The value of Idaho’s state endowment fund hit an all-time high of $1.46 billion at the end of March, up 14 percent from the start of the fiscal year July 1. That’s partly because of strong investment returns this year – through yesterday, the fiscal year-to-date investment earnings show a 19 percent gain – and partly because of higher revenue from endowment trust lands, which was up 14 percent through the end of March compared to same nine months of the previous year.  The receipts: $59.5 million. Much of the land revenue comes from logging on endowment lands. (In April, the fund had more gains, bringing it to $1.48 billion as of April 30.)

The state Land Board was briefed on the fund’s gains today by the Endowment Fund Investment Board, and there were smiles all around.

Investment returns for Idaho’s endowment fund have averaged 6.7 percent for the past five years, a big turnaround from the precipitous drops the fund saw after the state first started investing it in the stock market in the early 2000s. The fund lost nearly 15 percent of its value from 2000 to 2002, going from $803.7 million to $683.2 million.

Idaho’s state Land Board approved a timber sale plan for 2014 today that calls for harvesting 249 million board feet from state endowment lands, the highest logging level in more than a decade. The state endowment land timber cut has been fixed at 247 million board feet for the last several years, but next year’s includes a one-time adjustment, due to various factors in certain regions, that bumps it up by 2 million. In 2002, the state's timber sale plan volume was less than 175 million board feet.

The board, which consists of the state’s top elected officials and is chaired by Gov. Butch Otter, unanimously adopted the plan; the state received only positive public comments on it, including enthusiastic support from Bennett Lumber Products, Idaho Forest Group and Stimson Lumber Co. in North Idaho.

“Last year almost one-third of all sawlog volume brought into our facility originated from Idaho Department of Lands timber sales,” wrote Tom Biltonen, resource manager for Bennett Lumber in Princeton. “The IDL timber sale program is a critical component of Bennett Lumber’s supply base and long term viability. We appreciate the efforts of the Idaho Department of Lands in supplying raw materials to the timber industry and the resulting support of our schools and other endowments.”

Last year’s state timber harvest, despite the high level of cut, actually brought in reduced receipts due to lower prices. This year, state Department of Lands Director Tom Schultz pointed to some good news on that score – two timber sales in March brought an average stumpage price of $400 per thousand board feet, up from recent years’ averages of $200 or less; the state is now averaging around $250. State forester David Groeschl said the economic downturn brought significant drops in prices starting in 2008; now, there’s a surge in demand and a shortage of timber on the market from private sources.  “Over the next couple of years we will see improved demand and improved stumpage prices,” Groeschl said. “I think overall, it’s going to continue to slowly improve.”

Idaho’s state Land Board heard a “year in review” presentation this morning culminating in the presentation of a giant facsimile of a check for $31,292,400 to high school students, made out to “Idaho’s Public Schools.” Capital High School choir students who attended the ceremony also performed earlier in the statehouse rotunda. State Lands Director Tom Schultz said it’s part of “remembering where this money’s going and who it’s supporting.” Idaho’s state endowment, including both endowment lands and the state’s permanent endowment fund, are a trust, with proceeds going to support specific beneficiaries, the largest of which is the state’s public schools. In the past year, the endowment distributed $46 million, with $31.3 million going to schools. Other endowment beneficiaries  include colleges and universities, state hospitals and prisons.

The year-in-review presentation highlighted a timber sale for 2012 of more than $50 million; the planting of nearly 1.5 million trees; the final stage of the “lot solutions” process to prepare state-owned cottage sites for future sale or exchange; and two land exchanges, one trading the McCall Outdoor Science School property for commercial property in Idaho Falls, and the Camas Prairie land exchange with Bennett Industries, which swapped 2,900 acres of timber land for 1,200 acres of highly productive farmland and 450 acres of timber land.

State lands staff also noted that though Idaho had one of its worst fire seasons in history, only half the 20-year average burned on state-protected wildlands.

