The state government of Idaho has acquired a new asset: more commercial office space.
In a unanimous vote, the members of the Idaho Land Board chose Tuesday to swap approximately 14 acres of land in McCall, which is currently being used by the University of Idaho’s McCall Outdoor Science School, in exchange for a privately owned commercial building located in Idaho Falls.
The exchange will be between the Idaho Department of Lands, and a private company, IW4, LLC, an affiliated company of G.L. Voigt Development Co. of Idaho Falls.
Emily Callihan, a spokesperson for the board, said “the exchange will instantly more than double cash returns to the beneficiaries of the property.” Callihan also noted that the Idaho State Endowment has been heavily invested in rangeland and timberland, and that the acquisition of commercial office space will allow for portfolio diversification.
Following Tuesday’s Land Board decision, Gov. Butch Otter’s spokesperson, Jon Hanian, told IdahoReporter.com that “the transition of this property (Idaho Falls office space) from private ownership to state ownership does not impact pricing and lease rates, because the endowment trust charges market rent.”
Scott Phillips, a spokesperson for board member Brandon Woolf, Idaho state controller, noted to IdahoReporter.com that the acquisition increases revenue to the state endowment trust by $290,000.
Yet, what is good news for the Land Board may not be such good news for local residents of Idaho Falls. The Idaho Department of Lands reports that in 2011 the office space generated approximately $36,000 in property tax revenue for Bonneville County. But after the state endowment acquires the office space, it will no longer produce property tax revenue.
The office space that the state will acquire is currently leased to Battelle Energy Alliance, LLC., and the lease is expected to remain in place for another seven years. Battelle is an operating contractor of the Idaho National Laboratory (INL) and a collaborative partner with Boise State University, Idaho State University, University of Idaho and private industry in the Center for Advanced Energy Studies.
In recent years, the Idaho Land Board has been criticized for investing in commercial property, thus competing directly with private for-profit enterprise. Members of the board argue that the Idaho Constitution requires that public lands must be managed “in such manner as will secure the maximum long term financial return to the institution to which granted,” and this is said to imply a “fiduciary responsibility” for the board members.
The current Land Board has sought to uphold this fiduciary responsibility by taking funds derived from the sale of public lands, and using them to purchase for-profit businesses and commercial properties. In late 2010, it was reported that the Land Board had voted to purchase Affordable Storage, a self-storage business in Boise, an acquisition that drew concern from Michael Scanlon, president and CEO of the Self Storage Association, a professional trade organization for self-storage business owners.
“If the state-owned facility does not pay property taxes, how will the state establish rental rates?” Scanlon asked the board in a letter dated Nov. 5, 2010. He asked further, “If these rates are based upon operating expenses that do not include the same property tax expenses as private sector owner/operators, will your pricing be discernibly cheaper, thus undercutting private competing operators?” Scanlon also raised concerns about lost tax revenues for Ada County, the city of Boise and the local school district, noting that when the Idaho Land Trust owns and operates businesses, it pays no taxes.
Months later in 2011, Gov. Butch Otter, a member of the Land Board, told IdahoReporter.com that this purchase was a “mistake,” while Superintendent of Public Instruction Tom Luna expressed regrets as well. However, three other members of the Land Board—Attorney General Lawrence Wasden, Secretary of State Ben Ysursa and then State Controller Donna Jones—all stood by their “yes” votes.