circulation for up to seven years.”
Prior to Michigan Public Act 123 of 1999, the county treasurer sold delinquent tax liens to the Michigan Department of Natural Resources or to individuals, who controlled what
happened to them. PA 123 changed that so each county’s treasurer was empowered to sell the properties, and those properties went into outright foreclosure.
Then in 2003, PA 258 authorized land banks (which can be a single county or multiple counties), overseen by the Michigan Land Bank Fast Track Authority.
Land banks may acquire, hold and dispose of real property, including properties other than those foreclosed, and may partner with either developers or non-profit organizations. The banks may borrow money to finance their activities.
Another key advantage of the land bank authorization is that property put into the land bank automatically receives a brownfield designation, opening up all the tools associated with brownfield redevelopment.
Parrish said that only if the land bank seeks the property will the county be required to perform due diligence; land that comes the bank’s way by default is not subject to due diligence requirements. There will also be decisions to make about insurance issues.
Since properties in the land bank are not subject to taxes, Parrish said the board will also have to decide whether it will allow such non-profit entities as Inner City Christian Federation and Lighthouse Communities to “park” properties in the bank when they build or redevelop a property that does not sell immediately.
Homes or commercial properties may be renovated before resale under the authority of the land bank. One of Genesee County’s most impressive successes has been the transformation of the Durant Hotel, named for the founder of General Motors, into a 93-unit living complex with a restaurant on the ground floor, as well as a nearby civic center project and an inner-city grocery store.
Research in Genesee County and elsewhere indicates that the “recidivism” rate of tax-reverted properties is greatly reduced when they have gone through a land bank.
There is also the provision that upon sale of the property, 50% of the property tax captured goes back into the land bank for five years. This enables the land bank to replenish its coffers, possibly allowing for reduced-profit sales to enable community goals like affordable housing.
In Kent County, the land bank’s governing board will consist of the county treasurer, one county commissioner, a Grand Rapids city commissioner, one commissioner from another Kent County city, and one township board member. Parrish says he recommended this as a balance between fairness and a workable size. Also, the Kent County Board of Commissioners thought that all of the people on the governing board should be elected officials for best representation.
However, there will be an advisory board that has no limits on size, composed of individuals who are nominated or self-nominate, who can contribute to the land bank process.
After the five governing board members are appointed, they will develop governing documents. The advisory board is expected to be constituted after that.
In January, Parrish told a group of community activists gathered for a regular meeting of land-use educational organization United Growth for Kent County that he is proud the tax foreclosure numbers in the county are as low as they are. In 2006, there were 28; in 2007, 35; 2008 saw an increase to 59, and in 2009 the number jumped to 102. In the 1970s the amount of tax reverted properties was in the hundreds every year. Parrish said he worked with property owners as best he could to avoid tax foreclosures.
Nonetheless, it is difficult to see an end to the economic difficulties which result in increased foreclosures, whether for tax or other reasons, meaning the land bank will have its work cut out for it.
At the United Growth meeting, former County Commis-sioner Harold Mast asked Parrish whether it was likely the county would be proactive and start a process to determine where best to acquire, sell, renovate and demolish properties. Parrish said, “We will go thru a strategic planning process, and we’ll create some areas of emphasis or focus, but there will still be room for developers to make proposals to us.”
At that meeting Parrish also estimated that about 40 to 50% of the tax foreclosed properties are in the City of Grand Rapids, with the rest spread all over the county somewhat evenly.
In Michigan, the counties of Ingham, Saginaw, Calhoun, Jackson, Grand Traverse, Muskegon, Berrien and Wayne have started or are in the process of starting land banks. Governments throughout the United States are making plans to bank land as well; some are small towns, others are large counties such as Ohio’s Cuyahoga which includes Cleveland. Some are using “stimulus” money to incentivize changes they want to see in their area. Flint, for example, saw the benefit in establishing community gardens on some of its property to improve nutrition and fitness activities in its neighborhoods.
Parrish adds, “The benefits that I see most immediately for Kent County are the flexible disposition options that will be available rather than simply having to sell at public auction, and taking advantage of brownfield and other financing options to address contamination, restoration and/or demolition needs.”
Parties interested in par-
ticipating on the advisory
board may contact Parrish at ken.parrish@kentcountymi.gov.
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