County land banks rife with problems
The Wayne County Land Bank scooped up 240 acres, spent $26 million on “improvements,” and sold the land to a developer for $1 with the promise of thousands of jobs; who promptly turned around and resold seven of the acres for $179,000 while the jobs never materialized.
The Kent County Land Bank has blocked more than 40 properties from being sold, stopping sales to private developers to fund land bank operations, despite state law prohibiting the entities from doing so.
The land bank in Genesee County wants to selectively subsidize housing for certain government employees.
Land banks are government entities that acquire tax-foreclosed properties with the intent to sell it later at a profit. In Michigan, they tend to be run by counties and have had multiple problems. But a new bill would create more oversight of the land banks, limit some of their power and ensure legal recourse if they violate state law.
House Bill 4626 was recently-introduced by Rep. Ken Yonker, R-Caledonia. He said the bill's intent is simple: holding the entities accountable.
"This creates an avenue for a person or entity to be able to file a grievance when a land bank operates illegally," Rep. Yonker said. "If they are found guilty of violating state law, the director will be terminated."
He said the proposed law would help deal with some of the problems that have cropped up with land banks, especially the issue in Kent County.
"In Kent County, the land bank cherry-picked properties with higher values and then did the auction," Rep. Yonker said. "That is blatantly against state law. It is an example of government overreaching and that is not acceptable."
Land banks have been around for a long time, but began to take off in some states when the federal stimulus program began pumping in money in 2009.
The issue could become even more prominent if one Michigan Congressman gets his way. U.S. Rep. Dan Kildee, D-Flint, has introduced a bill at the federal level that he said would spend $1.9 billion funding demolitions to "eliminate blight."
But the text of the "Revitalize America Act of 2013" makes it clear that a lot of the money would go to land banks or similar organizations. Before winning his seat in Congress in November, Rep. Kildee headed an organization that promoted land banks, and previously was the head of the Genesee County Land Bank.
Audrey Spalding, a policy analyst at the Mackinac Center for Public Policy who has studied government land banks for years, said the Rep. Yonker bill would provide much-needed accountability.
"Land banks have a long history of failure in the United States," she said. "Michigan politicians got ahead of themselves when they approved the state's land bank law. Government land bank officials try to play the role of speculator, developer and landlord and Michigan taxpayers have pay for it. It's a great sign for taxpayers that legislators are considering land bank reform."
Rep. Yonker said the land bank's responsibilities are to try and keep area property values from falling by helping eliminate blight. But some of the county entities have gone too far.
"When private industry buys [the property], they pay taxes. But if we allow government to take over private business, we're taking land out of the tax base," he said. "That's not economic development at all."
(Editor's note: Every Saturday, Michigan Capitol Confidential brings you a story about a bill being discussed in committee or presented in the Legislature for a vote. For more information, go to www.MichiganVotes.org.)