WYOMING OFFICE OF STATE LANDS AND INVESTMENTS 122 West 25 th Street Cheyenne, WY 82002 Phone: 307.777.7331 Fax: 307.777.3524 slfmail@wyo.gov MATTHEW H. MEAD Governor BRIDGET HILL Director DETAILED ANALYSIS Wyoming Board of Land Commissioners Consideration for Disposal of State Trust Land 0.94 ACRES in ALBANY COUNTY, WY Prepared on July 11, 2014 by Office of State Lands and Investments Herschler Building, 3West 122 West 25 th Street Cheyenne, WY 82002 EFFECTIVELY MANAGING NATURAL RESOURCES AND FUNDS FOR CURRENT AND FUTURE GENERATIONS
TABLE OF CONTENTS AUTHORITY 3 PROPOSAL 3 SUBJECT PROPERTY DESCRIPTIONS 3 PROPERTY INFORMATION 3 IMPROVEMENTS 4 WATER RIGHTS 4 GRAZING AND AGRICUTURAL LEASES 4 MINERAL RIGHTS AND LEASES 5 ANNUAL TAX LOAD 5 EASEMENTS, ACCESS, HAZARDS 5 SPECIAL USE LEASES 5 TEMPORARY USE PERMITS 5 FLOOD ZONE AND ZONING DESIGNATIONS 6 FOREST PRODUCTS 6 WILDLIFE HABITAT AND WILDLIFE ORIENTED RECREATIONAL OPPORTUNITIES LOCATED ON 6 THE PARCELS CULTURAL RESOURCES AND PUBLIC RECREATIONAL OPPORTUNITIES LOCATED ON THE PARCELS APPRAISED VALUE 7 INCOME GENERATING POTENTIAL 7 ANTICIPATED APPRECIATION OF THE PARCELS AS REAL ESTATE ASSETS 8 TRUST LAND MANAGEMENT OBJECTIVES 9 CONCLUSION 10 LIST OF EXHIBITS 11 PAGE 6 2
DETAILED ANALYSIS PROPOSED LAND DISPOSAL OF 0.94± ACRES ALBANY COUNTY, WYOMING AUTHORITY: W.S. 36-9-101 through 36-9-120; Sale of State Lands. Wyoming Board of Land Commissioners Rules and Regulations, Chapter 26, Section 4. Trust Land Management Objectives adopted by the Wyoming Board of Land Commissioners, August 11, 2005. PROPOSAL: The Director of the Office of State Lands and Investments (OSLI) has determined the subject parcel of State Trust Land may be suitable for disposal. The land was nominated by Mr. Gary Williams on December 4, 2012. On December 20, 2012, the Director of OSLI moved the parcel to the Category II Disposal List in accordance with Wyoming Board of Land Commissioners Rules and Regulations (Board s Rules). The application letter is attached as Exhibit A. SUBJECT PROPERTY DESCRIPTIONS: The parcel is located in Albany County, Wyoming and is approximately 38 miles southwest of Laramie just off of Highway 230, near Mountain Home and WYCOLO, Wyoming. Maps and photos are attached as Exhibit B. Herein described as: Part of Section 16, Township 12 North, Range 78 West, Described by Metes and Bounds Legal Description per survey. Survey is attached as Exhibit C. This total proposed disposal of State Trust Lands comprises: 0.94 acres PROPERTY INFORMATION: The subject property was patented to the State of Wyoming by the Federal Government under the Act of Admission of 1890. The subject property is a small portion (0.94 acres) of a larger, half-section (320 acres) of property owned by the State of Wyoming and managed under the authority of the Board of Land Commissioners (Board) as State Trust Land. The subject property is nearly level with a gentle slope to the south. The terrain is characteristic of the mountainous area surrounding the property. The subject property is improved with two (2) structures which are the property of Mr. Gary Williams. The structures include a guest cabin and shed. Electricity, septic system, and a water well are immediately adjacent to the property. 3
The vegetation includes lodgepole pine, shrubs, forbs, and bunch grasses. The main soils on the subject property are sandy loams to gravely sandy loams that are moderately deep, well drained on terraces, fans, and hills of the mountains. The soils formed from alluvium material and derived mixed sources. Permeability is rated from moderate to rapid. Available water capacity is rated moderate to low. Effective rooting depth is 60 or more, unless depth to bedrock inhibits root growth. Runoff is rated as medium, and the hazard of water erosion is medium. The hazard of wind erosion is rated as moderate. Existing rights held by the State of Wyoming are 100% of surface estate and 100% of mineral estate. The proposed transaction will dispose of the surface estate only. The State of Wyoming will retain all mineral rights. Maps and photos are attached as Exhibit B. IMPROVEMENTS: The subject property is improved with two (2) structures which are the property of Mr. Gary Williams. The structures include a guest cabin, shed, fencing, and other associated minor dwelling improvements. Electricity, septic system, and a water well are immediately adjacent to the property. WATER RIGHTS: After a review of the records maintained