Cuyahoga County, OH  has been one of the most affected areas as a result of the current foreclosure crisis. County Treasurer Jim Rokakis has developed a long-term redevelopment strategy to address the growing number of abandoned properties and overall blight. Treasurer Rokakis has worked to acheive bi-partisan support for his initiative which if approved by the state legislature, would serve as a model for other counties in the state.

For an overview of the program, please see the following:

Overview

The crisis of land reclamation of vacant and abandoned properties has been a long standing problem which urban cities deal with in a responsive, rather than a strategic mode. In other words, nuisance or condemned structures, and overgrown vacant lots get demolished or cleaned based on complaints from the community. This often occurs on the basis of which councilman complains the loudest, which properties are the worst or which create the harshest neighborhood nuisance. The foreclosure crisis has seriously exacerbated the problem to the point of decimating entire once-thriving blocks. In Cleveland, for example, the city this year will likely spend about $9,000,000 on demolishing condemned properties and another $4,000,000 on cleaning overgrown vacant lots. As to the vacant lots, this is a regressive expense in that it will recur year-after-year. And, the demolished properties will be added to the next years inventory of vacant lots needing to be cut. The Cuyahoga County Treasurer proposes to create a county-sponsored “land bank” which can not only add needed resources to the foregoing problem, but can do so in a more nimble, strategic and productive way.

The County Land Bank

The proposed is Land Bank based on the successful Genesee County, Michigan model, the Land Bank. This Land Bank will be infused with powers to take properties from banks needing to off-load abandoned properties, receive tax-foreclosed properties, responsibly moth-ball properties pending rehabilitation, assemble land for development, and demolish on a larger scale properties beyond rehabilitation and which have no residual equity. The proposed Land Bank will have authority to buy, sell and hold properties throughout the County. The concept is to make a noticeable dent in the number of structures needing demolition and to retard the immediate negative impact they have on the community if allowed to stay in such disrepair. This retention of such properties by the Land Bank is also designed to retard the proliferation of multiple layers of speculation and flipping of these properties resulting from the foreclosure crisis.

Funding

There are several sources of funding. However, the Cuyahoga County Treasurer perceives that the Land Bank must be able to stand on its own since other government funding cannot be assured. Hence there are three essential sources of funding for the Land bank:           

• Tax Anticipation: The County Treasurer is responsible for collecting the real estate taxes twice per year, January and July. After each collection, anywhere from $60,000,000 to $70,000,000 becomes delinquent. Typically, as these delinquencies are collected, the principal tax, plus penalty and interest are collected and turned over to the various taxing districts entitled to the tax distribution. The County Treasurer proposes to internally borrow much of this delinquency from its daily balance, and shortly after the collection distribute the taxes to the taxing districts according to their share. This in turn will authorize the Treasurer to recapture the statutory 10% penalty and interest on the delinquency and divert it to the Land Bank. The borrowing on this money necessary to pay the taxing districts will be in the range of 3%-4%, while the penalty and interest will be 10% and 12% respectively. Internal models prepared by Treasurer staff show that this spread will add a sum of approximately $6,000,000-$7,000,000 using the example above. This annual revenue stream, in turn, will, at some point be bonded, or capitalized by short-term tax anticipation notes (secured by the ongoing annual revenue stream) to raise much larger sums to address the problem described above.
• Tax Collection Cost Fund: The Ohio Revised Code authorizes Treasurers throughout the state to collect 5% on all delinquent taxes collected after they have gone delinquent. This percentage is split between the Treasurer and the Prosecutor for the purpose of tax enforcement, advertising, tax foreclosure lawsuits, etc. In Cuyahoga County, because of the size of the County, the size of the cyclical delinquencies and the proliferation of foreclosures, this fund has sufficient funds to allow a portion thereof to be diverted to the Land Bank. Specifically, however, because this is a fund that technically is earmarked towards enforcement, the change in the law will allow those counties with a Land Bank to retain up to and additional 5% of the collected delinquency which will be directed to the Land Bank. Internal models prepared by Treasurer staff show that this change will add a sum of approximately $1,500,000-$2,500,000 for Land Bank operations.
• Bundling: By changes to the Ohio Revised Code, the Treasurer will be able to dispose of tax foreclosed properties at Sheriff’s auctions in “bundles.” What this means is that tax foreclosed properties that are not redeemed by their owners will not be sold individually in such a manner that allows speculators to “cherry pick” higher equity properties and leaving behind the negative equity properties to escheat to the state. Instead, the bundle will contain both negative and positive equity properties. The positive equity properties will be used to help fund the operations of the Land Bank through responsible resales of the properties to qualified homeowners and eligible rehabbers.  

Strategic Reutilization and Partnerships

By allowing the Land Bank to be the repository of the mass of properties needing reclamation, the disposition of properties will be done in such a way that compliments the city plans of the respective municipalities as opposed to losing control to of the lands to speculation. In areas where larger scale assemblage can occur, these assemblages will be marketed as low-no cost transfers to private redevelopers so long as they adhere to the city plan of other prescribed land reutilization models. Additionally, in areas where resources are insufficient to do strategic code enforcement, nuisance abatement or enforcement, the Land Bank, properly funded, will be able to enter into joint nuisance abatement activities, enforcement districts and rehabilitation activities.

Conclusion and Legislative Status
As of this date (3/25/2008), the Treasurer’s staff is in the finishing stages a draft bill which will be submitted for introduction into the State Legislature. The legislation, among many things, will authorize the creation of Community Improvement Corporations with decentralized County governance afforded by the Community Improvement statute (R.C. 1724). The proposed legislation will authorize those counties invoking this new authority to create their own plans to address the needs of their particular community. As to Cuyahoga County, the foregoing summary articulates the conceptual purposes and capabilities desired by the Treasurer, and which will be authorized by the passage of the proposed Land Bank legislation.

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