Missoulian Article today
This article appeared in the Missoulian and the Helena Independent Record. Go to the Missoulian Online to view reader comments and post your own.
HELENA – For the nearly 800 people who lease cabin sites from the state of Montana, this summer brought some sobering news: Rental rates are going up, and not just a little.
Rent for these properties, most of which are on western Montana lakes and rivers, is tied to the appraised value of the land, which in most cases increased greatly with the 2009 statewide reappraisal.
Cabin leaseholders have raised a ruckus about the increase. But others argue that the renters have paid below-market prices for years, violating state law and the constitution.
“These are (state) trust lands,” says Roy Andes, a Helena lawyer who sued the state over the issue a decade ago. “They’re not for the purposes of benefiting particular people to have lots at a bargain price. They’re there for the purpose of supporting our schools and universities.”
The cabin-site leases generated $1.57 million last year for units of the university system and public schools.
Next week, the state Land Board is scheduled to address the issue, determining whether and how higher rents will take effect.
State Natural Resources and Conservation director Mary Sexton says her agency is proposing a new rental calculation she thinks will give leaseholders more predictability, yet still comply with the state constitution and law.
However, the Land Board, which is composed of the governor, attorney general, state auditor, secretary of state and superintendent of public instruction, must make the final decision. The issue is on the board’s Oct. 19 agenda.
The leased parcels are all across the state, but most are in northwest Montana, often fronting lakes like Flathead, Echo, Placid, McGregor, Beaver and Rogers.
Current annual rental rates can range from a couple of hundred bucks to an average of $3,100 in the most expensive district, which is northwest Montana.
Leaseholders can build homes, cabins or other structures on the sites, and pay property taxes on these “improvements,” but pay no property taxes on the land itself.
Also, they can “assign” or sell the lease to someone else, with none of that income going to the state. State records show lessees selling this lease right for tens of thousands of dollars.
Lessees currently pay an annual rent of 5 percent of the land’s appraised value. This year, that appraised value for many lakefront cabin sites doubled, tripled or even quadrupled, as a result of the Department of Revenue’s statewide appraisal.
In the northwest Montana district, the average annual rent is scheduled to increase from about $3,100 to $8,300. In southwest Montana, it’s going from an annual average of $1,700 to $4,000.
Ron Waterman, a Helena lawyer hired by an association formed by the leaseholders, says some leaseholders have made the site their permanent home, are on fixed incomes, and can’t afford such large increases.
“There are some tremendous hardship cases out there,” he says. “There is story after story where individuals, people on fixed incomes, find themselves confronted with the choice of, ‘Can we afford to stay on the place?’ ”
The leaseholders group has asked to freeze rents at current levels and have the state and other parties study the issue, to come up with a reasonable, fair method of calculating the rent that doesn’t pose a hardship for people.
Waterman says the appraisal values attached to the land do not take into account that it is rental property that can never be purchased: “That’s the distinction that nobody has seemed to pick up on, and it’s really the fundamental problem.”
Yet Andes and lawyers for the university system say it’s not the role of the state to offer a reasonable deal to the renters. The law and the constitution say the state must get “full market value” for the property, which is part of a trust that earns revenue for schools and colleges, they point out.
“I don’t think anyone could argue that (the leases) have ever been set at full market value,” says Greg Munro, a University of Montana law professor who examined the issue for the Board of Regents, which oversees the university system. “They’re perpetually set at below full market value.”
Two-thirds of the money from the leases is earmarked for specific universities, which use it to pay off debt on building projects.
Cathy Swift, chief legal counsel for the university system, says the state can and should figure out a way to provide relief to leaseholders who need it, yet still get full market value on the leases.
Andes agrees: “For certain individuals, that may be a legitimate concern. … But for the people for whom these are second homes, or for people who recognize they’re getting a screaming deal on lakefront property, there’s no reason to subsidize them.”
Reach Missoulian State Bureau reporter Mike Dennison at (406) 443-4920.
