September 13, 2006 in Idaho

Lakeside leases may go for more

Betsy Z. Russell Staff writer
 

BOISE – Idaho’s top elected officials think the state should be charging higher rents for state-owned cabin sites at Priest Lake.

Because of that concern, the state Land Board on Tuesday voted against proceeding with a scheduled November auction for two new leases of prime waterfront lots on the scenic North Idaho lake.

“Once this gets out, we’re going to have some interesting feedback, I’m sure,” said Secretary of State Ben Ysursa.

The Land Board adopted its current rental rates in 1998 after a contentious battle over appropriate rents and property values. In the course of that, longtime renters of state cottage sites protested that sharp rent hikes would drive them out of the vacation cabins their families had owned for generations.

Cottage sites at Priest Lake rented for $10 a year in 1945. This year, they average $5,600.

State law requires the state to either charge market rents for the lots or open up the leases for bids by competing parties every 10 years.

“It’s going to open up Pandora’s box,” Ysursa told the rest of the board.

The state charges 2.5 percent of appraised value of the land for annual rent, plus a 10 percent premium payment when the lease changes hands. That’s on the value of the land only; homes, cabins or other structures that people build on the rented lots are their own property.

But some states are getting as much as 7 percent of value for rent in similar circumstances, incoming interim state lands Director George Bacon told the board. They also get premium payments that are “considerably higher,” he said.

Bacon recommended holding off on leasing the two new lots, which are the first of 21 buildable lots at Rocky Point, North Huckleberry Bay and Bear Creek that the state may lease out in the future, until a decision is made on future rental rates. All state-owned cottage sites at Priest and Payette lakes will come up for lease renewals in 2010.

The land is owned by the state’s public school endowment, so any money it brings in as rent goes to public schools.

Gov. Jim Risch said, “You’re right, it is prudent to consider this at this time.”

Risch asked how much the state is earning in cottage site rents each year on Priest and Payette lakes, and when Bacon told him $3 million to $4 million, the governor said that sounded low.

He noted that Idaho leases out the lots, lets people build expensive homes on them, then ends up in constant fights over how much to charge in rent for the ground. “Where there’s no residence built on these, are we better off stepping up to the auction block?” Risch asked, rather than leasing the lots.

State Superintendent of Schools Marilyn Howard strongly objected to that idea. “This is money-making property,” she said. “These people are selling their leases and making big bucks.”

Risch said later that he wasn’t suggesting selling the lots. “I guess I was a little surprised to hear that the rental was $3 million. The value of the asset, I would guess, is pretty substantial,” he said.

Mike Murphy, bureau chief for surface leasing for the state Lands Department, said rights to some state leases on Payette Lake have sold for more than $1 million in recent years. On Priest Lake, the leaseholds have sold for $200,000 to $600,000, he said. That’s in addition to the cost of structures on the land and annual rent payments.

Howard said Idaho schools could reap big gains in the long term from keeping the valuable state land along Idaho’s scenic lakes. “Sometimes we make decisions on the basis of how irritating it might be to deal with them,” she said. “I’d like to use a broader view.”

The Land Board, which consists of the state’s top elected officials, voted unanimously to endorse its staff’s recommendation to review its rental rate structure for cottage sites and hold off on auctioning new leases on Priest Lake until that’s completed.

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