Posts tagged: cabin site rents
Here's a link to my full story at spokesman.com on how cabin owners on state land at Priest and Payette lakes scored a surprise win in court today, as a district judge in Boise indicated he'll issue an order to freeze the rents they pay for the state-owned lots under their cabins and reject a bid to toss out a state law protecting them from conflict auctions when their leases come up for renewal. “I don't see where it precludes the Land Board from maximizing long-term financial return,” 4th District Judge Michael McLaughlin told a courtroom crowded with cabin owners who rent their cabin sites from the state of Idaho. McLaughlin said he'll issue a full written ruling, but wanted to let all sides know where he was headed.
“The court will be issuing an order that the rents remain as they were prior to the December decision to raise those rents,” the judge said. “We'll square those other things around as we get through this process. So I'm giving you a little insight as to where I'm headed.” His move would throw the state Land Board's much-debated plan for resolving contentious issues over the cottage-site leases into disarray. Idaho Secretary of State Ben Ysursa, who serves on the Land Board and watched the hearing from the audience, said, “Well, one could say we are in various stages of disarray to begin with.”
A district judge in Boise indicated today he's likely to throw the state Land Board's move toward resolving much-debated cottage-site lease issues into disarray. Fourth District Judge Michael McLaughlin, after a two-hour hearing, told a full courtroom, “Where I'm leaning, I can't find, even after this terrific oral argument today, I'm not looking at 58-310a as being unconstitutional. … I don't see where it precludes the Land Board from maximizing long-term financial return.” He also indicated he wants to again freeze cabin-site rents at the rates from a lease that expired in December; the Land Board, which consists of the state's top elected officials, already has set new methodology for calculating values and rents, and granted a one-year lease extension through 2011, plus a two-year extension after that at a higher rate.
“The court will be issuing an order that the rents remain as they were prior to the December decision to raise those rents,” McLaughlin said. “We'll square those other things around as we get through this process. So I'm giving you a little insight as to where I'm headed.”
The law in question, Idaho Code 58-310a, exempts leases of state-owned cabin sites from the conflict-auction rule that applies to other state leases; the Idaho Supreme Court hinted in an earlier ruling that it was likely unconstitutional, an earlier preliminary injunction from another judge suggested the same, and the state Land Board unanimously agreed and asked the Legislature this year to repeal it. The bill narrowly passed the Senate but stalled in the House.
Bud Belles, head of the Priest Lake State Lessees Association and a longtime cabin owner on Priest Lake, said after the two-hour hearing, “I liked when he was nodding his head - it seemed like to our side.”
Idaho Secretary of State Ben Ysursa said he'll have to wait for the judge's written ruling to fully understand its implications, but said as far as the Land Board's two-year struggle over cottage site leases and rents, “One could say we are in various stages of disarray to begin with.” The board voted earlier this year to move away from the current situation, in which the state owns the land under the cabins but cabin owners build and own the improvements; doing away with that “split estate” would mean either buying out the cabin owners or selling them the land, possibly though land exchanges or auctions.
There's a full courtroom at the Ada County Courthouse today for a hearing in the cottage site lease case, in which cabin owners on state-owned lands at Payette and Priest lakes are arguing they should be able to extend their previous leases, and Attorney General Lawrence Wasden is arguing that a state law exempting cabin-site leases from conflict auction requirements is unconstitutional. A judge already issued a preliminary injunction finding the law unconstitutional. It protects state endowment cottage site leases from conflict auctions at the end of the lease terms, partly on the grounds that some of the leases have been in the same family for 50 years and conflict auctions “caused considerable consternation and dismay to the existing lessee at the prospect of losing a long-time lease.”
The state Land Board is required to manage state endowment lands for maximum long-term returns to the endowment's beneficiaries, the largest of which is the state's public schools - and not for other purposes.
More than 50 people, many of them lease holders, are watching as the attorneys for the various sides offer their arguments on two summary judgment motions. The constitutionality issue focuses on the meaning of the word “disposal:” The Idaho Constitution says state endowment lands shall be “carefully preserved and held in trust, subject to disposal at public auction for the use and benefit” of the trust's beneficiaries.
