Leadership Views

As published in the December 1, 2013 Toledo Business Journal

Wade Kapszukiewicz, Lucas County Treasurer

Wade Kapszukiewicz,
 Lucas County Treasurer

Lucas County
Land Bank increasing
property values

Toledo Business Journal recently interviewed Wade Kapszukiewicz, Lucas County Treasurer and board chairman of the Lucas County Land Bank. David Mann, president of the land bank, was also present. They shared the following thoughts.

Toledo Business Journal: Can you discuss the purpose and objectives of the Lucas County Land Bank?

Wade Kapszukiewicz: The general mission of the land bank – no matter what we do, whether it is rehabbing the 123-year old Pythian Castle or whether it is helping an elderly lady to acquire her side lot so she can put in a garden – is to stop the erosion of property values throughout our community and to see those property values go back up.

The land bank’s mission is to stabilize neighborhoods, help neighborhoods rebuild, and to restore – not just the intangible sense of pride that may have been lost in some neighborhoods – the actual dollars and cents value that has been lost. One of the things that has made this economic downturn in our country so painful is not just the fact that we had a recession, but that the housing market also collapsed simultaneously and property values fell. The problem is so large and we are just one organization and are not going to solve the whole problem and not overnight. However, what we are trying to do is to stop those values from continuing to decrease so that once again people can get equity out of their homes and use that as a source of financial independence to help their families or to help grow their businesses.

Land banks have been around for 40 years. They were sort of an invention of the mid-1970s urban policy when New York City was defaulting. Our land bank is part of this new type of land bank. Dan Kildee, who was the county treasurer in Genesee County, Michigan, is the one who came up with the idea for this new type of land bank. He started the Genesee County land Bank, which was really the first of this new kind of land bank and he had to change Michigan law to do so. There are about 100 of these land banks now and this has really become the next big thing in urban renewal and urban redevelopment.

TBJ: Can you discuss the funding for this program?

WK: This type of land bank, our land bank, has funding attached to it. Specifically the funding takes the form of an increase in the penalty that delinquent taxpayers face when they are delinquent paying their taxes. In a county of our size, about $1.7 million in funding is generated each year. Essentially the money comes through the treasurer’s office and I think that is one of the reasons why the county treasurer is the chairman of the board.

David Mann: We also receive funding through property sales income, approximately $100,000 to $300,000 each year. Many of these transactions are a result of a property that needs demolition. After the structure is demolished we are left with a vacant lot. In this case, we could work with a next-door neighbor or someone on that block. For example, we may approach them and say that for $100 we will give you this property because it is too small to build new on in terms of current planning laws. Maybe that individual will use the space to grow his/her parcel for a garden or playground area. This can be the best long-term use for this property because ultimately it is about making sure there is someone to take care of it.

Occasionally, there are properties we acquire that are able to be rehabbed and do not do that rehabilitation work directly. We either list the property with a realtor or we connect with an end user. Let’s say that end user examines the property and tells the land bank that this house would be worth $40,000 in great condition, however it is in terrible condition right now. It might need $30,000 of work to get it to great condition. So we take into account that the end user is willing to invest $30,000 into the property and we may negotiate and sell that property to them for $10,000, which is the difference. So we receive property sales income from sales like this example.

When we complete a sale like the example, we also hold the end user accountable for an agreed timeline for investment. In the event they do not complete the work in the time period they agreed to, the land bank is legally able to step back in and take the property back.

TBJ: Can you discuss the leadership structure for the organization and newest changes?

WK: The Lucas County Land Bank has a board of directors consisting of nine members including myself as chairman of the board:

Day-to-day operations of the land bank are overseen by a group of officers and staff including:

TBJ: Can you discuss the tax foreclosure process and timeline as it involves the addition of properties to the Land Bank?

WK: Land banks, now by law, are allowed to automatically acquire any property that has been foreclosed on for tax reasons. We are not forced to acquire them, but we do have the ability if we are interested to acquire every tax-foreclosed property before it would be turned over to the courthouse for a sheriff’s sale.

We are able to acquire those properties relatively quickly. A process that used to take six years can sometimes take as little as six months in our case. Before the law changed, a property that was a tax foreclosure would wind through a very bureaucratic process only to end up at a sheriff’s auction. That process could take five years and during those five years, the property values would continue to go down.

Pythian Castle

DM: Our business model is a little bit more flexible than what they put together in Michigan land banks. In Michigan, the way that it is structured, the land banks have to take essentially every tax-foreclosed parcel that goes through the system, they are required to take them. Our model is really focused on first identifying an end user and then targeting the property. If we can identify that person or organization (end user) first, we can act as a sort of catalyst that doesn’t get used up in the process, but helps facilitate that change and helps to get that property back into productive hands. What we are trying to do is to be strategic and know that in doing that we are going to create real value for the community.

