Cook County Land Bank: Returning Vacant Land to Productive Use

By Matt Baron
ULI Staff Writer

This is a summary of the February 7, 2013 Roundtable of the Metropolitan Planning Council and the ULI Chicago District Council, held at Drinker Biddle in Chicago. The session’s discussion focused on the challenges and potential rewards that are anticipated with the emergence of the Cook County Land Bank.

The moderator for the session was MarySue Barrett, President of the Metropolitan Planning Council. Panelists were Toni Preckwinkle, Cook County Board President; Scott Goldstein, Principal, Teska Associates, Inc.; Jim Rokakis, Director, Thriving Communities Institute, a program of the Western Reserve Land Conservancy; and Bridget Gainer, Cook County Commissioner.

Turning around a problem and turning it into an asset—that, according to MarySue Barrett, is at the heart of a land bank’s purpose. Land banks target foreclosed and other distressed properties, then maintain and hold onto them, tax-free, until an agreed-upon redevelopment plan comes along to make it productive.

A potentially decisive factor in whether the Cook County Land Bank is merely the biggest in the nation, or if it also ranks among the best: the effectiveness of its yet-to-be-selected director.

That was the consensus of panelists who have played instrumental roles thus far in the land bank’s emergence. Foremost in voicing that view of leadership’s significance was Toni Preckwinkle, who on Feb. 5 announced the directors of the Cook County Land Bank.

It was in the same spot, during a ULI-sponsored event at Drinker Biddle last June, that Bridget Gainer said she hoped to bring a land bank ordinance to the county board. At the time, she emphasized, “The land bank is not some kind of panacea to solve all these issues. It is one more tool in the toolbox.”

She and others echoed much the same sentiment this time around as well.

As much as officials have been moving swiftly in recent months to reach this stage, Preckwinkle urged patience in the coming months as a director is selected and staff assembled.  She said that longstanding economic stagnation helped prompt her to move for the creation of the county land bank.

“What’s really troubling is that 10 percent of the housing units in Cook County are vacant,” Preckwinkle said. “That’s profoundly disturbing.”

Noting that there are 85,000 foreclosure cases pending in circuit court, she said that figure “gives you an idea of the magnitude of the problem.”

More than 80 local governments in 23 states use land banks, including one in south suburban Cook County. “They have been an effective tool in reversing the downward cycle of decline and decay,” said Preckwinkle.

Under the land bank model, once the city accepts property from a given entity—such as a banks, servicer, municipality or private owner—then it can either hold onto the property or follow a “rational format” that essentially provides three options. Those choices are to demolish, to find an intermediate use, such as a rental program, or to cede the property to the land bank, which can then turn it around and sell it.

With the Cook County Land Bank, the focus will be acquiring abandoned properties, particularly in those communities that have been hit hardest by the real estate economic crisis. “We want to remove redevelopment barriers and jumpstart economic investment,” said Preckwinkle.

When she represented the 4th Ward as a Cook County Commissioner, Preckwinkle helped spearhead similar turnaround measures in the 1990s. It was complicated and costly, but in the end, “it was time well spent and it was resources well spent,” she said.

Land banks are especially pivotal because “financially strapped communities find this process insurmountable,” she added.

Having a diverse group on the Land Bank board, representing wide-ranging sectors such as open space, real estate, and commercial development, is vital in helping the entity respond to market demands and balance competing needs.

Scott Goldstein said a land bank is an essential instrument not only in dealing with the fallout from foreclosures, but across a gamut of economic development issues.

He joined others in stressing it is healthy to have a combination of county leadership that enables action legally and an independent board that directs policy. Barrett referred to it as “government intertwined with independence.”

The leadership of ULI Chicago, said Goldstein, views as important that the land bank “really further the goals established by local communities and set by the region as a whole.”

From the developer’s point of view, Goldstein added, the land bank provides predictability. He cited the Minneapolis/St. Paul area, where a region-wide land bank has been “extremely effective at helping with transit-oriented development.”

Jim Rokakis has national expertise on land banks, and helped establish 15 county land banks in Ohio, starting in 2008. He said that, in terms of foreclosures, no state has been more devastated than Ohio and no city more devastated than Cleveland, where he served on the City Council for 19 years.

The mission of land banks there, he said, is to strategically acquire properties, return them to productive use, reduce blight, increase proper values, support community goals, and improve residents’ quality of life.

Among a land bank’s primary functions: clean up “toxic titles;” gain control of a property for demolition; rehabilitation or sale to new private owners; deeding to adjoining owners for side yards; creative reuse such as gardening, green space, storm water management; replanting urban forest; and other innovative and ecological purposes.

He urged the creation of a dedicated revenue stream, such as could be derived through a portion of the penalty on delinquent property tax bill payments. Rokakis also cautioned officials to steer clear of trying to “be all things to all people…you end up being nothing for anybody.”

He also called on leaders to lobby lawmakers to adjust Environmental Protection Agency rules related to demolition of homes that have hiked costs by 20 to 25 percent.

As he concluded his remarks, Rokakis sounded a hopeful note: “We needed a land bank to survive…the biggest difference is I think you can use it as a tool to thrive.”

In her address to the audience, Gainer acknowledged that there are existing laws that could enable much the same process as occurs via the land bank. However, she added, a land bank “has clarity of purpose, which we can never underestimate.”

By having an entity whose sole focus is that of a land bank, “that organizing principle helps us to move forward and address those issues.”

Gainer also emphasized the need to be market-focused: “We need to leverage the private market…government cannot get us out of this foreclosure crisis. There isn’t enough money to fund program after program after program.”

During a half-hour question-and-answer period, panelists addressed questions that surfaced for audience members.

