Business
Idaho Dept. Of Lands Posts Loss On Commercial Ventures
January 6, 2012 
Thursday we asked Gov. Butch Otter about his thoughts on the land board going into the commercial real estate business. Otter stressed that he was adamantly opposed to the state operating enterprises that would otherwise be found in the private sector. He said as long as the state remained in a LANDLORD capacity and avoided OPERATION of a business he was probably OK with it.
The GUARDIAN’s “Chief statistician” has provided us with a spread sheet of the most recent profit and loss statement from the Idaho Dept. of Lands which indicates–at least on the surface–the state doesn’t fare too well in the commercial business world.
(residential is mostly cabin sites and commercial parcels are those located mostly in Boise)
Based on the 2010 annual report–the most recent available on line– Residential cabin lease income has the lowest operating expense at 5.97%, and the highest net income ratio at 92.06%. Commercial real estate has an expense ratio of 121.81% (expenses exceed income by 21.81%) and the lowest net income ratio of -29.38% which as nearly a 30% loss.
The IDL solution seems to be to sell the cabin sites and buy more commercial, high intensive management properties to operate at a loss. Bottom line, managing recreational and grazing leases is not as flashy as management of commercial property. The philosophy is “Sell the cabin sites, double down on commercial and all will be well.” Trust the IDL employees, they are looking out for the school children and following the constitutional mandate to get the best bang for the buck.
With legislation waiting in the wings to be introduced during the current session, the lawmakers will no doubt have some probing questions for the would-be real estate tycoons at the Land Dept.
The issue was made public last year after the State of Idaho purchased Affordable Storage, a self-store facility on Maple Grove Road in Boise. The state also owns multiple commercial buildings in downtown Boise, including one at 9th and Bannock which will be remodeled to accommodate a brew pub. Last time we checked that building was 80% vacant and off the tax rolls.
The state properties are all tax exempt. Had they simply allowed the brew pub to make “tenant improvements,” at least that portion would have been taxable as personal property.
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Comments & Discussion
Comments are closed for this post.
Jan 6, 2012, 8:24 pm
Mr. Gunstream from Nampa could probably do a better job managing the commercial portion–after he gets done with his lawsuits. Might even negotiate a contract where he would pay for his own commute
Jan 6, 2012, 8:42 pm
The negative net income, cash flow from commercial properties should be verification that IDL should not own improved commercial properties. IDL staff wishes the Land Board to approve additional commercial property purchases. Negative cash flow does not increase school funding or benefit the school children. State owned properties pay no property tax towards local schools or local governments. One must question the competency of IDL management. Any property manager in the private sector would be immediately terminated for the negative returns from property with no debt service or property tax payments.
Jan 7, 2012, 12:46 pm
The whole concept of government ownership of commercial property flies in the face of every business owner who has put his life savings into a business. Government excuses itself from paying taxes and other overhead issues and it is just wrong.
Idaho Land Board has already done the markup of legislation to allow them with impunity to invest in commercial concerns. IT will be introduced in the next legislative session for consideration and approval.
Jan 7, 2012, 3:29 pm
Annual lease & expenses can be found on the IDL web site. Direct lease income from all sources has declined -18.6% over past 5 years. Mostly attributed to reduction in timber income.
Gross revenue from cabin sites has increased 47.5% over past 5 years. Net income from cabin sites, after direct and overhead expenses has increased 45.5% over same period.
Commercial revenue has increased 20.2% over same period. Commercial direct expense has increased 141.0% and overhead expenses increased 176.7% over 5 years.
Maybe its time the Land Board stops the rubber stamping of IDL’s poor recomendations and return to basics. A quick U-turn is required.
Jan 9, 2012, 1:27 pm
I bet management of State commercial properties is in the hands of the private sector. They are out to make a buck. Can’t really blame them. Republicans want to privatize everything so get used to it. Awarding management contracts at taxpayer expense is a great way to support your political base and friends. Government needs to be OUT of the commercial business, business.
My wife spends a geat deal of time training government contractors and she can’t back bill the contractors for her tax payer funded time. It is never ending.
Remind you of no-bid security contracts in Iraq? It’s only socialisim if the money isn’t going into your crony’s pocket