Sweetheart transfer of 160 tax-foreclosed properties to the taxpayer-funded Kent County Land Bank Authority by the City of Grand Rapids is bad for taxpayers and bad for city government

The Grand Rapids City Commission is due to vote this week on transferring more than 160 tax-foreclosed properties to the Kent County Land Bank Authority. This is a bad move for both taxpayers and for the City of Grand Rapids.

The Kent County Land Bank Authority, a taxpayer-funded real estate speculation entity, was formed by the Kent County Commission in 2011, but it began aggressively requesting special treatment from local government units last year in acquiring tax-foreclosed properties at far below market prices. Despite the fact that the Land Bank is a government entity that receives both direct and indirect taxpayer funding, David Allen, its executive director, was quoted last month as saying “I make no bones about it: We’re not a nonprofit; we’re a company. We’re a development company.”

As part of the proposed sweetheart deal, the City Commission of Grand Rapids purports to place a time limit on the Land Bank of 18 months to flip all of the properties it is receiving. However, the agreement between the Land Bank and the City has little in the way of teeth to enforce the timeline and it potentially would leave the City on the hook for failed Land Bank investments. The agreement, available online here, only states that the city “may” repossess the properties that the Land Bank fails to flip after 18 months. Furthermore, if the City decides to do so, it would be saddled with a clearly unwanted properties, including all the costs associated with owning such properties. No other consequence for a failure to abide by the agreement is included.

At a minimum, the City should add teeth to this agreement so that repossession is mandatory. In the case of such a failure by the Land Bank, the Land Bank should be on the hook for any and all costs incurred by the City in disposing of such properties. The proposed agreement is a sweetheart deal with the trappings of being all bark and no bite with a timeline that appears to force accountability, but has no real intent being invoked. It’s essentially meaningless with no serious enforcement requirements.

One of the allegedly "blighted" properties that the Land Bank will receive in a sweetheart deal - 49 Monroe Center NW, Ste 1B
One of the allegedly “blighted” properties that the Land Bank will receive in a sweetheart deal – 49 Monroe Center NW, Suite 1B

With the recent failures of City-granted tax breaks when promised jobs failed to materialize, it’s just good business for the City to ensure that promises made to taxpayers are kept and those who make those promises are held to account in the event that they don’t pan out.

Another important issue that taxpayers should consider is the impact of these property transfers on the budgets of both the County and other local governments. The Kent County Commission, after pressure from the Kent County Taxpayers Alliance, changed its policy on transferring properties to the Land Bank before the public auction and left the issue to local cities and townships. Because of that change, the City of Grand Rapids is considering this transfer to the Land Bank, again before the public auction and only for the amount of taxes owed on those properties.

As we’ve pointed out previously using the county’s own records, the public auction generally raises about 1.7 times the amount of taxes owed on tax foreclosed properties. This is good for the county because that additional money is transferred to the county’s general fund. However, because the City of Grand Rapids proposes to take more than 160 properties out of the public auction process, we expect the county to lose approximately $850,000 in revenue.

The impact doesn’t stop there. The Land Bank, while it owns properties, does not pay property taxes. This reduces revenue both to the City and to other local government, including schools. On top of that, once the Land Bank sells its properties, 50% of the property taxes collected for the next five years go to the Land Bank, a self-described “development company,” and not to the City, county, or schools.

Just what makes this self-described “development company” unique and deserving of special favors continues to escape us.

The City claims that the transfer of these properties fulfills a public purpose of “restoring blighted properties” and “providing affordable housing.” We’ve heard from several individuals who have, in the past, purchased homes at the public auction as a way of getting an affordable home, which they then fixed up and built equity. The City’s actions are having the opposite effect – it is reducing the availability of affordable homes by preventing average citizens from purchasing homes at a public auction. The auction, a fair and open process, is being replaced with an opaque process subject to cronyism and managed by a taxpayer-funded entity that is acting like a private company with virtually no public accountability.

We urge the Grand Rapids City Commission to reject the sweetheart deal, allow the public auction to proceed, and offer to transfer only those properties which are truly blighted and unwanted to the Land Bank, so it can fulfill its intended mission.