Agency Leery of BSU Private Building Scheme

As financial shenanigans on the part of public agencies have come to light on projects ranging from university housing to urban renewal projects, it becomes increasingly clear they depend on “flying under the radar” of public scrutiny.

A report in the Saturday Daily Paper quotes BSU Prez Bob Kustra saying, Moody Investor Services, “Came along and blew up the plan.” THE PLAN is risky for investors and appears to be an end run around authority.

It involved a deal that would have allowed a developer to finance a private commercial rental building (student housing) on property owned by the citizens of the state of Idaho and lease the land from BSU for a period of up to 85 years. If any of that land is acquired through eminent domain and then leased to a private developer, look for some legal action with support from across the nation.

The deal would have been great for Boise and Ada taxpayers because it would have put a $41 million asset on the tax rolls, but in their quest to “keep the debt off the books,” BSU got a law passed during the recent legislative session to exempt these private lease deals from taxation. We figure it would otherwise have been a combined tax bill of $800,000 on the project.

The state plays by different rules than the city and county, and don’t have to seek voter approval for debt. They do have to get permission of the State Board of Education for bonding authority. We haven’t seen the agreement, but an 85 year lease is murky any way you cut it.

Moody’s made a good call signalling a potential problem with the scheme put forth by BSU. “Private-Public partnerships” usually mean that one party or the other can’t afford to do something in the traditional manner (legal) and they try to get around regulatory and voter authority by other means.

Boise City has done it with fire stations, the airport, and attempted to get around the authority of voters with a police station and airport parking garage. Courts have shut them down each time they were challenged.

Ada County has a courthouse financed as a private-public partnership and it has turned into a taxing-financing-ownership-liability-maintenance nightmare. There are more than 400 pages of lease and sub-lease agreements on the courthouse complex and no one REALLY understands it.

This boils down to financial philosophy. One school (pun intended) is pro-growth and seeks to “leverage” by introducing finance charges. We GROWTHOPHOBES favor a “pay-as-you-go”system which precludes debt unless it is approved by authority of voters or State Board of Education.

Comments & Discussion

Comments are closed for this post.

  1. Kustra’s arrogance is off the charts! “came along and blew up the plan”? Are you kidding me?
    The statement ” to keep it off the books”, should be a career ender!
    It shows clear intent to deceive the public about the University’s indebtedness. Now the question is what other little deals have “been kept off the books”. No wonder we don’t trust these people as far as we can throw them.

    EDITOR NOTE–In fairness, the “off the books” statement was from the Statesman, but the deal would indeed have kept the debt off the books.

  2. Casual Observer
    May 16, 2010, 7:01 am

    Gee, the people only lose two ways. First when the state blows up the free market by stealing private land (excuse me, acquires land via eminent domain for the exclusive use by a private company), and second, when the people are forced to cover the taxes that would otherwise be paid by the private company.

    It is duplicitous stunts like this, but on a larger scale, that lead to the current world financial crisis / recession. In the spirit of not calling things by their real name I suggest we give Kustra a new assignment, surveying the market for college presidents. It is so much nicer, and less painful, than saying fired.

  3. Naaaa! Fired would suit the situation just fine. How do we get these guys attention if we don’t just fire them. No buy outs no nothing. Just have him escorted off the property with the BSU security force.

  4. Take it all
    May 16, 2010, 2:14 pm

    So if you have a “no loose” football team you strike while the fire is hot. Who would oppose you? So many people only know BSU for the football and have NO CLUE about how BSU actually operates. This is Kustra’s time to grab it all…and have support…even if it is only football fans who cannot figure out the difference between a fle flicker and ponsee scheme.

  5. Boise’s criminal enterprises cum quasi-governmental agencies continue to show the depth and breadth of their corruption and disdain for the common man by their relentless efforts to overtly and covertly subvert the expressed will of the people.

    Now all we need to do is get that Trolley built and pound that last nail in the coffin!

    Welcome to Boise Angeles, y’all.

  6. I read the article and frankly did not see anything wrong with the deal. Long term leases, typically 99 year leases are routinely used in places where “fee simple” land purchases are non-existent. The lease keeps the land in the “family” and the builder has a spot to build the project.

    85 years is generally beyond the useful life of most buildings. Renovations cost more than new construction with older buildings. BSU gives up the right to build on land it owns for 85 years in exchange for a revenue stream. The builder gets the site to build his project. Revenue from the project is profit for the developer/owner of the buildings and lease payments to BSU. Students get a decent place to live with adequate parking in the rental arrangement. And I would think somewhere in the fine print the project is fully taxable for property taxes and rental income.

    Long term leases like this are common in large cities. Ground Zero in New York is an example. The developer gets his site and the land owner can reclaim the site at the end of the lease. Somewhere in the agreement will be the rights to renew the lease talks before the lease expires. If the land owner wants the land back that pretty much is the end of the discussion. If the building owner wants to continue then he has to pay a new and higher rate on the lease.

    PAUL–If it were as you explain, it wouldn’t be all that bad. Instead, the builder is EXEMPT from taxes, thanks to a new law passed this session (HB596A). Boise/Ada would lose about $68,000,000 in tax revenues over 85 years if rates remained the same as today. We haven’t seen the plan, but the State Board and taxpayers should hold the cards.

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