HB 712 – PA Land Bank Legislation

This afternoon I sat in on an hour-long webinar on proposed legislation that would enable the creation and operation of land banks in PA. The ability to create land banks would give all municipalities and counties a tremendous tool against blight and property abandonment. I could see a Pottstown Land Bank working hand-in-hand with The Pottstown Partnership, Genesis Housing and even PACA, offering homes for sale or lease-purchase throughout the Borough, marketing & offering housing and work space to artists (similar to Paducah, KY), attracting homeowners, entrepreneurs and businesses, and getting properties back on the tax rolls. But I’m getting ahead of myself.

The Housing Alliance of Pennsylvania sponsored the webinar. The presenters were Cindy Daley, Policy Director of the Housing Alliance, and Irene McClaughlin, an attorney and mediator who has spent her career dealing with blight-related issues in the Pittsburgh area. From the Alliance website: “Anti-blight land banking legislation passed the House on Tuesday, June 29, 2010 by a majority vote of 190-8. HB 712 provides for the creation of land banks for the conversion of vacant or tax-delinquent properties into productive use. The Housing Alliance supports this bill, although we anticipate it will need some technical amendments in the Senate.”

Below are some key points about what this legislation would allow and how a land bank would function. There are still questions about the nitty-gritty details, but with such overwhelming support in the House, it seems like this legislation could very well get passed in some form pretty soon. It is enabling legislation, which means that it allows land banks to be created but it’s up to individual towns and counties. It is NOT mandatory.

There are an estimated 300,000 vacant properties statewide. Between population and job loss and sprawl, rural, inner ring suburbs and urban communities have been faced with blight and abandonment.

An abandoned house or lot reduces the value of all other surrounding houses by an average of $6,720.

There might be potential buyers for these properties, but an inability to find the property owner, the lack of clear title, and debt that exceeds the property’s value all prevent a property from getting a new owner. Existing tools are inadequate: uncertainty of tax foreclosure process; cost & difficulty of condemnation; and existing laws, which have been on the books for decades never anticipated people simply walking away from property.

Land banks are single purpose entities created by local government to manage properties that no reasonable purchaser otherwise wants.

Would allow for the clearing of existing liens and old debt; clearing of title; remediation; assembly of parcels for current market conditions; holding of property until a market emerges; disposal or transfer under terms and conditions driven by the market.

Land banks just a part of a larger picture. Still need tax collection and foreclosure reform along with clearer mechanisms for protecting low-income homeowners or owners who simply wait until the last possible minute before paying their taxes. This enabling legislation – HB 712 – is just the beginning of the process.

Details of HB 712
Defines a Land Bank as a public agency.
Jurisdiction: Cities or counties that are authorized by state law to create a redevelopment authority. Any city or boro with 10K or more population.
Formed by an ordinance subject to approval by a mayor or county executive.
Intergovernmental Cooperation Agreement (ICA) between 2 or more land bank jurisdictions.
Smaller jurisdiction could join an existing land bank.
If there’s a land bank in a city and in that county, the county can’t take real property in that city.

Board of Directors
5-11 members (odd number); can include public officials and municipal employees.
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 employee.
Must have open meetings, a regular meeting schedule and follow Sunshine Laws.
Staff: may hire employees, or have crossover with city staff & municipal functions

General powers
Adopt, amend, repeal bylaws
Borrow money
Issue negotiable revenue bongds and notes
Enter into contracts
Collect rent
Design, develop, construct, demolish real property
Partnerships, joint ventures for development of real property.
Needs to have capacity to maintain the property according to existing codes.

Acquisition & Holding of Property: gift, transfer, exchange, foreclosure, purchase, from municipalities, from tax claim bureaus. At this point, these properties are undesired by anyone else.
Land bank’s real property, income and operations are exempt from state & local taxation.
Land banks may only acquire property within their jurisdiction, except by Intergovernmental Cooperation Agreement (ICA.) Except if property is leased out to 3rd party for more than 5 years, then income becomes taxable. Ideally, will stabilize and bring up values of surrounding properties.

Disposition: A land bank must create an inventory of its real property which is available to the public for inspection.
May sell, transfer, lease, or mortgage any real property of the land bank.
A land bank may establish priorities for the re-use of real property it conveys, including but not limited to uses for: purely public spaces and places, affordable housing, retail, commercial & industrial activities, conservation areas. These uses are not specified in the bill; it’s up to each particular Land Bank. Priorities don’t have to be uniform across the land bank area. Bill recognizes that land use is going to be specific to location. By-laws and any ICA would establish specifics and priorities.

Financing Land Bank operations:
Grants & loans from municipality, Commonwealth, Fed. Govt. & other public & private sources.
Payments for services rendered.
Rents and leasehold payments.
A practice adopted in Michigan that provides a regular funding source: an agreement is reached with the taxing jurisdictions – not more than 50% of real property taxes collected for 5 years after the transfer of property will go back to the land bank. As proposed in HB 712, this is optional, subject to agreement with municipality and school district.
Borrowing and issuance of bonds. Municipalities may but are not required to guarantee the bonds Bonds and income are tax-exempt.

Required to keep records of proceeding & subject to following state laws:Open meetings, Right To Know, Conflict of Interests, Ethical Standards Laws

Special Powers
Power to discharge & extinguish real property tax liens and claims, subject to the approval of the school district for school taxes.
May file a court action to quiet title in an expedited procedure. Multiple parcels of real property may be joined in a single complaint in action to quiet title.
Land banks do NOT have power of eminent domain.

Dissolution: There is a procedure for dissolution of the Land Bank.

Audits: Land bank income and expenses and a report will be submitted annually to DCED and to participating municipalities.

Land Banks and PA Real Estate Tax Collection & Foreclosure
Municipalities may assign tax claims and liens to the land bank. Municipality and a land bank may agree to a set bid price in advance of public auction (upset sale or judicial sale as well as at “single sale” allowed unter MCTLL (only for Phila and Allegh. Counties)) and transfer property to the Land Bank as purchaser in accordance with the agreement. Within 30 days of the purchase, the land bank must receive the deed transferring the property free and clear of all claims, liens and charges.

Next steps: HB712 is now in Senate Urban Affirs & Housing Committee. The Committee intends to hold a hearing on the bill – early Sept.? The Housing Alliance is convening a Working Group to review the bill & propose amendments. All interested stakeholders are invited to participate. And once the language of HB 712 is finalized, the group will begin working on mechanism for financing land banks and tax sale reform, including strong hardship waivers.