October 22, 2009 [Plain Dealer]
Cuyahoga County plans to lend itself $20 million to help kick-start the fledgling land bank.
The loan – expected to be approved at today’s meeting of commissioners- is part of a complicated financial structure that will pay for the bank’s operations and allow it to borrow millions of dollars.
Formally named the Cuyahoga County Land Reutilization Corp., the bank was created by the state legislature in December to buy or accept foreclosed and abandoned properties throughout the county for demolition or rehabilitation.
Here’s how the financing, as structured in state law, will work, according to Paul Komlosi, the land bank’s financial adviser.
The county will take $20 million from assorted short-term investments.
The money will be paid to the county’s 105 taxing districts – including schools, libraries and municipalities – as an advance on a portion of the property taxes that were due in July, but have yet to be collected.
The county will get its money back, plus 2.75 percent interest, as the delinquent taxes are paid.
The land bank will receive the penalties and interest on the delinquent payments – about $2 million this year. The taxing districts agreed to forfeit that extra income in exchange for getting their property tax revenue in advance.
The bank then will use some of the proceeds to pay the interest to the county.
The whole process is formally known as “current year delinquent tax collection anticipation notes.”
Officials say a significant portion of unpaid taxes is typically collected soon after the due date. That virtually guarantees the $20 million county loan will be repaid, they said.
Robin Thomas, the county’s deputy treasurer, said the 2.75 percent interest will be a better return than if the county kept the $20 million in short-term investments that earn less than 1 percent.
The debt also will not hamper the county’s ability to float bonds for big projects, such as the medical mart, Komlosi said. The loan could be seen as a positive, he said, since it will be used to improve the county and return land to future tax rolls….