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Land board approves lakefront lease increases

Land board approves lakefront lease increases

Idaho Freedom Foundation staff
March 16, 2010
Idaho Freedom Foundation staff
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March 16, 2010

The Idaho Land Board agreed to increase rates for leases for state property on two lakes and restated its intent to sell the properties or unify the property with the cabins built on them. Two members of the board made up of statewide elected officials, Attorney General Lawrence Wasden and Controller Donna Jones, opposed the rate hikes because they said the leases would still be below a market rate. Wasden said that meant the Land Board didn’t fulfill its constitutional mandate. Money from the leases funds the state endowment, which goes to public schools and state programs. Leaseholders on Payette Lake and Priest Lake say the hikes could be catastrophic to them.

The rate hikes could bring in an additional $2.3 million a year, according to Secretary of State Ben Ysursa. The Land Board approved setting lease rates at 4 percent of the land’s value based on a 10-year average, and then phasing in that increase over five years. Ysursa said leaseholders could pay 54 percent more for their leases after the five-year incremental increases.

Ysursa’s increases could also raise the amount lessees pay the state if they sell their lease. This extra charge is called premium rent. Currently, the state charges 10 percent of the total amount sold, but would now charge 50 percent of the net increase between the leaseholder’s buying price and subsequent selling price.

Gov. Butch Otter and Superintendent of Public Instruction Tom Luna supported Ysursa’s planned increases. “I believe there’s a great value to stability,” Otter said about the phased-in increases. Otter also said that he supports the Land Board’s decision last month to look into selling the land or other options to combine the leased land with the cabins and houses built on the land. “I’m willing to discuss anything to divest us of these headaches—I mean cabins.”

“We have to move to sell these properties or trade them for other assets,” Luna said. “We know we can make more than that if we invest that money elsewhere.”

Wasden opposed the hikes because they won’t charge leaseholders a market rate for the lakefront property.

Wasden said the new lease rates would almost never get a market rate for the lease because a 10-year average property value would lag behind the actual value, assuming that property values increase over time. He also said the premium rent—the money charged on top of lease rates—is problematic. “The very fact that you have premium rent means that you’re not at market rate.” Wasden said these shortfalls mean the state isn’t collecting all the money it could for public schools. Laurie Boeckel, legislative vice president of the Idaho PTA, echoed Wasden’s remarks, saying the Land Board should have undivided loyalty to current and future public school students, which benefit from higher lease rates.

Some of the people paying those higher lease rates say the Land Board’s decision will hurt both them and the state. “I think this is catastrophic for the both of us,” said Chuck Lempesis, an attorney for the Priest Lake State Lessee’s Association. “You are driving down the values that you as the endowment fund want to get. We are both catching the anchor.” Lempesis said raising rates as the state considers selling the property would be a bad combination for people currently leasing property or considering buying a lease. He added that only about half of lessees on Priest Lake could afford to buy the land from the state.

Ysursa said the state would move forward in a market-savvy way to ultimately resolve the leases, including whether or not to sell the property. “We need to be reasonable and fair in the way we extricate ourselves,” he said. “There’s something in here for everybody to hate, so it might be a pretty good resolution.”

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