Government and Real Estate

City doesn’t follow through on transfers

July 26, 2013
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It was the news of a recently filed lawsuit that caused the Grand Rapids City Commission to remove a resolution from its agenda last week.

The agenda item would have transferred three additional tax-foreclosed properties from the city to the Kent County Land Bank Authority. The property owners were given extensions to meet their delinquent taxes by the Kent County Treasurer’s office but failed to do so within the required time frame, and their homes went into foreclosure.

The city’s Economic Development department acquired the properties from the county treasurer for the back taxes, interest and fees that were due, a total of $23,606. The city’s office wanted to sell the three houses for the same amount to the land bank to get the properties redeveloped.

But a lawsuit, filed by 10 plaintiffs in the local residential real estate business, has delayed that expected transaction. The lawsuit claims the city’s decision to transfer 163 properties to the land bank in June violated state law. The suit is dated July 19 and has been filed in Kent County Circuit Court.

Many of those plaintiffs took similar legal action last fall against Kent County, County Treasurer Ken Parrish and the land bank authority. The complaint was dismissed in December. The plaintiffs appealed that decision and the case is still pending.

Both Parrish and KCLBA were named with the city in the current lawsuit.

The land bank already has purchased the 163 properties the city transferred to the agency, at a cost of $1.18 million. That action had to be taken by July 19 in order to fulfill the city-commission approved agreement the land bank entered into in June with the city for the properties. KCLBA Executive Director Dave Allen told the Business Journal the land bank completed the transaction with the city on time and in accordance with the agreement.

City Economic Development Kara Wood estimated the transfer would result in $3.55 million worth of investment in the previously tax-foreclosed properties, an estimate that included the three houses that were to have been transferred to the land bank last week.

The estimate was based on the land bank only selling half of the properties and investing a total of $250,000 in those 83 properties. Another $3.3 million was estimated as coming from the property buyers at an average investment of $40,000 per property.

Wood projected the transactions would preserve $58,000 in property-tax revenue, half of which would go to the land bank for five years, and generate almost $88,000 in new property taxes each year from the improvements made by the investments.

Wood concluded the city would receive $22,200 annually in the preserved and new property-tax revenue, while the land bank would get $11,100 each year for five years.

She also pointed out the transactions would bring more than 200 new residents to the city, based on 2.5 persons per home. And the city would receive $30,450 in new income-tax revenue annually, a total based on an average hourly wage of $11.80 and one wage earner per house.

Her calculations did not include the amount the city would have spent on making sure the foreclosed properties were in compliance with building code regulations, which has been estimated at $7,000 per house per year. Nor did she include the standard 1.5 percent decline in property values the homes located near a foreclosed house normally suffer.

“My estimate is we will sell 100 by the end of the year,” said Allen of the tax-foreclosed properties last week.

No date has been given as to when the item would return to the agenda.

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