The cabin owners are arguing that “disposal” just means sale, and shouldn't be interpreted as covering their leases. Attorney Phil Oberrrecht, representing Payette Lake cottage site owners, cited Black's Law Dictionary and Webster's dictionary definitions of the word “disposal” to bolster his argument. “How does one dispose of his real property? By renting it? I don't think so. That's how you manage it,” he said. “This is the common meaning. … If you're going to dispose of something, you get rid of it - you don't go store it someplace or give it to temporary possession by somebody.” Fourth District Judge Michael McLaughlin drew laughter when he told Oberrecht, “I'm just glad you didn't quote from Wikipedia.”
Deputy Attorney General Clay Smith, representing Wasden, cited a string of Idaho Supreme Court cases and told the court, “It has to work this way because that's what the Constitution said.” He told the court, “It is a lease. And any suggestion to the contrary is simply untenable. The only issue before the court is how the term 'disposal' shall be construed.”
Attorney Merlyn Clark, representing the state Land Board, didn't offer arguments on the constitutionality issue, but spoke against the lessees' motion to renew their leases. “There's no option to renew, there's no contractual right to renew,” Clark told the court. “Only if the board determines to offer a right to renew does one exist, and not otherwise.” The Land Board has offered lessees both a one-year extension of their 10-year leases that expired Dec. 31, and an additional two-year extension after that, but at a higher rental rate.
The state Land Board unanimously supported legislation this year to repeal the law exemption cabin sites from conflict auctions on grounds it's unconstitutional; the bill, SB 1145, passed the Senate in March on an 18-16 vote but never came up for a committee hearing in the House.
Though the Idaho Land Board voted in December to offer cabin owners on state land at Priest and Payette lakes new 10-year leases at a rental rate of 4 percent of the land's value per year, rather than the current 2.5 percent, that hasn't happened yet as two lawsuits are pending over the issue. So today, the Land Board voted unanimously for a two-year lease extension for the cabin sites, at the 4 percent rate; you can read my full story here at spokesman.com.
“We need a short-term solution,” state Lands Director George Bacon told the board. All of the 10-year cabin-site leases were set to expire in December, but the state granted a one-year extension under the previous lease terms, at 2.5 percent rent. Now, it faces an April 30 deadline to provide notice of what will happen next year, in 2012. “The obvious comment is that we're in the middle of litigation, and this is a way to meet the deadlines and have this go through the next two years,” said Secretary of State Ben Ysursa. “I think we're in a corner. This is the way out of it for a while. … I think this is the best we can come up with.”
While agreeing to raise the rental rates for the land on which lessees have built their own cabins, the Land Board in December also voted to move away from the current “split ownership” arrangement, in which the state owns the land while the cabin owners own the buildings on it. That would mean, over time, either letting the cabin owners buy the land or acquire it through land exchanges; or the state buying out the improvements. The state Constitution requires state endowment land to be managed for maximum long-term returns to the endowment's beneficiaries, the largest of which is the state's public schools; that's been at issue with the rental rates charged to longtime cabin owners.
Meanwhile, the Land Board also voted today to move forward with auctions of three cabin sites at Payette Lake, including one on the lakefront. Two of the three leaseholders, including the one on the lake, have simply decided to stop paying their leases and given them up; the lake lot has a small cabin on it, while the other lot has just a shed, owned by a neighboring landowner who held the lease. The third cabin site had its lease canceled a year and a half ago for non-compliance with lease terms; all three sites will go on the auction block for bidding by prospective new lessees in August.
Here's some insight into why the Land Board yesterday extended current state-owned lake cabin site rental rates for another year before kicking in a big increase, from 2.5 percent of value to 4 percent of value, in 2012: State law requires six months notice to the lessees of rent increases. They'd already been notified of the proposed phased-in rent increases in proposed new leases that were to start Jan. 1, but a judge blocked those new lease terms with a preliminary injunction. Now, the state needs to give notice again of the larger increases proposed after the one-year extension.
