TESTIMONY BEFORE NEW JERSEY LEGISLATURE

ASSEMBLY HOUSING AND COMMUNITY DEVELOPMENT COMMITTEE

Trenton, NJ

March 16, 2015

LaveaBrachman, Executive Director, Greater Ohio Policy Center, Columbus, OH

ChairGreen, Vice Chair Jasey, and members of the Housing and Community DevelopmentCommittee.

Introduction

Myname is Lavea Brachman, and I am the Executive Director of the Greater OhioPolicy Center, a nonpartisan nonprofit organization located in Columbus, Ohiothat operates statewide and champions revitalization and sustainable growth tocreate economically competitive cities and communities.  I am pleased to be here in Trenton today tooffer testimony on the status of land banks in Ohio to help inform this body andthe governor’s consideration of proposed land bank legislation for NewJersey.  I am here at the invitation ofthe Housing and Community Development Network of New Jersey.

Similar to New Jersey, Ohio’s cities have been hit hard byurban blight and decline, experiencing some of the highest foreclosure andvacancy rates in the country. At its height in 2009, Ohio’s foreclosure filings was almost 90,000 peryear, and the vacancy rates have climbed to devastating levels of over 15% insuch cities as, Cleveland, Youngstown and Cincinnati, and over 20% in Daytonand many other cities and towns around the state.   Thesevacancies have also cost municipalities exponential amounts in collateraldamage, represented in the form of public safety hazards and decreased propertyvalues.

In 2008, in response to this unparalleled foreclosure andvacant and abandoned property crisis, the Ohio General Assembly, withbipartisan support, passed legislation creating Ohio’s first county land bank, pilotedin Cuyahoga County (where Cleveland is located).  In 2010, GOPC and a coalition of partnersfrom around the state successfully advocated for passage of legislation thatextended land bank authority to an additional 42 out of Ohio’s 88 counties (basedon a population threshold), permitting these specified counties to create a hybridorganization that combines the private sector efficiency of a non-profitcorporation with the public purposes, powers and funding of a governmentalorganization. 

Basic Ohio Land Bank Mission, Powers, Composition andFunding

These Ohio land banks were created to:

1.     facilitate reutilization of vacant, abandoned,tax‐foreclosed real property;

2.     holdand manage these types of properties to leverage their reutilization;

3.     clearthe title of property and coordinate property assembly; and

4.     promoteeconomic and housing development in the county or region.

Inorder to achieve these goals, Ohio’s county land banks have a number ofunusual, critical powers, including the ability to:    

·       take title to aproperty more than two years delinquent on property taxes, local governmentfines or fees, or has serious and chronic unabated code violations;

·       extinguish all private mortgages, liens, and stateand local taxes/fees, in order to “clear” the property’s title for future use;

·       prevent a foreclosed property from going tosheriff sale and thus help to interfere with purchase by an unscrupulous real estatespeculator; and

·       address blight mitigation, includingdemolition, property stabilization, and property rehabilitation, in order torevitalize neighborhoods and communities.

Additionally,Ohio land banks are governed by a board of directors that comprise at least 5“community stewards,” which includes both public and private sectorrepresentatives (that is, county commissioners, the county treasurer,representatives from a township and the county’s largest city, and a privatereal estate developer) to ensure land banks perform appropriate functions anddo not overextend their powers or undertake extensive property ownership whereit is unwarranted.

Perhaps most importantly, the Ohio statute names asource of operational funding that counties could chose to provide to landbank: 5% of the biannual delinquent property tax receipts, more commonly knownas “DTAC” (DelinquentTax and Assessment Collection).  Ohio isthe only state that statutorily provides a consistent funding source for countyland banks. 

Lessons Learned and Successes

In the five plus years of operations, as more landbanks have come on-line, Ohio’s land banks have learned some important lessonsand experienced significant success.  Letme give you a quick sense of some of those lessons and successes, large andsmall.

·       First, since the statute does not dictate how county land banks should programmatically operate, leavingit up to the local boards, county land banks have the flexibility to form inways that are responsive to local needs. They are all tailored to their localcircumstances, so that each of the 22 currently existing county land banks issomewhat unique in terms of operations and programming.  However, there are similarities in terms ofstructure and activity that have demonstrated successful outcomes.

·       Second, pilotingone land bank first, in Cuyahoga County, was very effective in demonstratingits operations and use for legislators.

·       Third, inaddition to property-by-property blight elimination, land banks in Ohio are achievingthe broader goals of: 1) stabilizing and strengthening markets—particularlyresidential neighborhoods—to prevent further decline, and 2) clearing a pathfor private sector re-engagement by lowering barriers through incentives,support, and resources.  For instance, Franklin County land bankcombined demolition of parts of a dilapidated apartment complex in Columbus, allowingfor reinvestment and renovation of the remaining apartments andtownhouses.  The complex is now under newownership and features a new public park.  This “targeted area” strategy involves a moreholistic approach to neighborhood revitalization, particularly where some market still activelyremains, to coordinate and concentrate interventions and resources to stabilizeand revive a functional market. 

·       Fourth, Ohio landbanks have become vehicles for use by state agencies (such as the Ohio AttorneyGeneral’s office and the Ohio Housing Finance Agency) to funnel much-neededdemolition funding.    Ohio had estimated100,000 blighted properties in 2010; close to 20,000 have been torn down by2015.  These lots are now the sites of brand new real estate developmentsthrough parcel assemblage, new sideyards for neighbors, community gardens, andparks. This blight removal activity has resulted in collateral improvements, including crime reduction,improving property and neighborhood values, residential redevelopment, andgreen space creation.

