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The post A Land Bank for St. Louis County appeared first on Show-Me Institute.

St. Louis County wants to follow the example of the City of St. Louis and create a land bank. This land bank will allow the county to become more aggressive about acquiring and selling property, primarily through tax auctions. If the examples in St. Louis and Kansas City are any indication, the land bank will fail in its goal of getting property back to the private sector. Creating a land bank will, however, increase opportunities for corruption and hold property off-market as a favor to politically influential developers. In case you have forgotten, here is the story on land bank corruption:

[Former Alderman] Boyd admitted accepting a total of $9,500 from Doe for his help convincing the city’s Land Reutilization Authority to accept a lower bid from Doe for a commercial property on Geraldine Avenue in Boyd’s ward. The LRA ultimately accepted Doe’s $14,000 bid. The LRA initially listed the property as worth $50,000. Boyd then worked to get a property tax abatement for Doe.

Inexplicably, the state authorized land bank expansion last year. St. Louis County is moving ahead with it. This is really the worst move the county could make and it isn’t going to end well for St. Louis County.

On the other side of the state, when St. Joseph created its land bank several years ago, the authorizing legislation included elements to help protect against corruption. It prevented people who might have a conflict of interest, such as anyone affiliated with St. Joseph city government, the land bank itself, or relatives of land bank staff or St. Joseph city government, from buying land from the land bank. Keep in mind that family members of the Jackson County Executive were able to purchase and flip land bank properties in Kansas City under questionable circumstances, to say the least. From the Kansas City Star:

No houses were built, and the company formed by Frank White’s stepsons Joseph, Darrel and Jordan Hurtt more than doubled its initial $3,700 investment by selling just four lots to a woman who lived near the properties on Montgall.

Now that it’s been several years since the St. Joe land bank was created and it has accomplished nothing, there is a bill in the legislature to remove those protections against corruption. It’s astonishing. What is the thought process here? Do St. Joseph city officials want to flip a few empty houses so badly that allowing those with inside information to profit is suddenly alright in St. Joseph? When something isn’t working under honest means, the answer is not to try it with dishonest means.  I hereby award House Bill 717 the title of the worst bill in Jefferson City this year.

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The state legislature in Missouri is again considering legislation to dramatically expand the authority to institute land banks to municipalities across the state (the state legislature must approve all new land banks in Missouri).

The state legislature should reject this legislation. If such legislation is enacted, counties and municipalities should reject the establishment of land banks. 

On January 17, Show-Me Institute Director of Municipal Policy David Stokes submits testimony to the Missouri Senate Emerging Issues Committee regarding expansion of Missouri’s land bank program. Click here to read the full testimony.

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The state legislature in Missouri is currently considering legislation to dramatically expand the authority to institute land banks to municipalities across the state (the state legislature must approve all new land banks in Missouri). The state legislature should reject this legislation. If such legislation is enacted, counties and municipalities should reject the establishment of land banks. Land banks may sound good in theory, but in political and practical reality they have been a major failure.

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Every county in Missouri has a land trust that takes ownership of property that comes into ownership by local government; this almost always happens because of property tax delinquency. A municipal land bank is different from a county land trust. Land banks have much more authority to proactively acquire, market, and package for sale city-owned land and buildings. In theory, land banks seem like a positive thing. But the fact is they do not work.

Three cities in Missouri have land banks: St. Louis, Kansas City, and St. Joseph. In St. Louis and Kansas City, the land banks have proved much better at acquiring property (where it is off the tax rolls) than at selling it and returning it to the private sector. Research by the Show-Me Institute and investigations by the Kansas City Star and the Kansas City Beacon have documented numerous problems with the land banks in Missouri, including political corruption, cronyism, failures to accept legitimate offers, preferences for large developments (which often never materialize) over small buyers, and much more. In St. Joseph, the land bank is very small and new, so conclusions are hard to draw, but the early indications are not promising.

As the story in the Star explains it:

“This is not an agency that is interested in selling properties, it’s more interested in regulating who gets them and under what circumstances,” development lawyer and former city councilman Mark Bryant told The Star after an offer from him and his partners at Onyx Development Corp. was rejected at a recent Land Bank meeting.

