ACTION REQUESTED:
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Communication from the City Manager and Director of Community Development to RECEIVE and FILE a REPORT BACK Related to the City of Peoria Land Bank and Purchasing Properties from the Peoria County TRUSTEE AUCTION.
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BACKGROUND: At the City Council meeting on May 10th, Councilman John Kelly asked for a report back about the possibility of the City of Peoria/Land Bank purchasing all properties located in the City of Peoria that are available at the County Trustee Tax Auction. Since that time, staff has met with Councilman Kelly and two local landlords to discuss this further. Currently, staff does not recommend purchasing all the properties for the County Trustee Auction, however, City staff wants to provide an update on the Land Bank and allow for future possible direction.
Land Bank History
The City of Peoria Land Bank was created in 2021 to provide a more direct and calculated approach to address blight in our community, boost access to affordable housing, and help stabilize the taxing base. It has focused on older neighborhoods that are losing value and suffer from high unpaid tax burden and property abandonment. It is the only land bank in Illinois that focuses solely within a city and is focused on outcomes in the areas that have seen the greatest disinvestment. The Land Bank has taken a strategic approach selecting areas of greatest need and using the available tools to return properties to good use. It seeks to provide new strategies for growth and investment in the city.
Land Bank Responsibilities
As a Division of the Community Development Department, the Land Bank has taken the lead in finding and addressing those vacant and abandoned properties, demolishing structures when necessary, and collecting larger land masses for future redevelopment. Abandoned properties plague our older neighborhoods. When a property has a heavy delinquent tax burden, clearing the delinquent taxes is a major obstacle to transferring the property for future productive use. The Land Bank can play a part in transitioning a property with that tax burden into a useful property once more. When a property meets the abandonment criteria, the Land Bank can step in, take ownership of the property, and potentially save it from the wrecking ball. In other cases, the only resolution for a property is demolition. Demolishing unsafe structures reduces the need for fire and police resources on that property and other properties within the neighborhood.
In May 2022, the Land Bank launched the Down Payment Assistance Program that reinvests in our older neighborhoods by promoting homeownership. It provides up to $5,000 of assistance to homebuyers within the Qualified Census Tracts in the city. These areas were hurt the most by the COVID-19 pandemic and investing in homeownership will create stronger and more vibrant neighborhoods.
Council approved $4 Million in American Rescue Plan Act funds for demolition purposes in 2022-2023. Additionally, the City was recently $1 million in federal funding to demolish Old Harrison School awarded through U.S. Congresswoman Bustos’ efforts. Two million dollars are dedicated to the removal of up to 200 blighted structures. This year 35 vacant structures throughout the city have been demolished, bettering the those blocks and making our neighborhoods safer.
Peoria County Trustee Land Holdings and Auction
Due to market and population shifts and the aging, poorly maintained housing in some areas, the Peoria County Trustee has become a large property owner within the city. The Trustee process is managed by the County through a third-party agent where properties with delinquent property taxes are transferred to the County after the taxes are left unpaid for three (3) years.
The disposition strategy for County land holdings is based around creating the highest return for the taxing bodies through an auction system. It is designed this way to ensure that the taxing bodies losing out on the property tax revenue are compensated through the transfer to a new owner. In theory, the auction proceeds for a tax delinquent parcel are eventually dispersed to the taxing bodies and the parcel is returned to private ownership. The properties are offered at a minimum bid of $817.00 and often result in a rather low purchase price for potentially dangerous conditions on a property. The Trustee does not vet, certify, or check that bidders will address any existing conditions or code violations after transfer. The lack of certifying or checking purchasers has led to corporations obtaining properties in bulk and selling them to out-of-state buyers that do not have the ability to address the decaying conditions.
The auction system intends to return a property to private use, but often the City becomes responsible for ongoing maintenance when the owner fails to care for the property. These parcels frequently sit abandoned and untouched for years until the City obtains a demolition order and removes the structure. The City incurs costs during this period for maintenance, any utilization of fire and police services, and the property remains a blighting influence.
