Dec 02 2012

What the state owns

Published by at 10:28 am under Idaho,Idaho column

idahocolumnn

A logical subject for hearings, and maybe legislation, when Idaho lawmakers convene in January: Deciding what Idaho’s endowment property policy should be. question: Should it be fungible?

When Idaho gained statehood in 1890, it got 3.6 million acres to be used for support of certain public institutions, mainly schools. The restriction was that they be managed “in such manner as will secure the maximum longer term financial return.” The job of directly managing the property was given to the State Land Board, which includes the governor and four other statewide electeds.

For many years governing these lands, widely scattered and often timber lands, was straightforward. Many were managed as timber properties, sometimes as leasable livestock grazing territory.

But what if the highest long-range return isn’t managing the lands this way? What if, as Idaho moves beyond a resource-based economy, other ways of generating income are more profitable? Should the lands be considered fungible – translatable into money, or into other sorts of money-making property?

The question is not entirely new. About a third of the endowment lands were sold in Idaho’s first half-century as a state, the money placed in an endowment fund. (Those sales have diminished, though exchanges have continued.) But more recently another development has caught interest: Acquiring private property as a money-making venture.

There are gray areas. Private companies have, since before statehood, managed their lands as timber property around Idaho, and some still do, so there’s no bright line between public and private in that field either. Still, when news broke a couple of years back that the state owned and operated a rental storage building – in effect, private-type business – attention was paid. Should the state be so overtly in competition with private businesses? Is that what the endowment lands were intended to do?

David Frazier, a blogger who has written extensively about this, told me that in his contacts with the Department of Lands, “They make no bones about being in the real estate game for the money and in my past personal conversations with the deputy director she said “nothing is off the table.”  If they can make a good return on running a hotel or resort, they would consider acquiring a property.” He said that he has checked into how much profit the state has made, “and the return is minimal at best and often times a loss.” Bob Forrey, a former state representative, told the Idaho Reporter site that the Land Board’s own asset management plan appears to call for more such property buys.

It may, however, be part of a larger trend. Idaho isn’t the only state with lands managed to generate revenue for schools. Oregon,where the source of the lands is a little different, has done something similar. “In the past two and a half years,  DSL [Department of State Lands] has acquired two commercial properties and is actively seeking more,” a spokesman said. One is a property being leased to a Eugene retailer, another a light industrial property at Hillsboro being leased to four companies.

You can reasonably argue that money-making of this sort is outside the scope of the original endowment intent, and that it puts the state into competition with private businesses. You can also argue that if the goal is to make money to help schools, this is the forward-looking way to do it. But this sounds increasingly like the kind of value judgment that ought to be made out in the bright light, be debated fully, and maybe by the legislature.

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