The land exchange that's at the heart of the University of Idaho's plan to take ownership of the lakeshore McCall Outdoor Science School campus it's leased from the state endowment for the past 65 years is up for approval by the state Land Board at its meeting tomorrow, which starts at 9 a.m. in the Capitol Auditorium. Through the exchange, the 14-acre property adjacent to Ponderosa State Park would be swapped for an office building in Idaho Falls that currently - and still would after the exchange - houses the Battelle Energy Alliance LLC, the operating contractor for the Idaho National Laboratory. The office building is in a commercial business park called the Education Research Center, where INL's in-town operations have been consolidated since 2005.

State Lands Department staff estimates the two properties are of equal value, but the office building would bring the endowment a return of 8.25 percent of property value per year; the science campus currently brings in 4 percent of value, but historically has earned less than 2 percent of its value in annual rents.

Two members of the state Land Board, Secretary of State Ben Ysursa and state Controller Brandon Woolf, recently held an open house in Idaho Falls to share information about the proposed swap. It's a step toward diversifying the endowment's land portfolio, which is mostly rangeland and timberland.

Today's unanimous Board of Education vote for the UI to buy the property was one step in the transaction; Land Board approval for the exchange would be the other.

Idaho's state endowment investments grew by 2 percent in August, investment manager Larry Johnson reported to the state Land Board today, but it's gotten better since then, he said: “So far in September things have been very good - we've earned almost 3 percent for the month, so as of yesterday, our fiscal year-to-date returns were up to 6.6 percent.” That's up from a 3.4 percent gain for the fiscal year as of the end of August. On Aug. 31, the state's endowment fund was worth $1.3 billion.

Idaho's state Land Board has voted unanimously to approve a recommendation from the state's Endowment Fund Investment Board for no increase in the distribution from the state endowment to public schools next year, holding schools at their current annual distribution level of $31.3 million. Larry Johnson, investment manager for the endowment fund, said the board recommended a 2.8 percent increase in total distributions from the endowment, based on earnings, but no increase for public schools and one other beneficiary, normal school, because their reserves are not yet at the target level, which is enough to cover five years' worth of distributions.

The board also recommended that $7.9 million from earnings reserves for six endowments be transferred into their permanent funds on Sept. 1, because those endowments, which include penitentiary and university, now have more than five years worth of distributions in their reserves. “The recommended distributions and transfers appear to be achievable and represent an appropriate balance between the interests of current and future beneficiaries, taking into account the current level of earnings reserves and expected future fund revenues,” Johnson said in his report to the Land Board.

The Idaho Constitution requires the state's endowment to be managed for maximum long-term returns to the beneficiaries, the largest of which is the state's public schools. With no discussion, Attorney General Lawrence Wasden moved to approve the recommendation, Secretary of State Ben Ysursa seconded the motion, and it passed unanimously. State Superintendent of Schools Tom Luna wasn't at the meeting; he's out of state.

Idaho's state Land Board, which is chaired by the governor and includes the state Attorney General, Secretary of State, Controller and Superintendent of Public Instruction, voted unanimously today to begin crafting updates to its asset management plan for the state endowment, to reflect recent updates, such as the decision dispose of many lakefront cottage sites, and to “clarify desirable types of land investments.” Though board members continue to clash over the endowment's purchase last year of a self-storage business, which is operated for the state by a contractor - and criticism from some legislators and others that the endowment is competing with the private sector - all said they thought the updates were a good idea; you can read my full story here at spokesman.com.

“I for one believe that clarification in our overall plan is probably appropriate, to help us focus our thoughts and our actions and also … educate the public and the Legislature about what we're trying to accomplish,” said Attorney General Lawrence Wasden.

Gov. Butch Otter said he thought the self-storage purchase was the first time the Land Board had “changed the character of our position” from simply being a landlord, to being “dependent on … profits and loss.” Deputy Lands Department Director Kathy Opp noted that there are other types of leases where the endowment gets a percentage of profits; the Tamarack Resort lease was one, she noted. Otter said that one included a base payment, with the percentage on top of that - and he's comfortable with that arrangement. “Then you have a posture of being the landlord,” he said. “You're not at risk.”

