Land Banks Buying Properties Private Buyers Would Want
Original land bank law aimed at 'undesirable' properties
Kent County's Land Bank has been acquiring tax reverted properties that include those that when placed on the open market, probably would be bought without government's intervention.
Under Michigan law, land banks can't buy such property until after market buyers get their chance at tax auctions. But the law allows local governments to purchase delinquent and abandoned properties before the tax auctions.
In Kent County, local governments have been buying properties for the land bank. They make the purchase and then sell the property to the land bank at cost. Many of these properties do not fit the definition of being undesirable or unlikely to attract private buyers.
Kent County Land Bank appears to be making no effort to conceal what's happening. It is instead arguing that what it has been doing is proper and lawful.
The law that pertains to the situation is Michigan's “Land Bank Fast Track Act” (PA 258 of 2003). It passed unanimously by both the GOP-controlled House and GOP-controlled Senate a decade ago.
Most legislators are not experts on each bill upon which they cast votes. Often, and particularly on complex issues such as land bank, they listen to the explanations given by members of the committees who worked on the bills and read the analysis of the legislation written by the nonpartisan fiscal agencies.
The 2003 “Land Bank Fast Track Act” consisted of several bills. However, at the time, the Senate Fiscal Agency gave a description of the kind of property to which the legislation pertained. The following description set the context for what the overall legislation was all about.
“Tax-reverted property generally is not sold or, equivalently, is not purchased, for one of two reasons: 1) its location or other physical characteristics make it undesirable, even for speculators, and/or 2) the title history and other legal circumstances, such as those related to the tax-reversion process, make the property undesirable and/or uninsurable.”
This description is in a prominent portion, on Page 2 of the Senate Fiscal Analysis, under the heading of “Fiscal Impact,” and was clearly written to provide the general background of the bill.
It appears that the Kent County Land Bank’s interpretation of the law represents an expanded interpretation of how it was meant to be applied. Many of the properties that the land bank has been acquiring do not seem to fit the 2003 analysis description.
"The Kent County Land Bank is reaching far beyond what legislators intended," said Audrey Spalding, director of education policy with the Mackinac Center for Public Policy, who has researched land banks around the country. "The state land bank law was billed as a fix for undesirable property. And yet, the Kent County Land Bank has repeatedly gone out of its way to block property from being sold at tax auction, even though there are many interested buyers. Instead of testing how far it can stretch the law, the Kent County Land Bank should give private buyers a chance."
Even now, 10 years later, the state of Michigan is using a description of the types of properties a land bank is supposed to purchase that seems consistent with the 2003 analysis of the "Land Bank Fast Track Act."
Ken Parrish, Kent County treasurer and head of the land bank, did not respond to a request for comment.
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.