State Leaseholders Battle Higher Payments

By Beacon Staff

Charlotte DeStein remembers the first toilet flush at her house on Lake Rogers nearly 30 years ago.

“My husband did all the plumbing himself,” DeStein said, laughing. “We had champagne afterwards.”

DeStein, 70, and her husband Ron moved into the 500-square-foot house on 1.3 acres near Lake Rogers 30 years ago from the East Coast. The couple paid a mere $25-a-year to lease the land from the state. The house was initially a stopover place until they found something more permanent, but the property grew on them.

“It’s our little piece of heaven,” DeStein said in her Rhode Island accent as she looked over the small, sparse yard. “It’s very emotional and sentimental. It’s more than a house, you know?”

The DeSteins planned on living out their retirement years at the house; Charlotte retired from the Tidyman’s deli two years ago and Ron expects to retire from his position as the gun manager at Snappy Sport Senter.

But DeStein said their hopes for a comfortable retirement faltered when they received a letter from the Department of Natural Resources and Conservation telling them their lease payments could increase from $5,500 this year to nearly $10,000 when they go to renew their lease in two years.

Such an increase could burn through their retirement savings at twice the speed, making their plans to pass the lease on to their two grandsons nearly impossible, DeStein said.

“It would break my heart if I had to leave,” DeStein said.

The DeSteins are not the only residents concerned about their new lease payments. Banding together with their neighbors and other state leaseholders, they have joined a vocal group of citizens railing against the payment increases.

The DNRC is well aware of resident leaseholder concerns. DNRC Deputy Director Joe Lamson said his agency expected public outcry after it ran the property value numbers last winter.

“At this stage, people are concerned and we anticipated that,” Lamson said. “If you started doing the numbers you would be concerned also.”

The numbers refer to the formula used to determine lease payments. The value of improvements and property type are reappraised periodically and, since the values go up, the landlord has to reset the rates according to Fair Market Value. The lessees are charged 5 percent of that value per year. Leases can last 10 or 25 years.

Of the 764 state land leases in the state, Lamson said some of the most expensive sites are in northwest Montana. Flathead County saw one of the highest spikes in residential property values in the past six years, up 73 percent from 2002. The state average is 55 percent.

Lessees enter into the agreement knowing they cannot purchase the land they build on or mortgage it. DeStein said she and her husband considered finding a permanent piece of property, but the plot on Lake Rogers felt like home.

Now, when considering the worst possible outcome for their future lease payments, DeStein said it feels like a lose-lose situation.

“We’re just going to try and fight this or we’re going to move,” she said. “We can’t sell, nobody’s going to pay for it.”

“It isn’t fair because they’re judging this as privately owned property, which it will never be,” she added.

Lamson said the DNRC understands complications brought on by the stagnant real estate market as well as the country’s economic nose-dive.

“We do realize that these (were) extraordinary times when these appraisals were taken,” Lamson said, since the land was revalued at the peak of the market.

Lessees who would like to challenge their site’s appraised value can visit the closest regional office for the Department of Revenue and protest, Lamson said. There is also an appeals process after that step, he added.

In the end, the final decision about rates will be up to the State Land Board. The board could discount the rates or come up with a different formula to determine rates.

“There’s a lot of room to play around with the formulas,” Lamson said.

The DNRC is working on at least four alternatives for lessees, officials said, though they would not go into detail about specifics of the plans.

“They’re aimed at addressing some of the major concerns the lessees have had – predictability of rates, financing,” DNRC spokesman John Grassy said.

The alternatives will be offered to the State Land Board on September 21. The board has about a month to decide on the outcome and should make their final decision in October, Lamson said.

Residents on Lake Rogers and other state cabin sites enlisted the help of Helena attorney Ron Waterman to represent their interests at the state level.

“It’s a combination of legal and logical it seems to me,” Waterman said in an interview with the Beacon. “We need to make sure the state gets full value for the property and the school trust is adequately and appropriately funded.”

Money garnered from state-leased cabin sites is split three ways: One-third goes to K-12 schools, one-third to Montana State University and the final third to the College of Mines in Butte.

But the current lease levels could push middle class Montanans out of their homes and replace them with out-of-state money, Waterman said. He plans on making a presentation at the September Land Board meeting on behalf of the leaseholders.

Lamson said his agency hopes to work out solutions for upset lessees because their property stewardship is important.

“We value their participation on the property and keeping it up,” Lamson said. “It’s in our interest to keep these people around.”

Until final decisions are made, DeStein said she would work on her watercolors and read more books. She said she doesn’t want to complain because she feels lucky to have had 30 years on Lake Rogers.

“We’ve worked really hard like most people,” she said. “We don’t want handouts, we just want them to be fair.”

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