The state legislature has previously proposed bills to dramatically expand the authority to institute land banks to many more municipalities (the state legislature must approve all new land banks in Missouri). Now, there is this organized effort to expand land banks to St. Louis County. The exact wording of the newest proposal for St. Louis and other counties is unknown. It is possible it could be better organized than the other banks, but I doubt that.

The state legislature should reject future land bank legislation. If such legislation is enacted, counties and municipalities should reject the establishment of land banks. Land banks may sound good in theory, but in political and practical reality they have been a major failure.

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Perhaps the thing that makes bad legislation into terrible legislation is when legislators try to implement programs that have clearly proven to be failures elsewhere (or previously). This is exactly the case for a few bills I have been following closely that seem close to passing this year.

There are many poorly designed tax credit and subsidy plans. Out of all of them, film tax credit programs are among the most studied, probably because of their more high-profile nature. People find films to be more interesting than soybeans, I guess. Those studies are clear in their conclusions: film tax credits do not succeed in growing the economy and do not generate the tax revenues to justify the subsidies. Missouri used to have a film tax credit program and we removed it—how often does that happen?—because it was clear it was not working. Yet, once more, there is legislation moving to reinstate a failed program. Why in heaven should Missourians pay millions of dollars to watch Ben Affleck drink coffee on Main Street for a few days? Missouri is better off without film tax credits. If the people of Georgia or California want to subsidize the shows and movies we watch, go ahead and let them. (Related bills are SB 961 & SB 732, primarily SB 961 at this point.)

Closely related to the zombie-like film tax credit program is the proposed Entertainment Industry Jobs Tax Credit that will provide tax subsidies for businesses that provide rehearsal and touring studios in Missouri. This entire program is aimed at one new company opening in Chesterfield, one that has already received other state and county tax subsidies. Apparently, that is not enough, as this proposal would have taxpayers further fund this new studio and entertainment center. It is simply awful policy for the state to decide that this particular type of business deserves a subsidy as opposed to a thousand other types of businesses. Taxes should pay for public goods such as parks, police, and transportation. There are other public goods, too, but however you define it, a private recording studio doesn’t make the cut. A new business coming to Missouri and, first and foremost, investing in a massive lobbying effort to get taxpayers to fund its operations represents everything that is wrong with our current system. (Related bills are SB 961 & SB 733, primarily SB 961 at this point.)

Another program that has consistently failed in Missouri is land banks. Show-Me Institute researchers produced significant work years ago on how the St. Louis land bank succeeded in accumulating property, not disposing of it (as was the plan), and empowered local politicians further by politicizing the land bank decisions. When Kansas City wanted to institute a land bank, Institute analysts warned those failures would be repeated there. According to investigative reports by the Kansas City Star, that is precisely what happened. The Kansas City land bank has favored local politicians at the expense of local communities, among many other problems. Despite that record, there are bills to now allow any city or county in the state to institute a land bank. This bill would empower local governments to proactively seize or purchase private property under the guise of assisting development. This would be highly troubling even if land banks had a successful track record, but the track record is terrible in St. Louis and Kansas City. (Related bills are HB 2177, SB 1089, and SB 724, primarily HB 2177 and SB 724 at this point.)

In government, nothing succeeds like failure. There is nothing quite as frustrating as watching legislators—many of whom would consider themselves supporters of limited government—trying to pass bills that propose policies with a proven record of failure.

I like a nice vineyard and a good glass of wine as much as anyone, but for these spoiled grapes, I’m hoping they all die on the vine in the last week of the session.

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In government, nothing succeeds like failure. How else to explain Springfield’s attempt to imitate St. Louis and Kansas City with the creation of a city land bank despite the clear evidence of failure of the existing lands banks in both of those cities.

Land banks are local agencies empowered to acquire vacant, derelict, or tax-delinquent properties with the goal of returning them to productive use in the private sector. Land banks are authorized to be more proactive in acquiring property than traditional county land trusts. The goal of land banks may be laudable. Their record of performance is much less so.

