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EDITORIAL: Learn right lessons from scandal

IBJ Staff
June 1, 2013
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IBJ Editorial

Predictably, just days after U.S. Attorney Joe Hogsett’s May 21 announcement that five people had been indicted in an alleged kickback scheme involving Indy Land Bank, the General Assembly announced it would make land-bank regulation the topic of a summer study committee.

Government officials should be trying to draw lessons from the scandal, of course. But we fear lawmakers and other government officials will mistakenly conclude that land banks are an inherently flawed weapon to combat urban blight.

Nothing could be further from the truth, and reaching that conclusion would have devastating consequences for Marion County, where land banks could become a powerful tool to put back into productive use an estimated 15,000 vacant and abandoned properties.

Many big cities have used municipal and not-for-profit land banks to handle the disposition of vacant and tax-delinquent homes. Indy Land Bank, the municipal agency at the center of the kickback scandal, has been operating since 2007, albeit with a small budget and a low profile.

Criminal investigators say its director, Reginald Walton, and colleague John Hawkins enriched themselves by exploiting a loophole that allowed low-priced sales to charitable organizations without public bids.

The indictment alleges the pair funneled properties to not-for-profits, which then flipped the real estate to private investors at a hefty profit. The investors then paid kickbacks to Walton and Hawkins, investigators allege.

News of the scandal broke at a less-than-ideal time for Land Bank of Indianapolis, a similarly named not-for-profit created two years ago that appointed its first executive director, Katy Brett, in March.

“I think it is unfortunate that the term land banking now carries a connotation in our city that it doesn’t carry elsewhere,” Brett says. But she said she hopes the sudden public attention helps spark a discussion about using land banks to revitalize neighborhoods.

Transparency and accountability must be part of land bank operations, she said. But entrepreneurial approaches also are important. Governmental entities aren’t always best positioned to pursue those approaches, she said, because of bidding requirements that can leave properties in the hands of out-of-state speculators who have little interest in adding to the community’s strength through revitalization.

“There is an element of needing to evaluate who is buying property, and what they want to do with it,” she said. From a community’s standpoint, the best purchaser is not always the highest bidder.

It’s complex work, even without the added challenge of confronting fallout from the Indy Land Bank scheme. While Land Bank of Indianapolis might rebrand in the wake of that scandal, it’s not shirking from the challenge.

“We can’t let the actions of a few hamstring us,” Brett said. “Land banking is a respected and viable tool that counties across the country use.”•

Send comments on this editorial to ibjedit@ibj.com.

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  • TY to IBJ
    Thank you IBJ for quickly adding some sobriety to the public frenzy regarding land banks, particularly here at home. "Don't throw the baby out with the bathwater" definitely describes this issue at present. IMHO this program presents a win/win opportunity; the city unloads eyesore properties while regaining property tax revenue by selling to wannabe homeowners unable to afford higher priced homes or to rental owners. Couldn't the Land Bank of Indianapolis pair with the city to prepare a fair and equitable program based on stringent bidding guidelines that is fair and equitable for all parties? Land Banks remind me of homesteading 200 years ago and look how that movement spurred the growth of our country!

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