Could a land bank fix Lebanon’s nuisance properties?

Imagine a Lebanon with less criminal activity, fewer nuisance properties, and more revenue for the school district without tax increases.

Mayor Sherry Capello says all that and more could come about when Lebanon’s land bank gets going. It’s a powerful new method for preventing properties at tax sales from going into the hands of undesirable land owners, and instead going to owners the city chooses.

The process has seen early signs of success in nearby counties. Still, critics call it a public land grab and even supporters say it isn’t a magic bullet and takes time and money to succeed.

Read more:What is being done about Lebanon's bad properties?

More:11th Street home ‘Exhibit A’ for ‘frustrating’ blight process

Ending the cycle

It’s a familiar story for city officials: a landlord abandons a property, causing it to eventually be sold at a tax sale. Because it’s in need of work, bids are low, so a new speculator purchases it for pennies on the dollar. After realizing the extent of the improvements needed, the new property owner decides it’s more trouble than it’s worth. So he abandons it, leading to another tax sale.

“Unfortunately, the judicial sale is very efficient at turning owner-occupied units into rentals,” Capello said at a presentation to the county commissioners earlier this year.

Perhaps the most powerful tool of a land bank – authorized by a 2012 Pennsylvania law – is the ability to end this cycle. It can preempt judicial tax sales via an agreement with the County Tax Bureau, taking possession of the land for an agreed-upon price that can be lower than the advertised minimum bid. The land bank then has discretion in reselling the land and can choose whether or not to accept offers from developers.

The land bank also can:

• Receive up to 50 percent of the tax proceeds for each property for up to five years. The other involved governments must agree to share the tax proceeds for each property, said Chris Gulotta, who heads a firm specializing in setting up land banks.
• Ask the taxing authorities to discharge any tax liens on the property.
• Expedite “quiet title” proceedings to eliminate other claims and challenges to the property

Land banks supporters argue that by increasing the value of the properties and obtaining cooperative property owners who pay their taxes, tax revenue will actually increase in the long run.

The surrounding counties of Dauphin, Lancaster and Schuylkill all have their own land banks. Matthew Sternberg, executive director of the Lancaster County Housing and Redevelopment Authorities, said many properties are “functionally obsolete,” and can only be transformed into a good future use if they are acquired as a group – something much easier for a land bank to do.

Background:Lebanon considers new strategy to fight blight

"It's not a cure-all for everything"

The land bank concept isn’t without criticism, particularly from small-government advocates who worry it can become a public land grab.

The Show-Me Institute – a free-market think tank in Missouri – has raised alarms about the St. Louis land bank, which the institute said is now the largest land owner in St. Louis and rejects nearly half of formal purchase offers.

Back in Pennsylvania, the free-market Commonwealth Foundation believes land banks “breed corruption, do a poor job of moving property and therefore have a terrible track record of reducing blight,” spokeswoman Gina Diorio said in an email.

Diorio would prefer other tools for fighting blight – for instance, making it easier and cheaper for the private sector to demolish homes and improving infrastructure and policing to stop the spread of blight.

Even supporters of land banks say it’s important to manage expectations. “It’s not a cure-all for everything,” Sternberg said.

One limitation is that the creation of a land bank doesn’t automatically create the funding stream needed to purchase properties and properties.

“(People think) just having a land bank means that the problems will magically be taken care of. There are still the issues of remediating the blight,” Gulotta said.

Columbia Borough in Lancaster County put up $100,000 of its own money to jump start the process, Sternberg said. Schuylkill County started by charging the seven involved municipalities $1,000 each, which allowed them to tap into about $375,000 in state grant and other funding sources, Gulotta said.

Lebanon would likely get seed money from Community Development Block Grants or other economic development funds, and ask financial institutions to consider donating, Capello said.

Lebanon’s land bank

City council approved the land bank at their March 27 meeting, and the city provided presentations to the county commissioners and school district in the spring. The county and district must also approve the land bank because of the tax revenue they will be asked to relinquish to support it.

The bank is on the commissioners’ agenda for July 6 and the city is seeking a July meeting date with the school district, Capello said.

The State Bureau of Corporations & Charitable Organizations accepted it on April 19, and the land bank now has most by-laws and policies in place, she said.

The land bank will be governed by three members of the Lebanon County Redevelopment Authority and four people appointed by Capello, which must include a representative of the Lebanon City Planning Commission, someone from the real estate industry, a representative of the Lebanon County Treasurer’s Office, and a Lebanon resident belonging to a recognized civic organization.