Missouri created the nation’s first land bank in St. Louis in 1971 to help get control of vacant properties and return them to private use. Since that time, the St. Louis land bank has proven better at acquiring properties than at returning them to the private sector. In a struggling city like St. Louis, that isn’t surprising. More troubling is that the reluctance to get rid of the properties it owns has been no accident. Research by Show-Me Institute staff and others has documented the alarming frequency with which legitimate offers for property in the land bank have been rejected. Most commonly, the land bank has been rejecting offers in order to hold the land for future—often more politically connected—development. That development has seldom come to fruition, so thousands of land bank parcels have sat unused for decades.

In 2012, Kansas City followed St. Louis with its own land bank. At the time, the Show-Me Institute published research documenting the failures of the St. Louis land bank as a warning to Kansas City. Disregarding the history and evidence, the state approved a Kansas City land bank, which was started up that year.

Fast forward to 2022, and the Kansas City Star has recently published a major investigative article on problems at the Kansas City land bank. Needless to say, the Kansas City land bank has not lived up to its promises. Its executive director was removed in 2018 after accusations of political favoritism and other problems. The family of the Jackson County Executive received a special deal on certain properties, which raised plenty of eyebrows. As in St. Louis, the Kansas City land bank has been plagued by conflicts of interest and poor management.

The final Missouri city to institute a land bank in Missouri is St. Joseph, in 2019. Thus far the land bank has proceeded laboriously. After two years, it owns just five properties. It may be too early to make a final judgment, but based on its slow start and the lack of success in other cities I’d say the prognosis for the St. Joseph land bank is poor.

Land banks have fundamental problems. Ideally, they would work quickly and efficiently to place properties they own back into private hands. But that very speed is what can make them subject to abuse by those with political connections. In order to guard against such problems, they can become a typical bureaucracy—slow and difficult to deal with. But in that case, few in the private sector will want to work with them. So, the choices are to operate quickly and accept some level of malfeasance, or to operate bureaucratically and drive away your own potential customers. Finally, land bank employees have little incentive to do their jobs so well that they find themselves out of one.

Supporters may claim that Springfield would operate its land bank more effectively than St. Louis, Kansas City or St. Joseph. I don’t dispute the sincerity of the promises—just the likelihood that they’ll be kept.

Springfield needs a new city land bank about as much as it needs the return of bushwackers and bald-knobbers. The city would be better off not creating a land bank and letting Greene County dispose of tax-delinquent properties in its longstanding manner. If Springfield does create a land bank, I fully expect to read a News-Leader investigative report of its failures in the next few years.

The post Springfield Does Not Need a Land Bank appeared first on Show-Me Institute.

You are probably familiar with various versions of the phrase, “Time to get out while the getting is good.” While that suggestion does not often apply to government, it most certainly does to the St. Joseph Land Bank.

In 1971, the state created the nation’s first “land bank” in St. Louis to help get control of vacant properties and return them to private use. Since that time, the St. Louis land bank has proven better at acquiring properties than at returning them to the private sector. In a struggling city like St. Louis, that alone should not be a surprise. More troubling is that the hesitancy in getting rid of the properties it had has been no accident. Research by Show-Me Institute staff and others documented the alarming frequency with which legitimate offers for property in the land bank have been rejected. Most commonly, the land bank has been rejecting offers in order to hold the land for future — often more politically connected — development. That development has seldom come to fruition, so thousands of land bank parcels have just sat there for decades.

In 2012, Kansas City followed St. Louis with its own land bank. At the time, the Show-Me Institute published research documenting the failures of the St. Louis land bank as a warning to Kansas City about what was ahead. But, proving once again in government that nothing succeeds like failure, the state approved a Kansas City land bank, which was started up later that year.

Fast forward to December 2021, and the Kansas City Star has just published a series of stories on development failures in parts of Kansas City, including a major article on problems at the Kansas City land bank. Needless to say, the Kansas City land bank has not lived up to its promises. Its executive director was removed in 2018 after accusations of political favoritism and other problems. The family of the Jackson County executive received a special deal on certain properties, which raised plenty of eyebrows. As in St. Louis, the Kansas City land bank has been plagued by conflicts of interest and poor management.

