February 4, 2011 at 1:00 am

Detroit's Real Estate Bazaar: Day 2 of 2

Governments own 50,000 properties in Detroit

Thousands of blighted parcels yield no tax revenue, but offer hope for mayor's revival plans, experts say

Detroit — Decades of abandonment, demolition and foreclosures have made taxpayers the largest landowners in Detroit.

As the city's population has declined by half since 1950 to about 900,000, more than 39,000 parcels have fallen into the city's control — far more than any single landowner and more than eight times the tally of the largest 10 landowners combined.

Another 10,300 parcels are owned by the state or federal government, meaning that roughly 12 percent of all parcels in the city are publicly owned. Excluding roads, bridges, parks and rights of way, publicly owned land in Detroit covers an area the size of Hamtramck and Ferndale put together.

Detroit is believed to have more taxpayer-owned land than any other city in the United States, and the parcels produce no taxes, cost money to maintain and are often blighted themselves. But Mayor Dave Bing says the land is an opportunity for his Detroit Works Project to reshape the city.

It won't be easy, but local leaders and national experts said publicly owned land could be used to stitch together neighborhoods or swapped with residents for the effort. Bing's plan is expected to emerge in the next few months and include offering residents incentives to relocate to seven to nine neighborhoods and reducing services to under-populated areas.

"Getting control of the land is one of the biggest factors for turning a city around," said Paul Fontaine, a lecturer at the University of Michigan's Taubman College of Architecture and Urban Planning.

Land reverts to the city if it isn't sold at tax foreclosure auctions. In 2009, the city took ownership of 7,928 parcels, more than double the 3,648 it acquired in 2008. Through November 2010, the city had taken control of 6,847 parcels.

"It has increased substantially in a short period of time," said Marja Winters, deputy director of the city's planning and development department and a leader in the Detroit Works Project.

More may be on the way: Banks and other financial institutions control another 7,560 properties, most from foreclosure.

"If there are going to be opportunities in Detroit's future, it's all going to require land," said Alan Mallbach, a land expert and part of a team that studied Detroit for a 2008 report for the American Institute of Architects that recommended reconfiguring city land to create "urban villages" connected by green space.

Track record questioned

Some are skeptical Detroit officials can pull it off.

The city has a spotty track record for assembling and maintaining land through the years. Residents have complained about overgrown city-owned lots for years.

Detroit's auditor in 2006 found that Henry Hagood, the city's former planning director, had alerted his friends to buy property in advance of proposed redevelopment.

One of those friends was developer Rayford Jackson, who later went to prison for his role in bribing city officials in 2007 to approve a $1.2 billion Synagro Technologies sludge-hauling contract.

Hagood resigned when the allegations surfaced in 2005, and no one was charged.

The U.S. Department of Housing and Urban Development also has taken issue with how the city spends money, accusing officials in 2001 of inappropriately spending $18 million on improperly performed or nonexistent construction work.

Ken Cheyne, a Beverly Hills developer, has battled the city to regain control of the Eliza Howell Park off Telegraph that his family deeded to the city as a park. Cheyne contends the land is in such sorry shape that it can't be considered a park. The city disagrees and has prevailed in court. Cheyne is appealing.

"I don't see any indication of the city, forget being good stewards, of being good business managers," Cheyne said. "They don't have any ability whatsoever, or staff or expertise."

'These things take time'

Public ownership of land alone isn't enough to make redefining Detroit easy. So many speculators have jumped into so many neighborhoods and picked up parcels for $500 or less that redevelopment could cost taxpayers millions of dollars to buy them out.

"Speculators and absentee landlords are the biggest obstacles to economic redevelopment," said Wayne State law professor John Mogk.

For nearly a decade, the city has spent about $9 million in an attempt to create a 190-acre area off Interstate 94 for an industrial park near Mount Elliott.

Over the years, the Detroit Economic Growth Corp. acquired nearly 90 percent of the parcels necessary for the project. But assessing records show more than 100 parcels in the area are still in private hands, including at least three owned by Michael G. Kelly, a Grosse Pointe Woods investor whose companies own more private parcels than any other landowner.

The project has taken so long that DEGC board member Conrad Mallet Jr. suggested giving up earlier this year, according to published reports. He didn't return phone calls for comment.

Even so, the project is ongoing and negotiations continue with property owners, said Malik Goodwin, vice president of project management for DEGC. The project's goals — creating jobs from blighted land — are as valid today as when the project started, he said.

"These things take time," Goodwin said.

Can't save every area

Though some fear city ownership, it's an asset if used properly, said Maggie DeSantis, who helped the Community Development Advocates of Detroit develop a "strategic framework" for the city's future.

DeSantis said the city could encourage people to leave one sparsely populated area if they were offered a city-owned home in a more dense area, perhaps free of charge and with a tax break. Or, she added, the city could trade larger plots of land to those who want to stay on "urban homesteads" — a largely vacant area that would then receive fewer city services.

"To me, the question of ownership and how we're going to reuse vacant property is wrapped up in 'are we going to get creative with it?'" said DeSantis, president of the Warren Conner Development Group that works to redevelop the east side.

In some neighborhoods, the city is a substantial landowner. In one seven-block area off Hayes, south of Seven Mile, the city owns 61 parcels, or more than a quarter of all properties. To the east of Hayes, in a similarly developed eight-block area, the city owns just four parcels, or 2 percent.

For city planners, it may mean using the lost neighborhood to the west to help the more stable one to the east. So many jobs have fled the city that finding and helping create industries is essential, Mogk said, which also may include rezoning residential areas for industrial or commercial use.

Saving every neighborhood as it is would be impossible, some planners have said.

While many municipalities don't want to play landowner, Detroit has little choice, said Dan Kildee, a former Genesee County treasurer who is a national advocate for cities and counties to create "land banks" to hold property until it's ready for development and fight property abandonment and blight.

"We've got to get control of the land," he said. "Government can't fear ownership of the land."

By taking land and holding it, the city can limit the supply of an already abundant resource for which there is little demand. It also can protect against blight in those parts of the city that still are in good shape. When opportunities arise, the city could more quickly put together land for developers, looking to steer development rather than solely profit from it.

"You've got to think big; you've got to have a big vision," Fontaine said. "And you've got to back it up."

mwilkinson@detnews.com

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