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Weekly UpdatesOhio Study Shows High Cost of Abandoned Properties
A recent study of eight cities in Ohio conservatively identified nearly $64 million in total costs to local jurisdictions related to vacant and abandoned properties. * This included nearly $15 million in city service costs and more than $49 million in lost tax revenues from demolitions and tax delinquencies. Another study identified 26 distinct, foreclosure-related municipal costs that fall into categories such as building inspection and code enforcement, boarding and demolition costs, tax loss from demolition and unpaid property taxes, utility (water/sewer) bill delinquency, trash removal and mowing costs, and fire and police services. **
* Community Research Partners, $60 Million and Counting: the cost of vacant and abandoned properties to eight Ohio cities (Columbus, Ohio: ReBuild-Ohio, February 2008).
** William C. Apgar and Mark Duda, Collateral Damage: The Municipal Impact of Today's Mortgage Foreclosure Boom (Minneapolis, Minnesota: Homeownership Preservation Foundation, May 11, 2005).
Current Litigation
A number of jurisdictions are suing banks, mortgage companies, and related firms in an attempt to recoup some costs related to foreclosures.
The City of Baltimore
The City of Baltimore, Maryland, filed suit in U.S. District Court, claiming a bank engaged in unfair lending practices that targeted minority communities in Baltimore, violating the federal Fair Housing Act and resulting in high rates of foreclosures and vacancies in minority communities. The city would like to recoup some of the costs it has incurred due to illegal practices. These costs include: decreased property tax revenue, increased expenditures for public safety, as well as related administrative and legal costs associated with foreclosures.
The City of Buffalo
The City of Buffalo, New York, sued more than 30 mortgage companies and banks to recoup costs for nuisance abatement related to specific buildings that have gone vacant and are now in disrepair. The city seeks reimbursement for the associated public nuisance costs, including demolition, associated with approximately 60 properties.
The City of Cleveland
The City of Cleveland, Ohio, has seen in increase in foreclosures over the past decade. Between 2004 and 2006, the number of foreclosures has increased to 7,369 from 397. The city is suing 21 banking institutions for public nuisance costs, including maintenance and demolition of vacant properties and the decrease in property tax revenues.
The City of Minneapolis
The City of Minneapolis, Minnesota, filed a suit against a real estate company, claiming it purchased and flipped homes in the north and northeastern areas of the city. The company was charged with inflating the values of the properties using fraudulent appraisals. Of the 140 homes purchased, more than half are in foreclosure. The city wants to obtain the foreclosed properties and rehabilitate these homes and rental properties.
The State of New York
The New York state attorney general filed suit against an appraisal company for providing inflated appraisal values on homes, allegedly in collusion with employees from one banking firm. The state seeks restitution for all individuals hurt by the conspiracy and all fees and costs associated with the filing, as well as reparations for all legal violations.
Fees and Fines
Many cities require owners to pay an annual registration fee for vacant properties. Examples include:
Many cities use a progressive fee structure to minimize the length of property vacancies. For example, the fee shown for Wilmington, Delaware, is for the first year of vacancy. The fee increases afterward: $1,000 for year 2; $2,000 for years 3-4; $3,500 for years 5-9; $5,000 for 10 years; and an additional $500 for each year after 10. But often, cities also try work with owners. In Minneapolis, for instance, the fee can be waived if there is an approved redevelopment plan in place.
Along with fees, cities institute fines to defray or recover costs incurred because of improperly maintained property by charging fines for improperly maintained properties. Examples include:
BOB WINTHROP is scheduled to start later this summer as the senior business operations manager for the City of Portland, Oregon, Police Bureau. He has more than a decade of experience specializing in improving government operations. Along with general government financial analysis, he has worked on projects for police departments throughout the country, including Saint Paul, Minnesota; Pittsburgh, Pennsylvania; and Long Beach, California. He currently is a member of the Public Strategies Group network and can be reached at bwinthrop@psg.us. REBECCA HERR is a consultant in the Strategic Consulting Group at Public Financial Management, Inc. (PFM). She joined the PFM team in 2007 and has worked with city and county governments on projects including arbitration support, workforce analysis, budgeting, and revenue generation. She has worked with jurisdictions including New York City; Philadelphia, Pennsylvania; and Baltimore, Maryland. She has a bachelor of arts in mathematics and economics from Lafayette College.
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