State land leaseholders pull together

Reappraisals could make rent fees unaffordable for some

Leaseholders on state land cabin sites have long grumbled about periodic fee increases, but this year they are banding together from McGregor Lake to Seeley Lake to protest, and possibly sue, to stop the latest round of fee hikes.

Preliminary notices sent by the Department of Natural Resources and Conservation have been alarming to leaseholders such as Doug and Shirley Stoner, who have had a lease for 15 years on Rogers Lake west of Kalispell.

"We knew when we bought the lease that (the annual fee) would be going up. That's no problem," Doug Stoner said. "But what's happened is the DNRC and the Department of Revenue think their lake lots are worth way more than they are."

The annual fee rate applied to the appraised values was raised several years ago from 3.5 percent to 5 percent, an amount that is tolerable to many leaseholders by itself. The problem for leaseholders comes with reappraisals on lease properties that come out every five years.

Stoner said his annual fee is set to increase from the current $2,800 to $8,250 by 2012, largely because of the most recent reappraisal.

That amount, he said, "takes half my retirement" income, and will force him to move his mobile home from the .41-acre lot, leaving his septic system and well behind.

There are 764 lease properties statewide, including 290 in the state's Northwest district and another 318 lots in the nearby Seeley Lake district. There are 149 lots in the immediate Kalispell area - mostly on Echo, Rogers and McGregor lakes.

For the first time, leaseholders from Seeley Lake to McGregor Lake will be joining forces, starting with a strategy meeting to be held Saturday at John Owen's Echo Lake home.

Owen said he acquired his lease property seven years ago, starting with an annual fee of $1,800 that has since gone up to $7,200 a year. With the latest reappraisal, Owen expects his fee to climb into the $10,000 to $12,000 range within five years.

Like Stoner, Owen is retired and says he will not be able to afford that rate on his fixed income.

"I've got a home here that I worked all my life for," Owen said. "Some of the leaseholders have cabins that wouldn't be so bad to walk away from but I live here full-time and I've got no place to go."

Owen believes the situation will eventually be a revenue problem for the DNRC, predicting that many of the leaseholders on Echo Lake will be forced to leave. And he's not so sure there will be a rush of new people willing to buy into such a volatile leasing system.

Leases come with restrictive land use conditions and the terms of the leases - 15 or 25 years - are not adequate as collateral for loans, Owen said.

"It's not owned. We're just renting … we can't get a loan on it," he said.

Because of those conditions, Owen said he and other leaseholders object to their appraisals being partly based on the comparable values of neighboring private lakefront properties.

What's worse about the recent reappraisals, Stoner said, is that they are based on peak market values that have tumbled over the last couple years.

Owen expects a big turnout of upset leaseholders at his home, because more than 150 have already signed on and contributed money to retain an attorney out of Missoula.

"It will go to court if the DNRC and the Department of Revenue don't do something about this," Stoner said. "Most of us are retired and we're on fixed incomes."

Any kind of remedy will actually come from the state Land Board, said Joe Lamson, deputy director of the DNRC.

The department is well aware of leaseholder concerns, Lamson said, noting that in June the department held a meeting in Seeley Lake that attracted 105 people and a meeting in Kalispell that brought in 107.

The department is considering input from those meetings in developing some alternative proposals for mitigating the impact of fee increases for the Land Board to consider at its September meeting, Lamson said.

The board can, for example, consider ways of lowering appraised values or phasing them in over a longer period. There is less flexibility in adjusting the 5 percent rent rate, because of a 1999 lawsuit in which the Montana Supreme Court determined that the 3.5 percent rate was inadequate in 'realizing a full-market return" in revenue for the state's school-trust funds.

About a third of the revenue goes to "common" K-12 schools, a third goes to the university system, and third is dedicated to the Montana School of Mines in Butte, Lamson said.

The Land Board's September meeting will be informational, Lamson said, and it's likely that the board will take final action on the matter at its October meeting.

Reporter Jim Mann may be reached at 758-4407 or by e-mail at jmann@dailyinterlake.com