Land Board moves toward sale of all cottage sites

So much of the debate over transferring federal lands to the state is based on the idea that it will shield these lands from politics.

But even Idaho’s trust lands and its endowment faces political pressures that wax and wane through time. Since 1988 the Idaho Land Board has struggled over how to manage thousands of acres of state endowment trust land on the shores of Priest Lake in northern Idaho and Payette Lake at McCall.

Ultimately the Supreme Court has forced the agency to make the hard calls.

Historically, these cottage sites, as they are called, have been leased to more than 500 families who have built cabins and homes on them, some that have been a part of their lives for generations. The fees were flat and cheap until the Idaho Department of Lands tried to bring them up to market value.

For the last 25 years they have faced an outcry from the politically powerful folks who have more than a financial stake in these very special properties. If the state were to truly run its endowment like a business – to make its decisions based solely on the free market — it would keep these lands and simply charge market rates.

After all, no one is creating new waterfront property. But because the Land Board, made up of the state’s elected officials inherently must consider the political implications, it has decided to get out of the cottage site business.

In 2010, the Land Board voted to give up its interest in the lots over time and reinvest in land assets that produce higher returns for the trust beneficiaries. But remember just two years ago how the Idaho Legislature balked when the Department of Lands went into the storage rental business.

Commercial real estate, another endowment favorite, makes some otherwise free market advocates become political opponents. The decision to get out of the cottage site leasing business will generate millions of dollars that can be reinvested.

So instead of getting about 1.7 percent return on the cottage sites the state can find other investments worth more than 6 percent. Valley and Bonner County also are going to get a significant increase in their tax base.

Real estate experts also expect the new owners to increase their own investment in the properties adding to the recreation-based economies of both areas. This also may mean big developments that carry both positive and negative effects.

The Department of Lands already is considering three land exchange proposals that involve $35 million in property, though the details are confidential. Since the state is best in the timber business, you can guess that at least one of them is a forest land company.
The state plans to hold auctions for some lots this summer. In the meantime the 500 current leaseholders have to make some interesting decisions.

In 2012, the Idaho Supreme Court ruled the Land Board could and should allow people to compete with current leaseholders for their expiring cottage site lease. If they don’t win their lease they won’t be able to decide if it is put up for sale or included in an exchange.

For lessees at Payette Lake, there is little change in land values between 2013 and 2014. But at Priest Lake, the value of the lease went up by more than 80 percent. The Land Board voted Thursday to approve the department’s recommendation to introduce a deferral option for lessees who may need a short-term bridge to be able to meet their financial contract obligations, showing the sensitivity that politics demands.

In the end, the easiest way to eliminate the politics from the state public land process is to sell it.

For more information to the Idaho Department of Lands website.