Last week, I sent this email (with a few subtle variations, depending on the recipient) to every Saint Paul City Councilperson (and each of their Legislative Assistants, just for good measure).
I’m Mitch Berg. I’m a twenty-year Saint Paul resident. I live in the Fourth Ward.
I also write a blog (Shot In The Dark) and host a radio talk show (“The Northern Alliance Radio Network”).
I have a few questions about a recent City Council decision.
At the June 25 meeting, the City Council passed Ordinance 07-1194 4 (”Green Sheet” number 3046791). This ordinance amends Legislative Code 33.03, and states that vacant homes (in Category I and II – the most saleable homes) can only be sold if all vacant building fees are paid, and if the owner posts a performance bond or escrow equal to the estimated amount needed to bring the structure up to code.
I have several questions about this ordinance, and I’d appreciate your answers.
1) It seems, on its face, that this ordinance is intended to compel banks and other lenders owning foreclosed property in Saint Paul to bring foreclosed property up to current building codes before they can be re-sold. Is this accurate?
2) Has the City Council gotten an estimate as to the likelihood of institutional mortgage-holders (banks) complying with this ordinance? Has there been any “market research” done on the percentage of compliance expected?
3) If a mortgage holder does *not* comply – fails to post the performance bond or escrow, or bring the building up to code – then as I read it, this ordinance means the property remains in limbo, a deteriorating vacant structure. Is this accurate?
4) Given that the reason most of these homes were foreclosed in the first place was that the amounts owing were greater than their market values, and that it can *easily* cost between $30,000 and $50,000 (or more) to bring an older home up to current code standards, on properties that are already “upside down” (worth less than the bank has lent for them), what percentage of institutional owners (banks) do you expect to comply with the terms of this ordinance?
5) Did the City Council seriously discuss this scenario? If so, why did they decide to take the action they did in approving the ordinance?
6) In the event that a large percentage of institutional mortgage holders that own foreclosed, vacant properties in Saint Paul *do not* comply with the ordinance, what is the city’s “fallback plan” for dealing with the large number of vacant, deteriorating properties that would result? And for the additional drag on the values of *neighboring* properties that will result from having huge numbers of vacant, distressed buildings as neighbors?
Finally, a few questions that deal with the consequences of the ordinance:
7) Hypothetically, let’s assume the worst: that most of the banks involved decline to comply with the ordinance. They also stop paying property taxes, allowing the properties to go tax-forfeit. The land forfeits to the State, obviously – but the State then assigns it to the city/county to dispose of. Assuming the hypothetical “worst case” scenario, what does the city intend to do with all of this new property?
8) Again assuming the “worst case” above – is it the city’s intention to use the epidemic of tax-forfeit property to…:
a) drag down property values in these distressed neighborhoods
to make eminent domain settlements against the remaining
homeowners cheaper, to enable the city to…
b) redevelop the land according to its own plans, on the relative
9) Finally – what do you, and the Council, *believe* the consequences of making properties much more expensive than they are worth to their owners will be?
Again, when you get a moment, I’d be very interested in your answers to the above. If email is less convenient for you, feel free to call my cell phone: [redacted].
Wednesday, the responses.