Friday, April 10, 2009

Revitilazation: Why Cincinnati loses and isn't competitive

Cincinnati has a historic building inventory that most Cities would DIE for, yet your city government is shooting itself in the foot and you the taxpayer are paying the price through higher property taxes.

Its been a busy couple of days. We found a building that we 'thought' might be a good building for our business. It is in a location we like in OTR, it is the right size, has good access, and its priced right. Our business would be a huge asset to the area and we feel we would be a good fit. For those of you unfamiliar, we own a nationally known Historic Restoration Consulting company and will be opening a 'one stop' historic design center where one can not only buy antiques, but reproduction historic lighting, period wallpapers and stencils, ceiling medallions, and other hard to find restoration items. Ours will be a one of a kind "destination" business for anyone restoring a historic home. We selected Cincinnati over several other cities that were offering us incentives, because we felt that Cincinnati has a bright future in the area of historic restoration.

The problem? We will likely have to pass on this location because of city inspections. This is not the first time I've had to say no to a building I normally would have bought.

After being "blindsided" by getting a letter from the city that our house in Knox Hill has a VBML (Vacant Building Maintenance License) order against it and we will be required to spend 900 a year to keep it vacant or go through the process of filing a "waiver", filing a detailed restoration plan with timeline, submitting sensitive financial information to the city to "prove" we have monies to restore the house . Although the city can't prove to me how they will protect that financial information and keep it out of other peoples hands in this age of identity theft. Oh, and pay huge amounts to acquire liability insurance on a house that has no real issues, that we aren't "allowed' to occupy. Although the city apparently feels it can trump State of Ohio Law which has no mandatory liability insurance requirement on residential property as you would with say a car. I would, quite frankly, be surprised if anyone in our neighborhood even has homeowners insurance, although we certainly plan to once we can move in.

Mind you to date we have spent almost 25,000.00 in cleaning up the property, repairs and re-siding to National Historic Preservation Standards, before, we even were made aware of the VBML. The average "sale price' in our neighborhood according to the city 's own data is 6750.00 the lowest in the city. That means with our purchase price we have invested more than 5 times the average value in the neighborhood and we haven't really started yet. We expect to invest 150,000.00 in a restoration of a house, in a neighborhood the city has 'written off". We are the ones who organized a neighborhood group, set up a neighborhood website and promote our neighborhood to Realtors and the historic preservation community. A JOB the city does not do.

And I am not the only one. I have received emails from others who bought a house, in areas like the West End and OTR, went though closing with title search and title insurance, and thinking they were free and clear, spent thousands on their homes and months down the road learned of all this new "burden" they must bear as an over burdened inspector on a six month or 12 month follow up inspection, discovers new owners or having your contractor pull a permit as part of a restoration.

In our case the orders were written in 2005 against a previous owner. The house was cited (according to the city records on line) for broken windows after the elderly family member who lived in it passed away and they were dealing with the estate issues and the house was vacant for the first time in years and apparently the owners did not comply fast enough for the city and they slapped a VBML against it. The owners, who were of limited means, and not well educated, looking at "OFFICIAL CITY ORDERS", then went out and refinanced the house, paid 1800 in VBML fees, spent thousands on new windows and also put in a new furnace and a new roof (not even required by the city), yet the VBML is still out there and NO ONE at the city will provide me with a specific list of "issues" that triggered a VBML despite several requests for this information. Because the owners were "forced' into a VBML and spending monies they did not have and had to borrow, (probably not at a good rate), they wound up losing the house to foreclosure. FYI: there is no mention in orders that you receive from the city that you have rights and should consult an attorney.

The city knows it "messed up". That this should have been a simple repair order and does not want to admit that they made a mistake in 2005.

In 2008 a Sheriffs sale was held after the old owners defaulted ( or in frustration walked away) and the bank wound up "buying back' the house at the sale and we eventually bought it from Fannie Mae. Certainly had we not bought this house it would have been bought by some slumlord or 'investor group' who would do little to it, and would not have felt any ownership in the neighborhood and most certainly was not planning on eventually living there or organizing or rebuilding a neighborhood.

I don't blame the current Inspector, I think he is a great guy and "gets' what historic restoration and preservation is all about. He has a huge caseload and I see his hands as tied , because he has to enforce a system that is clearly broken. He can't spend his time dealing with real problems because he isn't allowed to use his own common sense and good judgement and drop cases where clearly a new owner is more that willing to restore a property, and has by their actions demonstrated that. He is not able to reduce his own case load and concentrate on those that are the real problem property owners.

