Determining the COST of Vacancies in Baltimore - BY BOB WINTHROP AND REBECCA HERR
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
Determining the COST of Vacancies in Baltimore
BY BOB WINTHROP AND REBECCA HERR
A
s the number of home foreclosures rises nationwide, The cost of the extra safety effort was determined based on
cities face mounting costs related to vacant and 911 call data, a list of properties designated as vacant and
abandoned properties. Aside from subsidizing these unsafe for at least one month, and police and fire department
costs through general funds, fees and fines, cities are suing budgets, all for fiscal 2008.The call data and vacant property
mortgage financing companies and banks to recover costs, information was used to construct an econometric model
charging that irresponsible lending practices have led to that measured the statistical relationship between the number
increased foreclosures and vacancies. However, with any of of properties designated as vacant and unsafe on a block and
these measures, it is necessary to demonstrate that there are the amount of time police and fire personnel spent on that
specific costs associated with vacancies. block. In the analysis,“officer minutes” and “fire fighter min-
utes” were the base measures used, indicating one minute of
STATISTICAL ANALYSIS time for one officer called to a specific block. For police offi-
In 2008, the city of Baltimore, Maryland, used econometric cers,the officer minutes were calculated from the time an offi-
analysis to rigorously quantify the cost of police and fire serv- cer was dispatched until he or she left the scene,multiplied by
ices associated with vacant properties. Many studies have the number of officers who responded. For fire fighters, the
addressed the cost of vacant properties in a general sense,but number of staff responding was not broken out in the data, so
Baltimore was the first city to undertake a detailed study of the Fire Department provided an estimated number of fire
this nature. Working with a consultant, the city determined fighters who responded, based on the type of call.The econo-
that the cost per block of police and fire services showed an metric model used zip codes as a proxy control for geo-
annual increase of $1,472 for each vacant and unsafe proper- graphic differences in public safety costs (i.e.,areas with more
ty on that block (vacant and unsafe is a technical designation or less crime).The analysis determined a positive relationship
used by the City of Baltimore Housing and Community between vacant and unsafe properties and the officer and fire
Development Department). fighter minutes spent on a given block.
To calculate the cost of one officer or fire fighter minute,the
Ohio Study Shows High Cost portion of police and fire department budgets dedicated to
of Abandoned Properties responding to 911 calls — known as the response budgets —
was divided by the total police and fire response minutes.
A recent study of eight cities in Ohio conservatively identified These response budgets included most, but not all, of the
nearly $64 million in total costs to local jurisdictions related to departments’ activities. They excluded, for example, police
vacant and abandoned properties.* This included nearly $15 special investigative teams and the fire prevention inspectors.
million in city service costs and more than $49 million in lost This cost per officer or fire fighter minute was multiplied by
tax revenues from demolitions and tax delinquencies. Another the marginal increase in public safety response minutes asso-
study identified 26 distinct, foreclosure-related municipal costs ciated with each additional vacant and unsafe designated
that fall into categories such as building inspection and code property on a given block, as calculated by the model. The
enforcement, boarding and demolition costs, tax loss from results of this analysis are shown in Exhibit 1. The analysis
demolition and unpaid property taxes, utility (water/sewer) indicates a correlation between vacant and unsafe properties
bill delinquency, trash removal and mowing costs, and fire and and increased police and fire cost,and it measures the size of
police services.** that increase. But the analysis does not address whether the
vacant properties caused the increase in cost or whether
* Community Research Partners, $60 Million and Counting: the cost of vacant increased criminal activity might have caused an increase in
and abandoned properties to eight Ohio cities (Columbus, Ohio: ReBuildOhio,
vacancies. Further analysis would be needed to answer the
February 2008).
causality question.
** William C. Apgar and Mark Duda, Collateral Damage:The Municipal Impact
The statistical results for police and fire fighter minutes
of Today’s Mortgage Foreclosure Boom (Minneapolis, Minnesota:
Homeownership Preservation Foundation, May 11, 2005). yielded by the econometric model are shown in Exhibit 2.The
coefficients are the incremental number of minutes spent for
each vacant and unsafe property by block for police officers
June 2009 | Government Finance Review 39one month, out of 236,569 properties in the real property file.
Exhibit 1: Summary Results —
Of the addresses in the real property file, those that had
Public Safety Direct Cost
descriptive names rather than address identifiers were
Total Police Budget $311,044,000 removed,leaving in 229,020 addresses as the universe of prop-
Response Budget $241,059,100 erties in Baltimore.