by the Wyoming State Engineer's Office, it appears there are no water rights associated with the subject property. Should there be additional evidence presented that water rights do exist, the subject property will be conveyed in a manner that does not remove any associated water rights from the land. No water rights are to be conveyed in the proposed transaction. Surface ownership of this property is subject to W.S. 36-9-119: "Nothing in this act [Sale of State Lands] shall be construed so as to impair the rights of any ditch company, or any person owning any ditch or ditches, on or passing through any of the lands included herein." GRAZING AND AGRICULTURAL LEASES: There is not an active Grazing and Agricultural Lease issued on the subject property or the surrounding State Trust Lands. The previous Grazing and Agricultural Lease (1-7395) consisted of 317.5 acres and a rated carrying capacity of thirty-nine (39) Animal Unit Months (AUMs). Based on the AUM fee formula established by the Board, the 2013 rental income would have been $187.20 ($4.80/AUM x 39 AUMs = $187.20). The subject parcel, consisting of 0.94 acres, is rated at 0.06 AUM s. Based on the above referenced formula, the 2013 rental income would have been $0.29 ($4.80/AUM x 0.06 AUM s = $0.29). 4
MINERAL RIGHTS/LEASES: The State of Wyoming owns all mineral rights, and will retain all mineral rights upon surface disposal. There are no active mineral leases on the subject property. ANNUAL TAX LOAD: The subject property is owned by the State of Wyoming, and is not currently subject to ad valorem taxation. Upon disposal, the property will be assessed and taxed by Albany County, and all taxes shall be the responsibility of the winning bidder. According to the Albany County Assessor's Office, real estate is valued using a market value system, and the taxes are calculated based on nine and one-half percent (9.5%) of the assigned value of the property times.068. Therefore, if the property is valued at twenty-five thousand dollars ($25,000.00), the estimated annual ad valorem tax would be one hundred sixty-one dollars and forty-nine cents ($161.49). Market Value $25,000.00 Assessed Value $2,374.87 9.5% assessment Estimated Tax $161.49 0.06725 mill levy Agricultural land may be valued by the County Assessor on a productivity basis rather than actual market price. In that case, the taxes would be significantly less, but that decision is left to the County Assessor. EASEMENTS, ACCESS, HAZARDS: There are no easements located on the subject property. The subject property is accessed from the west by the Boswell County Road. No obvious hazardous materials or environmental concerns were noted during inspections of the property by the appraiser. There are no historical, documented uses that would have knowingly subjected the land to hazardous materials, or which would have created environmental concerns. SPECIAL USE LEASES: SU-387: Cabin Site Outbuildings. SU-387 was renewed in April of 2010 for a term of fifteen (15) years and shall expire on April 1, 2035. The leased area is comprised of 0.41 acres, all of which lie within the subject property. Annual rental was set at $475.00 per year and adjusted annually by 2.7% to off-set inflationary pressure. The last annual payment received at the lease s anniversary date was $528.42. SU-387 is currently issued to Mr. Gary Williams. TEMPORARY USE PERMITS: None. 5
FLOOD ZONE AND ZONING DESIGNATIONS: Flood Zone: The subject property is located in an area with low flood risk. FOREST PRODUCTS: Merchantable forest products on the subject property are minimal with little value to the State s Trust Beneficiaries. However, a road that bisects the subject property has historically been used to access to other merchantable timber located on the remaining State Trust Land. The Wyoming State Forestry Division (WSFD) has evaluated this road and has determined it to be expendable with the creation of a new, more useable road for large timber haul trucks. WSFD has analyzed the cost and location of a new road and have determined it to be a feasible project, when considering safety, resource protection, and best management practices. WSFD comments and evaluation are attached as part of Exhibit E. WILDLIFE HABITAT AND WILDLIFE-ORIENTED RECREATIONAL OPPORTUNITIES LOCATED ON THE PARCELS: The Wyoming Game and Fish Department (WGFD) evaluated the subject property in terms of wildlife and wildlife habitat. WGFD notes that it has no terrestrial wildlife or aquatic concerns pertaining to the proposed land disposal. The evaluation letter from WGFD is attached as part of Exhibit E. CULTURAL RESOURCES AND PUBLIC RECREATIONAL OPPORTUNITIES LOCATED ON THE PARCELS: The Department of State Parks and Cultural Resources (SPCR) evaluated the subject property in terms of public recreation, cultural resources, and historical significance. SPCR notes that it has no comments related to the archaeological aspects of the subject property, nor could it find existence or importance of public recreational opportunities on the subject parcel. The evaluation letters from SPCR are attached as part of Exhibit E. 6
