Land bank has a decision to make
Board meets this week to consider agreement with Grand Rapids.
Grand Rapids City Commissioner James White voted with the majority last week to transfer and sell 163 tax-foreclosed properties in the city to the Kent County Land Bank Authority because the action would provide plenty of work for small construction companies and remodelers.
Now it’s up to the KLCBA board members to put those firms to work.
The land bank board will meet Wednesday to decide whether to enter into a purchase and development agreement with the city. If board members agree to buy all the properties — of which the vast majority are residential — the organization will have to pay the city $1.182 million for the parcels by July 19 and redevelop or sell all 163 within 18 months.
KCLBA Executive Director Dave Allen told commissioners last week that could be done and he felt most would be sold by the end of the year.
“Our goal, wherever we go, is to push up the taxable value,” he said.
“I have all the confidence in the world that we will sell 99 percent of the properties based on the demand that is out there,” said Allen to the KCLBA Advisory Council.
The organization’s 15-member Advisory Council reviewed the list of foreclosed properties last week, a day after the city commission’s decision to sell the parcels.
The council is made up of public officials and private sector executives; last year they helped with the 44 tax-foreclosed properties the land bank bought from Kent County in July for $422,000.
As for coming up with the purchase price, the land bank had $240,700 in checking and savings accounts at the end of April and two lines-of-credit with local banks. The land bank has a $100,000 credit line with Huntington Bank for operations, and a $350,000 line for construction work with Founders Bank & Trust.
The land bank also has an investment agreement with Grand Rapids Community Foundation. That contract allows the land bank to make specific investments on foreclosed properties. GRCF has provided the organization with $400,000 of working capital but raised that amount to $600,000 last week.
White also said he voted for the transfer because his southeast side Third Ward contained a lot of tax-foreclosed properties, and he was right.
Of the 163 properties, 82 are on the city’s southeast side. Thirty-three are in southwest Grand Rapids, 27 are on the northeast side and 21 have addresses in the northwest sector.
The back taxes on the properties total nearly $873,000, with $308,200 also due in interest and fees. Another $1,785 in recording fees has to be paid to the city. Those figures add up to the $1.182 million the land bank needs to come up with to purchase all 163 properties.
The most expensive property on the city’s list is a home at 953 Innes St. NE with a price tag of $35,725: The delinquent taxes are $24,167, and $11,557 is due in interest and fees. The house’s most recent State Equalized Value was $36,800.
The least expensive is a residential property at 1411 Philadelphia Ave. SE. It costs $645. Only $101 of that is back taxes, while $544 is for interest and fees. The property’s 2013 SEV is listed at $45,300.
One property, 49 Monroe Center, is actually an elevator shaft that was inadvertently assigned a parcel number, and Allen said the land bank will ask the city to remove it.
City staff, headed by Economic Development Director Kara Wood, told commissioners last week that holding on to foreclosed properties is costly. Data compiled by the GVSU Community Research Center showed each foreclosed property can cost a municipality up to $7,000 a year in code violations and maintenance. At 163 properties, that cost could be as high as $1.14 million.
City Commissioner Dave Shaffer, who voted against the transfer at the morning’s Committee of the Whole meeting, voted for going with the land bank at the evening’s full commission meeting after his questions regarding a potential loss of tax revenue were answered. His vote made the decision a unanimous one.
Another municipality, the village of Sparta, is also transferring properties to the land bank.
If the land bank board agrees to the city’s contract and the organization redevelops and sells the properties, the city and the land bank will split the property-tax revenue for five years before all of that income goes to Grand Rapids.
Grand Rapids officials weighed the risk the city was taking against the potential benefits it could collect before commissioners approved the agreement.
“I think there is a risk, but a more positive upside than going through the auction,” said GR City Manager Greg Sundstrom of choosing the land bank over the annual public sale Aug. 21.
“What modest risk there is, in my mind, is worth taking. If it doesn’t work, we’ll be back at this table next year,” said Mayor George Heartwell. “I think there is a great potential in doing this.”