DAR File No. 40185

School and Institutional Trust Lands, Administration

Section R850-30-400

Special Use Leases

Notice of Proposed Rule

(Amendment)

DAR File No.: 40185
Filed: 02/01/2016 06:13:58 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

Current rule requires all adjusted rental amounts to be rounded to the nearest number evenly divisible by 10. The agency administers some leases that were acquired from the Bureau of Land Management in exchanges. The agency is required to administer these contracts pursuant to existing contract terms. The proposed rule changes will bring agency rules into harmony with existing contract requirements.

Summary of the rule or change:

The changes to this rule allow the agency the flexibility to look at the contract terms during review procedures and rental adjustments and determine if rounding the payment amount to the nearest number evenly divisible by 10 is allowed. If the contract terms don't provide for rounding, the agency will still be in compliance with the rules.

State statutory or constitutional authorization for this rule:

• Subsection 53C-4-101(1)
• Subsection 53C-1-302(1)(a)(ii)

Anticipated cost or savings to:

the state budget:

There is the potential that the state may lose a small amount of revenue as a result of establishing adjusted rentals at the exact amounts prescribed by their lease terms instead of rounding to the nearest amount divisible by 10. Since reviews are made only every three to five years and the rental rates do not always change, the amount of loss is undetermined but should be minimal.

local governments:

There is the potential that if a local government holds a lease with the agency, they could experience a slight savings in their rental if the adjusted amount is not rounded to the nearest amount divisible by 10.

small businesses:

There is the potential that if a small business holds a lease with the agency, they could experience a slight savings in their rental if the adjusted amount is not rounded to the nearest amount divisible by 10.

persons other than small businesses, businesses, or local governmental entities:

There is the potential that if persons other than small businesses, businesses, or local government entities hold a lease with the agency, they could experience a slight savings in their rental if the adjusted amount is not rounded to the nearest amount divisible by 10.

Compliance costs for affected persons:

There should not be any compliance costs for affected persons as the review and rental adjustment processes have not changed. In fact, there is a potential that affected persons may experience a slight savings based on whether or not the amount is rounded.

Comments by the department head on the fiscal impact the rule may have on businesses:

This rule will have only minor, if any, impact on business. All leases on trust land must pay annual rental which, until this rule amendment, would have been rounded to the nearest $10. The annual rental, after a scheduled review based on the change in the CPI, may have been rounded up or down but only by a $5 maximum. If this rule option is applied, the lease rental will not be rounded at all.

David Ure, Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

School and Institutional Trust Lands
AdministrationRoom 500
675 E 500 S
SALT LAKE CITY, UT 84102-2818

Direct questions regarding this rule to:

• Kim Christy at the above address, by phone at 801-538-5183, by FAX at 801-355-0922, or by Internet E-mail at [email protected]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

03/16/2016

This rule may become effective on:

03/23/2016

Authorized by:

David Ure, Director

R850. School and Institutional Trust Lands, Administration.

R850-30. Special Use Leases.

R850-30-400. Lease Rates.

1. Lease rates shall be based on the market value and income producing capability of the subject property and may be determined by:

(a) multiplying the market value of the subject property by the current agency-determined interest rate;

(b) the evaluation and use of comparable lease data; or

(c) using either a fixed rate per acre or a crop-share formula for agricultural leases providing that the rental rate is customary and reasonable.

2. The agency may base lease rentals on a value other than the market value of the subject property, provided that the director determines such is in the best interest of the beneficiaries and provided that the lease contains a clause whereby the agency may terminate the lease prior to the end of the lease term.

3. In addition to lease rental, the agency may require the payment of percentage rents.

4. The agency, pursuant to board policy, may establish a minimum lease rental based on the costs incurred in administering the leases, and a desired minimum rate of return.

5. Lease Review Procedures and Rental Adjustments for Special Use Leases.

(a) Special use leases shall be reviewed by the agency as of the effective date specified in the respective lease and such review may result in an adjustment of base rental.

(b) Adjustments in base rentals may be based upon changes in market value including appreciation of the subject properties, changes in established indices, or other methods which may be appropriate and in the best interest of the trust beneficiaries. The determination of which method to use may be based upon an analysis of the cost effectiveness of performing the review.

(c) When using established indices, the rate of adjustment shall be based on the indices established for the years involved in the review period, unless the rate of adjustment exceeds a maximum adjustment rate, or fails to reach a minimum rate of adjustment as specified in the respective lease. If no maximum adjustment rate or minimum rate of increase is specified in the lease, then the percent change will increase or decrease according to the above described rate of adjustment.

(d) The index used in the review may be the applicable component of the CPI-U or any other index determined by the agency to be appropriate.

(e) The adjusted rental amount as determined pursuant to this rule shall be rounded to the nearest number evenly divisible by [$10.]10 unless:

(i) the lease contains a fee schedule or other adjustment provisions which require a payment in an amount not evenly divisible by 10;

(ii) the lessee requests otherwise; or

(iii) the lease was acquired from the United States, Department of Interior, Bureau of Land Management, or other governmental agency and contains terms which do not allow rounding.

(f) The director may suspend, defer, or waive the adjustment of base rentals in specific instances, based on a written finding that the suspension, deferral, or waiver is in the best interest of the trust beneficiaries.

 

KEY: administrative procedures, leases, trust land management, request for proposals

Date of Enactment or Last Substantive Amendment: [October 9, 2007]March 23, 2016

Notice of Continuation: June 27, 2012

Authorizing, and Implemented or Interpreted Law: 53C-1-302(1)(a)(ii); 53C-2-201(1)(a); 53C-4-101(1); 53C-4-202