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Priest Lake site auction flops; state may revisit new lease rate

Bud Belles was 8 years old when his father bought the family cabin at Priest Lake in 1948 on land leased from the state of Idaho.

Now the retired computer consultant fears that years of family memories, from learning to water-ski to singing around a campfire, could come to an end because of moves by the state to capture more revenue from its state-owned cabin sites on Priest and Payette lakes.

A week ago, Idaho tried to auction off two new lakefront lots on Priest Lake as a test, with rental rates double those charged to current cabin owners. Rent would have been set at 5 percent of appraised value a year, rather than the current 2.5 percent. But the auction was a bust – no one bid.

Existing leaseholders on the lake were thrilled. About 50 of them attending the auction at the Coeur d’Alene Inn burst into cheers.

“We were disappointed in the way they set it up from the beginning,” said Belles, a Nine Mile Falls resident who is president of the Priest Lake State Lessees Association. “We’re scared that they’re going to try to do the same thing to all of our lots, and a large number of us will just have to say goodbye to Priest Lake.”

Waterfront lots on Priest and Payette lakes are a rare and increasingly valuable commodity. Idaho collects $4 million a year from its leased cabin sites, which Secretary of State Ben Ysursa said is “not an insignificant part of our revenue.”

Belles said the value of a leased lakefront lot at Priest Lake is running about $300,000 these days – and that’s not counting the cost of the cabin or other improvements. At 2.5 percent rent, that’d be $7,500 a year for the lot. At 5 percent, it’d be $15,000 a year.

Cabin site lessees also build and own their improvements, including power, sewer and water lines, and pay county property taxes on all buildings and improvements. When a cabin changes hands, the new lessee pays the state an additional “premium rent” worth 10 percent of the leasehold value – which for a $300,000 cabin site would be $30,000.

But values have been shooting up, particularly at Payette Lake near McCall. Increasingly, cabin owners are complaining that the costs to lease state cabin sites are outstripping the means of average area residents and that Idaho’s state-owned lakefront will soon become the preserve of the ultra-rich.

Mike Murphy, bureau chief of surface and mineral resources for the state Department of Lands, said, “We recognize that concern. We also recognize that lots of people are facing that same issue – I don’t think it’s unique to the lessees.” Anyone who owns, or wants to buy, waterfront property is facing the same jump in values and taxes, Murphy said.

“The property we own along Payette and Priest, these are prime lots for residential use,” he said. “So we’re looking to garner the revenue that would be appropriate for those types of properties, nothing more, nothing less – just what is reasonable and what is at the market.”

The 354 state cabin site leases on Priest Lake all come up for renewal in 2010.

Ysursa, who’s serving on a state Land Board subcommittee that’s trying to figure out how to set lease terms for the renewals, said the Land Board is required by the state Constitution to get the maximum return it can get from state endowment lands. That money goes to fund Idaho’s public schools and universities.

“The whole bottom line on this is price – how much are they going to pay, what’s our methodology, what’s a fair return to the state of Idaho on its assets?” Ysursa said.

He noted that the Land Board already recognized the difficult position of cabin site lessees by voting to lengthen lease terms, now limited by law to 10 years. “The board is on record by unanimous vote,” Ysursa said. “We will be seeking legislation in the next session to remove that limitation and obviously head toward a longer period of time, be it 30 years or whatever.”

Ysursa said he was surprised no one bid in the auction for the two new Priest Lake lots.

“We had an auction and nobody participated. Is that because the market’s flat?” he asked. “Is it because the 5 percent rent was too high for them in the long term? It’s probably a combination of factors. I don’t know.”

State officials aren’t sure what they’ll do next, now that the auction failed. Murphy said, “It’s going to take a little while to digest that.”

Ysursa and state Superintendent of Schools Tom Luna will hold a public meeting Nov. 7 in Boise to gather input on what should be in the new leases the state signs with cabin owners in 2010.

“We hope to get some input, and I’m sure we will,” Ysursa said. “This is the start of that discussion.”