Posts tagged: Cabins
Four cabin owners on state-owned leased land at Priest Lake, and one at Payette Lake, have drawn conflict bidders who want to bid against them in the fall for the right to continue leasing the ground under their cabins. It’s the first time in decades that Idaho has faced that situation on its state-owned cabin sites on scenic Priest and Payette lakes; for years, a state law has protected the lessees from conflicting bids at lease renewal time, but the Idaho Supreme Court overturned that law in July as unconstitutional.
“The high bidder, if it’s not the current lessee, would have to pay the value of the improvements before they left the auction,” said Tom Schultz, director of the Idaho Department of Lands. “The current lessee could be the high bidder, or the conflictor could be the high bidder.”
After years of struggle over whether the rents charged for the lake cabin sites met the state’s constitutional requirement to manage its land endowment for the maximum long-term return to the endowment’s beneficiaries – the largest of which is Idaho’s public schools – the state’s moving toward getting out of the cabin-site business. But it still has 354 at Priest Lake and at least 150 at Payette Lake, and every one of those has its lease expiring Dec. 31.
As of Tuesday’s deadline – 5 p.m. Boise time – 343 of the 354 lessees at Priest Lake had applied to renew their leases, or 97 percent; and 134 of the 150 at Payette Lake had done the same, at 89 percent. The fate of the 11 other lots at Priest Lake and the 16 at Payette Lake is uncertain, but Schultz said some of those involve lessees who already were behind on their rent or otherwise in default on their leases.
Over the coming years – and even as soon as this summer - the state will look at land exchanges, auctions and other moves to protect endowment income and get the state out of the business of being a landlord for people’s longtime lake houses. That could allow some of the existing lessees to buy the land under their cabins. But for now, a small number of them could face competitors to keep the plots. “If you’re a lessee, you probably don’t look at it as a good thing,” Schultz said. “If you’re the state, it says at least on those sites, at that value, someone is willing to want to acquire that for that value. To me that’s a positive.”
The five cabin owners who are the targets of the conflict bids haven’t yet been identified; the state will begin notifying them Wednesday. If they successfully complete land exchanges or voluntary auctions to remove the lots from state ownership by October, they could avoid the conflict auctions. Otherwise, the conflict auctions for the right to lease those lots will be scheduled in the fall. Bids start at $1,000 for the right to take over the lease at the existing lease rate; the high bidder wins. You can read my full story here at spokesman.com.
Here's a news item from the Associated Press: SANDPOINT, Idaho (AP) — Three lawsuits on behalf of 353 lease holders of cabin sites on Priest Lake in northern Idaho have been filed to prevent Idaho officials from increasing annual rent payments. The Bonner County Daily Bee reports (http://bit.ly/17Qkb7i) the lawsuits were filed Thursday and Friday in 1st District Court. A lawsuit filed Friday by the Priest Lake State Lessees Association represents 320 lease holders, and another lawsuit on Friday includes 17 more. A lawsuit filed Thursday includes 16 lease holders and names the Idaho Department of Lands, the Land Board and its five members, including Gov. C.L. “Butch” Otter. That lawsuit contends the appraisals by the Idaho Department of Lands are flawed and inaccurate. Rates are set to skyrocket as the state seeks to maximize its profit from state endowment land as it is required to do by law.
The clock is ticking for state-owned cabin sites at Priest and Payette lakes; current lessees must apply by April 30 if they want to continue to lease the land under their cabins from the state of Idaho next year. That’s also the deadline for conflict bidders who want to bid against the current lessees, whose leases all expire Dec. 31. Meanwhile, the state Land Board will let cabin owners on the Priest Lake sites flag factual errors in their new, much higher appraisals if they do so before the 30th.
“We’ve got a Supreme Court decision that we have to go with,” said Gov. Butch Otter. “That’s where we are.”
A court decision last summer removed protections the state had granted lake cabin-site renters from competitive auctions when their leases come up. At the same time, the state is in the process of moving to get out of the cabin-site rental business, either through land exchanges, auctions or other moves that will keep income flowing to the state’s endowment. In the midst of all that, new state appraisals on the 354 Priest Lake cabin sites came in an average of 84 percent higher for next year, with some more than doubling.
The Idaho State Land Board is required by the state Constitution to manage state endowment lands for the maximum long-term return to the endowment’s beneficiaries, the largest of which is the state’s public schools. Much of the state’s endowment is timber land on which logging brings in annual income; the cabin sites bring in far less.
“Obviously these people have enjoyed these cottage sites for generations, in some cases, and I certainly can see that,” Otter said. “I understand the anxiety that it’s caused, but it doesn’t lessen our obligation.” You can read my full story here at spokesman.com.
