Most favored developer status in Montgomery County?

In today’s Dayton Daily News we get to read about the “land bank” and how the city is wiping the debts off some sites that they’ve decided were over-encumbered by tax debt and making them available for development:

The targeted properties include:

• The former Dayton Electro Plate Inc., 1030 Valley Street;

• Rita Construction, 824 Leo Street; and

• the MPT Real Estate building, 1801 Home Ave.

These properties were selected for the land bank because a developer, with a successful track record in Dayton, sees their potential, said Aaron Sorrell, the city’s director of planning and community development.

“We were looking for high-profile properties, with owners who had walked away,” Sorrell said. “All the properties have brownfield issues.”

The land bank, a project initiated by Montgomery County Treasurer Carolyn Rice, is a non-profit, public corporation created to acquire low-value properties from foreclosures, lending institutions, and private individuals and sell them to organizations that aim to redevelop the community.

Once in the land bank, property taxes and deeds are cleared prior to being released to a developer.

“Our goal is to quickly turn the properties around to new owners,” said Paul Robinson, Montgomery County’s deputy treasurer, adding that this could mean within a few days.

The Dayton City Commission today will hear a first reading on a memorandum of understanding with the land bank to establish a procedure for acquiring properties. If approved, the land bank board will vote on the agreement on Feb. 21.

Then on March 9, the Montgomery County Board of Revision will preside over the tax foreclosure cases on the targeted properties and assess if they are truly abandoned.

If the Board of Revision finds in favor of transferring the property to the land bank, there is a 45-day waiting period.

Mike Heitz, managing partner for Garrett LLC, based in Lexington, Ky., said that if the three properties are land-banked, he’s committed to taking them on. The company has given the city of Dayton a $500 deposit for each property that will go toward expenses incurred during the process.

Garrett LLC — responsible for the transformation of the former Howard Paper Company site at 354 S. Edwin C. Moses Blvd., in Dayton, which is now for sale — specializes in acquisition and clean-up of brownfield properties.

• The Dayton Electro Plate Inc. property has been vacant for 16 years and currently has a delinquent tax balance of $564,246, according to the Montgomery County Treasurer’s Office. The assessed value of the property is $734,557.

The site was used since 1924 for coating metals with rustproofing materials by an electroplating process. In April 1996, the company ceased operations prior to petitioning for Chapter 7 bankruptcy.

Later that year, the Ohio EPA conducted an emergency removal action at the site due to risk posed to both the local population and the environment by the chemicals remaining on-site.

Heitz said he plans to demolish both the Dayton Electro Plant building and Rita Construction.

• Rita Construction, a large warehouse on Leo Street, was certified delinquent in 2009 and $168,824 in back taxes are owed. The property is valued at about $1.3 million.

• Heitz said the Home Avenue building will be renovated and a potential tenant/owner has been identified. That site was certified delinquent in 2009 and $160,786 in back taxes are owed. The building has an assessed value of $643,740.

“This is about putting properties back into productive use,” Dayton City Commissioner Nan Whaley said. “These are community properties that need to not just be sitting.”

via 3 Dayton sites first targets of county land bank.

Now, please read between the lines and let’s compare and contrast some other deals- and think about what’s happening here.

Ostensibly, the reason development hasn’t taken place is a combination of the fact that these sites are polluted and carry liabilities. The company has gone bankrupt- and there is no way that any sane individual would take a risk on them- there are also heavy back taxes on the “worthless property.”

Isn’t this a little like the Arcade? The liabilities on the property are great- partially because of its historic status which adds additional costs to development. Yet, the developers who jumped in to try to save it- had to pay the back taxes and are continuing to struggle to pay current taxes on a property that no one else has the balls to touch. Why aren’t they given this kind of clean slate deal? Is it because they aren’t a “most favored developer.”

We have another developer in town who has the taxpayers fund a very expensive highway interchange, which feeds some prime property he cornered a long time ago. He then moves a company with a brand new HQ that the taxpayers subsidized a half mile down the road to his new development- and then gets to take all his property taxes and reinvest them on his project (despite the fact that the Miami Valley Regional Planning Commission MVRPC- says we’re already over-built and market saturated in the  kind of buildings he’s throwing up).

Then we have the University of Dayton first buying up NCR property which takes much of it off the property tax rolls because they are a non-profit educational institution- and then, they start developing office space for one of the biggest companies in the world, GE, which also gets to skip paying property tax for 30 years.

In this example, we have the city clearing the liens on three properties for a guy who is putting down $1,500 to be handed property on the books at almost $2.6 million. Quite a deal. No auction on these properties, no marketing of them- nope, we found a friend and we’re going to hand the properties over without letting anyone else have a shot.

I could bring up the IRG deal for the Emery/UPS facility at the airport- but, that one is such a HUGE rip-off of the taxpayers, it makes me too mad to delve back in. You can go read the old posts and figure it out for yourself.

Anywhere else, public scrutiny would stop this kind of “most favored developer” status and these funky deals that aren’t open for competition, but in Dayton, this is business as usual.

Keep your head down and carry on.

