THE PREVENTION, MANAGEMENT, AND RE-USE

THE PREVENTION, MANAGEMENT, AND RE-USE OF JEFFERSON COUNTY S TAX DELINQUENT PROPERTY Prepared by: Mary Elizabeth Evans Master in Public Policy, 2005 John F. Kennedy School of Government, Harvard University Faculty Advisors: Nicolas P. Retsinas and William C. Apgar Joint Center for Housing Studies Harvard University April 5, 2005

ACKNOWLEDGEMENTS The research contained in this report would not have been possible without the generosity of community leaders, lawyers, policy experts and staff of the State of Alabama, Jefferson County, and the City of Birmingham. I am indebted to the time and expertise that they shared with me as I attempted to master the legal and administrative challenges posed by current systems and policies. I would especially like to thank Chris Retan, the Executive Director of Aletheia House, who has been a mentor for me throughout the research and writing process. This report would not been possible without the assistance of Jim Stanley, Assistant Attorney for the City of Birmingham, who so graciously shared his expertise and his passion for finding methods of more effectively bringing tax delinquent property back into productive use. In addition, I want to thank Nicolas Retsinas and William Apgar, my advisors who provided regular guidance, resources, and encouragement which have led to this final report. i

TABLE OF CONTENTS Executive Summary............................................. 1 Introduction................................................... 3 The Problem.................................................. 3 The Question................................................. 3 Methodology................................................. 3 Definitions................................................... 5 Background................................................... 6 Causes of Abandonment and Tax Delinquency....................... 6 Impact of Abandoned and Tax Delinquent Property.................... 7 Opportunity for Redevelopment................................... 8 Analysis of Market Conditions in Jefferson County.................... 9 Tax Delinquent Property and Tax Foreclosure..................... 11 A Picture of Jefferson County s Tax Delinquent Property.............. 11 The Life of a Tax Delinquent Property............................. 13 Time for Tax Foreclosure Reform................................. 16 Prevention, Management and Re-Use............................. 19 Prevention of Delinquency and Abandonment....................... 19 Management of Abandoned and Tax Delinquent Property.............. 21 Re-use of Abandoned and Tax Delinquent Property................... 24 Recommendations............................................ 26 Recommendations for the State of Alabama...................... 26 Recommendations for the City of Birmingham....................... 31 Recommendations for Jefferson County............................ 35 Appendices.................................................. 38 Appendix A: Case Studies....................................... 38 Appendix B: Geographic Concentration of Tax Delinquent Property..... 47 Appendix C: Alabama s Legal Procedure for Acquiring and Clearing Title to Tax Delinquent Property..................... 49 Appendix D: Tax Sale and Sold to State Property Data................. 55 Appendix E: Statutory Redemption Periods, by State.................. 57 Appendix F: City of Birmingham Condemnation and Demolition Documents.................................... 58 Resources..................................................... 61 ii

Figures and Tables Figure 1: Properties that Contribute to Blight Figure 2: Population Change, 1960-2000 Figure 3: Average Property Value by Year of Sale Figure 4: Example of Property Acquisition through Tax Foreclosure Figure 5: Tax Sale, Redemption, and Clearing Title Figure 6: Eminent Domain Timeline and Budget Figure 7: Condemnation Notice Table 1: New Construction Building Permits, Jefferson County and City of Birmingham, 1997-2004 Table 2: Top 10 Jurisdictions with the Most Sold to State Property Table 3: Owners with Over 50 Sold to State Properties Table 4: Sold to State Properties Redeemed, Sold, and In Active Status iii

EXECUTIVE SUMMARY Jefferson County currently has 11,698 tax delinquent properties, more than half of which have been delinquent for over five years, and 26% of which have been delinquent for over ten. These properties, which are likely to be abandoned, are creating blight in Jefferson County neighborhoods by contributing to declining property values, increasing crime, and less property tax revenue for local jurisdictions. Many of the existing tools for the acquisition and re-use of these properties are ineffective or underutilized. Alabama s Tax Foreclosure System As local jurisdictions and community groups attempt to revitalize Jefferson County neighborhoods, the current legal and administrative structure for acquiring and clearing title to tax delinquent property provides major barriers. The current tax foreclosure system: Takes a minimum of six years to clear title, which provides little to no incentives for the maintenance or re-use of delinquent property by tax lien purchasers or other prospective owners; Has been highly influenced by Alabama Supreme Court decisions, which have extended the rights of original property owners and made it more difficult for the purchasers of tax liens to clear title to the property; Ineffectively manages chronically tax delinquent properties, which has resulted in the steady increase in the total number of properties in the hands of the state; and Is outdated and too complex, which prevents responsible tax purchasers from successfully navigating the legal requirements to productively re-use the property. The reform of this inefficient tax foreclosure system is critical to the future of Jefferson County neighborhoods. Tax foreclosure reform must focus on shortening the time that it takes to clear title to abandoned, tax delinquent properties, and simplifying the process, in order to bring these back into productive use more rapidly. Comprehensive Strategy for Abandoned and Tax Delinquent Property A comprehensive strategy for addressing the blight created by abandoned and tax delinquent property requires the collaboration of the public and private sectors to prevent, manage, and reuse this property more effectively. Short term goals must include increased use of existing tools and improved administration and coordination of services. Long term goals should focus on increased resources and legislative changes that will allow jurisdictions and developers to more easily acquire and clear title to abandoned and tax delinquent properties. The State of Alabama, the City of Birmingham, and Jefferson County must play a central role in the implementation of this comprehensive strategy. The State of Alabama: Reform the tax foreclosure system to shorten the time required to clear title to tax delinquent properties and to expedite the movement of abandoned properties through the system; 1

Work to increase the number of Sold to State properties transferred to potentially responsible owners, and work with local jurisdictions to more effectively maintain the condition of Sold to State properties; and Authorize localities to create land banks that can acquire and clear title to tax delinquent properties as part of neighborhood revitalization strategies that target abandoned and tax delinquent property. The City of Birmingham: Develop an abandoned properties strategy that includes increased political and financial commitment, and that improves internal and external coordination between all City and County agencies responsible for the prevention, management and re-use of abandoned and tax delinquent property; Incentivize private owners to better maintain their property, and better facilitate the reuse of tax abandoned and tax delinquent property by non-profit and for-profit developers; and Take greater responsibility for the maintenance of blighted property, by more actively utilizing existing code enforcement tools that allow the City to positively shape its neighborhoods. Jefferson County: Work with the City of Birmingham and other local jurisdictions to craft plans for more actively acquiring, maintaining, and re-using abandoned and tax delinquent property; Make the prevention of tax delinquency and foreclosure a priority by providing referrals and assistance to homeowners who have difficulty paying taxes; and Facilitate the transfer of Sold to State property to other owners by marketing this property to community partners including local jurisdictions and non-profit developers who seek to eventually bring this property back into productive use. A comprehensive strategy for addressing property abandonment and delinquency must also leverage the support of private partners including non-profit and for-profit developers and area banks and realtors, who can improve the economic, social, and political feasibility of legislative and administrative reforms. By coordinating the more effective use of existing tools with new programs and strategies, each of these partners can contribute to the revitalization of Jefferson County communities through the prevention, management, and reuse of abandoned and tax delinquent properties. 2

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property INTRODUCTION The Problem In neighborhoods across Jefferson County, abandoned and tax delinquent properties are contributing significantly to neighborhood blight. As of December 2004, there were 11,698 tax delinquent properties in Jefferson County, almost half of which have been delinquent for over five years and 26% of which have been delinquent for over ten. This chronic delinquency is a symptom of overall disinvestment which often leads to further neighborhood decay. As housing developers and other partners work to revitalize neighborhoods, addressing the current challenges presented by abandoned and tax delinquent properties is critical. The Question The primary goal of this research is to determine the most effective methods of bringing abandoned and tax delinquent property in Birmingham and Jefferson County back into productive use, as well as to identify effective strategies for the prevention of property abandonment and tax delinquency. The specific questions addressed are: 1. What are the existing legal and administrative tools for preventing, managing, and reusing Jefferson County s tax delinquent property, available to the State of Alabama, the City of Birmingham, and Jefferson County? 2. What legislative and administrative changes should be made to allow these parties to most effectively bring abandoned and tax delinquent property in Jefferson County back into productive use? Methodology In order to effectively analyze the questions described above, the research method includes the following components: 1. Document the level and geographic distribution of tax delinquent property in Jefferson County. This includes gathering data that documents the quantity of tax delinquent property as well as its value, occupancy, vacancy status, zoning, and its ownership. In addition, geographic analysis shows the distribution of tax delinquent property across the County, and trend data provides insight into how the level of delinquency has changed over time. 2. Document the causes and effects of tax delinquency and abandonment. Data compilation and geographic analysis reveal the market conditions and other factors that contribute to tax delinquency and abandonment. Secondary research from other localities shows the financial and social impacts that tax delinquent and abandoned property have on individuals, neighborhoods and the entire County. 3

3. Document existing tools available for the prevention, management and re-use of tax delinquent properties. This includes legal and administrative procedures available to the State of Alabama, Jefferson County, and local jurisdictions within the County including the City of Birmingham. Analysis of these existing tools provides an understanding of how the public and private sectors can better use existing procedures to prevent, manage, and re-use tax delinquent and abandoned properties. 4. Analyze the capacity of the State of Alabama, the City of Birmingham, and Jefferson County to contribute to the re-use of tax delinquent property. This focuses on the ability of each entity to utilize existing tools and to make legislative and administrative changes to prevent, manage, and re-use abandoned, tax delinquent properties. 5. Analyze best practices from other cities. This involves secondary research to determine effective and innovative approaches being used in other cities across the country to bring tax delinquent property back into productive use (see case studies in Appendix A). This includes reviewing articles, reports, legislation, and administrative procedures, as well as conducting interviews with experts from those cities. 6. Recommend strategies for the prevention, management and re-use of abandoned and tax delinquent property based on analysis of the political, social and economic conditions for reform. This includes recommendations for the State of Alabama, the City of Birmingham, and Jefferson County to improve their ability to contribute to effective neighborhood revitalization through the acquisition and re-use of tax delinquent property. These recommendations are based on a thorough analysis of existing approaches in other cities and a comparison of the market conditions in those cities to identify the municipalities facing similar challenges. 4

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property Definitions In Jefferson County, abandoned and tax delinquent properties present a significant challenge for local jurisdictions, developers, and neighborhood residents trying to revitalize their communities. Before discussing the tools and strategies that can be useful in the prevention, management and re-use of tax delinquent property, it is important to distinguish between three categories of property that are often confused: vacant, tax delinquent, and abandoned. Vacant: These are parcels with no improvements. In many cases they are open space or side lots that are well kept and not contributing to Figure 1 neighborhood blight. Properties that Contribute to Blight However, the vacant properties of great concern are those lots that are categorized here as Vacant: vacant and abandoned. These No parcels are overgrown and/or improvements on the property have experienced dumping. Tax delinquent: This is property on which property taxes have not been paid. In most cases, properties that have recently become delinquent are not creating neighborhood blight. Financial difficulty or some other short term crisis has caused the taxes to go unpaid, but the property Tax Delinquent: Property taxes have not been paid. Abandoned: Owner has abandoned the property. is still in decent condition. Chronic delinquency, however (properties on which the owner has not been paying taxes for several years), often coincides with abandonment or other public nuisance characteristics. Abandoned: This is the category of property that by definition contributes to neighborhood blight. Abandoned property is defined here as property that is not occupied and is creating a public nuisance, is boarded, or is no longer inhabitable. It is property that has been abandoned and neglected by the owner and often negatively impacts the neighborhood by contributing to diminishing property taxes, increased crime, and higher health and safety risks. The focus of this research is properties that are both tax delinquent and abandoned. While the analysis and recommendations concentrate on the prevention, management and re-use of tax delinquent property, the intent is not to identify methods of evicting low-income homeowners who have been unable to pay property taxes. The goal is to identify strategies for eliminating the blight created by tax delinquent, abandoned properties that are depressing property values and increasing the health and safety risks for the neighborhood. 5

BACKGROUND Tax delinquent properties are often a significant contributor to neighborhood blight. These properties are frequently abandoned, and can lead to declining property values, increasing crime, and higher health and safety risks. In addition, they result in less property tax revenue to local jurisdictions, and place a strain on police, fire, health and other municipal services. The greatest challenge in revitalizing Jefferson County neighborhoods plagued by large numbers of abandoned and tax delinquent properties is the high cost and long time frame necessary to acquire these blighted parcels. Those properties in need of rehabilitation are likely to have numerous liens, many times in excess of the value of the property. The City of Birmingham has attempted to create a land banking program that acquires and reuses blighted properties, but it has found clearing title to be so time consuming and the legal costs so high that they have only been able to acquire 20 parcels with clear title. 1 Clear title to an acquired property is essential for effective neighborhood revitalization because construction and residential mortgage lenders are unwilling to take mortgages against properties that are subject to existing liens. Without clear title, the property cannot be sold to a responsible home owner. In structuring a legal and administrative system that facilitates the acquisition of abandoned and tax delinquent properties, it is important to first understand the causes and effects of abandonment and delinquency, and then to build on currently available tools to create a system that prevents such deterioration and that effectively acquires, maintains, and re-uses those properties. Causes of Abandonment and Tax Delinquency Property abandonment is a vicious cycle experienced by many inner city neighborhoods in metropolitan areas across the nation. Often it begins with increasing vacancy in a neighborhood due to residents moving to find newer homes, better schools, or increased economic opportunities. A decrease in demand for homes results in lower property values, which further increases vacancy and discourages future investment by developers, businesses and residents. Lack of Incentive to Maintain the Property As property values decline, property owners lose the incentive to maintain their property. In a depressed market, an investment of $1,000 to improve a property may yield less than $100 when the owner chooses to sell it. 2 In the case of rental properties, the declining rents eventually do not warrant continued maintenance and operation of the property, which can 1 Interview with Ken Knox, Deputy Director of the Housing Division, Department of Community Development, City of Birmingham, January 26, 2005. 2 Blight Free Philadelphia: A Public-Private Strategy to Create and Enhance Neighborhood Value, Eastern Pennsylvania Organizing Project and Temple University Center for Public Policy, 2001, p.24. 6

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property cause the owner to abandon the property and stop paying property taxes. Many abandoned single-family homes result from the death of an elderly individual whose relatives are not incentivized to maintain or sell the property because the value is so low. Lack of Access to Conventional Loans High levels of abandonment and tax delinquency are often concentrated in low-income neighborhoods. The inability of families to qualify for conventional mortgages and home improvement loans can lead to tax delinquency and abandonment. A study in Philadelphia found that a 10% decrease in loans made by sub-prime lenders would decrease housing abandoned in a census tract by 24%. The study also showed that a 10% decrease in the denial rate for home improvement loans would reduce housing abandonment by 9%. 3 Caught in the Downward Spiral Large scale abandonment begins with the abandonment of a few homes on a street, which causes property values to decline further. Those abandoned houses become a breeding ground You can go into neighborhoods in Flint and in places across the country and talk to homeowners and they will tell you which home was the first one on their block to be abandoned and they can tell you the pretty sad history that followed. Dan Kildee, Treasurer of Genesee County, MI for criminals, and deterioration of the property begins to present a health and safety risk to the neighbors. As crime increases and property values decrease, more residents leave the neighborhood, fewer new residents move in, more property is abandoned, and the downward spiral continues. Impact of Abandoned and Tax Delinquent Property Many of the conditions that lead to increased property abandonment are exacerbated by further delinquency and abandonment. Research has documented the adverse effects created by abandoned properties, which include declining property values, increased crime and fire hazards, and reduced tax revenues. Declining Property Values A 2001 study in Philadelphia, PA, found that the presence of an abandoned house on a block reduces the value of all other property on that block by an average of $6,715. All else being equal, houses within 150 feet of a neglected property experienced an overall loss in value of $7,627; those within 150 to 300 feet experienced a loss of $6,819; and those within 300 to 450 feet of such a property experienced a loss of $3,542. The study also found that five or six abandoned properties on a single block led to a reduction of $10,043 for other houses on that block. A study in Rhode Island estimated in 1995 that nearly 11,000 vacant and abandoned properties in five of the state s cities 4 led to a total loss in property values of $1.3 billion. 5 3 Ibid, p. iv. 4 Central Falls, Newport, Pawtucket, Providence and Woonsocket. 5 The Costs of Sprawl and Urban Decay in Rhode Island, Grow Smart Rhode Island, 1999. 7

