Local Government Owners of Historic Property Asked to Convey Property by End of 2017: What Public Officials Should Know

Federal tax reform is likely to be enacted before the end of the year. While the final form of the bill has not been determined, it is nearly certain that federal historic preservation tax credits—an important financing mechanism for preservation of historic properties—will be significantly affected. In fact, most observers anticipate that the value of the tax credits will be diminished by tax reform, thereby making historic preservation projects more difficult to finance and complete. For that reason, some real estate developers have asked local government owners of historic properties to convey those properties to new ownership before the end of the 2017 tax year (December 31, 2017) in order to “grandfather” those projects under the older, more favorable rules. This post briefly describes how federal tax reform could affect historic rehabilitation projects and offers some guidance for North Carolina public officials who wish to respond (on a very tight deadline) to a request to transfer historic properties owned by local governments. Continue reading “Local Government Owners of Historic Property Asked to Convey Property by End of 2017: What Public Officials Should Know”

Legal and Business Reasons Why Downtown Development Programs Should Involve Secured Loans—Not Grants

Dr. Blaine Beeper is a retired hospital administrator who was recently elected to council in the Town of Bushwood. Dr. Beeper thinks he has figured out how to jumpstart revitalization of Bushwood’s historic downtown. He proposes for the Town to offer annual cash grants to any owner who redevelops a commercial property within the downtown. Dr. Beeper reasons that redeveloped properties will carry a higher tax assessed value, and the additional tax revenue can be “granted back” to the owners in the form of cash grants for five years, calculated as some percentage of the additional property taxes received by the Town.  When Dr. Beeper floats this idea, he runs into resistance from the Town Attorney and the Economic Development Director, each for different reasons. The Town Attorney raises serious concerns about the legality of such a program, while the Economic Development Director says it doesn’t make good business sense and a loan program would better address owners’ financing needs. This post explains the legal and business reasons why Dr. Beeper’s proposed grant program should be scrapped in favor of a loan program. Continue reading “Legal and Business Reasons Why Downtown Development Programs Should Involve Secured Loans—Not Grants”

Conveyance of property in a public-private partnership for a “downtown development project”

Downtowns across America are experiencing a renaissance. Population growth in downtowns has outpaced growth in the broader regions in which those downtowns are located. North Carolina downtowns are likewise experiencing record growth. To capitalize on this renewed interest in downtowns, private developers and local governments are increasingly seeking to partner on relatively larger, coordinated development projects that involve construction of both public and private facilities.

Often these public-private partnerships are necessary because the local government owns property downtown and needs a private partner to develop it. When a municipality (not a county) seeks to partner with a private developer for development of a downtown parcel involving construction of both public and private facilities, there is a statute designed just for that purpose: G.S. 160A-458.3 Downtown development projects. The statute makes some potentially confusing references to a variety of other statutes when authorizing disposition of real property and therefore requires some explanation. This post provides historical context for the statute and describes the property disposition procedures. Continue reading “Conveyance of property in a public-private partnership for a “downtown development project””

Periodic Inspections, Permits, and Registration of Residential Rental Property: Changes in 2017

Local governments establish residential rental property inspection, permit, and registration (IPR) programs to ensure that residential rental properties within their jurisdictions are maintained in a safe and decent condition. In recent years, the General Assembly has sought to protect code-compliant landlords from what legislators perceived as overly zealous IPR programs. The most recent legislation in this area, Session Law 2016-122, became effective on January 1, 2017, and is explained in Community and Economic Development bulletin #9. This blog post offers some highlights from the new law. CED Bulletin #9 should be consulted for more detail. Continue reading “Periodic Inspections, Permits, and Registration of Residential Rental Property: Changes in 2017”

Conveyance of Local Government Property for Affordable Housing

A developer of affordable housing for low and moderate income persons has approached the City and County about an affordable housing project near the City’s downtown. The developer’s plan is to acquire and assemble two adjacent parcels—one owned by the City and one owned by the County—and then develop 20 units of affordable housing on that site.  There’s a catch: The developer has asked the City and County to provide the two parcels as a gift to the project. Local governments are generally not permitted to make gifts to private individuals or entities, so the developer’s request is immediately problematic. Can the local governments convey their property to the project in order to encourage the development of affordable housing? This post explains North Carolina law pertaining to the developer’s request. Continue reading “Conveyance of Local Government Property for Affordable Housing”

Local Government Support for Privately Constructed Affordable Housing

Picture1County officials from Tarheel County as well as City officials from the county seat were approached by two residential developers who are seeking to construct housing that is affordable to low and moderate income (LMI) persons. One developer, DoGooder Inc., is a private, for-profit developer who intends to construct multi-family housing in which half of the twenty apartment units will be rented at a rate that is affordable to LMI persons. DoGooder is financing the project through conventional private financing but has asked the City and County for a cash subsidy to “make the project feasible.” The other developer, Good Habits for Humans, is a nonprofit corporation whose staff and volunteers plan to construct one single family home and sell it to a family headed by a LMI person. Good Habits has asked the City and County to provide a cash grant to help them pay for staff supervision and construction materials for the project.

