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Montana Administrative Register Notice 36-22-143 No. 1   01/14/2010    
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BEFORE THE BOARD OF LAND COMMISSIONERS AND

THE DEPARTMENT OF NATURAL RESOURCES    

AND CONSERVATION OF THE STATE OF MONTANA

 

In the matter of the repeal of ARM 36.25.137, amendment of ARM 36.25.106, 36.25.110, 36.25.111, 36.25.112, 36.25.115, 36.25.117, and 36.25.125,  and the adoption of New Rules I through XIII regarding surface leasing and cabinsite leasing rules.

 

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NOTICE OF PUBLIC HEARINGS ON PROPOSED REPEAL, AMENDMENT, AND ADOPTION

 

 

To:       All Concerned Persons

 

            1.  The Department of Natural Resources and Conservation will hold two public hearings at 7:00 p.m. on the following dates:  February 3, 2010, at the Kalispell Red Lion Inn, 20 North Main Street, Kalispell, Montana; and February 4, 2010, at the Seeley Lake Community Hall, 3248 Highway 83, Seeley Lake, Montana, to consider the repeal, amendment, and adoption of the above-stated rules.  Preceding each hearing at 6:00 p.m. will an informational presentation by the department and an informal question and answer period.

 

            2.  The department will make reasonable accommodations for persons with disabilities who wish to participate in this rulemaking process or need an alternative accessible format of this notice.  If you require an accommodation, contact the agency no later than 5:00 p.m. on February 1, 2009, to advise the department of the nature of the accommodation that you need.  Please contact Mike Sullivan, Real Estate Management Bureau, Department of Natural Resources and Conservation, 1625 Eleventh Avenue, Helena, MT; telephone (406) 444-6660; fax (406) 444-2684;  e-mail misullivan@mt.gov.

 

3.  The department proposes to repeal the following rule:

 

            36.25.137  CABINSITES is found on page 36-5653 of the Administrative Rules of Montana.

 

            AUTH:  77-1-209, MCA

            IMP:  77-1-202, 77-1-208, MCA

 

REASONABLE NECESSITY:  This rule has been integrated with the text of New Rule II.

 

            4.  The rules as proposed to be amended provide as follows, stricken matter interlined, new matter underlined:

 

            36.25.106  TERM OF LEASE OR LICENSE  (1)  In general, a lease or license for agricultural or grazing lands shall be for a 5 five or 10 ten year period and shall expire February 28, 10 ten years or less from the beginning date of the lease or license.

            (2) A cabinsite lease shall be for a period not to exceed 15 years and shall expire February 28, 15 years or less from the beginning date of the lease.

            (a) In the event the lessee of a cabinsite needs a longer lease period for loan security purposes, the department may grant a cabinsite lease up to a maximum of 35 years.

            (2)  A lease for a use other than agricultural, grazing, cabinsite, or mineral production may be for up to 40 years. Leases for power sites or school sites may be for longer than 25 years.

            (32)  A land use license may be for a term not to exceed 10 ten years.

 

            AUTH:  77-1-202; 77-1-209, MCA

            IMP:  77-6-109, MCA

 

            36.25.110  MINIMUM RENTAL RATES  (1) As to agricultural lands, all All leases on agricultural lands shall be continued or made upon a crop share rental basis of not less than one-fourth of the annual crops to the state or the usual landlord's share prevailing in the district, whichever is greater.  For purposes of this rule, a district means the county or counties where the leased lands are located. "The board may, however, approve special crop share rentals of less than one-fourth for high production cost crops such as but not limited to potatoes and sugar beets or for high production cost methods when these methods would result in more income to the state. The board may not delegate the authority to approve such special crop share rentals" as per 77-6-501, MCA.  The board may approve special crop share rentals of less than one-fourth as per 77-6-501, MCA.

            (2)  The department may authorize a lease or license upon other a basis other than cropshare, but in these.  In those cases the rental shall at least equal the value of the usual landlord share prevailing in the district. This may only be accommodated Such accommodations may occur only once during the term of the lease unless changes in crops are contemplated. Such rental rate consideration may only be approved by the director upon proper written application by lessee or licensee.

            (3)  The rental rate for all grazing leases and licenses shall be on the basis of the animal-unit-month (AUM) carrying capacity of the land to be leased or licensed.  The minimum rental rate per AUM is:

            (a)  grazing leases issued or renewed prior to July 1, 1993, until the first date of renewal after July 1, 1993 , the minimum rental rate per A.U.M. is the weighted average price per pound of beef cattle on the farm in Montana as determined by the Montana agricultural statistics service of the US department of agriculture for the previous year multiplied by 6.

            (ba)  the weighted average price per pound of beef cattle on the farm in Montana as determined by the Montana Agricultural Statistics Service of the U.S. Department of Agriculture (USDA NASS) for the previous year, multiplied by 6.71 For for grazing leases issued or renewed between July 1, 1993, and June 30, 2001, until the first date of renewal after July 1, 1993; , the minimum rental rate per A.U.M. is the weighted average price per pound of beef cattle on the farm in Montana as determined by the Montana agricultural statistics service of the US department of agriculture for the previous year, multiplied by 6.71.

            (cb)  the weighted average price per pound of beef cattle on the farm in Montana as determined by the Montana Agricultural Statistics Service of the U.S. Department of Agriculture (USDA NASS) for the previous year, multiplied by 7.54 For for all grazing leases issued or renewed after June 30, 2001, and all grazing licenses. , the minimum rental rate per A.U.M. is the weighted average price per pound of beef cattle on the farm in Montana, as determined by the Montana agricultural statistics service of the US department of agriculture for the previous year, multiplied by 7.54.

            (d4)  The department shall appraise and reappraise the classified grazing lands and grazing lands within classified forest lands under its jurisdiction in accordance with 77-6-201, MCA, to determine the carrying capacity.  Such determination shall be made from time to time as the department considers necessary, but at least once during the term of every lease or license. and shall maintain Appraisal records of such appraisals in its shall be maintained in the department's  files. Such determination shall be made from time to time as the department considers necessary, but at least once during the term of every lease or license.

            (45)  When a lease or license term begins after February 28 but before July 1 during the first year of the lease or license, the lessee or licensee shall pay a rental price equal to the rental price for an entire year. When the lease or license term begins after June 30 but before February 28 of the next year, the lessee or licensee shall pay a rental price equal to 1/2 half of the yearly annual rental. Summer fallowing shall not entitle any lessee or licensee to a refund or reduction of the rental.  