Increased Crime A study in Austin, TX found that crime rates on blocks with open abandoned buildings were twice as high as rates on similar blocks without these buildings. The study showed that 41% of abandoned buildings could be entered without using force, and 83% of those buildings showed evidence of illegal use by criminals, prostitutes, and drug dealers. 6 Increased Fire Hazards When surveyed, fire departments cited vacant and abandoned properties as a serious fire safety hazard. According to the U.S. Fire Administration, over 12,200 fires are reported in vacant structures every year, 70% of which are arson related or suspicious. These fires result in at least $73 million in property damage annually. The National Fire Protection Association estimates that 6,000 firefighters are injured in vacant or abandoned building fires every year. 7 Reduced Tax Revenues Both tax delinquency and property abandonment result in less tax revenue for local jurisdictions. Tax delinquency, by definition, means that taxes are not being paid. And property abandonment leads to decreased value for that property as well as neighboring properties, which in turn reduces the taxes owed. Because property taxes are the primary source of revenue for many jurisdictions, a higher level of tax delinquency translates into a lower quantity or quality of government services. A study by the University of Minnesota found that an occupied, rehabilitated property would produce $13,145 in total property taxes over twenty years, compared to only $5,650 for a house that is inhabited but not rehabilitated, and $1,148 for a vacant lot. 8 Opportunity for Redevelopment While abandoned and tax delinquent property has many negative consequences, it also creates an opportunity for local jurisdictions such as Jefferson County by providing a centerpiece around which cities can formulate successful neighborhood revitalization strategies. Cities and other jurisdictions should begin to view tax delinquent properties as a resource for the most efficient accommodation of growth and development. The presence of these properties provides the opportunity to implement and promote smart growth principles, to provide affordable housing, and to encourage business and commercial development. In addition, abandoned and tax delinquent properties give community residents, local and state governments, and private developers and investors a chance to develop long term partnerships that increase community involvement and collaboration. 6 Spelman, William, Abandoned Buildings: Magnets for Crime?, Journal of Criminal Justice, 1993, 21(5): 481-495. 7 How Do Vacant Properties Hurt Communities? National Vacant Properties Campaign, www.vacantproperties.org. 8 Goetz, Edward G., Kristin Cooper, Bret Thiele, and Hin Kin Lam, Pay Now or Pay More Later: St. Paul's Experience in Rehabilitating Vacant Housing, CURA Reporter, April 1998, pp. 12-15. 8

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property Analysis of Market Conditions in Jefferson County An analysis of current market conditions throughout Jefferson County is essential to understanding the causes of abandonment and tax delinquency and developing effective strategies for bringing those properties back into productive use. Jefferson County, which has the largest population of Alabama s 67 counties, contains 33 separately incorporated municipalities, of which the City of Birmingham is the largest. The County s high level of abandoned and tax delinquent property has resulted from declining population, increasing vacancy, declining property values, and a loss of housing units in concentrated areas. Declining Population While Jefferson County s population has declined only slightly over the last twenty years (from 671,786 in 1980 to 662,047 in 2000) 9, the population in many of Jefferson County s inner-city neighborhoods has declined much more drastically. The City of Birmingham, Jefferson County s largest jurisdiction, contains some of the neighborhoods with the most severe disinvestment in recent decades. Birmingham s population decreased from 340,887 in 1960 to 242,820 in 2000, an overall decline of 28.7%. 10 This decline has been concentrated in the City s lowest income neighborhoods, some of which have experienced population losses of over 50% since 1960. 11 Figure 2: Population Change, 1960-2000 Population (in thousands) 800 700 600 500 400 300 200 100 0 Jefferson County Jefferson County Birmingham Birmingham 1960 1970 1980 1990 2000 Source: U.S. Census Year Birmingham s largest population decline occurred in the 1960s, when as a result of court mandated integration, many white families fled the City for schools in the suburbs. As wealthier families began to leave the City, the investment in Birmingham schools and other services began to decline and the City entered a vicious cycle. The supply of housing in Birmingham began to exceed the demand, home values plummeted, and the level of vacancy and abandonment increased. Deteriorating conditions pushed more families to the suburbs, while many of the elderly and low-income residents remained in their homes, unable to afford to move. 12 Increasing Vacancy In 2000, according to the U.S. Census, there were 24,897 vacant housing units in Jefferson County, or a vacancy rate of 8.6%. This is an increase from 21,618 vacant units, or vacancy rate of 7.9% in 1990. While the County has experienced only a slight vacancy increase, the 9 Consolidated Submissions for Community Development Programs, Part 3: Housing Market Analysis, Jefferson County Office of Community Development, March 2000, p. 8. 10 Policy Statement on Community Development and Neighborhood Revitalization. Birmingham Department of Community Development. 11 Birmingham Neighborhood Redevelopment Task Force Report, 2003, p. 1. 12 Policy Statement on Community Development and Neighborhood Revitalization. 9

vacancy rates in Birmingham have reached unprecedented levels over the past 20 years. The vacancy rate of 5.1% in 1970 doubled to 10.2% in 1990 and then increased to 11.5% in 2000. 13 Over the past several years, for every new unit built in the City of Birmingham, almost four units have been abandoned. 14 Declining Property Values As population in inner-city neighborhoods has declined and vacancy has increased, property values have decreased. Between 1990 and 2000, the median contract rent declined 1.54% and the median value of owner occupied units declined by 3.9%, after adjusting for inflation. 15 Of the 150 census tracts in Jefferson County, 104 experienced a decline in rent and 96 experienced a decrease in the median value of owner occupied housing units. 16 In 2004, the median rent in Jefferson County for a two-bedroom apartment was $598 17 and the average home value was $125,072. 18 Loss of Housing Units The City of Birmingham ranked eighth in the country in the loss of housing units between 1990 and 2000, among cities with populations of 100,000 or more. The City experienced an overall decline of 5%, and a decrease in owner-occupied units of 5.8%. 19 Increasing demolitions due to vacancy and abandonment and a low rate of new construction contributed to the high overall loss. As can be seen from Table 1, the City of Birmingham has experienced a disproportionately small percentage of Jefferson County s new construction. While the City is home to 38% of the County s households, it has held only 13% of the County s total new construction and only 5% of its single family new construction over the past five years. Table 1: New Construction Building Permits, Jefferson County and City of Birmingham, 1997-2004 1997 1998 1999 2000 2001 2002 2003 2004 Jefferson County Total Units 3,044 4,114 3,660 3,057 2,507 2,823 3,949 4,310 Units in Single Family Structures 2,538 2,857 2,812 2,347 2,377 2,567 3,325 3,310 Units in Multi-Family Structures 506 1,257 848 710 130 256 624 1,000 Birmingham Total Units 288 847 137 446 132 264 390 976 Units in Single Family Structures 128 152 137 118 108 188 152 144 Units in Multi-Family Structures 160 695 0 328 24 76 238 832 Source: SOCDS Building Permits Database, http://socds.huduser.org/permits/index.html. 13 Housing Units by Occupancy Status. SOCDS Census Data, http://socds.huduser.org. 14 Policy Statement on Community Development and Neighborhood Revitalization, Department of Community Development, City of Birmingham. 15 The change in real property value was calculated using CPI Index. 16 American Fact Finder, U.S. Census, www.census.gov. 17 U.S. Department of Housing and Urban Development, http://www.huduser.org/datasets/50thper. 18 Property values rise, tax bump to follow, The Birmingham News, June 13, 2004, p. 2A. 19 Birmingham Neighborhood Redevelopment Task Force Report, 2003. 10

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property TAX DELINQUENT PROPERTY AND TAX FORECLOSURE As of December 2004, there were 11,698 tax delinquent ( Sold to State ) properties in Jefferson County. Over 26% of these properties have been delinquent for ten years or more, and almost half have been delinquent for five years or more. This property, which is likely to be vacant and/or abandoned, is a significant contributor to neighborhood blight. As Jefferson County, other local jurisdictions, and developers seek to revitalize neighborhoods by redeveloping tax delinquent property, they face major challenges. The current process in Alabama for clearing title to tax delinquent properties takes a minimum of six years, and can result in steep financial costs. Because of this lengthy and cumbersome process, local jurisdictions and non-profit developers shy away from Abandoned, tax delinquent properties are a major barrier to redevelopment of lowincome inner-city neighborhoods. - Frank Alexander Emory University attempting to acquire these properties. Instead, the tax interest remains in the hands of the state and the cost of purchasing these properties continues to rise. As the delinquent taxes rise, the likelihood of re-use diminishes. Over the past ten years, the number of Jefferson County properties in the hands of the state has increased by approximately 3,000. 20 This increasing number of tax delinquent properties shows the ineffectiveness of the current system. Instead of creating assets from these properties for community revitalization, current policies and practices result in continued neighborhood deterioration. A Picture of Jefferson County s Tax Delinquent Property Geographic Concentration Table 2 shows the top ten municipalities in terms of total number of tax delinquent properties. Of Jefferson County s tax delinquent properties, 64.7% are in the City of Birmingham, with the next highest concentration in the City of Bessemer (6.2%). More detailed geographic analysis (see Appendix B) shows that tax delinquent property is disproportionately located neighborhoods with higher vacancy rates, lower incomes, and lower property values. Vacant Lots Table 2: Top 10 Jurisdictions with the most Sold to State property No. of Percent Municipality properties of total Birmingham 7,564 64.66% Unincorp. Jeff. Co. 1,782 15.23% Bessemer 728 6.22% Tarrant 235 2.01% Leeds 190 1.62% Brighton 181 1.55% Lipscomb 94 0.80% Graysville 78 0.67% Adamsville 69 0.59% Fultondale 68 0.58% Source: Jefferson County Tax Collector s Office According to the Jefferson County Tax Collector s office, 7,658 properties or 65.5% of the Sold to State parcels show no improvement value, meaning that they are completely vacant. The longer that a parcel has been in the hands of the state, the more likely the property is to be vacant. Of properties that have been Sold to State for five years or more, 83% are vacant. 20 Interview with Gary Boyd, Director of Land Divestment, Jefferson County, March 29, 2005. 11

Zoning and Occupancy Most of Jefferson County s tax delinquent property is located in residential neighborhoods. Of the tax delinquent parcels, 79.3% are zoned single-family residential and 1.4% are zoned multi-family residential. Thus, the majority of the parcels are single family homes or vacant parcels near other single family residences. However, most tax delinquent properties are not actually occupied by the owner. Overall, 9,726, or 83.1%, of the County s tax delinquent properties are not owner occupied. Of the properties that are zoned single-family residential, only 15.5% are owner occupied. Property Value Most tax delinquent properties, especially those still being held by the state, have exceptionally low property values. In many cases, property owners abandoned these properties because the values were so low, and the decline that ensued forced the values to decline even further. Fiftynine percent of Sold to State properties have values below $10,000. The majority (57.2%) of properties with such low values have been in the hands of the state for over 5 years. In addition, these properties are more likely to be vacant. Ownership The owners of many tax delinquent properties live outside of the County or the State and have allowed the property to deteriorate. Some are speculators, while others inherited the property when a relative passed away. Regardless of the circumstances under which they acquired an interest in the property, in many cases the poor condition and low property value has given them no incentive to sell or maintain the property for future investment. Most of the tax delinquent properties in Jefferson County are owned by individuals who are unable or choose Table 3: Owners with over 50 STS Properties Total # of Assessee Properties Residential Funding Corporation 373 Whitfield, Thomas B 233 Legion Land Company 170 M & R Properties Incorporated 133 Fulmer, Jimmy G 109 NTAC 82 Source: Jefferson County Tax Collector s Office Figure 3: Average Property Value by Year of Sale Value of Property 30,000 25,000 20,000 15,000 10,000 5,000 0 Average Value of Sold to State Property by Year of Sale 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 Year Property Was Sold to State Source: Jefferson County Tax Collector s Office not to pay the property taxes. In some cases, however, there is a property owner who also owns multiple other tax delinquent properties. These irresponsible property owners are placing an especially large burden on the community. Table 4 shows those property owners who had over 50 tax delinquent properties assessed in their name as of December, 2004. 12

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property The Life of a Tax Delinquent Property The legal procedure for acquiring and clearing title to tax delinquent property is contained in Title 40, Chapter 10 of the Alabama Code 21. The process is summarized below and a more complete description is contained in Appendix C. Page 15 offers a visual representation of the steps necessary to clear title, and Appendix D provides additional data about the movement of Jefferson County s tax delinquent properties through the tax foreclosure system. In the State of Alabama, the County is the designated collector of state, county, city, and school district property taxes. Property taxes are due to the County on October 1 of each year, and if taxes are not paid before January 1, the tax lien is offered for sale at the tax auction the following May. At the tax sale, which takes place at the County Courthouse, the tax certificate is sold to the highest bidder, with the minimum bid equal to the taxes due on the property. All properties that are not sold at the tax sale are transferred to the State, which holds the tax interest until the original owner redeems the property or until another buyer purchases the tax interest. These properties are designated as Sold to State. According to state law, the purchaser of the tax certificate (whether it is the State or a private entity) is entitled to possession of the property, immediately upon receipt of the tax certificate. The purchaser may demand possession of the property, and if possession is not surrendered Figure 4 Example of Property Acquisition through Tax Foreclosure: Oct. 1993: The owners of a Southside home stopped paying property taxes. May 1994: Property was Sold to State at the Jefferson County tax sale. Jan. 1998: An individual purchased the tax lien from the state, received a tax deed, and began paying property taxes. Nov. 1998: The buyer filed suit against the owners for possession of the property. May 1999: The buyer obtained judgment for possession and began possession sometime after. Dec. 2003: After holding the property in adverse possession for 3 years, the buyer filed quiet tile action against the previous owners. March 2004: Quiet title order was entered. July 2004: The tax lien purchaser sold the property to a new owner. within six months, the purchaser can take legal action to obtain possession. While immediate possession is allowed under state law, such action is never taken by the State and is rarely taken by private investors. Instead the purchaser typically waits until after acquiring a tax deed to take possession. The owner of the property or any other person having an interest in the property may redeem the property within three years after the tax sale by paying to the Probate Judge the amount paid by the tax purchaser, any taxes subsequently paid or owed, plus 12% interest per year. If the property was Sold to State, it may be redeemed at any time before title passes out of the State. Beginning in 1916, with Green v. Stephens, the Alabama Supreme Court developed a second opportunity for property owners to redeem their property. This judicial redemption period protects the right of owners to redeem their property without time limit, if they have remained in possession of the property. This right can only be 21 Available at http://www.legislature.state.al.us/codeofalabama/1975/coatoc.htm. 13

extinguished when the property has been held in exclusive adverse possession 22 by the tax lien holder for three years after receiving a tax deed. Three years after the tax sale, which coincides with the end of the statutory redemption period, the purchaser of the tax certificate can return the certificate to the Probate Judge to receive a tax deed to the property. After the purchaser has acquired the tax deed, the tax purchaser must be in adverse possession of the property for three years, after which the owner and other interest holders are barred from redeeming the property. Once the owner and other interest holders are barred from redemption, the tax purchaser can file for quiet title action, and thereby obtain clear, insurable title to the property. In 2002, the Alabama State legislature passed legislation to encourage tax purchasers to make improvements to property within an urban renewal zone or urban redevelopment area. 23 Under this legislation, if the property is located in an urban renewal or urban redevelopment area, the owner must pay in addition to the bid amount plus 12% interest, all insurance premiums paid for loss coverage on insurable structures, and all permanent improvements made by the purchaser plus 12% per year. If a property is Sold to State, an individual or entity can purchase the state s interest for the amount of taxes owed on the property, unless it has been redeemed. If the property is purchased from the state within three years of the tax sale, the purchaser is assigned a tax certificate and may obtain a tax deed on the three year anniversary of the tax sale. If the property is purchased after three years, the purchaser can immediately receive a tax deed. After a property has been Sold to State for three years, the State has the legal right to sell the property to a local jurisdiction, or to a non-profit entity designated by the jurisdiction, for less than the taxes due. After a property has been Sold to State for five years, the State has the right to sell the property to the highest bidder for less than the taxes due. In some cases, the state has sold tax delinquent property to a jurisdiction, but rarely has the state sold property to a private entity for less than the taxes owed. Table 4: Sold to State Properties Redeemed, Sold and in Active Status Date of Tax Sale STS Properties Redeemed Sold Active Status Percent in Active Status 1997 3,618 2,483 779 326 9.0% 1998 3,545 2,732 359 423 11.9% 1999 3,912 2,855 341 604 15.4% 2000 2,493 1,502 241 730 29.3% 2001 3,174 2,180 296 673 21.2% 2002 3,943 2,457 587 883 22.4% 2003 3,210 1,809 160 1,226 38.2% 2004 2,687 968 77 1,632 60.7% Source: Alabama Department of Revenue 22 Reese v. Robinson, Supreme Court of Alabama, 523 So. 2d 398 (Ala. 1988) 23 According to Alabama Code 24-3-2, an urban renewal area is an area designated by a municipality for undertakings and activities for the elimination (and for the prevention of the development or spread) of slums or blight. 14

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property Figure 5: Tax Sale, Redemption, and Clearing Title Redeemed from the State 62% 1,984 properties Held in adverse possession 3 yrs. New owner achieves clear title Sold to State 3,200 properties 15% Resold to an investor Investor receives a tax deed. 480 properties 23% Redeemed Annual Tax Sale Mid May 64% Remains in hands of the State 736 properties Remains in hands of the State 5,000 properties sold 36% Purchased by an investor 1,800 properties 10% 90% Held by investor 180 properties Redeemed during statutory redemption period Investor receives a tax deed. 210 properties Held in adverse possession 3 yrs. Redeemed New owner achieves clear title 1,620 properties Statutory Redemption Period - 3 years Judicial Redemption Period - At least 3 years * The estimates of properties in each phase of the process are based on averages of the past four tax sales, redemption statistics since the 2002 tax sale, and 15 estimates provided by the Jefferson County Tax Collector s office and the State of Alabama Department of Revenue.