Interestingly, the result for next year is not a rent freeze: Rents actually will rise an average of 5.37 percent. That's because they're not really at 2.5 percent of value now due to rent freezes for the past three years at Payette Lake and the past two years at Priest Lake.
Here's a link to my full story at spokesman.com on the state Land Board's decisions today about state-owned lake cabin sites at Priest Lake and Payette Lake. The state will take public comments for 90 days, starting Thursday, on a plan to get out of owning lots on which private owners build and own cabins, in some cases by giving the lessees a chance to get ownership of the land. The board also voted to extend current lease terms for one year, but move leases after that up to 4 percent of the land value for annual rents, from the current 2.5 percent.
Bud Belles, president of the Priest Lake State Lessees Association, said, “It's all about getting the money for the kids, and we're not opposed to that. We just don't want to pay a lot more money than the market value. … That's what we've been saying all along.” Belles, 69, whose family has owned his cabin since he was 8 years old, said, “I want to own my lot.” More than 300 cabin-site lessees at Priest Lake have expressed interest in a land exchange, Belles said.
Idaho Attorney General Lawrence Wasden said the lawsuit in 4th District Court in which he challenged proposed cabin-site leases still is alive, despite today’s Land Board action; it will look first at the constitutionality of the entire state law under which Idaho has been leasing out lakefront cabin sites without public auctions. “We’ve got a path forward, and that is a much more healthy place to be,” Wasden said. “I commend my colleagues on the Land Board for doing that.”
He said, “When you go back and look at the 80-year history of this problem, the real problem is not fluctuations in the market. The real problem is the lack of political will to get to a fair return.” He said, “What we need is to have a unified political will to go forward - I think we’ve found that at this point.”
Secretary of State Ben Ysursa’s motion, setting cabin-site rents for 2012 and the following nine years at 4 percent of current value, has passed unanimously. Attorney General Lawrence Wasden said the motion will increase revenue to the state endowment beneficiaries by $5.7 million over the next five years. “My personal opinion is that the record supports a rental rate of 6 percent, I also recognize that I am but one vote on this board,” he said. But studies show market rent for the cabin sites should be between 4 percent and 6 percent of value, he said. “It is therefore fiduciarially consistent with this board’s duty, and I will defend this motion.” State schools Supt. Tom Luna objected that the motion leaves the state facing volatility, with ups and downs of the housing market. Gov. Butch Otter said, “We have an obligation to the schoolkids. We also have an obligation to be fair and reflect the market value.”
Secretary of State Ben Ysursa has now moved to set state endowment cabin-site rents at 4 percent of value for 2012 and the following nine years, after a one-year freeze next year. Attorney General Lawrence Wasden seconded the motion. Ysursa said it supersedes the board’s action last March to set phased-in rent increases in its new cabin-site leases.
Ysursa said the ultimate goal is dispose of the cabin sites. “But while we do this, I certainly don’t believe we’re going to be able to … snap our fingers and get out of this,” he said. “So there are going to be cottage site leases , they are going to be around for a while.” Ysursa said the whole issue has been handled with “good faith.” He said, “This I believe in my heart of hearts, that this is a good rate for No. 1 the endowment. Secondly, I think it gives some stability down the road of what the cottage site users will face in future years. … The real goal, I can’t emphasize enough, is what we passed earlier in the day. Let’s get a reasonable good-faith effort to dispose of these properties and enhance the endowment.”
With the state facing an injunction against proposed new cabin-site lease terms, the state Land Board has just voted 4-1 to approve a one-year extension of current lease terms for state endowment land cottage sites on Priest and Payette lakes. That leaves rents at 2.5 percent of current market value. “You’d have to be on Mars to not know we’re in a little bit of litigation over this matter,” said Secretary of State Ben Ysursa. Lessees would have until Feb. 1 to pay.
