Starting a PA Land Bank Authority: First Steps

1. Starting a PA Land Bank Authority:First Steps Presentation by John Kromer July 17, 2013

2. Background Under Pennsylvania’s enabling legislation, a land bank authority can: • Provide a single point of contact for prospective real estate developers and investors (clearinghouse); • Make it easier to assemble sites for future development (land transaction facilitator); • Demolish and/or maintain abandoned properties for future reuse (blight removal resource).

3. Background So how do you actually get a land bank started? The best way: begin a dialogue that produces good answers to three key questions:

4. Background • What added value would a land bank authority provide to your community? • Who needs to buy into the idea of creating a land bank authority? • How do you support the cost of operating a land bank authority?

5. What’s the Added Value? Think about answering this question by showing that: • A land bank fits into an overall vision for the municipality or county; and • The creation of a land bank authority is consistent with approved and proposed plans. Here’s how to do this.

6. What’s the Added Value? • Check to see if your local or county government has a published vision and/or mission statement. If so, the statement(s) will probably make reference to the values of promoting economic development, stimulating new development, and/or removing blight. Even in a place with no published vision or mission statements, people are likely to agree that these values are important.

7. What’s the Added Value? • Review existing or proposed plans for references to new development and/or blight removal. You may find them in the following documents: • The comprehensive plan for the municipality or county; • Redevelopment plans or neighborhood strategic plans; • Main Street or Elm Street plans or other target-area plans.

8. What’s the Added Value? As you begin planning for a land bank, show that the creation of a land bank authority is not inconsistent with established goals, priorities, and previously approved plans…

9. What’s the Added Value? …a land bank authority is a new resource that can help stimulate high-quality investment and development by bringing vacant and underused land back into the mainstream real estate market.

10. What’s the Added Value? Many people are aware that economic disinvestment and property neglect are chronic, longstanding problems in every area of Pennsylvania. The creation and successful operation of a land bank authority can be a game-changing solution to these problems.

11. Who Needs to Buy In? You’ll want to get support for a proposed land bank from elected officials, public agency managers, and business and community constituencies. The more buy-in you can get prior to the formation of a land bank authority, the more successful the land bank is likely to become once it’s up and running.

12. Who Needs to Buy In? Start by discussing the idea of a land bank with the public agency staff who currently have some development- or blight-related responsibilities at the local and county level. Contact the chief executive of the municipality and/or county, let him/her know that you’d like to start an informal dialogue about a proposed land bank and that you want to report back to him/her on the results. See if you can get this approach “blessed.”

13. Who Needs to Buy In? Municipal/county staff to consider bringing into the discussion: • Staff from office of Mayor, City Manager, Managing Director, City Council, County Executive; • Community development department and planning department; • Authorities: Redevelopment, Housing, Water; • Code enforcement department. • Main Street/Elm Street district staff.

14. Who Needs to Buy In? You probably won’t need to schedule one-on-one meetings with every person. Instead, you should try to schedule group meetings with some of them. A group discussion can frequently be more productive as well as time-saving.

15. Who Needs to Buy In? Goals of these meetings: • Find out who’s currently dealing with vacant property acquisition, development, and maintenance issues and learn what they’re doing. • Understand the questions, concerns, and/or problems that agency managers and staff may have regarding the land bank. • Get opinions on how land bank resources could best be used (e.g., to assemble sites for new construction; to clear a block of vacant properties with no reuse potential; to assist a community development corporation).

16. Who Needs to Buy In? Next stop: the chief executive (Mayor or Manager) and City Council. The state enabling legislation requires that an ordinance authorize the creation of a land bank—so Council buy-in is critical… …but the executive is going to be deciding whether and how to commit government resources to support the operation of a land bank authority—so his/her buy-in is fundamentally important as well.

17. Who Needs to Buy In? Some questions they’re likely to ask: • Don’t we have enough government authorities already? • How does this get funded? • Won’t the land bank authority end up becoming a tool of politicians or insider developers? • Who’s going to sue us? What’s the legal exposure? (suggested responses later in this presentation)

18. Who Needs to Buy In? Equally important: start building a working relationship with county government. Top priority: Get acquainted with Tax Claim Bureau staff, learn how the judicial sale process is administered, and get comments and reactions on how the PA enabling legislation might be implemented in your county. Once established, the land bank authority will need to work closely with the Tax Claim Bureau.

19. Who Needs to Buy In? Why should the Tax Claim Bureau care? • A land bank authority could help the Bureau find appropriate developers and reuses for properties that no one bids on at tax sales, so that these unwanted properties don’t remain on “repository” lists indefinitely. • A land bank authority could convey currently tax-delinquent properties to responsible owners who will pay taxes reliably.

20. Who Needs to Buy In? After some substantive discussion with the Tax Claim Bureau, consult with other county officials: county development agency directors, county Treasurer, County Executive or Chief Operating Officer. Get advice on the best way to bring County Commissioners into the dialogue, after substantial buy-in from others has been obtained.