Time for Tax Foreclosure Reform While properties are stuck in Alabama s six year process between the date of a tax sale and the earliest time the purchaser can clear title, the properties continue to deteriorate and contribute to neighborhood blight. Other states across the country have reformed their tax foreclosure system to shorten and simplify the process. Georgia, Michigan, and New Jersey offer evidence that tax foreclosure reform can significantly improve urban neighborhoods and increase the redevelopment of tax delinquent land. See Appendix A for case studies that include details on these states reforms. Reasons for Reform in Alabama 1. Alabama s system is outdated. Alabama s tax foreclosure system was created over one hundred years ago and is founded in the state s agricultural history. It was created to prevent poor farmers from losing their land when they did not pay property taxes. The state has changed drastically since that time, and while some amendments have been made to the statute, the State is still operating under the outdated system. The past twenty years have brought reforms in many states across the country based on U.S. Supreme Court cases that mandated greater notice requirements to property interest holders. Through these reform efforts, states have updated their systems to improve the ability of jurisdictions to re-use tax delinquent properties. It is time for Alabama to do the same. 2. The life of a tax lien in Alabama is too long. Under Alabama s current system, at least six years lapses between the sale of a property at a tax sale and the time when a purchaser can get clear title to the property. This provides little incentive to the owner or the tax lien holder to maintain or improve the property. This lengthy process also presents many challenges to local jurisdictions, developers, and community organizations who are trying to revitalize the neighborhoods in which these properties are located. Those entities who do invest in tax liens rarely make improvements to the property, which often results in a waiting period of at least six years before the property is rehabilitated, which places a greater strain on the municipality, its neighborhoods, and its residents. Compared to other states, Alabama has one of the lengthiest statutory processes (See Appendix E for a comparison to other state laws). 3. The tax foreclosure process has been highly influenced by case law. The tax foreclosure process as determined by state statute takes only three years, but multiple Supreme Court cases have added two key requirements that have lengthened and complicated the process: 1) a judicial right of redemption that extends the original owner s right of redemption indefinitely if (s)he remains in possession of the property, and 2) the additional requirement to hold property in adverse possession for three years after receiving the tax deed. While these provisions strengthen the rights of the original owner and decrease the risk of foreclosure, they make the re-use of abandoned tax delinquent property extremely difficult. 16

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property 4. The requirement for adverse possession is an ineffective way of clearing title. According to Frank Alexander, Emory Law School professor and expert on tax foreclosure systems across the county, terminating the claims of the original owners through adverse possession is about as inefficient and ineffective as you can get. Clearing title through methods such as judicial decree is more efficient and provides less ambiguity for title companies about the title status. 24 5. Being Sold to State is often a death sentence for tax delinquent property. All of the tax delinquent parcels that are not sold at the annual tax sale are automatically transferred to the state. The state holds title to these Sold to State properties, until they are redeemed or purchased by another entity. The State Department of Revenue currently does little or nothing to increase the transfer of those properties to owners who will eventually put the property back on the tax rolls. While the state has the right to take possession and maintain Sold to State property, it chooses not to do so. In addition, the state currently has two important avenues for transferring Sold to State property to a buyer interested in re-using it, but these procedures are rarely used. Three years after the sale of the property to the State, any property not redeemed may be sold by the State to a municipality or non-profit for the best price offered, regardless of the amount of taxes and interest due; and If the lands have not been redeemed or sold within 5 years, the lands may be sold at a private sale for the best price obtainable, irrespective of the amount of taxes due. 6. The current process is too difficult to understand. Alabama s current tax sale and foreclosure law is so complex and so few people have a comprehensive understanding of the law that many purchasers of tax liens do not take the necessary steps to minimize the time it takes to clear title. For example, many purchasers do not know that they must take possession after receiving a tax deed in order to extinguish the owner s right to redeem. In fact, many purchasers mistakenly believe that have clear title to the property once they have obtained a tax deed. As a result, the required three years of adverse possession often does not begin until months or years after obtaining the deed. This exacerbates the challenges by extending the time between the tax purchase and obtaining clear title. In some cases, the tax purchaser becomes so frustrated with the process that they no longer see the value in holding an interest in the property, so they stop paying property taxes, which leads to another tax sale of the property, creating a vicious cycle that prevents the property from ever being returned to productive use. Because of its super priority status, the property tax lien should be the easiest of all liens to enforce. As the senior lien on the property, the enforcement proceeding, known as foreclosure, should be able to result in the sale of the property to a purchaser, free of all other liens and claims. The purchaser, whether a governmental entity, a nonprofit organization, or a private person, should then be able to redevelop the property in a manner consistent with public and private development strategies. - Frank Alexander, Emory University 24 Interview with Frank Alexander, Professor of Law, Emory University, March 15, 2005. 17

Challenges to Tax Foreclosure Reform 1. The state of Alabama is a Dillon s Rule state. Under Dillon s Rule, the power of local governments is limited to those powers expressly granted by the state legislature or constitution or powers fairly implied. Thus, local governments in Alabama have no authority to alter the tax foreclosure system. Instead, the legal reform of existing procedures or any creation of new powers must be authorized by the state legislature. Because the Alabama legislature must approve all changes in state and local authority, passage of legislation is time consuming and difficult. 2. Due process requirements must be satisfied. The most important legal consideration in reforming the tax foreclosure and redemption process is ensuring that the new legislation meets due process requirements. A 1983 U.S. Supreme Court case, Mennonite Board of Missions v. Adams (462 U.S. 791) mandated that a legally protected property interest with a reasonably ascertainable address is entitled to reasonably calculated notice to inform him or her of the tax foreclosure proceeding. While this case does establish some standard for minimum requirements there is still no consensus on its specific application. 25 However, to gain support from the legal and title insurance communities, tax foreclosure reform must meet all constitutional requirements for due process. 3. Legislative reform may face political opposition. Historically, farmers associations, coal and timber interests, major utilities, title insurance companies, and realtors have resisted efforts to change or modernize property tax laws. 26 In addition, the feasibility of any reform in Alabama that relates to taxes, in general, and property taxes, in particular, is always questionable. In order to build support for legislation, the reform must be framed as a tool that will allow jurisdictions and private entities to address the array of problems created by abandoned property. 4. Lack of coordination between the City and County may complicate implementation. There is much political tension between Jefferson County and the City of Birmingham, which has resulted in limited coordination in the past. The two jurisdictions have demonstrated an inability to cooperate in multiple projects. A previous proposal for a land bank resulted in no action because it recommended cooperation of both parties. Another example is the lack of coordination between the City of Birmingham s demolition of unsafe structures, which are frequently located on tax delinquent properties, and the Jefferson County Tax Collector s office, which maintains the inventory of tax delinquent properties and properties sold at recent tax sales. Because condemned property is often also tax delinquent, coordination between these two entities will be critical in creating an efficient and effective system of property maintenance on tax delinquent and abandoned parcels. 25 Alexander, Frank, Tax Liens, Tax Sales, and Due Process, Indiana Law Journal, vol. 75: 747, 2000, p. 749. 26 Interview with Jim Stanley, Assistant City Attorney, City of Birmingham, January 25, 2005. 18

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property PREVENTION, MANAGEMENT AND RE USE Because tax delinquency and abandonment are so inextricably linked, the most effective strategies for the prevention, management and re-use of tax delinquent property also include the prevention, management and re-use of abandoned property. For Jefferson County and its cities and towns to more effectively address the neighborhood blight created by abandoned, tax delinquent property, they must intervene in the tax foreclosure process and in the cycle of abandonment at multiple stages. A comprehensive approach should include: Preventing properties from becoming tax delinquent or abandoned, Managing property that has reached the stage of delinquency or abandonment through effective property acquisition and maintenance tools, and Re-using abandoned and tax delinquent property to create community assets. An analysis of current tools available to public and private entities in Jefferson County shows that many of the existing tools are being underutilized. Increased resources and greater coordination could result in a more effective system for the prevention, management and re-use of delinquency and abandonment in Jefferson County. Prevention of Delinquency and Abandonment Property abandonment, which often coincides with tax delinquency, is usually an economic decision. The property owner cannot afford to continue paying property taxes or to maintain the property, so (s)he abandons it. Investing in effective prevention strategies will allow Behind every vacant property there is a story. The trick is to find that story and address the underlying issues. - Diane Silva-Martinez, Head Deputy City Attorney, San Diego Jefferson County and the jurisdictions within to save struggling families from foreclosure, to prevent further decay of declining neighborhoods, and to preserve and enhance current property values. The first challenge that arises in preventing delinquency and abandonment is incentivizing owners to maintain their property such that it does not negatively impact the surrounding neighborhood. While local agencies do have some power to enforce minimum standards, to demolish property that becomes a public nuisance, and to acquire such property, in some cases these tend to be tedious and lengthy processes and can be politically difficult. The second challenge is helping homeowners avoid the financial distress that leads to tax delinquency and property abandonment. Home ownership counseling as well as financial assistance can provide the temporary support that some families need to avoid tax delinquency or abandonment. But for many home owners, the intervention must start earlier than that. In many cases, sub-prime loans have played a major role in the homeowner s inability to pay taxes or otherwise maintain the property. So a prevention strategy should also address the prevalence of these loans in low-income neighborhoods through education and financial counseling. 19

The key to prevention is understanding the causes of tax delinquency and abandonment, and implementing a warning system that allows local officials to intervene to prevent property abandonment or further decline. Several cities, such as Philadelphia, Chicago, Los Angeles, and Minneapolis have implemented neighborhood early warning systems that allow government, non-profits and other community members to target services such as housing counseling or rehabilitation loans to property owners in need of assistance. 27 Prevention Tools in Jefferson County Jefferson County and local jurisdictions including Birmingham already have several prevention tools at their disposal. Each of these tools can be used more actively to prevent abandonment and delinquency and all of them should be coordinated more effectively to create a system that results in greater levels of prevention. The tools currently available include: Delinquency Notices: The primary prevention mechanisms for tax delinquency are notices sent to property owners when they fail to pay their property taxes. Before a property is sold at the county tax sale, a total of seven notices are given including three notices sent through the mail and four advertised in the local newspaper. 28 In addition, property owners are notified on at least four other occasions before ownership can be transferred (when the property is sold at the tax sale, when the purchaser receives a tax deed, when the purchaser takes possession, and when the purchaser files for quiet title action). Code Enforcement: Cities and towns within Jefferson County impose maintenance requirements on property owners and impose fines if those standards are not met. But many of those jurisdictions have budgets and staff too small to effectively implement those regulations. Jurisdictions also do not want to be viewed as the evictor. The City of Birmingham for decades has practiced sensitive code enforcement which is based on the premise that the City does not want to be responsible for forcing people out of their homes or demolishing their houses. 29 In some cases, abandoned homes have remained abandoned for over a decade before the City took any action to condemn or demolish the property. Financial and Homeownership Counseling: Alabama ranks fifth in the nation in personal bankruptcies. 30 Combined with high levels of bad credit, this creates a need for financial and homeownership counseling for many homeowners, especially in inner-city neighborhoods. Multiple agencies in Jefferson County offer counseling services, including Neighborhood Housing Services of Birmingham, the Birmingham Housing Authority, Fannie Mae, YW Homes, and UAB Housing Plus. 31 In addition, the City of Birmingham opened the Home Ownership Center in October 2004, which is providing credit counseling 27 Snow, Christoper, Kathry L.S. Pettit, and Margery Austin Turner, Neighborhood Early Warning Systems: Four Cities Experience and Implication for the District of Columbia, Fannie Mae Foundation, March 2004. 28 Interview with Gary Boyd, Director of Land Divestment, December 20, 2004. 29 Interview with Ken Knox, Deputy Director of the Housing Division, Department of Community Development, City of Birmingham, January 26, 2005. 30 Birmingham Neighborhood Redevelopment Task Force Report, 2003, p. 21. 31 Ibid. 20

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property and pre- and post-purchase counseling to increase homeownership in the City of Birmingham. As of March 2005, they had provided services to 280 families. Rehabilitation Grants and Loans: Jefferson County, the City of Birmingham and other local jurisdictions offer rehabilitation grants and loans to assist property owners with property maintenance. This financial assistance allows individuals to make improvements to properties that are in need of rehabilitation. In addition, local non-profits such as Outreach, Incorporated and House Calls provide property rehabilitation services to lowincome homeowners. Management of Abandoned and Tax Delinquent Property No matter how effective prevention strategies may be, there will always be properties that slip through the cracks. Effective management of abandoned and tax delinquent property is essential to minimizing the negative impact that these properties have on their neighborhoods. The primary goals of a management strategy are property acquisition and property maintenance. For example, the Genesee County Land Bank in Michigan has created a comprehensive property management system in which the land bank acquires tax delinquent properties, demolishes dilapidated structures, maintains them, and acts as the steward for the properties until transferring them to another owner. The importance of property maintenance is magnified in Jefferson County because of the ineffectiveness of the tax foreclosure laws. Alabama s current tax foreclosure system incentivizes neither the original owner nor the purchaser of a tax lien to maintain the property. The system allows the owner the right to redeem the property even if they have not taken responsibility for maintaining it. And the risk of redemption encourages the purchaser of a tax lien to wait until (s)he has clear title to make improvements to the property. As one investor described, It is very difficult to do much with the property. You can t put much money in it because you risk someone coming in and redeeming and you losing your investment. Thus, a property that is not redeemed will likely remain in poor condition for at least six years until the tax lien purchaser clears title. This property will require effective maintenance to minimize its negative impact on the surrounding neighborhood. Acquisition Tools in Jefferson County One of the largest challenges to the future development of abandoned parcels is acquisition and assembly of the land. Because of title complications and the large number of liens on so many properties in Jefferson County s low income neighborhoods, the biggest hurdle is clearing title. In some cases, there are so many liens that the total value of the property is less than the total dollar value of the liens. Any combination of these complications can result in the failure to sell or re-use the property productively. The property, thus becomes a blight on the neighborhood, contributes to declining property values, increased crime, and the failure of new and existing residents to invest in the neighborhood. 21

