Funding the Blight Fight Illinois Municipal League ANNUAL CONFERENCE SEPTEMBER 18, 2014 LANCE C. MALINA

Funding the Blight Flight I. PROBLEM II. Taking control A. Contact and Follow-Up B. Vacant Property Registry C. Code Enforcement D. Administrative Adjudication E. Nuisance Abatements F. Nuisance / Injunction Lawsuits G. Demolition / Repair Actions III. ACQUISITION A. Deeds in Abandonment B. Foreclosure C. TaX DEED Actions D. Deed in Lieu IV. Funding A. Tax increment financing (TIF) B. Special service areas (SSA) c. Municipal bonds D. LIENS

I. PROBLEM Image source: John Morton

II. TAKING CONTROL Contact and Follow-Up Vacant Property Registry Code Enforcement Administrative Adjudication Nuisance Abatements Nuisance / Injunction Lawsuits Demolition / Repair Actions

A. Contact and Follow-Up II. TAKING CONTROL A. Contact and Follow-Up 1. Owners 2. Residents 3. Lienholders B. Vacant Property Registry 1. Contact Information 2. Minimum Requirements 3. Abatement of Violations

II. TAKING CONTROL 1. Ordinances C. Code Enforcement 2. Training 3. Resources D. Administrative Adjudication 1. Statutory Authority - 65 ILCS 5/1-2.1-2, 65 ILCS 5/1-2.2-1, 65 ILCS 5/11-31.1-1,et seq. 2. Local Control Image source: House of Apparel

II. TAKING CONTROL E. Nuisance Abatements 1. General Municipal Code Authority - 65 ILCS 5/11-60-2 2. Other Statutory Nuisances 3. Recovery in Mortgage Foreclosure Actions F. Nuisance / Injunction Lawsuits 1. Generally 2. Appointment of Receivers - 65 ILCS 5/11-31-2 3. Chronic Public Nuisance Ordinances and Suits

II. TAKING CONTROL G. Demolition / Repair Actions 1. 65 ILCS 5/11-31-1 2. “Super Priority Liens” 3. Includes Attorneys’ Fees Image source:: Rhys A.

III. ACQUISITION A. Deeds in Abandonment B. Foreclosure C. Tax Deed Actions D. Deed in Lieu E. Donation Image source: GreenWorksLLC

III. ACQUISITION A. Deeds in Abandonment 1. 65 ILCS 5/11-31-1(d) a. Tax delinquency or water bill delinquency (2 years); b. Unoccupied by legal possessors; and c. Dangerous or unsafe building. 2. Advantage: acquire property Image source: garyhymes

III. ACQUISITION B. Foreclosure 1. Ability exists to foreclose on a wide variety of municipal liens on property. 2. Lien priority must be considered. 3. Must be prepared to take ownership. Image source: cheesecurls

III. ACQUISITION C. Tax Deed Actions 1. Authority from 35 ILCS 200/22-5, et seq. 2. Advantage: Clean Title 3. Disadvantage: Time Consuming

III. ACQUISITION D. Deeds in Lieu 1. Avoids foreclosure expense. 2. Results in taxes being voided. 3. Fast. Image source: Federal Reserve Bank of Chicago

IV. FUNDING A. Tax Increment Financing (TIFs) Using future gains in taxes to subsidize current improvements Projected to create the conditions for gains above the routine yearly increases which would occur without the improvements

IV. FUNDING Example 5-acre area in a municipality Vacant Buildings Dilapidated Low tax revenue for schools, county, library, parks, etc. Municipality establishes a TIF District Bonds to install streetlights, benches, planter areas, etc. Promise to assist “Gap-like” retailers that improve their buildings Area improves Starbucks moves in Other retailers follow People shop and eat there Property values increase  Taxes increase

IV. FUNDING What areas can be designated as TIF Districts? 65 ILCS 5/11-74.4-3 Blighted Areas Conservation Areas Industrial Park Conservation Areas “But for” designation of the area as a TIF District, development of the area will not occur. Image source: sixcorners.org

IV. FUNDING What can be located in a TIF District? Almost anything, except: A golf course and related clubhouse facilities on vacant land. Anything at all on vacant land designated as public land for camping and hunting or for nature preserves and used for that purpose within the last five years. 65 ILCS 5/11-74.4-3(0).