You see the city doesn't follow its own ordinance regulation and, you and I, the home buyer loses. In 2007 when the VBML on our property had lapsed, the city did not do it's job as required by the ordinance:

1101-129.3Late Fee: In addition to the amount assessed for the vacated building maintenance license, the director of buildings and inspections shall charge a late fee equal to the license or renewal fee or $1,000.00, whichever is less, if the owner fails to obtain a vacated building maintenance license within the time provided by § 1101-77.2 CBC or if the owner fails to apply for renewal of a vacated building maintenance license before the annual renewal date. The annual renewal date shall be the anniversary of the date notice of violation is given pursuant to Section 1101-61 CBC wherein the building or portion thereof was initially ordered to be vacated or kept vacant. Unpaid Late Fees shall be considered a debt collectible pursuant to Section 1101-129.3A.

1101-129.3A Fee as a Lien: If the owner fails to pay the amount due for the license, for renewal of the license, or as a fine for being out of compliance with the vacant building requirements, said amount shall constitute a debt due and owing to the city. The department of buildings and inspections shall provide quarterly reports to the city manager and the solicitor's office regarding delinquent amounts owed on properties subject to the vacated building maintenance license provisions. The solicitor's office shall review such quarterly reports and will initiate collection efforts regarding the delinquent amounts, as appropriate.

BUT, the city doesn't do that. I was told by an member of city staff that ' We intend to use the liens, but why pile up liens on property the City does not intend to foreclose on. Right now we are getting judgement liens against individuals not buildings. You would have been far more discouraged if the building you purchased turned up 5000 in VBML liens?'

Really? At least HAD the city done its job I would have been informed that there was a problem, not "Blindsided 5 months later, I could have made a choice as to if I wanted to spend the time monies and energies restoring that house.

SO, the city doesn't follow its' own ordinance, liens aren't filed and the new owner has no way of knowing about the VBML because it is not filed as a lien, (as required by the ordinance) and does not show up on a title search when one buys a house. The bank who sold me the house ( in this case Fannie Mae who wound up with the property) is not at fault as the city never contacted the Bank or them. They had NO WAY of knowing about a VBML and therefore would have no way of disclosing a "known condition'. One would think the sheriff's sale would "vacate and nullify' any legal claim, as the city has had ample opportunity to track the ownership and notify them. The sheriffs sale is clearly a matter of public record and by posting City legal should have filed a lien and asserted its claim (Lien), and continuation of the VBML order, BUT they didn't do that! A responsible buyer does what buyers do, they hire a title company, buy title insurance and if there are no liens out there, any consumer will reasonably assume that the house is delivered free and clear of encumbrances. Its called "Disclosure" and the city fails to disclose its interest in seeing that a property is maintained to the standard, when they fail to file liens. Perhaps city legal should read the Federal Fair Housing Act not to mention the State of Ohio Consumer protection Laws.

Basically the city plays a "waiting game", they wait around until someone comes around that they can easily find, and then slap them with the problem. The analogy would be like buying a car and a city issued a traffic ticket against a previous owner. One day they come knocking at your door with a warrant for your arrest because you have an unpaid traffic ticket because the previous owner of a car didn't pay it and they are holding you responsible because you bought the car the ticket was written against. So you have to jump through all the hoops to get the matter cleared. You spend your time, your energy, your money, because the city FAILED to do its job right in the first place. Because most people are "fearful" of government and don't know they have rights they are "bullied and intimidated" into compliance. Especially the poor and undereducated who least know their rights.

So what does this do to city revitalization, you ask? Well it slows it, or it stops it. Many simply have throw up their hands in disgust and walked away. Developers have to look at the additional costs of dealing with old issues against a property, additional expense of filing waivers or 'jumping through hoops' for the city that may come up 6 months down the road and many just look elsewhere. The city winds up with property it doesn't want or more likely condemns it and bulldozes a blight that is in many cases their own fault, because of their broken system.

It is the REASON that OTR has blocks and blocks of undeveloped property, and struggles to attract investment. It is the REASON my neighborhood is struggling with 20 properties with VBML or Condemn orders, to turn itself around, as are other URBAN neighborhoods because many people who would buy one of these houses don't want to deal with the city "hassle" and look elsewhere. The slumlords, for whom the ordinance was originally intended, are the only ones buying and they play a shell sale game and milk properties dry while responsible people are put through the grinder.