The County Trustee system and process are very similar in every county in the State of Illinois. The current system may prove useful in stronger markets, but it does not work for distressed neighborhoods with market struggles.
A property that sells for $817.00 at auction is likely a property that needs demolished or would need substantial financial investment. In a distressed private market, like some of our older neighborhoods, substantial financial investment does not occur as there would be little or no return on the investment even over many years. Instead, the property is purchased for $817.00, minimal cosmetic repairs are made to possibly attract a tenant, and life safety and structural issues are never addressed. New owners of auction properties often lack the financial ability to invest to bring the property up to code and the City is forced to fine the owner and pursue demolition. This often leads the new owner to abandon the property and the process begins again when property taxes go unpaid.
City Land Bank and Peoria County Trustee Collaboration
This cycle of abandonment, delinquent taxes, and tax buyers has created ongoing issues for the City of Peoria. Most of the properties demolished by the City of Peoria within the last fifteen years have been involved in the County Trustee Auction.
It is important to note that this is not a problem unique to the City of Peoria. Many cities in Illinois have similar experiences with the tax auction process. A large part of the process is created through state statute and out of the local control of Cities and Counties.
Due to the creation of the Land Bank and the positive working relationship with the County and County Treasurer, the City of Peoria is in a better situation to handle these issues over the last few years. The City Land Bank Ordinance appointed the Peoria County Treasurer to the Land Bank Board of Directors. Treasurer Nicole Bjerke has been a great asset to the Land Bank. Her support of the Land Bank’s goals has allowed for a collaborative, community-based approach, reducing the unwanted outcomes and allowing the City to make decisions on transferring land to new owners.
Since the adoption of the Land Bank, the County, through the Trustee, has allowed for the City to obtain parcels, regardless of improvements, for $450.00. Last year, the City was able to request 107 parcels, including 37 structures from the auction, to determine the potential for rehabilitation or demolition. After the auction, the Land Bank purchased an additional 27 parcels using the same formula from the Trustee, bringing the number of total parcels purchased to 134. These purchases allow the City to determine the best course for the properties and avoids the long-wait times associated with pursuing a demolition case. There is no statutory requirement that the County or County Treasurer allows the Land Bank to do this; they do it to improve our community.
City Staff Recommendations
City staff does not recommend purchasing all the Peoria County Trustee parcels going forward for the following reasons:
- The County Treasurer has allowed the City of Peoria to purchase properties of interest over the last year, allowing the City to be strategic with the decisions being made.
- Purchasing every property creates a situation where the City would be responsible for parcels that have no ability to be developed in the future. A large portion of the County Trustee’s inventory are vacant lots with little to no potential for redevelopment. Purchasing these properties adds additional liability to the City going forward.
- Purchasing all the properties owned by the Peoria County Trustee would cost the City of Peoria about $310,000.
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Properties Purchased From Trustee in 2021 for Land Bank |
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Current Trustee Lots and Cost to Purchase All |
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Potential Acquisition by Trustee Tax Deed in 2022 |
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Parcels Purchased |
Cost |
Total Cost |
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Total Lots |
Cost |
Total Cost |
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Total Lots* |
Cost |
Total Cost |
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134 |
$ 450.00 |
$ 60,300.00 |
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470 |
$ 450.00 |
$ 211,500.00 |
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158 |
$ 450.00 |
$ 71,100.00 |
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* As of 5/12/2022, 220 parcels remained unredeemed, and risk being transferred to the Trustee. The number could be reduced if the outstanding taxes are paid before their expiration date of 6/1/2022 |
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City staff does recommend:
1. Continue working with the County to purchase properties that have strategic value to the City of Peoria before they go to auction.
2. Continue working with the County to purchase properties that need to be demolished before they go to auction so they are not sold for the minimum bid.
