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2 families look for changes in law after losing cabins in state auction

Jean Weaver lost her cabin at Payette Lake August 19 when she was outbid for the .34 acre lot of land under it at a Idaho Department of Lands auction. Photo courtesy of the Idaho Department of Lands.

Jean Weaver lost her cabin at Payette Lake August 19 when she was outbid for the third of an acre of land underneath it at a Idaho Department of Lands auction. Photo courtesy of the Idaho Department of Lands.

Two Idaho families are researching their legal options after they lost their cabins at the latest Payette Lake state land auction August 19.

The Idaho Land Board gave the Idaho Department of Lands the power to sell the land it owns at Priest and Payette lakes in 2010. According to the state constitution, the only method the state can use to sell the land is an auction.

Many families have owned cabins on the state land at the two lakes for decades, leasing the land underneath their cabins from the state. Now that the state wants to auction its land at these locations, many have risked losing their cabins by participating in the auction.

Two families lost their cabins to outside bidders at the most recent Payette Lake auction August 19 — Kevin Hanigan, executive director of the Idaho Auto Dealers Association, and Jean Weaver, VP of corporate affairs at Fiberpipe. Both cabin owners were outbid during the auction when their property sold above appraised value — Weaver’s by $27,500 and Hanigan’s by $14,000.

Kevin Hanigan

Kevin Hanigan

“This whole thing is ludicrous and I’m sad, hurt confused and mad – mostly mad,” Hanigan said.

Congress gave Idaho 3.6 million acres of land to fund specified beneficiaries before the territory was made into a state in 1889. The Idaho Constitution was crafted with this land in mind, mandating the lands be managed in “such a manner as will secure the maximum long-term financial return to the institution to which it is granted.”

The state can generate money from this land by selling the land, selling timber from the land, and leasing the land for grazing, farming, recreation and mining. The money is then set into endowments that benefit Idaho’s public schools, the University of Idaho, Idaho State University, Lewis-Clark College, Idaho School for the Deaf and Blind, state behavioral health hospitals, state veterans homes, the Capital Commission, the juvenile correction system and the prison system.

Lots at Payette and Priest lakes have largely been leased to cabin owners in order to raise this money. Weaver’s family had owned its cabin since 1981 and Hanigan had owned his since 2005. Both paid an annual lease rate to the state.

The Idaho Land Board decided it would make more sense to sell its land at these two locations  and to find a more profitable long-term investment for the money. It’s selling off the lots at auctions planned through 2019. The Land Board includes Idaho’s governor, secretary of state, attorney general, state controller and superintendent of public instruction.

The money raised from these sales will be used to purchase other lands in Idaho.

“The Idaho Constitution clearly states the process for selling this land which limits the options that we have, but I do know the families that lost their cabins have been left feeling upset,” said Sharla Arledge, spokeswoman for the Idaho Department of lands.

The Idaho Department of Lands must clearly advertise its plans to sell a piece of endowment land with ads for the auction in a paper in the county where the land lot is located.

This process was created to give as many citizens as possible a chance to have access to the land, but the process seems unfair to families that have leased the land for decades and have invested in cabins, Hanigan and Weaver said.

“Shame on the state for allowing it to happen this way and shame on anyone who outbids a longtime leasee,” Weaver said.

Weaver said the law should be changed to allow a longtime leasee the opportunity to pay the appraised value of the land in order to avoid risking their cabin.

Hanigan is considering seeking the opinion of a lawyer to see if he has grounds to sue.  A suit would argue that leasees were not given fair appraisals on their land and cabins.
Before entering the Department of Lands’ auction, a leasee must pay $1,000 to have their cabin and land valued.  Hanigan purchased his cabin in 2005 for $215,000 and has since replaced the floor and front door and painted the exterior and interior of the cabin.  His cabin was valued at $98,000 by the appraiser the state hired this year.

Kevin Hanigan lost his cabin and the .47 acres of land he leased at the Idaho Department of Lands auction Aug. 19. Photo courtesy of Hanigan.

Kevin Hanigan lost his cabin and the .47 acres of land he leased at the Idaho Department of Lands auction Aug. 19. Photo courtesy of Hanigan.

Hanigan paid for his land lot to be appraised in 2013 because he was considering selling the cabin. The land appraised for $48,000 that year, but was appraised at $77,000 this year by the state’s appraiser.

“You couldn’t argue the appraisal or you would lose the $1,000 fee you already paid and $800 paid for title insurance,” Hanigan said. “We knew it was a bad appraisal, but we figured if we went ahead to auction and bought the land we could at least be done with the state.”

But at the auction, the lot Hanigan’s cabin was on was bid up to $91,000. Hanigan stopped bidding after $90,000.

“I stopped bidding after $90,000 because the madness had to stop somewhere,” Hanigan said. “I knew I would be in bad shape even paying $77,000 because the land is probably not worth that.”

Weaver saw a similar increase in the appraised value for her land. An appraisal she paid for about three years ago valued the land she leased at about $40,000. It was appraised for $73,000 this year. She asked the Idaho Department of Land to recalculate, but her request was denied. She was told she could drop out of the auction and forfeit the $1,800 already invested if she didn’t like the appraisal, Weaver said.

“When you don’t have recourse on those appraisals, you don’t have any protection,” Weaver said.

Twenty-five leasees participated in the August 19 auction and 23 of them faced no competing bids. The Hanigan and Weaver cabins sold for a combined $41,500 over appraised value.

The land auction August 19 raised $12,605,500.

“They raised more than $12 million and the state only made an extra 0.56 percent over appraised value by having the auction,” Weaver said about not being given the opportunity to pay the appraised price before the land went to auction. “Half of 1 percent more money; no consideration was given to the pain and heartache of the families that lost their cabins.”

Hanigan and Weaver will reach out to other leasees, whether Hanigan pursues a lawsuit or not, to lobby legislators to change the law and to allow long-time tenants of state endowed land the opportunity to pay the appraised value of the cottage sites in order to avoid risking their cabins.

The two will also ask leasees to pressure legislators to change the rules against appealing appraisals. While the law about Idaho State endowment land auctions is written in the Idaho Constitution, the rule against leasees challenging the appraisal they received is a department rule and is potentially more agreeable for legislators, Hanigan said.

“I took a $117,000 loss on this,” Hanigan said. “What the state did was wrong.”

Idaho has sold 262 cottage site lots in 12 auctions at Priest Lake and Payette Lake for about $112 million; 235 of those lots were leased, according to the Idaho Department of Lands.

There has been competitive bidding on 12 of the leased lots and five leasees have lost, but the Idaho Department of Lands has not received any complaints, Arledge said.

“This is something we have worked hard on to try to make sure it is fair,” Arledge said, “We haven’t had anyone call to complain about the process even though you can tell at the time that those who lose are upset.”

“Most people in our situation walk away from something like this because they don’t have the resources to fight, “Hanigan said. “I don’t know if I do either, but the state could ultimately change the way they do this.”

About Benton Alexander Smith

Benton Alexander Smith is a reporter for the Idaho Business Review, covering the Idaho Legislature, new business, technology and financial services.