Livestock producers in Idaho who hold state grazing permits could see a change in the way fees are calculated. The State Board of Land Commissioners (Land Board), which provides direction to the Department of Lands in managing more than 2.4 million acres of state endowment trust lands in Idaho has been charged with reviewing the grazing fee formula that could result in increases of 30 to 50 percent per animal unit month (AUM).
The formula hasn’t changed since 1993, but the AUM rate is subject to yearly adjustments based on cattle prices. According to the Idaho Department of Lands (IDL) website, the IDL routinely evaluates management strategies for all endowment trust lands in order to ensure the Land Board is meeting a constitutional mandate to maximize long-term financial returns on the use of the land.
The IDL manages 1,153 grazing leases that cover 1,732,502 acres of state endowment trust land located primarily across the southern two thirds of Idaho. The board is reviewing five alternatives to the current formula, and accepted public comments through Sept. 21. Based on those comments, most respondents expressed support for Alternative No. 1, which is to maintain the status quo. Five alternatives were offered that include a revised status quo with adjustments to the base rate, and an option to follow the model used by the state of Montana, which received no support from public comments. (www.idl.idaho.gov/leasing/grazing/rate/index.html). The Land Board comprises Idaho’s governor, secretary of state, attorney general, superintendent of public instruction, and state controller.
Under consideration is changing the formula to bring state leases more in line with private leases. Michael Murphy, IDL Bureau Chief, endowment leasing, told WLJ the lease rate for 2017 is $9.01/AUM and will go down to $8.03/AUM. He went on to say the 2016 private lease rate was $18/AUM; the 2017 rate will not be available until January 2018 due to a date/market collection lag.
Murphy explained that the Land Board subcommittee is considering the alternative methodology options with each having a different AUM rate, so an actual price recommendation is not known at this time. Any rate change would not impact lease holders until the 2019 grazing year.
The prospect of change is concerning to lease holders like Cody Chandler, whose family has been ranching in Idaho for more than 100 years. During that time they have utilized private, state and federal land for grazing.
Chandler told WLJ the unknown and having five options under review is scary. Of most concern is the idea that state leases should be more in line with private leases, a comparison that is not apples-to-apples. He explained that the value of state leased ground is also not the same in different parts of the state.
Like most livestock producers who use public land permits, there are additional cost considerations above the AUM. Chandler explained that by the time he figures his cost of buying the permit from the previous owner, the yearly AUM fee, fences, developing water, predator control and other factors, his cost per AUM is close to $20. Under most private lease agreements, the landowner maintains fences, water, and provides predator control.
Russ Hendricks, Idaho Farm Bureau Federation (IDFB) director of governmental affairs said his organization is concerned because there seems to be an impression that the current formula isn’t working. But he said it is working exactly as it was expected to work when they put it in place. “It’s going up when the cattle markets go up, and it has come back down as the cattle markets have come back down over their historic highs a couple of years ago.”
Hendricks said it is important for people to keep in mind that the Land Board sets the minimum rate for state lands. The state constitution requires permits to be offered under a “conflict bid” system that allows anyone to bid a higher amount if they feel the land has increased value.
The whole premise that people are saying the current formula is not working because they feel parcels are undervalued is not borne out in evidence, Hendricks said. He explained that when permits become available for bid there are very few conflict bids, which IDFB members point to as prima facie evidence that the current formula is close to the rate that the grass is worth.
Hendricks used an analogy comparing public and private land to eating a steak at a restaurant. He explained that a person can purchase a steak at a grocery store, take it home, prepare it along with salad, potato and other sides for far less than they would pay for the same meal at a restaurant where all of the amenities are included. “Your labor is used,” he said, “so you pay far less.”
Chandler reiterated that the current formula is working, and agrees that funds need to be collected because it is endowment land which needs to be managed for the best possible return for the state. “The formula is not the issue. I like working with the state. They have treated us very well,” he said.
However, Chandler said that if the fee goes up by a large margin and cattle prices drop or stay low he will have to consider other options for his cattle. “I can make more money paying more money for private leases than on a state lease just because of what it costs to run it,” he said. “At a certain point they will price us out to where it isn’t worth running on the state leases.”
The Nov. 21 meeting will be streamed live via audio at this website: http://idahoptv.org/insession/other.cfm. The meeting is scheduled to begin at 9 a.m. A decision is not expected at this meeting, and lease holders will be able to provide input, according to Murphy.
The Land Board will hold a special meeting on Dec. 5 when a decision could be made. Murphy said producers will also be allowed to provide input at this meeting. — Rae Price, WLJ editor