APPRAISED VALUE: Michael J. Hastings (OSLI Appraiser) has completed an appraisal of the subject property per instructions from OSLI. The effective date of the appraisal was August 13, 2013. The appraiser was instructed to estimate the current market value of the fee simple interest of the subject property, excluding mineral estate and assuming legal public access. OPINION OF VALUE: The Board will use the appraised values below, with the acreages granted by Patent at the Act of Admission of 1890, to set the minimum bid when these parcels are sold at public auction. Based on the inspection, available market data and analyses, assumptions, limiting conditions, and the certifications, the appraiser s estimated opinion of market value for the defined property rights with an effective date of August 13, 2013 is: Subject Property 0.94 Acres of State Trust Land at $26,595.74 per acre $25,000 Twenty-Five Thousand Dollars OSLI instructed a separate, internal appraiser to review the appraisal. Dave Fuller (OSLI Appraiser) has reviewed the appraisal and concurs with the methods used and estimated market values. The appraisal, comparable sales information, maps, photographs, and related information, as well as the appraisal review completed by OSLI, are available upon request. INCOME GENERATING POTENTIAL: Pursuant to Chapter 26 of the Board s Rules, the Detailed Analysis shall include an estimate of the income generating potential of the subject property: Existing Annual Income Subject Property Special Use Lease No. 387; Cabin Site Outbuildings, 0.41 acres $528.42 Total $528.42 Cumulative existing income for the subject property is $582.42 annually. 7
ANTICIPATED APPRECIATION OF THE PARCEL AS REAL ESTATE ASSET The subject property is typical of rural recreational land, which generates an average appreciation potential. Due to the size and configuration of the parcel, future uses are limited to recreation. As a stand-alone parcel, the subject property is inadequate for new improvements, such as a cabin site, and would likely be unmarketable for most customary land uses. In the table below, OSLI staff compared a high and low estimate of appreciation plus earnings to an estimate of investment return upon disposal. Property value appreciation was based on the USDA Agricultural Land Values Summary Reports 1998-2012. Multiple factors can dramatically increase or decrease pasture values in any given year, and these rates have varied from a high of +22.0% (2007) to a low of -26.9% (1999). The appreciation estimates are based on a conservative analysis of trends, which resulted in an annual appreciation rate with a low of 3.20% and a high of 7.90%. Investment earnings were based on the Common School Fund projected long-term average total rate of return as reported by the State Treasurer's Office. Ultimately, this comparison is based on highly fluctuating real estate values and should not be viewed as an actual performance estimate. Appreciation and investment income calculations are attached as Exhibit F. These rates are for relative earning potential only. Appreciated land value is inherently speculative and would only be realized on a future sale. 10 Year Comparison of Appreciation and Income versus Earnings 10 Year Hold (low) 10 Year Hold (high) 10 Year Disposal Appraised Value 3.2% Appreciation + Current Income (x10 yrs.) 7.9% Appreciation + Current Income (x10 yrs.) versus 4.84% Investment Earnings Tract 1 $25,000 $14,540 $33,760 $15,106 The sum of the current appraised value, estimated appreciation and income, or investment earnings for the subject tract is outlined in the table below. Total Potential Returns 10 Year Hold (low) 10 Year Hold (high) 10 Year Disposal Base Appraised Value $25,000 $25,000 $25,000 versus Total $39,540 $58,760 $40,106 Appreciation & Earnings $14,540 $33,760 $15,106 8