            (56)  A lessee or licensee who grazes the stubble of harvested crops or hayland, or who grazes unharvested or damaged crops or hayland, shall contact the department regarding payment for such grazing on classified agricultural land.

            (a)  The department shall determine the number of animal unit months of grazing available on the land and shall bill the lessee or licensee for the grazing use based on the minimum grazing rental established under 77-6-507, MCA. 

            (b)  Failure or refusal to pay said the rental or to notify the department of such grazing may be cause for cancellation of the lease.

            (6) Effective January 1, 2001, and retroactive to those cabinsite leases issued between January 1, 1999 and December 31, 2000, and except as provided in (6) (a) , the minimum rental rate for a cabinsite lease or license is the greater of 5% of the appraised market value of the land, excluding improvements, as determined by the department of revenue pursuant to 15-1-208, MCA, or $250. This rate takes into account all those factors in 77-1-106, MCA reflecting the costs to the lessee of leasing state land.

            (a) For cabinsite leases or licenses expiring after January 1, 2001, and for those leases and licenses whose rates are reviewed from 2003 through 2007, the department shall, when issuing a new lease or license at a rental rate greater than $250 for the same cabinsite, or in reviewing an existing lease or license, calculate the minimum rental rate as 5% of the appraised market value of the land; and:

            (i) in the first year of the new lease or license, or of the lease or license review, the department shall collect a rental rate equivalent to the rental rate paid in the last year of the expired lease or license, plus 20% of the difference between:

            (A) the rental rate paid in the last year of the expired lease or license or lease review; and

            (B) the calculated rental rate of 5% of the appraised market value of the land.

            (ii) in the second year of the lease or license, or of the lease or license review, the department shall collect a rental rate equivalent to the rental rate paid in the last year of the expired lease or license, or lease or license review, plus 40% of the difference between:

            (A) the rental rate paid in the last year of the expired lease or license, or lease or license review; and

            (B) the calculated rental rate of 5% of the appraised market value of the land.

            (iii) in the third year of the lease or license, or lease or license review, the department shall collect a rental rate equivalent to the rental rate paid in the last year of the expired lease or license, or lease or license review, plus 60% of the difference between:

            (A) the rental rate paid in the last year of the expired lease or license, or lease or license review; and

            (B) the calculated rental rate of 5% of the appraised market value of the land.

            (iv) in the fourth year of the lease or license, or lease or license review, the department shall collect a rental rate equivalent to the rental rate paid in the last year of the expired lease or license, or lease or license review, plus 80% of the difference between:

            (A) the rental rate paid in the last year of the expired lease or license, or lease or license review; and

            (B) the calculated rental rate of 5% of the appraised market value of the land.

            (v) in each subsequent year for the remaining term of the lease or license, the department shall collect a rental rate equivalent to 5% of the appraised market value of the land.

            (b) For cabinsites only:

            (i) Any lessee or licensee has 60 days from the expiration or cancellation of the lease or license to remove all improvements from the leased or licensed premises. The removal of improvements must be conducted within the terms of a new land use license, for a fixed sum of 1/6 of the most recent year's lease or license fee or $50, whichever is the greater.

            (ii) If the lessee or licensee does not wish to remove the improvements, but rather chooses to be compensated for the improvements, the lessee or licensee shall be responsible for any applicable tax assessments.

            (iii) If, after two years of the expiration or cancellation of the lease or license, no new lessee or licensee is found, the department shall provide written notice to the former lessee or licensee that unless the improvements are removed within 60 days, the improvements will become the property of the state.

            (iv) If a new lessee or licensee is found within two years of the expiration or cancelation of the lease or license, during the pendency of the improvement valuation process, including arbitration and appeal, the new lessee shall place in escrow an amount equal to the assessed value of the improvements as per department of revenue assessment, plus any applicable tax assessment. Nothing herein will prevent the department from issuing a lease or license to the new lessee or licensee during the pendency of the valuation process.

            (v) If, during the two-year period described above, the prior lessee or licensee wishes to remove the improvements, the removal can occur only during those times when the leased or licensed property is not being offered for competitive bid.

            (vi) Determination of compensation for improvements through the arbitration process shall utilize standard appraisal procedures giving full consideration to the improvements condition, its contribution to the value of the property for residential purposes, remaining economic life, and shall be the estimated cost to construct, at current prices, a building with equivalent utility as of the date of the lease or license's expiration.

            (7)  All other leases of class 4 land, other than cabinsite leases and agriculture and grazing leases, shall be based on a determination of fair market value made by the department.  This determination and a record of the determination shall be made at least once during the term of every lease, and a record made thereof.

 

            AUTH:  77-1-106, 77-1-202, 77-1-209, MCA

IMP:  77-1-106, 77-1-208, 77-6-201, 77-6-501, 77-1-502, 77-6-504, 77-6-507, MCA

 

            36.25.111  COMPETITIVE BIDDING  (1)  All competitive bids for grazing leases or licenses shall be submitted in the form of $X.XX dollars and cents per AUM. A.U.M. In no case may the

            (a)  A bid may not be for less than the minimum rental rate per AUM for that year determined in accordance with ARM 36.25.110. If in any succeeding year of the lease or license the amount bid is less than the minimum for that year, then the rental shall be the minimum.

            (b)  Bids for any lease or license may only be submitted for the present reclassified use unless the bidder submits a proposed reclassified use in accordance with ARM 36.25.109.

            (2) remains the same.

            (3) All competitive bids for unleased cabin sites shall be submitted in the form of $X per/year. In no case may the bid be less than the minimum rental determined in accordance with ARM 36.25.110. If in any succeeding year of the lease the amount of the lease is less than the minimum for that year, then the rental shall be the minimum.

            (4) and (5) remain the same but are renumbered (3) and (4).

 

AUTH: 77-1-209, MCA

IMP: 77-1-208, 77-6-202, 77-6-501, MCA 

 

            36.25.112  PAYMENTS - WHEN DUE DATES  (1) For grazing leases and licenses, the grazing portion of leases and licenses containing both agricultural and grazing land, and agricultural leases not based on a crop share,:

            (a)  the department will send written notices to the address on the lease or license beginning in January of each year stating the amount of rental due. The notice shall also state that payment is due by March 1, and if not paid by April 1, the lease or license is cancelled. ;

            (b)  At at least two weeks prior to April 1, the department shall send by certified mail to each lessee or licensee who has not made payment a letter by certified mail notifying each lessee or licensee who has not made a payment the lessee or licensee that the lease or license is cancelled if payment is not received or postmarked on or before April 1. ; and

            (c)  If if payment is not received or postmarked by April 1, the entire lease or license is cancelled.

