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Genesee County Land Bank: putting property back into productive use
Successful land speculators specialize in buying low and selling high. The Genesee County Land Bank in Michigan is following that formula, but with a twist.
More interested in community revitalization than in financial gain, the Flint-based nonprofit land bank has the luxury of time. It can afford to be selective about the re-sale of properties and reserve them until the market is ready.
“There’s inherent value in all land,” said Dan Kildee, county treasurer and president of the land bank. “It’s not a perishable commodity. The challenge is to find a way to hold on to it until we can find ways to put it back into productive use.”
In Genesee County, particularly in Flint, dilapidated and abandoned houses, empty lots, and vacant buildings abound, blighting neighborhoods and depressing tax revenues. The problem has many sources, and public policies have discouraged communities from regional planning.
A land bank is a public authority created to hold, manage and develop tax-foreclosed properties. Land banks in Michigan can borrow money and issue bonds; enter into contracts and agreements with local governments; invest funds; collect rent; and purchase, hold and sell property.
In short, land banks allow local governments to overcome the legal barriers that restrain, rather than foster, conversion of publicly owned land and buildings into more productive use. They provide a streamlined, comprehensible, and uncomplicated legal and policy framework for property acquisition and disposition, according to Frank S. Alexander, author of Land Bank Authorities: A Guide for the Creation and Operation of Local Land Banks.
“A land bank is just one of several tools available for reshaping both policy and planning,” Kildee said. “When aggressively applied, land bank tools are formidable.”
In 2004, Genesee County received a $150,420 grant from the Mott Foundation to share the successes and lessons of the Genesee County Land Bank with other Michigan cities, to develop a model for other municipalities to replicate or adapt, and to continue to evaluate the land bank’s economic and quality of life impacts over time.
Ingham Country is one of seven counties receiving technical assistance in developing land banks through the Genesee Institute, a nonprofit research and teaching affiliate of the Genesee County Land Bank.
In 2003, Eric Schertzing, treasurer of Ingham County, attended a Michigan Municipal Treasurer’s Association meeting where the Genesee County Land Bank was being discussed. He became convinced of the advantages of creating a similar operation.
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A long-empty building in downtown Flint, Michigan, was rehabilitated to house the Genesee County Land Bank, commercial space and loft apartments.
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However, Schertzing initially was leery of becoming the person in charge.
“I was hesitant to become involved in economic development issues as a county treasurer,” he said.
“But as an elected official, I figure if I’m responsible for something, I’ve got to think of ways to do it better. Ultimately, I came to believe that the treasurer’s office is the glue that can hold the whole process together.
“Rather than send property to auction, a land bank allows county treasurers to interrupt that process and gives the community time to think about how to deal strategically with disposition.”
Ingham County, home to the state capital of Lansing and several prosperous suburban communities, uses its land bank very differently from Genesee County. In Lansing, the land bank is used more as a strategic planning tool for “smart growth” to preserve the physical attractiveness and identity of the community. This flexibility is part of the appeal of the model, Schertzing said.
“We have a much stronger market for our properties than Genesee County and much less blight,” he said. “But I can see the value of a land bank as a strategic economic development tool that can work hand in hand with other economic development and planning efforts.”
Before 1999, Michigan county treasurers were severely hampered from moving tax-delinquent properties back into productive use because of the slow and cumbersome process that governed the disposition of these properties.
But over the course of several years, and two governors from different political parties, barriers were removed and a structure put into place that helped foster the development of today’s land banks.
That process began when then-Governor John Engler authorized sweeping changes to the General Property Tax Act by signing Public Act 123, which amended the law to move tax-delinquent property through the forfeiture, foreclosure and sale process within a 25-month period. The framework for Public Act 123 had been developed by John Weicher of the Hudson Institute through a $200,000 Mott grant in 1997.
Not only did the new legislation halve the time required to obtain a marketable title to tax-reverted property, but also it permitted counties to acquire, renovate and sell these properties with minimal input by the state.
The legislation offered Flint and Genesee County an opportunity to combat, and possibly reverse, the blight and decay threatening the central city and its neighborhoods. Unfortunately, there was little available experience to guide the county as it took on its new responsibilities.
