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Land banks emerge as tool in Pa.Local officials starting to weigh the pros, cons of recent legislation

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A community revitalization tool aimed at cleaning up tax-delinquent and abandoned properties is gaining some traction at the local level.

Officials in Philadelphia and Reading are discussing the creation of land bank authorities, while others across the commonwealth are beginning to research the powers of land banks under Act 153, which Gov. Tom Corbett signed into law last October.

"People are looking at what this means for their community, and how they would integrate it with the work they are doing," said Cindy Daley, policy director at the Housing Alliance of Pennsylvania.

Land banks are designed to acquire, manage and market vacant and tax-foreclosured properties. The goal is to clean up title on these properties — often acquired through tax sales or a county's repository of unsold properties — and get them back into productive reuse.

Pennsylvania has roughly 300,000 vacant and abandoned properties, according to state projections. About 54,000 of those are in Philadelphia and Pittsburgh.

"Strong code enforcement is important in preventing as well as remediating blight," Daley said. "But for some properties, even code enforcement won't get you to the desired result. Land banks can tie the loose ends together to move a property forward."

Unlike a redevelopment authority, land banks don't have the power of eminent domain.

"Land banks take a broader, holistic look at the market and do an inventory of what's out there and how it's impacting an area," Daley said. "A land bank does not need a redevelopment plan in mind. The ultimate goal is getting a property back into productive use."

The land bank can hold onto properties until there is a community-based or economically viable need, said Christine Goldbeck, executive director of the Pennsylvania House Urban Affairs Committee.

Without them, these tax-deliquent properties are sold to the highest bidder at public auction, which does not guarantee improvements will be made. And those not purchased at tax sale sit in the county repository in legal limbo.

"This could benefit anybody," Goldbeck said. "It's not only an urban problem."

The intergovernmental component of the legislation (see "Land bank basics") creates more potential for the creation of land bank authorities, because it opens up regional possibilities, she said.

"We are definitely going to look at it," said Ed LeClear, community development director at the Cumberland County Redevelopment Authority.

Land bank authorities present great promise for properties with tax debt that far exceeds the value of the property, he said. Officials are researching the volume of these properties not moving into the market and back on the tax rolls.

LeClear said he would like to see support from the county's school districts and other local taxing authorities. This might work best as a countywide initiative, he said.

The Reading Eagle reported that Reading is looking to create a land bank authority with board members who also sit on other public agencies, such as the redevelopment or housing authorities.

LeClear said a similar structure might be considered here.

"The (land bank) board could contract with the redevelopment authority to staff it," he said, or some other entity doing blight remediation.

Startup costs

When a land bank is up and running, proceeds from a sale can go back into the land bank to fund additional acquisitions, Daley said. Once a property is back in the market and generating tax revenue, the land bank and municipalities involved can structure shared revenue splits, she said.

The law provides for tax recapture by agreement with the taxing jurisdictions for up to 50 percent of property taxes collected for five years after transfer of a property.

"Startup costs is the difficult nut to crack," she said.

Community development block grants funds, or CDBG, could be one potential source, Daley said. Bond financing is another possibility.

As local governments consider land bank authorities, the cost of dealing with these delinquent and abandoned properties also is something that should be evaluated, she said.

"There is probably a way of moving some of that effort under the heading of land banking," Daley said, referring to costs associated with code enforcement, as well as police and fire services.

Other thoughts

The concept of public land banking is still fairly new in Pennsylvania. It could take a few larger urban areas to make this tool a more mainstream approach, said Amy Sturges, director of governmental affairs for the Pennsylvania Municipal League.

"We continue to see that throughout the city there are a lot of distressed properties," said Bryan Davis, executive director of the Harrisburg Redevelopment Authority. "We need some legal remedy to get title from those owners when you can't reach them otherwise."

H. Ralph Vartan, CEO of Susquehanna Township-based Vartan Group Inc. and one of the city's largest private landholders, said land banks are a tool that amplify a local government's power of eminent domain.

"For a place like Harrisburg, it would be a good tool, but probably in the middle of the queue in terms of community development priorities," he said.

The capital city's heavy debt burden, which is largely tied to its incinerator, has pushed several items to the back burner, including renewal of a tax abatement ordinance.

Land bank basics

• The sole function of a land bank is to acquire, manage and dispose of tax-deliquent or abandoned properties. It is created by ordinance or through intergovernmental cooperation agreements. The latter also can be used by school districts to collaborate with land banks.

• A land bank does not have the power of eminent domain, while a redevelopment authority does.

• Legislation signed by Gov. Tom Corbett allows counties and every municipality in Pennsylvania with a population of 10,000 or more, or a consortium of smaller municipalities whose joint population is 10,000 or more, to create a land bank.

• A land bank may hire staff or contract with another agency, such as a redevelopment authority, to operate.

• Land banks have the ability to negotiate with municipalities over tax-deliquent properties, use an expedited quiet title procedure and issue bonds for financing. Real estate held by land banks is tax exempt.

• Without land banks in place, tax-deliquent properties are sold to the highest bidder at a public auction, without regard for redevelopment intentions or impact of the sale on the adjacent properties or community.

• An established land bank makes an inventory of the properties it has acquired available to the public. Land banks may set priorities for the reuse of the property rather than just sell to the highest bidder.

• Land banks are governed by a board of directors of between 5 and 11 members. That board must include at least one voting member who is a community resident and a member of a civic organization but who is not a public official or municipal employee.

Source: Housing Alliance of Pennsylvania

Jason Scott

Jason Scott

Jason Scott covers state government, real estate and construction, media and marketing, and Dauphin County. Have a tip or question for him? Email him at jasons@cpbj.com. Follow him on Twitter, @JScottJournal. Circle Jason Scott on .

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