November 12, 2013 in Idaho

Priest Lake cabin-site exchanges likely dead

By The Spokesman-Review
 
Betsy Russell photo

Idaho’s state Land Board, chaired by Gov. Butch Otter, center, deliberates on Tuesday.
(Full-size photo)

BOISE – Land exchanges designed to let a fifth of the lake cabin owners at Priest Lake get ownership of the land under their cabins – while trading the state higher-yielding commercial property – are likely dead, mired in legal and political problems.

“We share the angst and frustration of the lessees, the board does,” Idaho Secretary of State Ben Ysursa said after the state Land Board held an hour-plus closed-door session on the situation Tuesday, but took no action. Last month, the board abruptly rejected two major land exchanges, after a handful of legislators and local officials raised legal and political questions about the moves.

A subdued Tom Schultz, director of the state Department of Lands, said, “The board did not take any action to reconsider the ones that weren’t approved. My understanding is that legally, auctions are the most defensible route forward.”

Later Tuesday, the Lands Department issued this notice: “IDL has suspended all pending and future land exchange proposals from consideration of further evaluation.”

The state’s been working to get itself out of the business of renting lakefront lots on which the renters build their own cabins; the nearly century-old practice has led to years of lawsuits and protests over what constitutes fair rent in that situation. Proceeds go to the state’s endowment, which largely benefits Idaho’s public schools.

Land exchanges and auctions have been the two main routes the state’s been pursuing. Last month, the state auctioned off 13 cabin sites on Payette Lake for a total of $5.88 million; more than 100 people attended the public auction. Ten of the sites had current leases, and the lessees – who own the cabins they’ve built on the lots – successfully kept the lots. If other bidders had outbid them, they’d have had to pay the cabin owners appraised value for the improvements. The three unleased lots included two that sold for more than $1 million, and one that sold for $620,000.

But last month, when the board was about to approve two major land exchanges, one to swap 48 cabin sites on Priest Lake and 10 on Payette Lake for three commercial buildings in Idaho Falls that house an Idaho National Laboratory contractor, and the other to exchange 11 Payette Lake cabin lots for a Nampa office building, new legal questions were raised, including one about a section of state law that authorizes the board to exchange state endowment lands “for similar lands of equal value, public or private.”

Canyon County officials objected to losing local property tax revenues when the office building in Nampa moved into state ownership. But they also raised legal issues, arguing that lake cabin sites and the Nampa office building aren’t “similar lands.”

Schultz said there are legal arguments that property with a lease on it that’s generating a return is similar to other such property. But another argument is that the characteristics of the two properties must also match – like exchanging timber land for timber land, or grazing land for other grazing land. And it turns out the state took that more restrictive position in the late 1990s.

Gov. Butch Otter said, “I feel bad that we went through all this before we finally figured out that we had a noose around our necks, and that noose was ‘like properties.’ … It leaves us very little … room to maneuver.”

The Idaho Constitution specifically says the Legislature can authorize the Land Board to exchange state land on an “equal value basis” with government or private companies or individuals. But Schultz said more clarification may be needed from the Legislature on the similar-lands question.

Prior to its closed-door session, the Land Board voted unanimously to extend all cabin site leases now scheduled to expire Dec. 31 for one year at the current rental rates. That will allow all property owners – including those who had been signed up for exchanges – to get new appraisals completed.

Earlier state-commissioned appraisals that showed an average increase of 80 percent in values for Priest Lake lots from a year earlier prompted protests. Lessees who disputed the appraisals were then offered a chance at new ones, but not if they’d signed up for soon-to-close land exchanges.

Bill Podobnik, a retired architect from Spokane, was among those signed up for an exchange, in an attempt to get ownership of the lakefront lot where his family cabin has stood for the past 22 years. Without an exchange, he said, his family likely will “find a way to exit the lease.” The new lease rates will be too much for the family to afford, he said.

Denny Christensen, president of the Priest Lake State Lessees Association, said of the “similar lands” issue, “That question should have been answered five years ago.”

Priest Lake cabin owners have been on a “roller coaster” as state policies about the sites have continued to change in fits and starts, he said. The sharply higher appraisals, which form the basis for calculating annual rents, prompted a third of the cabin owners to consider giving up their leases, he said.

When the board considered the one-year extension, Christensen urged it to make the one-year extension at 2012 lease rates – 2.5 percent of value – instead of this year’s higher rates of 4 percent of value. He said changes the state has made – from reducing the length of the leases to raising the prospect of “conflict auctions,” with cabin owners having to bid at public auctions to keep their leases each time they’re up for renewal, have made the leases less valuable.

State Superintendent of Schools Tom Luna moved to grant Christensen’s request, but his motion failed for lack of a second. The one-year extension then was approved unanimously at current rental rates.

The one-year extension means another shot at conflict auctions, when other parties could bid against the current lessees at renewal time.

Christensen said members of his association are growing increasingly “anxious” about their situation. Some were counting on a third proposed land exchange, to exchange cabin sites for timber land, that was scheduled to go to the Land Board in December.

“We’re trying to contain our lessees,” he said. “I would not be surprised if litigation occurs.”

Darin Davidson, a Spokane lawyer whose family has a Priest Lake lease, noted that state estimates showed the endowment’s annual earnings on the properties would double as a result of the exchanges. “There’s political pressure being imposed,” he said. “They don’t seem to care that the return to the trust is going to double.”

Ysursa, who’s worked on the cabin-site issue for years, said, “Certainly, getting rid of the cottage sites and getting out of the scenario is going to take a while, even at an accelerated pace, but we’ll plow forward. We were successful at doing some auctions. I think that’s probably the path ahead.”


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