Annual Officer Minutes 107,262,204 Unfortunately, while the police and fire data were input in
Cost per Officer Minute $2.25 the same format, the real property file used slightly different
naming conventions. The following methodology was devel-
Additional Minutes for Each Vacancy on Block 445 oped to rectify these differences and match real property
Additional Police Cost for Each Vacancy $1,000 addresses to call data. Four pieces of the street address
were used to create a unique street address identifier: street
Total Fire Budget $137,761,000 name, house number, street type, and street direction (where
Response Budget $134,145,000 applicable). The resulting address code is a unique 11-digit
Fire Fighter Minutes 39,211,589 number.The first piece of the address code is the name of the
Cost per Fire Fighter Minute $3.42 street where the property is located.The consultant created a
unique four-digit identifier for each of the approximately
Additional Minutes for Each Vacancy on Block 13 2,500 street names in the real property file. The numbers
Additional Fire Cost for Each Vacancy $472 were assigned to streets in alphabetical order, starting at 1000.
The next digit of the address code was for the street direction.
Total Additional Public Safety Cost $1,472 A unique number was assigned to each cardinal direction
(i.e., North, South, East, and West), and for streets without
or fire fighters, respectively. The coefficients are positive, as a direction. For every street type (e.g., street, road, lane) in
one might predict (i.e., more time is spent servicing blocks the real property file, a two-digit value was assigned. Street
with vacant and unsafe properties than those without), and names that did not have a street type (e.g., Broadway) were
they are statistically significant.That is, there is a greater than assigned a value as well. The final piece of the address code
99 percent chance that these coefficients are not zero.The R2 was the house number. No house numbers were longer than
value indicates the amount of variation (in officer minutes) four digits, so each one was converted to a four-digit number
this equation explains.While vacant properties and zip codes (e.g., 300 would become 0300). In the real property file,
can explain 8.4 percent of the variation of officer time spent some of the addresses contained a range of house numbers;
on a specific block, 91.6 percent is explained by other vari- for the purposes of this analysis, the first house number in
ables such as poverty, density, transience, etc. the range was used.
As an example, the address code for the Baltimore Police
EVERY ADDRESS IN BALTIMORE Department headquarters, located at 601 E. Fayette St., is
Conducting the analysis required four city departments to 18491350601. The first portion of the code is for the street
work together. The Department of Housing and Community name, Fayette, which was assigned the number 1849.The next
Development (HCD) established which properties were number, 1, is the numeral assigned to the direction of East.
vacant and unsafe.The police and fire departments provided
specific call data, and the Department of Finance provided
Exhibit 2: Statistical Results
budget information. HCD also provided the real property file
to determine the universe of addresses and blocks within the Incremental Standard T Value R2
Minutes Error of the
city. Each of the four departments assigned staff to a steering (Coefficient) Coefficient
committee that guided the analysis. Police Officers 445.21 22.55 19.74 8.4 percent
Fire Fighters 137.86 14.5 9.51 2.4 percent
Over the 12 months of data, there were approximately
19,000 properties designated as vacant and unsafe for at least
40 Government Finance Review | June 2009Current Litigation
A number of jurisdictions are suing banks, mortgage compa- The City of Cleveland
nies, and related firms in an attempt to recoup some costs The City of Cleveland, Ohio, has seen in increase in foreclo-
related to foreclosures. sures over the past decade. Between 2004 and 2006, the
number of foreclosures has increased to 7,369 from 397.The
The City of Baltimore
city is suing 21 banking institutions for public nuisance costs,
The City of Baltimore, Maryland, filed suit in U.S. District
including maintenance and demolition of vacant properties and
Court, claiming a bank engaged in unfair lending practices that
the decrease in property tax revenues.
targeted minority communities in Baltimore, violating the fed-
eral Fair Housing Act and resulting in high rates of foreclosures The City of Minneapolis
and vacancies in minority communities.The city would like to The City of Minneapolis, Minnesota, filed a suit against a real
recoup some of the costs it has incurred due to illegal prac- estate company, claiming it purchased and flipped homes in
tices.These costs include: decreased property tax revenue, the north and northeastern areas of the city.The company
increased expenditures for public safety, as well as related was charged with inflating the values of the properties using
administrative and legal costs associated with foreclosures. fraudulent appraisals. Of the 140 homes purchased, more than
half are in foreclosure.The city wants to obtain the foreclosed
The City of Buffalo
properties and rehabilitate these homes and rental properties.
