Bank shot

As the Michigan Legislature finished its business for 2002, a handful of bills to create the largest, most powerful land bank in the nation for the City of Detroit failed to make the cut.

Most observers agree a land bank could be a decisive step in reshaping the face and future of Detroit. It would amass abandoned and vacant properties and slash red tape that has kept the parcels idle for years. It would cluster swaths of land and sell them off, injecting city tax rolls with millions of dollars and spurring new development. It would clear titles and forgive old tax and utility bills on properties so they can be sold, steps the city apparently can’t manage on its own.

“This is possibly the most important land-use issue Detroit has seen in 100 years,” says John Powell, director of the Institute of Race and Poverty at the University of Minnesota. Powell studied Michigan’s proposal for MOSES (Metropolitan Organizing Strategy for Enabling Strength), a Detroit nonprofit group of churches and community activists.

“Its potential for revitalizing the city cannot be underestimated.”

So why hasn’t it happened?

The question of who should control Detroit’s land bank has scuttled attempts to create it, at least for this year.

Critics say the concept, as proposed by Mayor Kwame Kilpatrick and Detroiters in the Legislature, would have made him king of city real estate — locking out the City Council, city bureaucracy and, to a degree, the public.

As proposed, the mayor would appoint four members of the authority board, the governor, one. And therein lies the problem.

City Council President Maryann Mahaffey says the council will fight any attempt by the Legislature to create a land bank in Detroit, because Detroit should be allowed to create its own land bank in its own way. She has said the state legislation would create a “superpower” — the mayor. Critics complain that with total control in the mayor’s hands through his appointees, land potentially could be granted as favors, sales prices could be unfairly set and neighborhoods could be locked out of the process.

Another point of contention: Land bank customers would get a 50 percent cut in property taxes for five years, and would split what taxes are paid between the land bank, the city and other normal recipients such as the school district. The bank would use the money to clear titles, pay administrative fees and amass land. Mahaffey has said the city should get all the taxes, though right now, the city gets none from the lots in question.

Powell estimates vacant land is costing Detroit $100 million a year in property taxes. If collected, the money would increase the city’s property tax take by a third.

The city itself owns at least 40,000 parcels, though city officials don’t know exactly how many.

The land bank could stimulate nonprofit affordable housing ventures and business development with land sales and tax breaks, Powell says.

“There’s very little that could be done that’s more important to the viability of Detroit,” says Powell. “We should not get too lost in the details that we lose the big picture. The land needs to be redeveloped.”

But it is details, and politics, that are holding up creation of the land bank, and for good reason. The way the legislation is written, there’s no provision to inform the public of pending sales or development plans, no opportunity for public comment. The City Council would be locked out.

Building consensus

“With the right authority and administration, it could be a good thing,” says Margaret Dewar, an associate professor in the Institute of Labor and Industrial Relations at the University of Michigan who has studied Detroit’s housing issues for years.

“I think Detroit very much needs a land bank. But there need to be checks and balances,” she says. “It would be a stronger board if it seemed less like the mayor’s board. I think they should adopt the land bank and work out the details later.”

Mayor Dennis Archer originally proposed the land bank when he was in office, and Gov. John Engler supported it. Kilpatrick introduced land bank legislation in the state House when he was a representative, and the measure was barreling toward adoption with bipartisan support until this summer, when City Council caught wind of it. Mad as hell, council members stormed the state Capitol. For weeks, they lobbied relentlessly in person, sent some half-dozen resolutions and statements and even mailed form letters protesting the legislation.

Local nonprofits also felt left out of the loop and lobbied against the bill. In the end, state lawmakers listened, and postponed voting until Detroit interests could settle their differences.

Steve Tobocman, a state senator-elect and Detroit nonprofit housing leader, says there was no grassroots consensus building in Detroit before the legislation was introduced. He also sees problems with the bills themselves.

“I think it probably wasn’t the best-drafted original piece of legislation,” says Tobocman. “But I think the framers have in mind community redevelopment. And for whatever reasons, I think politics got in the way of policy making.

“Hopefully, we can use this opportunity to build the kind of coalition we need. I hope we haven’t poisoned the well because of procedural issues.”

State Rep. Buzz Thomas, D-Detroit, sponsored the most recent version of the bill. He will take a seat in the Senate come January, and says he’s confident the measure will pass. He plans to redraft the legislation based on input from the City Council and nonprofit groups such as MOSES.

“The politics of the council slowed it down,” says Thomas. “They didn’t kill it. We will introduce this again next year, redrafted and rewritten. I passionately believe we will not have the city we deserve without tools. This is a vital tool for reinvigorating Detroit.

