Ohio's big counties get to 'bank' foreclosed properties
4/8/2010COLUMBUS - Saying it would be a valuable tool even during better economic times, Gov. Ted Strickland yesterday signed into law a bill allowing Lucas and as many as 40 other counties to create government-run programs to acquire and "bank" foreclosed properties.
"We believe that communities will be benefited, that blighted neighborhoods will be improved," the governor said. "There's no doubt that nearly every community of any size has suffered greatly as a result of the fallout of the recession and the resulting foreclosures and abandoned properties."
The bill, sponsored by former state Rep. Peter Ujvagi (D., Toledo), would allow urban and suburban counties with populations of at least 60,000 to create nonprofit organizations that could accept clear title to tax-foreclosed properties, as well as voluntarily surrendered mortgage-foreclosed properties.
The properties could be renovated, demolished, or simply maintained while awaiting a market rebound. The goal is to prevent them from deteriorating and dragging down the values of entire neighborhoods.
"The foreclosure crisis made it more urgent for this legislation to pass," said Mr. Ujvagi, now Lucas County administrator. "... In a perfect world, none of this would have been needed."
The law will take effect in three months. Currently, only Cuyahoga County is authorized to operate a government-funded land bank. Its program began as a pilot, but state lawmakers opted to dramatically expand less than a year into its test period. Northwest Ohio counties that would meet the new population threshold include Lucas, Wood, Hancock, Sandusky, Erie, and Allen.
A nonprofit County Land Reutilization Corp. could acquire tax-foreclosed pro-
perties that otherwise would go through sheriff's sale. It would rely on a complicated funding mechan-
ism through which the county treasurer would advance money to the corporation while maintaining the taxes owed to local schools and governments. The nonprofit also could accept federal grants as Cuyahoga's has done.
The county then would place penalty liens on the property in hopes of recovering the taxpayers' investment when the properties are sold.
Lucas County Treasurer Wade Kapszukiewicz said the program's genesis was in Flint, Mich.
"Twenty-six thousand properties saw their values go up in the first three years,'' he said. "If they can do it in Flint, we can do it anywhere in Ohio.''
Michelle Wells, governmental relations director for the Ohio Real Estate Investors Association, said changes in the bill have her "cautiously optimistic." Among the changes, the nine-member county land bank board would have a seat for a real estate investor.
"We still do see some unfair advantages that this board will have over the private sector, but we're hoping this could be a positive tool," she said. "The goal is to use investors to purchase the property through the land bank and to do the rehab work that will be necessary on the foreclosed, abandoned property."
Low-cost financing also could be made available through the land banks at a time when private investors have seen other sources of financing dry up.
Contact Jim Provance at:
jprovance@theblade.com,
or 614-221-0496.