21. Who Needs to Buy In? One potential ally: Realtors in your area. Realtors can help market vacant properties to qualified buyers. The PA Association of Realtors created the CORE (COmmunityREinvestment) program for that purpose. More information: http://www.PARealtorCORE.com/

22. Who Needs to Buy In? Another potential ally: community development corporations (CDCs). Many CDCs develop vacant property in areas that risk-averse conventional developers avoid. The Philadelphia Association of CDCs has created a web site devoted exclusively to land bank issues affecting Philadelphia: http://www.phillylandbank.org/.

23. What’s the Business Plan? Even if your efforts to obtain buy-in prove to be highly successful, the proposed land bank authority may not have any funding for property acquisition, property maintenance, insurance, staff, and other expenses.

24. What’s the Business Plan? The state enabling legislation does not include funding support for land bank authorities. Without sufficient resources, a land bank authority that starts acquiring lots of neglected or surplus properties won’t be effective in solving the blight problem… … it will just become the new owner of the problem.

25. What’s the Business Plan? Therefore, your initial approach should be based on two principles: • Start small. • Look for opportunities to make use of existing resources.

26. What’s the Business Plan? Start-small policies The land bank authority acquires only properties for conveyance to developers that: • Have documented experience and qualifications; • Have obtained approval for property development proposals; • Have firm financing commitments; • Have committed to specific settlement and construction start dates and the payment of holding and transaction costs.

27. What’s the Business Plan? Start-small policies The land bank authority does not acquire “surplus” properties unless/until: • A Land Bank Trust Fund is been capitalized. • The fund has sufficient resources to support property-specific maintenance, insurance, and other expenses

28. What’s the Business Plan? A good way to start planning: Think about how this approach would have worked if a land bank had existed in 2012. Review the addresses on the 2012 county judicial sale lists and consider how the land bank authority would have responded.

29. What’s the Business Plan? Which properties on the lists would the land bank authority have wanted to acquire? Could the authority have been able to convey these properties quickly to pre-qualified developers? Are any of these properties small lots that could have been conveyed to adjacent owners for yard space or parking (subject to zoning/land use standards)?

30. What’s the Business Plan? Existing resource-use policies See if local and/or county agency staff can be enlisted to support the land bank authority’s initial operations. Possible agency roles: • Community Development Department: Overall direction/supervision, coordinated with local/county executive. • Redevelopment Authority: Developer prequalification and proposal review.

31. What’s the Business Plan? Existing resource-use policies (cont’d.) Housing Authority: Property maintenance, based on cooperation agreement with land bank authority. This division of responsibilities may be consistent with existing agency roles. With this approach, land bank startup on a small scale would not require the hiring of new staff.

32. What’s the Business Plan? A Leadership/Management Issue Consistent with a conservative startup approach, consider appointing to the land bank’s governing board as many board or staff members of existing city agencies that report to the Mayor as possible. This approach will make the best use of available resources and will help address concerns that the new entity might become a “runaway authority.”

33. What’s the Business Plan? Legal Services for Land Bank Authority The land bank authority could request that the local or county Redevelopment Authority’s legal counsel provide the legal services required for initial organization and startup—or the authority could choose to engage its own legal counsel. In many instances, these expenses are not likely to be substantial. Legal expenses associated with property transactions would be paid by the selected property developers.

34. What’s the Business Plan? Will We Get Sued? Starting small reduces the threat of political or legal problems. In addition, litigation risk is further reduced in light of the following : • The local or county ordinance authorizing the land bank would be reviewed and approved by the PA Department of Community and Economic Development. • Upon successful completion of the DCED review, the PA Department of State would authorize the formation of the authority as a legal entity.

35. What’s the Business Plan? Will We Get Sued (cont’d)? If proposed land bank authority transactions involving the purchase of properties listed by the county Tax Claim Bureau are made subject to county review—including legal review—and approval in advance, an additional layer of oversight is built into the process.

36. What’s the Business Plan? Taxing Authorities The land bank authority will need to establish a working relationship with taxing authorities: local government, county government, the school district, the water authority, and possibly others.

37. What’s the Business Plan? Taxing Authorities (cont’d.) The land bank authority can remove a taxing authority lien associated with a particular property in one of two ways: • Obtain approval for a discharge of the lien from the appropriate taxing authority prior to acquisition; or • Just pay off the lien.

38. What’s the Business Plan? Taxing Authorities (cont’d.) Taxing authority approval of the discharge of liens may be granted on a “blanket” basis… Or a taxing authority may instead require that each property for which a lien discharge is requested be reviewed individually… Or a taxing authority may decide not to approve the discharge of any liens.

39. What’s the Business Plan? Taxing Authorities (cont’d.) Why should a taxing authority care? A land bank authority could convey currently tax-delinquent properties to responsible owners who will pay taxes reliably. This benefit may be particularly important with respect to “underwater” properties with mortgage debt that is substantially higher than market value.

40. Keep in Mind… The experience of Dauphin County, which has already authorized the creation of a land bank authority, and other places in which land bank authorities are proposed can provide illustrations of what works and guidance on how to solve or avoid problems.

41. Keep in Mind… The Housing Alliance of Pennsylvania will be scheduling additional training sessions… …and land bank issues will be on the agenda at the Housing Alliance’s annual Homes Within Reach conference (November 11-13 in Harrisburg; details at http://www.housingalliancepa.org).

42. Keep in Mind… In the meantime: jkromer@sas.upenn.edu