“It’s time for us to put politics aside and do what’s best for our city.”

Thomas’ proposed changes include:

l Allowing City Council to appoint two of five land bank board members.

l Making land bank meetings public and requiring general public and neighborhood notification and comment periods.

l Requiring the land bank authority to disclose its actions and give annual status reports.

l Adding anti-nepotism language to attempt to prevent graft, such as authority board members approving sales to associates and family.

Thomas says the council is selfishly fighting the land bank and scaring Detroiters into opposing it so they can protect their power. He notes that the council has spun the land bank movement as a state attempt to take over Detroit — yet most of the bill’s backers are Detroiters.

Further, he says the land bank would rely on community development groups for in-fill housing, and cites that groups such as MOSES have lent support, contingent on Thomas’ rewrites.

“Most of the land bank sales will be clusters of 10, 15 lots,” says Thomas. “Big developers can’t do a deal with that [small] amount of land. Neighborhood associations, nonprofits, church developers, it’s going to take the people who can use those tax credits to make this work.”

Kilpatrick administration officials did not return calls to say if they would support Thomas’ proposed changes.

The problem

With all the vacant land and empty homes in Detroit, you’d think it would be easy to buy one. It isn’t. Just ask Paulie Thurman, who’s been trying to buy the lot behind his hardware store for five years. His northwest Detroit business, Paulie’s Thrifty Hardware, is growing. He needs parking and storage space.

“This house behind me, well, calling it a house is kind of a stretch,” Thurman says. “It’s gone through quite a few hands. It’s a haven for criminals, and it’s ugly. I’d like to get it cleaned up and turn it into a parking lot. … Nobody can tell me who owns it so I can go buy it.”

The property, which is owned by various investors, is in deplorable shape.

Buying vacant or abandoned lots owned by the city is even more excruciating than from private owners. The Planning and Development Department is responsible for selling property the city controls; City Council approves each sale and purchase. Developers say it takes an average of at least a year — long enough for fragile financing to fall apart for most nonprofit developers.

City officials couldn’t provide any statistics on property sales in time for this story. But Detroit planning officials are canvassing and mapping the city, as well as studying the real estate system, with the aim of improving it, says Kathy Royal, executive manager of real estate for the city.

“Right now I’m trying to learn the process to determine if it can be streamlined,” says Royal. “We’ve been meeting on a daily basis to try and figure out why the system has been going the way it’s going, and how we can improve it.

“Whether or not there’s a land bank, we want a process that works.”

As much as 80 percent of Detroit’s vacant land is city-owned, says Rochelle Lento, University of Michigan law professor and director of the Legal Assistance for Urban Communities clinic, which provides legal advice to some 30 nonprofit Detroit developers.

Lento drafted 1999 state legislation to shorten the foreclosure process — from five years to three years — on abandoned houses and vacant land. She says the city is reluctant to foreclose on tax-delinquent property. City officials say that’s because the city doesn’t want to increase its property inventory or assume the liability and maintenance costs that go along it.

If the city had a land bank, foreclosed land would go straight into the bank to be sold.

John George, executive director of Motor City Blight Busters, a nonprofit community revitalization group, says buying land from the city now is “not an option,” so he’d favor a land bank if it would make acquisitions easier.

“Once the property gets into the hands of the city, forget about it. Dealing with those people, I swear, it’s like you’re in kindergarten,” George says.

Contrary to popular belief, there is high demand for property in Detroit, George and others say. The land moves slowly for many reasons, including an intractable bureaucracy. In addition, the city Law Department has long ruled that city-owned property must be sold for “market value,” effectively pricing out nonprofit, low-income housing developers.

Often the city will charge $30,000 for a house in a low-income neighborhood. The house will need thousands of dollars in repairs, in addition to the paying off of back taxes and utility bills. That’s too much, says Joel Little, a neighborhood redeveloper.

George says, “One of the reasons you aren’t seeing a stampede of people going into the neighborhoods and rebuilding is because it’s cost-prohibitive. The price the city makes you pay, it’s really a penalty tax. It’s a slap in the face.”

Last year, because of problems getting city property, George and a group of nonprofit leaders convinced the state to give them state-owned property. Michigan owns 6,600 properties in Detroit; 70 percent are vacant; 30 percent contain some type of structure. Until 1997, the state passed the properties along to the city. That practice stopped when it became clear the properties are seldom sold once they get into Detroit’s hands.