The City of Birmingham has attempted to implement a land banking program to assist in the acquisition and re-use of properties throughout inner-city neighborhoods. In 2002, $3 million in bond funds was allocated for property acquisition within a three year period (which expires in December 2005), only five percent of which is allowed for soft costs such as legal fees. Some of this money has been used for the acquisition of large parcels such as former school sites. But the City s attempt to acquire and assemble scattered parcels in Birmingham neighborhoods has been largely unsuccessful. To date, the City has acquired a total of 20 parcels for the land bank. Acquisition has been so difficult because of the high costs of clearing title on the majority of properties it identifies, and the limited proportion of the bond funds allowed for legal costs. 32 The City of Birmingham and other jurisdictions within Jefferson County do have the following tools available to them for property acquisition: Direct Purchase: The simplest method of property acquisition is direct purchase from the owner. This is the most common method of acquisition, but even in situations when the property is not tax delinquent, clearing title can be a nightmare. Property often has been handed down for several generations. Finding all of these interest holders, and getting them to agree on selling the property or on a sales price is extremely difficult, if not impossible. In addition, liens may have been placed on the property due to unpaid medical bills, mortgages or taxes, or for demolition or upkeep by the City. Foreclosure on Demolition Liens: Most cities and towns do have the right to demolish property, and to foreclose on demolition liens when not paid. The City of Birmingham has the capacity to foreclose on unsatisfied demolition liens after they have not been paid for one year. This authority, however, has little effectiveness because the foreclosure of the lien does not give the City clear title to the property. 33 Demolition by Neglect : This recently passed law allows a municipality to demand that a neglected property be repaired by the owner, and if the owner does not comply, the City can foreclose on the property. After a two year redemption period, the locality may clear title to the property through a quiet title action. This is a limited tool, however, because the lien held by the municipality is subordinate to any tax liens. In most cases, abandoned properties that would be targeted by jurisdictions also have tax liens that must be satisfied. 34 Donation by the owner: Occasionally individuals or family members choose to donate their property to their city or town in cases such as the death of the principal owner, when the property is facing demolition, or when the declining value of the property does not warrant continued maintenance or operation. In some cases, jurisdictions in Jefferson County have encouraged and facilitated the donation of troubled properties to non-profits that develop affordable housing. In the 1990s, the City of Fairfield implemented an aggressive code 32 Interview with Ken Knox, Deputy Director of the Housing Division, Department of Community Development, City of Birmingham, January 26, 2005. 33 Interview with Jim Stanley, Assistant City Attorney, City of Birmingham, January 26, 2005. 34 Ibid. 22

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property enforcement strategy, through which the city offered the option of donating the property to Habitat for Humanity. As a result, Habitat was able to acquire approximately 30 properties on which it has constructed affordable homes. 35 Eminent Domain: The City of Birmingham has the power of eminent domain to acquire property for the redevelopment of blighted areas, but Jefferson County does not. However the City of Birmingham rarely uses this power due to the length of time required to complete the process (Figure 7 demonstrates the time that the legal and administrative process can take). In addition, most owners decide to sell their property once it has been designated by the City for acquisition. However, eminent domain is a critical tool for the City s ability to implement redevelopment plans. 36 Figure 6: Eminent Domain Timeline and Budget Case Study: Use of Eminent Domain in Fountain Heights The City of Birmingham is currently in the process of acquiring five parcels in Fountain Heights through its power of eminent domain. Below is the timeline and budget for this process. Timeline: 2000: January - Birmingham City Council adopts urban renewal and redevelopment plan for Fountain Heights. The plan identifies 69 properties for acquisition by purchase or through eminent domain. 2001: February - Title searches are ordered for the first phase of 23 properties. May - Appraiser is appointed to appraise the first 23 properties. August - Appraisal is completed and City begins attempts to locate owners to make offers to purchase properties. 2002: April - City Council approves purchase of 15 properties for which owners could be located. July - City begins closing on properties for which clear title can be obtained. August - City files complaint to acquire though eminent domain five properties with missing owners or severe title problems. 2003: September - First set of lots transferred to Housing Authority. December - Probate Judge enters order of condemnation of the five lots. 2005: January - Closing on the most recent acquisition; 3 lots remain for acquisition. Budget: The condemnation budget for these five properties totals $46,125, including $22,000 for land, $4,900 for award and court costs, $8,150 for appraisals, $875 for title searches, and $10,000 for attorney s fees. Maintenance Tools in Jefferson County Local jurisdictions in Alabama have the legal right to address nuisance properties by condemning, demolishing, and providing services such as weed maintenance on properties whose owners have not met their responsibilities. 35 Interview with Charles Moore, Executive Director, Habitat for Humanity of Greater Birmingham, January 20, 2005. 36 A case pending in the U.S. Supreme Court, Kelo v. City of New London (04-0108) may have an impact on the ability of jurisdictions to use eminent domain in the future. A decision is expected in this case by June, 2005. 23

Condemnation: Birmingham s power to condemn unsafe property provides an important tool for enforcing property maintenance standards and ensuring neighborhood safety. Receiving a complaint from the public is the first step in the process of property condemnation. Then the City inspects the property and determines whether it meets the standards for condemnation (See Appendix F for the City s definition of abandoned property.) The City also works with the Department of Public Works as well as the fire and police departments to identify properties that qualify for condemnation. However, the Department of Planning, Engineering and Permits, which oversees condemnations and demolitions, does not actively search for abandoned properties in need of condemnation or other city services. 37 Demolition: Typically, the time between condemnation and demolition is approximately a year and a half. In a case where the property presents an immediate safety risk to neighbors, the City will expedite the demolition process to sixty days. 38 Further information about the demolition process is included in Appendix F. Figure 7: Condemnation Notice Weed and lot maintenance: As most jurisdictions in Jefferson County, the City of Birmingham provides services such as cutting grass and weeds and cleaning lots that have become overgrown and experienced dumping. The Mayor s office of Citizens Assistance provides an online system for requesting such services. Re-use of Abandoned and Tax Delinquent Property While the right and responsibility for the maintenance of abandoned and tax delinquent property falls with local jurisdictions, the re-development of this property usually occurs by local housing authorities and private for-profit or non-profit developers. One of the largest challenges with the re-use of property in Jefferson County s declining neighborhoods is the weak real estate market. New construction does not make economic sense in a neighborhood where the house will sell for half of the construction cost. As Jefferson County and the jurisdictions within craft plans for the redevelopment of abandoned and tax delinquent properties, an important question that they must address is when to re-develop this property. In Genesee County, Michigan, the Land Bank believes that only 15% of its inventory has market potential. The remainder of the land, the Land Bank holds and maintains. It serves as a market force to decrease the amount of land available for acquisition, and is a land assembly tool for future development. 37 Interview with Jim Cloud, Chief of Condemnation and Demolition, January 24, 2005. 38 Ibid. 24

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property Once the decision has been made to re-develop a property, the jurisdiction must decide how to determine the highest and best use for the property. Should it seek to provide the highest financial return for developers and property owners or identify the use that maximizes the social benefit? Jefferson County and the City of Birmingham typically make the decision about property disposition and re-use by issuing a Request for Proposals (RFP), and evaluating the proposals according to their goals. Tools for the Re-Use of Abandoned and Tax Delinquent Property in Jefferson County The resources currently available to jurisdictions and developers working within Jefferson County to redevelop abandoned and tax delinquent property include: Subsidized loans for rehabilitation and new construction: For non-profit developers, the primary locally provided subsidies available are subsidized loans for rehabilitation and new construction through the HOME and CDBG programs. Jefferson County and the cities of Birmingham, Bessemer, and Hoover all receive an annual allocation of these block grants, which allow them to fund revitalization activities. Unfortunately, according to some nonprofit developers, the City of Birmingham s housing policies in recent years have deterred them from working inside the city limits. Federal Subsidies: In addition to the locally administered programs, federal subsidies are available such as Section 202 and Section 811. These programs provide funding for the development of affordable housing for special populations such as seniors and disabled individuals and families. Low Income Housing Tax Credit and Historic Rehabilitation Tax Credit: These programs provide tax incentives to encourage developers and investors to build and rehabilitate housing that can serve as community assets. The Low Income Housing Tax Credit provides subsidy for the development of affordable housing and the Historic Rehabilitation Tax Credit assists with the rehabilitation of certified historic structures. Housing Enterprise of Central Alabama (HECA): HECA is a joint venture among regional banks to provide affordable loans and gap financing to developers revitalizing Jefferson County neighborhoods. Through the financial support of the banking community, HECA seeks to leverage resources and build capacity for community development. It provides loans for acquisition and rehabilitation, infill new construction, and the development of new subdivisions. 39 Federal Home Loan Bank programs: The FHLB of Atlanta offers programs that assist forprofit and non-profit developers with the development and rehabilitation of low and moderate income housing. Their programs, which include the Affordable Housing Program, the Community Investment Program, and the First-time Homebuyer Program, can be utilized by developers to make working in Jefferson County s inner city neighborhoods economically feasible. 39 Financial Products and Projects, Housing Enterprise of Central Alabama, www.region2020.org/currentprojects/heca.shtml. 25

RECOMMENDATIONS A comprehensive strategy for creating assets from Jefferson County s tax delinquent property will require the collaboration of the public and private sectors in order to effectively prevent, manage, and re-use this property. It will require the commitment of political leaders and administrative staff, as well as community groups and neighborhood residents. Leaders should frame these reforms as part of a broader strategy to improve Jefferson County s neighborhoods by targeting the blight that diminishes property values, increases criminal activity, and threatens the health and safety of residents. The recommendations outlined below focus on the steps that should be taken by the State of Alabama, the City of Birmingham, and Jefferson County to bring abandoned and tax delinquent properties back into productive use. Steps to be taken by the private sector, including banks, realtors, and for-profit and non-profit developers, are not directly addressed here, but these constituencies have an essential role to play in the success of an abandoned properties strategy. The following recommendations include ways that existing tools can be better utilized to prevent, manage, and re-use abandoned and tax delinquent properties, as well as legislative changes that should be made to improve the ability of cities, counties, developers, and other interested parties to bring these properties back into productive use. While each of these recommendations individually can improve some aspect of the process, the maximum impact will result from the coordinated implementation of these recommendations as a part of a single strategy. A summary of the recommendations, on page 39, establishes short and long term goals for each of the four entities. Recommendations for the State of Alabama Increase the number of Sold to State properties transferred from the State to other owners or developers: All of the tax delinquent parcels that are not sold at the annual tax sale are automatically transferred to the state and designated as Sold to State. The Alabama Department of Revenue currently does little or nothing to increase the number of those properties transferred to owners who will eventually put the properties back on the tax rolls. There are two methods within the state s statutory authority to encourage public and private entities to purchase Sold to State properties in order to bring the properties back into productive use. The State can use these tools to market Sold to State properties as an opportunity for jurisdictions and developers to acquire and rehabilitate tax delinquent properties that are vacant or abandoned. The state should increase the use of both tools: 26

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property Sell properties that have been delinquent for over three years to local jurisdictions for less than the taxes due. After three years, the state has the legal authority to sell Sold to State parcels to the municipality or county in which the property is located or to a nonprofit or governmental entity designated by the municipality or county, at the best price offered, irrespective of the amount of taxes and interest due. 40 The State has done this in some instances. For example, the City of Birmingham purchased 12 Sold to State properties for $100 each. But the State should facilitate the sale of more properties to localities seeking to redevelop struggling neighborhoods. Sell properties that have been delinquent for over five years to anyone for less than the taxes due. According to Alabama Law, when a property has been Sold to State for five years, the Land Commissioner, with the approval of the Governor, may sell the same at private sale to any purchaser for cash at the best price obtainable, irrespective of the amount of taxes due. 41 Currently the State does not actively follow this practice. Even in cases when the amount of taxes due exceeds the value of the property, the state has been known to refuse to sell the property for less than the taxes owed. The community is much better served by transferring these properties to an owner who will maintain or re-use them. Create a Side Lot Disposition Program: The state currently holds 4,723 vacant properties in Jefferson County that have been Sold to State for five years or more. Of these, 2,972 are worth $5000 or less and 652 are worth $1000 or less. These smaller parcels are ideal for a side lots program similar to that created by Michigan s Genesee County. Through a Side Lot Disposition Program, the state should convey vacant lots that have been tax delinquent for over five years to adjacent property owners who will maintain and begin paying taxes on the property. This will both bring these parcels back onto the tax rolls and improve the appearance of these vacant lots throughout Jefferson County neighborhoods. Genesee County s Side Lot Disposition Program allows the Land Bank to convey unimproved property to an adjacent owneroccupied residential property which shares at least 75% of a common side boundary. Properties that are too small for independent development are transferred for a nominal fee, and other properties can be conveyed at a minimum of the acquisition, demolition, and maintenance costs. Encourage local stewardship of Sold to State properties: In Jefferson County neighborhoods with weak market conditions, the redevelopment of tax delinquent properties may not be the most effective neighborhood revitalization strategy in the short term. However, these neighborhoods can be transformed simply by regular property maintenance. The State of Alabama should work with localities to improve the maintenance of Sold to State properties that have been abandoned. This will increase property values and 40 Alabama Code, Section 40-10-132. 41 Alabama Code, Section 40-10-134. 27

improve the state s ability to market Sold to State properties for transfer to local jurisdictions or private entities. Provide information to purchasers of Sold to State properties about clearing title: When an individual or company purchases a Sold to State property, (s)he currently receives a letter advising him/her to seek legal counsel. However, the number of lawyers in the state of Alabama who fully understand the tax sale and foreclosure process are few and legal costs can be high. Therefore, the state should include basic information on methods of clearing title when a tax deed is received from the state. Because there is a shortage of proper advice, many of those who seek to positively impact neighborhoods by rehabilitating Sold to State property get caught up in the requirements and confusing legal process, and find themselves unable to clear title. For example, four years ago, YW Homes, a non-profit developer in Birmingham acquired four vacant parcels that had been Sold to State for over three years, located in an inner city Birmingham neighborhood. YW Homes immediately received tax deeds on the property, and has since been paying the taxes and maintaining the property. However, it has not been able to clear title. If it had filed a suit to take possession of the property immediately after acquiring the tax deed, there would be no doubt that it would be eligible to file quiet title action. However, YW Homes did not receive such advice. The State Department of Revenue should provide this important advice to all purchasers of Sold to State property. Reform Alabama s tax foreclosure laws: The state of Alabama s tax foreclosure system is in need of legislative reform. There is agreement across a variety of sectors and interests that the current tax sale process in Alabama is outdated and impedes progress in urban renewal. The current process allows a property to be delinquent for at least six years before a purchaser can clear title. While this provides extensive protection for property owners to redeem their property, the greater community suffers as that property contributes to decreasing property values, and increasing crime and health and safety risks. A fair but effective system should balance two important goals: protecting the rights of property owners and incentivizing owners to act as responsible stewards of their property. There are multiple avenues for improving Alabama s tax foreclosure process. Ideally, the state will embark on comprehensive reform that creates a new, more equitable and efficient system. A second option is to amend the current process to shorten the length of time that it will take to clear title to properties in urban renewal zones. A third option could include a decision of the Alabama Supreme Court to overturn previous rulings that have expanded the rights of property owners by increasing the length and complexity of the redemption process. Reform options include: 28

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property 1. Complete overhaul: The optimal solution to Alabama s current tax foreclosure system is complete overhaul. The current six year system imposes social and financial costs on the greater community that far exceed the benefit of providing property owners with additional time to redeem. Michigan s 1999 Public Act 123, which reduced tax foreclosure to two years, with an expedited one year foreclosure process for properties that are abandoned, provides a model for reform legislation. The legislation should provide for a judicial foreclosure process that will speed the process of clearing title, and impose increased penalties for tax delinquency. Maximizing support and limiting opposition will require the input of the Alabama Farmers Association, Alabama Realtors Association, Alabama Bankers Association, the Mortgage Bankers Association of Alabama, National Tax Lien Association, title insurance companies, and the Association of County Commissions of Alabama. Michigan s Public Act 123: This legislation, passed in 1999, replaced the old tax foreclosure system which could take seven years to clear title. The new system shortened the tax foreclosure process to two years (and one year in the case of abandoned property), increased penalties for nonpayment of taxes, ensured that foreclosure results in a clear title, and eliminated investors from the process. 2. Legislative changes to the current system: A secondary legislative reform option is to amend the current law to eliminate the requirement to hold property in adverse possession for three years for properties located in urban renewal zones. This would allow purchasers of tax liens in urban renewal zones to file quiet title action immediately after receiving a tax deed. The restriction to urban renewal zones would ease concerns by the Alabama Farmers Association and other lobbying groups which might be expected to oppose any reduction in the redemption period. But this change would still allow the legislature to target the remedy to the areas in which tax delinquent property is most highly concentrated. Because any state legislative change relating to taxes will be difficult, it may be wise to further restrict the applicability of the legislation only to Jefferson County. 3. Court challenge: The current requirement to hold property in adverse possession for three years was established by a series of court cases (see Gulf Land Co. v. Buzzelli, 501 So. 2d 1211, 1213 (Ala. 1987)) based on Section 40-10-82 of the Alabama Code. The court s interpretation of the statute is questionable according to some legal experts. Given the current judicial climate in Alabama (judges who are extremely cautious about legislating from the bench) the requirement to hold property in adverse possession for three years before clearing title could possibly be overturned by a decision of the Alabama Supreme Court. 29