IV. FUNDING What can TIF revenue be spent on? 65 ILCS 5/11-74.4-3(q) Costs of redevelopment in a TIF district, including its own expenses, expenses of developers and expenses of certain other taxing districts NOT direct financial aid to a retail entity opening in the TIF while closing at another Illinois location within 10 miles of the TIF district and outside the boundaries of the municipality.

IV. FUNDING Criteria for: Forming a Blighted Area due to Detriment to Public Health and Safety 65 ILCS 5/11-74.4-3(a)(1) Forming a Blighted Area with Vacant Land 65 ILCS 11-74.4-3(a)(2) Forming a Conservation Area with 50% or More of Structures that are 35 years of age or older 65 ILCS 5/11-74.4(3)(b) 65 ILCS 11-74.4-3(a)(3)

IV. FUNDING B. Special Service Areas (SSAs) The Illinois Constitution allows certain public bodies to levy additional real estate and other taxes in an area within its boundaries for the purpose of providing special services to that area that are not available to the entire community. Statutory Authority - 35 ILCS 200/27-5, et seq. Easier than using individual special assessments

IV. FUNDING Boundaries of a SSA A contiguous area within a municipality. 35 ILCS 200/27-5. The “hole in the doughnut” SSA – held to be valid Does not have to be restricted to the areas directly benefited Ciacco v. City of Elgin, 85 Ill.App.3d 507, 407 N.E.2d 108, 115, 40 Ill. Dec. 877 (2d Dist. 1980)

IV. FUNDING Permissible Taxes, Rates, and Debt Limits Taxes may be levied or imposed in the SSA at a rate or amount sufficient to produce revenues required to provide the special services. 35 ILCS 200/27-25.

IV. FUNDING Procedures for Creating a SSA Public Hearing – required to: Form the district Levy or impose a special service tax Issue bonds to be retired by taxes levied in the district Objection Petitions The proposed district may be vetoed by 51% of electors and owners of record, filed within 60 days after the public hearing. 35 ILCS 200/27-55. Image source: sixcorners.org

IV. FUNDING Ordinance Establishing the District The boundaries by legal description, permanent tax index numbers, and when possible, street location; The nature of the proposed special services; A statement as to whether the proposed special services are for new construction, maintenance, or other purposes; The proposed tax rate limits, if any; The proposed limit on the amount of bonds to be issued, if any; The maximum number of years during which taxes are to be levied, if there is to be a maximum; The form of notice to the property owners; and The nature of the tax. 35 ILCS 200/27-25.

IV. FUNDING C. Bonds Principal and interest are secured by taxes levied against all taxable property within a municipality They are used to finance the construction of buildings, make major equipment purchases, construct needed public improvements, and for a variety of other purposes

IV. FUNDING Non-Home Rule Concerns Non-Home Rule - subject to a statutory debt limit of 8.625% of the equalized assessed valuation of the municipality. General obligation bonds are counted against this debt limit. Because of the Property Tax Extension Limitation Law (“PTELL”), 35 ILCS 200/18-185 et seq., in most cases, a non-home rule unit may not issue general obligation bonds until a referendum on issuance has been approved by a majority of the voters.

IV. FUNDING Non-Home Rule Issuance of Bonds: Adopt referendum ordinance on issuance of the bonds. Hold election on the question. Limited by 10 ILCS 5/2A-1.1. Issue the Bonds – must wait 30 days. 30 ILCS 350/17.5. Sell the bonds. Adopt a bond ordinance setting out the terms of the sale, maturity schedule, interest rates, and a tax levy sufficient to retire the bonds.

IV. FUNDING Bonding for Economic Development Corporate authorities of a municipality may appropriate and expend funds for economic development purposes. This includes, but is not limited to, providing grants to other governmental entities or commercial enterprise that are deemed necessary or desirable for the promotion of economic development within the municipality. 65 ILCS 5/8-1-2.5.

IV. FUNDING D. Liens Weed Liens (65 ILCS 5/11-20-7) Pest Extermination Liens (65 ILCS 5/11-20-8) Removal of Infected Trees (65 ILCS 5/11-20-12) Garbage Liens (65 ILCS 5/11-20-13)

IV. FUNDING To perfect these liens (65 ILCS 5/11-20-15): The municipality must, within one year after the removal cost is incurred, file notice of lien in the office of the recorder in the county in which the underlying parcel is located or, if the underlying parcel is registered under the Torrens system, in the office of the Registrar of Titles of that county.