            (2)  For agricultural leases and licenses, and for the agricultural portion of leases and licenses which containing contain both grazing and agricultural land, when the rental is paid on a crop share basis or on a crop share/cash basis, whichever is greater, ;

            (a)  the rental shall be due immediately after harvesting or before November 15 of the year in which the crop is harvested. ;

            (b)  The the department shall compile a list as soon as possible after November 15 of those lessees or licensees with agricultural land who have not paid the agricultural rentals. ;

            (c)  A a notice shall be sent to each lessee or licensee on the list by certified mail at least two weeks prior to December 31 advising such lessee or licensee that the lease or license is cancelled if payment is not received or postmarked on or before December 31. ; and
            (d)  If if payment is not received or postmarked by December 31, the entire lease is cancelled.  All appropriate seeding and crop reports must be submitted with the payment. Partial payments shall be accepted, however, such payments will not prevent cancellation of the lease or license if full payment as verified on the crop report is not received on the date required by law.

            (3) For cabinsite leases or licenses, the department will send written notices to the address on the lease or license beginning in January of each year stating the amount of rental due. The notice shall also state that the payment is due by March 1 and if not paid by April 1, the lease or license is cancelled. At least two weeks prior to April 1, the department shall send by certified mail to each lessee or licensee who has not made payment a letter notifying the lessee or licensee that the lease or license is cancelled if payment is not received or postmarked on or before April 1. If payment is not received or postmarked by April 1, the entire lease or license is cancelled.

            (43)  When a lease or license takes effect after July 30 and before February 28 of the next year, the lessee or licensee shall pay both the rental for 1/2 half of the yearly rental due, and full yearly rental due for the next succeeding year before the lease or license is executed.

            (54)  If there are special circumstances, a lessee or licensee of agricultural land must write to the department prior to November 1 if they wish an extension for an extension of the rental payment beyond the December 31 deadline. All extension requests must set forth the reasons for the extension and verification of those reasons by the appropriate sources. In all cases, permission for an extension may only be given in writing by the department, and such extension may not extend beyond April 1 of the following year.

            (6) remains the same but is renumbered (5).

 

            AUTH:  77-1-209, MCA

            IMP:  77-6-103, 77-6-506, MCA

 

            36.25.115  ISSUANCE OF LEASE OR LICENSE ON UNLEASED OR UNLICENSED LAND AND RECLASSIFIED LAND  (1)  A person who desires to lease or license unleased or unlicensed state land may apply on the standard application form prescribed by the department. The application form must be returned to the department and must be accompanied by a nonrefundable application fee.  Such application shall be deemed an offer to lease or obtain a license on the land described therein at a rental rate which reflects the fair market value of the lease or license.

            (2)(a)  When the department receives an application to lease or obtain a license on an unleased or unlicensed tract of land, or on a tract which has been reclassified, it shall advertise for written bids on the tract according to the procedures set forth in (4) (c), except in the following circumstances:

            (ia)  where grazing land is reclassified to agricultural land upon application of the existing lessee; or

            (iib)  where land is reclassified and a licensee applies for a lease on the land for the same use for which he was formerly licensed, or a lessee applies for a license to use the land for the same use for which he formerly leased the land; or .

            (iii) where the application is for a cabinsite lease or license on a tract of land which was subject to a cabinsite lease or license on or before October 1, 1983.

            (b3)  The department may advertise for bids according to the procedures set forth in (c4) in any of the above circumstances where such procedures are deemed by the department to be in the best interests of the state.

            (c4)  When advertisement for bids is called for under this rule, the department shall advertise for written bids on the tract once a week for 2 two weeks in the official county newspaper of the county in which the tract lies. The tract will be leased or licensed to the highest bidder unless the board determines that the bid is not in the best interests of the state.

            (a)  All bids shall be sealed bids and will not be opened until a specified time and place.

            (b)  If the high bid is rejected, the board will issue its reason for the rejection in writing. The lease or license shall then be issued, at the fair market value determined by the board, to the first bidder willing to pay the board-determined rental whose name is selected through a random selection process from all bidders on the tract.

            (3) remains the same but is renumbered (5).

            (4) Cabinsite leases issued on previously unleased land shall be subject to the bid rental rate for the full term of the lease unless, after 5 years, 5% of the adjusted rental rate as determined by ARM 36.25.110 is higher, and then the lessee or licensee shall pay the higher rate.

            (6)  When a lease or license is cancelled by the board or department or surrendered by the lessee or licensee, the department shall attempt to release or relicense the land. The department shall:

            (a)  advertise for written bids on the tract, and application and bid forms will be mailed to all persons who have expressed in writing an interest in leasing or licensing the land. ; and

            (b)  The department shall receive applications and bid forms from potential lessees or licensees for a reasonable time after the date on which the first such application and bid form is mailed, and the.  The land will be leased or licensed in accordance with (1) and (2) through (4).

            (7)  Any person who has had his a lease or license cancelled and not reinstated by the board or department for any reason except nonpayment of rentals shall not be allowed to bid upon the lease or license or upon any lease or license for land managed by the department.

            (a)  If no other bids are received, the former lessee or licensee may be allowed to bid, but ; however, the board may reject any or all bids from a lessee or licensee who has had his lease cancelled in the past.

 

            AUTH:  77-1-209, MCA

            IMP:  77-6-202, MCA 

 

            36.25.117  RENEWAL OF LEASE OR LICENSE AND PREFERENCE RIGHT         (1)  The board retains the right to select the best lessee possible to fulfill the operating obligations under any lease. In the exercise of the board's discretion to select the best lessees possible for agriculture and grazing leases, the board recognizes that retention of stable, long-term lessees who are familiar with the operating history and characteristics of the leases promotes good stewardship of the land.  Such security of land tenure encourages the lessees to place and develop improvements which, in turn, increases the productivity of the land and improves its management. Consequently, it is the board's policy to allow an incumbent lessee in good standing, a preference right to meet the high bid and retain the lease.