Develop statutory authority for the City of Birmingham and/or Jefferson County to create a land bank: The largest barrier to bringing abandoned property in Jefferson County back into productive use is acquiring property with clear title. Other U.S. cities that have been successful at bringing tax delinquent property back into productive use have been enabled by state legislation to clear title through the use of a land bank or a similar entity. State Legislation should be enacted that gives the City of Birmingham and Jefferson County the authority to create a land bank that: Can acquire any property not bid on at a tax sale. Properties not identified for transfer into the land bank would be Sold to State. The land bank could also acquire property by donation or by purchase from the owner. Has statutory authority to clear title to property upon transfer into the land bank. Can hold and maintain property for parcel assembly. Cleveland Land Bank The City of Cleveland s land bank is operated out of the City s Department of Community Development. The City identifies tax delinquent properties that it wishes to acquire for the land bank, and submits that list to the County, which handles all tax foreclosure proceedings. If the properties have not been bid on after two Sheriff s sales, the Cleveland Land Bank is declared the winning bidder. (If the City does not want the property for the land bank, it is transferred to the State.) The land bank acquires property for only the transaction costs it does not have to pay the amount of taxes owed. All land bank property is title free and clear of all liens and interests, except those covenants and easements created before the tax delinquency arose. CDCs must apply to the land bank to acquire property by submitting a proposal for reuse. This application must be evaluated and approved by land bank staff, a neighborhood planner, and a neighborhood advisory council. Upon acquiring a property, a developer must begin construction within 6 months and complete it within one year. The Land Bank is funded primarily with CDBG funds. In addition, a 1988 bill established a 5% set aside of income collected from delinquent taxes to fund efforts to expedite the foreclosure process. May convey property for minimal cost to developers whose plans for re-use are approved by the land bank and who pledge to redevelop the property within a specified time frame. A forthcoming book by Frank Alexander, an Emory Law School professor, will provide a detailed analysis of the five major land banks in the United States that may provide insights into the most effective land bank authorizing legislation. 30

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property Recommendations for the City of Birmingham Make the commitment: The first step in developing an effective system for the prevention, management and re-use of abandoned and tax delinquent property in the City of Birmingham must be strong local leadership. Currently there is a clear interest among City, County, and other community leaders in actively pursuing community revitalization, and there is an understanding that abandoned and tax delinquent property significantly contributes to neighborhood blight. But this has not been translated into a plan of action. City leadership must make an active commitment to the prevention, management and re-use of abandoned and tax delinquent property. This commitment must be in the form of verbal pledges, financial resources, and political capital in advocating for necessary legislative changes at the state level. The initiative should be branded and marketed as a part of an overall strategy to improve the lives of all City residents. And through the development of effective programs to target abandoned and tax delinquent properties, the City can encourage the involvement of individual citizens in its implementation. Philadelphia and Baltimore are cities in which the strong commitment of local leadership to addressing the blight created by vacant properties has resulted in policy changes and substantial commitment of capital to bringing such properties back into productive use. Both Mayor Street (of Philadelphia) and Mayor O Malley (of Baltimore) recognize the potential for strategic redevelopment of abandoned property and have shaped economic development campaigns around the opportunities provided by these properties. Experts attribute the successful re-use of abandoned and tax delinquent property in both cities to the leadership provided by the mayors. In 2001, Mayor Street launched the Neighborhood Transformation Initiative, a campaign involving a range of activities, from demolition of blighted buildings to the rehabilitation of vacant houses. The City has issued $295 million in bonds to support the implementation of this initiative. In 2002, Mayor O Malley launched Project 5000, which aimed to acquire 5,000 vacant properties over a period of two years. These properties were targeted for demolition or rehabilitation to support new development in the near future. Develop a plan: The City of Birmingham should develop a plan for the prevention, management and re-use of abandoned and tax delinquent property. This plan should frame a strategy that implements a vision for the future of Birmingham neighborhoods, including Prevention: Minimize the number of properties that reach delinquency or abandonment. Management: Minimize the harm caused by abandoned and tax delinquent properties. Re-use: Bring properties back into productive use as effectively and efficiently as possible. The plan should provide for assessing the city s administrative capacity, developing an effective system for property management, creating an inventory system, identifying targeted 31

goals and implementation procedures, as well as focusing the City s activities on priority neighborhoods. The City can use such a plan to launch an initiative that will leverage support and build partnerships among the public, private and non-profit sectors in order to achieve the City s goals. The National Vacant Properties Campaign, Local Initiatives Support Corporation, and the International City/County Management Association offer resources including technical assistance that may be helpful in developing a plan for the prevention, management and re-use of abandoned and tax delinquent property in Birmingham. Hire an abandoned properties coordinator: Establish a point person housed in the Department of Community Development who will maintain close working relationships with all of the City and County departments that come into contact with abandoned properties (including the Department of Community Development, the Planning Department, Code Enforcement, police, fire, the County Tax Assessor, the Tax Collector, and attorneys). This individual should be responsible for San Diego appointed a vacant properties coordinator, housed in the Neighborhood Code Compliance Department, to facilitate the abatement and rehabilitation of vacant properties. This person became the primary contact with other city and county staff that deal with vacant properties, as well as attorneys who provide legal expertise. Although San Diego does not have the same level of vacant properties as many other cities that have undertaken similar programs, the vacant properties coordinator has been key to its success. coordinating the work of all of these agencies related to the demolition and maintenance of the City s vacant and abandoned property. In addition (s)he should develop a standardized definition of abandoned property (See Appendix F for the definition used by the Department of Engineering, Planning and Permits), develop a method for measuring and keeping inventory of abandoned properties, and maintain an abandoned property list. Actively maintain and acquire abandoned and tax delinquent property: The first step in revitalizing many of Birmingham s neighborhoods is cleaning up the vacant property and abandoned buildings. The City should increase the use of available maintenance The Genesee County Land Bank serves as the guardian of the county s tax delinquent property. It holds property in order to improve it and to influence the market by decreasing the supply of available land in order to push property values upwards. The Land Bank s Clean and Green Program creates assets from abandoned property by demolishing blighted structures and transforming these areas into parks, gardens or green space. It leverages community involvement by paying community groups such as scout troops and churches to provide maintenance services on vacant lots owned by the Land Bank. tools to improve the appearance of distressed property. Genesee County, Michigan provides an example of how holding and maintaining property can improve the appearance of neighborhoods and influence the market. Secondly, the City should use more willingly its existing property acquisition tools including its power of eminent domain. While the process should be streamlined, eminent domain is an effective tool because it allows the City to acquire abandoned properties and clear title to them. 32

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property The City should also increase use of eminent domain to clear title to properties in cases where there is a willing seller but the property has too many liens. The City has only utilized eminent domain 15 times during the past five years. Other cities such as Baltimore and Philadelphia rely on eminent domain as a primary tool for the acquisition of blighted properties. Incentivize private owners to maintain their property: The City should incentivize private owners to maintain their property according to the minimum standards. Two strategies, which can be used individually or simultaneously include increased fines and increased code enforcement. Increased fines for delinquent taxes can incentivize property owners not to fall behind in property tax payments. However, this must be balanced by the possible increase in abandonment that can come with penalties that are too severe. Compared to other states, though, Alabama s penalties are one of the mildest. In Michigan, when a property becomes delinquent, a 4% fee and 1% monthly interest are imposed. If the property taxes still have not been paid after a year, the property is forfeited, and the owner must pay a $175 search fee, and the monthly interest rate increases to 1.5%. Such increased fees could encourage property owners to take greater responsibility. Increased enforcement of building standards and more aggressive condemnation and demolition of dilapidated and abandoned structures will show residents that the City is serious about neighborhood revitalization. Current sensitive code enforcement strategies have contributed to neighborhood blight by allowing abandoned structures to remain in poor condition. Compile and make accessible information about abandoned and tax delinquent properties: The City of Birmingham currently has a mapping system available on its website, www.informationbirmingham.com, with which users can map neighborhood, school district, and other political boundaries, zoning, parks, buildings, and flood plain areas. However, the system currently does not allow users to map data related to vacant or tax delinquent property because this information is maintained by Jefferson County. The City should partner with the county to obtain data that could be used by developers to identify vacant and tax delinquent parcels for acquisition. This online mapping tool is an important resource for Birmingham, and the City should continue to invest in updates and improvements to ensure that it is user friendly. The skills and expertise available at area universities should be accessed for assistance in developing and maintaining an effective information system on abandoned and tax delinquent properties. 33

Increase the City s financial commitment to community development and neighborhood revitalization: The success of the City s efforts to re-use abandoned and tax delinquent properties will depend on its financial commitment. The budget for Birmingham s Department of Community Development is composed primarily of federal funds. The city must commit more dollars to the acquisition and re-use of abandoned and tax delinquent property and make funding more accessible to developers seeking to revitalize Jefferson County neighborhoods. Even the limited funds that are available are difficult to access according to non-profit developers who work in the City. Some of them have decided to work more closely with Jefferson County or other area counties because of the weak market conditions and frustrations with the City s distribution of community development dollars. Complaints include caps on the level of construction financing, the lack of developer s fees, and the delay involved throughout the development process. Incentivize developers to build and rehabilitate in the City of Birmingham: Birmingham s weak real estate market and the City s housing policies in recent years have prevented development in the City by private and non-profit developers. Because the market is so weak, developers have turned to areas outside of Birmingham where they can earn a return on their investment. The City must incentivize developers to build in distressed neighborhoods. It should consider streamlining its regulatory system (The current system requires as many as 25 separate inspections. 42 ) and implementing a tax abatement strategy similar to Cleveland s. 43 Such a strategy for Birmingham would more than pay for itself in the long term due to increased property taxes after the fifteen year abatement ends, and in the short term based on the increased values of surrounding properties, the prevention of further abandonment and the increased incentive for further investment. Cleveland Tax Abatement Program: The City of Cleveland grants a fifteen year tax abatement for developers who develop land acquired from the land bank. This incentivizes development on land bank property by allowing the developers to pay property taxes only on the land for the first fifteen years. Increased development in the City s weak market neighborhoods can incentivize additional development and decrease future abandonment. Leverage Private Partnerships: The City of Birmingham should work closely with realtors, banks, non-profit developers and other private sector partners who regularly invest in Birmingham neighborhoods. The strength of Birmingham s banking community provides an asset for making a strategy for abandoned properties a reality. They can provide the financing to non-profit and for-profit developers for the strategic re-use of these properties. In addition, the City should work with banks to analyze the portfolio of properties on which they hold mortgages to address cases in which the homeowner is at high risk of foreclosure. 42 Birmingham Neighborhood Redevelopment Task Force Report, 2003, p. 51. 43 This program would require state authorizing legislation. 34

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property Recommendations for Jefferson County Make the commitment: The County Commission, comprised of five elected officials, must take primary responsibility within the County for advocating a system that will prevent, manage and re-use tax delinquent and abandoned property more effectively. Two of the Commission s stated responsibilities are to serve as custodians of all of the County s property and to allocate resources for the construction of buildings, roads and other public facilities. 44 These statements point directly to the County s responsibility for maintaining and providing resources for the re-use of troubled properties. Increase the financial commitment to community development and neighborhood revitalization: Jefferson County s Community Development budget currently receives no allocation from the county s general fund. The Community Development budget is entirely financed through the federal HOME and CDBG programs, which provide limited dollars with certain restrictions. Jefferson County should make a financial commitment to neighborhood revitalization by allocating additional dollars over the current HOME and CDBG funds for the acquisition, management, and re-use of abandoned and tax delinquent property. Actively maintain and acquire abandoned and tax delinquent property: The first step in revitalizing many of Jefferson County s neighborhoods is cleaning up property that is creating neighborhood blight. The County should increase the use of existing tools to acquire abandoned and tax delinquent property. It should then maintain the property until transferring it to a developer or responsible owner. The County has already initiated plans to create a land banking program that will acquire and transfer properties to non-profit developers. 45 The Genesee County Land Bank (Michigan) and the Fulton County Land Bank (Georgia) provide examples of land banks that have been successfully established by urban counties. Make prevention of tax delinquency and foreclosure a priority: The Tax Collector s office and the Office of Community and Economic Development should work together to prevent properties from falling into tax delinquency and the taxes from being sold to the state. Once a property is Sold to State, the taxes and interest owed on the property begin to build, and it becomes more difficult for a Genesee County s Foreclosure Prevention Program is extremely aggressive. The Land Bank works hard not to foreclose on families who are struggling to pay their property taxes. The Land Bank has a full time foreclosure prevention staff member, who utilizes tools ranging from reverse mortgages to case management. The Land Bank even pays legal services staff to reach out to families facing foreclosure and fight the foreclosure process. Since its inception, the Land Bank has successfully postponed foreclosure on 1,160 family owned properties. 44 Jefferson County Commission, http://www.jeffcointouch.com/jeffcointouch/ieindex.asp. 45 Interview with Larry Langford, President of Jefferson County Commission, March 28, 2005. 35

financially strapped owner to pay the money they owe. The owner may eventually have to take out a loan to ensure they do not lose their house, and due to their financial condition, they are likely to be the victim of predatory lending. Thus, assistance to homeowners who are having trouble paying their taxes before the tax sale is an important opportunity for the County to intervene. The County should refer owners who are unable to pay property taxes due to financial hardship to community groups who provide counseling and financial assistance. The Genesee County s Land Bank s tax foreclosure prevention program provides a model for Jefferson County. Market Sold to State property to increase the sale and re-use of this property: While Jefferson County does not have direct control over the sale or maintenance of properties after they are offered for sale at the annual tax sale, they do provide information to interested purchasers of the Sold to State properties located in the County. The Jefferson County Tax Collector s office provides a list of Sold to State properties available to interested parties, from which investors or other purchasers may buy tax liens for the amount of taxes owed. The County should become more aggressive in encouraging private and public entities to invest in these properties by purchasing the tax liens from the state. 36

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property Summary of Recommendations State of Alabama Short Term Goals Increase the number of Sold to State properties transferred from the state to other purchasers. Provide information to purchasers of Sold to State properties about clearing title. Encourage the stewardship of Sold to State properties by local governments. Create a side lots program. Long Term Goals Reform the tax sale and foreclosure system to shorten the time between the purchase of tax lien and clearing title. Create the statutory authority for counties and cities to create land banks that can acquire and clear title to tax delinquent property. City of Birmingham Make the commitment to target tax delinquent and abandoned property for revitalization. Develop a plan for the prevention, management and re-use of abandoned and tax delinquent property. Hire an abandoned properties coordinator. Compile and make accessible information about abandoned and tax delinquent properties. Foster partnerships with realtors, banks, universities and private developers. Increase the City s financial commitment to community development and neighborhood revitalization. Actively acquire and maintain abandoned and tax delinquent property. Incentivize private owners to maintain their property. Incentivize developers to build and rehabilitate property within the City Make Community Development funds more accessible to developers seeking to revitalize Birmingham neighborhoods. Jefferson County Make the commitment to target tax delinquent and abandoned property. Market Sold to State property to increase its sale and re-use. Make prevention of tax delinquency and foreclosure a priority. Increase the County s financial commitment to community development and neighborhood revitalization. Actively acquire and maintain abandoned and tax delinquent property. 37

APPENDIX A: Case Studies GENESEE COUNTY, MICHIGAN Genesee County has received national attention for its effective implementation of Michigan s Tax Foreclosure and Land Banking laws. These pieces of legislation have allowed Genesee County to acquire, hold, and maintain property to positively impact the market and the neighborhoods in which it works. Michigan Tax Foreclosure Law In 1999, the Michigan legislature passed Public Act 123, a new law that streamlined the process of property acquisition through tax foreclosure. It achieved the following: Shortened the tax foreclosure process: Previously, tax liens were sold at county tax sales after a property had been delinquent for three years, and the original owner and other lien holders were given one year to redeem their property. This process has been shortened to two years, and to one year in the case of abandoned property. 46 Ensured that foreclosure results in clear title: Under the new system, either the State or the county treasurer forecloses on tax delinquent property after two years of unpaid property taxes, at which time the property has clear title. This greatly reduces the time and cost needed to bring the property back into productive use. Eliminated investors from the process: Previously, investors purchased the county s interest in the property at annual tax sales, and the investors received interest when the owner redeemed the property. Now, fees and interest are still charged to tax delinquent property owners, but that money is paid directly to the County rather than to an outside investor. However, Genesee County has a Delinquent Tax Revolving Fund. 47 46 Brophy, Paul C. and Jennifer S. Vey, Seizing City Assets: Ten Steps to Urban Land Reform, The Brookings Institution and CEO s for Cities, October 2002, p. 11. 47 The County sells notes each year, and distributes the proceeds to each of the taxing jurisdictions in an amount equal to that taxing unit's delinquent taxes. As the County Treasurer subsequently collects the delinquent taxes, such moneys are then used to pay the debt service on the County notes. In this way, the taxing units are able to receive all of their property tax revenues in the fiscal year for which the taxes are levied. This fund enables local units of government that levy property taxes in the County, to receive all of their property tax revenues in the fiscal year for which those taxes are levied instead of having to wait until such property taxes are actually paid. 38

