Land Bank Expansion Draws Numerous Proponents
Hannah Report - December 2, 2009
Witnesses in favor of land bank legislation filled committees Wednesday in the House and Senate to press their cases. The bills would take the existing land bank structure and lower the population threshold to allow more counties to form one.
The House Local Government and Public Administration Committee accepted a substitute version of its land bank legislation, HB313 (Ujvagi), to address concerns raised in recent weeks. Those issues include the makeup of the board for charter counties, deposits or investments of county inactive money, debt collateral, loan making, boards of directors for land reutilization corporations and annual report publication.
Michelle Wells, real estate investor in the Youngstown/Warren area and member of the Ohio Real Estate Investors Association (OREIA), said in opponent testimony that the OREIA worked long hours with legislators in the last session to move 127-SB353 (Spada) through the process. Although HB313 is an effort simply to expand SB353, the OREIA had several concerns with that expansion. Wells cited eight specific concerns and suggestions from the OREIA - many of them addressed in the substitute bill.
However, not all were. The first of the unanswered questions was on the subject of salaries. OREIA was concerned that the board might create "salaries that are outrageous and in some cases higher than the elected officials in that county, with a perception of patronage." Gus Frangos, president of the Cuyahoga County Land Reutilization Corporation (CLRC), at the request of committee chair, Rep. Kathleen Chandler (D-Kent), responded, saying that the salaries would be left as a local issue and not included in the bill.
The second unaddressed issue dealt with expedited foreclosures. "Expedited foreclosures due to property tax delinquency or mortgage failure should be viewed as extraordinary times for homeowners and property owners and should be used only on extreme cases and only on truly abandoned and unoccupied properties."
Frangos answered that it was not the intent of the bill nor did it occur in practice in Cuyahoga County that people were being evicted from their homes. He said that the land bank was only picking up already abandoned properties.
The third and last OREIA issue was the CLRC's lack of liability for damages or being subject to equitable remedies for EPA and other public hazards on the properties they acquire.
Frangos explained that, while the CLRC was not responsible for fines incurred by previous owners for EPA and other violations, the CLRC was bound by the same laws and statutes as any other landowner for clean up. Rep. Terry Boose (RNorwalk) said that he understood that if the CLRC demolishes a property, the CLRC would be responsible for clean up but wondered what would happen in the case of a resale of a standing property that had a mold or other problems. Frangos said, again, that the CLRC would be as responsible as any property seller, meaning the CLRC would be responsible to fix the problem or fully disclose the problem to the buyer.
Wells, who said that she had only just received a copy of the sub bill, said that she would take it back to the OREIA for review.
Several other proponents were heard including Lavea Brachman of the Greater Ohio Policy Center; Frank Alexander, professor of law at Emory University School of Law; Eric Schertzing, Ingham County treasurer; Aaron Sorrell, housing and neighborhood development manager of Dayton; and Chris Eilerman, special projects coordinator for the city manager's office in Cincinnati.
All the proponents praised the sub bill. Brachman said that Ohio "can no longer afford to operate under a series of systems that were designed to address an entirely different reality in the issues of foreclosure, vacancy and abandonment." She called HB313 the "right fix" for the problem. Alexander praised the bill as "a model for the country" in terms of land banks and focus on surplus public property, "below water" properties, abandoned properties and tax delinquent properties. He said the goals of the bill are to eliminate blight, maximize short- and long-term revenue, create affordable housing and stabilize neighborhoods. Boose and Rep. Tim Derickson (R-Oxford) asked if perhaps it was better to wait to see if Michigan and Cuyahoga County were successful before Ohio tries to expand the program. Alexander answered, "We can always learn that each county was different with different needs and would implement the program differently, and that there is no need to wait."
Boose still had questions about the whole issue of land banks. "Why should the government invest in properties that private individuals and commercial investors have no interest in having?" Brachman answered that a land bank is set up to hold property and hold a property's value until there is a change in the market. A land bank can also obtain and assemble smaller properties that they can merge into larger, more attractive ones. Chandler added that it was part of government's job to do the things that private and commercial entities are unable or unwilling to do in order to benefit the public as a whole.
Schertzing said that Ingham County does not "seek to replace the private market but act as a catalyst where the market is not functioning in a healthy fashion." Sorrell said that the "increased vacancy rate has contributed to an increase in service demands despite declining local government revenues."
Chris Eilerman, special projects coordinator for the city manager's office in Cincinnati, read a letter from Cincinnati Mayor Mark Mallory. In the letter, Mallory wrote that Cincinnati's land bank efforts have been "hampered by the constraints of a passive land bank model," in which the land bank is a city agency and must compete with other city services for funding. Mallory also asked that the bill, which would expand the composition of any CLRC board of directors to include up to nine members, be amended to require that at least two of the CLRC board members represent the most populous city in the county.
Former Sen. Linda Furney provided proponent testimony, discussing her experience working for the Greater Toledo Housing Coalition. Furney emphasized that SB188 (Wilson) would preserve local control, leaving the decision to initiate a CLRC up to the counties. To emphasize that SB188 would help cities attract private developers, Furney spoke on behalf of Bailey Stanberry, a Toledo builder who was not able to appear in person but offered his support as a private developer, because he said eliminating blight and nuisance properties assures private investors that their commitment is worth
making. Furney also talked about the New Schools New Neighborhoods initiative, a coalition of public and private sector members created by the Toledo Area Chamber of Commerce to use the building of new schools as a catalyst for improving neighborhoods.
Proponents also testified Wednesday in the Senate Ways and Means and Economic Development Committee in support of companion bill SB188. The Senate committee heard testimony from Hugh Grefe, executive director of the Toledo office of the Local Initiatives Support Corporation (LISC); Frank S. Alexander, Emory University law professor and director of the Project on Affordable Housing and Community Development; Joshua Murnen, attorney with Advocates for Basic Legal Equality; Furney; Schertzing; Frangos; Eilerman; and Brachman.
Grefe said SB188 provides "vitally important authority for counties to begin the much-needed stabilization of real estate conditions, while at the same time, it makes it possible for county treasurers to provide a better way to assemble land in order to support redevelopment."
"Over time, SB188 will clear the way for developers - both private and nonprofit - to organize housing and commercial development at a scale and comprehensiveness that will be sustained by restored market confidence in areas where that is not now present."
Sen. Eric Kearney (D-Cincinnati) expressed support for Grefe's comments and the work of LISC in Cincinnati. In response to a question from Sen. Tom Patton (R-Strongsville) about whether LISC had worked with the Cuyahoga County land bank, Grefe said at the time legislation was passed last year for Cuyahoga County, they hoped it would extend permission to smaller cities to participate on a voluntary basis.
Murnen said that CLRCs can play a key role in affordable housing development, an issue that affects his organization's client population. CLRC's help generate new property tax revenue, increase property values through demolishing abandoned homes and efficiently putting to use abandoned tax delinquent properties, which can be sold to developers who may use tax credits, block grants and other incentives to rehabilitate the properties and turn them into affordable housing, he said. Murnen also noted CLRC's ability to work with local governments to develop entire blocks and work on a large scale to restore affordable housing in urban areas. CLRCs can also rent properties to low income buyers or renters, and rehabilitate nuisance or blighted properties.