IV. FUNDING To perfect a lien (65 ILCS 5/11-20-15) (cont.): The notice must consist of a sworn statement setting out:          (1) a sufficient description of the underlying parcel (include: common address, legal description and PIN);          (2) the description of removal activity and amount of the removal cost;          (3) the date or dates when the removal cost was incurred by the municipality. If, for any one parcel, the municipality engaged in any removal activity on more than one occasion during the course of one year, then the municipality may combine any or all of the costs of each of those activities into a single notice of lien; and (4) state the substance of 65 ILCS 5/11-20-15 and related implementation ordinance.

IV. FUNDING To perfect a lien (65 ILCS 5/11-20-15) (cont.): Notice must be (i) personally served on or sent via certified mail to taxpayer of record, and (ii) delivered or sent out after removal activities are performed. Municipalities have the right to foreclose on these liens under the Illinois foreclosure laws or mechanics’ lien statute (See, 65 ILCS 5/11-20-15(e)). Foreclosure action must be brought within 2 years of date of filing notice of lien. Failure to file a foreclosure action does not affect the validity of the lien. Upon payment of lien, a municipality is required to release the lien. A release of lien may be filed by property owner at his/her expense.

IV. FUNDING These liens are superior to all other liens and encumbrances EXCEPT FOR tax liens and these liens are not valid as to: any purchaser whose rights in and to the underlying parcel arose after the removal activity but before the filing of the notice of lien; or any mortgagee, judgment creditor, or other lien-holder whose rights in and to the underlying parcel arose before the filing of the notice of lien.

Abandoned Property Liens IV. FUNDING Abandoned Property Liens Municipalities can place liens on abandoned properties in order to recover costs for: Securing and enclosing said properties Cutting and removal of neglected weeds, grass, trees and bushes Pest extermination Removal of infected trees Removal of garbage and debris.

IV. FUNDING Benefits and Limitations: It is a superior lien: it has priority over all other liens in a foreclosure sale, aside from tax liens. The lien is subject to challenge by a lender or beneficiary or trustee of a deed in trust during a foreclosure action on several grounds, such as: noncompliance with statute, scope of work not reasonable or in excess of authorization or cost not commercially reasonable. Applies only to property maintenance activities performed after March 1, 2010.

IV. FUNDING What is Abandoned Property? Permanent residential dwelling units and manufactured homes that are treated as real estate Property must be unoccupied by any lawful occupant(s) for at least ninety (90) days After ninety (90) days, the municipality must make a good faith effort to contact the legal owner(s) or their agent(s) No contact with owners must be made for property to be abandoned

IV. FUNDING Illinois Housing Development Authority Programs Public Act 96-1419 Created “Abandoned Residential Property Municipality Relief Program” and “Abandoned Property Municipality Relief Fund” – Controlled by IHDA Fund issues grants to municipalities to assist with removal costs and securing or enclosing costs for abandoned residential properties per actions brought under 65 ILCS 5/11-20.15.1.

IV. FUNDING Illinois Building Blocks Program IHDA offers financing for developers interested in redeveloping abandoned properties in each of the designated targeted communities. Once renovations are complete, IHDA provides up to $10,000 in down payment assistance to homebuyers interested in the properties to improve their marketability. This coordinated effort is intended to help stabilize neighborhoods, prevent foreclosure, and provide affordable homeownership to first time homebuyers.

IV. FUNDING Land Banking Land banks were created to acquire, maintain, and build or rehabilitate abandoned properties in communities affected by property abandonment or which desire to develop affordable housing. After properties are rehabilitated, they are sold, and profits are recycled to repeat the process.

Lance C. Malina lcmalina@ktjlaw.com (312) 984 – 6439 Questions? Lance C. Malina lcmalina@ktjlaw.com (312) 984 – 6439

20 N. Wacker Drive, Suite 1660 Chicago, IL 60606 312.984.6400 15010 S. Ravinia Avenue, Suite 10 Orland Park, IL 60462 708.349.3888