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property Increased fees for delinquency: When a property becomes delinquent, a 4% fee and 1% monthly interest are imposed. When the property is forfeited, the owner must pay a $175 search fee, and the monthly interest rate increases to 1.5%. Provided funding for the management of tax delinquent property: The new tax law provides funding to help counties manage tax foreclosed properties by designating profits from property sales to a land reuse fund. Genesee County Land Bank After the passage of the new tax foreclosure law, Genesee County Treasurer, Dan Kildee, capitalized on this new legislation by creating a land bank that would allow the county to more effectively bring tax foreclosed property back into productive use. The Genesee County Land Bank, a public entity, works to prevent foreclosure, manage delinquent and foreclosed property, and redevelop this land. Created in August of 2002, it served as the model for the Michigan Fast Track Land Bank Act which was passed in 2003. The Genesee County Land Bank exercises the County s right to acquire tax foreclosed property that has been titled to the County Treasurer by bidding on property at the county auction. (The State and the City where the property is located have the first choice to acquire this land but rarely if ever exercise that right). The Land Bank also can acquire land that became delinquent before the passage of the new tax foreclosure law, through an expedited quiet title procedure. To give the Land Bank priority on which tax foreclosed property it wishes to acquire, the County has the right to bundle properties for sale that have been identified for acquisition by the Land Bank. The Land Bank can then hold, sell, or develop this land. The Land Bank has aggressively pursued the clean up and demolition of its properties before selling them, and often holds property in order to influence the market or as a part of a larger land assemblage plan. Although the Land Bank is a public entity, it is not funded through general funds from the county s budget. The 2003 land banking law provided that land banks receive half of the property tax proceeds from any property sold by the land bank for five years after the sale. In addition, an amendment to the Brownfield Redevelopment Law, has allowed the Genesee County Land Bank to implement an unusual tax increment financing (TIF) plan. 48 This has been a way to connect the wealth within the region with the neighborhoods with the greatest need. When the Land Bank was created, it entered into an agreement with the City of Flint to reassure the City that the County would not pursue development against the City s interest. To ensure continued cooperation, the City Council president serves on the board of the Land Bank. This 48 The taxes generated by the newly redeveloped tax-foreclosed properties are used to support bond payments that fund aggressive demolition, cleanup, and rehabilitation of forgotten land. The taxes from the entire property inventory are cross-collateralized to support the cleanup of all of the land bank s property, with the tax captured from more valuable properties supporting improvements for all properties, whether or not those properties are ever redeveloped or generate any significant tax collections. 39

helps with cooperation on use of the land, needed maintenance on the properties within the City s jurisdiction, and occasional financial assistance. In addition to acquisition and disposition activities, the Land Bank has multiple special programs that allow it to work more effectively. Genesee County s Foreclosure Prevention Program is extremely aggressive. The Land Bank works hard not to foreclose on families who are simply struggling to pay their property taxes. The Land Bank has a full time foreclosure prevention staff member, who utilizes tools ranging from reverse mortgages to case management. Since the land bank s establishment, it has successfully postponed foreclosure on 1,160 family owned properties. The Side Lot Disposition Program allows the Land Bank to convey unimproved property to an adjacent owner-occupied residential property which shares at least 75% of a common side boundary. Properties that are too small for independent development are transferred for a nominal fee, and other properties can be conveyed at a minimum of the acquisition, demolition, and maintenance costs. The Clean and Green Program pays community based organizations such as churches or scout troops to provide property maintenance on several hundred Land Bank properties. This allows the Land Bank to convert vacant Land Bank property into gardens and green spaces by supporting neighborhood groups and fostering community participation. 49 The money we re spending is not just cleaning up neighborhoods. It s helping to develop capacity and a sense of connectedness that is really important to the neighborhood. -Dan Kildee Housing Renovation Program: The Land Bank limits its development to strategically targeted parcels because the market cannot support a large amount of new development. However, a 2004 county bond initiative provided the Land Bank with $1.5 million in rehab funding, with which the Land Bank plans to renovate up to 50 properties. The Land Bank sees its Housing Renovation Program as a part of its neighborhood redevelopment strategy. 50 49 Urban Property Abandonment: Turning Blight Into Opportunity Knowledgeplex Expert Chat, March 15, 2005. 50 Genesee County Land Bank website, www.thelandbank.org. 40

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property ATLANTA, GA Reforms at both local and state levels have facilitated the ability of key players in Atlanta to work more effectively to bring abandoned and tax delinquent property back into productive use. The State of Georgia has passed both land bank authorizing legislation as well as tax foreclosure reform legislation. Both are playing a major role in bringing abandoned and tax delinquent property back into productive use in Atlanta. In addition, the City and Fulton County have established the infrastructure necessary to acquire and facilitate re-use, including an inventory system and the Fulton County/City of Atlanta Land Bank Authority. 1. Enabling legislation Changes to the Georgia state statute in 1990 and 1995 have allowed the City of Atlanta and Fulton County to more effectively acquire and re-use tax delinquent property within their jurisdictions. Land bank authorizing legislation (1990) provided that two or more local government entities could together create a land bank authority with the ability to foreclose on, acquire, clear title to, and dispose of tax delinquent property. The land bank authority must be a nonprofit entity governed by a board comprised of officials from both government entities. Tax foreclosure reform legislation (1995) created a streamlined tax judicial foreclosure procedure that both shortens and eases the process of clearing title. This new method of tax foreclosure is available as an option for counties to use for some or all of its tax delinquent properties. 51 Non-judicial Tax Foreclosure Process Tax sale may be held 30 days after taxes are due. Judicial participation is not required. Redemption period lasts at least 12 months. Clearing title requires quiet title action, which may take one to three years and cost $2500. Judicial Tax Foreclosure Process Taxes must be delinquent for one year before the tax sale may be held. Judicial order authorizes the sale of the property. Redemption period lasts 60 days. After the 60 day redemption period, the tax purchaser holds free and clear title. The property is then marketable and insurable. 2. Fulton County/City of Atlanta Land Bank Authority In 1991, Fulton County and The City of Atlanta partnered to create the Fulton County/City of Atlanta Land Bank Authority (LBA). Its mission is to free land bound by cloudy title for transfer to those who are bringing new life to struggling communities. 52 51 Interview with Frank Alexander, Professor of Law, Emory University, March 15, 2005. 52 Atlanta Case Study Summary: Model Practices in Tax Foreclosure and Property Disposition, Local Initiatives Support Corporation, www.lisc.org. 41

The LBA works most closely with CDCs because it is funded primarily through Community Development Block Grants and focuses primarily on affordable housing development. It has four staff and an annual operating budget of $322,000, with half of the funds contributed by the City and half by the County. Its four member board, which is comprised of two members appointed by the Fulton County Commission and two members appointed by the Atlanta Mayor s office, approves the land bank s acquisition and disposition decisions. 53 Property Acquisition The LBA acquires approximately 75 parcels per year. 54 As determined by state legislation the LBA is authorized to use three mechanisms to acquire property: Acquisition directly from the owner either by purchase or by accepting a donation of the property or tax deed (however, LBA policy doesn t allow this method). Acquisition of the deeds to tax delinquent properties held by city or county agencies. This can be done by accepting conveyance of parcels held by the city or county, bidding on parcels levied by the tax commissioner, or purchasing tax liens from the tax commissioner. Acquisition of parcels where a failed sale has occurred (The LBA can also request that the tax commissioner convey tax deed parcels to it). 55 Property Disposition Land Bank property is transferred without charge to primarily non-profit developers whose proposals are approved. Each project must apply to LBA to get unpaid taxes forgiven, and the LBA board of directors determines if the project meets the criteria to allow delinquent taxes to be waived. Over 900 housing units have been built on land secured with the help of the LBA, and nearly 240 more are under construction (2002). 56 3. Effective community advocacy and coordination The successful enactment of Georgia s state and local reforms is due to the strong advocacy and coordination of many non-profit, private, and government partners. An informal coalition of affordable housing advocates played a key role in the creation and implementation of the described legislative and administrative initiatives. The local government has been a key player, as they have remained involved and worked closely with the advocacy community to ensure increased housing revitalization funds for the effective disposition of property through the LBA. 53 Interview with Audrey Akpan, Director of Fulton County Land Bank Authority, March 30, 2005. 54 Ibid. 55 Atlanta Case Study: Model Practices in Tax Foreclosure and Property Disposition, Local Initiatives Support Corporation, 2003, www.lisc.org. 56 Brophy, Paul C. and Jennifer S. Vey, Seizing City Assets: Ten Steps to Urban Land Reform, The Brooking Institution and CEOs for Cities, Oct. 2002, p. 14 42

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property ORANGE, NEW JERSEY New Jersey provides an excellent example of the role that non-profits can play in the passage and the implementation of legislative reforms to assist with the prevention, management and reuse of abandoned properties. The Housing and Community Development Network of New Jersey is a state-wide non-profit that played a pivotal role in the drafting and passage of New Jersey s Abandoned Properties Rehabilitation Act. This legislation created new tools and reformed existing tools for more effective and more efficient management and re-use of abandoned and tax delinquent property. Housing and Neighborhood Development Services, Inc. (HANDS) is a non-profit housing developer that has taken the lead in implementing the provisions of the law in Orange, New Jersey. Abandoned Properties Rehabilitation Act In 2004, New Jersey enacted the Abandoned Properties Rehabilitation Act, designed to help municipalities and other parties bring abandoned properties back into productive use. The legislation serves as a tool kit for the acquisition and redevelopment of troubled properties. First, it defines abandoned property 57, and encourages municipalities to track this property. The law makes the following legislative changes: 1. Creates a special tax sale: Municipalities can remove properties that are on the abandoned property list from a tax sale and set them aside for a special tax sale. They can set terms for special tax sale, including limiting eligible bidders to qualified entities, setting performance requirements for bidders, and combining properties into single bid packages. Municipalities can also require that if the successful bidder fails to carry out its obligations under the sale, the liens or the properties revert to the municipality. 2. Accelerates the foreclosure of abandoned properties: Prior to this act, foreclosure on tax liens took at least two and a half years. Now purchasers of the tax liens on abandoned properties can initiate foreclosure proceedings immediately, and the lien purchaser has the right of entry on such properties in order to make repairs, abate nuisances, and preserve the value of the property. 3. Creates the power of spot blight eminent domain: Eminent domain can be used to take any property on the abandoned properties list without designating the neighborhood as a revitalization zone. For purposes of compensation, the law establishes a standard in such proceedings, providing that where the value of the property after rehabilitation or new construction is less than the total development cost, the value of the land is zero. 4. Provides receivership rights to Municipalities to take possession of abandoned structures: Municipalities or qualified entities designated by municipalities may seek 57 Abandoned property is defined as any property that has not been legally occupied for six months, and which also meets any one of the following criteria: (a) the property is in need of rehabilitation, and no rehabilitation has taken place for six months; (b) construction was initiated and then discontinued prior to completion, and no construction has taken place for six months; (c) the property is in property tax arrears by at least one installment; or (d) the property is determined to be a nuisance by the public offender. 43

receivership rights from a superior court to renovate abandoned properties. Before the entity is given possession, the court must provide the owner and other lien holders with assurance that they will carry out renovation in timely manner. The developer must submit a rehabilitation plan to be approved by the court, after which (s)he can qualify for state grants and rehabilitation loans. Construction or rehabilitation funds borrowed by the entity can receive lien priority over existing liens and mortgages. If the owner fails to regain control of the property, the court may order the sale of the newly renovated property. 5. Allows municipalities to take recourse against other assets of a property owner: The law provides municipalities with recourse against any other assets of the owner of an abandoned property to recover funds spent by the municipality for repairs, boarding, or demolition of the property. 58 HANDS HANDS has been working to revitalize neighborhoods in Orange, New Jersey for over 16 years. According to the organization s website, The HANDS strategy is built upon a working philosophy that believes that neighborhoods are revitalized by the actions of hundreds of individuals investing their time, their funds, their energy, and their hopes in the future of that neighborhood. HANDS believes the role of the CDC is to leverage those investment decisions, to bolster public sector action, and to generate more private sector investment. 59 Both before and since the passage of the Abandoned Properties Rehabilitation Act, the organization has utilized a redevelopment strategy that has reduced the number of vacant and abandoned properties by two-thirds. The organization has worked closely with the City to gain control over troubled properties through tax sales, bank foreclosures and direct purchase, and to rehabilitate them for home ownership. Under the new law, HANDS is targeting the properties sucking the life out of neighborhoods. Since the passage of the new law, the organization has been able to purchase tax liens and foreclose on homes immediately. In addition, it is working with the City of Orange, which with its new power of spot eminent domain, will be able to acquire and clear title to properties that can be transferred to HANDS for redevelopment. 60 58 Abandoned Properties and Receivership Laws, Housing and Community Development Network of New Jersey, www.hcdnnj.org. 59 Our Strategy, Housing and Neighborhood Development Services, Inc., www.handsinc.org. 60 City Ready To Move Under New Law, Community Development Digest, April 6, 2004, No. 04-07, p. 10. 44

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property BALTIMORE, MD The City of Baltimore has utilized a variety of strategies aimed at revitalizing inner city neighborhoods through the acquisition and re-use of abandoned properties. Project 5000 Project 5000 is the City s most recent effort to gain control over abandoned properties. In early 2002, Mayor Martin O Malley announced his goal of acquiring 5,000 vacant properties within two years. While it utilized a variety of acquisition tools including eminent domain, donation, and direct purchase, Project 5000 focused on tax sale foreclosures as the primary vehicle for acquisition. The City worked closely with private attorneys who donated their time and expertise to conduct title searches and to assist the City in acquiring vacant and abandoned property through tax foreclosure. 61 The City has now exceeded its goal of 5,000 properties and is focusing efforts on the revitalization of these properties. Project 5000 is part of a larger strategy to revitalize Baltimore neighborhoods through the acquisition and re-use of blighted properties. A multitude of legislative and administrative tools have made Baltimore s aggressive implementation of this strategy successful. Legislatively authorized tools that have facilitated Baltimore s ability to enforce codes and acquire abandoned and tax delinquent property include the following: Quick Take Legislation: In 1999, the Maryland legislature authorized Baltimore to utilize its power of eminent domain to acquire abandoned properties by filing quick take requests in Housing Court (The use of Housing Court instead of Circuit Court speeds the process). The legislation allows the city to use eminent domain to acquire three additional categories of properties: properties that are unoccupied, uninhabitable, and tax delinquent for two or more years; properties that are uninhabitable and for which rehabilitation cost exceeds postrehabilitation market value; and vacant lots resulting from demolition. The process reduces notification requirements and allows faster acquisition of occupied property located in targeted revitalization areas. 62 To ensure efficient compensation for owners who come forward after foreclosure, the City places money in a fund where it is held until the owner claims it. 63 Amended Building Codes: In 2000, Maryland passed streamlined building codes that reduced the compliance costs of rehabilitations. These new codes provide that the renovation of an old building does not have to be brought into total compliance with codes for new construction. Because codes 61 Urban Property Abandonment: Turning Blight Into Opportunity, Knowledgeplex Chat, March 15, 2005. 62 Kromer, John, Vacant-Property Policy and Practice: Baltimore and Philadelphia, University of Pennsylvania, October 2002, pp. 30-31. 63 Leigh, Nancy Green. The State Role in Urban Land Redevelopment, Georgia Institute of Technology, January 2002, pp. 28. 45

are locally adopted, the State of Maryland provided incentives for adopting the new code system in the form of access to state funding for conservation and transportation programs. Special Tax Sale In 2000, Maryland authorized special tax sales, in which lower minimum bids may be set for certain properties, and in which multiple properties may be bundled into bid packages. This special tax sale process has facilitated the success of Project 5000. Vacant House Receivership Law The City of Baltimore enacted this legislation to allow the court to appoint a receiver for property with city code violations that have remained unaddressed by the owner. The receiver may then sell the property as-is to an approved buyer or improve it before selling it, using the sales proceeds to repay the rehabilitation costs. Once court action is instituted, the only way for a property owner to regain control of the property is to fully rehabilitate it to code standards. 64 Administrative initiatives, in addition to legislative changes, have allowed Baltimore to effectively address its large number of vacant and abandoned properties. Neighborhood Typology is a system that was created by Baltimore to organize housing market data and to identify revitalization strategies for the city s neighborhoods. The system was created using Census data reorganized on a neighborhood basis. By analyzing data such as home values, owner-occupancy, and vacancy rates, the City identified four categories of neighborhoods: preservation neighborhoods, stabilization neighborhoods, reinvestment neighborhoods, and redevelopment neighborhoods. Based on this categorization, the city targeted strategies for neighborhood revitalization. CitiStat is a performance measurement and accountability tool that Mayor O Malley launched in 2000. It monitors and improves service delivery through accurate and frequent collection and mapping of data, which allows the city to effectively and efficiently target resources to emerging or ongoing problems. The City has used CitiStat to evaluate its performance on its maintenance of vacant and abandoned property such as the cleaning and boarding of vacant buildings, its building demolitions, and its property acquisition. The system has led to millions of dollars saved and improved services to Baltimore communities. The Interdepartmental Property Disposition Task Force was created to review the sale potential for properties owned by the city, and to identify methods of shortening the time required to complete the disposition of a city property. In addition, to improve its effectiveness, the City has focused on increasing its staff capacity and expertise. Partnerships with lawyers, realtors, and developers have facilitated the acquisition and disposition of vacant and abandoned buildings and lots. 64 Kromer, pp. 24-31. 46

