June 10, 2010 in Idaho

Idaho’s top court hears cabin case

Land Board claims discretion to set rent
By The Spokesman-Review
 

At a glance

Several studies commissioned by the Land Board over the years have said market rents would be between 3.5 and 6 percent of current market value for the land, but the board has never set them that high.

Documents

Brief in support of dismissing lawsuit against Land Board

Brief opposing motion to dismiss

BOISE – Idaho’s latest rent plan for state-owned cabin sites at Priest and Payette lakes would result in an effective rate of just 1.8 percent of market value next year, according to a lawsuit filed against the state Land Board by Idaho Attorney General Lawrence Wasden.

That’s nowhere near the constitutionally required “market” rent, Wasden contends, and would actually be less than the current 2.5 percent rate that’s been in place since 1998.

Merlyn Clark, the private attorney representing the Land Board in the case, told the Idaho Supreme Court on Wednesday that how to get the best returns from state endowment lands is up to the discretion of the board. “They do the best they can. If they’re wrong, they’re wrong,” Clark told the justices. He said the court shouldn’t intervene.

Wasden has taken the unusual step of suing the Land Board – on which he serves – over the rents it set by a 3-2 vote in March for the cabin sites. He said the board violated the Idaho Constitution’s requirement that it garner the maximum long-term returns from state endowment lands, which largely benefit the state’s public schools. State law says that’s to be done by charging market rents throughout the term of the lease.

Deputy Attorney General Melissa Moody, representing Wasden, told the high court, “We are not here because he thinks the rate is too low. We’re here because the board itself set a rate that it said is too low.”

Board members, as they set the new rates, acknowledged they wouldn’t get the state up to market rents, but noted that it hasn’t been at market rent for years.

Idaho has set rents at 2.5 percent of land value per year for cabin sites since 1998, but repeated rent freezes, imposed at the requests of the leaseholders who built cabins on the sites, have left the effective rate much lower.

Cabin owners have complained that sudden, sharp rent increases could force them out of cabins their families have owned for generations, to make way for wealthier people to take over the prized lakefront land and build grand homes.

In March, the board set rents for the 355 state-owned cabin sites at Priest Lake and the 167 at Payette Lake at 4 percent per year, but pegged that percentage to a 10-year rolling average of land values, rather than to current value. Then, they imposed a five-year phase-in to get to that rent amount, which Moody argued Wednesday guarantees that rents will remain below market rates at least for the next five years.

Justice Warren Jones, in questioning the lawyers, indicated that bothered him. “By phasing in this 4 percent over five years, that seems to me to be a concession” to the leaseholders, he said.

The Constitution requires the board to act only in the best interests of the beneficiaries of the state endowment – schoolchildren – and not for any other interest.

With the 10-year rolling average and five-year phase-in, effective rents for the cabin sites for the next five years would be 1.8 percent of current value in 2011; 2 percent in 2012; 2.2 percent in 2013; 2.4 percent in 2014; and 2.6 percent in 2015 – less than the rates the state’s charging now.

Clark told the justices that it may be impossible to determine market rents for a unique situation like the cabin sites, where the cabin owner owns the buildings and the state owns the ground, and Chief Justice Dan Eismann echoed that concern. “Under this current system, the market rent may be abnormally depressed because of the split ownership,” he said.

The high court took the case under advisement; its average time to issue a ruling is 60 days.

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