Cabin site leases on school trust land have increased substantially.
CABIN SITE LEASE RATES
NO EASY SOLUTION
"We are on a sinking ship," stated a McGregor Lake resident, "My family will lose our place that weve have had for 25 years." This family leased the lot in 1976 for $50 per year. The lease rate increased 50% every five years until 1990 when it tripled. By 2000, the rate was $2,066. With the implementation of a new administrative rule regarding cabin site lease rates, the cost of the lease would go to about $4,000 per year. The improvements on the lot would be taxed separately. If the cabin and improvements were worth $150,000, taxes could be another $2000, making the total cost of lot lease and taxes $6,000 per year.
The Department of Natural Resources and Conservation (DNRC) has adopted this new rule pursuant to a Montana Supreme Court ruling that found that the States policy of charging 3.5% of the appraised cabin site value failed to achieve fair market value and was therefore unconstitutional. The effect of this rule change is an increase of cabin site lease rate from 3.5% to 5% of appraised value staggered in over a five-year period. When fully implemented, a lot valued at $80,000 would cost $4,000 per year. This rule change will affect 773 lessees, most of whom have had their leases for many years.
Options are limited. In the short term, cabin site lease holders can challenge both the appraisal on their lot and on their improvements. House Bill 36 which has passed both the House and Senate this term provides that the appeal process for challenging the value of a cabin site located on state land must begin with the County Tax Appeal Board, which may, if necessary, be followed by an appeal to the State Tax Appeal Board. HB 36 amends section 77-1-208 of the Montana Code to use the appeal process in Title 15, chapter 15 of the Montana Code.
The main assessment method used in Montana is comparative value: sales of similar property in similar locations. The fact that there are not many leases changing hands makes appraisals subject to error. Also, local conditions such as fire danger, the local economy, flexibility to use the land, and existence of services are big factors affecting value.
In the long term, leases are going to change hands for values much lower as people are forced to sell. Unfortunately, the early sellers will be those who got in early at a low price, made improvements and now cannot pay full market value as redefined by the court.
My consultations with legislative legal staff have determined that there are no easy legislative answers to the dilemma faced by cabin site owners. A change in the law would have to be consistent with the Montana Constitution or the Constitution would have to be amended. However, in this case, the Montana Constitution cannot be amended without changing the Federal Enabling Act of 1889. This act required that any proceeds from these state lands be held in trust to support public education, forming the Public School Fund. The Enabling Act required that the Montana Constitution provide that the lands be administered to return "full market value" to the Public School Fund when Congress granted the State of Montana over 5.8 million acres of land. My attempt to find a legal remedy to assist cabin site owners ended with a resolution to Congress urging them to change the enabling act. The resolution is on hold. Resolutions of this type have had little success in the past unless they have been multi state efforts.
Montanas school trust lands now comprise 6 million acres. About 1,200 acres (.02%) of the lands are leased as cabin sites.
Rep. Verdell Jackson, House District 79, Kalispell