Land banks have fundamental problems. Ideally, they would work quickly and efficiently to place properties they own back into private hands. But that very speed is what will inevitably make them subject to abuse by those with political connections. In order to guard against such problems, they can become a typical bureaucracy—slow and ponderous to deal with. But if they do that, few in the private sector will want to work with them. So, the choices are to operate quickly and accept some level of malfeasance or to operate bureaucratically and drive away some of the people who approach you. Finally, land bank employees have little incentive to do their jobs so well that they find themselves out of one. Idealists may wonder why St. Joseph’s land bank can’t have the best of all worlds and be nimble, honest, and focused—but if the experiences in St. Louis and Kansas City are any guide that is not going to happen.

The St. Joseph land bank has, according to reports, chosen to err on the side of ponderous bureaucracy since it began operating in 2019, and that was before it even held any properties. Now it has five properties to try to return to the private sector as taxable, productive land and buildings. I remember in 2012 when Kansas City opened its land bank and promised it would be operated more effectively than St. Louis’s. That didn’t happen. I am sure the same promises would be made now at the St. Joseph land bank in reference to Kansas City. I don’t dispute the sincerity of the promises—just the likelihood of their fulfilment.

Traditional county land trusts have worked fine as a way to deal with abandoned properties. The City of St. Joseph should take heed of the recent stories in Kansas City and transfer those five land bank properties to Buchanan County for inclusion in the annual county tax sale process. Get out while the getting is good, or else I will expect in about five years to read a News-Press exposé on the failures of the St. Joseph land bank.

The post When It Comes to The Land Bank, St. Joseph Should Get Out While It Still Can appeared first on Show-Me Institute.

Despite some attempts to aggressively put public properties back into private hands (which is the ostensible goal of a land bank), recent investigations of the Kansas City land bank have found an entity chock full of conflicts of interest, property hoarding, and operational failures. This may not come as a surprise to our longtime readers—Institute analysts have done extensive research on the failures of the St. Louis land bank. The St. Louis land bank accumulated and held numerous properties, often rejecting attempts by people to purchase them.

The supposed purpose of a land bank is to rapidly get property back into the ownership of private individuals. The leaders of Kansas City’s land bank made promises for programs to achieve that. But investigations by Kansas City-area reporters seem to indicate that the more things change, the more they stay the same.

It is not in the interest of bureaucracy to actually solve the problem it is created to address. That puts the people who work there out of a job. The natural interest of bureaucracy is to expand its influence and power. You don’t do that by keeping your agency small and making it smaller by getting rid of the very thing you’re managing. This is an important insight from public choice economics.

So, to no one’s surprise, it seems the flaws that have permeated the St. Louis land bank have become embedded in the Kansas City land bank. Those flaws will almost certainly emerge in the St. Joseph land bank, which was unfortunately created a few years ago. Springfield city officials, who want a land bank, should keep these repeated failures in mind and reconsider whether a land bank is truly needed.

The post Land Bank History Unsurprisingly Repeats Itself appeared first on Show-Me Institute.

In the first four blog posts in this series, we have seen how Saint Louis City’s property tax base is significantly curtailed because much of the city’s land is owned by governments and nonprofits, which pay little or no real property tax. Many other properties also receive special real property tax breaks, like TIF and Chapter 353 abatements, further reducing the number of parcels paying the city’s full property tax rate of $7.5850 per $100 assessed value (plus a $1.64 commercial surcharge). In total, an incredible 40% of the city’s property by value either is tax exempt or receives special tax breaks. The situation is worse downtown, where virtually any recent development has received tax breaks.

This situation has put Saint Louis City in a bind. Most cities rely almost entirely on property taxes and sales taxes to run government. But in Saint Louis, the city is forced to rely on an earnings tax to make up for the weak property tax base. Many economists and even Mayor Slay agree that earnings taxes are damaging to city growth and put Saint Louis at a competitive disadvantage. The mayor promised to look for ways to reduce the city’s reliance on the earnings tax in 2011. However, since that time Saint Louis’s reliance on the earnings tax has grown.

