Funding from the state attorney general fuels a regional approach to the problem of distressed properties

It could be said that the drafters of New York’s 2011 land bank legislation followed the dictum of that master of paradox, G. K. Chesterton: “That which is worth doing is worth doing badly.”

But not due to any real flaws in the law. On the contrary, at the National Trust for Historic Preservation’s conference in Buffalo in 2011, land bank pioneer Dan Kildee, now a congressman and then director of Flint, Michigan’s Center for Community Progress (think land bank think tank), called New York’s recently passed law a national model. Rather this legislation, while a capstone achievement of Assemblyman Sam Hoyt and his progressive political organization, in partnership with the Erie County Association of Governments, was passed at a time of very tight state budgets, and came without a corresponding dime of startup funding.

Without delving too deeply into the public policy ins and outs of land banks (which you can read about in our 2012 cover story: artvoice.com/issues/v11n24/cover_story), at its core a land bank is a real estate entity crafted specifically to break the downward spiral of delinqency and blight associated with foreclosed, distressed, and abandoned properties. It has the legally constituted ability to step in to stop the endless churn of flipping of properties in and out of housing court and in-rem auctions. With adequate funding, a land bank can acquire, stabilize, and sell properties to responsible parties—instead of to the minimally qualified bidders, often from out of town (or fronting for out-of-town investors), who flock to in-rem auctions.

But no real estate operation gets going without startup capital, and for some time that was not forthcoming from New York. In the fall of 2012, the five land banks that had then been authorized by the state that spring met with officials from Empire State Development, asking for startup loans. There were none granted. Lackawanna Mayor Geoff Szymanski, who cooperated closely with the administration of Erie County Executive Mark Poloncarz and the team that created the combined Buffalo & Erie County Landbank, personally visited the governor’s mansion and asked Governor Andrew Cuomo to provide startup funding. He was turned down.

This lack of a path to sustainability affected, to one degree or another, all of the eight land banks New York has so far authorized, according to the Center for Community Progress’s update on New York’s land bank program published earlier this year (communityprogress.net/blog/years-land-banking-takes-shape-york-state). Attorney General Eric Schneiderman, having taken an interest in the plight of the land banks, put funding from legal settlements toward hiring an advisor from Community Enterprise Partners to work with all of New York’s land banks. For mutual support, the land banks have been sharing updates and comparing best practices on a weekly conference call.

So for nearly two years, our land bank, formally known as the Buffalo Erie Niagara Land Improvement Corporation (BENLIC), has labored to build the best possible vehicle to take us away from the cycle of blight to a better day, without knowing if there would ever be fuel to put in the tank. No startup funds also means no paid staff, so progress has meant board members doing staff work along with in-kind staff assistance from constituent municipalities, the Association of Erie County Governments, the local office of national nonprofit LISC (Local Initiatives Support corporation), the Western New York Law Center, and UB Law School.

Ironically, priming the engine was an unintentioned holdover gift from former Erie County Executive Chris Collins—$100,000 that had been appropriated by the Erie County Legislature to deal with distressed properties, but which he had refused to spend. That expenditure was then authorized by hs successor, Poloncarz, and put toward a small pilot project focused on several suburban properties, and one in the rural Village of Angola.

Why pilot in the suburbs, rather than the City of Buffalo, with its second-in-the-nation ranking (after Detroit) in the vacant properties tournament? According to Erie County Commissioner of Environment and Planning Maria Whyte, to best work out an intermunicipal process that can be used thoughout the county, and, frankly, because that is where rehabbed properties are likely to be most marketable. While not out to make a profit, in order to become eventually self-sufficient, the land bank will need to make at least a modest return on some properties it acquires, rehabs, and resells, in order to fund its work with more troubled properties.

The properties most likely to turn a profit are suburban, the troubled properties urban.

