Cleveland to Create an Industrial Land Bank

By Kirstin S. Toth

Last fall, Mayor Jane Campbell of Cleveland announced the kick-off of an industrial/commercial land bank for the city, modeled after the highly successful residential land bank established by the city several years ago. The mayor has initiated discussions and strategy planning to define the best use of an industrial/commercial land bank for the city.

An industrial land bank, as we define it, is “an assemblage of properties reserved for industrial or commercial redevelopment, either as individual parcels, or grouped into a geographic area, such as an industrial or business park.”

Part of the work taken on by the Great Lakes Environmental Finance Center of Cleveland State University in assisting in this effort is to scan the nation to find the best existing practices in land bank management to better inform those involved with Cleveland’s efforts.

One key question that should be answered in early planning is whether a land bank should be considered as a tool for brownfield redevelopment, or as a component of a broader strategy to manage all of a city’s real property assets in a real estate portfolio approach.

The portfolio approach would incorporate all of the real property owned and operated by a municipality for its own services, as well as for redevelopment purposes. A land bank for housing satisfies the assembly and reservation of properties for specific residential uses; likewise, an industrial/commercial land bank can do the same for vacant land deemed useful for the economic growth of commercial and industrial concerns.

While some cities are beginning to view their real property holdings for all purposes in an overall asset management context, brownfields remain a unique type of asset in the portfolio mix. Communities are beginning to see the benefits of including this type of asset in a land bank within their portfolio of real property.

Why Create a Land Bank?

So, what are the economies of scale provided by the establishment of an industrial/commercial land bank? How can a land bank strategy facilitate and spur redevelopment of core properties that may happen to be brownfields? Is the land bank another tool in an array of economic development tasks, or is the land bank a cornerstone economic development strategy within the management of a city’s real estate portfolio?

The answer lies in looking at the benefits of land bank creation around the nation, (although there are few mature examples in the strict sense of the term). Much experience has been gained in the development of land banks for housing and neighborhood development, particularly in Baltimore, Philadelphia, Detroit, Milwaukee, St. Paul and an array of other cities around North America.
For most cities where a vacant property focus has been implemented, the benefits are accrued over a period of planning and implementation. This period includes a redefinition of economic development practices that focuses on both commercial/retail and neighborhood revitalization concurrently. An information system is created that makes the community able to project economic improvement by targeted geographic areas, as well as clearly defining the types and characteristics of properties available.

Those communities that have created a consensus of “operational will,” in addition to political will, to achieve the real-life, day-to-day goals of improving economic status for residents and investors of slow-recovery cities, will achieve success in the near term as well as in the long term.

The Benefits

Just a few of the benefits of land bank creation for brownfield redevelopment include:
• Operation of a land bank for industrial/commercial brownfield properties puts into motion an outreach/marketing orientation to redevelopment, deflecting a criticism toward cities that are often seen as reactive rather than proactive in the redevelopment of their core communities.
• Measurable outcomes result from consolidating municipal resources, not necessarily in manpower, but in focus of those resources on the goals of overall economic development and brownfield redevelopment strategies. Streamlining municipal resources to focus on land bank management for all underutilized property will tie together all concerns within a city and keep management focused on goals and objectives. For example, legal structure of the land bank itself, along with risk management and other liability concerns, will take major effort in departmental collaboration. This collaboration will improve the community’s ability to move properties in and out of the land bank in a timely manner, ready to market, and respond to development opportunities. Potential funders like to see measured and tracked outcomes.
• Investor access through the Web to geographic and information systems that are integrated and complete serves as a decision-making tool for investors and a foundation for the municipality’s redevelopment strategy. It also provides one more reason to deal with a city in its marketing efforts to turn around brownfields.

Several cities have just begun to see the fruits of their efforts along these lines from land assembly programs or strategies begun only two or more years ago. Time and financial stability are, of course, key factors of success.

Creative development of funding mechanisms is being addressed by many cities, including the examination of bond capacity and the will to utilize it, creation of separate organizational structures to operate the land bank (an LLC or REIT?) and ability to respond to legal frameworks established in state or federal law. Successful programs will be able to adjust or tackle those challenges accordingly.

As we begin to see more examples of land banking strategies and practices, models will emerge to help cities like Cleveland seeking to respond in a strategic way to brownfield and economic development. Land banks may serve as future examples of the benefits of portfolio asset management when it comes to real property assets.

Kirstin Toth is project director for the Great Lakes Environmental Finance Center at Cleveland State University, one of nine university-based technical assistance centers established nationally.

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