Land Banks Not the Answer for Nebraska – April 5, 2012

The Lincoln Independent Business Association (LIBA) opposes legislation that allows for land banks in Nebraska. This legislation was introduced by Senator Mello as LB1137 and may be attached to LB924. While land banks are created with the intent to help cities and counties to clean up tax-delinquent properties, they become the problem, not the solution. Below are several reasons why Nebraska should keep land banks out.

I.    Land Banks Purposely Hold Property for Future  Development

Land banks hold onto property they could otherwise sell. St. Louis has had a land bank, also known as the Land Reutilization Authority (LRA) for the past 40 years.[1] The LRA has more than 11,000 properties, which makes it the largest landowner in St. Louis.[2]

Between 2003 and 2010, the LRA rejected almost half of all formal offers to purchase its property with the most frequent reason being that they were holding the properties for future development.[3] Unfortunately, the anticipated developments rarely occur and the LRA is left with the properties.[4] In the past eight years, the LRA has rejected offers to purchase more than 2,200 different properties, properties that could have been put back on the St. Louis tax rolls.[5]

 II.      Land Banks Act as Land Speculators

Cities that create land banks provide powers that allow land banks to act as land speculators. The city establishes priorities for vacant land and uses these priorities to determine when to sell the properties. For example, in St. Louis a land bank’s rejection letter indicated that the would-be buyer’s intent was to use the property as a rental and the land bank only wanted to support a sale to an owner/occupier.[6] The property remains vacant years later.[7] The proposed Nebraska Land Bank Act provides cities with the power to give land banks the same authority.[8]

 III.      Land Banks Spend Millions Maintaining Their Properties

When land sits unsold in land banks it not only keeps property off of the tax rolls, but it also requires money to maintain. For example, the St. Louis land bank owns more than 11,000 parcels of land. Mowing and maintaining this land costs $2.7 million a year.[9] The Genesee County, Mich., land bank spent $1.2 million last year and $1.6 million the year before that mowing and maintaining its properties.[10]

 IV.     Land Banks Bid Against and Otherwise Compete with Individuals in the Private Sector

A land bank can go to any nonjudicial tax sale or court-ordered tax sale and bid on those properties with the benefit of the land bank’s bid taking precedence above any bid from individuals in the private sector. This allows for land banks to compete with the private sector and gives land banks an unfair advantage in the marketplace.

While LB1137/AM2205 attempts to reconcile this unfair advantage by providing two conditions in which a land bank’s trump bid would apply, the trump-bid provisions are written too broadly to settle the concern of an unfair advantage taking place.[11]

Land banks can collect rents on land with the benefit of being exempt from paying taxes. Land banks can hold on to land and use it for any other purpose deemed appropriate by the land bank board. At the same time, the private sector is also trying to collect rents and run a profit but has to pay taxes. This is another unfair advantage that land banks have over the private sector.

 V.     Land Banks Are Not Needed to Address the Challenge of Tax-Delinquent Properties

Cities do not need to create another political subdivision to do the same thing that they can already do. For example, in 2005 the City of Lincoln declared the old Misle car lot blighted, which allowed for the city, developers and the landowner to move forward with the redevelopment project: Walgreen’s, West Gate Bank, Braeda Fresh Express Cafe and Runza.[12] Creating a land bank would just be another way for government to unnecessarily grow and spend more money while standing in the way of the private sector.

In addition, there are other entities that are successfully working to put tax-delinquent properties back on the tax rolls. In Kansas City, MO, the Jackson County Land Trust currently takes ownership of tax-delinquent properties that fail to sell at tax auction, and tries to sell them.[13] The State of Missouri currently has a bill that would create a land bank, a city organization, to handle what is already being handled inKansas City by a county organization.

NeighborWorks Lincoln, a nonprofit organization dedicated to community revitalization, works with city, county and private-sector representatives to resolve the challenge of tax-delinquent properties. In fact, NeighborWorks put 18 units back on the tax rolls last year.

 


[1] Audrey Spalding, “Land Banking Is No Miracle,” Show-Me Institute (Feb. 29, 2012) http://showmeinstitute.org/publications/commentary/privatization/715-land-banking-is-no-miracle.html.

[2] Tim Logan, “City’s land plan has successes, shortcomings,” stltoday.com (Feb. 25, 2012) http://www.stltoday.com/business/local/city-s-land-plan-has-successes-shortcomings/article_cb0f6e66-5f09-11e1-94ca-001a4bcf6878.html.

[3] Audrey Spalding, “Land Banking Is No Miracle,” Show-Me Institute (Feb. 29, 2012).

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] See Neb. 102nd Leg. 2nd Session, LB1137/AM2205 Sec. 10(5) p.8.

[9] Tim Logan, “City’s land plan has successes, shortcomings,” stltoday.com (Feb. 25, 2012) http://www.stltoday.com/business/local/city-s-land-plan-has-successes-shortcomings/article_cb0f6e66-5f09-11e1-94ca-001a4bcf6878.html

 [10] Ron Fonger, “Land Bank may still get cash from Flint, Genesee County to maintain nearly 8,000 abandoned properties,” The Flint Journal (March 19, 2012) http://www.mlive.com/news/flint/index.ssf/2012/03/land_bank_may_still_get_cash_f.html.

[11] See Neb. 102nd Leg. 2nd Session, LB1137/AM2205 Sec. 16(3)(a)(i and ii) p. 13.

[12] Deena Winter, “City strikes deal for 48th and O,” (Nov. 10, 2005) http://journalstar.com/news/local/article_fc893b99-4515-5488-9371-e503efe62184.html.

[13] Audrey Spalding, “Land Banking Is No Miracle,” Show-Me Institute (Feb. 29, 2012) http://showmeinstitute.org/publications/commentary/privatization/715-land-banking-is-no-miracle.html.