Posted in Local on Monday, October 12, 2009 5:45 am Updated: 6:30 am. | Tags:
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The tone of this article is disheartening. It reads as though the author has completely missed the point of our protests. I have called the Mike and left him a message asking that he read what leaseholders have been saying here on our blog. He’s on vacation until Oct 21 (too late for us). I spoke to Chuck who is answering Mike’s calls and asked him to read our blog and make an attempt at reporting more accurately.
The average annual rent numbers quoted here are misleading to the public. These numbers are most likely accurate since they were provided by DNRC. But they take into account all leases which include some cattle grazing land in Eastern Montana and what-not. It is completely misleading to imply that someone with lakefront property on Placid Lake is paying these types of fees. There was also no mention of how unfair it is to base the fee increases on appraised values that go up because of the sweat and money that the leaseholders put into the properties. There are dozens if not hundreds of examples of this in written testimony by leaseholders published on the internet.
see posts here:
Leasee Comments after summer public hearings
Leaseholder Improvements
Beetle Kill
Chuck assured me that Kim Biggerman would be interviewing a Lease Holder and writing a follow-up story. Let’s hope that they will tell “the rest of the story” and that the Land Board will hear our message and treat us fairly.
I have just left the comment below on the MISSOULIAN website for what it is worth. It is wonderful that Phyllis has got someone to do a more accurate follow-up article. Let’s hope it helps!
Comment on Missoulian site:
My family has had a cabinsite lease on Placid Lake for 50 years and our improvements to the land alone have increased the value of the lease enormously. Our lease fees have increased steadily since the mid-1980s and we currently pay nearly $7000 a year. This, along with the expense of drilling a well, installing a septic system, removing diseased trees and so forth is not quite such a “screaming deal” as Cathy Swift implied in the article. Leaseholders are not being “subsidized” by anybody, least of all the DNRC and MonTrust. My family petitioned the state to buy the property when this briefly became a possibility in the mid-1990s, the state brought in an independent assessor (whose fee had to be paid for by us) who set a value on the land. After considerable expense and months of waiting, we were refused because the state said they could make more money from the lease over the next 60 years than from the value set on the sale of the land. It is true that land prices have skyrocketed in the last 8-10 years but, as many have pointed out, leased land is not the same as fee-simple property and so cannot fairly be assessed on the basis of valuations of fee-simple property. It is certainly not the same as renting a house in town because we receive NO services and, in fact, have to get the state’s permission and pay ourselves for such things as sewarage, water and removal of diseased trees. Many people who have had their cabins for years have chosen to retire on their cabinsites and have re-modeled or re-built in order to make these “recreational” sites usable year-round. Yes, perhaps this was a “foolish” choice (as Art Marducci said), but prior experience had given no indication that the State would make things so difficult for leaseholders. “Zootown” is unsympathetic to the plight of current leaseholders because he spent a couple of years doing up what was clearly for him a lucrative investment and he obviously made a nice pot of money from it when the market was strong. The rest of us are suckers for having a connection to the land that is something other than a matter of financial gain. Undoubtedly, some who have bought state-lease cabinsites have done so for investment purposes and some who didn’t get out soon enough are now suffering because their investment is now worthless since potential purchasers (and their banks)are unwilling to risk their money with the expense and uncertainty of the current system.Our cabinsite has benefitted from significant physical, spiritual and financial investment for 50 years. We have been stewards of the land and have paid our lease fees without resentment; we have transformed a swamp into a desirable property. We are Montana people with a deep love for the state and this is our home. However, since we are not rich enough to afford to buy fee-simple land and are not allowed to buy our lease, if the lease fees double or triple we will not be able to afford to stay. The state will not buy our improvements and, by the terms of our lease, we will be required to remove them. What will this mean? Can we replace the trees that have been cleared to reveal the view of the lake? Can we replace the swamp? Well, perhaps we could find a way to rip out the new, environmentally sound septic system (installed last year), we could bulldoze the buildings and open the well to flood the land to help return it to the condition in which it was found. Let us hope that it does not have to come to that. The Montana State Leaseholders Association has proposed a fair and reasonable alternative to the State’s proposals that would provide a fair rent for the land and the opportunity for the state to benefit from any profits from the sale of a leasehold. No one is trying to get something for nothing, we just want a fair deal and a chance for ordinary people like us to continue to keep our connection to the land.