The first was about which “next step” loomed as most important. Preckwinkle said establishing strong leadership was vital, a point that nobody disputed. In addition, Goldstein said the land bank must create “clear priorities” so that the process, which is “designed to do just about anything,” doesn’t get bogged down.

During this portion of the meeting, Preckwinkle rued what she termed a “public policy error” in the last decade—the push for home ownership, when some people are clearly better off renting instead of owning properties.

“There are large portions of our population that should be renters,” Preckwinkle said. “It’s better for them in the long run. It provides more stable housing for them.”

On the question of how the land bank will sift through the various possibilities at its disposal, Gainer said the entity will “funnel it through the question of, ‘How does it mitigate these issues of vacancy and foreclosure?’”

On a related note, Rokakis expressed doubts that urban farming was a viable option on a broad scale. He pointed to one such project that is generating $1.4 million in revenue, but incurring $3.2 million in costs.

“I just don’t want to get too excited,” he said, “I just don’t know how long you can have those numbers work at cross-purposes…I just want to be realistic about it.”

He voiced similar concerns about the economic realities of recycling content, such as the re-use of demolished materials, whose cost he pegged as “at least double” the cost of going the traditional route.

“Deconstruction is very, very costly…as much as we feel good about it,” said Rokakis.

In her concluding remarks, Preckwinkle diplomatically observed that she welcomed advocacy groups contacting her and other leaders with their views about how properties can take new shape. However, she added, “We’re going to focus, frankly, on trying to work with units of government.”

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Before the panel discussion, ULI Chicago posed a few questions to panelists on a 1-on-1 basis. Here is a transcript of those conversations:

 

Q & A with MarySue Barrett, President, Metropolitan Planning Council

How was the ULI Chicago Technical Assistance Panel helpful in getting Cook County Board approval for the Land Bank?

The ULI Technical Assistance Panel occurred very early on in the advisory committee process and it was integral to our deliberations. It opened up the process to engage and consult a lot of experts across a lot of different segments of real estate expertise: industrial, residential, commercial, retail, as well as other private sector stakeholders from banking and other institutions, to advise us about how to best structure a tool to meet our needs.

ULI had an interview process which is unique and was able to, in rapid-fire format, engage literally more than 100 voices in a very short period of time. So to be able to sift through that input, we could not have done that as an advisory committee.

How will you involve developers and the larger real estate community in the Land Bank project?

The Land Bank moved from the report to the actual ordinance and now President Preckwinkle is considering appointments to the board, so it’s moving very quickly. And members of the real estate community can be involved every step of the way.

There will be that expertise reflected on the board—the ordinance explicitly calls that out. There will also be ad hoc teams, helping with the start-up phase of this Land Bank. Expertise has already been volunteered and accepted.

And then as partners, once this is operational, we envision this Land Bank as being very strategic, targeting parcels that, with the right assembly, could be ripe for development.

Q & A with Bridget Gainer, Cook County Commissioner:

How was the ULI Chicago Technical Assistance Panel helpful in getting Cook County Board approval for the Land Bank?

The ULI Panel was incredibly important to us to establish the Land Bank. The Land Bank is a concept that most people are not familiar with. It’s new to Illinois and it’s new to this region, so having the Urban Land Institute was really important both as subject matter experts and as a third-party validator that said, `We have reviewed this, we think it’s useful, we think it’s productive and it’s something that we really need in our real estate market.’

They brought a lot of deep expertise and they validated to a larger market that the Land Bank is something worth looking at.

How will you involve developers and the larger real estate community in the Land Bank project?

One of the things that we said from Day One about the Land Bank is that if it doesn’t work for the market players in real estate, then the whole thing was a waste of time. So that includes the Realtors, that’s the developers, both non-profit and for-profit, as well as everybody else who participates in our real estate economy.

So we’ve got to keep the focus on the fact that this is not going to be a continuation in a long line of government-funded answers to foreclosure. This is something that says, ‘Right now, our real estate market is off-kilter. There’s too much vacant housing. Supply-and-demand is not being met, those things are not matching.’

It will fix itself eventually. The question is, `Is it going to fix itself in a way that’s optimal to our community and to our tax base?’ That’s why private developers have to be at the table because, at the end of the day, the whole point of the Land Bank is to encourage private development. So if you don’t keep up with what they need, then you’re going to be stuck … and we might as well not have even bothered.

Q & A with Scott Goldstein, Principal, Teska Associates, Inc., and Chairman of the ULI Chicago Technical Assistance Panel

Will ULI Chicago continue to be involved with the Land Bank? How?

Absolutely ULI is going to stay involved. Several of the board members connected to ULI or involved with the organization want to work with those members to inform the board. We also are very interested in ongoing follow-up with staff.

There are a lot of issues here and ULI clearly brings the perspective of both non-profit and for-profit developers to really make sure that development projects come out of this and that we see continued revitalization.

What role should ULI Chicago play as the Land Bank takes shape?

I think that the ULI really needs to play the role of being the resource. Having private sector individuals, as well as government officials, help think through, how is this Land Bank going to work, how is it going to be strategic, effective, cost effective and how’s it really going to support property redevelopment?

To get more transit-oriented development, to get more urban reinvestment, to get more suburban neighborhood stabilization, I think with 1,000 members of ULI out there in Chicago, there are a lot of resources at the table.

Why is input from the private sector so important to the success of the Land Bank?

Everything’s about public-private partnerships these days. You can’t do anything without both the public and the private involved.

If you’re talking about foreclosures, you need banks, you need attorneys, you need developers, you need homeowners, you need prospective buyers, you need renters, renter developers, all those folks.

None of these deals are going to be easy, so how do you make sure that there’s good communication, and that there’s expertise in terms of what are development costs, what are acquisition costs? All of those issues will be important.

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