State Schools Supt. Tom Luna said he's concerned about impacts on local property taxes when the endowment purchases land in a particular county, city or school district; that property becoming publicly owned, and thus exempt from property taxes, would cause others in the same jurisdiction to pay more to make up the difference, he said. Secretary of State Ben Ysursa noted, “There are more taxes than property tax - there's income and sales taxes, and sometimes work on the endowment property impacts that area, too. … They go into the general fund, and a pretty high percentage goes to public schools.” He said, “You can't discuss that in a vacuum. … You've got to look at the whole picture.”

Some lawmakers, including House Majority Leader Mike Moyle, R-Star, have suggested that the endowment should make payments in lieu of taxes to local governments. But Otter said, “It's been pointed out again and again, the Constitution prohibits us from doing that.” He said he was interested in exploring some type of “mechanism” to allow something along those lines, but that'd likely take a constitutional amendment. Wasden noted that when the endowment buys property in one jurisdiction, it typically sells or trades away property in another jurisdiction - so any property tax impact in one is balanced by the opposite impact in the other.

The Lands Department will work on the updates to the asset management plan and coordinate with all the Land Board members and their staffs, and present them to the board at its November meeting.

The month of August was “a tough one for the endowment,” state endowment fund investment manager Larry Johnson reported to the state Land Board this morning, with a loss of 4.5 percent for the month, for a total loss for the fiscal year, since July 1, of 5.3 percent. “All of our managers are performing about as you would expect them to in this environment,” Johnson said. Distributions from the fund for fiscal year 2012 remain “well secured,” Johnson said.

Associated Press reporter John Miller reports that Reps. Grant Burgoyne, D-Boise, and John VanderWoude, R-Nampa, are planning to work on revised legislation to limit the state Land Board's endowment land investments, out of concern over competition with the private sector. “There's clearly an area where we can legislate,” Burgoyne told Miller after two days of hearings on the issue concluded Tuesday in the Legislature's Natural Resources Interim Committee. “I think House Bill 188 is going to have to be reworded,” VanderWoude said. “But it's going to be something similar to that.” That bill sought to place limits on the state Land Board's management of endowment lands, including requiring that “all business operations located on or using said land, shall be sold to private persons;” it didn't pass. Click below for Miller's full report.

Lawmakers on the Natural Resources Interim Committee have raised an array of questions about management of state endowment lands. Among them: Sen. Jeff Siddoway, R-Terreton, asked state Superintendent of Schools Tom Luna if Idaho might not have been better off to sell some of the endowment land when values were soaring, “if some of that land could've been liquidated,” and give the money to schools. Luna said no. “I do not think it's wise to sell any of the assets to the endowment and distribute the money made off of that sale,” he said. “I think through proper management, we … take the money we've earned from that sale and invest it in other hopefully higher-profit generating ventures that then generate more revenue for the endowment. … If it means distributing the corpus, then I don't think that's wise.” Luna said some states have taken that route in the past “to the point where they have nothing left.”

House Majority Leader Mike Moyle noted that the federal government pays PILT, or payments in lieu of taxes, to local communities for some federally owned land, and Idaho's Fish & Game Department now makes such payments when it purchases formerly private land and takes it off the tax rolls; a constitutional amendment authorized that. He suggested the endowment should look at something similar if it acquires property that formerly was private.

Rep. John VanderWoude, R-Nampa, said the state endowment's commercial property has seen its value drop from $45 million in 2007 to $36 million in 2010, and he said his calculations show the property's bringing in a return of just 2 percent of its value per year for the state. “It seems like that investment's going south,” he said. Secretary of State Ben Ysursa noted that “the commercial property and the value of it goes with the market, and of course goes down if in fact commercial real estate has gone down.” He noted, “I think taking snapshots is maybe a little bit unfair, as to how this is working. I think maybe you have to look at the long term on all this.” He added, however, “I am concerned - you brought up some good points, and I'm going to ask those same questions myself.”