Another effect has been the creation of an unlevel economic playing field, especially for small businesses and depressed neighborhoods. Effective property tax rates vary from neighborhood to neighborhood, from block to block, and from building to building. If a business or development is big (or is setting up where civic leaders would like it to), it is almost certainly going to get a real property tax break. If a resident or a business doesn’t meet either of these criteria, it pays the full property tax rate. The homeowner in Southwest Garden pays full property tax rates, but the condo dweller downtown doesn’t. The laundromat in the Central West End pays full property taxes, but the Chase Park Plaza doesn’t. Fairness aside, the civic leaders are using the tax code to entice certain businesses or favor certain neighborhoods, in the hopes that these municipal champions will create trickle-down development. This prevents the city from charging broadly lower tax rates, which could generate more broad growth from the bottom up.

In the end, a good portion of the city’s property tax base problems are beyond its control. Parks, courthouses, schools, and cemeteries are tax exempt by state law or practicality. But much of the problem is the result of city policy. The city’s land bank, the LRA, has long dragged its feet over selling properties to willing buyers. Other city organs inappropriately own land on which private developments stand, like Busch Stadium. And when the city hands out tax breaks to any large developer that makes the request, even when their development plan is speculative at best, the hole gets deeper. With another vote on the earnings tax coming soon, now would be good time for the city government to stop hollowing out the tax base and reverse the damage already done.

The post Saint Louis City Property Tax, Part 5: Problems Ahead appeared first on Show-Me Institute.

There does not appear to be any evidence that the Jackson County Land Trust is doing a poor job of getting vacant property back into private, productive use.

Considering the Saint Louis example, any effort in Kansas City was likely to fall prey to Kansas City politicians who might direct the city to hold onto property on behalf of favored constituents or special interests. We are glad to report that the Kansas City Land Bank has addressed these concerns. On March 3, the Board of Commissioners adopted the following resolution:

The Land Bank supplements the Code of Ethics with the additional requirement, that any Commissioner that receives a contact from an elected official or staff lobbying for or against particular application for a property held by the Land Bank shall disclose such contact to the Land Bank staff within a reasonable time thereafter, and shall disclose that contact to the other Commissioners prior to voting upon the particular application for which such contact was made.

The board also will start listing the reasons for any application rejection in the minutes so that applicants and others can understand the commissioners’ decision-making process. This is a great win for transparency in government, and we congratulate the land bank board for taking this important step.

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• a report on the supreme court’s decision to uphold the ACA
• a message from Executive Director Brenda Talent
• Michael Rathbone’s eighth-grade curriculum on the economics of the Great Depression
• Recent ways the Show-Me Institute has helped spread information about the problems with TIFs
• information on the Show-Me Institute’s upcoming events
• a recap of the 2012 Missouri Legislature’s performance
• a look at the legislation that will allow the forming of a new land bank in Kansas City

The post Show-Me Newsletter: 2012, Number 2 appeared first on Show-Me Institute.

However, this ease of regulation comes just a little late. The housing market crisis began years ago. Part of the federal government’s response was to throw hundreds of millions of dollars in taxpayer money at the problem. In February 2010, the U.S. Department of Housing and Urban Development (HUD) awarded more than $223 million to help establish land banks in Michigan. More than $40 million went to a land bank in Ohio. The Saint Louis land bank, the Land Reutilization Authority (LRA), has used federal money to acquire property.

It would have been nice if the federal government had eased this regulation earlier, and before so much money was dumped into a program that has not been proven successful. After all, the Saint Louis land bank, which is the oldest standing land bank in the U.S., has not succeeded in getting vacant property back into private, productive use. Since its creation, the land bank’s holdings have quintupled, and Show-Me Institute research found that the land bank had a habit of rejecting nearly half of all formal offers to purchase its property.

There is a real risk that land banks set up in Michigan, Ohio, Indiana, New York, and other states will end up where the Saint Louis land bank has: Holding many properties indefinitely, and plagued by processes that favor political insiders. Much of the blame for this expensive and unproven expansion of land banking rests squarely with the federal programs and funding that encouraged it.

Reducing regulations associated with renting vacant, foreclosed homes is a good first step to dealing with the glut of foreclosed property. A next good step would be for the federal government to cease funding land banks.

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