In 2001, George and other nonprofit housing leaders convinced Lt. Gov. Dick Posthumus to spearhead creation of a program called RevitaLife, which grants tax-delinquent, abandoned properties to nonprofits, charging a mere $48 per parcel to cover administrative costs. In 2002, RevitaLife turned over 200 properties to nonprofits and city residents; next year, some 2,000 properties are slated for transfer.

It’s ironic that a Republican gubernatorial administration widely perceived to be anti-Detroit has been most effective in spurring low-cost redevelopment in the city.

“They’re going to give us five houses for $300, and we’re going to renovate them,” says Little.

“It’s a wonderful, wonderful program,” says George.

Some nonprofit developers feel angry and left out by the land bank push, or, at least, threatened.

City nonprofits lobbied against the legislation at first because they were uncertain how it would affect them. Barbara Washington Bass, executive director of Community Development Advocates of Detroit, an association of some 60 nonprofit housing groups, says it’s time for the mayor to partner with nonprofits.

“When this whole thing came about, we were never invited to the table for discussion,” says Bass. “When we found out about it, it was almost at the point where they were going to pass it.”

Bass says mayoral insularity is a big problem for nonprofits. It’s an oft-heard complaint.

“It is very difficult getting an audience with the [Kilpatrick] administration,” she says. “We have to be very tenacious scheduling meetings. We have to continue to work very hard to make sure our phone calls are returned.”

She wishes the city realized, “we’re here to help. It’s disappointing to me that they are not reaching out to us.”

Adds Bass: “If you’re going to be successful in the City of Detroit, you have to include all the groups in the city. When you leave one entity out, it spins out of control. Despite everything that has occurred, we remain positive about the City of Detroit. Our members are in it for the long haul. We feel there needs to be housing for low-income families and young families. It should be a right for all our folks to have housing in the cities. And we’re not going away.”

Bass, George and others say they won’t support the land bank if it doesn’t guarantee low-cost sales and priority to nonprofits, groups that cannot compete with well-financed for-profit developers.

While it’s unlikely big money developers will be interested in purchasing small clumps of low-income neighborhoods to redevelop, there is no guarantee in the land bank legislation that nonprofits will get priority or affordable prices.

Nonprofits have been at the heart of successful revitalization in other cities. The nonprofits’ leaders say they are dedicated to low-income housing and have connections to neighborhoods.

“The nonprofits must be in the front row,” says George. “We have the capacity to turn these neighborhoods around. We’ve been doing this for years and years and years. We live in the neighborhoods. We’ve earned the right. I wish the city would partner with the nonprofits, because we are a benefit to the city.”

Cleveland model

Cleveland’s land bank is praised for single-handedly redeveloping a city once notorious for its slums and blight. The land bank, launched in 1990, sells abandoned residential lots for $100 and adjacent lots for $1.

Evelyn Sternad, manager of Cleveland’s land bank, says it’s spurred 350-800 new housing starts each year.

Nonprofit developers are the land bank’s biggest customers, says Sternad. In the 1990s, to stimulate development and sales, the city passed an ordinance granting a 15-year tax abatement for new home buyers, and for any new residential construction. The measure spiked property sales for several years, and saw the revitalization of once bombed-out neighborhoods, she says.

Developers must apply for the land bank property and include plans for the parcel. Each sale must get approval by a city planner, to ensure the plan jibes with that area. Nobody with any housing violations or unpaid back taxes may purchase property from the land bank, she says.

Those issues have posed major problems in Detroit, which has large landowners with numerous housing violations and overdue taxes.

In addition to a host of Cleveland city agencies and City Council committees, the City Council member from the district where the property is located must approve the sale. Then the entire Council must vote on it.

Despite all this, sales take an average of three months, says Sternad.

Powell says Detroit’s land bank would differ from Cleveland’s — or anyone else’s.

For one thing, Detroit has about twice the population of Cleveland with 10 times more vacant parcels, he says.

Atlanta, which also has a highly touted land bank, is also difficult to compare to Detroit. Atlanta is one of the nation’s fastest-growing cities and never suffered the type of exodus that cost Detroit half its population.

“The scope in Detroit is so much larger than any other city, and there’s distrust and bad feelings between so many groups, the city and state, the City Council and mayor,” says Powell.

Yet Powell is convinced that everyone would benefit from a land bank.

“Initially this had bipartisan support. Who cannot support it, really?” says Powell. “What people are arguing about is details: should it happen now, who should have control, how exactly will it work?

“I don’t want to suggest those are unimportant questions. But I don’t think we should lose sight of how important this legislation is for Detroit. If it succeeds in bringing properties onto the tax rolls, and helps to revitalize Detroit, each resident will benefit immediately.”