Testimony - Pennsylvania House Urban Affairs Committee

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1 Testimony - Pennsylvania House Urban Affairs Committee November 14, 2017 Good morning Chairman Keller and Democratic Chairman O'Brien and Members of the House Urban Affairs Committee. My name is Herbert Wetzel and I currently serve as Director of Housing and Community Development for Philadelphia's City Council. Prior to holding this position, I was Executive Director of the Philadelphia Redevelopment Authority. I am one of the original members of the Board of the Philadelphia Land Bank and currently serve on Philadelphia's Housing Trust Fund Advisory Board and am Vice-Chair of the Philadelphia Housing Authority's Board of Commissioners. Before I get into my testimony, I want to acknowledge and publicly thank Representative John Taylor for his tremendous work on behalf of our City and our Commonwealth. He has shepherded a package of blight fighting tools that have served us well - Housing Trust Funds, Conservatorship and Land Banks. These are all effective tools local governments and neighborhood groups can use to fight blight, provide affordable housing and rebuild communities. My experience acquiring properties from various public entities in Philadelphia goes back to the mid-1970s, when a group of residents in Philadelphia's Germantown neighborhood formed a community development corporation to acquire vacant, abandoned houses to rehabilitate and sell. In our first year of operation, 1976, we acquired, rehabilitated and sold 16 homes. Over the years our skills and abilities grew, to the point that we began to undertake large and more sophisticated projects. It is then that we began to experience first-hand the immensely frustrating problem of assembling sites for larger scale projects. Here's just one example: There was a large assemblage of developable properties located at the corner of Germantown Avenue and Wister Street, but unfortunately, they were owned by no less than three different public entities. Part was owned by the City of Philadelphia - Department of Public Property (acquired by the City at Sheriff's Sale), another part by the Philadelphia Housing Development Corporation (a quasi-public non-profit created by the City) and another part by the City's Redevelopment Authority. The site was large enough to accommodate a small strip shopping center which would bring needed goods and services, as well as jobs to the community. We received preliminary approval from all three public entities to proceed to develop plans and financing for the project with a commitment from each that they would transfer the land once the project proved to be financially feasible. We proceeded and were able to design the center, secure Rite-Aid as our anchor tenant and put all the financing together. We had a drop-dead 1

2 construction start date from our financing entities and Rite-Aid - and that's when our nightmare began. We had to deal with three separate public entities, each with its own set of requirements and bureaucratic processes to dispose of its properties. There was no coordination among these entities and no sense of urgency. With only a few days remaining to take title to the land or lose our financing and anchor tenant, then State Representative David P. Richardson intervened with the Mayor, and only by the Mayor's intervention was title passed on time and the project able to move forward. That was the world that we lived in up to the creation of the Philadelphia Land Bank. A world full of frustration, costly delay, and countless lost opportunities. So today, I want to start with the good news. We are working diligently to transfer to the Land Bank all surplus properties owned by the City, and all properties owned by the Philadelphia Housing Development Corporation (PHDC), and - thanks to an amendment we requested and that was included in the Land Bank legislation - all surplus properties owned by the Philadelphia Redevelopment Authority (PRA) that were acquired prior to the effective date of the Land Bank legislation. The goal is to consolidate all surplus publicly owned land into the Land Bank, which will then serve as the City's land disposition agency with a single set of policies and procedures. To date the City has transferred 1,230 parcels, PHDC has transferred 775 parcels and the PRA has transferred 297 parcels. As a result, the Land Bank now has an inventory of 2,302 parcels. This may sound like a straightforward task, but it is not. In fact, it has been an arduous task to clear title to these properties, many of which were acquired 40 and 50 years ago. The work will continue until all 3,000 plus surplus properties are transferred from these entities to the Land Bank. This inventory is exciting to contemplate. Now to the not so good news. Next month will be the fourth anniversary of the Philadelphia Land Bank. To date, using the special powers granted under the General Assembly's historic Land Bank legislation, the Philadelphia Land Bank has acquired - other than by transfer - only 58 properties. With over 10,700 vacant tax delinquent parcels in Philadelphia, this represents a little over one property per month since the inception of the Land Bank in Philadelphia in In the infamous words of former Eagles Head Coach Andy Reid, "We gotta do a better job." Why so few? There are several factors, but from my perspective, one stands out: To date, there has been too great an emphasis within City government on the short-term gain that comes from disposing of vacant tax delinquent parcels at Sheriff's sale. This approach results in the collection of payments for those properties, but it comes at the high price of depriving the Land Bank of an opportunity to obtain, consolidate, develop and sell those properties in a well-planned manner. How can we do a better job? Moving forward requires the adoption of a policy framework that maximizes the benefit of creating the Land Bank as a tool for rebuilding neighborhoods as the primary emphasis and acknowledges that the collection of past taxes is secondary to this mission. 2