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property APPENDIX B: Geographic Concentration of Tax Delinquent Properties High levels of tax delinquency occur in areas with low property values, low median incomes, and high vacancy rates. The maps below show by zip code the concentration of tax delinquent property in Jefferson County, median household income, median value of owner-occupied units, and the percent of housing units vacant. 65 Zip codes 35020, 35211, and 35207 had over 500 properties become tax delinquent in 2000. These zip codes also had some of the lowest household incomes, the lowest median home values, and the highest vacancy rates in the County. Number of Tax Delinquent properties, 2000 Median Household Income, 2000 Median Value of Owner Occupied Units, 2000 Percent of Housing Units Vacant, 2000 65 The number of tax delinquent properties was provided by Jefferson County s GIS department. The other maps were generated based on Census data. 47

Tax Delinquent Property By Zip Code The maps below, provided by Jefferson County s Department of Information Technology show the number of properties that became tax delinquent in each of the years between 2000 and 2005. They show that the concentration of tax delinquent property in low-income neighborhoods has been rather consistent over the past six years. 48

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property APPENDIX C: Alabama s Legal Procedure for Acquiring and Clearing Title to Tax Delinquent Property The legal process outlined below is encoded in Title 40, Section 10 of the Alabama Code. The legal process is the same for all 67 Counties in the State of Alabama. Property Taxes in Alabama In the State of Alabama, the County is the designated collector for all state, county, city, and school district property taxes. Tax Delinquency Taxes are due to the County on October 1 of every year. Taxes become delinquent if they have not been paid by January 1. The owners of affected properties are given a total of seven notices before the property is subject to sale at the annual tax sale. These notices include: A late notice sent if taxes are not paid by October 1. (This notice is not required by law but is practiced by Jefferson County) A delinquency notice sent to all owners that haven t paid taxes on February 1 to notify the owner that their taxes are delinquent. A citation ad in the paper if taxes have not been paid by March 1. This ad lists the names (and only the names) of owners whose taxes are still delinquent. A citation notice sent to the owner by mail if taxes have not been paid by March 1. Three successive legal ads in the newspaper for those properties for which taxes are still delinquent in April. These notices include the property s legal description, the owner s name, and the amount of taxes due. In April of each year, the property owners with delinquent taxes also have the opportunity to appear before the Probate Judge to appeal that their land not be sold in the tax sale. Very few reasons are accepted by the judge other than bankruptcy. 66 The Annual Tax Sale An annual tax sale is held by the County once a year during mid-may, at which the County Tax Collector auctions off the tax liens on all tax delinquent property. Jefferson County has the largest tax sale of all of the counties in Alabama, and it lasts approximately 3 days. 67 During the tax sale, investors and other tax purchasers gather at the county courthouse to bid for the tax liens on tax delinquent property. The minimum bid allowed for a given piece of property is the amount of taxes owed on it. The tax lien is sold to the highest bidder, who, upon confirmation of sale receives a Certificate of Purchase. If no one bids on the property, it is sold to the state, and the State of Alabama receives the Certificate of Purchase (See Sold to State Properties below). 66 Interview with Gary Boyd, Director of Land Divestment, December 20,2004. 67 Ibid. 49

Taking possession of the Property After receiving the Certificate of Purchase, the purchaser is immediately entitled to possession of the property. The purchaser may demand possession and if possession is not given within 6 months, the purchaser may file legal action to obtain possession. 68 Although immediate possession is allowed under statute, for several reasons it rarely occurs in practice. 69 First, the likelihood of redemption within the first three years is high. Ninety percent of the properties that are tax delinquent at the time of the tax sale are redeemed within the three year statutory redemption period. 70 In addition, case law has created a requirement that after receiving the tax deed, the purchaser must be in adverse possession of the property for three years. So, most tax purchasers wait until after receiving the tax deed to take possession. Moreover, by not taking possession of the property, tax purchasers may be able to avoid responsibility for upkeep of the property and may be able to lessen their potential liability exposure. Receiving a Tax Deed Three years from the original Date of Sale, the tax purchaser can return the Certificate of Purchase along with $5.00 to the Probate Judge to receive a tax deed. After this point, the owner or another interest holder cannot redeem with the County, but must redeem with the deed holder. In addition to 12% annual interest, the redemptioner must pay legal fees for judicial redemption. If the deed holder has taken possession of the property, (s)he can charge as much as (s)he wants for the original owner to redeem. Statutory Redemption As developed by Alabama state and case law, there are two primary methods of redemption with which the owner or other lien holder can redeem the property. The first is the statutory or administrative redemption period, and the other is the judicial redemption period. Statutory redemption is redemption through the method described in statute. This is described in Title 40 of the Alabama Code and is relatively straightforward. For three years from the date of sale, the original property owner and others entitled to redeem have the right to redeem the property by paying to the Probate Judge (who will transfer the funds to the tax purchaser) the amount the tax purchaser paid for the tax lien, and all subsequent taxes paid or owed by the purchaser, plus 12% annual interest. 71 As listed in statute, those entitled to redeem include the owner, his heirs or personal representative, mortgagees, purchasers, or other persons having an interest in the property. Whether the property is sold to an investor or Sold to State, the property can be redeemed through this method for the first three years after the tax sale. If the property is Sold to State, the owner can redeem at any time before the title passes out of the hands of the state. 72 68 Alabama Code, Section 40-10-74 69 Interview with Will Hereford, Attorney at Law, Burr and Forman, February 2005. 70 Interview with Gary Boyd, Director of Land Divestment, December 20, 2004. 71 Alabama Code, Section 40-10-120. 72 Alabama Code, Section 40-10-120. 50

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property If the land contains a residential structure at the time of the tax sale or is located in an urban renewal or urban redevelopment area, the owner must also pay: All insurance premiums paid or owed by the purchaser for casualty loss coverage on insurable structures, The value of all permanent improvements made by the purchaser (in urban renewal areas) or the value of all preservation improvements (on land with a residential structure), plus 12% interest. Special Redemption Rules A mortgagee or other lien holder has one year to redeem the property after receiving written notice of the sale from the tax purchaser. If the original owner (or their heir) is an infant or insane person, they may redeem within one year of the removal of their disability. A remainderman or a reversioner is entitled to the right to redeem without time limit. 73 Judicial Redemption Through a series of court cases beginning in 1916, the Alabama Supreme Court created judicial redemption, based on Section 40-10-83 of the Alabama Code. Judicial redemption, a process outside of statutory redemption is based on possession of the property rather than the time limit of three years outlined by the original statute. Under judicial redemption, if the landowner has maintained possession of the property that has been sold in the tax sale, then their right of redemption has no time restriction. Redemption can occur through a lawsuit to redeem the property, or in response to a lawsuit for possession by the tax purchaser. 74 The Alabama Supreme Court stated the following in Gulf Land Co. v. Buzzelli, 501 So. 2d 1211, 1213 (Ala. 1987): We have stated many times that the purpose of 40-10-83 is to preserve the right of redemption without a time limit, if the owner of the land seeking to redeem has retained possession. This possession may be constructive or scrambling, and, where there is no real occupancy of the land, constructive possession follows the title of the original owner and can only be cut off by the adverse possession of the tax purchaser. Adverse possession As determined by case law, the tax purchaser must hold the property in adverse possession for three years, following the end of the statutory redemption period before (s)he is able to clear title. This requirement, which is based on Code Section 40-10-82, effectively extends the total life of the tax lien to a minimum of six years. Gulf Land Co. v. Buzzelli, 501 So. 2d 1211, 1213 (Ala. 1987) describes the adverse possession requirement: 73 Ibid. 74 Justice, William R. Redemption of Real Property Following Tax Sales in Alabama, The Cumberland Law Review, vol. 11:331, 1980, p. 335. 51

Code 1975, 40-10-82, does establish a 'short statute of limitations' for tax deed cases. This section states that the redemption action must be filed within three years from the date when the purchaser became entitled to demand a deed for the property. We have held that this statute does not begin to run until the purchaser is in adverse possession of the land and has become entitled to demand a deed to the land. In order for the short period of 40-10-82 to bar redemption under 40-10- 83, the tax purchaser must prove continuous adverse possession for three years after he is entitled to demand a tax deed. It is important for a tax deed holder who wishes to clear title to file suit for possession of the property immediately after the end of the statutory redemption period (which coincides with the timing of the receipt of a tax deed). This provides record of the beginning of adverse possession and allows him or her to clear title as soon as possible without legal question of possession. If there is evidence that the original owner has maintained possession of the property, the judicial redemption process preserves their right to redeem without time limits. Adverse possession is defined as using the land in a manner consistent with its character. Acts constituting adverse possession include posting For Sale and No Trespassing signs on the lot, surveying the lot to determine the front corners, recording a tax deed, paying taxes, picnicking on the property, and cutting the front yard. 75 From the perspective of the owner of a tax delinquent property owner who wants to keep the property, (s)he should redeem the property within three years after the tax sale. In addition, (s)he should try to prevent the tax purchaser from taking possession of the property, because in the case that the owner is financially unable to redeem within three years, if the tax purchaser has not held the property in adverse possession for three years, the owner s likelihood of redemption is still high. Sold to State Property If no one bids on a property at the Annual Tax Sale, it is Sold to State, and these parcels are available for purchase from the state. In Jefferson County, there are over 11,000 parcels available for purchase. If a purchaser wishes to buy a piece of Sold to State land, (s)he must submit an application to the state (which is available on the State s website). When such an application is received, the Land Commissioner must mail a notice to the owner or some person having an interest in such land informing him or her of the application and fixing a reasonable time within which such owner or such other person having an interest in the lands may redeem. 76 The Land Commissioner is required to give notice only to one person entitled to redeem. 77 If the original owner or someone with interest wants to redeem Sold to State property, the redemptioner must pay to the Probate Judge: 75 Redemption of Real Estate from Ad Valorem Tax Sales, p. 14. 76 Alabama Code, Section 40-10-133. 77 Kilgore v. Gamble, 253 Ala. 334, 44 So.2d 767 (1950). 52

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property The amount for which the land was sold, plus 12% annual interest, and The amount of taxes due on the land since the tax sale, including costs and fees, plus 12% annual interest. Three years after a property is Sold to State, if the property has not been redeemed, then the state can do either of the following: 1. Sell the property at a private sale to any purchaser for the price paid by the state with the amount of taxes due since the original sale, plus 12% annual interest; 2. Sell the land to the county or municipality or to a non-profit or government entity designated by the county or municipality at the best price offered, irrespective of the amount of taxes and interest due. 78 If a Sold to State property is still in the hands of the state 5 years after the Date of Sale, the Land Commissioner can sell the land in private sale to any purchaser at the best price obtainable, irrespective of the amount of taxes due. 79 Clearing Title Clearing title is an essential step in bringing tax delinquent properties back into productive use because without clear title, the deed holder cannot get title insurance. Without title insurance, banks and other lending institutions will not take a mortgage on the property. The easiest and fastest method of clearing title is by purchasing the interest in the property of the owner and all other parties, and obtaining a quit claim deed from the tax purchaser. If the interest holders cannot be found or do not agree to sell or release their interest, a tax purchaser cannot clear title to a piece of property until they have been in adverse possession of the property for three years following the end of the three year statutory redemption period. The process of clearing title involves the filing of a quiet title action in court, which quiets the title of other interest holders to the property. This process takes a minimum of 90 120 days and with delays that are somewhat common the process can take a year or more. Costs associated with quiet tile action include a filing fee, legal expenses, fee for a court appointed guardian, etc, and can easily total over $3,000. 80 So, from the perspective of a tax purchaser whose goal is to gain possession of the property and clear title, (s)he should take possession of the property immediately after receiving a tax deed, and file a suit to maintain possession for three years. After holding the property in adverse possession for three years, the original owner will be barred from redemption and the tax purchaser will be eligible for quiet title action. 78 Alabama Code, Section 40-10-132. 79 Alabama Code, Section 40-10-134. 80 Interview with Jim Stanley, Assistant City Attorney, January 25, 2005. 53

Investors As is the case in over half of the jurisdictions around the country 81, investors come to Jefferson County s annual tax sale to bid on tax liens as a form of investment. Because of the priority status given to property tax liens (meaning that they will be repaid before any other lien), and because of the guaranteed interest earned if the owner chooses to redeem, tax liens generally are a safe investment. The involvement of investors in the process allows Alabama s counties, cities, and school districts to receive property tax revenue more reliably. For example, at the tax sale in May, 2004, liens worth $2,827,560, were sold by the Birmingham Division of the Jefferson County Tax Collector s office. Over two-thirds of those liens were collected from investors, in addition to over $25 million in overbid moneys. In Alabama, the rate of return for tax liens which are redeemed is twelve percent. According to Alabama law, if the original owner chooses to redeem their property (which occurs in 90% of the cases 82 ), they must pay the investor the amount for which the land was sold, all taxes that were due on the land since the tax sale, including costs and fees, plus 12% annual interest. Until recently, investors could bid over the minimum amount of delinquent taxes, and receive 12% annual interest on the total amount of the bid (no matter how high the over bid was) from the redemptioner when (s)he redeemed. However, a recent change in the law limits the amount of the overbid to 15% of the appraised value of the property. However, instead of limiting the amount of the overbid, since that legislative change, the overbid amount on almost every piece of property has been 15% of the value. 83 81 Alexander, Frank, Renewing Public Assets for Community Development, Local Initiatives Support Corporation, Oct. 2000, p. 4. 82 Interview with Gary Boyd, Director of Land Divestment, December 20, 2004. 83 Ibid. 54

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property APPENDIX D: Tax Sale and Sold to State Property Data Sold to State Properties in Jefferson County as of December, 2004 Year of Tax Sale No. of Sold to State properties Percent vacant Average Value Percent Located in Birmingham 1981 1 100.00% $4,700 100.0% 1982 79 91.10% $5,940 78.5% 1983 73 86.30% $6,403 78.1% 1984 94 90.40% $5,704 86.2% 1985 254 91.70% $4,626 78.7% 1986 171 91.20% $5,695 73.1% 1987 254 92.50% $6,204 79.1% 1988 227 94.30% $6,572 77.5% 1989 331 94.30% $6,878 77.6% 1990 276 90.20% $5,818 65.6% 1991 250 91.60% $6,759 73.6% 1992 484 92.60% $5,604 59.3% 1993 266 89.50% $8,615 67.3% 1994 303 91.40% $6,602 64.4% 1995 345 87.80% $6,027 71.3% 1996 339 85.30% $7,789 72.3% 1997 467 77.10% $8,483 68.1% 1998 671 72.00% $10,916 68.9% 1999 786 60.60% $16,582 72.6% 2000 823 65.50% $15,457 60.9% 2001 1,080 48.90% $20,105 58.3% 2002 1,556 45.70% $24,066 59.9% 2003 2,568 45.10% $28,250 57.4% TOTAL 11,698 65.50% $16,606 64.7% Source: Analysis of data provided by Jefferson County Tax Collector s Office 55

