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Monday, August 23,2010

The New Tycoon

The Ingham County Land Bank’s quest to make this place a better ... place

by Neal McNamara

This story was updated to remove the reference to the superintendent's house at the School of the Blind as being in Old Town and to delete a statement that the house is "formally known as the Old Town Manor."


On the day Rochelle Rizzi first saw the grand, brick house along Pine Street in Lansing, it was “complete construction zone.” The 6,000-square-foot Colonial Revival house was once the home of the superintendent of the School for the Blind but had been vacant more than a decade. Rizzi was on a quest to find the perfect space for her marketing firm, Rizzi Designs, and when she stepped inside, she knew she had found the right place. “I knew which furniture was going to be in what room,” she remembers. “It just seemed like a great fit.”


She was given a tour on that day last year by developer Gene Townsend, who was renovating the house for the Ingham County Land Bank. Around that same time, Rizzi and her business partner, Sandra Neuman, had won a contest through Inc. Magazine to meet with entrepreneurial guru Norm Brodsky in New York. He advised her that she must move out of her 300-square-foot office and into something bigger and better. This house was it.


Though she had the desire and the advice to move into the building, there was still the issue of purchasing the $225,000 building. Luckily, the Land Bank was much more sympathetic to her cause than, say, an out-of-state multi-national bank.


She met with Mary Ruttan, executive director of the Land Bank, and Ingham County Treasurer Eric Schertzing, who chairs the Land Bank’s executive board. “I told them what we wanted to do, and they loved my ambition and the fact that we would respect that it has a history to it,” she said. “This was their first commercial sale, so I was really proud to be a part of that.”


Rizzi worked out a deal that most banks would probably balk at in the midst of a recession/foreclosure crisis. The Land Bank granted her two years to pay off a $25,000 down payment. The rest of the payments will be made on a land contract — where the buyer forgoes traditional financing and pays the seller in monthly installments and takes care of taxes and insurance.


But the Land Bank benefited, too. It sold its first commercial property, and breathed life into the mostly vacant 130-year-old School for the Blind campus. Now, less than a year after opening, Rizzi Designs has added four employees (bringing it to 15) and the property is back on the tax rolls.


“It's the socio-economic mission that (the Land Bank) has to revitalize people as much as the properties,” she said. “Whether you start with the people or the properties, it's meeting in the middle, it's working to make people appreciate what we have.”


The Land Bank is coming up on its fifth anniversary, and though some of its activities have been highly publicized, the Land Bank’s mission and inner workings might be missed by the general public. Gradually, the Land Bank is forging a reputation as an innovative and successful local public developer, filling in some of the broken teeth on the county’s urban areas and taking hold of properties that might other wise deteriorate in the hands of careless property owners.


The benevolent authoritarian


When asked where Ingham County would be without the Land Bank, Schertzing plays it a bit modest. He says that the recent housing crisis has been so huge (asked if he saw the crisis coming back when the Land Bank was established in 2005, he says, “I don't think there would have been a way to predict” that it would get so bad) the Land Bank has only been a “small response.”


The Land Bank has been able to “rally the troops to some issues,” Schertzing says, like providing foreclosure prevention. But the best thing the Land Bank has been able to do, he supposes, is create a few positive stories out of all of the bad economic news. Take, for example, the old Deluxe Inn south of downtown Lansing. The property, which was in mortgage foreclosure, was a sad den of crime and extreme poverty. Lansing’s Human Services Department swept through after a murder and found residents living in squalor; eventually the department went to court to evict some tenants. Last September, the Land Bank bought it from Business Lenders LLC, the bank that owned it, for $400,000. Just a few weeks ago, the property was turned into a canvas for graffiti artists. Soon it will be demolished after being used as a training ground for firefighters, and Schertzing hopes to see it someday become the site of housing catering to urbanites.


The graffiti project was so successful, Schertzing said, that some people want to preserve pieces or purchase them for their homes.


Another heartwarming Land Bank story: It took a couple of vacant lots in the east Lansing Urbandale neighborhood — properties in a flood plain — and leased them ($1 per year) to two gardening experts. Now the neighborhood, recognized as being in a food desert — residents lack reasonable access to groceries — has an urban garden and access to fresh food.


To the delight of some, the Land Bank was also responsible for the demolition of the old Dollar Nightclub on Michigan Avenue near Frandor.


These examples show the incredible power of the Land Bank. That is, to take an interesting idea and run with it. It does not appear, yet, at least, that the Land Bank is crippled by bureaucracy or politics. If Schertzing and the Land Bank board — which includes Ingham County commissioners Debbie DeLeon, Dale Copedge, Rebecca Bahar-Cook and Deb Nolan — think it’s a good idea to let some graffiti artists paint a shuttered motel, all they have to do is say, “Yeah, go ahead.”


This is in line with the Land Bank’s mission: “Just to make the place better,” Schertzing said.