For the first time ever, the state of Idaho is opening up every state-owned cabin site on Priest Lake to conflict bidding – meaning others could bid against the current cabin owners when the 354 leases come up Dec. 31; the same is true for the 165 cabins at Payette Lake. At the same time, new state-commissioned appraisals have come in a whopping 84 percent higher for next year for the land values on the Priest Lake state lots, which are used to calculate annual rents; the Payette Lake lots actually declined slightly in value in the news appraisals. Some Priest Lake cabin owners who were in the midst of negotiating for land exchanges to get ownership of the land under their cabins now are finding out they can’t afford it.
“It will have an effect,” said state Lands Director Tom Schultz. He’s guessing that anywhere from 8 percent to 30 percent of the 354 Priest Lake cabin owners may default on their leases, walking away from cabins that in some cases have been in their families for generations. “I’m not going to make false promises and say that it’s going to be OK, because for some of those folks, it may not be OK,” said Schultz, who will travel north to the Spokane Valley for a meeting with cabin owners on Wednesday night. “What I’ve found is that people would rather hear the truth and be given options for dealing with the truth.” You can read my full story here at spokesman.com.
Idaho will start surveys and other groundwork in early June to prepare to sell off or trade away some or all of its 521 leased lakefront cabin sites, including more than 350 at Priest Lake. Top state officials warned, however, that it's not likely to be a quick process. “It's not going to be done immediately,” said Idaho Secretary of State Ben Ysursa. “No one wants to get out of this thing faster than I do. But I also have a duty of undivided loyalty to the beneficiaries. We need to do it in a manner where we will get as much as we can.”
Bud Belles, president of the Priest Lake State Lessees Association, said he's disappointed by the time frame. “This is going to stretch out for years if they do it their way, and it doesn't have to,” he said. “If the values go up and nothing happens, a lot of us won't be able to afford our lots … we're going to get kicked off our lots, essentially.” Belles, 70, a retired computer consultant from Nine Mile Falls, said he wants to buy the land under his cabin, which has been in his family since he was 8 years old.
Today's vote came as the state and cabin owners are facing off in court over rental rates for this year and following years; on Friday, 4th District Judge Michael McLaughlin issued a written ruling calling for a rent freeze to match 2011 rents to 2010 levels. The Land Board then filed a motion for reconsideration on Monday, saying if it had to match rents for 2011-2013 to 2010 levels, the state endowment - and Idaho's schools - would lose close to $6 million. You can read my full story here at spokesman.com.
Here’s a link to my full story at spokesman.com and to links to briefs from both sides in today’s oral arguments at the Idaho Supreme Court in the Land Board case, in which Idaho Attorney General Lawrence Wasden is suing the board - on which he serves - contending it violated the Idaho Constitution when it set rents for state-owned cabin sites well below market rents. The plan the board adopted in March would result in an effective rental rate of just 1.8 percent of current market value next year.
An issue that was discussed in the briefs filed with the Idaho Supreme Court on the Land Board case, but that didn’t come up specifically during the oral arguments in the case today, is that Idaho’s Land Board has charged 2.5 percent of value annually in rents for state endowment-owned cabin sites since 1998, but due to repeated rent freezes, actually charges an effective rate well below that amount. The new plan approved in March would charge 4 percent, but instead of applying that percentage to current values it would apply it to a 10-year rolling average of values, and then would set a five-year phase-in to reach the resulting rent figure.
Attorney General Lawrence Wasden, in legal arguments filed with the court, noted that the rolling average and the phase-in mean that for the next five years, effective rents actually would be 1.8 percent of current market value in 2011; 2 percent in 2012; 2.2 percent in 2013; 2.4 percent in 2014, and 2.6 percent in 2015 - less than the rates the state is charging now, which the Land Board has acknowledged are short of market rents. Several studies commissioned by the Land Board over the years have said market rents would be between 3.5 and 6 percent of current market value, but the board has never set them that high. In 1990, the state abolished conflict auctions for cabin-site leases when they come up for renewal.
Interestingly, Idaho Supreme Court justices allowed Deputy Attorney General Melissa Moody, speaking for Attorney General Lawrence Wasden’s side, to give her entire presentation before asking her questions during arguments on the Land Board case today, while they interrupted attorney Merlyn Clark, representing the Land Board, with questions no more than 30 seconds into his argument. Still, there were plenty of questions from the justices for both sides. Justice Roger Burdick compared the question of whether the court should intervene with another branch of government to the state’s long-running school lawsuit, saying, “We just had a political campaign where we argued this extensively as to whether or not we’ll … give orders to the executive and legislative branches.” Clark responded that the Land Board issue is “the same thing.”
