Economic Development, Government, and Real Estate

Land bank makes its case before key panel

November 17, 2012
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Before members of the Kent County Land Bank Process Subcommittee decided to suspend future meetings until a pending legal case is settled, they listened to an update of the land bank’s activities from Executive Director Dave Allen.

Allen began his presentation by asserting that the land bank’s mission is similar to the county’s in that it, too, is dedicated to delivering a service that can improve the quality of life for residents within the constraints of a sound fiscal policy.

“I think there is a strong mission alignment between the Kent County Land Bank Authority and the county’s mission,” he said.

Allen told the subcommittee that preserving property values, assisting in the development of new jobs and the retention of existing ones, and preserving real estate for public purposes were the land bank’s main areas of focus.

He then cited data from the Community Research Institute at GVSU that showed each vacant house decreases the value of 15 homes in a neighborhood, and each foreclosed property costs a local unit of government an average of $7,000 for inspections, violations and other reasons.

“These are not only CRI’s numbers; national numbers back that up, too,” he said.

Allen then pointed out there were 684 tax foreclosures in the county from 2010 through this year. Those actions directly and indirectly cost the county’s cities and townships an aggregate of $4.7 million in tax revenue, as nearly 10,000 homeowners lost at least 1 percent of their market value. The total loss in value was $14.7 million. Adding the tax loss to the value depreciation results in a negative economic impact of $19.4 million.

“The county has seen $3.3 million in lost property values the last three years. Is that all to foreclosures? No, but it’s a part of it,” he said.

The point Allen said he wanted to make with the four Kent County commissioners who make up the subcommittee is that the land bank is enacting the county’s mission, and he provided comparisons to underline that central theme.

Allen compared the results of a house purchased by the land bank with a comparable one sold to a private individual at the county Treasurer’s public auction last year. Both are older two-story homes on the west side of Grand Rapids.

Allen said the individual, whom he didn’t identify, bought a house on White Avenue for $10,250 at the 2011 auction. The previous owner owed $6,950 in back taxes on it. Allen said there isn’t a record of the new owner applying for any building permits, which means there likely hasn’t been an upgrade to the house. But the new owner has compiled $475 in nuisance fees since taking ownership. The house is currently being rented. The State Equalized Value of the house at the time of purchase was $21,900.

“We don’t even want to hold rental properties. We want to sell it to a rental company,” said Allen.

In contrast, he said the land bank bought a house on Crosby Street for $9,232, the delinquent tax amount owed on it. The family who owned the house was foreclosed on by their mortgage company, and the lender stopped paying the rent on it because it didn’t want to go through the expense of foreclosing, which made the county foreclose on it. The house had an SEV of $37,400 at the time.

The land bank did $35,000 worth of renovations to the house, with licensed contractors doing the work, and has listed the house for $69,900 with a Realtor who belongs to the Grand Rapids Association of Realtors. He added that the land bank helped the family who previously owned the house find another one they were able to purchase.

“We’ve had three banks donate some properties to us and we’re renovating the neighborhood,” said Allen of the area around the Crosby address.

On the commercial end, Allen said a private buyer purchased a single-story building on Alpine Avenue at the 2011 auction for $19,200, the amount of back taxes owed. The SEV was $88,800. So far, no work has been done to the building, as has been the case since 2007, and it’s vacant. The SEV today has fallen to $49,900.

As a comparison, the land bank purchased a two-story commercial building on East Fulton Street for the back-taxes amount of $12,090 and allowed the current tenant to remain until the building was sold. The SEV was $54,100. The land bank listed it “as is,” and one day later had a buyer, who paid $50,000 for it. The new owner is making about $100,000 worth of improvements and will open a catering business and café there.

“One day after we listed it, we got an offer,” he said.

Allen gave a few more comparisons to the subcommittee of what the land bank has accomplished recently, and explained what those actions have meant. He then wrapped up his presentation by noting that the land bank has acquired and redeveloped 44 properties and entered into construction contracts worth $2.75 million.

Based on the earlier CRI numbers he offered, Allen said the land bank has preserved $973,000 in local property values and saved local units of government $308,000 worth of costs. When the construction contracts, the property values saved and the lower government costs are added, Allen said the land bank has made an estimated economic impact of slightly more than $4 million.

“I think we need to be judged by our economic activity in the county,” said Allen.

Allen made his presentation at the request of the subcommittee, which has been established to review and assess the county’s policy regarding the sale of tax-foreclosed properties to the land bank before the public auction is held.

Some private-sector real estate professionals opposed this summer’s sale of 44 properties to KCLBA; the Kent County Taxpayers Alliance has filed a lawsuit against that action in Kent County Circuit Court. In light of the legal action, the subcommittee decided to suspend its meetings until it hears from the court.

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