·       Fifth, land banksare versatile.  They can operate as the“lead entity” in projects, driving stabilization and revitalization efforts, butthey also act as excellent partners and work closely with other local entitiesthat share similar goals of neighborhood stabilization and/or marketre-invigoration.    For instance, aMahoning County (Youngstown) land bank took over a blighted property on anotherwise well-kept street and sold it to Habitat for Humanity which built anADA-accessible house for a retired Marine staff sergeant and his family.

·       Sixth, land banks have helped to save money by eliminatingproperties that received disproportionate number of emergency services calls,e.g. police calls to abandoned houses used as drug dens, properties targetedfor arson, properties that attract wildlife and vermin. 

·       Seventh, land bank operations are helping to stabilize existingbuildings, which prevents future extraordinary costs.    Forinstance, Hamilton County (Cincinnati) has the “High-Impact Property Program”that improves commercial buildings to a level that attracts private sector,saving one of the oldest skyscrapers in Cincinnati and a historic theater thisway by doing the roof repairs and title clearing needed by the privatesector. 

·       Finally, their work has prevented bank walkaways and performedproperty assembly to aggregate properties to improve their reuse potential.  For instance, the Lucas County (Toledo) landbank gained site control of a multiple, adjacent commercial properties(an old strip mall with a former grocery store, a Kroger, and multiple smallerunits) with complicated title history with mortgage foreclosure, several majorlien holders and an high delinquent tax bill, and worked with receiver to finda purchaser who is restoring the property with new commercial users that arealready generating tax revenues.

Conclusion

Ohio land banks are awelcome example of a state policy implemented with appropriate local controlintervening effectively to jumpstart local market operations. While Ohio communities have a long way to go to return to economic andphysical health -- and while there is room for land banks to maximize furtheruse of their tools to help individuals thrive and achieve communityrevitalization -- many cities and counties are actively leveraging their landbanks’ capabilities demonstrating that well-intentioned state policyinterventions in combination with local capacity and oversight can work intandem with market operations.  They areworking so well that a recent proposal floated by the county treasurers’association to expand land banks to the rest of the counties in the state. 

Posted: 6:58 p.m.Tuesday, Oct. 6, 2015

Land bank and Miami students to benefit from study

By Denise G. Callahan

Staff Writer

BUTLER COUNTY — 

Miami Universitystudents are poised to embark on a cost/benefit analysis on whether the Butler Countyland bank has had a positive impact bringing down blighted buildings.

ExecutiveDirector Mike McNamara has been working with political science and businessanalytics professors and the Center for Public Management and Regional Affairsto get the study off the ground. The purpose is to see if spending almost $7million in federal and state funds to bring down an estimated 600 eyesores wasworth it.

McNamarasaid the university is paying the students out of grants and other sources, sounless some incidental costs pop up, the county is getting the valuable toolfor free. Land bank chairman and county Treasurer Nancy Nix was pleased to hearthe study doesn’t have a price tag, or much of one.

“It’sa more efficient, low-cost way to determine if the land bank has had anyverifiable impact,” Nix said. “We don’t have many resources, so we want to putall of our land bank resources to actually demo and not studies.”

With$2.7 million it received in Moving Ohio Forward grants from the state, Butler Countyformed a land bank three years ago to deal with blighted buildings. The citiesof Hamilton and Middletown each gave $1.1 million to the landbank fund as well. Approximately 500 blighted buildings have been torn downthrough the land bank program.

Butler County commissioners agreed last summer tosiphon 1 percent of delinquent tax and assessment collection funds (DTAC) tobolster the land bank and open up services for the entire county. DTAC fundsare late payment penalties on real estate taxes. Nix estimated the 1 percentwould garner about $155,000.

Theland bank in Cuyahoga County released a studythat showed in moderate to high functioning markets the benefit to banishingblight ranged from $4.27 to $13.45 per dollar invested in demolishing badbuildings.

“Justover 6,000 demolitions were completed over the study period costing roughly$56.3 million. Findings estimate total demolition benefits at $78.9 million.Suggesting a $22.6 million benefit attributed to demolition activity,” thestudy reads. “Benefits from demolition activity were shown to accrue primarilyin high to moderately functioning markets. Conversely,findings suggest that little real estate equity return is available fromdemolition activity in weak real estate markets.”

McNamarasaid the Butler County study isn’t just about money.

“Thestudy is to see if there is an economic boost and to see what other areas ithas impact on,” he said. “Such as fire runs, police runs, overall propertyvalues. I want to see what the big picture is.”

ProfessorAllison Jones-Farmer, director of the Center for Analytics and Data Science at Miami, said there arecountless benefits for the five students who will be working on the project,and some aren’t all that obvious.

“Itgives the students the opportunity to see how business decisions essentiallyaffect all the other variables in the economy, including the market values forthe properties and then moreover the crime rate,” she said. “So it’s a reallygood learning opportunity for these students who are young, 19, 20 years old,away from home for the first time, to really see that maybe the suburban, uppermiddle class environment they grew up in is not indicative of the whole world.”

Departmentof Political Science chair and Professor Patrick Haney said 15 or 20 years agoprojects such as these were almost always done by professional staff at theuniversity and perhaps a couple really good students. In the last five to eightyears, he said, they started using the studies as learning tools.

“Itputs students then in the position to apply the things they’ve started to learnin class, work together with other students and with faculty direction, to helpdeliver a product for our client, for lack of a better term,” Haney said. “Thishas been a great model, this has been a transformative experience for thestudents to go from learning by sitting in a classroom to learning by doing inthe real world.”

Haneysaid McNamara should get at least some information by March and the full reportin May.