            (2)  A current lessee or licensee shall be sent an application to renew his the lease or license if he has paid all rentals due are paid. The application shall be accepted under the same conditions as specified in ARM 36.25.115; however, applications for renewal will only be accepted after December 1 of the year preceding the expiration of the lease or license and must be postmarked on or before January 28 of the year of expiration of the lease or license. Failure to submit a renewal application by the lessee or licensee postmarked on or before January 28 will result in an unleased or unlicensed tract and the tract will be subject to the requirements for leasing or licensing an unleased or unlicensed tract under ARM 36.25.115.

            (a) remains the same.

            (3)  Unless the board decides on its own volition and sole discretion that a lease should be given to a better qualified applicant, a surface lessee or licensee who has strictly complied with the applicable conditions set forth in 77-6-113(1), MCA, has a preference right to meet the high bid offered for the lease or license and may retain the lease or license subject to the provisions in (89), if all rentals have been paid and appropriate reports submitted, and (4) has not been violated. When an agricultural lessee or licensee meets the high bid and retains his the lease or license, the new rental rate must be paid for all crops harvested after the renewal date even if such crops were planted before the lessee met the high bid. The lease or license shall be renewed at the fair market rental provided no other applications for the lease or license have been received by the department within the time limits set forth by ARM 36.25.116(2) . Grazing or agricultural uses on classified forest lands may be terminated if it is determined that the resources under that classification are being damaged or not perpetuated.

            (a) A cabinsite lease is not subject to bids upon renewal if the lessee continues the lease and the lessee has paid all rentals and (4) is not violated. The lease shall be renewed at the rental provided by law.

            (ba)  If, during the previous lease term, an existing lessee has violated any condition set out within 77-6-113(1), MCA, the lessee shall not have the right to renew the lease or match any other bids submitted.  The department shall notify the lessee if it determines that they have the lessee has failed to comply with the requirements of 77-6-113(1), MCA. The notice shall include the factual basis for that determination.

            (cb)  The lessee may, within 15 days of receipt of the notice, appeal the decision by requesting an informal hearing before the director or his the director's designee. Any individual conducting the hearing shall not have been involved in the original determination to revoke the lessee's preference right. If the director, or his the director's designee, concludes that the conditions under 77-6-113(1), MCA, have not been met by the lessee during the previous terms, no preference right shall be recognized. The renewal lease shall then be advertised for competitive bids as provided in ARM 36.25.115.

            (d) remains the same but is renumbered (c)

            (4)  For leases or licenses issued for a new lease or license term beginning in 1987 and thereafter, a lessee or licensee who subleases more than 1/3 one-third of the land under the lease or license may not exercise the preference right at least lease renewal if he has subleased the land for more than two years during the term of the lease or license. If such lessee or licensee subleases more than 1/3 one-third of the land for more than three years during the term of the lease, the department shall cancel the lease.

            (a)  For all leases and licenses the A lessee or licensee may sublease the land within a lease or license for a period of not no more than five years without losing the preference right or subjecting the lease to cancellation during the term of the lease, if the land is subleased only to a spouse, son, daughter, adopted child, or sibling of the lessee.

            (b)  For the purposes of these rules, A a lessee or licensee who has accorded another the use of all, or a portion of, the allowable A.U.M.'s AUMs during one year will be deemed, for the purposes of these rules, to have subleased the entire tract for that year.

            (c)  The provisions of this rule which state that a preference right will be lost, or that a lease will be cancelled for subleasing, do not apply in those instances where:

            (i)  the approved sublease involved 1/3 one-third or less of the total acreage in the lease or license, ; or

            (ii)  where the sublease is considered to be a pasturing agreement pursuant to ARM 36.25.120.

            (5) and (6) remain the same.

            (7)  A surface lessee or licensee who has lost the opportunity to exercise a preference right because of a sublease or other arrangement may apply to the director and set forth the specific grounds why the lessee or licensee is entitled to a hearing.

            (a)  Such application for the The hearing application must be submitted in writing to the director within 15 days of receipt of notice of loss of preference right by the lessee or licensee. If the grounds include a bona fide factual dispute, the

            (b)  The  director shall order a hearing within 20 days if the grounds include a bona fide factual dispute. When such a hearing is granted, the contested case provision of the Montana Administrative Procedure Act, Title 2, chapter 4, MCA (MAPA), shall apply.

            (c)  The board shall make a final decision after considering the entire record, or may delegate such authority to the director. The director may appoint a hearings examiner from the department's staff or from another source to conduct the hearing and produce proposed findings of fact, proposed conclusions of law, and a proposed order. The hearings examiner may be from the department's staff or from another source.

            (a8)  If a surface lessee or licensee has lost the opportunity to exercise a preference right because of a sublease or other arrangement and disputes only the legal ground upon which the rights were lost, then the lessee or licensee may apply to the director for a declaratory judgment concerning legal grounds. Such application for declaratory judgment must be submitted in writing to the director within 15 days of the receipt of notice of loss of preference right by the lessee or licensee. The application shall specify the legal grounds which the lessee or licensee disputes. The procedure of applying for and issuing such a declaratory judgment shall be that set forth in MAPA the Montana Administrative Procedure Act.

            (89)  If other applications are received by January 28 of the year the lease or license expires, and the lessee or licensee has not violated (4) or 77-6-113(1), MCA, the lessee or licensee shall have a preference right to renew his the lease or license provided he meets the high bid for such lease or license. Such bid is deemed to be met if the amount of the high bid is received by the department prior to the expiration of the lease or license or, in the case of agricultural land leased solely on a crop share rental basis, if the lessee or licensee agrees in writing to meet the high bid prior to the expiration of the lease or license.

            (a)  A lessee or licensee who believes the bid to be excessive may request in writing a hearing before the director after he meets meeting the high bid. The request for a hearing must contain a statement of reasons and supporting evidence why the lessee or licensee believes the bid not to be in the state's best interest, .  Those reasons, with supporting evidence, must support one or more of the following allegations:

            (i)  because it that the bid is above community standards for a lease of such land; or

            (ii)  that the bid would cause damage to the tract; or
            (iii)  that the bid would impair its the land's long-term productivity. The lessee or licensee shall also submit evidence of rental rates for similar land in the area with his request.

            (8)(b) through (8)(b)(vii) remain the same but are renumbered (9)(b) through (9)(b)(vii).

            (viii)  any other information the director deems necessary in order to provide a recommendation to the board.  The department may incorporate all, or part of this information as terms and conditions in the new lease agreement.

            (ix) The department may incorporate all or part of this information as terms and conditions in the new lease agreement.