This post describes the legal authority for the City and County to provide the requested subsidies and explains some important differences between City and County authority in this area. Continue reading “Local Government Support for Privately Constructed Affordable Housing”

Follow Procedures Prior to Acquiring Property for Redevelopment

Main St aerialThe Town of Renewville has ambitious redevelopment plans for several key—but tired and/or underdeveloped—properties along its Main Street. As we know from a prior post examining the limited situations in which a local government may discuss property acquisition in closed session, the Renewville town council intends to kick-start the redevelopment process by acquiring several of those key properties directly. After acquiring the properties, the council intends to engage development finance experts to conduct predevelopment analysis, and then it will sell the property to a private developer through a Request for Proposals (RFP) process, similar to the process completed by other North Carolina communities as described here and here.

However, a threshold determination must first be made. Is it necessary for the town to comply with any procedural requirements prior to acquiring the property? After all, local governments typically don’t comply with any particular procedural requirements when they acquire property. In this case, however, the answer is “yes”—certain procedures must be followed if the town wishes to convey the property to private developers selected through its RFP process. The answer is the same for a county, too. This post explains why it is advisable to issue notice and hold a public hearing prior to acquiring property for redevelopment and discusses risk mitigation for local governments that fail to do so. Continue reading “Follow Procedures Prior to Acquiring Property for Redevelopment”

Notice and Hearing Requirements for Economic Development Appropriations

Gov Brd MeetingAs discussed in a prior post, Session Law 2015-277 requires North Carolina local governments to issue notice and hold a public hearing prior to approval of any appropriation for economic development pursuant to North Carolina General Statutes Chapter 158, Article 1, “The Local Development Act of 1925.” Local governments have held public hearings pursuant to that act for decades, but previously such hearings were required only when an economic development appropriation was related to real property or to an incentive payment for a private business. Now local governments must issue notice and hold a public hearing prior to approving any appropriation for economic development—even when the appropriation has nothing to do with incentives or real property. In fact, the bill summary written by legislative staff states “The bill standardizes the treatment of appropriations for economic development by: Making all appropriations subject to the public hearing requirement of G.S. 158-7.1(c).” Unfortunately, S.L. 2015-277 provides no guidance on the form of notice for the new set of required hearings. This post proposes a framework for understanding and complying with the old and new notice and hearing requirements under G.S. 158-7.1. Continue reading “Notice and Hearing Requirements for Economic Development Appropriations”

Local Government Economic Development Powers “Clarified”

Grading siteOn October 20, 2015, the Governor signed Session Law (S.L.) 2015-277, placing into effect several “clarifications” to the primary economic development statute used by local governments, G.S. Chapter 158, Article 1, “The Local Development Act of 1925.” The modifications fall into three categories: first, broad discretionary language was removed; second, new procedural requirements were imposed; and third, historic rehabilitation was explicitly included within the penumbra of allowable economic development activities, subject to the same limitations that have long been imposed on such activities by the statute and the North Carolina Constitution. Each will be addressed in turn. Continue reading “Local Government Economic Development Powers “Clarified””

Cash Grants for Real Estate Developers without Competition for Jobs—A Constitutional Quandary

shopping mall constructionA local real estate developer, Al Czervik, proposes to construct a mixed-use development with residential, office, and retail space. The city council likes the development plan because it is consistent with the council’s vision for the area. Czervik, seeing incentives being offered to convince companies to locate in North Carolina rather than other states, misses the significance of the competition element of those incentives and thinks his development, too, should receive incentives. He requests a $1 million cash grant ($100,000 per year for 10 years) from the city to “make the project work.” Czervik is unwilling to promise jobs, of course—because it is the tenants who will provide jobs, not his development—but he is confident that tenants with jobs will locate in the development and therefore he seeks a subsidy nonetheless. Czervik’s request gets the attention of the city attorney, who is well aware that this request rests on very shaky legal ground (as explained in this blog post and this law review article). How might the city attorney frame the legal issues for city council members, who are initially receptive to Czervik’s request? Continue reading “Cash Grants for Real Estate Developers without Competition for Jobs—A Constitutional Quandary”

Conveyance of Local Government Property to Nonprofit EDC for Industrial Park

Business Park SignRay Kinsella leads the nonprofit economic development corporation (the “EDC”) that was jointly formed by the county and its largest city in the early 2000s, and that is now governed by an independent board of directors. Ray has heard some optimistic forecasts of “re-shoring” of manufacturing facilities to the United States, and he has a plan to take advantage of the possible trend. He proposes for the EDC to build a new industrial park with the help of the county and city. Upon completion of the park, Ray believes the available land with new infrastructure will attract manufacturing facilities to the local area.

The EDC hasn’t amassed enough privately-raised capital to undertake the project on its own, and private developers and investors don’t have an appetite for the project, so Ray’s plan depends on direct local government support. Ray proposes for the county to contribute the land for the park by conveying a 500-acre tract of land, which the county already owns, to the EDC for one dollar. The tract lies outside of city limits, but Ray thinks he can convince the city to provide water and sewer. Ray plans to market the tract to manufacturing companies, and when a company decides to locate in the park, the EDC will sell the required land to the company. Ray hopes the EDC can keep the proceeds from any sale, and then the EDC would use those retained proceeds for future economic development activities.

Is the EDC’s proposed structure allowable? In a word, no. Continue reading “Conveyance of Local Government Property to Nonprofit EDC for Industrial Park”

Sale of Historic Structures by NC Local Governments for Redevelopment

Old NC MillAlmost ten years ago, in the town of Bushwood, North Carolina, the “generous” owner of the historic textile mill building just off Main Street donated the property to the town (it was difficult to maintain and the owner didn’t want to pay property taxes on it any more). The town accepted the property, hoping that it would be able to find a new private owner who would redevelop the property and retain the historic character of the building. Some potential buyers have kicked the tires on the building, but no one has made an offer. Due to the value of the land and the excellent location of the parcel, the property appraises for $300,000.

