Banking & Finance, Government, and Real Estate

Taxpayers group wants land bank restrained even further

April 19, 2013
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The Kent County Taxpayers Association feels a recent vote by Kent County commissioners not to sell tax-foreclosed properties to the Kent County Land Bank Authority prior to the annual auction was a step in the right direction.

At the same time, however, KCTA said the county needs to take more action.

A few weeks ago, commissioners made their decision by an overwhelming 18-1 vote, after they sold 44 properties to the land bank for $422,000 last July. The association criticized that sale as being one that gave the land bank preferential treatment to purchase properties below market prices for a purely speculative purpose to fund its operations rather than fulfill what KCTA sees as its mission.

“The changes to the process approved by the county commission are an improvement. The process has been modified to move the decision on which properties the land bank may acquire from the county commission to local cities and townships. This creates an additional step and allows local governments to weigh the pros and cons of each property transfer,” read the KCTA’s press release.

“Further, the land bank will otherwise be required to bid at the public auction for properties, which improves the process, but now creates a situation with the land bank’s public funds will be used to bid against private buyers,” the release added.

“In other words, taxpayer money will be used against them.”

But County Treasurer and KCLBA Chairman Ken Parrish said the agency doesn’t use public funds to buy properties or anything else. “The land bank has no ‘taxpayer money’ to spend on anything,” he said.

KCTA also said the land bank was created to “address the problem of blighted properties, which do not sell because they are too expensive to rehabilitate or pose environmental problems.”

But according to Public Act 258 of 2003, the Land Bank Fast Track Act, the purpose of a land bank is to “foster the development of that (public) property and to promote economic growth in this state and local units of government in this state.” Section two of the act, where the above quote comes from, does not define a land bank as a blight fighter.

KCTA also challenged some unnamed county leaders in its release. The association said those officials said proceeds from the foreclosure process can’t be transferred to the county’s general fund, which covers most of the services the county offers.

KCTA reported it filed a Freedom of Information Act request and came up with a 2010 fiscal services department memo that said $4.6 million was being transferred from the Delinquent Tax Account to the general fund, and a $300,000 transfer to the same fund was also coming soon from the Land Sale Proceeds Accounts. The memo also noted that another $5.2 million transfer from the Delinquent Tax Account was being anticipated for 2011.

The Delinquent Tax Fund contains the short-term notes the county’s Treasurer’s office borrows each year and uses to buy tax-foreclosed properties from the cities and townships in the county. Last year, commissioners approved up to $35 million. A few weeks ago, they approved up to $28.5 million.

The municipalities sell the tax-foreclosed properties to the county when the units receive those dollars, and the cities and townships use that money to get whole on delinquent property taxes. The Treasurer’s office uses the proceeds from the annual auction to cover the notes.

The Land Sale Proceeds Accounts contain the net balances from multiple land sales and the report is filed annually, as required by state law, and is available online. The most recent LSPA was filed June 30, 2012; it listed the proceeds of seven sales from the tax years of 2001-2007. The bottom line is nearly $1.3 million was available for transfer to the general fund last June.

“The proceeds from the auction go into a restricted fund, per statute. After two years, the Board of Commissioners, at its discretion, can transfer any remaining uncommitted funds to the general fund,” explained Parrish.

Funds from the LSPA have also been spent on certain properties over the past few years. A Superfund site in the county received $100,000 from the account, $430,000 went to some parcels for Millennium Park, and $1.1 million has gone to the former Sparta Foundry site in Sparta Township.

KCTA has taken the position that the land bank deprives the county and municipalities of tax revenue. As an example, it said when the land bank sells a property, it collects half the parcel’s property taxes for five years, and that money would go to the county and the local unit as tax revenue if a private buyer had sold it. The 550 tax rule is part of the state’s land bank act.

KCTA also said the county lost about $1 million in revenue when commissioners agreed to sell the tax-foreclosed properties to the land bank last summer. The association arrived at that figure by noting the land bank was allowed to buy the properties for back taxes, and had the parcels gone to auction, the bids from private buyers would likely have exceeded the tax amount by multiple times.

“We stand by the fact that the land bank is a solution in search of a problem. It was designed to reduce blight, yet it clearly has stepped way beyond those bounds. There is no significant problem to address that couldn’t be handled in other ways, such as through existing nonprofit organizations,” read the release.

“The land bank should be limited to only handling truly blighted properties, not purchasing properties at a distorted, below-market rate for the purpose of funding itself. While KCTA supports the recent change, a better step would be to limit the land bank’s mission to addressing problem properties that do not sell at any of the public auctions.”

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