The Idaho Department of Lands has announced that the level of state endowment fund assets is at an “all-time high.” Yet a growing number of state legislators and private business operators are expressing disapproval over how the department manages those assets, given its propensity for purchasing and operating for-profit businesses.

“At $1.46 billion, the balance of Idaho land grant endowment fund assets is at an all-time high, up 14 percent from the end of FY12,” the department announced in a recent press release. Yet one of the department’s most recent transactions – the swap of 14 acres near Payette Lake in Valley County in exchange for a commercial office complex in Idaho Falls – has added to a list of dealings that has drawn criticism of the department.

“They have no business doing this,” said Bob Forrey, a former member of the Idaho House of Representatives who has monitored the department for several years. “They (the Department of Lands) are undermining local taxpayers with this transaction.”

Forrey said that the Idaho Falls office complex, which was previously owned by a company known as IW4 had an assessed value of $2.1 million, and as such it produced approximately $39,000 annually in county property taxes for Bonneville County. However, now that the office complex is a state-owned property, it will no longer be taxed by the county. Forrey finds that to be problematic.

Forrey also said that the department isn’t following the Idaho State Constitution because it didn’t put the Payette acreage up for public auction before swapping it to IW4.
Emily Callihan, spokesperson for the department, acknowledges that there is a constitutional requirement for such auctions, but said that the requirement doesn’t apply in this particular scenario.

“According to requirements of the Idaho Constitution, disposal of state endowment trust land must occur through a public auction if two or more parties are interested in using or acquiring the same land,” Callihan told IdahoReporter.com. “Disposal has been determined through constitutional debate discussions and case law to include direct sales and leasing of state endowment trust land. The public auction requirement does not apply in a land exchange where properties of equal value are exchanged.”

But Forrey questions whether the two properties were actually of equal value, despite the fact that the two were “swapped.” He said that the Payette Lake property was appraised at $6.1 million, the Idaho Falls office complex assessed at $2.1 million, and believes that the swap was inappropriate, noting that the difference between $6.1 million and $2.1 million is $4 million—clearly not a trade of equal value.

“I’m working with a private attorney and property appraiser and we’re examining this,” Forrey commented. “We’ll have more to say about this later in June ... ”

The Idaho Department of Lands was created to manage the original land endowed from the U.S. government at the time of Idaho’s founding. It is governed by a board consisting of the statewide constitutional officers—the governor (Butch Otter), secretary of state (Ben Ysursa), state superintendent of public instruction (Tom Luna), state controller (Brandon Woolf) and the attorney general (Lawrence Wasden).

The Land Board has been criticized for investing in commercial property in competition with the private sector. Board members maintain that the Idaho Constitution stipulates that the public lands must be managed “in such manner as will secure the maximum long term financial return to the institution to which granted,” and this is said to imply a “fiduciary responsibility” for the board members.
The Land Board has sought to uphold this fiduciary responsibility by taking funds derived from the sale of public lands and using them to purchase for-profit business entities and commercial properties. IdahoReporter.com reported in late 2010 that the Land Board had at that time voted unanimously to purchase the Affordable Storage business in Boise.

At that time, Jane Wright, an analyst with the department, was asked by the Idaho Statesman: “Could Idaho eventually become the landlord of other types of properties like fast food restaurants or hotels?” Wright replied "that has been at least considered, but the risk is likely too high. Burger joints come and go. A storage facility is more stable."

In 2012 the Land Board purchased a commercial building in downtown Boise and had arranged a lease agreement with 10 Barrel Brewing Company of Bend, Ore.

This week, Idaho Reporter.com asked Callihan if there were any types of businesses that the Land Board would not consider purchasing. “The Idaho Department of Lands and the Land Board manage endowment trust lands,” Callihan noted. “The term ‘land,’ when used in law, generally means the solid material of the earth as well as the natural and manmade things attached to it and the rights and interests associated with it.”

“I’m definitely displeased with their (the Land Board’s) behavior,” Rep. John Vander Woude, R-Nampa, told IdahoReporter.com. “In my opinion, they are a government organization trying to compete against the private sector, and that’s wrong. For one thing, they don’t know how to run a business, but they also have all kinds of unfair advantages over actual businesses. They don’t have to show a profit and they don’t pay taxes. I’ve looked at the last 10 years of the department’s investments and their rate of return, using their numbers, is about 1.5 percent. No private company stays in business with that kind of return.”

Vander Woude, along with Rep. Grant Burgoyne, D-Boise, unsuccessfully sought to legislatively reign in the board’s behavior this year.

While Forrey says that he’ll have more analysis of the Payette Lake/Idaho Falls transaction later this month, Vander Woude says he’ll be working on this issue in next year’s legislative session.