City Government

State Owns Tax-Exempt Commercial Storage, Competes With Private Business

Politicos are fond of attempting to “run government like a business” in these hard economic times, but how about government flat out running a business?

The State of Idaho recently created a front company which discreetly operates a tax-exempt commercial public self-storage facility hiding behind the assumed name of “Affordable Storage” at 450 South Maple Grove in Boise.

The GUARDIAN was tipped off about the tax-exempt facility owned by the state because of our concerns with cities entering the commercial real estate speculation business at airports if HJR5–the proposed constitutional amendment–were to pass.

According to our confidential informants, the private facility was up for sale for several months and was sold in September for $2.68 million dollars. That effectively took about $40,000 out of the coffers of Boise and Ada County governments and the Boise School District. In addition, there will be a loss to the state of an estimated $16,000 in income taxes.

Jake Smith of Republic Storage said his firm owns 13,000 units at 17 locations in the Valley. “It’s damn difficult to do business when your competitor doesn’t pay income or property taxes,” said Smith.

Records at the Ada County Assessor show the current value is a mere $400, but at the first of the year it was appraised at about $2,000,000. We visited the site and it is a very modern and well maintained storage business consisting of several parcels including an office and what was once a manager’s residence.

The “True Name” of the business entity is listed at the Secretary of State as “State Board of Land Commissioners as trustee for the Idaho Endowments.” The profits from the commercial venture are destined to the state school endowment fund. Since the transaction was a “quit claim deed” and not a warranty deed, our experts figure it was some sort of land swap.

While it may be good business to diversify investments, it sure as heck isn’t good government to compete with private businessmen who are at a disadvantage coming out of the gate since they have to pay taxes and compete with their tax-exempt state government. Ironic that state wide elected officers are eager to crate jobs during this election year, but quietly start their own company to compete with the private sector.

They may be well intentioned, but certainly ill advised. We were told this “assumed business name” is the first one attempted by the Land Board. It will probably be the last too.

At the risk of fanning the flames, we note that Communist China, Vietnam, Cuba, and some Mideast sheikdoms are known to operate state-owned businesses. Just can’t imagine such a thing in a place like Idaho.

Comments & Discussion

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  1. Government takes your money by taxing, then uses your money to compete against the private sector. Even in this conservative state, they act like socialists. New motto, pay your taxes, don’t complain, and do as big brother says. We the people have little or no freedom left.

  2. Uh, you been to a state run liquor dispensary lately?

    Nice work Dave. It begs for answers. It strikes me that all the land board commissioners are running for re-election right now. I would like to know more.

  3. No property taxes?
    No income taxes?
    Those are two of our biggest expenses. Without them every competitor could lower prices to match those at Affordable Self Storage.

  4. Connecting an unknown and un-researched action by the Idaho State Land Board with Boise City, Communist China, Vietnam, Cuba and Mideast sheikdoms does not support your positioning as a responsible journalist — it damages the purity of your efforts.

    Also how do you substantiate the statement that the transfer to the Land Board will cost the state $16,000 in income taxes? Have you had access to the previous owner’s tax returns or profit and loss statements?

    You might have a story here but comments from both the assessor and State Land Board would have been more professional.

    EDITOR NOTE–Thanks for your journalistic critique. We do indeed have it nailed with multiple sources, documents, etc. There is no way for us to offer lengthy quotes, etc. Part of the success of the GUARDIAN is not quoting people who will get spanked for talking to the media. Many a good TV story never airs for want of someone to go “on camera.” This story has legs and there will be many more versions from legacy media outlets. The heavy lifting has been done, now it is detail work.

    The GUARDIAN probably doesn’t qualify as “professional” because we do it all for free.

  5. Wow! Good catch, Guardian.
    I’m sure the Land Board isn’t pleased that you outed them. They sure haven’t publicized the purchase (No ads, saying, “Store your stuff here and save. We offer lower prices, because we don’t pay taxes.”)
    And Sisyphus — I’ve been criticizing the state-run liquor stores for decades for doing what could be done by private business — and is done that way in many states.
    I hope the mainstream (or lamestream, as many call it) media will pick up on this and ask the Land Boarders and other officials in publishable interviews and on camera to explain their actions.

  6. BRR, make excuses and try to offer a smokescreen on this until the cows come home! Bottom line here is that the Guardian has them by the “short ones” and the pain will prove to be significant!!!

  7. About government “going into business” – I immediately thought of Nevada taking over the Mustang Ranch and not being able to turn a profit selling whiskey and, uh, well, since this is a “G” rated site, I had best leave it at that.

    And speaking of whiskey – Sisyphus, whether or not you think the state should be in the business of selling liquor, at least they aren’t competing unfairly with private business there – they have a monopoly.

  8. sam the sham
    Oct 19, 2010, 10:24 pm

    Keep digging into this… we want to know who is responsible and if there is a law, let’s make them, and each person who did not blow the whistle, accountable.

  9. This makes me want to declare my home as a “church” and get it exempt from property taxes. THE CHURCH OF DIVINE EXEMPTION sounds good for lack of a better name.

    I promise anyone who attends will get free coffee and perhaps a few cookies after my sermons on the evils of taxation without representation.

  10. Vote the bum’s out!
    Vote new Bum.s in?

  11. I thought Idaho had a law or executive order on the books that prohibited government from offering services or products which compete with the private sector.

    Can not find it but an Example from North Carolina:

    “The Act specifically prohibits North Carolina government agencies from:

    * Directly or indirectly selling goods in competition with NC citizens;
    * Rendering services to the public that are ordinarily provided by private businesses;
    * Leasing space in a state owned or operated building for purposes of selling goods or rendering services in competition with private business; or
    * Contracting with anyone to sell goods or render services in competition with private business.