Kildee was intrigued by the possibilities presented by the new legislation. He approached Mott for a grant to help devise a process that would enable the county to use tax foreclosure more creatively as a community development tool.
In 2001, with $270,000 in Mott funding to the county, a local team of representatives from the public and private sectors worked with several national organizations, including the Brookings Institution, Local Initiatives Support Corporation, the Urban Land Institute, Emory University School of Law, and the University of Michigan’s Taubman College of Architecture and Urban Planning. They researched and designed an intergovernmental, policy-based land reutilization plan.
A year later, the Genesee County Land Reutilization Council, Michigan’s first land bank, was created. The Genesee County Board of Commissioners transferred $331,559 in fee revenue from delinquent taxes to support the land bank program for the 2002-2003 fiscal year.
“I estimated that we had about 1,000 properties coming our way via the tax foreclosure act,” Kildee said.
“The former law provided no way for local officials to intervene to help a family dealing with the loss of their home. A family facing tax foreclosure was at the mercy of a tax lien holder, usually an out-of-state investor with a personal financial interest in the property being foreclosed.”
Tenants of tax-reverted rental properties, who often continued to pay landlords who no longer owned the dwelling, also were penalized by the former system, which failed to protect them from substandard, often dangerous, living conditions.
The old system of foreclosure rarely accomplished any public good beyond the efficient collection of taxes, according to Kildee. Worse, it contributed to the predictable devolution of use: A family home became a decent rental house, then a dilapidated rental house, then an abandoned house, than a vandalized house, until the property basically lost its value and was scattered among other properties facing the same destiny.
Land banks have been used as part of a community revitalization formula in several major cities throughout the country since the early 1970s. However, they remain rare, due in large part to “inconsistent governmental policies, antiquated state statutes and economic pressures,” said Alexander, who serves as a legal and policy consultant to the Genesee County Land Bank.
Like most states, Michigan did not have legislation expressly authorizing the creation of a land bank authority. The Genesee County group initially relied upon the Michigan Urban Cooperation Act to execute an agreement among local governments, creating a corporation that would acquire, manage and dispose of properties. Mott agreed in 2002 to provide the county with start-up funding totaling $891,000 over three years.
In 2003, Governor Jennifer M. Granholm created the Michigan Land Use Leadership Council to initiate a bipartisan dialogue about urban sprawl in Michigan.
State officials tapped Kildee to join the council, where he quickly became the lead voice for land-use policies that promote urban revitalization. With Mott funding, the council produced a series of recommendations, among these encouraging the replication of the Genesee County Land Bank Authority.
A year later, Granholm signed into law the Land Bank Fast Track Legislation, enabling the establishment of city and county land bank authorities and permitting these authorities to expedite “quiet title” clearance on their properties to make them available more quickly for sale and productive reuse.
The legislation was packaged with four additional acts, providing land banks with methods of generating revenue for their ongoing operation. In one swoop, Michigan not only passed the most extensive land bank statute in the country, but also enabled communities to
- tap state Brownfield Redevelopment Act tax-increment financing to clear titles and sell land;
- issue bonds;
- exempt properties held or sold by land banks from general property taxes for five years; and
- impose a tax on property sold by a land bank, half of which funded a land bank’s title clearance and land disposition costs, and half of which was earmarked for the municipality in which the property is located.
Currently, the Genesee County Land Bank provides six services: demolition, foreclosure prevention, rental management, housing renovation, property maintenance and a side lot program, through which empty lots are sold to adjacent homeowners. It also has developed a Web site to provide quick access to real estate listings and maps, and to allow visitors to communicate with staff through e-mail.
Today, the land bank holds title to slightly more than 2,600 properties and has sold more than 1,000 properties since 2003. By the end of 2005, 531 structures had been demolished and another 131 demolitions are scheduled through 2006.
The land bank also works with the Flint-based Legal Services of Eastern Michigan to prevent individuals and families from losing a home to foreclosure. Since 2002, the Treasurer’s Office and the land bank have postponed foreclosure of 1,350 properties.
The land bank currently manages approximately 70 tenant-occupied properties as well as overseeing the maintenance of the balance of unoccupied buildings.