3 Absent such a framework we will miss many opportunities to assemble large parcels for redevelopment, to develop small parcels for workforce housing, and to establish shared revenue opportunities (shared by the City and the Land Bank) for those properties that the Land Bank sells for fair market value. Right now, short term revenue collection reigns supreme over the longterm benefits of putting properties into the Land Bank, and that's a mistake in my view. As you know, the lack of sufficient workforce housing is a growing crisis. The Land Bank could and should be part of the solution. But by prioritizing short-term revenue collection over Land Bank acquisitions, we are missing opportunities to assemble larger parcels consisting of vacant tax delinquent properties, publicly owned properties and smaller properties in gentrifying neighborhoods - parcels that could be used to develop workforce housing amid houses now selling for $300 and $400 thousand. I will briefly explain what I mean by assemblage. Attached to my testimony is data on three blocks located at 39th and Folsom Streets in West Philadelphia. The yellow and pink parcels are in the existing public inventory. The gray areas are vacant, tax delinquent parcels. There are 35 publicly owned parcels and 20 vacant tax delinquent parcels that if combined would yield a 55- parcel site that could be more effectively marketed to developers. I am not exaggerating when I say that there are thousands of opportunities like this throughout Philadelphia. In fact, we know that there are 3,258 vacant tax delinquent parcels that are adjacent to existing publicly owned parcels and that could be combined to create marketable assemblages like the one we just reviewed. There are reasons why Land Banks are superior to tax foreclosure and why they yield more benefit to local government in the long term. This quote from an article in the Detroit Free Press says it all: "When the Grand Rapids area land bank sells a piece of property, the new owners take out building permits 73% more often than those who buy properties at traditional taxforeclosure auctions, according to the statistics from the Kent County Land Bank Authority. That suggests parcels handled by the land bank are more often being put to some sort of productive use than those sold at auction. Also, the rate of blighted buildings cropping up on properties handled by the land bank has decreased by 70% compared to those sold through the tax auction." In 2016, the Center for Community Progress issued a report titled, "Catch or Release." It was a long-term study of Tax Foreclosure Conveyance in Flint, Michigan between 2008 and The study found that 57% of properties that were foreclosed by the Genesee County Treasurer and sold at public auctions were foreclosed again by the Genesee County Treasurer in no more than seven years. 3

4 We do not know the scale of this problem in Philadelphia, but attached to this testimony is a spreadsheet that lists vacant lots purchased by entities between 2012 and 2016 which are now on the City's delinquent property tax schedule. Tax foreclosure and lien sales are a crap shoot. You don't know who is going to buy them and if they are going to be responsible owners. The research and data on Land Banks prove: That Land Bank dispositions are the only way we can have some guarantee that ownership is transferred to responsible buyers with the means to develop the properties. That Land Banks have proven to be superior to tax lien auctions in putting properties back on the tax rolls and keeping them there. I thank you for the opportunity to testify about the Philadelphia Land Bank story. Most of all I thank you for giving us this law, this crucial tool, to fight the blight created by vacant, tax delinquent properties throughout our Commonwealth. 4