The town recognizes that it needs to market the building more actively—and that it may need the help of experts. “Old Mills R Us,” a regional historic preservation nonprofit with a mission to preserve historic mill buildings, has a proposal for the town:

  1. The town will sell the mill to the nonprofit for one dollar.
  2. Old Mills R Us (OMRU) will market the property and sell the mill to a private developer who will redevelop the property while retaining the historic features.
  3. Rather than charging a broker fee, OMRU will simply keep the proceeds from the sale at whatever price OMRU can get.

Can the town enter into this transaction with OMRU? Short answer: not on these terms. This post explains why and suggests some alternatives. Continue reading “Sale of Historic Structures by NC Local Governments for Redevelopment”

NC Local Governments, Meet Your New State Partner for Economic Development

NC General AssemblyNorth Carolina local governments have a new partner in their economic development efforts. Session Law 2014-18 authorizes the North Carolina Department of Commerce to enter into a contract with a nonprofit entity in order to carry out many of the Department’s economic development recruiting and marketing functions for the state. The nonprofit entity has already been incorporated and dubbed the Economic Development Partnership of North Carolina. In order to assist local governments with understanding their new economic development partner, this post describes the enabling legislation and some of the significant requirements imposed on the entity. Continue reading “NC Local Governments, Meet Your New State Partner for Economic Development”

Acquiring real property for redevelopment—can local governments keep it confidential?

downtown propertyThe town of Renewville wants to improve the look of its downtown Main Street, which is pocked with poorly-maintained commercial buildings. The Mayor has had his eye on a few key properties on Main Street, which, if redeveloped, would transform the look and feel of downtown, perhaps spurring additional private investment in the area. After years of watching potential developers and investors “kick the tires” downtown but decline to invest, the Mayor has given up on the private sector. He now firmly believes that the town must take the lead in acquiring properties, because the private sector isn’t willing. He knows, however, that if the town’s interest in purchasing any particular property is made public, the owner of that property will hold out for a premium on the sale price. Can the council direct the acquisition of properties downtown and keep the town’s involvement confidential during negotiations? Under North Carolina law, it depends. This post examines several situations to illustrate the possibilities. Continue reading “Acquiring real property for redevelopment—can local governments keep it confidential?”

How a North Carolina Local Government Can Operate a Land Bank for Redevelopment

Aerial downtownIf America’s cities and towns are to realize their greatest potential as attractive and welcoming places—and as drivers of the new American economy—they must be able to repurpose their vacant, abandoned and foreclosed properties. Those properties—whether the product of the current foreclosure crisis or the remnants of the old economy—diminish the sense of community among neighbors, erase the value of lifelong investment in a home, and make it nearly impossible for cities and towns to attract and keep the creative, innovative, entrepreneurial citizens who will build the next economy.

Dan Kildee, founder of Genesee County Land Bank, in the foreword to Land Banks and Land Banking

Dan Kildee’s sentiment is shared by local governments across North Carolina, but how can they “repurpose” their vacant and abandoned properties and revitalize distressed communities? The answer in Genesee County, Michigan, was a redevelopment tool called a land bank, which is a public authority created to acquire and redevelop vacant and abandoned properties. In the span of a decade, the Genesee County Land Bank acquired more than 10,000 parcels to hold or redevelop, and during the “great recession,” catalyzed more than $60 million in new private investment. Land banks continue to spring up across the nation and are playing an increasingly important role in revitalization efforts in places such as Cuyahoga County, Ohio, and Fulton County, Georgia. A complete explanation of land bank policies and approaches across the nation can be found in a downloadable text, Land Banks and Land Banking.

In Michigan, forming a land bank is rather straightforward, because the Michigan state legislature enacted specific enabling authority for the establishment and operation of land banks. No such land bank legislation exists in North Carolina. Nonetheless, local governments in North Carolina can perform the basic functions of a land bank by cobbling together existing statutory authority. In this way, the local government itself serves as the land bank and performs the major activities of a land bank:

  1. Acquire and hold troubled properties
  2. Stabilize properties and eliminate encumbrances
  3. Convey properties to a redeveloper

Each activity will be addressed in turn. Continue reading “How a North Carolina Local Government Can Operate a Land Bank for Redevelopment”

Food Deserts and Development Finance Options in North Carolina

Farmer's Food Share - Courtesy of Donn Young Photography
Farmer’s Food Share – Courtesy of Donn Young Photography

On January 27, 2014, the North Carolina General Assembly’s House Committee on Food Desert Zones heard testimony about food deserts in North Carolina. A “food desert” is defined in the Food, Conservation, and Energy Act of 2008 as an area “with limited access to affordable and nutritious food.” Maps and census tract data about food deserts can be found in the Food Access Research Atlas compiled by the U.S. Department of Agriculture (USDA).

Food deserts are often found in low-income areas. A recent media report pointed out that North Carolina contains 349 low-income food deserts; that is, communities with a high proportion of low-income residents and containing no supermarkets (1) within one mile in urban areas or (2) within 10 miles in rural areas. While it might seem counter-intuitive for farming communities to lack access to food, rural areas are particularly susceptible to food deserts. As pointed out in my 2010 report on rural asset-building strategies (co-authored with Lisa Stifler), looking forward, food deserts are expected to increase in number in rural areas as rural populations decline and food industries continue to shift food distribution channels to larger superstores in more populous communities. With low-income food deserts now located in 80 out of North Carolina’s 100 counties, food deserts are increasingly being viewed as a statewide issue requiring a coordinated policy response. This post describes some of the policy approaches presented to the House Committee on Food Desert Zones and then takes a closer look at a proposed approach involving development finance tools, such as loans and grants. Continue reading “Food Deserts and Development Finance Options in North Carolina”

When May NC Local Governments Pay an Economic Development Incentive?

