Michigan needs to review land bank operations
FBI officials raided the office of the Indianapolis Land Bank on May 28 after a months-long investigation revealed evidence its officials were receiving kickbacks for selling properties to favored nonprofit groups.
The land bank's director, Reginald Walton, has been charged.
Allegedly, land bank officials were exploiting a policy that gives nonprofits preference over other would-be buyers of land bank property. The Indianapolis Land Bank would sell properties at a steep discount to nonprofit organizations, instead of using a bidding process. Michigan land banks, such as the Kent County Land Bank and the Genesee County Land Bank, also have policies that favor nonprofits.
Indianapolis Land Bank officials allegedly took bribes to exploit this policy. Officials reportedly then sold land bank properties to "pass-through" nonprofits at a steep discount. According to reports, the executives of those nonprofits would then transfer the properties to private investors — while collecting a fee.
In light of this, the Indianapolis mayor has suspended the land bank's operation.
The corruption of the Indianapolis Land Bank is not surprising to anyone who has tracked these government entities. The country's oldest land bank, in St. Louis, Mo., has a similar history of corruption and favoritism.
Granting government officials the power to choose who can buy property and for how much, along with the ability to funnel subsidies to certain developers, is a recipe for corruption. And yet, that is what Michigan's land bank law allows.
The Kent County Land Bank created controversy when it blocked properties from going to auction — where they would have been bid on in a transparent process — to be able to pick and choose who could purchase property.
Indianapolis officials' misdeeds should cause legislators here to revisit the wisdom of allowing such entities to exist in Michigan. While there is no evidence of bribery, land bank officials around this state have already put in place policies that favor nonprofits and government employees.
At the very least no land bank should be allowed to block property from being sold at tax auction. Moreover, these government agencies should adopt uniform pricing policies, instead of extending preferred treatment to some.
Michigan has 40 or so land banks, and they operate without much independent oversight. It would be best to eliminate or reform them now, instead of waiting for a scandal to occur.