When Clark argued that the Supreme Court can’t issue a writ unless the Land Board acted outside its jurisdiction, Burdick asked, “Doesn’t it boil down to this: That if you plainly acted unconstitutionally, you have no jurisdiction?” Clark agreed. Justice Joel Horton said by asking for a writ to prevent the Land Board from entering into leases unless they meet the requirements of the Constitution, Wasden asked for “I don’t want to say (a) meaningless request for relief, but a very broad request.” Horton also asked both sides if it’s possible to achieve maximum return in a situation where the state owns the lots, but private parties own the cabins, a question Chief Justice Dan Eismann also probed; Moody said yes, while Clark said no. “There is no market rent for these properties,” he said.
When Moody argued that the problem is that Land Board members said their plan wouldn’t meet constitutional requirements and then approved it anyway, “flagrantly disregarding the law,” Eismann asked, “So the message you want us to send is don’t tell us what you’re doing … don’t admit it on the record?” Moody replied, “The message we want to send is do it right - comply with the Constitution.”
Former Justice Linda Copple Trout, who sat in for Justice Jim Jones, who recused himself from the case, asked whether premium rent should be considered part of an overall plan to collect market rents on state-owned cabin sites, even if annual rents fall short of that standard. Moody replied, “No, under Idaho Code, they have to get market value progressively and they are not allowed to catch up at the end of a lease term.”
Idaho Attorney General Lawrence Wasden said after today’s Supreme Court arguments on the Land Board case, “I thought that both sides represented the case well. The court has a couple of options here; we knew that going in.” The court, he said, could either issue a writ of prohibition against the state Land Board, as Wasden requested; or it could deny the writ and “send us to the district court.” He said, “I thought the arguments were well constructed and well presented to the court, and I thought the questions were pretty telling as far as the interest of the court.”
One light moment in today’s Idaho Supreme Court arguments on the Land Board case came when Justice Roger Burdick, who asked by far the most questions today, asked Deputy Attorney General Melissa Moody for an explanation of the new “premium rent” plan for state-owned cabin sites, in which, on the sale of a cabin lease, the state would get either 10 percent of the amount the seller got for the value of the lease (sale price less value of seller’s improvements, including buildings), or 50 percent of the seller’s profit on the lease value compared to the price for which it was purchased.
Moody explained that if someone bought a lease for $500,000 in 2006 and sold it for $700,000 in 2010, they’d pay $100,000 in premium rent, under the plan, because 50 percent of the gain is greater than 10 percent of $700,000. Burdick responded, “What demented genius came up with this?” Amid laughter, some in the full courtroom turned to Secretary of State Ben Ysursa, who sat watching from the second row of the audience.
Ysursa, who chaired the Land Board’s cottage site subcommittee that proposed the plan, said with a chuckle after the court proceeding, “I almost wanted to jump up and say a few words on a couple of things.” He said, “We’ll anxiously await the decision. I thought both sides acquitted themselves well, as far as the legal arguments. This is what the rule of law is all about.”
Idaho’s state Land Board set rents for state-owned cabin sites for an upcoming 10-year lease period “that it knew would not achieve market rent, and it said so on the record,” Deputy Idaho Attorney General Melissa Moody told the Idaho Supreme Court today. “Attorney General Wasden is not challenging the rate. … We’re not here because he thinks the rate is too low. We’re here because the board itself set a rate that it said is too low.”
Wasden has taken the unusual step of suing the Land Board - on which he serves - over the rents it set by a 3-2 vote in March for state-owned cabin sites at Priest and Payette lakes, because he said the board violated the Idaho Constitution’s requirement that it garner the maximum long-term returns from state endowment lands, which largely benefit the state’s public schools. State law says that’s to be done by charging market rents throughout the term of the lease. Justice Warren Jones, questioning Merlyn Clark, the private attorney who argued today on behalf of the Land Board, said, “I got the impression, looking through the record, that everybody on the board realized what they’re charging is not market rent.”
Clark responded, “These statements are not attributable to the board. … They are individual members of the board.” He said, “The board has taken action.” Clark argued that how to obtain maximum long-term returns for the endowment is up to the discretion of the Land Board. “They do the best they can - if they’re wrong, they’re wrong,” he said. He filed a motion to dismiss the case on grounds that it could be taken up a lower-court filing under the Administrative Procedures Act, but Clark admitted today that that could be lengthy, and could mean litigating each cabin-site lot’s value individually. “If you send it to the district court, it’s going to go on for a long, long time,” he said.
