February 12, 2009 BOARD MATTER H 2 ACTION: CHASE FARMS SALE PROPOSAL IN SHERIDAN COUNTY, WYOMING AUTHORITY: W.S. 36-9-101; Rules Chapter 26, Section 4 ALTERNATIVES: Authorize the Land Sale, Establish the Minimum Bid, Direct the Office to Sell the Parcel at Public Auction and Determine Whether to Offer Financing via an Amortized Sale Contract Deny Authorization of the Land Sale I. OVERVIEW OF PROPOSAL AND PROCESS: Chase Farms, a New Mexico general partnership, (now known as Caza Ranches, LLC) has submitted a letter application for the sale of Wyoming State trust land. The Office of State Lands and Investments (the Office) received the proposal in March 2006 and recorded the application on the Category I Disposal list. After preliminary review, the Director determined that the parcel may be suitable for disposal, and moved the parcel to the Category II Disposal List in accordance with the Board s rules. There are two separate parcels that encompass 1,202.92± acres described below. The appraised value of the 1,202.92± acres is $704,000.00. Parcel No. 1: Township 58 North, Range 82 West, 6 th P.M., Sheridan County, Wyoming Section 36: Lots 1, 2, 3, 4: N1/2: N1/2S/12 (622.77 acres) Parcel No. 2: Township 58 North, Range 81 West, 6 th P.M., Sheridan County, Wyoming Section 36: NW1/4: Lots 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11 (580.15 acres) The State of Wyoming owns the mineral rights. Parcel 1 has an operating Oil & Gas lease (00-123) to Pennaco Energy, Inc. and a coal lease (0-4231) to Gastech, Inc. which expires April 1, 2018. Parcel 2 has an operating Oil & Gas lease (00-114) to Yates Petroleum Corp. and a coal lease to Gastech, Inc. (0-42315) which expires April 1, 2018. All mineral rights and associated income will be retained by the State. Further details, including maps, appraisal figures, and the full reports of the Wyoming Game & Fish Department (Game & Fish) and the Department of State Parks and Cultural Resources (State Parks) are presented in the Detailed Analysis, available both in hard copy at OSLI and on the Internet at http://slf-web.state.wy.us/land/land.aspx. Pursuant to Board Rules, Chapter 26, Section 4(e), on January 5, 2009, the Office made available to the public: (1) the Detailed Analysis of the proposed disposal; (2) the appraisal; (3) the income generating potential of the parcel; (4) the manageability of the parcel, individually and in combination with other state trust lands; (5) the existence and importance of any wildlife habitat and wildlife-oriented recreational opportunities located on the parcel, as determined by Game & Fish; and (6) the existence and importance of any public recreation opportunities or cultural resources located on the parcel, as determined by State Parks. The Office has accepted public comment and held a public hearing concerning the proposed disposal in Sheridan County on January 21, 2009 after having notified the Sheridan County Commissioners of the hearing. Page 1 of 5
Accordingly, pursuant to Board Rules, Chapter 26, Section 4(f), the Board must now consider in open session the proposed disposal. If the Board rejects disposal of the parcels, the Office shall remove it from the Category II Disposal List. If the Board approves the proposed disposal, pursuant to Board Rules and W.S. 36-9-101, it shall authorize the sale, establish the minimum bid and direct the Office to sell the parcels at public auction. II. PUBLIC COMMENT A public hearing for the Chase Farms sale proposal was held in Sheridan County at the Sheridan City Hall (Council Chambers) at 7:00 P.M. on January 21, 2009. Five people from the public attended. Ted Lapis, representing the Public Land User Committee, commented that he was pleased that the State was conducting public hearings on these sale/exchange proposals. He would prefer that the state consider exchanges over sales, and supports blocking up of state lands. Mike Watkins, representing himself, commented that he supports the sale. He would like the State to consider value as more than just dollars and cents. He prefers exchanges over sales, and supports exchanges that would gain more access. Mr. Watkins complemented Chase Farms for their support of the community. Written comments were accepted through February 4, 2009. Two written comments were received. Mr. Luszcz urged the Office to use the lands in exchange for others for the purpose of obtaining public access to some of the larger tracts of landlocked public lands in Sheridan and Johnson Counties. Mr. Luszcz is not in favor of a net loss of public lands in Wyoming. County Commissioner Terry Cram forwarded an email opposing the sale of state lands, but would favor exchanges. See attached letters. III. ANALYSIS Relevant analysis can be summarized in the following categories: (A) socioeconomic impacts, (B) price and investment return, (C) physical and natural attributes, and (D) recreational attributes. A. Socioeconomic Impacts The possible socioeconomic issues regarding the proposed disposal are inherently related to the use to which the ultimate purchaser puts the land. These matters would be beyond the State to control in the event of a disposal. Both parcels are located about 20 miles northeast of Sheridan in north central Wyoming. Parcel No. 1 is located approximately one-quarter mile north of Badger Creek Road and Parcel No. 2 is approximately 5 miles due east of Parcel No. 1. Well maintained ranch roads provide access to both state parcels. However, both parcels are surrounded by privately owned land and there is no legal public access. Both parcels are rolling to rough hills with deep draws. Soils are sandy loams to clay loams. Vegetative cover ranges from native grasses and forbs to a variety of woody shrubs and trees. There is no water on either parcel. Both parcels are fenced into larger pastures along with privately owned land. Since the property is owned by the State, it is not assessed or taxed by Sheridan County. If the sale of the property to a private entity takes place, Sheridan County would assess property taxes on the land. The Sheridan County Assessor s Office estimates that the annual property tax on the parcels would be $326.71. B. Price and Investment Return By law, the Board is required to sell State trust land for a minimum of the appraised fair market value. Page 2 of 5