            (c)  The director shall recommend to the board whether there should be a reduction to the bid rate, and who should be selected as the lessee. The director may recommend to the board that the bid be lowered only if he the director feels that it is in the best interests of the state to do so. The hearing is not subject to MAPA the Montana Administrative Procedure Act. The and the board may accept or reject the director's recommendation.

            (d)  The lessee is obligated to lease or license the property at the rate determined by the board. It is the The duty of the board is to achieve fair market value. The lease or licensing of such land shall be such so as to generate revenue commensurate with the highest and best use of the land, or portions thereof, as determined by the department.

            (9) remains the same but is renumbered (10).

            (1011)  When land under lease or license has previously been sold and the certificate of purchase has been cancelled, any later reinstatement of the certificate of purchase shall not have the effect of canceling any lease or license except that the current lessee or licensee shall lose his the right to renew the lease.

 

            AUTH:  77-1-209, MCA

            IMP:  77-2-333, 77-6-205, 77-6-210, 77-6-212, MCA 

 

            36.25.125  IMPROVEMENTS  (1)  A lessee or licensee may place improvements on state land which are necessary for the conservation or utilization of such state land with the approval of the department; however, only a single one-family residence will be permitted on each cabinsite lease.

            (a)  The lessee or licensee shall apply for permission prior to placing any improvements on state land on the form prescribed by the department and then in current use. Blank forms shall be available at no cost.

            (b)  A lessee or licensee will not be entitled to compensation by a subsequent lessee or licensee for improvements which are placed on the land after May 10, 1979, and which are not approved by the department. Proof of the date of placement of improvements may be required by the department.

            (c)  Any improvements or fixtures paid for by state or federal monies shall not be compensable to the former lessee or licensee.

            (2)  It shall be the responsibility of the The lessee or licensee is responsible to notify for notifying the new lessee or licensee of the improvements and their value on the lease or licensed tract and the value of such improvements.

            (a)  Prior to the issuance of a new lease or license, a Within 120 days of the issuance of the lease or license, the new lessee or licensee shall: prove that he has offered to pay or has paid

            (i)  provide proof of the new lessee's offer of payment or actual payment to the former lessee or licensee of the value of the improvements and fixtures either as agreed upon with the former lessee or licensee; or

            (ii)  the value of the improvements as fixed by arbitration; or

            (iii)  provide proof that the former lessee has decided to remove the improvements and fixtures from the lease or license.

            (3)  However, if If the improvements and fixtures become the property of the state because the former lessee or licensee has failed to act within 60 days after expiration of the lease, as per (4), then the new lessee or licensee shall not be required to prove that he (she) has offered provide proof of the offer to pay the former lessee or licensee for such improvements and fixtures.

            (4)  The department may require a written notice from the former lessee or licensee stating that he has been paid for, or is removing the improvements and fixtures. If the former lessee or licensee does not agree on the value of the improvements and fixtures or begin arbitration procedures within 60 days after the expiration of the lease or license, then all improvements and fixtures remaining, both movable and fixed, shall become the property of the state. This applies to permanent as well as movable improvements. The 60-day period for removal of improvements may be extended by the department upon proper written application.

            (35)  The value of the improvements will be determined by arbitration when When the former lessee or licensee wishes to sell improvements and fixtures, and the new lessee or licensee wishes to purchase such improvements and fixtures, and but the parties cannot agree upon a reasonable value, such value shall be determined by arbitration.

            (6)  When the new lessee or licensee does not wish to purchase the movable improvements and fixtures, then the former lessee or licensee shall remove such improvements immediately. Extensions for removing these improvements for good cause may be granted by the department.

            (47)  In case of arbitration, :

            (a)  the lessee or licensee, or purchaser and the former lessee or licensee, shall each appoint an arbitrator, with a third arbitrator appointed by the two arbitrators first appointed. :

            (i)  No no party may exert undue influence upon the arbitrators in an effort to affect the outcome of the arbitration decision. ; and

            (ii)  If if any party refuses to appoint an arbitrator within 15 days of being requested to do so by the director, the director may appoint an arbitrator for that party. ;

            (b)  The the value of the improvements and fixtures shall be fixed by the arbitrators in writing and submitted to the department. and such That determination shall be binding on both parties; however, either party may appeal the decision to the department within 10 ten days of the receipt of the arbitration decision by the department. ;

            (c)  If if any relevant portion of the arbitration decision is vague or unclear, then the department may ask for written clarification of the intent of the arbitration panel. ;

            (d)  Upon upon appeal by either party, the department may examine such improvements to determine the value of the improvements and fixtures and the department's determination shall be final., however:

            (i)  The the determination of the value of improvements by the department shall be limited to those improvements involved in the arbitration. ; and

            (ii)  The the department shall charge the cost of its examination to the party or parties in such proportion as justice may require. ; and

            (e)  The the compensation for the arbitrators shall be paid in equal shares by both parties. :

            (i)  If if the former lessee or licensee refuses to pay his share of the cost of arbitration, then those costs may be deducted from the value of the improvements and fixtures. ;

            (ii)  If if the new lessee or licensee refuses to pay the cost of arbitration within 30 days of the completion of the arbitration, the lease or license shall be cancelled shall not be issued and the bid deposit shall be forfeited to the department, and the lease or license shall be put up for bid to qualified bidders.

            (5) remains the same but is renumbered (8).

            (69)  Summer fallowing, necessary cultivation done after the last crop grown, seeding and growing crops shall all be considered improvements. The value of seeded acreage and growing crops shall be limited to costs for seeding, seedbed preparation, fertilization and agricultural labor at the prevailing rate in the area. The former lessee's or licensee's anticipated profit shall not be included in such value. If the parties cannot agree on the value of seeded acreage or growing crops, the arbitration procedure set out in (47) shall be followed. The original breaking of the ground shall also be considered an improvement; however, if 1 one year's crops have been raised on the land, the value shall not exceed $2.50 per acre, and if 2 two year's crops have been raised, there shall be no compensation.

 

            AUTH:  77-1-209, MCA

            IMP:  77-6-301 through 77-6-306, MCA

 

REASONABLE NECESSITY:  The amendments to the above rules are reasonably necessary because the pertinent references to cabinsite leases have been integrated with the text of New Rule I through New Rule XIII.  The amendments also correct spelling and grammatical errors and remove obsolete language.