State Superintendent of Schools Tom Luna objected, saying the move would mean Idaho will collect less in rents to benefit public schools in 2011 than it would have under the proposed leases. “Apparently the solution thus far is to collect less rent,” he said.
Idaho Attorney General Lawrence Wasden moved, and Secretary of State Ben Ysursa seconded, to adopt the state Lands Department’s recommendation: A 90-day public comment period on a plan to dispose of the state’s lakefront cottage sites over a number of years. The motion passed unanimously.
The proposed plan before the Land Board to dispose of leased-out lakefront cottage sites anticipates current lessees having three options: Join in an exchange, enter a voluntary public auction with credit for the value of their improvements and the opportunity for installment payments, or continue leasing - but at higher rates. The proposal calls for a 90-day public comment period to start this Thursday.
Secretary of State Ben Ysursa noted, “There are some lands around Priest Lake or Payette Lake that we may want to retain, not necessarily for single residential cottage site leases but for other purposes. Being an eternal optimist, I don’t think the devastation in our land values will continue esto perpetua. But they will come back, and I think some of those properties we ought to look at strategically, at retaining some of those, but not for leases. Those are just my observations. I want to make it clear that we as a board have some more critical thinking to do.” Ysursa added, “This is a first step. … It is a step in the right direction.”
Idaho should “dispose of the cottage sites in an orderly and expeditious manner,” according to a report now being presented to the state Land Board. However, Lands Department staffer Kate Langford said first, the department is recommending opening a 90-day public comment period - starting this Thursday - and closing around March 24, 2011. “The purpose of that period obviously this is a huge endeavor that we’re considering, has significant potential to impact the asset mix within the portfolio as well as many other … issues, so we wanted to make sure that there was adequate time for obviously the Land Board and their staff members as well as the beneficiaries and the lessees to thoroughly review, vet their questions,” she said.
A consultant hired to help develop the plan said the cottage sites currently are underperforming assets for the state endowment, and “a financially and emotionally invested buyer pool already exists” - the current lessees of the cottage sites. Options include a series of exchanges, where the cottage sites would be pooled together into twice-a-year land exchanges of at least $20 million value, with the lessees getting title to the cottage sites under their cabins in exchange for the state obtaining “institutional-grade real estate assets;” along with voluntary auctions in which the current lessees would receive a credit for the value of their improvements and be able to pay installment payments.
Here’s a link to my full story at spokesman.com on today’s preliminary injunction blocking new state cabin-site leases from taking effect at the end of this month. Attorney General Lawrence Wasden sought the injunction, arguing that the state’s whole system for renting out cabin sites is unconstitutional.
The attorney representing the state Land Board today was none other than Merlyn Clark, the attorney who’s been recently in the news as the state’s hearing officer on the Highway 12 megaloads case, a decision that’s now pending in his hands.
Clark argued in court today that the Land Board takes no position on whether the 1990 law that eliminated conflict auctions for cabin sites in favor of “market rents” is constitutional or not. “As I understand the argument of the Attorney General, it’s that the board should assume the role or the duty of the court in determining whether that statute is constitutional. … We still have separation of powers,” he declared.
Clark said, “The board cannot choose which law it will follow and which law it will not follow.” He also told 4th District Judge Deborah Bail that according to the ISEEO school lawsuit decisions from the Idaho Supreme Court, “You do not have the power or authority to tell another branch of the government how to do their job. … You have the power to declare the statute unconstitutional,” he said. But, he said, “We don’t think you have the power to enjoin the board.”
Deputy Attorney General Clay Smith said the Attorney General’s proposal for a preliminary injunction wouldn’t enjoin the Land Board; it merely blocks state Lands Department Director George Bacon from entering into the new cabin-site leases. “That does not restrain the board from taking appropriate action at its next meeting, which is scheduled for Dec. 21,” Smith told the court. He also said the idea that the Land Board must comply with unconstitutional laws until a court tells it otherwise was “remarkable.” Said Smith, “The real dispute here lies with the Land Board’s failure to comply with the Constitution.”
