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Editorial: Lake leases are bad deal for everyone but tenants

Fri., May 6, 2011

Idaho’s public schools can’t catch a break. They’ve taken a budget beating lately from the legislative and executive branches of state government. Now, just as the Idaho Land Board was moving closer to meeting its constitutional duty regarding endowment land management, in stepped the judicial branch and stymied it.

In Boise on Tuesday, 4th District Judge Michael McLaughlin announced what amounts to good news for tenants who own cabins on land they lease from the state at Priest and Payette lakes. He plans to freeze their rent at rates that are well below market levels and therefore far short of maximizing the long-term financial return on those properties as the constitution requires.

But the tenants’ bargain comes at the schools’ expense since they are the primary beneficiaries of the endowment.

Nevertheless, McLaughlin’s decision could yet have positive results if it adds urgency to the Land Board’s growing interest in getting out of the landlord business.

The complicated lease arrangements, described by Secretary of State Ben Ysursa as a “split estate,” have been a headache since a decade or more ago when Idaho real estate values began a steady upward climb. The state owns the land and leases it to tenants who may build – and own – improvements such as cabins. Some leases have been retained for generations by the same families.

But if the lease levels are allowed to rise with the lusty real estate market, many of those tenants will be priced off the property they have improved and enjoyed. They’ve presented their case effectively enough to forestall adjustments that Attorney General and Land Board member Lawrence Wasden says are compulsory under the state constitution.

Meanwhile, the revenues that the schools could use at a time like this are constrained. Tenants have been paying annual lease fees equal to 2.5 percent of the land’s market value. McLaughlin’s action blocks a Land Board decision to raise the rent to 4 percent, which is still considered below the maximum potential.

No wonder the lake properties have been categorized by the Land Board as “underperforming assets.”

For the state to divest itself of endowment lands in a way that preserves the public’s value while conforming to the constitution’s expectations is no simple matter, but the Land Board decided in December that it wants to escape the divided ownership trap.

The constitution’s insistence on maximum financial return will require the state to seek top dollar if it sells or trades the lake properties, and that won’t set well with the tenants. But it will afford the state’s schools some overdue relief.