Shell building under construction 2News outlets regularly report about the latest company that was lured to North Carolina through the payment of a cash economic development incentive by a local government and the state. Local government cash incentives often take the form of an annual cash payment to a company that is contingent on the company’s creation of jobs, investment in taxable property in the jurisdiction, and timely payment of property taxes, among other conditions. The statutory authority for making the incentive payment is supplied by G.S. 158-7.1, and the local government is required to approve and account for how the incentive payment is expended by the recipient company pursuant to G.S. 158-7.2. The accounting of payments is accomplished through an incentive agreement in which the recipient company agrees, typically, to create jobs at a facility that involves leasing or purchasing land, constructing a building, and/or installing equipment in the jurisdiction.

For most of the last century, however, North Carolina local governments were not permitted to make such incentive payments. It wasn’t until 1996, following the loss of economic development projects to other states, that the North Carolina Supreme Court finally decided that economic development incentives serve a constitutionally-permitted public purpose—under certain conditions. These conditions continue to impose limitations on incentives today, so this post reviews the relevant limitations and summarizes the conclusions of a 2013 North Carolina Law Review article entitled, Economic Development Incentives and North Carolina Local Governments: A Framework for Analysis. Continue reading “When May NC Local Governments Pay an Economic Development Incentive?”

Did the NC Supreme Court put cash economic development incentives in jeopardy?

Cash economic development incentives are widely used by local governments to induce companies to locate in their jurisdictions. A 2006 survey indicated that more than 40% of North Carolina local governments employ cash incentives for business recruitment. And yet, no statute contains language specifically authorizing cash incentive payments. G.S. 158-7.1(b) contains a rather comprehensive list of activities in which local governments may engage for economic development, but cash incentives are not found on that list. Rather, authority for cash incentives is derived from a general grant of authority for making appropriations for economic development found in G.S. 158-7.1(a). In other words, the authority to offer cash incentives is implied from a general grant of authority. But what happens when the North Carolina Supreme Court becomes reluctant to find implied authority? Continue reading “Did the NC Supreme Court put cash economic development incentives in jeopardy?”

Using a Redevelopment Area to Attract Private Investment

The neighborhood of Doherty Heights has seen better days. Once a vibrant residential neighborhood that was home to families and retail businesses close to the downtown core, Doherty Heights is now better known for its vacant storefronts and dilapidated houses. The majority of the city’s housing code complaints come from Doherty Heights. Police have identified Doherty Heights as an area of concern. To make matters worse, the neighborhood lies along Main Street, so every visitor to the city gets to see the blighted housing stock and commercial buildings first-hand. As part of a larger effort to revitalize Doherty Heights, city officials are exploring ways to attract private investment to the community, and they want to know how a redevelopment area can help them achieve their goals. The School of Government Development Finance Initiative has been working with city officials on various options, and as part of that effort, Continue reading “Using a Redevelopment Area to Attract Private Investment”

Local government assistance for a real estate development project—without making a grant

Al Czervik is a real estate developer who has invested in several shopping malls and mixed-use developments across the Tar Heel state. He is planning a mixed use development called “Gopher Commons” in your community, but “in order to make the numbers work,” he claims that he needs local government assistance to address a “financing gap.” He wants the local government to provide him a cash grant to be paid out over five years, with the annual grant amount equivalent to 50% of the additional tax assessed as a result of the higher taxable value of the property upon completion. He hasn’t locked down any commercial tenants yet, so he can’t promise any jobs. He’s also not exactly sure what kinds of tenants might occupy the space, but he’s certain that the retail businesses will need to hire new employees.

The city council wants to support the project because it generally comports with the council’s vision for development in this area. But the council is not interested in offering grants to real estate developers. The claims about new jobs ring hollow, since the developer can’t promise any, and retail establishments generally don’t pay high wages. Besides, the council reasons, any new jobs at this development will likely come at the expense of retail establishments elsewhere in the community. There certainly is no interstate competition for this project—the developer can’t threaten to take his development elsewhere. The city attorney has raised concerns about the developer’s request right from the start. Is there a way for the council to offer support for this real estate development without offering a grant or other direct subsidy? Continue reading “Local government assistance for a real estate development project—without making a grant”

Investors benefit from financial planners and coaches: Can the poor do the same?

This post is part of a series that highlights approaches described in a School of Government web guide on asset-building tactics for individuals and communities on the economic margin.

What if a concept that works for investors and their financial planners could be used to build the personal financial assets of low-income persons? An approach called financial coaching is being employed in North Carolina to coach low-income persons on financial behaviors that will enable them to build savings and other financial assets.

A 2007 report, Financial Coaching: A New Approach for Asset Building?, reviews the ways that coaching has been used to improve human behaviors in a range of areas:

There are health coaches who work with clients to curb bad habits like smoking or improve their diet and exercise. There are life coaches who help people to make plans and changes in their career and home life. There are executive coaches who help managers in the workplace to improve their approaches with colleagues and on projects. There are career coaches who help clients explore options for changing or advancing their job prospects. There are job coaches who help developmentally disabled people maintain steady employment. There are performance or skills coaches who work with clients on a specific task or event. And there are financial coaches or wealth coaches who help clients make changes in their financial lives. All of these coaching approaches add value to clients by providing an external force to help them to learn and improve some aspect of their work or personal lives.

