A proposal by Franklin County Treasurer Ed Leonard to set up a nonprofit corporation that could rapidly acquire, fix up and sell vacant properties has the potential to remedy blight and boost property-tax collections.
But Leonard could have a tough sell ahead, because he proposes to run the County Land Reutilization Corp. with a share of tax-penalty payments that school districts and other levy agencies are used to receiving.
State law requires the county to charge a 10 percent penalty and interest, typically 3 to 6 percent, on delinquent property-tax payments. This year, the fees totaled $71.8 million. Leonard proposes using 5 percent of these fees annually — it comes to about $3.5 million this year — to run the public corporation’s land bank. This would allow it to take and hold property for redevelopment.
School districts and other tax-supported agencies would get every dollar of property taxes due to them, but they’d have to give up a sliver of the late penalties. That’s painful at a time when every dollar counts. Still, Leonard argues, the agencies would come out ahead in the long run. Here’s why:
Property-tax delinquencies are at a record level. By using the land bank to return properties to the active tax rolls, the agencies would get a return on forfeited late charges. This year alone, agencies were owed $24 million in delinquent taxes from 3,387 properties headed to foreclosure. Giving up a few million dollars a year to reduce this drain could result in a net gain.
Similar land-bank corporations are under way in Cuyahoga, Hamilton and Lucas counties. This follows last year’s change in state law to permit big counties to use the delinquent-tax fees to set up aggressive, blight-busting land banks.
Franklin County has an existing land bank, but it lacks money and its powers are limited. It can claim only industrial and commercial property no one has bid on at two sheriff’s sales.
Leonard’s new land-bank corporation could quickly snag foreclosed properties — including houses — or purchase them from banks or neglectful owners. It then could fix them up, or offer the properties to nonprofit developers.
The land bank also would become the buyer of first choice for foreclosed properties, thwarting speculators and flippers who might let properties remain vacant until the market improves. Currently, the county must wait three or four months for the sheriff’s auction; the new land bank could move in right after foreclosure, as soon as the owner’s 45-day grace period for repayment expires.
The new corporation would coordinate efforts between communities, targeting particular eyesores or engaging in broad-scale redevelopment.
Few things vex neighbors as much as neglected properties, which signal that a neighborhood is on the decline and draw criminal activity. Moreover, such disinvestment spreads, blighting entire neighborhoods, depressing tax values and feeding opposition to new levies.
The legacy of economic recession and Ohio’s foreclosure crisis is evident in this year’s record $192.3 million in delinquent property taxes, meaning agencies aren’t getting — in a timely manner, at least —what’s owed them by 35,072 properties.
In 2010, for example, Columbus City Schools was shorted more than $70 million. That’s significantly more than the $1.08 million a year the district would provide the land bank to stabilize future collections.
Leonard’s plan requires approval by county commissioners. They should consider that the cost of doing nothing could prove far more expensive to the community and its agencies.