The purpose of this publication is to provide a general understanding of land reutilization corporations (“LRCs”) enabled by Ohio S.B. 353, 127th General Assembly (“S.B. 353” or the “Act”) and to provide a practical “playbook” to navigate the operational and inter-agency relationships involved in land banking under the Act. Guidelines, explanations and forms for the implementation and operationalization of LRCs will be provided. For those counties seeking to create LRCs, a practice guide is needed to avoid misapplication, misuse and mistakes in the implementation of this powerful and complex new tool.
Implementing the significant tax foreclosure reforms in the Act, the holding of bulk distressed properties on a tax-free basis and the governmental “land bank powers” afforded to LRCs require direct interaction and coordination between the offices of the Auditor, Treasurer, Prosecutor, Clerk of Courts, Recorder, Courts/Boards of Revision (foreclosure boards) and the Sheriff.
B. The Benefits of Land Reutilization Corporations
Counties with larger populations typically have larger challenges. The Act affords counties of all sizes the ability to implement as much or as little of the Act as they wish. County governments are also free to provide as much or as little assistance as they believe community priorities require. In Cuyahoga County, for example, the government of Cuyahoga County does not fund the land bank at all, whereas in other counties, general fund dollars may be expended. In some cases, a LRC can be created for the specific purpose of promoting an individual pending economic development project or land assemblage. Other counties may wish to engage the full range of statutory authority under the Act, i.e. blight clearance, demolition, rehabilitation, tax foreclosure, economic development, deconstruction, etc. Whatever the “right-sizing” from county-to-county, LRCs can be a tool for all counties.
C. The General Nature of a Land Reutilization Corporations
As indicated above, prior to the passage of S.B. 353, land banks were legislatively authorized in the 1970s pursuant to R.C. 5722.01 et seq. Cities, townships and counties were always–and still are–authorized to create these conventional land banks. These land banks reside in government, the operations of which compete with other priorities such as police, streets, health, playgrounds, etc. These conventional land banks typically only receive vacant land after a lengthy tax foreclosure process.
The Act significantly modified R.C. 5722.01 et seq. to authorize counties to form land banks, but through the independent agency of R.C. Chapter 1724 “Community Improvement Corporations” known as land reutilization corporations (“LRC”). Simultaneously, the Act also significantly modified Chapter 1724 of the Revised Code to give these corporations broad additional capabilities and authorities along with the governmental powers in R.C. 5722.01 et seq. No other corporation has this unique blend of governmental/private capabilities. Indeed, LRCs can buy, sell, borrow, lend, float bonds and be an equity partner in land and development projects. Though it can hold property tax free, and retain many of the governmental capabilities reserved specifically to political bodies, it is, in all respects, a private non-profit corporation capable of being highly flexible and transactionally efficient.
The unique capabilities afforded to LRCs would be of little effect without a reliable and leveragable revenue stream. There are basically four ways that LRCs can be funded. 1) direct government support, i.e. general fund dollars from the county; 2) a system of arbitrage of penalty and interest on delinquent real estate taxes (explained further on in Section IV); 3) use of “DTAC” (explained further in Section IV); and 4) outside grants and sales of properties.