It was simply a matter of time before coaching approaches were tried in the context of anti-poverty efforts. Continue reading “Investors benefit from financial planners and coaches: Can the poor do the same?”

Who is an owner “of record” to be served with complaints and orders under NC minimum housing codes?

John Spartan serves as the senior housing code official for the town of San Angeles, NC, where he recently presided over his 100th minimum housing hearing. He has overseen the repair or removal of many unfit homes over the years, and he is careful to ensure that his town’s minimum housing code keeps up with changes to the authorizing statutes: Minimum Housing Standards, Part 6 of Article 19 of G.S. Chapter 160A. For example, he adjusted his inspection procedures to comply with the 2011 residential inspections law, and he ensured that town council adopted modifications to its minimum housing code to comply with changes to the minimum housing statutes back in 2009. And he carefully follows the procedural flowchart that he found in a School of Government publication on minimum housing codes. But he’s never been completely comfortable with one part of the minimum housing process: identification of a property’s “owner” and “parties in interest” who are to be notified of any complaints or orders. Properly identifying the “owner” of an unfit dwelling can be tricky on occasion, and it has been the subject of litigation in North Carolina courts over the years. Lenina Huxley, the town attorney, wants to update him on a North Carolina Court of Appeals case, Patterson v. City of Gastonia, that was decided in May 2012. She wants to discuss how the town should identify an owner “of record” following some ambiguous remarks in the case law. Ambiguity is never fun in his line of work, so he reaches for a bottle of aspirin before setting out for her office…. Continue reading “Who is an owner “of record” to be served with complaints and orders under NC minimum housing codes?”

Protect Community Wealth by Increasing Financial Literacy of Adults

Tyler Mulligan is a School of Government faculty member.

This post is part of a series that highlights approaches described in a School of Government web guide on asset-building tactics for individuals and communities on the economic margin.

When a household falls victim to a predatory financial product, such as a high-interest payday loan, a high-fee prepaid debit card, or a fraudulent reverse mortgage, there can be no doubt that the affected household suffers. The household’s purchasing power is reduced and the family’s financial stability is placed in jeopardy. But there is broader impact on the community, because others may depend on the financial participation of that household in the local economy, such as local businesses and charitable groups, to say nothing of close friends and family of the household.

Low-income persons are often targeted by purveyors of predatory financial products, so the aggregate wealth-draining effect of these products is particularly acute in low-income communities. Recognizing the need to protect community wealth and make residents more resistant to these products, some communities have stepped up their financial education efforts. The importance of financial education was explained in an earlier post. This post describes two creative approaches that communities have used to make financial education programs more accessible to vulnerable populations. Continue reading “Protect Community Wealth by Increasing Financial Literacy of Adults”

Targeting Troubled Neighborhoods for Housing Code Inspections

Along Broken Dreams Boulevard, not far from Main Street, an abandoned mill overlooks a troubled neighborhood. Once a thriving residential area with inexpensive mill housing (single family homes and duplexes), the neighborhood is now typical of a declining mill village. Many of the dwellings are substandard, owned primarily by absentee landlords who are either unable or unwilling to maintain their properties. The neighborhood’s decline has recently attracted the attention of local officials, who are in the midst of planning a comprehensive effort to clean up and revitalize the historic neighborhood.

While the planning process unfolds slowly, impatient community leaders demand immediate action in the interim. Specifically, they want the local inspections department to conduct a housing code inspection sweep of the entire neighborhood—immediately. Can the inspections department conduct a program of housing code inspections that targets this particular neighborhood? Continue reading “Targeting Troubled Neighborhoods for Housing Code Inspections”

Youth Financial Education as an Asset-Building Tactic

Tyler Mulligan is a School of Government faculty member.

This post is part of a series that highlights approaches described in a School of Government web guide on asset-building tactics for individuals and communities on the economic margin.

As explained in an earlier post, financial education can play an important role in efforts to encourage low-income persons to save and accumulate assets. Why not start with young people? This post describes two programs to illustrate how youth financial education can be accomplished. Continue reading “Youth Financial Education as an Asset-Building Tactic”

Financial Literacy: A Necessary Ingredient for Building the Financial Assets of Low-Income Households

Tyler Mulligan is a School of Government faculty member.

This post is part of a series that highlights approaches described in a School of Government web guide on asset-building tactics for individuals and communities on the economic margin.

A prior post explains the benefits that result when low-income households contribute to savings accounts and accumulate assets. For example, asset accumulation has been connected to increased educational attainment, better health outcomes, and increased local civic participation, among others. Communities can encourage asset accumulation by sponsoring matched savings programs known as individual development accounts (IDAs).

However, even with matched savings programs in place, it can be difficult for low-income households to save. Low-income persons often find themselves in a financial environment rife with predatory financial products, such as payday loans and mortgage rescue scams, which are designed to exploit the vulnerabilities of low-income populations. To navigate these treacherous financial waters, low-income persons need a better understanding of the risks associated with the entire range of financial products. Continue reading “Financial Literacy: A Necessary Ingredient for Building the Financial Assets of Low-Income Households”

Savings Programs for Low-Income Households: Overcoming Challenges in Rural Areas

Tyler Mulligan is a School of Government faculty member.

