Tuesday, September 23, 2014

City gains a pond, potential liability with land purchase

6/2/2014

Ownership of anything comes with liability. Often that liability includes maintenance costs. Whether the property is land, buildings or some other iteration, nothing is free.

The Ottawa City Commission’s recent decision to acquire a proposed single-family homes development on Easy Street, between 15th and 17th streets on the city’s southwest side appears too good to be true. The $111,725 purchase price covers the amount of property taxes owed by Lawrence-based developer Wayde LLC. The developer, which hasn’t paid property taxes since 2009 on these properties — or another development east of Ottawa’s GreatLife Golf and Fitness, 1001 E. Logan St. — approached the city about acquiring 20 of 23 lots in the Lakeside Estates residential development.

Ownership of anything comes with liability. Often that liability includes maintenance costs. Whether the property is land, buildings or some other iteration, nothing is free.

The Ottawa City Commission’s recent decision to acquire a proposed single-family homes development on Easy Street, between 15th and 17th streets on the city’s southwest side appears too good to be true. The $111,725 purchase price covers the amount of property taxes owed by Lawrence-based developer Wayde LLC. The developer, which hasn’t paid property taxes since 2009 on these properties — or another development east of Ottawa’s GreatLife Golf and Fitness, 1001 E. Logan St. — approached the city about acquiring 20 of 23 lots in the Lakeside Estates residential development.

The property includes a pond and city commissioners would like to see a portion of the area turned into a city park complete with an area for fishing. The city is getting a great deal on the tracts with an average price of $5,586 each, compared to original asking price of $35,000 to $45,000 each for the presumed executive subdivision. While the tracts are a worthy acquisition, their purchase might open the door to some awkward situations when other folks who don’t pay their property taxes come calling, expecting the city or county to make them a similar deal — transferring ownership and the attached liability to a municipality instead leaving to it with the individual or developer.

Worse yet, the sale could artificially lower the value of neighboring properties and create an uneven playing field for other for-profit businesses with tracts of land to sell within the city.

The city isn’t loaded with cash for such acquisitions and the land’s subsequent maintenance costs won’t be cheap either. Just because the land is located on Easy Street doesn’t mean it will be easy to sell the building sites. If it were, why wouldn’t the developer already have done so? And selling some of the lots later might get politically dicey if the city attempts to sell the lots itself rather than relying on professional real estate agents to do the job.

Local taxpayers are not prepared to pay a heavier load of property taxes to make up the difference for taxes lost through this deal either. Last year’s delinquent tax list included $1,269,329.77 of delinquent property taxes — about 4 percent of all assessed taxes. No doubt, some of those property owners, such as Westwood Acres LLC — another subdivision developer — might want the same kind of deal the city entered into with the Lawrence developer.

Sure, with the Lakeside Estates purchase, the city gets back about one-third of its investment in the taxes via the property tax revenue and unpaid mowing fees already assessed against the land. But it comes with a risk. The city’s ability to get loaded down with un-sellable property is evident in the former city hall building at Fourth and Walnut streets, which the city vacated more than 18 years ago. Though a potential buyer now could be on the horizon, it took a long time to get to that point.

In Detroit, more than half of the city’s property owners were delinquent on paying last year’s property taxes, according to the Detroit News. The situation became so dire that property taxes reportedly are 10 times the value of the appraised value of properties in an attempt to generate the needed income to pay for city services. Meanwhile, Detroit’s city services continue to decline from a lack of revenue, so one problem fosters the other one.

Detroit property owners’ insolvency became contagious to its city government and others leaving remaining property owners wondering if they are crazy to even pay their taxes. While Ottawa isn’t facing anywhere near this level of foreclosure and underpayment of taxes, city officials certainly ought to want to do all they can to support the success of local businesses and not allow itself to become the repository of insolvent properties.

Anything that looks too good to be true probably is. The city must be careful about the possible predicaments it might face with this purchase. If Ottawa is left owning un-sellable land, we’re all on the hook.

Jeanny Sharp,

editor and publisher

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