            4.  The rules proposed to be adopted provide as follows:

 

            NEW RULE I  CABINSITE DEFINITIONS  (1)  "Abandon" or "abandonment" means the simultaneous intent and voluntary act of surrendering or disclaiming any ownership of, or surrendering or disclaiming a property interest in a lease or the improvements existing upon a lease, or both.

            (2)  "Adjusted 2009 appraised value" means the 2003 Montana Department of Revenue (DOR) appraised value for a state parcel increased by 6.53 percent annually to 2009.

            (3)  "Annual lease rental period" means March 1 to February 28, annually.

            (4)  "Assignment" means the transfer of rights, obligations, and ownership of a current lease agreement to another person or other legal entity qualified to hold a lease.

            (5)  "Base rent" means the lower of five percent of the adjusted 2009 appraised value of the state land under lease or five percent of the actual 2009 reappraisal of market value by the DOR.

            (6)  "Board" means the Board of Land Commissioners.

            (7)  "Cabinsite", also referred to as "homesite" and "residential lease", means land occupied or to be occupied for a non-commercial use as a temporary or principal place of residence for a single family or equivalent of the same, and the supporting buildings, within the lease area.

            (8)  "Cancellation" means an involuntary nullification or voiding of rights under a lease before the end of its stated term due to a breach of the lessee's obligations under the lease contract.

            (9)  "Consumer Price Index" (CPI) is a measure of the annual change in the price of a basket of consumer goods over time.  For these rules, the department will use the CPI-U, West Urban Index published by the U.S. Bureau of Labor Statistics (http://www.bls.gov/) or, should the CPI-U, West Urban Index be discontinued, a similar index published by the U.S. Bureau of Labor Statistics chosen by the department.  The CPI shall be established by reviewing the annual change in the CPI on October 1 of each year. 

            (10)  "Department" means the Department of Natural Resources and Conservation.

            (11)  "Director" means the director of Natural Resources and Conservation, chief administrative officer of the Department of Natural Resources and Conservation, or the director's designee.

            (12)  "Lease" means a contract by which the board conveys state land for a term of years for a specified rental, and for the use for which the land is classified (77-1-401, MCA).

            (13)  "Lease fee adjustment" means the department application of the rental rate contracted in the lease to the most recent appraised market value to determine if it is necessary to alter the annual rental payment. The adjustment will occur at the review period defined in the lease.

            (14)  "Lease fee adjustment process" means the annual process by which the department applies the Lease Fee Indicator to the adjusted 2009 appraised value of the leased premises, or by which the department applies the rental rate contracted in the lease to the actual 2009 reappraisal of market value by the DOR, and subsequent reappraisals, to determine if it is necessary to alter the annual rental payment. Future lease fee adjustments will occur at the review period defined in the lease, or at any time that it is considered necessary to protect the interests of the state, as determined at the sole discretion of the director of the department.

            (15)  "Lease Fee Indicator" (LFI) means the increase that is applied annually to the previous year's lease fee. The LFI, which is recalculated annually, is the average of the CPI and the Real Estate Index; however, the LFI shall be limited in that it may never be less than 3.25 percent and may never be more than 6.5 percent.  The LFI is named for the year the CPI data was primarily collected, but applied to the billing for the following year.  For example, an LFI determined from CPI data from calendar year 2014 would be called the 2014 LFI and would be applied to the 2015 cabinsite lease fee adjustment process. 

            (16)  "Real Estate Index" (REI) means a moving 25-year average of the annual appreciation of all cabinsite parcel values. This number will be adjusted after every new re-appraisal cycle by the DOR. The REI is currently 8.75 percent and will remain so until the next DOR appraisal, which is currently scheduled for 2014.

            (17)  "Security interest" means an interest that a third party retains in any portion of a lease and the lease improvements located on that lease in order to secure the payment by the lessee to that third party.

            (18)  "Semi-annual lease rental period" means March 1 to August 31 or September 1 to February 28.

 

            AUTH:  77-1-202, 77-1-209, MCA

            IMP:  77-1-208, MCA  

 

            NEW RULE II  CABINSITE LEASES  (1)  A cabinsite lease may only include a maximum of five acres unless special circumstances exist for which the department may grant more than five acres.         

            (2)  The lessee shall be required to comply with all rules and regulations, including, but not limited to:

            (a)  county planning;

            (b)  subdivision requirements; and

            (c)  other state and federal statutes and regulations. The department's approval to place or modify any improvement on the lease lot does not necessarily constitute approval from any other regulatory entity such as a county, other state administrative agencies, or federal agencies.

            (3)  The successful bidder for a cabinsite lease may be required to pay for the cost of any surveys, fulfillment of zoning and subdivision requirements, and other assessments, or costs related to compliance with any other local, state, and federal statutes and regulations.

            (4)  The issuance of any cabinsite leases after January 16, 1987, shall require reclassification of the land as provided by ARM 36.25.109.

            (5)  A cabinsite lease grants the lessee the right of access and the right to place necessary utility facilities within the cabinsite lease premises, and from the main utility to the cabinsite lease premises. For any such rights outside of the cabinsite premises, the lessee must acquire an easement with the appropriate landowner(s).

 

            AUTH:  77-1-202, 77-1-209, MCA

            IMP:  77-1-208, MCA

 

            NEW RULE III  CABINSITE MINIMUM RENTAL  (1)  Effective January 1, 2010, and for those cabinsite leases due for the lease fee adjustment process in calendar year 2008 and 2009, and except as provided in (1)(a) and (1)(b), the minimum rental for a cabinsite lease is the greater of five percent of the 2009 appraised market value of the land, excluding improvements, as determined by the Montana Department of Revenue (DOR) pursuant to 77-1-208 MCA, or $250, or a competitive bid amount as described in [NEW RULE IX]. As required by 77-1-106, MCA, this rental rate reflects the expenses commonly incurred by lessees in leasing state land.  A cabinsite lessee may:

            (a)  choose to pay rental on a cabinsite lease according to the existing terms and conditions within the current lease contract with the department; or

            (b)  sign and execute a 2010 supplemental lease agreement, which will direct that the minimum rental shall be calculated as follows:

            (i)  the 2003 appraised parcel value determined by the DOR shall be increased at an annual rate of 6.53 percent, compounded annually for six years to obtain the adjusted 2009 appraised value. [Example: 2003 appraised value x (1.0653)6 = adjusted 2009 appraised value];

            (ii)  the adjusted 2009 appraised value shall be compared to the 2009 appraised parcel value determined by the DOR;

            (iii)  the lower of either five percent of the adjusted 2009 appraised value or five percent of the 2009 appraised parcel value shall be the base rent applicable to the lease in the year 2010; and

            (iv)  the annual rental due for years 2011 and thereafter shall be calculated by applying the LFI to the previous year's lease fee.  Any lease renewed, reviewed, or subject to lease fee adjustment, shall pay an annual rental equal to that calculated under (b)(i) through (iv), above. In year 2010, the LFI will not be used.  [Example: 2010 base rent x (1 + LFI) = 2011 rent]. 

