Local cabin site leaseholders denounced the state’s proposed rules to implement a new law intended to establish market-based lease rates through a competitive bidding process.
During meeting last week with officials from the state Department of Natural Resources and Conservation staff, a crowd of several dozen people expressed confusion and concern about the DNRC’s proposed rules on the new bidding method for lease sites.
After the 2009 land reappraisal, many of the cabin site annual payments increased significantly.
Lessees said the high annual payments would drive many middle class leaseholders out, while wealthier lessees would opt to buy land instead. In an attempt to establish a market-rate based system for these properties, the 2011 Legislature passed Senate Bill 409, sponsored by Sen. Bruce Tutvedt, R-Kalispell.
The law establishes an auction system for the properties with a minimum bid of 2 percent of the lot’s value. The current lessee would have no preference in the bidding process.
In order to implement the new law, the DNRC was charged with writing rules for the auction. The crowd at the Dec. 6 meeting disagreed with these proposed rules, saying they increased lease fees unfairly and did not allow for an open bidding process.
According to the proposed rules, the auction winners would pay their bid amount for the first year’s rent. After that, the amount would be the most recent appraisal multiplied by the “geographic area average” bid rate, as well as increases by the annual change in the Consumer Price Index.
Lisa Owens of the Montana State Leaseholders Association said the geographic area average, which is a rolling average from the most recent three years, was not part of the new law.
A three-year rolling average diminishes predictability for lessees and the beneficiaries of the land trust, Owens said, and it makes the lease program less attractive.
Other attendees echoed Owens’ sentiments, and asked the DNRC to remove the three-year provision from the rules before submitting them to the Land Board.
Tutvedt supported the idea of a three-year average, saying it would level out lot rates in each geographic area.
“It was my intent to treat the leaseholders in a fair, predictable, straightforward manner,” Tutvedt said. “We’re just trying to find a fair-market way to do that.”
The proposed rules for the bidding process would have interested parties enter a sealed bid for state lots, which would be opened at the end of the bidding period. Meeting attendees said that would make leaseholders bid too much in an attempt to keep the property, and they would prefer unsealed bids.
There was also consternation about the rule capping the amount of leases that can go to bid each year. The rule would allow up to 10 percent of the leases in a geographic area to go to auction so as not to flood the market.
Leaseholders disagreed with this idea, saying they should be allowed to put their properties in the bidding process if they want to.
Mike Sullivan of the DNRC said the agency would respond to the comments collected at the Dec. 6 meeting. The proposed rules and any of the agency’s changes to said rules are expected to head to the Land Board on Dec. 19.