Blight and delight


The man synonymous with Michigan’s land bank system is Dan Kildee, the former treasurer of Genesee County, briefly a potential 2010 gubernatorial candidate and a co-founder of the nonprofit Center for Community Progress.


Up until 1999, properties that went into tax foreclosure in Michigan hung around for up to seven years. Tax-foreclosed properties are often in bad shape and susceptible at foreclosure auctions to being scooped up by buyers who might just let the properties rot. In 1999, the state Legislature passed a law that allowed counties to take possession of tax-foreclosed properties after just two years. The legislation also allowed tax foreclosures to be done all at once and for the title to pass immediately to the county government. This gave counties control over properties. In 2004, the Legislature created a law that would allow counties to create land banks. Kildee created the state’s first land bank in Genesee County (which followed the Genesee County Land Use Revitalization Council). With a land bank, a county can tear down substandard properties, renovate decent ones and sell them off. (The land bank model existed long before Michigan: St. Louis and Cleveland began land bank programs in the 1970s, followed in the late 1980s and early 1990s by Atlanta and Louisville, Ky.)


Though Kildee and Genesee County were pioneers in land banking in Michigan, that county and its principal city, Flint, are much different from others. Schertzing, whose job as treasurer includes pursuing delinquent property taxes, almost gets nervous when Kildee and Genesee County are mentioned.


“When I'm thinking about Saginaw and Flint and Detroit and Dan and the Genesee model, I had a pretty tough time figuring out how that would apply to Lansing,” he said. The scale of deteriorating properties is smaller in Ingham County. In fact, Schertzing said that at first he was skeptical Ingham County needed a land bank. What tipped him in that direction, though, were the tax-foreclosure auctions.


“It seemed to me that we needed an alternative to just a crass auction that kind of let the bottom feeders into the market that couldn't care less about what happened in the neighborhoods,” he said.


Schertzing put together the state’s second land bank in 2005 — it was a little under the radar, amid a hot Lansing mayoral election — as an alternative to those crass foreclosure auctions. In 2005, the Ingham County Land Bank came into possession of 21 miscellaneous little properties from the city of Lansing (some were just a few feet in size). But in 2006 it got a number of useful properties. One of those was a home at 5926 Laporte Drive in south Lansing. The Land Bank renovated the property, which ended up being its first sale. (However, a recent visit to the property turned up a crew of workers cleaning up what appeared to be a fire inside the house.)


In 2007, at the height of the housing bust, the Land Bank
started buying more mortgage-foreclosed homes. Schertzing estimated that
the Land Bank has about 425 properties in its possession, a mix of
commercial and residential and vacant parcels. Precisely 159 of those
425 properties have a structure. This year, the Land Bank will demolish
or start the demolition process on about 60 homes (20 have come down, 20
more were begun last week). Renovation on 14 homes was recently
completed, and 12 more are under renovation.


The
Ingham County Land Bank has a budget of $6.5 million, derived from
proceeds from property sales, federal stimulus funds and reimbursable
income. Sometimes the Land Bank will establish a Brownfield tax
increment financing (TIF) district on a property. The Brownfield
captures future property taxes and can be borrowed against for
financing; so if the Land Bank wants to tear down a home, it can use the
TIF to borrow money for the costs, then pay it back later with captured
taxes. The Land Bank also has a $5 million line of credit with PNC Bank
(backed by Ingham County). Schertzing estimated that the Land Bank owns
— between vacant properties and renovated houses — about $20 million
worth of assets.


The Land Bank also has the effect of putting properties back on the tax rolls. Schertzing
says they’ve been able to do that with 40 or 50 properties in five
years — but since the Land Bank is so young, that rate could easily grow
as time goes on. (You could say the Land Bank is laying the groundwork
for a nice comeback in property tax revenues.)


The
Land Bank has a staff of eight, including Schertzing and two other
county treasurer employees. Its office (appropriately, in a foreclosed
house) is at 422 Adams, a tiny street between Cedar and Center streets
south of Old Town. A lot of work is contracted, from the upkeep of
properties’ lawns, to general contracting.


Lansing
Developer Gene Townsend has worked as general contractor on several
Land Bank projects. One coup was the rehabilitation of a home at 1039 N.
Chestnut St. into a LEED certified house. LEED — Leadership in Energy
and Environmental Design — is a building standard for “green” houses.


“They
have the leeway to do whatever needs to be done to meet their mission,”
Townsend said. “That's the whole idea of a Land Bank, to use the taxing
power of government in a way that is completely creative.”


Townsend
is in the midst of rehabilitating two other homes for the Land Bank —
both in the Churchill Downs neighborhood in south Lansing — funded by
federal stimulus funds. In partnership with the city of Lansing and the
Michigan State Housing Development Authority, the Land Bank has been a
steward for Neighborhood Stabilization Program funds. Some of that has
gone into tearing down homes, but some to renovations, too.


