Rents for state-owned cabin sites at Priest Lake would have to rise dramatically to reach market rates - which the state is required by law to charge.
“We need to do something more than we’re doing to get to market rent,” said Bryce Taylor, a bureau chief for the state Lands Department. “What that more is, is the more difficult question.”
The state Land Board, which consists of Idaho’s top elected officials, will hold a special meeting Wednesday to discuss cabin site rents. If they decide to raise the rents, they’ll need to act quickly. Notices would have to be mailed out to leaseholders by July 1 for rent hikes next January.
Upping rents on land where folks have built their own cabins can be politically risky.
“Contrary to a lot of perceptions, a lot of the lot owners are not wealthy and have done almost all of the improvements … to the property themselves,” said state Controller J.D. Williams, who sits on the Land Board. “It’s very difficult.”
But the Land Board’s first duty is to the state’s schoolchildren, he said, who benefit through the state’s school endowment. That’s where the money from the rents goes.
Gov. Phil Batt, chairman of the Land Board, said he favors an increase. “I don’t think we’re carrying out our constitutional mandate to maximize returns off state property.”
In 1945, cabin sites at Priest Lake rented for $10 a year. Now, the average is $3,915.
But even that is nowhere near 2.5 percent of market value, which the state has identified as a measure of market-rate rents.
“The effective return today is about 1 percent of current value,” Taylor said.
At the board’s request, the Lands Department has conducted an extensive study of Idaho’s cottage site rents. The state rents out 352 cottage sites at Priest Lake and 241 at Payette Lake, near McCall.
The Legislature passed a law in 1990 freeing cabin owners from facing competitive bidders when their leases come up for renewal. But in exchange, lawmakers required that the state charge market rents.
That’s because state lands are required by the Idaho Constitution to be managed for the maximum long-term gain to the school endowment fund.
But the Land Board in 1992 decided to cap rents at 2.5 percent of the 1992 land value for the next 10 years. Because they were well below that at the time, the board set up a phase-in process where no leaseholder would see more than a 5.3 percent increase in a single year.
Now, the value of the lots has gone up again.
“Over one four-year period, they went up over 60 percent at Priest,” Taylor said.
That’s why the state is left with rents that are so far below the market.
“It was a plan,” Williams said. “We used the best information we had available.”
But the plan didn’t anticipate the big jumps in land value, he said.
Said Batt: “I don’t want to get caught in that situation again. If there’s a phase-in, it has to be a pretty rapid phase-in in order to work.”
The Lands Department study looked at several comparable programs in other states, which charged 2.5 to 5 percent of value.
Cabin owners, some of whom have had their cabins for generations, are worried.
Post Falls attorney Chuck Lempesis, who represents the Priest Lake State Lessees’ Association, sent a letter to the Lands Department noting that Priest Lake cabin owners have concerns that are “unique to the character of the property and the culture of the area.”
Payette Lake cabin owners also have an attorney.
At the special Land Board meeting Wednesday, people with concerns will be given a chance to speak.
The meeting will start at 9 a.m. in the fourth-floor training room of the Joe R. Williams Building, also known as the Hall of Mirrors, at 700 W. State St., Boise.
Said Williams: “I will be very surprised if the Land Board does not adopt a new leasing policy.”