The total return of any investment is comprised of two parts; (1) income generating potential; and (2) appreciation of the underlying asset. The Board of Land Commissioners Rules and Regulations, Chapter 26, requires that the detailed analysis include an estimate of the income generating potential of the parcel. Parcel 1 (Lease No. 2-3643) is rated at 120 AUMs and Parcel 2 (Lease No. 2-5176) is rated at 156 AUMs for a total of 276 AUMs. Annual income for 2008 was $1,437.96 based upon $5.21/AUM and will be adjusted to $1,415.88 in 2009 based on $5.13/AUM. If the 1,202.92 acres was sold for $704,000 and the proceeds invested by the State Treasurer in the Common School Permanent Land Fund at the current projected long term (10+ years) average total rate of return (interest, dividends, and realized and unrealized capital gains) of 7% per annum, the investment would generate $49,280.00 per year. Although the principal gained as a result of the sale is invested in the Common School Permanent Land Fund, the interest earned on that principal is distributed by the State Treasurer via a formula to the State Department of Education, thus offering no opportunity for compounding. If the $704,000 was to be invested, the total return over a 10, 20, and 30 year period would be: Years Common School Interest from Principal at 7.0% 10 $492,800 20 $985,600 30 $1,478,400 If the land sells at public auction for more than the $704,000 appraised value, the anticipated returns from the sale would increase proportionately. Chapter 26, Section 6(c) of the Board Rules provides that the sale may be in cash, or pursuant to a sales contract. The increased benefit and efficiency to the state of an immediate cash sale, including the opportunity to reinvest the proceeds by purchasing consolidated, high-amenity lands as assets of the trust, would make this option preferable. The subject property is typical of rural land with potential for recreational purposes. Many factors influence the value of a particular property. It is generally agreed that of them all, location is most important. Other factors are size and shape, utility, access and exposure. Based on comparable sales from February 2002 to April 2008, the appraiser estimates the rate of appreciation of similar parcels in Sheridan County at 7.48% annually. Appreciation rates are influenced by several factors including current market conditions, economy, interest rates, and inventory levels. Appreciated land value is inherently speculative and would only be realized on a future sale; moreover, the sales proceeds could be reinvested in land with equal or greater appreciation potential. C. Physical and Natural Attributes Parcel 1 (36-58-82) is relatively square in shape and is comprised of 622.77 acres. Parcel 2 (36-58-81) is rectangular in shape and comprised of 580.15 acres. Both parcels deviate from the normal 640 acres in a typical section because they are located on correction lines and have lots of uneven sizes. D. Recreational Attributes Board Rules, Chapter 26, Section 4 require the Office to make available to the public the existence and importance of any wildlife habitat and wildlife-oriented recreational opportunities located on the parcels as determined by the Wyoming Game and Fish Department. The Game and Fish was asked to evaluate the parcels proposed for sale in terms of wildlife, wildlife habitat and wildlife oriented recreational opportunities. Game and Fish indicates that Page 3 of 5
the management of the parcels is unlikely to change as a result of the proposed sale and effects to wildlife would be minimal. Board Rules, Chapter 26, Section 4 further require the Office to make available to the public the existence and importance of any public recreation opportunities or cultural resources located on the parcels as determined by the Wyoming Department of State Parks & Cultural Resources. State Parks was asked to evaluate the parcels in terms of cultural resources, historical significance and public recreational opportunities. Since there is no public access, they do not feel that these lands can serve the recreational needs of the public. IV. POLICY CRITERIA On August 11, 2005, the Board of Land Commissioners adopted a set of Trust Land Management Objectives, derived from applicable Wyoming Statutes and in accordance with the Wyoming State Legislature s mandate that trust land should remain a substantial component of the trust portfolio, managed under a total asset management policy and with a focus on protecting the corpus for multiple generations. Applying these objectives, the proposed disposal of this parcel should: 1.) Better meet the beneficiaries short and/or long term objectives Revenue: Lease No. 2-3643 is rated at 120 AUMs and Lease No. 2-5176 is rated at 156 AUMs for a total of 276 AUMs. Annual income for 2008 was $1,437.96 based upon $5.21/AUM and will be adjusted to $1,415.88 in 2009 based on $5.13/AUM. Should the sale occur, this income would not be generated. Investment: If the land is sold at $704,000 and the proceeds are invested at 7% per annum, the investment would generate $49,280 per year. If the land is sold for more than the appraised value at the public auction, the annual return from the investment of the sales proceeds will be proportionately greater. The sale would significantly increase the current annual return, and that return would be similar to the estimated appreciation rate of 6-7.5%. Appreciated land value is inherently speculative and would only be realized on a future sale; moreover, the sales proceeds could be reinvested in high amenity land with equal or greater appreciation potential. Thus, a sale would reasonably meet the beneficiaries short and long-term needs. 