3. Encourage the County to vet potential buyers at the auction to ensure properties are purchased by those with the financial resources to correct any code violations and maintain the property in the future.
4. Take a more aggressive approach with taking properties to Circuit Court to declare them abandoned before they are sold at the tax auction. In the past, the State of Illinois had an abandoned property statue that allowed a property to be declared abandoned and provided a path for municipalities to pursue ownership if it met the following criteria:
(1) the property has been tax delinquent for 2 or more years or bills for water service for the property have been outstanding for 2 or more years;
(2) the property is unoccupied by persons legally in possession; and
(3) the property must contain a dangerous or unsafe building for reasons specified in the petition.
Last year, this statue was changed. A property can now be declared abandoned if the following three things apply:
(1) the property has been tax delinquent for 2 or more years or bills for water service for the property have been outstanding for 2 or more years;
(2) the property is unoccupied by persons legally in possession; and
(3) the property's condition impairs public health, safety, or welfare for reasons specified in the petition.
Starting January 1, 2022, municipalities will now only need to prove that the property “impairs public health, safety or welfare” which is a nuisance standard far short of demolition. The change in the statute should improve the ability of the City of Peoria Land Bank to obtain abandoned properties before they need to be demolished. The City has used the previous statute many times in the past and has been able to save some properties from demolition. Focusing more attention on this strategy going forward could result in fewer demolitions and keep more structures on the tax rolls.
5. Engage in a discussion with other taxing bodies on future collaboration on vacant properties. Often, property owners of vacant homes would like to turn over their property to the City because they have several years of delinquent property tax and no ability to pay. In some cases, the home may be salvageable, but the value of the taxes makes further investment into the property not appealing. The process to obtain the property through the courts can be successful in clearing the title from delinquent taxes, but the home will remain unoccupied, not maintained, may become a danger to the neighborhood, and eventually may need to be demolished. A parcel with a house that can be saved and transferred to the City is another accessible home for the community. Developing a novel approach to this issue with the taxing bodies could keep a property from being razed and return it to the tax roll with more value than a vacant lot.
6. Provide incentives to bring vacant properties acquired by the Land Bank up to code. Recently, the City Land Bank approved a pilot project grant in the amount of the demolition cost to the owner of a previously City-owned property within the Randolph-Roanoke Historic District. The new owner had begun extensive rehabilitation work with a budget close to $150,000, but there was little room in the budget to ensure the value of the completed remodel would meet the market value of the home. If the house were not transferred for the rehabilitation work, it would have been demolished at the City’s expense. The Land Bank Board agreed that giving the owner the value of the demolition is a better spend, ensuring a salvageable home reaches complete rehabilitation. The pilot project will return a property to the tax rolls and help stabilize the neighborhood that once had two abandoned properties on the same block. Broadening this project into a program or using other approaches to divert a property away from demolition will provide new housing opportunities within the city, grow the tax base, and create safer, stronger neighborhoods.
FINANCIAL IMPACT: NA
NEIGHBORHOOD CONCERNS: Vacant and Abandoned property reduce property values and become attractive nuisances cause major concerns for neighborhoods.
IMPACT IF APPROVED: City will continue to move forward based on recommend path.
IMPACT IF DENIED: City will continue to explore other opportunities to improve the conditions of our neighborhood.
ALTERNATIVES: NA
EEO CERTIFICATION NUMBER: NA
WHICH OF THE GOALS IDENTIFIED IN THE COUNCIL’S 2017 - 2032 STRATEGIC PLAN DOES THIS RECOMMENDATION ADVANCE?
1. Beautiful Peoria
2. Grow Peoria
3. Choose an item.
WHICH CRITICAL SUCCESS FACTOR(S) FROM THE COMPREHENSIVE PLAN DOES THIS RECOMMENDATION IMPLEMENT?
1. Reinvest in neighborhoods.
2. Have an efficient government.
3. Reduce crime.
DEPARTMENT: Community Development