For the first time ever, the state of Idaho is opening up every state-owned cabin site on Priest Lake to conflict bidding – meaning others could bid against the current cabin owners when the 354 leases come up Dec. 31.
At the same time, new state-commissioned appraisals have come in a whopping 84 percent higher for next year for the land values on the state lots, which are used to calculate annual rents. Some Priest Lake cabin owners who were in the midst of negotiating for land exchanges to get ownership of the land under their cabins now are finding out they can’t afford it.
“It will have an effect,” said state Lands Director Tom Schultz. He’s guessing that anywhere from 8 percent to 30 percent of the 354 Priest Lake cabin owners may default on their leases, walking away from cabins that in some cases have been in their families for generations.
“I’m not going to make false promises and say that it’s going to be OK, because for some of those folks, it may not be OK,” said Schultz, who will travel north to the Spokane Valley for a meeting with cabin owners on Wednesday night. “What I’ve found is that people would rather hear the truth and be given options for dealing with the truth.”
Three factors are converging to leave those who built and own cabins on state-owned lots at Priest Lake – many of whom are from Spokane – at a crossroads, if they don’t have abundant and ready sources of cash or credit.
First, the Idaho Supreme Court ruled last summer that a law protecting state-owned cabin sites from competing bids and lease auctions was unconstitutional. Second, the appraisal values ballooned. And third, Idaho has been moving toward getting out of the awkward business of renting land to people for private summer cabins, and toward a variety of methods aimed at bringing back together the ownership of the land and the buildings on it – from land exchanges to auction sales to buying out cabin owners.
Bud Belles, whose family has enjoyed summer trips to the lake cabin since 1948, said, “My lease payment this year is $8,700. And it would go up to $19,000.” He said, “We can’t afford it. I’m going to have to give up, but I’m afraid I won’t be able to sell it. Who would buy it, with these prices? Maybe there’s 300-and-some Californians down there that have been waiting for this to happen, but I doubt it.”
Schultz doesn’t expect many conflict bids on the existing cabins; none have come in so far. Both the existing cabin owners and potential competitors have until April 30 to file applications. Competitors would have to pay one year’s rent in advance when they file; that’s an average of $16,000 to $18,000 now at Priest Lake. If they succeeded in outbidding the current cabin owner, they’d also have to pay the full appraised value of the building and improvements on the spot on the day of the auction, which likely would be in October.
“I think it’ll be unlikely that we get any conflicts at all,” Schultz said. “There might be a few, but they’ll be few and far between, I think, given the uncertainty around this issue.”
Belles agrees. “I don’t think we’re going to get too many of those, with the prices they’ve placed on the land,” he said. “It’s just so bizarre. They’ve been kind of slowing down and going down the last two or three years, and it looked like the economy is a little better than the last two or three years, but I don’t think it’s 84 percent better.”
Denny Christenson, president of the Priest Lake State Lessees Association, said, “A lot of people are worried. Since the valuations have been announced, I’ve received probably 500 emails from our members. They’re very upset.”
The state’s not allowing for appeals of the new appraisals. “There is not an appeal process built in, because technically you have other people bidding against these,” Schultz said. “You would put it out for bid. … If nobody bid, that would tell you you’re too high.”
Christenson disagrees, and said a lawsuit could result. “We believe through the administrative code that there is a right to appeal through the courts,” he said.
If cabin owners were to decide not renew their leases, there are four possible things that could happen to their cabins, Schultz said: The owners could remove the cabins from the lots. They could sell the cabins and assign the lease to the purchaser. “Now some folks say there is no way someone in their right mind will buy one of these,” Schultz said, “but we did have nine sales last year where people sold their houses and assigned their leases up at Priest Lake.”
A third possibility is selling the lot and cabin at public auction, with the purchaser reimbursing the cabin owner at appraised value for the improvements. The fourth is less likely, but it’s happened in two cases at Payette Lake, where the state also has state-owned cabin sites: The state could buy out the cabin owner.
“I wouldn’t hold that out as much hope, because we don’t have a big war chest of funds to go out and acquire improvements, but that is an option available to the (Land) board,” Schultz said.
The state Land Board oversees the cabin sites, which are a part of Idaho’s permanent endowment of lands and invested funds, all of which are managed to raise money for the state’s public schools. That board consists of the state’s top elected officials and is chaired by Gov. Butch Otter; at its next meeting next week, it’s scheduled to hear an informational report on what happens when cabin owners walk away from their state leases.
Last month, the board approved a “deferral option” for lessees who can’t afford to pay the big jump in rents next year all at once, allowing them to pay the increase in payments at 6 percent interest. “I wouldn’t say anybody’s been knocking at our door,” Schultz said.
Christenson said, “I think it was an insult to our lessees. It would only delay the inevitable, and the state would get 6 percent interest on it.”
He said, “It’s going to be a big mess for everybody.”
Schultz noted that Payette Lake state cabin sites along the lakefront saw a similar big jump in appraised values several years back; they now average $850,000 to $900,000 per lot, while even after the increases, Priest Lake lots are averaging $450,000.
“If you’re a lessee, I know the uncertainty has been difficult for them,” Schultz said. “But right now, in the short term, if they can hang on, I think that uncertainty may play to their advantage,” by discouraging conflict bidders.
The state has already given tentative acceptance to three land exchange efforts involving lots from both lakes and totaling $35 million to $40 million in property, more than 17 percent of the value of all the lots at the two lakes.
“I can tell you there will be transactions, there will be land exchanges, there will be auctions,” Schultz said. “Things will move.”