Adding fuel and a driver

Now, thanks to New York Attorney General Eric Schneiderman’s Community Revitalization Initiative, our land bank is finally getting both the fillup and driver it has needed. While he hasn’t breathed fire against the bad boys of Wall Street in anything like the way of his predecessor Eliot Spitzer, neither has Schneiderman gone along with the anemic settlements pushed by the feds, which represented little more than wet-noodle flogging. As our waterfront is enjoying a shot in the arm thanks to Congressman Higgins’s hard line on NYPA relicensing, our distressed properties benefit from the AG’s vigorous pursuit of larger settlements for the misdeeds of downstate financiers.

Schneiderman was in Buffalo Friday to formally announce that money from these settlements has been provided to our land bank and to five others. BENLIC is receiving just over $2 million.

Introduced at last Friday’s press conference was BENLIC’s new executive director, Jocelyn Gordon, in the driver’s seat for a month and already well up to speed when I interviewed her two weeks ago. Gordon comes to the job with an impressive resume, including master’s degrees in both urban planning and business, and two decades of private-sector work in municipal planning. Projects she has managed include developing a revitalization strategy for the district around Cleveland’s storied Westside Market, and Broome County’s waterfront revitalization strategy. Gordon will be paid $75,000 per year—in the middle of the range BENLIC’s research found for other land bank executive directors.

Planning has clearly been in Gordon’s blood for some time. She told me that her first date with her architect husband, Charlie Gordon, was at, of all things, a community meeting on plans for a new Peace Bridge—in 1993. And that, Gordon told me, was a principal reason she jumped at the chance to lead the land bank: the opportunity to do work that will pay off for the community very quickly, as opposed to planning for things that may only unfold over decades, if at all.

As it happens, I first met Gordon while out and about on the West Side last winter. She and Charlie were in the process of closing, along with partners Helfer-Lamparelli, on a large, four-story brick building that has been vacant for a half decade. It had been mothballed by a West Side preservationist awaiting buyers with the right combination of financing and good intentions. It is just a block away from another project undertaken by the Gordons—an outstanding rehab of a house with beautiful Eastlake wood trim. It bodes well that our land bank’s director is also versed in the nitty-gritty of rehabbing properties in a challenged neighborhood.

Gas up the bulldozers

Not only will the Schneiderman’s Community Revitalization Initiative funding put metaphorical fuel in the tank of the land bank, it will put real diesel fuel in dozens of very real backhoes that may be coming soon to a Western New York neighborhood near you. Of the six land banks to receive CRI funding, only those in Western New York (BENLIC and Chautauqua County) plan to use the funds extensively for demolitions.

This may be understandable in Buffalo, which, per capita, has one of the highest vacant properties rates in the nation, but other upstate cities with significant rates of blight and abandonment, such as Syracuse, are not emphasizing demolitions.

And where will the demolitions be? Lists of specific properties were to be demolished (50 in Buffalo, five in Lackawanna) were not required to be part of the CRI application, and as of press time have not yet been released for either city. Rather, in the application, Buffalo submitted a map identifying areas with significant blight remaining to be cleared that also overlap with areas slated to receive reinvestment through the Build a Better Buffalo Fund (part of Cuomo’s Buffalo Billion). Such areas of overlap include East Side arterials such as the Broadway corridor. The houses to be demolished are already owned by the city, have failed to attract buyers at in-rem auctions, and are considered health and safety hazards. The worst of the worst.

Commissioner of Permits and Inspections James Comerford told me, at the press conference, that the final list of demolitions will be submitted to the Buffalo Preservation Board for review this month. He expects, he told me, that they will be “received and filed”—meaning no objection.

Historically, it is not unheard of for the Buffalo Preservation Board to review large numbers of demolitions at a time—on occasion, even receiving them on CD-ROM.

But wait—there’s rehabilitation, too

Land banks were not envisioned to oversee wholesale demolitions. Shrinking cities like Buffalo have had, unfortunately, to become very good at that on their own in recent decades. Land banks are about acquiring challenging properties and improving them to be, once again, assets to the community. Apart from the demolition detour, the CRI funding from the Attorney General will get the land bank moving solidly in this direction, too. The funding will allow eight properties to be acquired and rehabbed, continuing a pilot project the land bank has had in the works for the last year. The pilot project has accomplished the non-insignificant task of working out how, practically, the land bank can function in an inter-municipal environment.

