Municipal land banks discussed

Senators began debating a bill March 27 that would allow metropolitan class cities or counties that have at least three first class cities—currently only Douglas and Sarpy counties—to establish land banks or tax-exempt political subdivisions that acquire, manage and develop vacant and tax-delinquent properties.

Under LB97, introduced by Omaha Sen. Heath Mello, the land banks would be created by passing a city ordinance or by way of interlocal agreements. Such land banks would be allowed to borrow money, issue bonds, procure insurance, enter into both private and public contracts and sell property to private entities in which they would receive 50 percent of the collected property tax amount for five years after the sale.

The land banks also would have priority over other bids in tax foreclosure proceedings and be prohibited from exercising eminent domain rights to acquire private property.

Property owners who do not pay their property taxes often abandon the property and leave it vacant, Mello said, so tax lien sales are critical for properties in which the amount of taxes owed exceeds the market value. Half of Omaha’s property tax liens sold in 2012 were purchased by out-of-state investors, he said, who are not necessarily concerned about property redevelopment.

Vacant and abandoned properties are a recurring problem in Douglas and Sarpy counties, Mello said, and they sometimes attract criminal behavior, such as drug trafficking and prostitution, that poses a public health and safety risk. Land banks would give communities an alternative option to address these issues, he said.

The bill also would require each land bank to have a seven-member board of directors appointed by the mayor. The appointed board members must:
• be residents of the land bank’s municipality or be representing an entity whose primary place of business is located in the land bank’s municipality;
• represent, to the greatest extent possible, the racial and ethnic diversity of the municipality that created the land bank; and
• have verifiable skills and knowledge in the areas of law, financing, asset management, purchasing and sales, economic and community development and market-rate and affordable residential, commercial, industrial and mixed-use real estate development.

A Revenue Committee amendment, adopted 36-0, would clarify board member requirements, narrow the board’s ability to acquire property in the bidding process and require the board to submit an activity report to the Legislature for review.

Lincoln Sen. Amanda McGill supported the bill. Over 13,000 Omaha properties currently are vacant or condemned, she said, and the city lacks the necessary resources to address the problem.

Omaha Sen. Brad Ashford also supported the bill. Cities are facing revenue shortages and currently are unable to acquire abandoned properties, he said, so creating a partnership between public and private entities could remedy the problem.

Sen. Ernie Chambers of Omaha said he was concerned about allowing the mayor to appoint the land bank board members and called the board requirements “gratuitous.” The bill would require people to serve on the board who are more concerned about making a profit than they are about the affected communities, he said.

Further, Chambers said, a racially and ethnically diverse board would be difficult to achieve through the proposed requirements. He offered an amendment, adopted 39-0, which would eliminate the board requirement to represent the racial and ethnic diversity of the municipality that created the land bank.

Papillion Sen. Jim Smith said he was opposed to creating governmental agencies that could purchase commercial properties and become competitive with private entities.

“I do see a potential that this [land bank] could become profitable and grow too large,” he said.

Smith offered, and later withdrew, two amendments that would cap the land banks’ assets at $25 million and would cause the bill to expire Jan. 1, 2019.

The Legislature adjourned before taking further votes. One amendment from Chambers is pending.

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