Wasden has asked the Supreme Court to issue a “writ of prohibition” preventing any further action on leasing the cabin sites - leases for all the cabin sites expire at the end of this year, and new leases are being drafted now - until they are leased under terms meeting the requirements of the Idaho Constitution. After hearing the arguments from both sides today and asking plenty of questions, the justices took the case under advisement. Their average time to issue a ruling is 60 days.
In Idaho Attorney General Lawrence Wasden’s legal challenge of the Land Board’s cabin-site rent decision, the Idaho Supreme Court has ordered oral arguments, to be held June 9 before the Supreme Court. Wasden, a member of the Land Board, last month challenged the constitutionality of the board’s 3-2 decision approving new lease terms for state-owned cabin sites on Payette and Priest lakes; they include 9 percent increases in rent each year for the next five years, for a total increase of 54 percent over the five-year period. Wasden contends the rental rates aren’t high enough to bring appropriate returns to the beneficiaries of the state’s school endowment, as required by the Idaho Constitution.
Meanwhile, groups representing cabin owners contended the rents were too high and also threatened to sue; in the pending Idaho Supreme Court case, two cabin owners’ associations and three education groups have filed motions to offer amicus briefs and make arguments in the case. The Supreme Court could have decided the case based on legal briefs already filed and pending motions from both sides, but now has determined it’ll first hear oral arguments.
Idaho’s state Land Board has adopted a new valuation policy for state-owned cabin sites on Priest Lake, in a rare moment of agreement from all sides on this issue. The state uses Valley County assessments to value cabin sites on Payette Lake, but has been using a five-year rolling appraisal process, plus an indexing process for non-appraisal years, for the 354 cabin sites at Priest Lake. Now, it’s switching there to a process more like what the U.S. Forest Service uses for its federally owned cabin sites on Priest Lake: The cabin sites will be divided into 25 groups that are similar in land value, and just one site from each group will be appraised each year, with a different site chosen the next year. As a result, only 25 appraisals will need to be conducted each year, at a total cost to the state of $20,000 and a substantial savings over trying to reappraise all the sites every five years.
That doesn’t do anything to settle the larger dispute: How much to charge the cabin owners in rent for the state-owned ground underneath their cabins. That issue is currently the subject of an Idaho Supreme Court lawsuit - in which Attorney General Lawrence Wasden sued the Land Board, on which he serves, for what he said were state constitutional violations in setting rents too low - and cabin owner associations are contemplating their own legal action because they contend the latest rent proposals adopted by the Land Board are too high. At issue there is the percentage of value that should be charged each year in rent; today’s agreement is just on how the value is set.
Idaho Secretary of State Ben Ysursa, who chaired the Land Board subcommittee that developed the rent proposal for state-owned cabin sites that Attorney General Lawrence Wasden is now challenging in the Idaho Supreme Court, said he was disappointed at the legal challenge, which he said was unprecedented in his three decades’ experience with the state Land Board. “The Land Board is where this ought to be discussed and vetted, not in the Supreme Court,” Ysursa said. “I respect the attorney general and have for years and will continue to, but I think the Land Board and completely vetting the issue there rather than marching off into court would be a better way to do it.” You can read my full story here at spokesman.com.
Ysursa defended the Land Board’s decision, which calls for rent increases of 54 percent over the next five years. The only reason the rents aren’t at full market value now, he said, is because the entire Land Board has repeatedly voted for one-year freezes in rents. “To then turn around and hit ‘em with an astronomical increase in one year, I just did not think that was fair,” Ysursa said. A month ago, the Land Board voted to look into possibly selling or trading the cabin sites to get the state endowment out of the business of renting lots on which people own their own buildings; the state Lands Department will report back with a plan in a year.
Idaho Attorney General Lawrence Wasden has filed a legal challenge with the Idaho Supreme Court over new lease rules for state-owned cabin sites - including rent increases - approved this month by the Idaho Land Board, contending the rental rates aren’t high enough to bring appropriate returns to the beneficiaries of the state’s school endowment. “The approved plan is flawed because the rent is too low,” said Wasden, who was in the minority in the Land Board’s 3-2 approval of the plan. Click below to read his full announcement and link to court documents filed with the Idaho Supreme Court today.
Here’s a link to my full story at spokesman.com on today’s Land Board decision to hike cabin-site rents on Priest and Payette lakes by an average of 9 percent a year for the next five years, or 54 percent, plus impose new surcharges when the leases change hands. The Land Board voted 3-2 in favor of the plan, which will take effect when all of the state’s cabin-site leases on both lakes come up for renewal on Dec. 31st.