5 3gth and Folsom: Ownership and Delinquency Legend us Bank Liens q> 39th and Folsom Assemblage Potentral ~~ F-j _~ p,\( j'.'.i\i._,\ 1'11:1111 SI -~ ~ ~- Q\tli \ ;- l <C ~:; '.. n ~ Public Ownership Phila. Housinr;i Authority Vacant Tax Delinouent Parcel Tvpe Count Public Ownership 21 Phila. Housing Authority 14 Vacant Tax Delinquent 20 Grand Total SS \,-,., ' -rt ' i,... J :?: '... ~.,.. "i«ll., I,] r.n \ nif011\ ~-11 1 ~J\:..:. ~. xn. ') l \- (;\ ::. :1 i ~~) ~ ij

6 3gth and Folsom: Consolidated Parcels with Approx. Square Footage Legend 39th and Folsom Assemblage ~~ b 3w '-;1 ~J Jf()\\I\; '-.;.- _ t.,..., \_lrcn.1n '.':)'\ -''" t~ro\ Jn S1 ~.. 2 ) -'' 1.'oflJl, ~ ;>1.11 'l S41.7k 3... z_,o."f""' ~~ '!l t L. C -:J... ' ~~?.'~'' 1~ :r:i -~~ 111 ~:~ 5 (n 'fl - - r-o\~.:.nn' St \: o1.~on1 c~ \ '\ f-c1\o,on1 S\

7 Philadelphia Properties Purchased At Sheriff's Sale That Are Deliquent Again legal name CALC_TOTAL!ADDRESS IOPA I Cnt_leg~ Sher_Sa! Sale_Date CTDS PROPERTY LLC $ S PAXON ST Y 17/30/2014 CTDS PROPERTY LLC $1, S 52ND ST! jy 1 2/3/2014 CTDS PROPERTY LLC $1, CHANCELLOR ST :y!5/10/2014 CTDS PROPERTY LLC $ S 52ND ST y 16/10/2014 CTDS PROPERTY LLC $1, SPRUCE ST y 5/30/2014 CTDS PROPERTY LLC $ PINE ST y 4/13/2014 CTDS PROPERTY LLC $1, N 38TH ST y 7/30/2014 CTDS PROPERTY LLC $ BROWN ST y 15/10/2014 CTDS PROPERTY LLC $ BROWN ST y 5/3/2014 CTDS PROPERTY LLC $ WYALUSING AVE y 7/5/2014 CTDS PROPERTY LLC $ POPLAR ST y 1/29/2014 CTDS PROPERTY LLC $ W GIRARD AVE y 5/30/2014 CTDS PROPERTY LLC $ PARKSIDE AVE y 6/29/2014 CTDS PROPERTY LLC $ WORTH ST y 3/29/2014 CTDS PROPERTY LLC $ FAIRMOUNT AVE y 7/5/2014 CTDS PROPERTY LLC $ ASPEN ST y 6/10/2014 CTDS PROPERTY LLC $1, BROWN ST y 5/10/2014 CTDS PROPERTY LLC $ PENNSGROVE ST y 1/29/2014 CTDS PROPERTY LLC $ WYALUSING AVE y 5/30/2014 CTDS PROPERTY LLC $ CAMBRIDGE ST y 7/30/2014 CTDS PROPERTY LLC $ CAMBRIDGE ST Iv 2/3/2014 CTDS PROPERTY LLC $ CAMBRIDGE ST ly 2/3/2014 CTDS PROPERTY LLC $ S 50TH ST y 4/13/2014 CTDS PROPERTY LLC $1, UPLAND ST y 5/14/2014 LOL LLC $ N MARSHALL ST y 8/13/2015 LOL LLC $ E TULPEHOCKEN ST ! 14 y 10/20/2015 LOL LLC $ LANSDOWNE AVE ly 7/8/2015 LOL LLC $ HAVERFORD AVE y 11/19/2015 LOL LLC $ GRANSBACK ST y 5/27/2015 LOL LLC $ E SEYMOUR ST y 9/30/2015 LOL LLC $ E CHELTEN AVE y 6/22/2015 LOL LLC $ W SEYMOUR ST y 11/5/2015 LOL LLC $ W LEHIGH AVE y 11/16/2015

