Two Key Players in State-Purchased Self Storage Business in Idaho Reverse Stance

Posted on Jul 12 2011 - 8:15am by John Stevens

The government purchase of Affordable Self-Storage in Boise, Idaho, last year has always been a controversial one, especially with self storage operators and local business owners who cried foul, accusing Idaho of competing unfairly with the private sector. Now two key players in the purchase – Gov. C.L. “Butch” Otter and Superintendent of Public Instruction Tom Luna – say they made a mistake when they voted to spend $2.7 million to buy the storage business and use the revenue to benefit Idaho public schools and other state institutions.

The 400-plus-unit facility located in a Boise suburb was purchased in August 2010 by a state-managed endowment trust overseen by the Dept. of Land. A state-managed endowment trust overseen by the Department of Land paid $2.7 million to buy the 400-plus-unit Affordable Self Storage in a Boise suburb. The revenue from the business was earmarked to benefit Idaho public schools and other state institutions. The business is run by a private contractor, but self storage industry officials have put the pressure on and now, nearly a year later, Otter and Luna say their original vote was a mistake.

“Superintendent Luna does not support the state competing with the private sector in the storage business or any other kind of business,” said Luna’s spokeswoman, Melissa McGrath, adding that he’s since become “disappointed in his vote and will work with the Land Board to explore selling Affordable Storage.”

Otter said he shares that sentiment, but the remaining three of the five Land Board members who oversee the endowment remain resolved that their original decision was appropriate despite the constant controversy.

Idaho decided to invest in self storage to fulfill its responsibility to maximize earnings, a requirement dating back to the drafting of the Idaho Constitution. Like other real estate investors, the state recognized that self storage is a good investment — one of the few good investments available in real estate, these days. George Bacon, Idaho’s Land Department director, said in The Idaho Statesman last October that the Land Board is required by Idaho’s state constitution to use state endowment lands to produce as much income as it can for public schools and other beneficiaries of the state endowment. Affordable Self Storage, with its 80 percent occupancy rates, offered the state the potential to earn more income than any other option the Land Board was considering.

Attorney General Lawrence Wasden, Secretary of State Ben Ysursa and Controller Donna Jones said separately they believe the endowment’s purchase still makes business sense and upholds the Idaho Constitution. The storage business generated about $30,000 in annual taxes when it was private and it now generates $20,000 per month, an annual rate of return of nearly 9 percent, with the proceeds being distributed statewide.

Even if Otter and Luna are entertaining selling the business, the majority formed by Wasden, Ysursa and Jones said they’d only consider selling if the alternative improved endowment returns, not to simply put an end to any controversy. The three board members point out that Idaho’s endowment, which generates about $48 million annually to benefit schools, universities and colleges, prisons, and mental hospitals, holds many timberlands and commercial properties that also compete with the private sector.

“Our number one responsibility, as trustees, we have a duty of undivided loyalty to the beneficiaries,” Ysursa said Thursday, while conceding, “I’m sure we’re going to hear more about this.”

The continued discontent from some Idaho lawmakers over the state’s purchase of the self storage property  prompted the introduction of a new bill in February that would set restrictions on what types of buildings the state Land Board can purchase in the future for investment purposes. The proposed bill by Nampa Republican Reps. Bob Schaefer and Rep. John Vander Woude is the result of some lawmakers’ opinions that it is unfair and inappropriate for the state to dabble in commercial ventures on a tax-exempt basis.

 Woude said Thursday he believes endowment-owned businesses enjoy an unfair advantage over private competitors.

“They don’t pay property taxes, they don’t pay for any of the services like fire and police, and yet they still get it all,” he said. “My biggest fear is, they want to start trading off a lot of their forest ground and cottage sites, and put that into commercial.”

Sources Used:

Miller, John. “Otter, Luna Reverse Stance on Storage Business.” Associated Press. July 7, 2011.

“City Officials in Idaho Reverse Stance on State-Owned Self-Storage Business.” Inside Self-Storage. July 11, 2011.

Kilpatrick, Kim. “Should State Governments Get Into the Storage Business? Public Reaction to Idaho’s New Self Storage Venture is Mixed. “ Self Storage Industry News. Oct. 21, 2010.