2.) Improve the manageability of the land asset Consolidate ownership patterns: Sale proceeds could be used in accordance with W.S. 9-4-715(k) to purchase land adjoining other state owned land thereby blocking up ownership and improving access, manageability, and income generating potential. Office resources can be more efficiently utilized in managing larger, consolidated blocks of land with high amenities, legal access, and multiple compatible uses as compared to small isolated parcels with single or limited uses. Due to the isolation of these parcels, they are inefficient to manage for recreational use, grazing, or hunting. 3.) Meet a specific school and/or community need Improve access/recreational opportunity: There is no legal access to these parcels. Sale proceeds could be used to purchase land adjoining other legally accessible State owned land in accordance with W.S. 9-4-715(k), thereby blocking up ownership and improving access and recreational opportunities. Office resources can be more efficiently utilized in managing larger, consolidated blocks of land with high amenities, legal access, and multiple compatible uses as compared to small isolated parcels with single or limited uses. In the 2006 Budget Session, the Wyoming Legislature enacted law which requires no Page 4 of 5
net gain of lands held for the Common School Permanent Land Fund (CSPLF) in excess of 10,000 acres. FY-1999 establishes the baseline used to maintain the no net gain inventory. The current CSPLF net acreage gain/loss in Sheridan County is -1.67 acres. The sale of this 1,202.92± acre parcel would further ensure compliance with this legislation. In conclusion, the sale of this parcel represents a prudent transaction for the trust beneficiaries and the State under the majority of the State Trust Land Management Objectives: 1. investment return 2. increased income 3. efficiencies of consolidating land for efficient management DIRECTOR'S RECOMMENDATION: The Director recommends that the Board authorize the sale of the 1,202.92± acres described above. The Director recommends a minimum bid of $704,000 for the sale, and that the parcel be advertised for sale and sold at public auction. The Director further recommends that the terms of the sale be cash or a contract with a term not to exceed 90 days. The land will be sold in Sheridan County, Wyoming. BOARD ACTION: Page 5 of 5
Page 1 of 1 Russell Noel- Fwd: Proposed Chase state land sale From: To: Date: Subject: Lorraine Fresquez Jim Arnold; Russell Noel 2/3/2009 4:27 PM Fwd: Proposed Chase state land sale»> On 2/3/2009 at 2:06 PM, in message <99626C0554E24816B0427BB5DB68B96B@courthouse.sheridancounty.com> I <tcram@sheridancounty.com> wrote: To whom it may concern, "Terry Cram" I'd like to make a couple comments about the proposed sale of approximately two sections of state lands in northern Sheridan County. Please don't. We are back to setting precedent by nominating and selling parcels of state land that mayor may not ever afford the public the right to access and recreate. Once sold, the potential is forever gone. The public will never again have a chance to use them. If they were to remain, then the chance of a future land sale, access agreement or (better yet) a trade could still occur. There is a large landowner near here that has a similar predicament but has done considerable legwork in locating potential lands that could be traded for those within the boundaries of his ranch. I genuinely hope that he will get the properties bought and submit a trade proposal to your office in the near future. These potential trade properties would greatly benefit the recreational public particularly because they border other public lands. The real point is that this landowner will naturally lose his incentive to trade if it becomes apparent that he can merely BUY the subject state lands, And, he too can certainly afford to do sol Another point is the fact that in the write-up it mentions the state lands within the Chase property are inaccessible. I believe the parcel (sec 36,T58N,R81W) actually borders another landowner and as such should certainly be accessible with permission of that landowner. I believe that the only thing separating the section from another landowner is an 8 foot buffalo fence that was allowed to be erected around a state section at some time in the past. As such I see no laws being broke should someone scale the fence and chose to hunt so long as they had permission from the adjacent landowner. I think we would be making a terrible mistake to again begin selling off state lands. There are so few acres left and so much need. Encourage Mr. Chase to acquire other lands and commence a trade negotiation. I and other public land enthusiasts would then surely encourage the endeavor and not oppose. The dollars offered sounds great today, but the value of our public lands with be many times multiplied in the years to come. Thank you for your consideration. Terry Cram County Commissioner Sheridan, Wy. file:iic:\docurnents and Settings\moel\Local Settings\ Ternp\XPgrp",ise\4988708CWYOMI... 2/4/2009