    However, there are specific exceptions….”

  12. JJ- No law specific to the Idaho Department of Land(IDOL) that I have found. Could be under another subsection.

    I task all to find out how the IDOL actually works. I have no dog in this fight, but would like to bring some balance to this conversation.

    Department of Lands is tasked with investing in the future for Idaho Public Schools and few others. The state has been buying and leasing commercial real estate for some time according to the Master Plan of 2007.

    http://www.idl.idaho.gov/am/upd073008/Final_AM_Plan_wEFIB.pdf

    “Idaho has a long history of leasing properties for various commercial activities,but only began acquiring commercial office and retail properties in 1998.
    Idaho currently manages 15 Class C properties principally in downtown Boise. Commercial office and retail properties are designated as Class A, B, or C. The property class impacts lease rates and is driven by property age, location,
    construction quality, caliber of tenants and professional property
    management.”

    One of their concerns was about private enterprise.
    “Managing the perception that the endowments (government) are in competition with private enterprise.”

    For those who don’t know the state owns many properties where income is received but no property tax is collected on the land. There are cottage sites owned on Payette and Priest Lakes by Idaho DOL and they act only as the landlord. They collect a annual lease on property. The tenant pays property taxes only on the leasehold improvements. So no property taxes are being collected on these lands, nor have they been since 1932.

    What are the possible solutions?

    -Pay taxes on improvements such as the cottage site leases.
    -Let it be.
    -Discourage commercial real estate all together.

    EDITOR NOTE– Clancy is correct on all counts. Not only is there no law AGAINST state owned businesses, the feedback we are getting is that board members feel OBLIGATED to get maximum return on the fund’s investments, even it it means going into what is normally PRIVATE BUSINESS.

  13. Wait, does the Board of Land Commissioners not own an office building and rent office space to others downtown? Maybe not, but I thought they did. Wouldn’t this be the same thing?

    EDITOR NOTE–They do indeed own office buildings and bare ground downtown and in other locations. Previously they have not operated retail businesses under assumed names.
    Even if the state owned the self store outfit and leased it to a private operator, Boise, Ada County, Schools and ACHD would not suffer as much tax loss.

  14. Well.. the County is in the entertainment business… Wedding venue, RV park, racing, baseball, fair. Not sure why this is different, except for the lack of competition in most of the County enterprises.

  15. Geeezus. Who knew about this that is running for office? I need to know that prior to voting please, so do about 300 of my friends.

    EDITOR NOTE–the entire land board of statewide elected officers.

  16. FYI those downtown properties are not on the tax rolls and compete against other real estate in the area. I don’t see much difference in this or the “retail” competition. It is still a government competing against private entities.
    http://www.idl.idaho.gov/bureau/smr/csl/csl_index.html
    http://www.idl.idaho.gov/am/flyers/commercial_leasing-development_opportunities-flyers2.pdf

    Since it does not look like an issue that is going away, “voting the bums out of office” is not a valid response as that should of happened in 1998 when the commercial purchases first stared. How about some real solutions?

  17. There wasn’t any mention of just how “Affordable” the storage is. If they’re charging the going rate that private businesses do, it’s all good, eh? The extra income from “no taxes” would go to the state and reduce everyone else’s taxes. In theory.

    EDITOR NOTE–State people agree the benefit of “no taxes” increases the profit to the state, but since the money is destined for the educational endowment trust fund, it will not reduce anyone’s taxes. State would argue the profit would offset need for taxes. HOWEVER, Boise, Ada County, ACHD, and Boise Schools would all lose the tax revenues.

  18. FROM BG: “According to our confidential informants, the private facility was up for sale ….. Since the transaction was a “quit claim deed” and not a warranty deed, our experts figure it was some sort of land swap.”

    From what I have found, this was done at a public meeting in August. Nothing done in secrecy and no land swap. I assume the information packet presented to the Land Board could be obtained via a records request. http://www.idl.idaho.gov/LandBoard/2010MinutesPDF/aug17finmin.pdf#4.96

    Questions for those in the know.
    - What are their storage rates vs “Affordable Storage” now and historical.

    EDITOR NOTE–Quit claim was only part of the transaction chain, The Board paid $2.68 million from their fund. We will be doing a follow up, but the bottom line is a difference in philosophy among educators, politicians, and businessmen with regard to retail operations by the State of Idaho.

    FYI, state claims they charge “market rates.”

  19. Rod in SE Boise
    Oct 20, 2010, 7:29 pm

    Is this the same Land Board that leases shoreline land on Payette Lake to their wealthy friends at less than fair market rates?

  20. I always wondered why the Boise Police were allowed to sit in the parking lot to catch speeders. Now I know, it’s public property.

  21. The purchase of Affordable Self Storage only happened last month. Until the begining of September 2010 it was not owned by the state. Prices have not changed. The prices there were always lower than most and in fact should have probably been brought up closer to competition a while ago. The state DID NOT lower any prices to undercut competition. As for police being able to sit there, they have been there for years before the state owned it. I lived in the subdivision north of the storage, and as there is no middle lane it is dangerous and difficult to pull out of driveways and business lots onto Maple Grove. I am thankful to have speed controled there. There have been people flying off that hill if it is know as a “speed trap” maybe people will slow down.

  22. I have just skimmed the details but I am still confused…WHY? I mean, did the government all wake up one morning with a mind fart…’let’s own a business’..

    There has to be a why in this story.

  23. Dave,
    You were absolutely right: the story does have legs and has been fleshed out with damning details.

    And the connection with China, Vietnam, Cuba, and mideast sheikdoms still smells.

    BRR

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