February 15, 2012

'Land bank' proposed to help KC's urban blight

To help deal with the crisis of vacant residential properties, Kansas City-area lawmakers are once again pushing an idea that they contend could have a dramatic impact on blighted neighborhoods throughout the community — the creation of a land bank.

Just a few years ago, Delores Johnson’s home on Kansas City’s East Side was worth around $80,000. Last year, she says it was worth only half as much.

“I’m maintaining my house and my property, but what’s happening around you has just as much impact as anything you do,” said Johnson, president of the Vineyard Neighborhood Association.

On her block, where she has lived since 1965, there are three vacant lots and one vacant home. In the entire neighborhood, Johnson estimates that about 10 percent of the homes are empty.

But a study last year by the Federal Reserve Bank of Kansas City found that Johnson’s neighborhood is far from unique. All told, it found there were 12,000 vacant residential properties in Kansas City. In some areas, the vacancy rate ranges as high as 25 percent.

To help deal with the crisis, Kansas City-area lawmakers are once again pushing an idea that they contend could have a dramatic impact on blighted neighborhoods throughout the community — the creation of a land bank.

Cities big and small — from Olathe to St. Louis — have created such “banks,” where vacant properties are acquired and set aside for rehab or resale so that they can be put back on the tax rolls.

Not everyone approves of the idea, however. A similar effort ran into opposition last year in the Missouri Senate.

A House committee is expected to vote on a different land bank bill today.

“We’re talking about areas where no one wants to buy, and this is a chance to get away from the blight and truly transform Kansas City,” said Rep. Noel Torpey, an Independence Republican and one of the bill’s sponsors. “A land bank is simply a tool to allow the city and county to deal with a crisis. This is local control at its best.”

The land bank would “fast track” vacant properties back into productive use in various ways, said David Park, director of the city’s Department of Neighborhood and Community Services.

Some homes could be fixed up and sold. The worst could be demolished, with the land sold to nearby homeowners or developers. Some vacant properties could become community gardens or parks, he said.

The aim is to stop the cycle of blight, then reverse it by making once-derelict areas more attractive to potential homeowners. Removing blight is key to shoring up property values, Park said.

The spiral of decay that began with white flight in the 1960s only gained momentum in the decades since, with the decline of the Kansas City School District, rising crime rates and, more recently, the foreclosure crisis.

Many vacant properties are in such disrepair that they go unsold even at tax sale auctions. That real estate then becomes property of the Land Trust of Jackson County, which has existed for years.

The Land Trust also aims to put parcels back on the tax rolls, but current rules require sales to bring in at least two thirds of the assessed value of each parcel. As a result, many properties sit empty for years.

There are 3,226 properties being held by the county’s Land Trust. Of that total, about 60 percent have been held for more than a decade, according to Land Trust Commissioner Mike Hunter.

The Land Trust doesn’t have the budget to cover the costs of mowing grass and weeds, much less rehab houses for resale. Upkeep and maintenance on vacant property runs about $1 million a year.

But a land bank could change all that, said Rep. Michael Brown, a Kansas City Democrat and the bill’s co-sponsor. “This will allow neighborhoods to reclaim their community, block by block,” Brown said.

The legislation also would allow the bank to assemble parcels of land for targeted redevelopment, said Julie Porter, executive director of Greater Kansas City LISC, a nonprofit that helps distressed neighborhoods.

“A land bank would be able to hold on to property, clear the titles and then get it into the hands of someone hoping to redevelop it,” Porter said. “When you’re talking about multiple properties, that would be difficult and very expensive for a nonprofit or even many private developers.”

Funds for land bank purchases might initially come from city coffers, but ultimately the goal is for funds to build up from selling properties. The land bank also would be entitled to the first three years of property tax payments on any resold properties and could incur debt that would not count towards the city’s debt limit.

The bank would be managed by a board made up of one representative of the county, one from the largest school district in the county and three to five residents of the city.

Park said another key aspect of a land bank would be that it could accept donated property. Currently, Bank of America and the city are negotiating a deal in which the lender would turn over to the land bank an unspecified number of houses that had been foreclosed upon. Park said an announcement could come in a couple of weeks.

But not everyone is sold on the idea.

Audrey Spalding, a policy analyst for the Show-Me Institute, a St. Louis-based conservative think tank, believes proponents of the land bank have not proved that it would do a better job than Land Trust.

In 2011, she published a study on the 40-year-old St. Louis Land Reutilization Authority, that city’s version of a land bank. She found that, between 2003 and 2010, the bank rejected nearly half of all formal offers to purchase its property.

The frequent reason for rejection was that the property was being “held for future development.”

“You have the city turning down offer after offer in the hopes that a future, better development will materialize,” Spalding said, later adding: “Passing legislation to create a land bank in Kansas City will allow the city government to hold land for future development, and by doing that the city will be betting against the very residents that it is supposed to help.”

However, Park said the intention of forming the bank is not to assemble large swaths of property to hold for some future project.

“If anything, the bank will struggle to remain viable if it’s holding property, since its finances are based on selling property,” he said. “There is a very strong incentive to sell, but with more control over what happens than what is allowed with the land trust.”

Torpey said the Kansas City bank would have very little in common with its counterpart in St. Louis. A better comparison would be the land bank in Flint, Mich., formed in 2002. A Michigan State University study estimated the land bank’s activities there had boosted property values by more than $100 million.

“This isn’t a short-term fix,” Torpey said. “We’re trying to look at this problem in the long term. A land bank doesn’t fix everything, but it is another tool for the city and county to help revitalize neighborhoods.”

If the House committee passes the bill today, Torpey said he expects a vote in the full House within two weeks. A similar bill cleared the House last year, but died in the Senate.

One key objection, Park said, was a provision that would have allowed the land bank to buy tax-delinquent properties ahead of tax sales — shutting out private investors before they had a chance to bid.

“They (legislators) were afraid that we’d cherry pick the best properties,” Park said.

But that provision is not in this year’s bill.

“I feel pretty hopeful that it’s going to pass this year,” he said.

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