A news service for the people of Michigan from the Mackinac Center for Public Policy

Kent County Treasurer Ken Parrish is also executive director of the Kent County Land Bank. The following is the transcript of an interview with Capitol Confidential.

Q. Some argue that the purpose of a land bank is to manage abandoned or foreclosed-upon property that the free market has failed to utilize. Do you agree with this definition?

A. That is certainly one aspect of land banking, but [it] is unlikely to be sustainable as the only strategy. The core values of the Kent County Land Bank Authority (KCLBA) include the elimination of blight, but equally important are the values of increasing property values, preserving neighborhood character and promoting economic development.

Q. Governmental entities all claim some sort of service to the community as their primary motivation. However, through human rationalization, service to the community can become a secondary motivation and just perpetuating the entity can become the primary motivation. Is the Kent County Land Bank already becoming this type of self-perpetuating governmental entity?

A.  No. As with any organization, public, private, not-for-profit or government, there is a certain pressure to keep the doors open in order to provide a tangible and valuable service. KCLBA is operating with only four employees. We are committed to managing the organization through partnerships with the private sector by contracting nearly all functions out. That will allow us to remain rooted in meeting the needs of this community.

Q. Kent County Land Bank has been accused of favoring realtors who have close connections to it or are willing to cooperate with its designs. Is that true?

A. Absolutely not. Once KCLBA was ready to sell real estate, a request for qualifications was sent to every member of the Grand Rapids Association of Realtors (GRAR). The responses were reviewed by a committee of community members knowledgeable in the local real estate market and evaluated based upon such criteria as length of time in the career, neighborhood specialization and number of sales. Since KCLBA has taken on a larger number of properties, another RFQ has been sent to all members of GRAR.

Q. Does the Kent County Land Bank contend that the land bank’s interests should come before those of local Realtors?

A. Quite to the contrary. Nearly every property offered for sale is represented by a licensed realtor and listed on the Multiple Listing Service. That allows any realtor, whether they are representing KCLBA or not, to be the selling agent and earn commission. 

Q. Ultimately, does this issue come down to centralized government planning versus the free market?

A. The main issue for KCLBA is whether the County and/or local units should exercise their right to acquire tax foreclosed property prior to the public auction and sell them to KCLBA. Some suggest that the public auction is a free market, but that is a false assumption. There are significant barriers to entry, including the inability to inspect the interior of properties, lack of clear title and the requirement to pay cash on the day of sale. Very few potential buyers have the capacity and willingness to purchase property that way. So an oligopoly is created. The real difference is between the oligopolists who don’t want to lose the profitable competitive advantage that they have through the auction process versus KCLBA and those who wish to see a more open market created by selling real estate through traditional sales methods that allow buyers to fully inspect the product, negotiate a price and have the ability to arrange financing.

The auction process was created as an efficient means for counties to recoup the taxes owed on the foreclosed properties, with no regard for the impact on the community. That is precisely why land bank legislation was created and unanimously passed — to allow for a process that can specifically take community impact into account.

By following the process that includes, rather than excludes, the land bank, a market that more closely resembles the free market is created and both individual investors and the community at large can benefit.

Meet James Hohman, Assistant Director of Fiscal Policy at the Mackinac Center. James discusses his latest project, an analysis of Proposal 1, the proposal on personal property tax reform that will appear on the August 5th ballot. Read more about Proposal 1 here: http://www.mackinac.org/20246


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