This post is part of a series that highlights approaches described in a School of Government web guide on asset-building tactics for individuals and communities on the economic margin.

A prior post lists several reasons that many communities have sought to encourage low-income households to contribute to savings accounts. In short, low-income households that accrue savings reap long-term benefits for themselves and contribute more to the communities in which they reside. One way to promote savings among low-income households is through Individual Development Account (IDA) programs—also known as matched savings programs—as described in a prior post.

Rural communities, however, face special challenges in administering IDA programs related to their lower population density. For example, many IDA programs require participants to attend financial education courses, but such courses may not be available in rural areas. This could make it difficult or impossible for rural residents to participate in an IDA program. Additionally, lower population density and transportation hurdles may make it difficult to identify and recruit participants, qualified staff, and financial partners.

There are several ways that rural communities have overcome these difficulties. Continue reading “Savings Programs for Low-Income Households: Overcoming Challenges in Rural Areas”

Build Financial Assets for Low-income Households by Sponsoring IDA Programs

Tyler Mulligan is a School of Government faculty member.

This post is part of a series that highlights approaches described in a School of Government web guide on asset-building strategies for individuals and communities on the economic margin.

Market-based economies are characterized by boom and bust cycles. Since the Great Depression, every decade has seen at least one economic recession. Regardless of the size of the recession, individuals on the economic margin are among the most vulnerable to recessionary effects. This vulnerability stems in part from the fact that groups on the economic margin lack the assets and savings to weather a financial storm. Households with more savings are better equipped to handle tough times and stay out of poverty. For this reason, anti-poverty efforts have begun to include asset-building components that help low-income households build and retain financial assets for the long-term.

But there is another reason to help households build financial assets. Evidence suggests that owning assets changes outcomes for low-income households, enhancing educational attainment, health outcomes, and local civic participation, among others.  This is not a pipe dream. Research indicates that low-income individuals—with the proper supports and structured opportunities—are capable of saving money and building assets. So how can local leaders spur savings and asset-building among low-income households? Continue reading “Build Financial Assets for Low-income Households by Sponsoring IDA Programs”

Asset-Based Development: An Approach to Poverty in the U.S.

With politicians and the media focusing so much attention on the gap between the rich and the poor, some community leaders are asking what they can do to assist communities and households on the economic margin. One approach that deserves serious examination is known as “asset-based development.” This approach involves taking an inventory of existing individual and community assets—such as a viable community bank, determined entrepreneurs, an economic development opportunity, or leaders capable of cooperating on development efforts—and using them to enhance the community’s assets or to create new assets.

A wide array of asset-building tactics have been employed around the country, ranging from individual development accounts for low-income households, to offering banking services to the unbanked, to eliminating food deserts. The sheer number of programs makes it challenging for community leaders to learn about the options and to select the best ones for their communities. What programs have been established? Which asset-building activities would be most suitable for a specific community? Who has undertaken such programs in the past? Some of the answers to these questions can be found in a School of Government web-based guide on asset-building strategies in rural areas. Continue reading “Asset-Based Development: An Approach to Poverty in the U.S.”

Ensuring Local Policy Complies with New Residential Inspections Law

Tyler Mulligan is a School of Government faculty member.

The city manager of Tooltime, North Carolina, picks up the phone and calls Tim Taylor, the city’s minimum housing public officer and lead housing inspector. “Tim, I understand why you suspended all periodic inspections in Tooltime that did not comply with the new periodic inspections law.  I know we have much less flexibility now than we had before. But residential buildings still need to be inspected, and new complaints about neglected dwellings come in every week. I need a plan for moving forward that I can explain to the council. Can we modify our inspections program to comply with the law?”

Tim had already been working on it. Earlier that week, he and city attorney Heidi Keppert had reviewed and discussed a School of Government (SOG) bulletin on the new law. Although the law now requires inspectors first to find “reasonable cause” prior to inspecting a residential building, there was no other guidance on the procedural aspects of an inspection program. Heidi explained that the lack of guidance offers some flexibility to the city, but there are pitfalls as well. In the absence of clear procedures, inspections might be conducted inconsistently, or similarly-situated owners and landlords might be treated differently, leaving the city vulnerable to equal protection or due process complaints. A written inspections policy would help in that regard.

As Heidi and Tim work to revise their local policy, what aspects of the policy should they evaluate and modify? Continue reading “Ensuring Local Policy Complies with New Residential Inspections Law”

Minimum Housing: A Way Around Residential Inspection Limits?

Tim Taylor is both a housing inspector and the appointed minimum housing public officer for the town of Tooltime, North Carolina. For years he has conducted periodic inspections of dwellings throughout the town in accordance with his town’s periodic inspection program. When those inspections revealed minimum housing violations, he used his powers as a minimum housing public officer to ensure that the dwellings were either repaired or demolished as required (of course following the strict procedures for minimum housing actions as required by law). He has never given much thought to the distinction between his role as an inspector and his role as a minimum housing public officer. That is, until the summer of 2011. Continue reading “Minimum Housing: A Way Around Residential Inspection Limits?”

Is Interstate Competition Required for Economic Development Incentives?

