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Land bank bill likely heading for study committee

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An ambitious bill aimed at reducing abandoned housing has been watered down and is likely heading for a summer study committee.

Rep. Ed Clere, R-New Albany, said his bill on land banks may have tried to tackle too many issues involving abandoned housing, including Indiana’s tax-sale process.

It’s such a complicated issue with so many stakeholders we may have to break it down into even smaller bites,” Clere said.

The bill was important to Indianapolis Mayor Greg Ballard’s administration, which already uses a land bank, and the legislation was supported by the Indiana Association for Community and Economic Development. Clere said he also had support from Habitat for Humanity and the Indiana Association of Realtors.

But the bill faced opposition from the Association of Indiana Counties, which said it would have diverted revenue away from public uses and given land banks the ability to pick and choose the best real estate, saddling taxpayers with truly blighted properties.

“Rather than let the bill die, I decided to amend it to provide for study of the issue,” Clere said. House Bill 1317 cleared the lower chamber before last month’s deadline and is before the Senate Committee on Local Government.

The original bill gave municipalities explicit authority to set up land banks, and it provided for tax-delinquent properties to be transferred from a county to a land bank at no cost.

“Who gets to make the call on what properties go to the land bank?” asked Andrew Berger, director of government affairs for the Association of Indiana Counties. “Our position is, it needs to be done by the county officials, not an unelected, unaccountable not-for-profit board.”

Berger said the Indy Land Bank, which sold 154 properties to a not-for-profit organization serving as a straw buyer for real estate investors, is a prime example of why land banks’ powers should not be expanded. The 2011 deal prompted the land bank, operated by the Department of Metropolitan Development, and Marion County Treasurer Claudia Fuentes to halt bulk sales to not-for-profits.

Indianapolis has roughly 15,000 abandoned and vacant houses and lots. The Indy Land Bank holds 1,200 surplus properties, thanks to a 2006 law that allows land banks to be set up by counties.

The bill also made several changes to Indiana's process of auctioning tax-delinquent property. Under the current system, investors who step in to pay back taxes receive a tax-sale certificate that allows them to collect interest from the property owners. Clere says that redemption process is a problem because it leaves properties in limbo for six to 12 months. He hoped to address it in part by requiring counties to notify lenders when a property is slated for tax sale. That would give banks an opportunity to pay the back taxes before an auction.

But counties oppose mandatory notification of lenders, which would add title-search costs. A court case on the notification-requirement issue is currently before the Indiana Supreme Court.

"This is a titanic battle between the association of counties and banks," Clere said.

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