Land Banking Authority

Illinois REALTORS® Oppose Land Banking Authority
Senate Bill 2101/House Bill 1195

Senate Bill 2101 and House Bill 1195 (Sen. Collins/Rep. Yarbrough) seek to enact a new law to allow ALL municipalities to establish a new entity called a Land Bank Authority (LBA). The bills provide for LBAs to engage in an unlimited array of real estate activities, with special powers not available to the private sector, and with no direct accountability to taxpayers. The IAR is strongly opposed to this legislation.

The General Assembly is essentially delegating the power to create LBAs, and the power to determine the scope of their powers, to all of the municipalities of the state. Municipalities could each form their own LBAs, or they could band together and form a regional or even a statewide LBA. The scope, powers, and purpose of the LBA? The makeup of the LBA boards? Accountability and transparency to the taxpayers? Public hearing or referendum requirements? Funding sources? The power to incur debt and issue bonds? Disposition of LBA proceeds and profits? ALL of these decisions are left up to the discretion of municipalities or groups of municipalities in creating an LBA.

Municipalities could set up LBAs with the following powers:

• The power to function much like a private real estate corporation, with the power to buy, sell, maintain, demolish, lease and manage any full or partial interest in real estate.
• The power to acquire any property (residential, farm, commercial, industrial), at any time, by virtually any means (accquisition via eminent domain is unclear), and for any purpose. Again, these LBAs would be out there functioning with no limitation on the purpose of their transactions or the disposition of their liabilities or profits.
• Bids of LBAs at tax sales would have priority over all other bids at tax sales, and would have the power to extinguish outstanding property taxes on property, including all outstanding county, city, consolidated, and school taxes.
• LBAs would have the power to borrow money and issue bonds or notes.
• LBAs would have the power to enter into intergovernmental cooperation agreements for the purpose of acquiring properties outside of their jurisdiction.

We’re not only concerned with this huge delegation of power. We question whether this is a proper function of local government, or one which they are capable of performing well.

We also question whether LBAs are needed. Under their inherent home rule powers, as well as under several state laws that already exist, municipalities have extensive powers with respect to vacant and abandoned property. Many municipalities already have robust abandoned property programs.

For example:

• Under Division 31 of the Municipal Code, all municipalities can clean up, repair, demolish or enclose unsafe and abandoned properties; they have a lien for their costs for doing so; and, they have an expedited lien foreclosure procedure where they can take title to the property in the same proceeding in which the property is declared abandoned;
• Also under Division 31, municipalities can ask a court for an injunction and the appointment of a receiver to maintain, repair, and rehabilitate property that fails to conform to minimum health and safety standards;
• Under the Abandoned Housing Rehabilitation Act, not-for-profits can secure temporary possession of abandoned housing, fix it up for use as low to moderate income housing, and eventually obtain a judicial deed for the property if it is not redeemed by the owner.

This legislation seems to set up LBAs to compete with or undercut not-for-profits that utilize programs like these and the Neighborhood Stabilization Program, a recently enacted federal program.

In addition to this new Land Banking Act, the bills contain several onerous amendatory provisions, such as:

• Granting municipalities undefined and unlimited powers to enact rules, regulations, ordinances, registration fees, and fines regarding “vacant and abandoned” property (doesn’t even define “vacant and abandoned”);
• Allows municipalities to hold lenders and trustees responsible for complying with these rules, and provides for lenders or trustees to enter property without the owner’s permission in order to bring property into compliance;
• Gives municipalities a “super-lien” for clean-up costs on property, which would be superior to all prior liens (including mortgages), except taxes.

Again, given the powers municipalities already have, this is just plain overkill.

The IAR is very concerned about the State, in a noble (but misguided) attempt to act quickly to deal with the foreclosure crisis, enacting an unchecked, unnecessary, and irresponsible grant of power to units of local government, in the hope that those powers will be used wisely, and in the people’s interest.

While we stand ready to help the State – and local governments – to continue to address vacant and abandoned property issues, we think these bills are not good public policy. We respectfully urge a NO vote.

If you have any questions, please fee free to contact Greg St. Aubin, Julie Sullivan, or Neil Malone at 217-529-2600.