Land Banks: Preventing the Next Generation of Ghost Towns?

Population losses, the mortgage foreclosure crisis, and general urban decay have left neighborhoods around the United States abandoned and unoccupied. Abandoned property can result in chronic problems for both the remaining property owners, who are faced with reduced property values and an increased criminal presence; and municipalities, which can find itself with lower property tax revenues and an increased demand for public safety services.

In order to cope with these problems, governments have taken a renewed interest in Land Banking. The idea of land banks is not new (the earliest contemporary land bank was established in St. Louis in 1971), however, in the wake of the Great Recession, many state and local governments are taking a harder look at land banking as a way to stabilize reeling metropolitan areas.  

Land Banking refers to the policy where local governments, through a public development authority or other public agency, acquire abandoned property and then either convert the property into a productive use (through renovation, demolition, sale, or other means), or hold the parcels for long term land use planning. When disposing of property, land banks don’t operate in the usual sell-to-the-highest-bidder-as-quickly-as-possible mentality that plagued tax foreclosure sales (which usually resulted in the properties going to vacant landlords), instead, most land banks are guided by disposition policies which favor buyers who can help the long-term revitalization of the community, such as charities or nonprofits. Each land bank has different policies and prerogatives to accommodate the distinctive needs of each municipality.

Probably the most well-known “modern” land bank is the Genesee County Land Bank Authority (GCLBA), located in Flint, Michigan. Through state legislation, the GCLBA is able to take clear title to abandoned property in half the time, eliminating tax liens and resulting in hardship postponements. The GCLBA then has a variety of programs the abandoned lot can find itself in: demolition, housing renovation and rental, sales, side lot transfer (a program where the adjacent property owner may purchase the vacant lot for $25 plus fees), as well as a variety of gentrification programs. The GCLBA’s disposition of property is governed by a variety of policies which favor nonprofit, government, or charitable buyers who present the best opportunity for continued neighborhood revitalization. The GCLBA has acquired and encouraged the re-use of more than 4,000 residential, commercial, and industrial properties since its inception. However, continuing financial woes of both Flint and the GCLBA leaves the overall effectiveness of land banks in question.

Regardless, an effectively implemented land bank is believed to offer municipalities a number of benefits, including: acting as a catalyst for economic development, stabilizing municipal finances through both increased (or stablized) tax receipts and the decreased need for public safety expenditures; expanded housing opportunities, decreased criminal activity, and a decreased number of public nuisances. Although the results of land banks are subject to interpretation, a 2009 report issued by the U.S. Department of Housing and Urban Development has noted the benefits of land banks in Michigan, Maryland, and Georgia. Additionally, recent legislation in New York and pending legislation in Pennsylvania, among other states, suggests that land banks could be more widespread in the future.

A more in-depth explanation of Land Banks, all by Professor Frank S. Alexander, can be found here (from the Journal of Affordable Housing), here (from the Brookings Institute), and here (from the Center for Community Progress).

Indiana to Reform Local Governments with a New Legislative Agenda

Indiana has recently made efforts to reform local governments through proposed legislation.  The initiative was started by Lt. Governor Skillman who proposed a legislative agenda concerning local government reform that has been getting attention from the press and state lawmakers.  The recommendations came after Lt. Gov. Skillman toured Indiana’s various local governments and spoke with local officials.  It was clear from her tour that local government officials are worried about the availability of revenue to support local government services. Therefore Lt. Gov. Skillman is proposing fiscal flexibility within local governments, while at the same time advocating for a property tax cap to ease the burden on property owners. 

The fiscal flexibility measures suggested include allowing transfers of surplus revenue to maintain roads and streets, changing the 911 funding, broadening options for legal advertising, and creating a referendum process for local units of government allowing them to acquire more operating money, which is similar to the school district structure.

Furthermore, the suggestions include allowing townships to streamline their government by eliminating township advisory boards and transferring the fiscal responsibility to the county, as well as, align townships with the three existing county commissioner districts.  In addition, encourage local governments to adopt centralized purchasing within their government unit and joint purchasing with other municipalities.  The Lieutenant Governor also proposed reforming local government infrastructure planning by suggesting that the state should develop model plans for local infrastructure projects to save money on consulting and planning fees.

One reform proposal getting a lot of traction in the state legislature is a bill that will reduce the conflict of interests problems that are often seen at the local government level.  The proposed Indiana legislation would prevent public workers from hiring their relatives for jobs that they supervise.  The bill would also preclude those who work for municipal governments (firefighters, police,  park workers, etc.) from sitting on county commissions or agencies because it is not in the public’s interest to have the same people working for the municipality and setting the wages and benefits for that same position.  With this conflict of interest eliminated municipalities can focus efficiency and can stop worrying about local officials implementing self-serving policies.

The proposals can be found on Lt. Gov. Skillman’s webpage available here.

Article describing the success of the local government conflict of interest bill is available here.