Townsend
was also chosen by the Land Bank to create a master plan for the
redevelopment of the entire School for the Blind campus. The Land Bank
owns, by Schertzing’s estimate, about one-third (11.5 acres) of the
property; the rest is controlled by the Lansing Housing Commission and
the Mid-Michigan Leadership Academy, which has operated a charter school
at 730 W. Maple St. since 1996, and bought its building from the state
in 2006. The property is essentially an entire college campus smack in
middle of north Lansing and is predominantly abandoned. Such a project
could be the Land Bank’s largest yet.


Condo luck


“I’d like to get a
couple of more things knocked off in REO Town,” responds Schertzing when
asked if the School for the Blind will be the Land Bank’s next
high-profile project.


He’s speaking of the
old Deluxe Inn, at I-496 and Washington Avenue, as well as a project
with developer and environmental consultant Alan Hooper to renovate the
former Ramon’s Restaurant farther south on Washington. Hooper recently
purchased the building from the Land Bank for $116,000.


But
the School for the Blind is on the radar. A couple of years ago, the
Land Bank did a marketing study of the area, and formed a plan to
develop 15 condominiums near Rizzi’s new headquarters. Schertzing
said he would like demolition to begin sometime next year on 10 acres
of former dorms on the west side of the property.


Though
the Land Bank has an ownership interest in the property, it still has
to collaborate with the city of Lansing on the overall design of the
property.


But
things are moving along at the School for the Blind. The Greater Lansing
Housing Coalition is in the process of renovating the former library
building into a “neighborhood empowerment center.” That building —
perhaps yet this year —will be the coalition’s headquarters and contain
city of Lansing and Land Bank offices, plus host early education
classrooms.


“I
think what will happen after the neighborhood empowerment center is open
and recognized as a neighborhood opportunity is there will be more
interest generated in the development of those buildings,” the Housing
Coalition’s executive director, Katherine Draper, said of the
still-abandoned buildings on the property. “There's a lot of ideas, a
lot of players. We have to proceed cautiously because all the people
involved in that development have to agree with what is going to be done
there.”


Another
player (or players) looking to make something out of the School for the
Blind property is Lansing's theater community. Oralya Garza, vice
president of the Lansing Civic Players board, has a vision that two
pieces of the property — the cafeteria and auditorium buildings — would
become a performing arts center. The Lansing Housing Commission owns the
building, but Garza said the commission agreed to let her tour the
buildings this week. She also foresees a visual arts component.


"The
bigger plan is creating an entire arts community on the School for the
Blind property using the existing buildings," Garza said.


Garza
mentioned the fledgling Stormfield Theatre, run by former BoarsHead
artistic director Christine Thatcher, and the award-winning Peppermint
Creek Theater as potential users, in addition to the Civic Players.
Having a home at the School for the Blind, Garza said, would allow the
Civic Players to expand its at-risk youth theater program.


Schertzing said that while he has concerns about how to pay for a theater, “an arts community can work."


"It
comes down to what is necessary to create that place that people want
to live and work and play in. Theater certainly fits that bill,"
Schertzing said.


Garza
came at the arts community idea as a way to serve the surrounding
neighborhoods, teaching young people how to create art in their
backyard.


"It might be pie in the sky, but if we don't try, nothing happens," Garza said.


The
Land Bank has also made an effort to rehabilitate homes in the
neighborhood surrounding the School for the Blind to try and restore the
neighborhood. Schertzing said the Land Bank has renovated six houses
there so far.


The
School for the Blind opened in Lansing around 1880 on the site that was
formerly the Michigan Female College. The school, which had moved from
Flint to Lansing, closed around 1995.


Townsend’s
master plan depicts roughly 70 units of various types of housing,
including a few rentals but mostly condos, some with interiors facing a
park, others over shops. The school’s running track would be preserved
but turned into a mini-nature preserve at its north end with a water
fountain and a blind of trees. The plan also has space for parking,
which Schertzing says anticipates a special use, like a theater.


Small Wonder


The excitement in
Rizzi’s voice is noticeable when she talks about the “grassy knoll” at
the School for the Blind property. Rizzi looks at the area and has a
vision to put a sculpture garden there. And she’s contacted none other
than the School for the Blind’s most famous graduate, Stevie Wonder, to
be a part of it. Rizzi says she’s
working with the Lansing Housing Commission to acquire the knoll and is
putting out an request for proposals for artists to submit ideas for the
sculpture garden.


Last
month, Rizzi Designs was hired by the Land Bank to be its marketing
department. Rizzi will redesign the website and do marketing outreach
for the Land Bank. The slogan it has come up with is, “Create (blank).”
In the “blank” is space for the words “place, community, opportunity.”


“They're
creative in renovating, but also how to solve problems,” she says.
“They really truly want to make Ingham County bigger and better.”

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