As noted by the Center for Community Progress in its status report on New York’s land banks, our state’s over-governed structure of multiple layers of local municipalities and jurisdictions, often with unique charters and privileges under the Home Rule principle, creates a potential minefield for a countywide entity that needs to get things done. So our land bank has had to become something of think tank, with board members (five of whom represent the City of Buffalo), in-kind staff expertise from municipalities, and advice from nonprofit partners working long hours in rooms with white boards on a project Maria Whyte said they collectively considered “the most intellectually challenging thing they’ve tackled.”

What they’ve come up with, as Whyte, who led the process, described to me, is a system that, once proven, she hopes may be used as a model elsewhere in the state. At its core, to avoid what could easily become disputes over competing priorities, interests, and parochial matters in individual municipalities, the land bank will look to the municipalities themselves to take the lead in telling the land bank what they want help with. Through the existing, well-defined process of local governing body resolution, any municipality wanting to involve the land bank will state clearly that it wishes to do so, and also submit its list of priority properties. And because of local variations in record keeping and inspections practices, the team developed a standard inspection record (SIR) for municipalities to submit to the land bank with each property.

This is the engine and vehicle the land bank has built, with the luxury of time as a blessing in disguise because of the lack of startup funding. The land bank is betting that this process, mechanism, and framework, fueled with startup capital, will take the community where we need to go in grappling with distressed properties. It was ready in the fall when the AG sought proposals for funding, and the land bank’s $3 million request included a $2 million to get this process rolling. According to Whyte, the AG’s office was impressed, yet was unwilling to pour that much funding into an untested mechanism. They felt it better, the first time around, to focus on quick, highly visible results like the demolitions, while funding a smaller pilot project to prove the mechanism.

Yet to be answered are questions of how and how much the City of Buffalo, at the center of the region’s distressed properties problems, will use the land bank—questions I put to the city’s commissioner of economic development, and BENLIC’s vice-chair, Brendan Mehaffy.

While committed to the entity he helped to create and helps chair, Mehaffy also offered the perspective of an organization, City Hall, with over a century of experience with real estate, and extensive staff and legal capacity—however shrunken along with the city’s population and overall assessed value. While he would like to eventually use the land bank’s “trump bid” authority within the city, he said that at the last in-rem auction his department could easily have identified a hundred properties to be handled by the land bank. Just holding that many properties, even temporarily, Mehaffy said, would far exceed BENLIC’s current capacity in both staff time and legal costs.

Also, the city has developed some in-rem alternatives of its own, including putting properties that are considered salvageable on the Multiple Listing Service. Some of those have sold at market rate, and some have been eligible for homesteading , where a qualified owner who commits to investing in the property purchases it for $1.

The Brown administration often takes heat for its widely touted demolition programs, like “5 in 5.” But what is often overlooked, Mehaffy said, is investments like 300 emergency repairs being funded through CDBG funds this year, the mayor’s push for ECIDA’s adaptive reuse program, the city’s investment in PUSH’s project to rehab 46 housing units, and other rehab projects such as School 60 in Riverside, the Summit Building, Hotel Lafayette, and the Statler.

“A common refrain of mine is that there is no desire to demolish, there is a need to demolish—and this need is repeatedly expressed by the community who endures abandoned properties on a daily basis,” Mehaffy told me.

In comparison, our land bank is fresh off the lot, but with gas in the tank, a capable driver, and ready to prove its worth on the streets and avenues of Western New York. It may well score additional fuel in the next CRI funding round, to scale up its activities and capacity. Despite a long road to getting on the road, BENLIC may be on a drive to subvert Chesterton’s dictum—by doing well something that is very much worth doing.