            (2)  Effective for the 2025 cabinsite billing, the department will have a lease fee adjustment and review the 2024 annual cabinsite rental for each lease individually, as calculated under the provisions of (1)(b).  The department will compare that cabinsite rental to an amount equal to five percent of the most recent appraised parcel value for the cabinsite lease as determined by the DOR.  The difference between these two rental amounts shall be compared and described as a percentage of how much five percent of the appraised parcel value is above or below the 2024 rental as billed.            

            (a)  If the 2024 rental, as billed, is not more than 15 percent above or below five percent of the most recent appraised parcel, then the 2025 rental will be the same as the 2024 rental. 

            (b)  If the 2024 rental, as billed, is more than 15 percent above or below five percent of the most recent appraised parcel, then the 2024 rental will be increased or decreased by that percentage amount so it becomes identical to five percent of the appraised parcel value. 

            (c)  The lease fee adjustment between 2024 and 2025 will not exceed a 50 percent increase or decrease. 

            (d)  No additional LFI will be applied in determining the lease fee adjustment from 2024 to 2025. 

            (3)  For leases that will complete their current contract rental calculation and have a lease fee adjustment, particularly those cabinsite leases due to start the lease fee adjustment process in calendar year 2011, 2012, and 2013 and beyond, the rental will be calculated per (1)(a) and (1)(b). 

            (4)  The lease fee adjustment will occur every 15 years after the 2024 review. 

            (5)  In the 15-year periods between lease fee adjustments, rentals will be calculated per section (1)(b). 

            (6)  New and renewed leases will have rents calculated in accordance with (1)(b), or at the discretion of the director. 

            (7)  Cabinsite lessees shall pay a lease rental that is the higher of the rental amounts as calculated by this rule, or the bid amount, or a minimum annual rental of $250. The lessee shall pay that higher amount until such time as the rental, as calculated by this rule, exceeds the bid amount or $250.

 

            AUTH:  77-1-202; 77-1-209, MCA

            IMP:  77-1-208, MCA

 

            NEW RULE IV  CABINSITE PAYMENT DUE DATE  (1)  Beginning in January of each year, the department will send to each cabinsite lessee written notice of the amount of rental due. Notices shall be sent to the lessee's address of record. The notice shall also state that the payment is due by March 1, and if not paid by April 1, that the lease will be cancelled. Payments made after March 1, but before April 1 will be charged an additional $25 late fee. In mid-March, prior to April 1, the department shall send a letter by certified mail to each lessee who has not made payment, notifying the lessee that the lease is cancelled if payment is not received or postmarked on or before April 1. If payment is not received or postmarked by April 1, the entire lease is cancelled.

            (2)  If the lessee elects to make semi-annual payments, the department will send written notices in January and July of each year to the address of record, per ARM 36.25.104(3), stating the amount of semi-annual rental due. The notice shall also state that the first-half payment is due by March 1, and if not paid by April 1, the lease is cancelled. The second-half payment is due by September 1, and if not paid by October 1, the lease is cancelled. Likewise payments made after March 1 but before April 1, and payments made after September 1 but before October 1 will be charged an additional $25 late fee. In mid-March, prior to April 1, and mid-September, prior to October 1, the department shall send by certified mail to each lessee who has not made payment a letter notifying the lessee that the lease is cancelled if payment is not received or postmarked on or before April 1 or October 1. If payment is not received and postmarked by April 1 or October 1, the entire lease is cancelled.

            (3)  A lease may be reinstated for an additional reinstatement fee, which will be a minimum of $500 or as much as three times the annual rental amount of the lease.  The decision whether or not to offer a lessee the ability to reinstate the lease by paying a reinstatement fee, as well as the amount to charge for the reinstatement fee, are both at the discretion of the department.

            (4)  When a lease term begins on or between March 1 and August 31 during the first year of the lease, the lessee shall pay a rental price equal to the rental price for an entire year. When the lease term begins on or between September 1 and February 28 of the next year, the lessee shall pay a rental price equal to half of the annual rental. Prorated or partial-year payments shall be made in amounts equal to either the full annual rental or half the annual rental.

 

            AUTH:  77-1-202, 77-1-209, MCA

            IMP:  77-1-208, MCA

 

            NEW RULE V  CABINSITE IMPROVEMENTS  (1)  A cabinsite lessee may place improvements on state land which are necessary for the conservation or utilization of that state land and associated structures such as outbuildings, utilities, and sleeping cabins, with the approval of the department; however, only one single-family residence will be permitted on each cabinsite lease, and the lessee is responsible to insure all such installations and improvements meet all applicable rules, codes, and regulations.

            (2)  The lessee shall apply for permission prior to placing any improvements on state land and shall use the form prescribed by the department.

            (3)  A lessee will not be entitled to compensation by a subsequent lessee for improvements which are placed on the land after May 10, 1979, unless those improvements have been approved by the department. Proof of the date of placement of improvements may be required by the department. Any improvements or fixtures paid for by state or federal monies shall not be compensable to the former lessee.

            (4)  It shall be the responsibility of the lessee to notify the department of the value of the improvements.  The asking price of the improvements shall be the higher of either the most recent DOR assessment of the improvements, or of an appraisal of the improvements, though the lessee retains the right to lower the asking price of the improvements. Settlement for the improvements shall be determined pursuant to 77-1-208(3), MCA, and the procedures set out in ARM 36.25.125.  All settlement for improvements must occur within 120 days of the issuance of the lease.

            (a)  If an appraisal is needed, the appraisal shall be contracted by the department and paid for by the lessee.

            (b)  Determination of compensation for improvements shall utilize standard appraisal procedures, giving full consideration to the improvements condition, its contribution to the value of the property for residential purposes, remaining economic life.  Compensation shall be the estimated cost to construct, at current prices, a building with equivalent utility as of the date of the lease or license's expiration.