A company’s sole facility has been located in North Carolina for the past decade, but the company recently decided to move its facility to a new location in order to expand its operations. It has three choices: (1) move to an available facility in the same county in which it is currently located, (2) move to an available facility in the county next door, which is another North Carolina county, or (3) move out of state. The company’s executives determine that moving out of state is not advantageous for the company, so the search is narrowed to the two counties in North Carolina. The company approaches each of the two counties and requests incentives. With no out-of-state competitor in the picture, may the two North Carolina counties offer incentives to the company pursuant to G.S. 158-7.1? Continue reading “Is Interstate Competition Required for Economic Development Incentives?”

A Primer on Inclusionary Zoning

Tyler Mulligan is a School of Government faculty member.

As part of its comprehensive planning process, a town commissioned a housing study to determine whether its current and projected housing stock is adequate to meet the needs of its local residents and workforce. The results weren’t terribly surprising. Most of the town’s service sector and public sector workforce (for example, retail workers, police, and teachers) earn less than the county’s median wage. Those workers make up a sizeable portion of the workforce, but in order to afford a home in the town, they must devote approximately half of their wages to housing costs. The housing situation for this group has not changed much over the past decade even though the town experienced steady growth during that period. The housing market has not responded to demand for housing at lower price points, even though such housing could have been constructed profitably—but perhaps not as profitably as at higher price points.

Taking this information into account, town leaders incorporated language into the final comprehensive planning document that clearly articulates a desire to use all legally-available regulatory tools on remaining developable land to increase production of housing at lower price points. This housing was called “workforce housing.” Strategies mentioned prominently include eliminating some land use restrictions, increasing the availability of subsidized housing, and inclusionary zoning. Continue reading “A Primer on Inclusionary Zoning”

No Legislative Surprises in Community and Economic Development as General Assembly Adjourns

Tyler Mulligan is a School of Government faculty member. 

Following the 2010 session of the North Carolina General Assembly, local governments will see an essentially unchanged statutory landscape for community and economic development. Some of the highlights are discussed below. Continue reading “No Legislative Surprises in Community and Economic Development as General Assembly Adjourns”

More foreclosed and vacant homes ahead. How can local governments respond?

2009 was a record year for foreclosures in North Carolina. Now it looks like 2010 is going to be worse. In the first five months of this year, North Carolina experienced 35% more foreclosure starts as compared to the same period in 2009. (2012 update: a GAO report on vacant homes and foreclosures can be found here).

The challenge is to rehabilitate foreclosed properties and return them to full occupancy before they fall into disrepair and cause further neighborhood decline. How are local governments responding to this challenge? Continue reading “More foreclosed and vacant homes ahead. How can local governments respond?”

Venture Capital for Community Economic Development

Tyler Mulligan is a School of Government faculty member.

When we think of venture capital, we imagine business people making investments in the most innovative companies and technologies: pharmaceuticals, medical devices, computer software, and nanotech applications, to name only a few. Indeed, this month’s venture capital conference in Pinehurst, North Carolina, is boldly titled, “Where Great Minds Meet Smart Money.” But it might take a particularly innovative investor with an especially great mind to make venture capital investments in distressed communities in pursuit of economic growth and social benefits. Continue reading “Venture Capital for Community Economic Development”

Repairing unfit houses—and then recouping the costs

[2011 UPDATE: For more detail on this topic, see the following 2011 book: Housing Codes for Repair and Maintenance: Using the General Police Power and Minimum Housing Statutes to Prevent Dwelling Deterioration]

An earlier post on minimum housing ordinances (MHOs) explained how MHOs can be employed by a local government for the purpose of ordering owners to repair unfit dwellings. When an owner fails to comply with a repair order, the local government may proceed to effectuate the repairs itself. The costs to the local government for making the repairs become a lien on the property. What mechanisms are available to local governments to collect on these liens? Continue reading “Repairing unfit houses—and then recouping the costs”

Foreclosures, abandoned homes, and minimum housing codes

Boarded home[2011 UPDATE: For more detail on this topic, see the following 2011 book: Housing Codes for Repair and Maintenance: Using the General Police Power and Minimum Housing Statutes to Prevent Dwelling Deterioration]

North Carolina experienced a record number of foreclosures in 2008. Then, in 2009, even more. January 2010 was worse than January 2009 (the latest foreclosure data can be viewed here). North Carolina communities are seeing unprecedented numbers of vacant and abandoned homes. When these dwellings deteriorate to the point that they become “unfit for human habitation,” cities and counties possess authority under the Minimum Housing Standards statutes (G.S. 160A-441 et seq.) to order owners to repair or demolish the unfit structures. Recent amendments contained in Session Law 2009-279 gave a boost to local government authority under the statutes, essentially shifting some discretion from dwelling owners to local governments. This post explains that shift. Continue reading “Foreclosures, abandoned homes, and minimum housing codes”

Taxation of Affordable Housing in Community Land Trusts

Imagine that you own a home, but not the land on which it sits. You’re a tenant on the land, subject to a 99-year ground lease. As a condition of the ground lease, you are permitted to sell your home only to a household earning less than the community’s median wage, and the ground lease sets a maximum sales price to ensure that the home is affordable to that household. Just down the street, similar homes are selling for considerably more than your price restriction allows. That fact doesn’t bother you, because you knew the terms when you bought the place. Even with the price restrictions, you will earn some equity upon resale, and besides, you got a great deal when you bought it.

Now the tax assessor visits. Should your price-restricted home be valued in the same way as the market-rate home down the street, or should the assessor take your price restriction into consideration? That is the question addressed by the General Assembly in S.L. 2009-481. Continue reading “Taxation of Affordable Housing in Community Land Trusts”

How do local governments create green jobs? Here’s one idea.

