County land bank enjoys good fiscal year
Agency may have a buyer for Grand Rapids commercial structure.
An audit of the Kent County Land Bank Authority’s fiscal year revealed the agency finished 2012 with a surplus of $276,134, as net revenue grew by $112,796 last year.
KCLBA began 2012 with net revenue of $163,338.
Operating revenues totaled slightly more than $1 million. The agency’s largest source of income came from the sale of 42 properties worth $961,574. Donations to KCLBA gave it another $50,500 in revenue, and rental income provided an additional $14,132. The land bank leases three residential properties.
The economic impact of the land bank’s property sales in 2012 was estimated at $4.5 million, which included construction contracts awarded, sales commissions made and payments to local units of government.
Operating expenses reached $908,449. The largest expenditure was for the agency’s property sales, at $655,770. Second was the cost of personnel, $161,968, at the agency.
Non-operating expenses fell just short of $5,000. The agency had interest revenue of $2,500, but its interest expense for 2012 was nearly $7,500.
KCLBA had lines of credit with Huntington Bank and Founders Bank & Trust in 2012, for $100,000 and $178,000, respectively, and a $400,000 loan from the Grand Rapids Community Foundation that matures in 2017 and carries an interest rate of 3 percent. The Huntington Bank line of credit was renewed in March.
The Grand Rapids office of Rehmann Robson performed the audit; the firm concluded the land bank did not have any outstanding long-term debt obligation.
Although the auditors did not express an opinion on the effectiveness of the agency’s internal control over its finances, the firm offered an adjustment to the process.
“This condition appears to be primarily the result of a misunderstanding in the division of responsibilities between management and its contracted accountant, which resulted in various account balances not being reconciled prior to audit fieldwork,” read the Rehmann Robson report.
The audit said the situation was the result of a small entity still in its start-up stage.
“Much of it is due to our size,” said Kent County Treasurer and KCLBA Chairman Ken Parrish.
The organization has a staff of three.
Parrish also said the agency has a fiscal safeguard in place, as the staff doesn’t have signatory rights and the board reviews all the checks that are written.
“In future years, we recommend that a single individual be assigned the primary responsibility for coordinating audit requests and ensuring that all necessary adjustments have been posted,” the report concluded. The KCLBA board agreed with the recommendation.
Financially, the land bank got off to a good start this year.
“We did end the first quarter with a positive net income of $18,000,” said KCLBA Executive Director Dave Allen.
Greg Conway, Founders Bank & Trust executive vice president and chief lending officer, is on the land bank’s advisory council. He said the 15-member group sees the upcoming tax-foreclosure sale as an opportunity for the agency to continue its good work and improve on its track record.
“The local units seem to be excited that they’ll be more active this time,” said Conway. “The council feels the more involved the land bank is with the local units, the better it is.”
Now that Kent County commissioners have agreed not to sell tax-foreclosed properties to the land bank before the annual auction, KCLBA is depending on cities and townships to transfer properties to it. The municipalities must have a “public purpose” in mind for each transfer, and Public Act 258 of 2003 defines a land bank as a public purpose.
“It is declared to be a valid public purpose for a land bank fast track authority created under this act to acquire, assemble, dispose of and quiet title to property under this act,” reads the state law.
Last year, Kent County sold 44 properties to the land bank for $422,000 in July, about a month before the annual sale took place. As of the agency’s March meeting, none of the municipalities had contacted the land bank about a transfer.
“I’m fairly confident that we’ll get a request before our next board meeting,” said Parrish of the meeting set for May 22.
Allen said one property the land bank took possession of, outside of the county’s sale last summer, is close to being sold. KCLBA temporarily took ownership of a three-story, 60,000-square-foot structure at 1515 Madison Ave, SE, which sits in the Madison Square Business District in Grand Rapids.
The building is 107 years old and once served as a warehouse for P.B. Gast & Sons. The owner lost it to foreclosure in 2011, and the lender allowed the land bank to purchase the structure for $1 so it can be redeveloped. The city and three nonprofit groups have pledged their support to the land bank’s effort.
Allen told the board at its April meeting that he has potential buyers for the building. “The partnership with Ed De Vries Properties has been vital, and Mike De Vries has had some creative ideas.”