Idaho Secretary of State Ben Ysursa told the Legislature's Natural Resources Interim Committee today that after watching the process for the past 37 years, “I think we're at an interesting intersection, crossroads … of the three branches of government dealing with endowment property.” The executive branch, through the Land Board, manages the endowment. “We have the legislative branch who wants to know, and they're good questions, how far can they go in putting up sideboards on what we can do.” And then, the judicial branch is weighing in: A decision is pending from the Idaho Supreme Court on whether a section of state law regarding not holding conflict auctions for endowment-owned cottage sites is constitutional. “The folks at the Supreme Court are going to have an opportunity to give us all some more guidance, I think, fairly quickly,” Ysursa said. “We are going to get some more guidance from the State Supreme Court … on how far can the Legislature set the sideboards.”

He said, “I think the real evolution I've seen in the 37 years is that we don't wear two hats, we wear one hat.” Court decision after court decision has come down telling the state that it can't consider other interests in managing endowment land, such as the health of the state's grazing industry or even the general public interest; it has to focus solely on getting the maximum long-term return for the endowment's beneficiaries, the largest of which is the public schools. “As a trustee, I totally understand the furor over some of our recent decisions and where some of our investments are,” Ysursa said. “We're at an intersection. You have your interests as a legislative body. We certainly have ours as the executive branch, and very shortly the judicial branch will give us some more guidance. And I welcome this. … I welcome and need legislative input, we need input from beneficiaries, to provide constructive alternatives.”

Former state Controller J.D. Williams told lawmakers today, “Every dollar that we can make for these endowment lands and the trust fund is a dollar that does not have to come from taxpayers. The more we make, the more it grows and the less taxes have to be collected.” Williams said when he was first elected as state controller and to a seat on the state Land Board, he went to a conference of lands commissioners from other states, and found that some were making 10 times what Idaho was from its endowment lands, and using the money to fund schools and other needs. That concern was part of the driving force behind the endowment reforms initiated in the 1990s and approved by voters as an amendment to the state constitution, Williams said.

“Talk to Gov. Batt about this - endowment reform was led by Gov. Batt, without him it would not have occurred,” he said. A major piece of the reform allowed the endowment fund to be invested into higher-earning but riskier investments, such as the stock market, rather than just in low-return bonds; it also allowed the funds and land to be managed together; and called for diversifying the portfolio of land investments, including exchanging away lower-yield land such as cottage sites and grazing land, for higher-yielding land, from timber land to commercial property.

Williams said much of the commercial property that was acquired was in the immediate vicinity of the state capitol. “I thought it made a lot of sense to diversify the portfolio and we would also protect the vicinity of the capitol for further generations,” he said, noting that some states have ended up with their state capitols in deteriorated or unsuitable areas. Williams noted that when he was first elected state controller in 1990, the state endowment was worth $320 million. “When I left in 2002 it was worth almost $600 million, almost double in 13 years. Today … it's worth $1.2 billion. It's doubled again in nine years. As Ronald Reagan said many times … if it ain't broke, don't fix it. I think they're on the right track.”

The Legislature's Natural Resources Interim Committee is taking a course in “Trust Law 101,” starting with a presentation from University of Idaho professor and author Jay O'Laughlin. Idaho's state endowment is a trust for which the Land Board holds a fiduciary duty, O'Laughlin told lawmakers. That means they must manage the trust's assets for the sole benefit of the trust beneficiaries - mainly public schools, but also the University of Idaho and other state institutions - not for the general public. “It is a fact that trust businesses have always competed with the private sector,” O'Laughlin said. “The underlying issue here is determining the appropriate business enterprises from which to maximize income from the endowment assets.”