8 Philadelphia Properties Purchased At Sheriff's Sale That Are Deliquent Again legal name CALC_TOTAL I ADDRESS iopa Cnt_legci Sher _Sa! Sale_Date. LOL LLC $ HORROCKS ST : IV!10/1/2015 LOL LLC $ E BIRCH ST IY!7/8/2015 LOL LLC $ ESTELLA ST Iv 5/27/2015 LOL LLC $ N BAMBREY ST y 3/23/2015 LOL LLC $ CEMETERY AVE y 11/16/2015 LOTS FOR SALE LLC $ N MARVINE ST y 1/13/2015 LOTS FOR SALE LLC $ W BERKS ST y 11/25/2014 LOTS FOR SALE LLC $ E STAFFORD ST y 4/8/2014 LOTS FOR SALE LLC $3, W POMONA ST y 12/5/2013 LOTS FOR SALE LLC $ N 54TH ST y 10/25/2014 LOTS FOR SALE LLC $ N 20TH ST y 8/12/2014 LOTS FOR SALE LLC $1, N BEECHWOOD ST y 10/13/2014 LOTS FOR SALE LLC $ E LIPPINCOTI ST y 4/11/2014 LOTS FOR SALE LLC $ N HUTCHINSON ST y 9/12/2014 LOTS FOR SALE LLC $ W WISHART ST y 8/12/2014 LOTS FOR SALE LLC $ N PERCY ST y 2/12/2014 LOTS FOR SALE LLC $ N loth ST y 1/31/2014 LOTS FOR SALE LLC $ KERBAUGH ST y 4/15/2014 MAROM 2015 LLC $ PENTRIDGE ST y 1/7/2016 MAROM 2015 LLC $ S VOGDES ST y 2/25/2016 MAROM 2015 LLC $917.09!1718 S FRAZIER ST y 12/18/2015 MAROM 2015 LLC $ DELANCEY ST y 2/3/2016 MAROM 2015 LLC $ WINDSOR ST y 12/11/2015 MAROM 2015 LLC $ TH AVE y 2/25/2016 MAROM 2015 LLC $1, MAPLE LA y 1/5/2016 MAROM 2015 LLC $1, W SHELDON ST Y* 8/7/2015 MBEN REAL ESTATE INC $ PEMBERTON ST y 10/25/2014 MBEN REAL ESTATE INC $1, S ALLISON ST y 7/23/2014 MBEN REAL-ESTATE INC $ WHITBY AVE y 7/5/2014 MBEN REAL ESTATE INC $ TRINITY ST ,y 8/6/2014 MBEN REAL ESTATE INC $4, MECHANIC ST y 1/8/2015 MBEN REAL ESTATE INC $ DELANCEY ST y, 10/31/2014 MBEN REAL ESTATE INC $2, OSAGE AVE Y 3/24/2014

9 Philadelphia Properties Purchased At Sheriff's Sale That Are Deliquent Again legal name CALC_TOTAL 1 ADDRESS OPA! Cnt_leg~ Sher_Sa Sale_Date MBEN REAL ESTATE INC $ HAVERFORD AVE :is iv 10/31/2014 MBEN REAL ESTATE INC $2, BLAKEMORE ST !Y 10/23/2013 MBEN REAL ESTATE INC $1, W LOGAN ST j1s y 3/24/2015 MBEN REAL ESTATE INC $1, W RUSCOMB ST iv 4/9/2015 I MBEN REAL ESTATE INC $3, LANSDOWNE AVE y 10/8/2014 MBEN REAL ESTATE INC $ S ALDEN ST j18 y 6/22/2015 MBEN REAL ESTATE INC $4, CHESTER AVE y 3/12/2014 MBEN REAL ESTATE INC $1, S DEWEY ST y 3/12/2014 MBEN REALTY MANAGEMENT LLC $3, S ALDEN ST Y 6/6/2012 MBEN REALTY MANAGEMENT LLC $2, RENO ST Iv 7/31/2012