TRUST LAND MANAGEMENT OBJECTIVES: In 1997, Wyoming Session Laws Chapter 200, section 3(a)(i), the Wyoming Legislature declared 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. Subsequently, the Board adopted criteria for evaluation of land exchanges, sales, acquisitions, and long-term leases, collectively called Trust Land Management Objectives (TLMO), on August 10, 2005. A proposal need not meet all objectives, but all objectives are considered by the Board which has the sole discretion in determining how to best manage State Trust Lands. Trust Land Management Objectives: To better meet the beneficiaries short and/or long term needs Improve the manageability of land assets Meet a specific school and/or community need A summary of key points considered in this transaction evaluation are outlined below: Better meet the beneficiaries short and/or long term objectives: The subject property is a small portion of a larger, half-section of State Trust Land. It is typically undesirable to dispose of such a small parcel when considering its affect on land values and manageability. In the case of the subject property, a cabin, guest house, shed, and related infrastructure were originally constructed on private land. After a resurvey sponsored by the United States Forest Service of the area was completed, the ownership boundary between State Trust Land and the deeded property had moved into the deeded area, leaving a portion of the described buildings located on State Trust Land. OSLI has determined that the encroachment of these buildings was not intentional on the part of the deeded property owner, and that their presence decreases or limits the value of the State Trust Land parcel. Further, presence of the buildings limits additional uses the Board may employ to enhance revenues to the State s Trust Beneficiaries. Disposal of the subject property meets the beneficiaries long term objectives by promoting the appreciation potential of the parcel as a whole. Proceeds from a sale would be deposited in the Common School Permanent Land Fund, and shall be held on deposit until such time as the Board wishes to invest the funds or purchase other lands. Therefore, an action on the subject property would yield investment earnings until such time as a separate proposed acquisition could prove substantial benefits based on TLMO beyond the subject property s potential. Improve the manageability of the land asset: As described above, encroachment of the described buildings happened as a result of a resurvey of property boundaries. The Board approved a Special Use Lease on the subject property to allow Mr. Williams continued use of the existing buildings while properly compensating the State s Trust Beneficiaries. Disposal of the subject property allows the owner of the buildings, if the winning bidder, to realize the ownership rights as he believed them to be before the resurvey took place and improves OSLI s management of the parcel. As a result 9
of a disposal, OSLI will work towards improving an access road that currently bisects the subject property, increasing the manageability of future timber sales. Through disposal of the subject property, the Board would have an opportunity to improve asset manageability through the consolidation of state and private ownership patterns and the ability to acquire other consolidated lands for the State s Trust Beneficiaries once an opportunity arises. Meet a specific school and/or community need: Disposal of the subject property does not meet a specific school or community need. CONCLUSION: It is the opinion of OSLI that disposal of the subject property will better meet the long term objectives of the State s Trust Beneficiaries through optimized, sustainable revenue generation, and divest the Board of a parcel with an encroaching cabin site and related infrastructure not intentionally built on State Trust Lands. Disposal may further offer the opportunity to acquire other land assets, which would improve manageability and/or meet a specific school or community need. The sale proceeds could be used in accordance with W.S. 9-4-715(k) and the Board s Rules, Chapter 26, Section 3, to purchase land adjoining other State Trust Land, which would improve manageability. OSLI resources can be more efficiently utilized in managing land with marketable amenities, legal access, and/or multiple compatible uses rather than small isolated parcels with single