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8 Responses

  1. J Dziwulski February 2, 2012 / 7:41 pm
    Actually a very good question why they don’t offer the same tax relief deal on the Arcade.  It HAS to be the most high-viz, key vacant property in the city.    Galling, actually….
  2. bobby February 3, 2012 / 11:45 am
      “Then we have the University of Dayton first buying up NCR property” ….UD paid NCR a half a million dollars per acre for the 50 acres between Brown St. and Patterson Blvd. They did this knowing that there were environmental issues that would require remediation. UD received around 11 million ($220,00 per acre) in Clean Ohio Funds to clean up NCR’s mess. In addition, NCR was able to take a five million dollar write off for their gift of their interest in land donated to UD. 
      Then we have the University of Dayton buying the Frank Z building property. The known environmental issues were again, not remediated by the seller, and Clean Ohio “granted” $750,000 for this project. Neither NCR or the Frank Z properties were involved in bankruptcy. 
      The Mendelson’s group received a “grant” of $114,000 from Clean Ohio for a phase II enviornmental assessment of a building that has been in Mendelson’s control for a decade or more. 
      The “read between the lines” reference above piqued the senses when reading this morning’s headline “Medical ed center explored at Sinclair”. Wouldn’t it be coincidental for Sinclair to purchase the four and a half acre Howard paper site from Garrett LLC at their asking price of $1,060,000 for their Medical ed center?  
  3. Aaron Sorrell February 4, 2012 / 12:42 am
     The phrase “timing is everything” is especially important in this discussion.  At the time the Arcade was purchased in 2009, the landbank wasn’t in place.  In fact, the legislation that allowed Montgomery County to establish a county-wide landbank wasn’t approved by the Ohio legislature until 2010.  Had the State legislature allowed Counties such as Montgomery to establish landbanks prior to 2009, there’s a good chance the Arcade would have been a featured property in an article like this much earlier.  Unfortunately, the State didn’t allow counties the size of Montgomery the power to create a landbank until 2010, and by then, the Arcade had already been sold for a substantial price.   
      
    You do bring up a key point of the landbank:  “No auction on these properties”  That is by design.  To limit and hopefully eliminate random speculation of property. There are numerous cases of individuals looking for the quick deal, who buy property at auction, hoping someone else will come along to buy them out.  Surely you’ve seen the negative effects of this in your neighborhood, and understand the desire to limit the speculation. 

    Aaron Sorrell
    Director, Department of Planning and Community Development
     

  4. David Esrati February 4, 2012 / 6:47 am

    @Aaron Sorrell- Welcome and thanks for responding.

    So, because the land bank wasn’t established- you are going to continue to tax the hell out of the arcade, based on some inflated valuation that takes zero account of the situation? While on the other hand, openly hand select- without an RFP or Competitive bid process- hand over a whole bunch of property to a “most favored developer’? I hope you see the bias in this.

    So- don’t call it an auction, but do put out RFPs- and make sure that if you give it to them for nothing- if they turn around a flip it, the taxpayers get some of their money back- esp. if they turn it to sell to someone like Sinclair.

    Yep- I’ve full well seen what happens when foreclosures are done- and auctions happen- and speculators glom onto property. The real question is why are there not requirements for these speculators to bring property to code, or require occupancy?

    Or- better yet, when they buy a home and turn it into a constant crime scene- doesn’t the city start levying fines for excessive visits by safety forces? You will fine me for false burglar alarm calls- but, you don’t fine the house on my block for police visists 3x a week for the last 3 years.

    Nope- I’m not buying your argument. What I see is government picking winners and losers- and doing it with tax dollars. There has to be a better way.

  5. Aaron Sorrell February 4, 2012 / 7:51 am
    David,

    My point about the Arcade, which I should have been more direct, is that had the landbank been allowed at the time, the current owners could have used that tool to acquire and stabilize the property.  Instead, they paid roughly $600,000.00 to pay off the tax obligation of the previous owner.  In my view, that’s money that could have been better spent stabilizing the building.  

    Aaron    

         

  6. David Esrati February 4, 2012 / 9:51 am

    @Aaron, While I agree that money could have been better used to stabilize the arcade- the problem still exists that without some sort of RFP process and evaluation we have the State playing favorites and capriciously awarding tax breaks/giveaways of what was private property. There has to be a process that makes sure that it is fair and equitable- and that the developer is held to a standard.
    This isn’t much different than the foreclosure process- where the state is supporting private business (banks) in taking away private property (homes- often backed with federal guarantees) and then putting them up for auction- where the new owners are released from responsibilities.
    What stops the next logical step of the city doing the same for housing- only keeping them occupants in the house instead? We’ve seen that banks are bad stewards of private residences? Where is the accountability for performance after the giveaway?

  7. Civil Servants Are People, Too February 4, 2012 / 11:45 pm
    Excuse me, but why would the City be required to issue an RFP for private properties that have been vacant for years?   Dayton does not own the properties.   Any one could have applied to the County to put these sites in foreclosure at any time, even prior to the landbank.
     
    The fact that no one has taken them on before now should be evidence enough that the market for such sites is very, very narrow.   Besides, it is better to have someone that knows what he is doing.   There are too many empty buildings purchased by irresponsible and/or ill-informed investors that do nothing for our neighborhoods.
     
     
    Most of the tax breaks are available for the asking to anyone who can meet the requirements under the Ohio Revised Code.   The problem is not favored status, rather it is usually the shortage of qualified people willing to step forward and do these projects.
     
     
     
     
     
     
     
  8. bobby February 5, 2012 / 10:51 am
    Clean Ohio Asistance Fund Policies

    Section 1.01   Eligible applicants for Clean Ohio Assistance Fund grants are townships, municipal corporations,counties, port authorities, and conservancy districts that submit applications for a brownfield located within an eligible area. Eligible applicants may jointly apply for the same project.

    Section 1.02  Non-profit and for profit organizations are eligible Development Partners if they have entered into an agreement with an applicant identified in Policy 1.01.

    Section 1.04  Applicants identified in Policy 1.01 shall be signatories on the assistance fund grant agreement entered into with the Director of Development and these entities. Parties identified in Policy 1.02 may not be signatories to the grant agreement. 

    Section 1.06  Entities that caused or contributed to the contamination at the property are not eligible applicants , nor may they enter into an agreement with a third party to apply on their behalf. All applicants identified in Policy 1.01 and all parties identified in Policy 1.02 must sign a “clean hands” affidavit. 

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