Idaho Secretary of State Ben Ysursa, who sat through the court hearing today in which fellow Land Board member Lawrence Wasden won a preliminary injunction halting the signing of new cabin-site leases, emerged from the hearing frustrated. Ysursa chaired a Land Board subcommittee that’s been working for years, and heard hours of testimony, on the issue. “I think the key thing we have to figure out is what does that mean to our lease situation,” Ysursa said. “The bottom line is to get the leases done and get revenue for the endowment beneficiaries.”
He noted that if the current lease terms were frozen, the state would be collecting less - the new lease terms call for a 9 percent increase in 2011, and 54 percent over the next five years, and cabin-site lease rents have been frozen for three years at Payette Lake and two years at Priest Lake. Plus, he noted, “We gave people six months notice June 30, as required by law,” about the new rental rates. “We need leases in place.”
After a judge’s ruling today to grant the preliminary injunction he sought against the state Department of Lands, Attorney General Lawrence Wasden said, “We welcome the court’s decision. I certainly look forward to working with my colleagues on the Land Board to try and resolve these issues.”
Asked about the board’s upcoming meeting on Tuesday - at which a plan to move away from state ownership of ground on which private owners build and own cabins already is on the agenda - Wasden said, “If we had unity of title, we wouldn’t be having the kind of problems that we’ve been having.” He noted that every member of the state Land Board supported moving that direction. “That’s the ultimate answer,” he said. But he noted that there likely will be a number of preliminary steps before the state can get there.
Deputy Attorney General Clay Smith said in court today that the case involves “an exceedingly unusual situation,” and 4th District Judge Deborah Bail agreed. Attorney General Lawrence Wasden went to court to block a decision made by the state Land Board, on which he serves; the board voted 3-2 last March for a new rent scheme in new 10-year leases for state-owned lake cabin sites. Wasden was among the dissenters in the vote.
The cabin sites include 355 at Priest Lake and 167 at Payette Lake on which private owners have built and owned their cabins, in some cases, for generations, while the state owns the land underneath. In wrestling with the situation over the past year, the state Land Board voted unanimously to move toward unifying the estate for cabin sites, which means the same owner would own both the land and the structure. That plan is on the Land Board’s agenda for its meeting on Tuesday.
Attorney General Lawrence Wasden argued that the entire state law on which Idaho has based its cabin-site rents for state endowment lands - a 1990 state law that requires the state Land Board to charge “market rents,” while eliminating the requirement that cabin-site leases be auctioned off to the highest bidder, like other state endowment land leases - is unconstitutional. Wasden long has maintained that position; it was laid out in an official 2009 attorney general’s opinion. Today, 4th District Judge Deborah Bail agreed. “Clearly the Legislature was trying to balance some fairly sensitive issues, but the Constitution is plain and the interpretation of the Constitution is clear,” Bail declared in court. “I think the state has met its burden … for a preliminary injunction.”
The judge said she had done extensive research, and a long string of Idaho Supreme Court cases clearly supports that determination. “Nothing in my ruling means that anybody wasn’t trying to do the best,” Bail said. “It’s just that the Constitution is clear.” She added, “I believe that the public auction requirement of the Constitution can’t be negated by a statute. I think it will require a constitutional amendment to negate that requirement.”
Bail said her ruling will maintain the status quo while all parties in the case are given an opportunity to weigh in. She also granted a motion to intervene from Payette Lake cabin-site lessees who already are suing in Valley County to challenge the new rent scheme - they claim the new rents would be too high. The preliminary injunction, she said, will “preserve the status quo and then we will let everyone weigh in fully before we address the permanent injunction,” including arguments on the constitutionality of the 1990 law.
Fourth District Judge Deborah Bail, ruling from the bench, today granted a preliminary injunction barring the state Department of Lands from entering into proposed new leases with hundreds of cabin owners on state-owned cabin sites on Priest and Payette lakes, in response to a constitutional challenge from Idaho Attorney General Lawrence Wasden.