or limited uses. This Detailed Analysis will be distributed to the public in accordance with the Board s Rules, and will be available on OSLI s website. It will also be available for public viewing at several locations in Albany County, including the County Library, County and City Clerk s Offices, and the County Commissioners Office. If approved by the Board, a notification of sale will be published in a local and statewide newspaper. In addition, OSLI will market the sale of the parcels to the real estate community, on OSLI s website, and have information available for public viewing at several locations in Albany County, including the County Library. As required in the Board s Rules, a public hearing will be conducted in Albany County. The date, time and location of the public hearing will be advertised in the Laramie Boomerang. It is the intent of OSLI to publicize the sale of these parcels to attract potential buyers. OSLI will then follow the disposal procedures as required by Wyoming Statute, Title 36, Chapter 9, and the Board s Rules, Chapter 26, Section 4. OSLI intends to auction the subject property as one (1) tract which is described in the appraisal. The parcels will be sold subject to any pertinent special use leases, water rights, mineral lease, and easements. All interest in the mineral estate will be retained by the State of Wyoming. 10
LIST OF EXHIBITS: A Cover Letter and Land Sale Application B C Subject Property Map and Photos Subject Property Survey D Category II Designation Letter E "F" State Agency Evaluation Letters Projected Appreciation and Earnings Calculations 11
Exhibit A Cover Letter and Land Sale Application 12
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Exhibit B Maps and Photos 17
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Exhibit C Subject Property Survey 26
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Exhibit D Category II Designation Letter 28
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Exhibit E Wyoming State Forestry Division Comments Wyoming Game and Fish Department Comments State Parks and Cultural Resources Comments 31
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Exhibit F Projected Appreciation and Earnings Calculations 43
Appreciation Appreciation Rate Determination USDA Agricultural Land Values Pasture Avg. Value per Acre Year Avg. $/Acre Appreciation 1995 $192 6.3% 1996 $206 6.8% 1997 $215 4.2% 1998 $222 3.2% 1999 $175-26.9% 2000 $190 7.9% 2001 $200 5.0% 2002 $210 4.8% 2003 $220 4.5% 2004 $230 4.3% Appreciation rates are reported in the USDA National Agricultural Statistics Service, "Agricultural Land Values, 1995-2013." The 20-year average appreciation for Wyoming is 4.04%. Special Use Lease Income Annual Income 10 Year Income Tract 1 $528.40 x 10 $5,284.00 3.20% Low Estimate, Appreciation + Income Appreciation Income Total Tract 1 $9,256.03 $5,284.00 $14,540 7.9% High Estimate, Appreciation + Income Appreciation Income Total Tract 1 $28,475.45 $5,284.00 $33,759 44
3.20% Appreciation Potential as a Low Estimate Appraised Value Tract 1 $25,000.00 Appreciation Rate 3.20% Year 1 1.032 $25,800.00 Year 2 1.032 $26,625.60 Year 3 1.032 $27,477.62 Year 4 1.032 $28,356.90 Year 5 1.032 $29,264.32 Year 6 1.032 $30,200.78 Year 7 1.032 $31,167.21 Year 8 1.032 $32,164.56 Year 9 1.032 $33,193.82 Year 10 1.032 $34,256.03 10 Year Base Value + Appreciation $34,256.03 10 Year Appreciation Only $9,256.03 7.90% Appreciation Potential as a High Estimate Appraised Value Tract 1 $25,000.00 Appreciation Rate 7.90% Year 1 1.079 $26,975.00 Year 2 1.079 $29,106.03 Year 3 1.079 $31,405.40 Year 4 1.079 $33,886.43 Year 5 1.079 $36,563.46 Year 6 1.079 $39,451.97 Year 7 1.079 $42,568.67 Year 8 1.079 $45,931.60 Year 9 1.079 $49,560.20 Year 10 1.079 $53,475.45 10 Year Base Value + Appreciation $53,475.45 10 Year Appreciation Only $28,475.45 45
Investment Return Rate 4.84% Long-term Investment Yield Appraised Value Tract 1 $25,000.00 Return Rate 4.84% Year 1 1.0484 $26,210.00 Year 2 1.0484 $27,478.56 Year 3 1.0484 $28,808.53 Year 4 1.0484 $30,202.86 Year 5 1.0484 $31,664.68 Year 6 1.0484 $33,197.25 Year 7 1.0484 $34,803.99 Year 8 1.0484 $36,488.51 Year 9 1.0484 $38,254.55 Year 10 1.0484 $40,106.07 10 Year Principal + Compound Interest $40,106.07 10 Year Compound Interest $15,106.07 5.05% Short-term Investment Yield 5.05% $ 25,000.00 Year 1 1.0505 $ 26,262.50 Year 2 1.0505 $ 27,588.76 Year 3 1.0505 $ 28,981.99 total $ 28,982.00 earnings $ 3,982.00 46