This is not what the Multi Neighborhood Taskforce had in mind when they drafted this ordinance proposal. The idea was to get the irresponsible to fix their property to the minimum preservation standard and eventually get the property habitable again. It was supposed to get those "worst of the worst' properties moving along towards restoration and return to the tax base. Instead, because it is not used in a consistent manner and now simply is another "Revenue Stream" for the city, property that could, and would, get developed, is bypassed because no one wants to deal with an inefficient city system. Inspectors hands are tied because when they see a property that clearly is being brought into compliance don't have an avenue to simply drop a VBML.

In the case of this commercial building in OTR, I will probably pass. So who loses? Well the city loses because I would have spent 250K or more, in restoration, surely increasing the tax base of the area. The city also loses the jobs that would have been created by our hiring Electricians, HVAC people and others as part of the restoration.

OTR loses because they don't get a business that would have helped historic tourism, a business that ultimately that would bring 5-7 relatively good jobs to the area and you lose because the tax base of the city isn't growing and those who do pay property tax will wind up paying more as the city has to get money from somewhere.

So the traffic gets heavier going across the river to Newport where people can BUY property and fix it up and are encouraged to invest. Cincinnati shoots itself in the foot and as a taxpayer who no doubt will see increasing taxes to support a dying city you should be VERY angry.

AND I will give anyone at the city, From the Mayo, the city council, on down, space on this blog to attempt to explain this. Its read nationally by the preservation community, so here is your chance to explain how this "helps and encourages" restoration and preservation of historic structures.

If you are someone, like us, "blindsided" by a VBML, I'd like to hear from you too. We need a dialog about how to fix this broken system, and restore the city of Cincinnati.

5 comments:

steve-o said...

I am sympathetic towards your plight and hope that this issue can somehow be resolved. As election season looms in the city, perhaps a few council members could be persuaded to see how critical this issue is.

The question I have would be does 3CDC, in their constant development of the OTR area, also have to deal with the VBML that, most likely, exist on those properties? Or is this "waved" because of the relationship 3CDC has with the city. I'm guessing it's somehow overlooked.

This would be an angle to explore in fighting this ridiculous code.

Paul Wilham said...

I would be guessing but I suspect a "big" developer like 3CDC just billed the VBML cost into the sale price of the units. 3CDC also doesnt "restore' property in the traditional sense they do gut/rehabs. Ultimately the buyer is just paying more.

There actually are some lawsuits that are working through the courts claiming the city has an "abuse of process". If you are interested you can see the inpector orders and such at this site:
http://cagisperm.hamilton-co.org/cpop/permits/address.aspx

It is searchable by address. Most of the property sitting empty in OTR seems to have orders against it, which is one reason why redevelopment is taking so long.

In any other city they would gladly waive existing orders and likely be offering facade grants to ANYONE willing to come in and invest, but that is other cities.

Mark Miller said...

"In this present crisis, government is not the solution to our problem; government is the problem."

The city also has TIF abatements on nearly all properties in the basin, which is why you won't see the County lifting a finger to help. There's no money in it for them.

The district-based TIF also pre-empts individual property tax abatements, that are often useful to attract individual investors. This is an abuse of TIF that the City hasn't yet been called on the carpet for.

David said...

I would think that there are only 2 strategies.. move in illegally with no visible source of support or spend money on a good lawyer instead of on compliance.

Cincinnati will never support organic, bootstrapped enterprise. It just not the way things are done here. If it was, you would find people from all over the country coming here to take advantage of what truly is a marvelous building inventory and a reasonable cost of living.

Government isn't always "the" problem. Government is a nuisance in most cities - even in successful ones. 3CDC is all about building communities by and for the illusive "young professionals" who appear to be about drinking, procreating and moving to West Chester. They - in spite of the pro business talk - are not really into enterprise. They're just into branding and test marketing. That raises the bar for (prices out) individuals who want to take a chance on something unique.

Paul Wilham said...

David, we are just "working along" on the house making steady improvements. Obviously since the city notified us about 30 days ago, they soon have to "decide" if its politically expedient for local government, (in an election year),to "Take on" this issue. They already have two lawsuits working their way through courts. Either of which could get the ordinance reversed. Taking on a Nationally known historic preservationist with a proven track record for turning around neighborhoods doesnt look good. However they have an option if they choose to take it:

1101-67.2Rescinding vacation order: When it shall appear to the director of buildings and inspections that the reasons for the order of vacation have ceased to exist and that the building or portion of the building and the occupancy thereof are in substantial compliance with law and the orders of the director of buildings and inspections, he shall rescind the vacation order in writing.

So as I see it the "ball' is in Ed Cunninghams court. It is in the citys' best interest to have the inspectors concentrating on the non compliant , rather than wasting a good inspectors time with
this.

We will see what they decide to do?