Kent County Considers Land Bank Changes

A Kent County Board of Commissioners subcommittee is recommending that the Kent County Land Bank be prohibited from purchasing tax-foreclosed property prior to tax auction.

If Kent County commissioners approve this recommendation, they will be taking a step toward both encouraging private-sector development and saving taxpayers money.

Last summer, the Kent County Land Bank caused a stir when it snapped up more than 40 vacant, tax-foreclosed properties before tax auction. By doing so, the land bank blocked redevelopment from occurring in the private market.

Moreover, the land bank spent more than $400,000 to buy those properties. The Kent County Taxpayers Alliance estimated that if private buyers had been allowed to bid, the county could have received up to $1 million in additional sales revenue. Instead of taking in money that could have been used to fund county operations, officials chose to spend.

State law prohibits land banks from acquiring property before tax auction, but the Kent County Land Bank worked around that by coordinating with county officials so that property was transferred first to the county and then to the land bank.

The subcommittee's recommendation is a good first step, and is in line with Michigan law. However, the Grand Rapids Business Journal reports that the land bank will still be able to bid against private buyers at tax auction. While this is certainly better than allowing the land bank to circumvent the auction, it's not a solution.

By bidding against private buyers at tax auction, the land bank would be using taxpayer money to keep vacant, tax-foreclosed property from going to back to private use. As the recipient of federal, state and local subsidies, the land bank also would be able to bid property prices up above a competitive price. In short, the land bank would be the biggest shark at tax auction, thanks to taxpayer assistance.

The St. Louis, Mo., land bank has a long-standing practice of bidding against private buyers, and spent hundreds of thousands of dollars to prevent individuals from buying property. The land bank has amassed property over time, instead of letting entrepreneurs take a shot at developing long-vacant properties.

The best move would be to remove the Kent County Land Bank from the speculation game entirely, and allow it to step in only if properties fail to sell at tax auction.

Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited.