May 1, 2006

In his January 2002 State of the City address, Baltimore Mayor Martin O’Malley declared the goal of acquiring 5,000 vacant and abandoned properties in two years and outlined the series of steps that would be taken to accomplish that goal. The mayor believed that setting such a high acquisition target would help galvanize the public around the issue, ensure greater inter-agency cooperation, and achieve economies of scale.

When O’Malley embarked on Baltimore’s Project 5000, the city had a vacancy rate of 14.1 percent, the fourth highest in the nation. It had more than 15,000 vacant and abandoned houses and more than 10,000 problem vacant lots – many in tax arrears. These properties represented “dead capital,” the mayor asserted in his address. “No one can use their value to make improvements or create wealth,” he said. “Potential investors can’t buy up abandoned blocks to rehab historic row-houses or start over with new homes. Neighbors can’t claim vacant lots to make side yards or new green space. These properties, for all intents and purposes, are without owners – except for the city, by default.”

O’Malley’s plan to accomplish Project 5000 included:

• aggressively pursuing tax sale foreclosures, quick-takes, and traditional acquisitions;

• transferring surplus vacant properties owned by the Housing Authority of Baltimore City; and

• calling on law firms, title companies and related businesses to help clear titles.

Implementation of Project 5000 involved four major steps:

1. Strategic Identification of Properties – Through a collaborative process, city agencies and community partners developed property selection criteria in more than 100 hours of meetings. The city used the latest geographic information and property-related data bases in its decision-making process. All city vacant buildings and lots were reviewed – in-depth, block-by-block. Property selection focused on areas where development opportunities already existed.

2. Strategic Partnerships – By working with attorneys, the court system, and others in the legal system, litigation services were provided either free or at a reduced rate. The city estimates that, to date, $5.1 million in free and discounted services have been provided:

• Private attorneys have donated $3.2 million in legal services.

• Property Insight has supplied $62,000 in discounted judgment reports.

• The Daily Record has discounted publishing costs by $1.4 million.

• The Circuit Court has waived $340,000 in filing fees.

• The Sheriff’s Office has waived $93,000 in posting fees.

In addition, many city government agencies have been involved in, and contributed to, the initiative. These include Housing, the Mayor’s Office of Neighborhoods, Transportation, the Baltimore Development Corporation, Planning, Police, and Finance.

3. Building New Infrastructure – The legal process has been improved to allow large'scale tax foreclosures by creating electronic pleadings and a legal manual; hiring and training qualified staff and pro bono firms; getting advanced buy-in from national underwriters for a uniform process; and creating a web-based tracking tool for organizing and tracking data, generating pleadings, and tracking progress. City officials worked closely with the Circuit Court to prepare the manual and all forms, provide funding for additional court staff dedicated to the initiative, and create timely case status reports.

4. Moving Beyond Acquisition – Various methods for property disposition have been employed: SCOPE – Selling City Owned Property Efficiently – is a public-private partnership with local realtors employed in the sale of higher value properties. Rolling bids – managing “unsolicited” offers through streamlined sales – are used for less valuable properties. RFPs and RFQs are used for unique properties or areas in which the city wants greater control of development outcomes.

In conjunction with these activities, the city has employed stepped-up code enforcement through it’s TEVO (Targeted Enforcement for Visible Outcomes) program on over 6,000 vacant properties on viable blocks throughout Baltimore. TEVO is used where the city believes aggressive code enforcement will make a significant difference in the strength of the housing market. It is expected that between now and 2013, TEVO will generate $139 million in private investment and bring in over $37 million in revenue for the city.

Over the past three years, Project 5000 has cost $22,044,486 – $7,418,238 in operating costs and $14,626,248 in capital costs. Average expenditures per acquisition are $12,606 for those involving eminent domain, $1,600 for tax sale foreclosures. City officials have helped to meet these costs by investing sales revenues back into the program.

Baltimore’s Project 5000 has produced significant results. In the four years since it began:

• 6,000 abandoned properties with clear title have been acquired.

• 1,000 properties have been returned to private ownership.

• 2,000 more properties have been programmed for a specific development outcome.

• Sales revenues since 2003 total $4.5 million.

• Taxes and fees collected total $1.8 million.

• Home sale values have soared from $69,000 in 1999 to $170,000 in 2005.

City officials have identified other benefits resulting from Project 5000: Limited code enforcement resources have been re-directed. Private investment has been directed to strategic neighborhoods. The opportunity for predatory real estate practices has been limited. Information sharing among agencies has improved substantially.

Despite the remarkable success of Baltimore’s Project 5000, several challenges remain.

Intra- and inter-agency coordination could be further strengthened: Property management and sales processes remain fragmented within various agencies. There is tension between legitimate competing governmental objectives – for example, between short-term revenue collections and long-term development objectives. Maintaining consensus among the various stakeholders for a consistent, targeted acquisition and disposition strategy is difficult.

The disposition process needs additional improvements: The city is exploring the creation of a land bank or similar vehicle that would allow it to sell property in a more streamlined and market'sensitive manner. The collective capacity of community partners – neighborhood organizations and CDCs – needs to be expanded. Transparent sales policies are needed to help protect against outside pressures and inconsistent outcomes.

The initiative is operating in a dynamic market: Rising home values have further restricted the city’s acquisition resources. As a result of the Supreme Court’s decision in Kelo, there is growing anti-takings sentiment. Safeguards to ensure development outcomes are achieved need further improvement. Properties need on-going monitoring after they are sold to ensure that new purchasers are redeveloping the properties. Baltimore needs to develop a comprehensive strategy to address vacant properties not in tax arrears or occupied properties on otherwise blighted blocks.

For further information please contact Michael Bainum, Assistant Commissioner for Land Resources, Baltimore Department of Housing and Community Development, at (443) 984-1645 or Michael.Bainum@Baltimorecity.gov.