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Land Board, Wasden react to lawsuit over lakefront leases

Land Board, Wasden react to lawsuit over lakefront leases

Idaho Freedom Foundation staff
April 20, 2010

Lawyers for the Idaho Land Board are asking the state’s highest court to throw out a lawsuit from Attorney General Lawrence Wasden to block raising the price of leases on state-owned lakefront property.  Wasden thinks the state needs to charge more for leases on Payette Lake and Priest Lake so the state can bring in more money for public schools, universities, hospitals, and other programs that benefit from rent collected.  Attorneys for the Land Board say the Idaho Supreme Court should give discretion to state land managers to set lease rates.

Wasden is one of the five members of the Land Board, along with the governor, secretary of state, superintendent of public instruction, and state controller, that voted 3-2 in March to increase leases from their current rate of less than 2.5 percent of current land value to 4 percent of a 10-year average of land value, phased in over 5 years.  Leaseholders could also pay the state a higher premium rent, which is a fee they pay when they sell their lease to another buyer.  Those rate hikes would bring in several million additional dollars a year, according to Secretary of State Ben Ysursa, who backed the increase.  Wasden said a larger increase, to 5 or 6 percent or potentially higher, is necessary to bring the leases up to a market rate.

In a legal filing with the Idaho Supreme Court, the Land Board said court shouldn’t interfere with its decision, because it has authority and discretion in setting lease rates.  Documents supporting the board say setting leases any higher would drive away lessees.  “While it is understandable to hope for a higher lease rate, the board’s obligation is not to charge the highest rate possible,” the legal documents said.  “The board’s obligation is to obtain the maximum ‘long-term’ financial return, and that objective is not obtained if state lands go unleased.”

The dispute centers around 354 plots of land at Priest Lake in north Idaho and 168 at Payette Lake near McCall in central Idaho that are often called “cottage sites.”  The state owns the land, but the leaseholders own the cottages or houses built on the land.  The Land Board’s response to Wasden said that 4 percent is the limit for lease rates because it unsuccessfully tried to lease two cottage sites at a 5 percent rate on Priest Lake in 2007.

In a written response, the attorney general’s office said that was a weak argument.  “This thin reed will not bear the weight the board seeks to place upon it,” the rebuttal said.  It also points out that Ysursa and Idaho Department of Lands Director George Bacon explained during Land Board meetings that there were other reasons for the lack of bidders on the two Priest Lake sites.

The attorney general’s rebuttal claims that the Land Board was unwilling to raise lease to a market rate because it didn’t want to upset current leaseholders.  The written paperwork quotes Ysursa at a 2009 meeting saying, “I think we have bent over pretty good for the lessees.”  Such decisions, according to the attorney general’s office, are unconstitutional.  “When the board takes action that it admits elevates the interests of the lessees to a level equivalent to the beneficiaries, it is abusing its discretion by not acting with undivided loyalty to the beneficiaries.”  The attorney general’s response also said that the state’s use of premium rent on leases is an indicator that it’s charging leaseholders less than what they'd pay in an open market.

Groups representing the leaseholder on the two lakes aren’t happy with the Land Board’s approved rates either, though claiming that the rates will be too high.  Former Idaho Attorney General Tony Park holds a lease on Payette Lake, and says a cabin owners association is preparing a lawsuit.  “Our lawyers are presently working up the form of the litigation,” he told IdahoReporter.com.  Park added that he thinks Wasden’s lawsuit is misguided and likely to fail.  “It’s not based on any formula or theory that I’m aware of that has anything to do with stable market rate,” he said.

The Idaho Supreme Court could reach a decision on the issue by the end of the week.  The five justices could dismiss Wasden’s lawsuit or call for more arguments.  Several organizations have asked for the opportunity to file “friend of the court” briefings sharing their side of the argument.  Those groups include the Payette Lake Cabin Owners Association and Priest Lake State Lessees Association, as well as education organizations like the Idaho Education Association and Idaho School Boards Association.  Wasden would like a decision soon, because current lakefront lessees have an April 30 deadline to renew their leases.  Once leases are renewed, it would be more difficult for the state to change or terminate the leases.

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