Idaho’s top elected officials voted Tuesday to auction off nine state-owned commercial properties, five of them in downtown Boise near the Capitol – even as another state official warned the state will be sorry someday.
The state Land Board is carrying out a plan to get the land holdings of the state endowment on track for maximum long-term gains, and as part of that, consultants recommended the endowment get out investments in commercial property in Idaho. Among the properties to be auctioned in December are Affordable Storage, a 7-acre property with a thriving self-storage business in central Boise; and commercial and office buildings in Idaho Falls.
The rest are all individual properties within a block or two of the state Capitol. And state Department of Administration Director Bob Geddes says two in particular would be suitable for future expansions of state offices in the Capitol Mall, the area surrounding and including the Capitol.
“I’ve been in this debate with the governor that in all likelihood, we’re going to continue to grow as a state, the population’s growing,” Geddes said. As head of the Department of Administration, he said, there’s not a week that goes by without a state agency contacting his office about its need for more office space.
“I personally think those would have been great properties for the state to hold onto, but if you can’t justify it as meeting the fiduciary duty of the endowment, there’s no way to do it,” Geddes said. “We’ll wish someday that those properties would have remained in some way or another in state ownership.”
A third property that Geddes identified, a former bank building at 6th and Washington streets that’s now leased to an accounting firm, was knocked off the auction list by the Land Board in its unanimous vote today. Idaho Secretary of State Lawerence Denney argued that the remodeled brick office building, which also comes with 31 parking spaces, might be more suitable for inclusion in the state Capitol endowment.
The state has seven endowments, the largest of which benefits public schools. That building at 590 W. Washington Street is currently owned 96 percent by the University of Idaho endowment, and 4 percent by the State Hospital South endowment. Denney said the state should explore a possible land exchange between those endowments and the Capitol endowment, which currently owns only the state Capitol and 7,000 acres of other land, largely timber land.
After lots of questions, the rest of the board – including Gov. Butch Otter, Attorney General Lawrence Wasden, state Controller Brandon Woolf, and state schools Superintendent Sherri Ybarra – backed Denney’s proposal unanimously.
The endowment’s acquisition of Affordable Storage in 2010, when the Land Board was moving into commercial property investments with the idea that they could be more lucrative for the endowment than its timber and grazing lands, stirred a backlash. Opponents complained the state was unfairly competing with private business.
Michael Finch of Century Pacific, a commercial real estate consultant to the Idaho Department of Lands, told the board, “I can tell you the market’s very strong right now.”
But when Wasden quizzed him as to whether leaving off the 6th and Washington property for now would hurt overall long-term returns to the endowment, Finch said no. “This is not a high-value asset; we’re talking under a million dollars,” he said. “I don’t see a lot of risk in hitting pause for the moment and making a broader evaluation.”
Geddes noted that the property is across the street from two existing state parking garages, and located near other state offices and the Capitol. He’s even been eyeing it as an ideal location for the state’s Division of Purchasing.
The Idaho Constitution requires the Land Board to manage the state endowment for maximum long-term returns to the endowment’s beneficiaries.
The other two properties Geddes identified are the current home of the Idaho Public Utilities Commission, an office building two blocks from the Capitol at 5th and Washington streets; and a vacant former Home Federal Bank building diagonally across from the Capitol at the corner of 8th and State streets.
Said Geddes, “I think those properties are only going to hold their value and perhaps increase in value, just by virtue of the location.”