JEFFERSON COUNTY TAX SALES DATA, Birmingham Division 1988-2005 CALENDAR YEAR TAX YEAR Total Parcels offered at tax sale Parcels Sold Percent of Total Offered Sold at Tax Sale Total $ Received from Sales Over plus $ to Treasurer Tax Amount Collected SALE DATE 1 87-88 1987 3597 383 11% 27,665 5/28/1988 2 88-89 1988 3571 214 6% 27,044 5/31/1989 3 89-90 1989 3948 167 4% 13,499 5/30/1990 4 90-91 1990 4328 92 2% 11,194 5/29/1991 5 91-92 1991 3936 78 2% 13,922 5/27/1992 6 92-93 1992 3954 75 2% 15,485 5/26/1993 7 93-94 1993 3424 155 5% 33,251 5/25/1994 8 94-95 1994 3495 301 9% 332,739 5/31/1995 9 95-96 1995 4065 616 15% 2,693,906 1,914,570 779,336 5/31/1996 10 96-97 1996 4069 934 23% 5,872,936 4,609,450 1,263,486 5/21/1997 11 97-98 1997 4534 1560 34% 19,799,651 18,298,316 1,501,335 5/27/1998 12 98-99 1998 4550 1296 28% 14,301,828 12,837,600 1,464,228 5/19/1999 13 99-00 1999 3353 1344 40% 14,084,121 12,611,900 1,472,221 5/31/2000 14 00-01 2000 3556 1114 31% 16,435,260 14,951,622 1,483,638 5/15/2001 15 01-02 2001 3969 1031 26% 13,410,484 11,937,600 1,472,884 5/14/2002 16 02-03 2002 3819 1459 38% 21,961,220 20,352,919 1,608,301 5/13/2003 17 03-04 2003 3712 1758 47% 27,127,617 25,253,500 1,874,117 5/25/2004 Average 3,875 740 19.1% 8,009,519 13,640,831 1,435,505 Source: Jefferson County Tax Collector s Office 56

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property APPENDIX E: Statutory Redemption Periods, by State This list only includes statutorily authorized redemption periods. Judicially mandated redemption periods such as Alabama s judicial redemption period are not considered in this list. Even based solely on this comparison of statutory redemption periods, only three states have redemption periods longer than Alabama s: Wyoming, Utah, and California. Statutory Redemption Period Delaware 60 days after judicial confirmation of sale Texas 6 months; 2 years for homestead and agricultural land Maryland At least 6 months after sale Georgia 1 year after nonjudicial sale; 60 days after judicial sale Connecticut 1 year after sale Hawaii 1 year after sale Indiana 1 year after sale Pennsylvania 1 year after sale Rhode Island 1 year after sale South Carolina 1 year after sale Tennessee 1 year after sale Vermont 1 year after sale Ohio 1 year after sale Kentucky 1 year before sale 1 year prior to forfeiture; 3 years before sale for taxes prior to 1999; special provisions for Michigan abandoned property West Virginia 12-15 months Maine 18 months after nonjudicial proceeding; 1 year following judicial sale Florida 2 years after issuance of tax certificate Oregon 2 years after judgment New Jersey 2 years after nonjudicial sale; 6 months after judicial in rem proceeding Iowa 2 years after sale Mississippi 2 years after sale Missouri 2 years after sale New Hampshire 2 years after sale Oklahoma 2 years after sale Illinois 2 years after sale; 6 months for vacant land Arkansas 2 years before final sale Virginia 2 years delinquency pre-sale; 1 year where structures are a nuisance Wisconsin 2 years delinquency pre-sale Nevada 2 years prior to issuance of deed Minnesota 3-5 years depending on location and usage of property; 5 weeks for abandoned property Kansas 3 years for homestead properties; 1 year for abandoned properties; 2 years for all others Alabama 3 years after sale Montana 3 years after sale Nebraska 3 years after sale North Dakota 3 years after sale South Dakota 3 years after sale if within municipality Arizona 3 years after sale of tax lien Colorado 3 years after sale of tax lien Idaho 3 years before deed is issued New Mexico 3 years delinquency pre-sale Washington 3 years delinquency pre-sale Wyoming 4 years after sale Utah 4 years delinquency pre-sale California 5 years before final sale; 3 years in case of nuisance properties Source: Alexander, Frank. Tax Liens, Tax Sales, and Due Process, Indiana Law Journal, vol. 75: 747, 2000. 57

APPENDIX F: City of Birmingham Condemnations and Demolitions Documents.:. WHAT CONDITIONS MAKE A STRUCTURE CONDEMNABLE? "Abandoned property" means any property that is not legally occupied in whole or large part, and which meets anyone of the following additional criteria: a. The property has not been legally occupied for a period of six months, is in need of rehabilitation in the judgment of the Building Official, 'and has not been the subject of rehabilitation during that six month period; b. The property has been determined to be a nuisance by the Building Official for good and valid reasons, which may include but shall not be limited to the following: (1 ) The property has been found to be unfit for human habitation, occupancy or use, whether for residential or nonresidential purposes, as appropriate; (2) The condition and vacancy of the property, taking into account the nature of the structure and its proximity to other structures, increases the risk of fire to the property and adjacent properties; (3) The property has been used at any time during the six month period prior to the Building Official's determination for illegal purposes as recommend by the City of Birmingham Police Dept, including the consumption or sale of illegal substances, and the conditions resulting in that use have not been corrected; c. The owner has failed to secure the property, and it is subject to unauthorized entry leading to potential health and safety hazards. d. The presence of vermin, accumulations of debris, uncut vegetation, or physical deterioration of the structure or grounds have led to potential health and safety hazards, including the risk of fire; e. The dilapidated appearance or other condition of the property materially affects the welfare, including the economic welfare, of the residents of the area in close proximity to the property and their quiet enjoyment. 58

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property STEPS TAKEN WHEN PROPERTY IS CONDEMNED 1. All complaints from the public. (All complaints received for the Department of Planning, Engineering & Permits are to first go through the Mayor's Office of Citizen's Assistance, Don Lupo). 2. Inspector inspects property, and if found condemnable, formally writes-up complaint. (Inspector posts a "Danger Do Not Enter" sign at each entrance to the building). 3. Property ownership researched through a title company, obtaining names of parties with interest in the property. 4. 30 day NOTICE mailed certified to all known persons having interest in the property.. (State law and city ordinance gives owner 30 days from date of letter to start repairs or demolish property. Upon receipt of 30-day letter the owner(s) can make application for a permit to repair property. Repairs must begin promptly and inspections must be called for every 30 days during the rehabilitation process at (254-2211), in order to stay further condemnation action. Minimum valuation for repair permits is $10,000.00). Owner's failure to do extensive/substantial repairs will result in the permit being voided. If the permit is voided, the condemnation process resumes at the stage it was in when permit was issued. 5. Formal condemnation by Birmingham City Council. (This happens 31 days after date of certified letter). 6. After the property has been formally condemned, only the City Council can stop the condemnation process. (If owner wishes to appeal the condemnation process, the owner must file a request with the City Clerk's Office, phone 254-2290, to appear before the City Council. After formal condemnation, only the City Council can approve the issuance of a repair permit). 7. The condemnation resolution for the condemned property is recorded in the Probate Office at the Jefferson County Courthouse, phone 325-5420. 8. 15 day (Courtesy) Notice mailed certified to assessed owner and by regular mail to any other known interested party to remove personal property from structure. 9. Property is bid for demolition and advertised in a paper of local circulation. (The lowest responsible bid is accepted). 10. Before demolition, all structures are assessed for asbestos. Any asbestos MUST BE REMOVED. (Asbestos removal is bid separately from demolition, and the lowest responsible bid is accepted. After asbestos removal, a notice to proceed is prepared for Jeffco Health Department with a 10-day delay before work is to start. The demolition has a 60-day completion time). 11. Demolition by the City or a private contractor. (Demolition is to be completed 60 days from start date listed on the notice to proceed. Only the Director of Buildings and Inspection can stop a demolition after the issuance of the demolition permit). 12. Demolition costs are approved by City Council. (The demolition cost includes: asbestos removal, an administrative cost plus the cost of demolition. This cost is assessed against the property's legal description). 13. Demolition costs are assessed against the property as a Tax Lien, all liens must be paid off before property can be sold with clear title. (Call 254-2204). (The council resolution assessing the property is RECORDED IN THE PROBATE OFFICE OF THE JEFFERSON COUNTY COURTHOUSE). If LIEN is not satisfied within 10 years the City becomes owner of property. 59

THE FOLLOWING ARE SOME NOTICEABLE CONDITIONS, FROM PLAIN VIEW THAT WILL JUSTIFY A STRUCTURE AS POSSIBLY CONDEMNABLE. Any Burned structures Many burned structures have insufficient or no insurance Building open with doors and windows removed Roof Collapsing on any structure Weak and sagging floors, including dangerous porches & steps Bulging Walls, Interior Ceilings Falling In Portions of a building haven fallen onto the public right of way or onto adjacent property Obvious roof and structural deterioration Vandalism of property i.e. removal of plumbing, electrical and mechanical systems fixtures Tree(s) have fallen onto structure making them uninhabitable House that has been moved to a site with no repairs Tornados & Flooding making houses unfit for habitation Structures in danger of sliding off a hill or slope NOTE: Each structure deemed condemnable is evaluated by a Condemnation Inspector on a case-bycase basis. Each Condemnation Inspector is certified by the Southern Building Code Conference. 60

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property RESOURCES Interviews Akpan, Audrey. Director of Fulton County Land Bank Authority, March 30, 2005. Alexander, Frank. Professor of Law, Emory University, March 15, 2005. Boyd, Gary. Director of Land Divestment, December 20, 2004; January 24, 2005; March 29, 2005. Burks, Lewis. Vice President, Community Development Manager for Alabama, Regions Financial Corp., January 20, 2005. Cloud, Jim. Chief of Condemnation and Demolition, January 24, 2005. Calvert, Michael. Executive Director, Operation New Birmingham, March 24, 2005. Carruthers, Paul. Vice President of Regional Community Development, AmSouth Bank, January 19, 2005 Davis, Yvonne Green. Attorney at Law, January 27, 2005. Dominick, Frank. Executive Director, Outreach, Incorporated, February 23, 2005. Doyal, Larry. State Land Agent, Ad Valorem Tax Division, Alabama Department of Revenue, January 21, 2005. Durham, Suzanne. Executive Director, YWCA of Birmingham, January 18, 2005 Fenstermaker, Jim. Director of Community Development, City of Birmingham, October 18, 2004. Gemmill, John. Department of Housing and Urban Development, February 8, 2005. Hereford, Will. Attorney at Law, Burr and Forman, February 2005. Kelley, Susan. Lead Grant Manager, Jefferson County Department of Community and Economic Development, December 20, 2004. Kildee, Dan. County Treasurer, Genesee County, March 10, 2005. Knox, Ken. Deputy Director of the Housing Division, Department of Community Development, City of Birmingham, January 26, 2005. 61

Langford, Larry. President of Jefferson County Commission, March 28, 2005. Liggett, Howard. Executive Director, National Tax Lien Association, February, 2005. Meeks, Jim. President, Mooring Tax Asset Group, February 3, 2005 Moore, Charles. Executive Director, Habitat for Humanity of Greater Birmingham, January 20, 2005. Newbill, Robert. Jefferson County Department of Community and Economic Development, December 20, 2004. Retan, Chris. Executive Director, Aletheia House, October 18, 2004; December 20, 2004; January 2005. Schumacher, Dave. President of Tax Title Services, March 14, 2005. Sewell, Jeff. Assistant County Attorney, Jefferson County, January 18, 2005. Smallwood, J.T. Jefferson County Tax Collector, December 20, 2004. Stanley, James C. Assistant City Attorney, City of Birmingham, October 18, 2004; January 25, 2005; April 1, 2005. Sternad, Evelyn. Director, City of Cleveland Land Bank, March 14, 2005. Tucker-Smith, Cerita. Real Estate Agent, Barnes and Associates Realtors, January 24, 2005. Weinrib, Dan. Jefferson County Tax Assessor, November 22, 2004. Williams, Jack. Member, Alabama House of Representatives, January 26, 2005. Other Sources: 50 th Percentile Rents, U.S. Department of Housing and Urban Development, www.huduser.org. Abandoned Properties and Receivership Laws, Housing and Community Development Network of New Jersey, www.hcdnnj.org. Alabama Code, Title 40, Chapter 10, http://alisdb.legislature.state.al.us/acas/acaslogin.asp. Alabama Department of Archives and History, www.archives.state.al.us/counties/jefferso.html. 62

The Prevention, Management, and Re-use of Jefferson County s Tax Delinquent Property Alexander, Frank. Renewing Public Assets for Community Development, Local Initiatives Support Corporation, Oct. 2000. Alexander, Frank. Tax Liens, Tax Sales, and Due Process, Indiana Law Journal, vol. 75: 747, 2000. American Fact Finder, U.S. Census, www.census.gov. Atlanta Case Study Summary: Model Practices in Tax Foreclosure and Property Disposition, Local Initiatives Support Corporation, www.lisc.org. Blight Free Philadelphia: A Public-Private Strategy to Create and Enhance Neighborhood Value, Eastern Pennsylvania Organizing Project and Temple University Center for Public Policy, 2001, http://www.temple.edu/rfd/content/blightfreephiladelphia.pdf. Brophy, Paul C. and Jennifer S. Vey. Seizing City Assets: Ten Steps to Urban Land Reform, The Brookings Institution and CEO s for Cities, October 2002. City Ready To Move Under New Law, Community Development Digest, April 6, 2004, No. 04-07. Cleveland Case Study Summary: Model Practices in Tax Foreclosure and Property Disposition, Local Initiatives Support Corporation, www.lisc.org. Consolidated Submissions for Community Development Programs, Part 3: Housing Market Analysis, Jefferson County Office of Community Development, March 2000. The Costs of Sprawl and Urban Decay in Rhode Island, Grow Smart Rhode Island, 1999. Financial Products and Projects, Housing Enterprise of Central Alabama, www.region2020.org/currentprojects/heca.shtml. Genesee County Land Bank website, www.thelandbank.org. Goetz, Edward G., Kristin Cooper, Bret Thiele, and Hin Kin Lam. Pay Now or Pay More Later: St. Paul's Experience in Rehabilitating Vacant Housing, CURA Reporter, April 1998. Housing Units by Occupancy Status, SOCDS Census Data, http://socds.huduser.org. How Do Vacant Properties Hurt Communities? National Vacant Properties Campaign, www.vacantproperties.org. Jefferson County Commission, http://www.jeffcointouch.com/jeffcointouch/ieindex.asp. Justice, William R. Redemption of Real Property Following Tax Sales in Alabama, The Cumberland LawReview, vol. 11:331, 1980. 63

Kildee, Daniel T. Forgotten Urban Land, Urban Land, Jan. 2005, pp.32-35. Kilgore v. Gamble, 253 Ala. 334, 44 So.2d 767 (1950). Kromer, John. Vacant-Property Policy and Practice: Baltimore and Philadelphia, University of Pennsylvania, October 2002. Leigh, Nancy Green. The State Role in Urban Land Redevelopment, Georgia Institute of Technology, January 2002. Neighborhood Redevelopment Task Force Report, City of Birmingham, 2003. Our Strategy, Housing and Neighborhood Development Services, Inc., www.handsinc.org. Policy Statement on Community Development and Neighborhood Revitalization, Department of Community Development, City of Birmingham. Property values rise, tax bump to follow, The Birmingham News, June 13, 2004, p. 2A. Redsale Address, List of Tax Delinquent Property, Jefferson County Tax Collector s office. Reese v. Robinson, Supreme Court of Alabama, 523 So. 2d 398 (Ala. 1988). Schilling, J.M. The Revitalization of Vacant Properties: Where Broken Windows Meet Smart Growth, International City/County Management Association, 2002. Snow, Christoper, Kathry L.S. Pettit, and Margery Austin Turner. Neighborhood Early Warning Systems: Four Cities Experience and Implication for the District of Columbia, Fannie Mae Foundation, March 2004. Spelman, William, Abandoned Buildings: Magnets for Crime? Journal of Criminal Justice, 1993, 21(5). Tingle, James M. and Fred Enslen. Redemption of Real Estate from Ad Valorem Tax Sales. Urban Property Abandonment: Turning Blight Into Opportunity, Knowledgeplex Expert Chat, March 15, 2005. 64