Why should Idaho have millions of dollars of its school endowment fund tied up in grazing land that returns only 60 cents an acre, when it could be making a killing for schools on timber and commercial development?
That’s what state Controller J.D. Williams wants to know. Williams sits on the state Land Board, which oversees the 2.4 million acres of land that the state holds in trust for the sole purpose of making money for schools. He envisions a more lucrative real estate portfolio, with office towers, timberlands and industrial parks.
The first move toward changing the mix, a controversial land deal the board will consider Monday, is raising troubling questions.
Idaho plans to swap six leased cottage sites at Payette Lake, near McCall, plus 2,920 acres of rangeland, for 459 acres of timberland owned by Evergreen Forest Products. The timber company then would sell the rangeland and cottage sites to the people who now lease them, at the appraised value.
Evergreen would end up with $1.5 million in cash. Four ranchers in Washington County would get to buy state rangeland at about $67 an acre. And cabin owners could buy the land they’ve leased for years, at prices ranging from $53,500 to $426,000.
The state would get healthy timberland that it says will provide income long into the future.
Opponents of the swap say it smells political. Robert Hitchcock, Evergreen’s owner, and his businesses have contributed $16,635 to state Republican campaigns since 1994, according to state records. That includes $9,000 to Gov. Phil Batt and $1,000 to Attorney General Al Lance, who both serve on the Land Board.
Evergreen gave Batt $1,000 on Nov. 8, 1995 - a year after Batt was elected and less than a month after the Land Board voted its first approval of the land exchange.
Batt, who declined to comment before Monday’s meeting, has in the past emphatically denied that contributions influence his decisions.
Bill Petzak, the Lands Department supervisor in McCall, says he contacted Hitchcock and the ranchers to initiate the swap.
“I think it’s too bad that it’s gotten into the emotional and political arena,” Petzak said.
Petzak said he contacted Hitchcock because Hitchcock had his timberland up for sale, and it looked attractive for the state. Appraisals showed the timberland was worth slightly more than the state land.
“Changing investments from cottage site leases to other investments was a decision made by the Land Board,” Petzak said.
“However, after having responsibility for administering ‘em for 19 years, I think it’d be a good idea….It’s very difficult for us to arrange what we consider equitable rents.”
That’s the other sticking point about the exchange. It’s based partly on the higher income expected from timberland than from rangeland and cottage sites. Rangeland’s low return is widely acknowledged. But opponents say the state isn’t charging enough rent for cottage sites.
The Land Board decided, in 1992, to cap cottage site rents for 10 years - despite a 1990 law requiring the state to charge market rates.
The board set the maximum rent at 2.5 percent of the 1992 land value. But the six cabin sites have increased in value by more than 2-1/2 times since 1992, according to state figures.
The premise for the exchange is that the cottage sites and grazing land were not generating enough revenue, said Sally Trott, of the Stop the Swap Coalition. “That’s faulty. Because the reason income is so low is that the board has failed to charge…market value.”
Secretary of State Pete Cenarrusa, the longest-serving member of the Land Board, admits the board’s policy on cottage-site rents probably conflicts with the 1990 law. “I think there are some problems there.”
Law was a trade-off
The law was passed as a trade-off, when the Legislature freed cabin owners from facing competitive bidders when their leases came up.
Lawmakers were spurred in part by an elderly woman who faced the possible loss of her longtime home to wealthy competitors. But state staffers now say about half the Payette Lake cabin sites have changed lessees in the past 10 years.
Those kinds of concerns helped persuade several Land Board members that the state should get out of the cabin-site business.
Batt said last fall, “It’s so difficult for the state to charge market rates for leases that I think any responsible way to get out of that business would make sense.”
The Evergreen exchange is a first step. The Lands Department has launched a pilot project asking all Payette Lake cabin site renters if they want to own the land under their cabins. Fifty-eight have signed up.
The program is not being offered at Priest Lake, at least not yet. Williams says he favors keeping the Priest Lake cabin sites because they’re adjacent to large blocks of state forest land, unlike the Payette Lake sites. And Priest Lake cabin owners haven’t been pressing for change.
If the state sells the land outright, the money must be placed in the endowment fund and can’t be used to buy more land. Studies have shown that income from land far outstrips cash investment earnings over time, so the state is looking to make swaps.
“We will search and find a piece of property we’d like to own. We’ll search primarily in the commercial sector, since they have good return and appreciation,” said Bryce Taylor, the state’s chief of range management and surface leasing. “Currently, we are examining some commercial office space.”
The state then will ask the cabin owners to buy the commercial property, and trade it to the state in return for their cabin sites.
Taylor anticipates the state could earn a 10 percent net annual return on commercial property. “Cottage sites are way less than that.”
Dollar signs are dancing
Williams points to a swap last year, in which the state traded rangeland in Owyhee County for commercial property near the Boise airport. The commercial land is leased for far more money than the rangeland ever generated. “It’s a 1,300 percent increase in return,” Williams said. “I believe we can replicate that many times over.”
He’d like to see the state buy the office buildings around the Capitol, and get out of less-lucrative land, particularly grazing land.
Cenarrusa, a sheep rancher, points out that state grazing land is open to public hunting and fishing, and it might not be if it was sold or traded.
But Williams, the Land Board’s only Democrat, said he’ll work to protect public access as the state shifts its priorities for school endowment land.