WK: That is an important difference because in Michigan, their law was in such a way that their land banks were required to acquire all of the tax-foreclosed properties. The Ohio law, which came a couple years later, does not require us to acquire every vacant and abandoned property – it simply gives us the first option of acquisition if we are interested.

We very rarely will acquire a property where we do not have an end user in mind. In fact, it is quite often that it is the end user who asks us for help to acquire a property. As a result, since August 2010 we have acquired around 2,000 vacant or abandoned properties. That does not mean that we currently own 2,000 properties, it means that since that time we have been involved with that amount for end users, rehabilitation, or demolition.

TBJ: Can you discuss the home demolition program?

WK: There has already been one, and I think there will soon be a second, wave of funding for demolition. The first one is the program we have done through the Attorney General’s office, which is money received from the mortgage fraud settlement. This money was distributed throughout the country, including Ohio. That money went towards many purposes. Some went to help communities demolish the vacant and abandoned homes that unfortunately became a byproduct of the foreclosure crisis. The way Attorney General Mike DeWine set up the distribution was a match program so that whatever local communities could raise on their own, he would match it with money Ohio received from that mortgage fraud settlement. Around August 2012 we received a match grant from the State. In total we had approximately $6.8 million to be spent to demolish as many homes as could be identified between August 2012 and December 31, 2013. The Attorney General has extended that deadline, but we are going to be pretty close to making the old deadline.

What we were able to do was identify the worst, blighted, vacant, and abandoned homes in our community. These homes had absolutely no market solution. We felt that with that amount of money and time, we could demolish around 820 homes. We are one of the few – if not the only – community that is going to hit its goal on time and satisfy the obligations of its grant.

Part of the challenge we have inherited is that no one really had an accurate listing of the vacant and abandoned homes in our community. Part of the reason for that is defining what it means to be vacant. After this first wave of funding, and possibly a second wave from the Hardest Hit Fund, I think we will have made a significant dent in the problem.

In 2011 the City of Toledo demolished about 310 homes, which at the time was the largest amount in its history. Compare that figure to our target that is roughly three times that record setting amount with more to come.

TBJ: Can you explain the procedure for purchasing a property from the Land Bank and discuss current properties for sale?

DM: We have a dozen or more properties at any given time that we do not have an end user for, but are confident that someone with the right exposure will step up and be willing to rehabilitate a property.

WK: The system is give us a call and let us know you are interested. With larger properties, such as the Gray Gables estate, we will take in bids and compare what will be the best fit for the property. This can include the initial offer, the investment willing to be made in rehabilitating the property, and use. We usually list these properties with a realtor.

(Note: As of late October, the land bank had close to 20 properties listed for sale on its website. Most of these properties are located in Toledo, with one property located in Oregon. On its website, the land bank states that all properties are sold as is and may accept multiple offers on any listed property. “Purchaser will generally be required to invest substantial resources into the home in order to secure a Certificate of Occupancy before taking final possession of the property.”)

TBJ: Can you explain the urban gardening initiative as it involves the Land Bank?

WK: We want to promote green space as much as we can. An individual, David Johnson, approached the land bank with an idea. He acquired from us a parcel on the corner of Junction Street and Nebraska Avenue in Toledo. Here he built a barn, out of which he runs a year-round fresh market. He grows his produce on adjacent lots nearby that he also acquired from the land bank. So in this situation the land bank was able to give him land for his barn and business and land for him to farm.

TBJ: Are there opportunities for area contractors involving land bank properties?

DM: There is a host of different ways that we work with contractors every day. Obviously the demolition program is one of those ways. Just with this first grant we have had 100 or more private contractors who have received significant work. Also as part of the program, we have to survey and, in many cases, remediate the asbestos we find in these properties. We have worked very closely with a couple local companies that do environmental surveying and a couple local companies that do environmental remediation.

Occasionally we have to do some basic investments in a property in order to get them to the point where we can get them marketed. In these cases we work with electrical contractors, roofing contractors, and others to make minimal investments. We work with contractors saving, salvaging, and demolishing properties on a regular basis. There is a contractors form on our website that interested contractors can fill out to be considered for such projects.

TBJ: Is the Land Bank limited to residential properties or are there commercial properties involved and what is the status of the Pythian Castle property?

WK: Our tools work just as well for commercial properties as they do for residential ones. We do as much commercial work as we have end users who want us to do commercial work.

For the Pythian Castle, we have a two-year deal with Louisville Title Agency and they are working on a plan to redevelop it. We believe that this property is so historically vital and relevant that even if the two years shall pass without Louisville being successful in their efforts and it would revert back to the land bank, we would own it and continue to hold it because we don’t want to see something like that demolished.

There are a number of different ideas that are being tossed around about what to do with the property. It could be a mix of residential and commercial and there is certainly a lot of work that needs to be done to the building.

We have had a success story with a similarly historic building right across the street from the Pythian Castle. The land bank acquired this property in the spring and partnered with an end user who is going to put in a mix of residential and commercial in the building. So I would like to believe that there is something similar that could happen with the Pythian Castle.