As a neighborhood redevelopment strategy, the land bank intends to complete up to 50 structural renovations and improvements on targeted properties with $2.1 million in rehab funding available through a county bond issue. To date, 14 rehab projects have been completed and six are under way.
In an ongoing effort to arrest neighborhood deterioration and encourage home ownership, 37 single-family houses have been sold to owner-tenants through the land bank, in cooperation with a commercial real estate company. These homes had been rehabilitated and brought up to code before being sold.
All proceeds from the sale of private and commercial properties and rental income go back to the land bank to renovate and maintain properties. In addition, hundreds of empty lots have been assembled for potential development projects.
“The land bank properties I’ve sold are just beautiful,” said Jill Freeman, a commercial real estate agent who works with the land bank to put families into homes that are considered too valuable to demolish. “I’m honored to be their agent. I feel like I’m a part of something that will make a difference in the lives of people living all over the county.”
Similar rehab standards apply to rental properties managed by the land bank. Because many tenants have proven to be stable renters, the land bank is experimenting with a lease-to-own program.
Art Potter, the director of the land bank since January 2004, works with a staff of 13 full- and part-time employees. Serving as a landlord, general contractor, real estate broker, planner and economic development agency, the land bank can be a chaotic place to work at times, he said.
“We’re finally starting to get on top of it,” Potter said of the land bank’s various programs that deal with specific property-related issues. “One of our biggest challenges in the coming year will be systematizing our management. We need to concentrate on institutionalizing our programs while keeping them live and flexible.”
Said Kildee: “The land bank is still a work in progress. There are so many things pulling at us, it’s sometimes hard to keep staff on track and motivated. We’re trying to become more strategic as we move forward.”
Both Kildee and Potter frankly admit that the “continuous improvement process” that guides the land bank involves trial and error. What keeps the staff going is the “immediacy” of results.
Potter, a 30-year veteran of the nonprofit sector, says he rarely has witnessed a project that has helped as many people and effected such visible change as quickly.
“This is the first nonprofit project I’ve been involved with that has the resources to do what needs to be done,” he said. “Thanks to the legislation, we have a way of sustaining the land bank over the long term, and we have the time to consider how we can best get our properties back into productive use.”
In 2005, the land bank spent more than $450,000 countywide to clean and remove 390 tons of debris from vacant properties. Cleanup efforts involved both for-profit and nonprofit entities, and Potter hopes to involve more community-based groups through the land bank’s “Clean and Green” program, which funneled $91,000 to seven nonprofit organizations that maintained 464 lots throughout the summer.
“In addition to its other benefits, the land bank provides a terrific opportunity to begin revitalizing neighborhoods,” Potter said.
Recently, the land bank purchased an abandoned and long-neglected hotel on the edge of Flint’s downtown. The land bank also is in the middle of negotiations to acquire another large commercial building, which some consider “off-mission.”
“Commercial buildings are prey for speculators. We’re simply stepping in to interrupt the process, just as we do with housing,” Kildee said.
“It all knits together. There’s no definitive description of what a land bank can and cannot do. It’s a unique public authority that holds the legal and financial tools to accomplish a variety of tasks.”
The land bank’s office is now located in a rehabilitated building in downtown Flint.
“If you would have told me that I’d be redeveloping a downtown building when we started this, I wouldn’t have believed it,” Kildee said.
The four-story office building, part of the transformation of a block of buildings in the central city, was in bad shape when it was acquired by the land bank for nonpayment of property taxes in 2003. Reopened in late 2005, the building features loft apartments and street-level commercial space for rent, the proceeds from which will support other land bank activities.
“When we first started, we were moving along on this happy, naïve path, believing that all we had to do was acquire property, demolish it or clean it up, and sell it. I didn’t see the larger possibilities; I didn’t think about being in the development business or how a land bank might be a force in community planning,” Kildee said.
“Now I’m not so anxious about mirroring the old system of acquisition and sale. I can see how over the longer term, land banks can be used to unlock the value of urban land, preserve farm land, and conserve open space. It takes patience and discipline, but land banks offer the tools that can make it happen. It’s an avenue to good policy and better government.”