The panel also is hearing today from University of Idaho constitutional law professor Dennis Colson; current and former state Land Board members; representatives of the trust beneficiaries; and more. Tomorrow, the joint committee will hear about the management of the trust's current assets, from the state's permanent endowment fund to timber and grazing land to cottage sites. The committee is meeting in room EW 42 of the state Capitol; live audio from its meetings is being streamed live here.

The discussion follows the introduction of HB 188 in this year's Legislature by Rep. Bob Schaefer, R-Nampa, which sought to place limits on the state Land Board's management of endowment lands, including requiring that “all business operations located on or using said land, shall be sold to private persons.” The measure, which didn't pass either house, was co-sponsored by five other state lawmakers.

The Natural Resources Interim Committee includes 10 state lawmakers from both houses, plus eight more lawmakers from both houses who serve as ad hoc members. Colson, an expert on Idaho's state constitution, shared the history of the endowment and constitutional requirements with the lawmakers. “The idea was that the endowment was directly related to keeping taxes low for public schools,” he said.
  

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.

Idaho is starting a process to prepare for possible sale or exchange of its state-owned cabin sites at Priest and Payette lakes, and the state's top elected officials wrestled today with the implications. The state plans to spend about $1.48 million to survey and otherwise prepare for the transactions; state lands strategic business analyst Kate Langford said that may sound like a lot, but it's “less than 1 percent of that total estimated value, on a conservative level.” Langford said that work will start at both lakes in June. The first lots should be ready for possible transactions in the first quarter of 2012, Langford told the state Land Board, and the rest could be ready by the end of 2012. For Bonner and Valley counties, she said, “This is huge potential for both of those counties, a very positive impact for their taxable foundation. But it's also something that's not been done in recent times,” so the state will need to work with both counties as lots transition from state to private ownership. “Those discussions will be initiated once we get some direction from the board,” she said.

Idaho Secretary of State Ben Ysursa said he's worried that cabin owners on state-owned lots are getting “unrealistic expectations” that all the lots will be sold or traded quickly, and that's not likely to happen. “It's not going to be done immediately,” he said. “No. 1, you're working with the state, and No. 2, the market itself is going to dictate how fast some of this happens, and as we all know, the market's not real hot.” He added, “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.” Plus, he said, the state may opt against disposing of some of the cabin sites, choosing instead to buy out cabin owners. “Eventually those values are going to go back up, and we're going to have some valuable recreational property around lakes that no one's making any more.”

Under the state's current plan,  the lake cabin owners who now lease their lots from the state would have three options: Voluntary participation in consolidated land exchanges, voluntary participation in rolling auctions for sale of the lots, or continuing to lease the land from the state. “We're going to be leasing lots for the next foreseeable future, quite a while, because we're not going to get rid of them in that quick a time frame,” Ysursa said.

After much discussion, the Land Board voted unanimously to adopt recommendations from its staff for the process, including all three of those options, but didn't adopt a proposal to set up installment payment programs for cabin owners who participate in auctions. Several Land Board members, including Attorney General Lawrence Wasden, said they had concerns about the state acting as a “bank” for those transactions; they may revisit the installment issue later.

Idaho's permanent endowment fund gained 3 percent in April, endowment fund investment manager Larry Johnson reported to the state Land Board this morning, for a fiscal year-to-date gain of 26.8 percent. “April was a very good month,” Johnson said. And year to date, “We have outperformed our benchmark.” May so far hasn't been as good, showing a drop of about 2.1 percent, “so we've given back some of that gain that we earned in April. But all of our investment managers are performing as we would expect in this environment,” Johnson said. “We have been outperforming vs. other public funds.”

Meanwhile, receipts from endowment lands for the first nine months of the fiscal year show an increase of 5 percent from the same period in 2010, Johnson said, “about equal to where we were in 2009.” Both the endowment lands and the fund benefit the beneficiaries of the permanent endowment, the largest of which is the state's public schools.

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.