July 9, 2012 in City, Idaho
Priest Lake leaseholders could lose longtime homes
Ruling has cabin owners in limbo
When Jim and Myrna Brown invested in their Priest Lake cabin 20 years ago, they hoped summers on North Idaho’s “crown jewel” would become a family legacy.
Like so many others entrenched in Northwest lake life, the retired public school teachers put countless hours of sweat equity into the lakefront oasis.
But those improvements to the cabin built in the 1930s may become someone else’s family heirloom. While the Browns own the cabin, they do not own the land it sits on. Rather, they lease it from the state of Idaho, and under a recent court decision the Browns and many other families may lose their summer retreats to the auction block.
In a June 29 decision, the Idaho Supreme Court overturned a previous state law that protected leaseholders on Priest Lake from having the land beneath their structures auctioned off in a competitive bidding process. The state charges rent to cabin owners like the Browns, who build and maintain their summer cabins on the sites. The rent funds Idaho schools and other public institutions.
Under the Idaho Constitution, the Land Board has an obligation to “maximize long-term financial returns” on endowment lands for the beneficiaries. The current law is in violation of the constitutional requirement, the Supreme Court found.
The endowments include the 354 cottage sites at Priest Lake, as well as 167 at Payette Lake near Boise.
The ruling adds another layer to an already complicated issue and creates instability for the Priest Lake community, leaseholders said.
“In theory Mr. Moneybags can come in to the area and say, ‘I really like that cabin at the end of the lake,’ ” and push current cabin owners off sites that have been in families for generations, said Bud Belles, a longtime cabin owner and a trustee of the Priest Lake State Lessees’ Association.
The leaseholders say they have been squeezed out, as property and lease rates have skyrocketed.
Lease rates increased this year from 2.5 percent of market value to 4 percent, based on appraisals completed by the state.
From 2005 to 2012, one leaseholder said his annual rent increased by 273 percent. The average lease rate is $11,000 annually.
“It’s just crazy what people will do to be up here,” said Denny Christenson, president of the lessees association, which works with the state on behalf of leaseholders. “It’s the loss of control that has people concerned.”
Some argue that the longtime leases have allowed generations of families access to pristine waterfront properties for a fraction of the cost of the privately owned lots. This has been to the detriment of Idaho schools, which rank 50 out of 51 in the nation for per-pupil spending, opponents of the preferential leases said. Those pushing for a change in the law include Attorney General Lawrence Wasden, who sued the Land Board, of which he is also a member.
But cabin owners said that while they support the endowment, they just want security for their investments.
“I don’t think anybody would bid on these leases if they knew the story,” said Hugh Campbell, a retired school teacher whose family entered into a lease in 1973.
While the implications of the Supreme Court decision are still uncertain, the state has been working toward what it calls a “lot solutions process.”
Under that system, the Land Board will offer leaseholders one of two choices under the law: public auction or a land exchange. Most cabin owners are not in favor of auction because of the uncertain nature of a public bidding process.
“If you do the auction, the family needs to be willing to lose it – which we are not,” Jim Brown said.
The land exchange option means less risk for the leaseholder, but it is also more complicated. Land given to the school endowment in exchange for lakefront property must meet strict requirements, officials said.
Before either option can be considered by the leaseholders, the state must complete the process of surveying the lake lots to be recorded with the county, which has never been done in the history of the leased sites. That process should be completed in about three months, at which time leaseholders can begin unification, officials said.
The average value of a privately owned, unimproved, lakefront lot with 100 feet of access on Priest Lake is about $425,000, said Ken Bocksch, residential supervisor for the Bonner County Assessor’s Office.
Bocksch said the county has not been privy to appraisal figures for the state-leased lots.
“The state holds that pretty close,” he said. While the land value is unclear to the assessor, Bocksch said the price of cabins being sold on leased lots have decreased about 50 to 60 percent in the last two years.
And the number of leased lots available for reassignment has also increased.
“Back in the early 1990s you would never see a ‘for sale’ sign – the properties would move that quickly,” Christenson said. Now people are leery of investing in property with so many unknown variables.”
“Our goal is to maintain the quality of the lake – with the least amount of change,” said Campbell, who also sits on the lessees association. In the past, turnover of the leased sites has been low because the families have “a love for the lake and the land around it.” It’s a culture they want to maintain.
“We don’t want people coming in here and changing the lake,” Campbell said.
Many cabin-owners are also putting off improvements to cabins and property as the state muddles through changes to the leasing program. Cabin owners pump about $3.8 million into the local economy each summer, an economic study by the association showed.
“Many people just want to know what it all means,” Campbell said.
The biggest concern cabin owners have is the perception that they are trying to get out of paying the leases and providing much-needed funding to the endowment’s beneficiaries.
“The truth is we are hardworking families, farmers, school teachers, who are trying to hang on to our cottage sites,” said Jennifer Lehn, whose family purchased her cabin near Cavanaugh Bay in 1957. “One thing that is not good for Idaho schools, or anybody, is the uncertainty.”