Private sector shouldnt fear land bank

April 1, 2011
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Ingham County Treasurer Eric Schertzing tried to calm any fears that private-sector property owners and developers may have about a land bank interfering with their livelihoods by using public money to mess up a real estate market that embraces free-enterprise principles.

“The private sector is much more powerful than we are,” said Schertzing recently before a local audience of about 100. He added that he spends much of his time as treasurer overseeing the six-year-old Ingham County Land Bank, which only purchases tax-foreclosed and sometimes bank-foreclosed properties.

Schertzing said many tax-foreclosed houses and commercial buildings in the Lansing area have been abandoned and should be demolished in order to prevent blight from overrunning a city or township in his county. But he also pointed out that the private sector isn’t going to spend its money to purchase a dilapidated structure for the sole purpose of razing it.

“You’re not going to pay $5,000 for a house, or $500, and then demolish it. We do things that the private sector doesn’t do. When buildings are in foreclosure, that’s a sign the private market isn’t working. I hope (the market) gets better pretty soon,” said Schertzing.

“We have to have different ways of dealing with this, and we think the land bank is one. We operate as a public developer.”

Schertzing said foreclosures in Ingham County, like almost everywhere else, spiked steadily over the last three years: from 63 in 2008, doubling to 125 in 2009, and more than doubling to 260 last year. He said the county’s land bank bought a number of those buildings and followed high standards in those it rebuilt.

“We have created four-star renovations and five-star new construction,” he said of the energy ratings. “No one in the private sector was doing that.”

Schertzing also said private-sector developers have bought properties near the sites the land bank has redeveloped, because after the land bank finishes a project, the market value of that property and those nearby rise. He also said if a governmental unit in the county doesn’t want the land bank in its backyard, that’s fine with him. “If another community doesn’t want us involved there, I’m happy with that.”

Kent County Treasurer Kenneth Parrish invited Schertzing to come here to give interested individuals an insight into what a fully operational land bank can do. Parrish has been the driving force behind the formation of the Kent County Land Bank, which only began operating at the start of this year. Like Schertzing, Parrish told the Business Journal he also has heard a few concerns from the private sector.

“I think people are concerned about losing the ability to acquire properties through the tax-foreclosure auction. I’ve heard from a few people about that. I’ve heard a general concern about whether the land bank would be a competitor to other efforts to develop particular properties, and my response is we certainly don’t want to be a competitor. We want to be a partner,” he said.

As for the auction, Parrish pointed out that it’s not the best vehicle to market a property, largely because full payment is due on the day a parcel is sold and that requirement by itself can limit the buying pool and put a ceiling on the market value of those properties.

“Many studies show that properties sold through the more traditional real estate sale means are more effective in getting the properties in the hands of owners who will maintain their properties, will pay their taxes and will build on the assets they’ve acquired,” he said.

One thorny issue the private sector can have with an auction occurs when a county treasurer bundles a handful of properties together and sells the sites as a single unit. Doing that raises the price and makes it difficult for a developer — who may only be interested in one of those properties — to make a purchase. But Parrish put that fear to rest.

“I don’t necessarily intend to use bundling or other ways of discouraging property sales,” he said.

Schertzing said he has spent a lot of time talking about what his land bank can do with private sector and economic development professionals since the entity began in 2005. He also said Kent County has a key advantage in starting up its land bank.

“Grand Rapids is blessed with some pretty good nonprofit developers,” he said. “We don’t have that in Lansing.”

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