Tyler Mulligan is a School of Government faculty member.

Have leaders in your community been using words like “green economy” and “green jobs?” What role can a local government play in enhancing the local green economy and creating some green jobs? This post explores one possible role: local governments could enact a comprehensive local program around energy efficiency and renewable energy. I’ll propose the outlines of such a program at the end of this post. Continue reading “How do local governments create green jobs? Here’s one idea.”

Kelo Revisited: Eminent Domain for Economic Development in North Carolina


Tyler Mulligan is a School of Government faculty member.

A New York Times article today covered Pfizer’s announcement that it will be leaving New London, Connecticut, the city at the center of the landmark eminent domain case, Kelo v. City of New London, 545 U.S. 469 (2005). In Kelo, a 5­‑4 majority of the U.S. Supreme Court decided that the Fifth Amendment of the U.S. Constitution permits the condemnation of private property for the purpose of carrying out a comprehensive economic development plan, even if the condemned property is not blighted. The decision permitted the city to condemn Susette Kelo’s New London home to make way for an “urban village” adjacent to Pfizer’s property. According to the article, Pfizer asserts that it had no interest in the condemnation case, but the city touted its comprehensive plan in its efforts to lure the company to New London.

The Supreme Court’s decision proved to be unpopular. In response, a number of states enacted amendments to their state constitutions to restrict or prohibit the exercise of eminent domain for economic development, except to eliminate blight. A similar amendment was proposed in North Carolina during the 2009 session of the General Assembly (House Bill 1268), but it did not make it out of the House. Bills containing constitutional amendments are eligible for consideration in the short session, so the proposed amendment could be put forward again in 2010. Continue reading “Kelo Revisited: Eminent Domain for Economic Development in North Carolina”

Valid cash incentive or illegal tax rebate?

Tyler Mulligan is a School of Government faculty member.

One news outlet reported that in exchange for constructing a data center in North Carolina, Apple Inc. will be reimbursed by North Carolina local governments for “50 percent of tax revenue on real estate property — buildings and land — and 85 percent of tax revenue on business property — computers and other equipment — for the next 10 years.” How do we determine whether this is an improper tax exemption or a valid incentive? I’m afraid there’s no “app for that.”

Continue reading “Valid cash incentive or illegal tax rebate?”

Mission investing by community foundations

Tyler Mulligan is a School of Government faculty member.

In the traditional model of philanthropic foundations, the principal (or endowment) is invested in a conservative investment portfolio to generate a predictable return. The returns on investment become the operating funds of the foundation, with the principal remaining untouched in a portfolio of investments which aren’t closely related to the mission of the foundation.  Community foundations are challenging that model, sometimes using aggressive portions of their principal to make riskier “mission investments” that support the foundation’s broader goals.  A report entitled Equity Advancing Equity describes “mission investing” in detail and examines several community foundations that are using mission investments to make a difference in distressed communities. Continue reading “Mission investing by community foundations”

Awarding “blanket” incentives to all qualified applicants

Up to this point, I have written about the “unwritten requirement” of a public hearing for cash economic development incentives, and about drafting a notice for the public hearing. What if a governing board approves a blanket incentive policy to provide a grant by formula to all qualifying applicants? For such policies, the board often intends for its involvement to end with adoption of a policy directing staff to make an award to every applicant meeting a set of criteria. Should a hearing be held prior to awarding each incentive under such a “blanket” policy?

Continue reading “Awarding “blanket” incentives to all qualified applicants”

Public Hearings for Cash Incentives: An Unwritten Rule?

North Carolina local governments frequently use cash grants as an economic development incentive to lure businesses into their respective jurisdictions. The grants are authorized under the Local Development Act, G.S. 158-7.1 et seq., but a quick read of the statutes might obscure the need for a public hearing prior to approving such incentives. To understand the source of this hearing requirement, you have to look closely at the statute and the case law.

Those familiar with the Local Development Act are aware of the stringent notice and public hearing requirements for activities related to acquiring, improving, and conveying property authorized by subsection (b) of G.S. 158-7.1, such as constructing and conveying shell buildings, extending utility lines to a facility, and engaging in site preparation. For those enumerated activities, the hearing requirements are clearly spelled out in G.S. 158-7.1(c) and (d).

But what about an appropriation for a cash incentive to induce a company to bring jobs and capital investment to North Carolina? Some argue that the award of a cash grant is not authorized by the property-related provisions of subsection (b); rather, they suggest that the authority to offer cash incentives is likely derived from the general grant of authority described in G.S. 158-7.1(a), which is a catch-all authorization for economic development appropriations. If that were the case, then a cash incentive would conveniently avoid all of the procedural requirements associated with property-related activities authorized under subsection (b). That argument just doesn’t hold up under closer examination. This post explains why. Continue reading “Public Hearings for Cash Incentives: An Unwritten Rule?”

Rural Realities article on Homegrown Development

Here is the link to an article written by members of our own CED program about homegrown economic development. The article explains that homegrown revitalization strategies fall into three broad categories, which are summarized in the article as follows:

  • Place-based development incorporates strategies that capitalize on the distinctive and special characteristics of a particular place, such as its natural resources, cultural heritage, or other amenities.
  • Economic gardening relies on “growing your own” by cultivating local entrepreneurs and small firms and creating and environment that supports their growth.
  • Creativity and talent cultivation involves fostering an environment that supports individuals and firms who use art or design in their products and services.

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