The charging of “premium rent” when state-owned cabin sites - on which private renters build and maintain their own cabins and other improvements - change hands is designed to recapture part of the gain in value of the premium lakefront lots for the state, rather than having all the appreciation go to the cabin owner who sells. The idea is that if the state really is charging market-rate rents, there’s essentially no value in the leasehold itself, the right to rent the land. That, instead, is paid through yearly rents. However, leasehold values have skyrocketed over the years. In fiscal year 2009, 10 cabins on state endowment leased land sold. The state received $305,901 in premium rent, at a 10 percent rate. That means the sellers collected $2.75 million in gains on their state-owned leaseholds, according to the state Department of Lands.
That’s why a state Land Board subcommittee originally proposed to hike premium rents to 50 percent over the next five years. The subcommittee’s report says, “Since 2003, cottage site owners have realized in excess of $25 million for the use of state endowment lands while the endowment received only $2.7 million” in premium rents. The problem with that approach was illustrated in a letter to the Land Board from cabin site lessee Karl Klokke, who said he and his wife bought their Payette Lake lakefront cottage site leasehold in 2005 for $750,000, then spent another $100,000 to demolish existing buildings, build retaining walls and make other site improvements to prepare for a new home - which never was built. Now, Klokke says, he’d be lucky to sell his leasehold as-is for $300,000. If the state took 50 percent of that, it’d take $150,000 and, rather than tapping anyone’s profits, just compound his losses. Klokke suggested the state charge premium rent only on the increase in value of the leasehold - the net, rather than the gross.
The final proposal from the subcommittee, approved today on a 3-2 vote, offers an either-or: The state would charge either 10 percent of gross leasehold value when the lease changes hands, or 50 percent of net leasehold value - compared to what the seller originally paid for the leasehold - whichever is better for the state. For those who acquired their cabins decades ago or had them passed down through their families, though, that’d be a steep hit.
Chuck Lempesis, attorney for the Priest Lake cabin owners, said that’d be enough to stop anyone from wanting to either sell or buy one of the leases. “The marketplace is already in catastrophic condition,” he said. “This is probably its death knell, at least for the short term, because of the instability.” Bud Belles, president of the Priest Lake cabin owners’ association, said, “I think they’ve truly taken an action that will reduce the value of the property at Priest Lake.” But with rising rents, he said, “We have a lot of lessees that just cannot afford it any more.”
The Idaho Land Board has voted 3-2 in favor of Secretary of State Ben Ysursa’s motion on state-owned cabin site rents, with Ysursa, Superintendent of Schools Tom Luna and Gov. Butch Otter voting in favor, and Attorney General Lawrence Wasden and state Controller Donna Jones voting against.
Secretary of State Ben Ysursa has moved to adopt the subcommittee’s recommendation - rents for state-owned cabin sites on endowment land to be set at 4 percent of the average value over the past 10 years, phased in over a five-year period, plus a premium rent of either 10 percent of gross leasehold value or 50 percent of net, whichever is better for the state. The result would be rent increases of an average of 9 percent a year for the next five years, or about 54 percent total over that time period, he said. Still, he said, the state won’t be collecting full market-rate rents as the state constitution mandates. “Why aren’t we at current? We, everybody on this board, has voted for a freeze at least one time, some of us two times. We are complicit in the problem that we’re at.” Currently, because of the freezes, he said, the state’s not even at 2.5 percent of current value in its rents - and it still wouldn’t be with the proposed increases.
State Controller Donna Jones spoke out against the motion. “I don’t think it’ll bring us to a true market rent,” she said. Attorney General Lawrence Wasden said, “We have an obligation to obtain the maximum long-term return. I do not feel we’re fulfilling that obligation with regard to this motion. … I’ll be voting no.” Gov. Butch Otter said, “I believe there’s a great value in stability.” Most importantly, he said, he wants the state to “get on a program” to “in some way trade ourselves out of, auction ourselves out of, sell ourselves out of these lots. And I think I’ve made myself clear on that.” State Superintendent of Schools Tom Luna said, “We’re never going to maximize earnings for these properties until we sell them … or trade them for other assets.”
Laurie Boeckel, legislative vice president of the Idaho State PTA, urged the state Land Board to keep in mind the beneficiaries of the state endowment when it makes its decision on cabin lease rents, urging the board to “act in a manner that has the undivided loyalty to the beneficiaries, which are the children in public education now and in the future.” She also requested that if the process goes into mediation, the PTA be invited to participate. Attorney General Lawrence Wasden thanked Boeckel for participating in the meeting, saying the beneficiaries’ interests are key.