Economic Development, Government, and Real Estate

New option surfaces from land bank subcommittee

March 15, 2013
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With tax-foreclosure day rapidly approaching on April 1, the panel charged with determining whether the Kent County Land Bank Authority can buy properties from the county prior to the public auction is moving into overdrive.

The Kent County Land Bank Process Subcommittee has scheduled a special meeting this week to learn if a newly offered solution to the matter is legal and, if so, would reimburse the land bank for its role in it.

“This may be a solution for everybody,” said Commissioner Michael Wawee, chair of the subcommittee, who offered the alternative.

The proposed solution would have the county transfer all the tax-foreclosed properties to the land bank instead of having the county Treasurer’s office retain possession. The land bank would then use the judicial process available to it to clear the titles on all the foreclosed properties, and that organization, not the Treasurer’s office, would then offer all the sites for sale at the annual public auction.

At the auction, though, the land bank would be allowed to add a fee for clearing each property’s title to the minimum bid in order to cover its cost. The advantage for buyers is they get a site with a clear title. But there was no mention of whether the land bank would be able to buy properties before or during the auction.

KCLBA Executive Director Dave Allen told the subcommittee that he received calls from auction buyers who were having difficulties in clearing the titles from the foreclosed properties they bought last year and they asked him for help with that process.

County Corporate Counsel Dan Ophoff is looking into the legality of two issues related to this option and will report his findings to the subcommittee this week. One is whether the land bank can add a fee for its title-clearing work to a minimum bid at the auction, which has traditionally been the back taxes owed on a property. A fee wasn’t set, but $500 was mentioned as a hypothetical talking point.

The second issue is whether the 550 tax rule found in the state’s land bank authority statute would apply to properties sold at the auction with the land bank running the annual sale. The 550 rule allows the land bank to collect half of the property-tax revenue from every property it sells for five years. However, it’s uncertain if auction buyers would be interested in splitting that revenue.

“I think this could be a good and fair alternative for the land bank and the buyers at the auction. At the end of the day, it’s got to be a win-win for everybody,” said Wawee. “After the next meeting, we have to come to some finality.”

The subcommittee is pressed for time to make its recommendation. A group of realtors and property managers filed a lawsuit in the 17th Circuit Court last fall against the county, the land bank and County Treasurer Ken Parrish for selling tax-foreclosed properties to the land bank prior to the tax sale.

Because of the suit, which claimed the sale violated state law and the county’s policy, the county asked the subcommittee to suspend its meetings until the complaint was resolved, which has pushed back the panel’s decision.

Circuit Court Judge George Buth dismissed the case in December. Although the plaintiffs immediately appealed, the subcommittee began meeting again in January.

Two other options under consideration by the subcommittee are to let the county transfer all or none of the properties to the land bank. A third is to let the county sell a preset percentage of the properties to the land bank. One number suggested by commissioner and subcommittee member Tom Antor was 16 percent. He recommended that figure because, over the past three years, that has been the percentage of properties purchased at the auction that then went back into foreclosure.

Whatever the subcommittee recommends, county commissioners will make the decision. Last July, the board sold 44 tax-foreclosed properties to the land bank for $422,000. The land bank then sold 19 of those sites to nonprofit developers. The properties the land bank sold were listed on the Grand Rapids Association of Realtors service and local realtors collected commissions.

GRAR Executive Director Julie Rietberg and Commercial Alliance of Realtors President John Francis addressed the panel. Both said they wanted their groups’ voices to be heard in this process and both said the land bank is a useful tool for dealing with blighted properties.

“(But) the concept of the land bank taking all the properties is one we can’t support. It’s not about the realtors getting a commission; it’s about free enterprise,” said Rietberg.

Parrish, who also chairs the land bank, said the organization could only take all the properties once because it has to get county commission approval every year to do anything with those sites.

State law puts the county third in line to get tax-foreclosed properties. The state is first, but it is required to pay market value. Cities, townships and villages are next, and can buy properties for the taxes owed but have to have a public purpose in mind. Rehabilitating a property qualifies. Then comes the county, which also can buy properties for the back taxes but doesn’t need a public purpose.

“I like the idea of accountability and transparency in the public purpose. Everybody knows what’s happening with the property,” said Wawee.

“The county sells properties to the land bank,” said Commissioner Dick Vander Molen, a member of the subcommittee. “What’s not transparent about that?”

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