Many state and local governments are currently facing, or will potentially have to address, budget shortfalls.
Newer public organizations, like land banks created to address vacancy and abandonment, are often the first to struggle with funding. Often local governments recognize the value in creating the land bank, but they don’t put enough money into the new organization to jump start its success. Still others are seeded with sufficient funds to get started, with the expectation that they will independently figure out how to generate enough funds to continue operations for the long term. Expectations often exceed the reality, unfortunately.
Common Obstacles for Land Banks
From our experience advising land banks, we see three common challenges:
- As quasi-governmental or nonprofit organizations, land banks don’t fit neatly into a government organizational chart. It’s unclear which entity “owns” funding the bank. Land banks may need special allocations, joint funding agreements, or new line items carved from existing budget lines to cobble together a budget.
- Private foundations and other private funders often want to fund experienced organizations, and newly-formed organizations can’t meet the “minimum years’” requirement. Some funders may also discourage or prohibit funding to quasi-government organizations, even though it is legally permissible as per IRS rules.
- Land banks may be expected to generate program revenues by selling property allocated to them. Too often that property has little or no monetary value or requires upfront expenses to get it turned around.
Funding Sources for Lank Banks
Some land banks are fortunate enough to be able to work with property that has clear monetary value, and they can generate program revenues once any attached taxes or liens are cleared. This includes properties with structures that can be salvaged and rehabbed into something useful and industrial sites that need brownfield remediation to unlock their potential. A number of land banks have been able to take advantage of EPA brownfield funds to tackle large projects. To assist with this, we published an article and link to a helpful tool for organizations considering brownfield projects.
A lucky few land banks have the capacity to research and solicit private funders to raise funds, though not all communities have foundations and the competition for philanthropic dollars is fierce. In response, we have added grants research as a service to help our clients seek out funding opportunities. We recently identified over a dozen new funding sources for one organization by performing grants research they were not able to do themselves.
Additionally, the American Rescue Plan Act of 2021 (ARPA) program offers a once-in-a-lifetime opportunity for local governments to boost start-up funding into land banks, especially in the area of general operating support funding that is so hard to come by. The Treasury Department’s interim rule provides a good deal of flexibility for state and local spending in lower-income neighborhoods, tribal government spending, and spending targeted to “other populations, households, or geographic areas disproportionately impacted by the pandemic.” To learn more about the flexibility provided by the interim rule and ways these funds can be used, read our recent blog on this topic.
Last but not least, the best option is to fund land banks directly, whether through a tax-
recapture approach or by adding a line item in local budgets to fund some portion of land bank operating costs. A city might spend tens or hundreds of thousands of dollars to cut the grass on vacant lots. Spending some of that money to put properties to productive reuse through a land bank is money well spent.
We Can Help You Develop a Funding Plan
If you are looking for ways to raise funds for your community revitalization strategy, we’d like to help. Our consulting team has provided strategic consulting services to public and private clients working to strengthen their organizations and communities for over 30 years. Our typical land bank consulting services include financial feasibility analysis and developing a reasonable and realistic funding strategy. We understand land banks and revitalization organizations face unique challenges. Let us apply our experience to help you.
If you’re interested in learning more, contact us to schedule a time to discuss how we can help.