The City of Buffalo, New York, sued more than 30 mortgage
companies and banks to recoup costs for nuisance abatement The State of New York
related to specific buildings that have gone vacant and are now The New York state attorney general filed suit against an
in disrepair.The city seeks reimbursement for the associated appraisal company for providing inflated appraisal values on
public nuisance costs, including demolition, associated with homes, allegedly in collusion with employees from one banking
approximately 60 properties. firm.The state seeks restitution for all individuals hurt by the
conspiracy and all fees and costs associated with the filing, as
well as reparations for all legal violations.
The value of 35 corresponds to the street type, in this case Originally, the analysis tried to match specific addresses to
“street.”The final portion is the four digit number for the house specific calls, but the Police Department does not always use
number, 0601. the exact address and at times uses what it calls an “implied”
Using this methodology, an 11-digit number was created for address.That is the first two digits of the address number with
each of the records in the real property file. In addition to the either an odd or even designation to indicate the specific side
longer address code created for the specific address, a block- of the block.To overcome this hurdle, the city’s budget direc-
level address was created as well. The block-level code is a tor suggested conducting the analysis on a block level rather
nine-digit number created by removing the last two digits in than a specific address level. Due to data irregularities, how-
the house number.The same methodology was used to create ever,not all records could be matched to a block.Once all the
the address code and block-level code for each record in the quality checking was complete, there were 870,201 police
police and fire call data. There were records, or about 90 percent, that
12,824 blocks identified in the City of The city is armed with financial infor- could be matched to a specific block
Baltimore real property file. in the real property file.
mation that will allow it to pursue
The police provided 1,103,091 call A similar process was conducted
additional action in fighting problems
records, of which approximately on the fire data (although there were
143,000 were designated as adminis- caused by vacant properties. no administrative codes in the fire
trative (i.e., lunch, transportation, etc.) data). The original file contained
and thus removed from analysis. 158,728 records, and once the quality
June 2009 | Government Finance Review 41of all the data was checked, 122,275 records remained, or
approximately 80 percent. Fees and Fines
Many cities require owners to pay an annual registration fee
CONCLUSIONS
for vacant properties. Examples include:
While a great deal of literature generally estimates or
hypothesizes the cost of police services associated with City Fee
vacant properties,the Baltimore study represents the first time Oak Forest, Illinois $200
direct public-safety costs have been rigorously measured with Albany, New York $250
statistical validation. Using this analysis, the city is armed with Chicago, Illinois $500
financial information that will allow it to pursue additional Wilmington, Delaware $500
action in fighting problems caused by vacant properties. City Saint Paul, Minnesota $1,000
staff are currently determining what type of program to use — Burlington,Vermont $2,000
an additional fee, fine (citation), or both to help defray the Minneapolis, Minnesota $6,000
costs of vacant and unsafe properties.Whichever path it pur-
sues, the city now has defensible data it can use to hold own- Many cities use a progressive fee structure to minimize the
ers who allow their property to become vacant and unsafe length of property vacancies. For example, the fee shown for
financially accountable. ❙ Wilmington, Delaware, is for the first year of vacancy.The fee
increases afterward: $1,000 for year 2; $2,000 for years 3-4;
BOB WINTHROP is scheduled to start later this summer as the sen- $3,500 for years 5-9; $5,000 for 10 years; and an additional
ior business operations manager for the City of Portland, Oregon, $500 for each year after 10. But often, cities also try work
Police Bureau. He has more than a decade of experience specializ- with owners. In Minneapolis, for instance, the fee can be
ing in improving government operations. Along with general govern- waived if there is an approved redevelopment plan in place.
ment financial analysis, he has worked on projects for police depart-
Along with fees, cities institute fines to defray or recover
ments throughout the country, including Saint Paul, Minnesota;
Pittsburgh, Pennsylvania; and Long Beach, California. He currently is a costs incurred because of improperly maintained property
member of the Public Strategies Group network and can be reached by charging fines for improperly maintained properties.
at bwinthrop@psg.us. REBECCA HERR is a consultant in the Strategic Examples include:
Consulting Group at Public Financial Management, Inc. (PFM). She
City Fine
joined the PFM team in 2007 and has worked with city and county
Burlington,Vermont $50-$500
governments on projects including arbitration support, workforce
Chicago, Illinois $200-$1,000 per day
analysis, budgeting, and revenue generation. She has worked with
Kansas City, Missouri $1,000
jurisdictions including New York City; Philadelphia, Pennsylvania; and
Baltimore, Maryland. She has a bachelor of arts in mathematics and
economics from Lafayette College.
42 Government Finance Review | June 2009You can also read