            (5)  The department may require a written notice from the former lessee stating that the former lessee has received full compensation for the improvements or has removed the improvements and fixtures when a new lease is issued.

 

            AUTH:  77-1-202, 77-1-209, MCA

            IMP:  77-1-208, MCA

 

            NEW RULE VI REMOVAL OF CABINSITE IMPROVEMENTS AND COMPENSATION  (1)  At cancellation, termination or abandonment of the cabinsite lease, the lessee will be notified of their right to be compensated for their improvements by a new lessee, or their right to remove those improvements.

            (2)  If the former lessee informs the department that they wish to remove their improvements, the former lessee must:

            (a)  obtain a land use license to remove the improvements.  The land use license may be for a term up to 60 days.  The term may be extended by the department for good cause; and

            (b)  pay the license fee in advance.  The license fee will be calculated as the most recent year's lease fee, divided by 365, and multiplied by the number of days in the license.  The minimum fee for a removal land use license shall be $50.

            (3)  If the former lessee informs the department that they wish to be compensated for their improvements by a new lessee, the former lessee will have a maximum of three years from the time of cancellation, termination, or abandonment of the cabinsite lease to be compensated for their improvements by a new lessee.  The former lessee shall have:

            (a)  submitted in writing to the department a statement that the former lessee is seeking third-party compensation for the improvements;

            (b)  paid all property taxes and any applicable special assessments; and

            (c)  provided the department with qualifying value information for the improvements.  At any time during the three-year period and at the approval of the department, the former lessee may request a license to remove the improvements, at a fee and duration consistent with this rule.

            (4)  The department reserves the right to withhold authorization to remove the improvements during any time that a lease is being actively bid by the department.

            (5)  If three years after the cancellation, termination, or abandonment of the cabinsite lease no new lessee has been found, the department shall provide written notice to the former lessee that unless the improvements are removed within 60 days, the improvements will become the property of the state. This condition and limitation applies to all improvements on the property, including movable and non-movable improvements, as well as personal property.

            (6)  If the department receives no written request from the former lessee seeking to receive compensation for improvements from a new lessee or to remove the improvements, the department shall seek a new lessee for the cabinsite lease.

            (7)  Final determination of settlement for improvements will be conducted in accordance with statutes and rules pertaining to arbitration. 

 

            AUTH:  77-1-202, 77-1-209, MCA

            IMP:  77-1-208, MCA

 

      NEW RULE VII  ACCESS TO CABINSITE IMPROVEMENTS ON AN INACTIVE LEASE  (1)  A former lessee who has provided to the department a request to receive compensation from a new lessee for the former lessee's improvements, must obtain a land use license from the department to access the cabinsite for the limited purpose of maintaining the improvements and the lot and to market the improvements to a new lessee. The former lessee may not occupy the cabinsite or utilize the cabin site for recreational or residential purposes.

 

            AUTH:  77-1-202, 77-1-209, MCA

            IMP:  77-1-208, MCA

 

            NEW RULE VIII CANCELLATION AND ABANDONMENT OF CABINSITE LEASES AND SECURITY INTERESTS  (1)  The department may cancel a lease for nonpayment of rentals or any other breach of the lease contract.

            (2)  A lessee may request to abandon the lessee's right, title, and interest in the improvements on a cabinsite lease and the cabinsite lease itself to the department.

            (a)  The department reserves the discretion whether to accept the abandonment of the improvements and lease.

            (b)  All such abandonments shall utilize a form as prescribed by the department.

            (3)  Before any cancellation or abandonment of a cabinsite lease, the department shall notify any holder of a security interest form issued by the department of the impending cancellation or request by the lessee for abandonment.

            (4)  Abandonment of the lease begins on the date specified on the abandonment form.  At such time the former lessee will forgo all rights to the lease, and if specified on the form, will forgo all rights to all improvements on the property. Abandonment of improvements means all movable and nonmovable improvements, as well as personal property.

            (5)  The cancellation date of the lease begins on the date specified by the department when the cancellation process is complete.

            (6)  After the lease is cancelled or abandoned, the lease shall be available for lease to a third party and the department may put the lease lot up for bid.

            (7)  The former lessee may or may not choose to market the improvements for sale.  In no case will the department pay any realtor fees or commissions for the marketing of former lessee improvements.

            (8)  The buyer of a former lessee's improvements must still participate in, and be the successful bidder of the cabinsite lease, per [NEW RULE IX]. 

            (9)  If the lease improvements have been abandoned, the improvements may be sold to a new lessee at a price determined by the department.

            (10) The former lessee shall not be entitled to any refunds of any lease payments related to cancellation or abandonment.

 

            AUTH:  77-1-202, 77-1-209, MCA

            IMP:  77-1-208, MCA 

 

            NEW RULE IX  ISSUANCE OF CABINSITE LEASE ON UNLEASED AND RECLASSIFIED LAND  (1)  A person who desires to lease unleased state land for a cabinsite must apply on the standard application form prescribed by the department. The application form must be returned to the department and must be accompanied by a nonrefundable application fee. Such application shall be deemed an offer to lease land for a cabinsite as specified by the application, at a rental rate which reflects fair market value.

            (2)  When the department receives one or more applications to lease a cabinsite on an unleased tract of land, or on a tract which has been reclassified, it may advertise for bids on the tract and shall use the procedures set forth in this rule. The department has the discretion to put cabinsite leases up for bid even without first receiving any applications or offers for those cabinsite leases.

            (3)  The department will advertise cabinsites for bid in any of the following ways, or any combination of the following:

            (a)  at least once in a newspaper of general circulation, which services the area where the cabinsite is located;

            (b)  at least once in any newspaper, magazine, trade journal, flier, or other print medium that potential cabinsite bidders may view;

            (c)  sending letters to interested parties;

            (d)  sending e-mails to interested parties; and/or

            (e)  placing information on the internet.

            (4)  Nothing in this rule shall preclude the department from generally making it known that a cabinsite is currently unleased and that the department is accepting applications to lease state land for a cabinsite.

            (5)  All bids shall be submitted at a specific place and time as specified by the department. Bids may be sealed bids, oral auction, or submitted electronically, whichever is indicated by the department at the time it advertises for bids.

            (6)  All competitive bids for cabinsites shall be submitted in the form of dollars per year. In no case may a bid be considered qualified if it is less than the minimum rental specified in the bid solicitation.

            (a)  For a bid to be considered, the bid must:

            (i)  include the bid application and application fee;

            (ii)  include a bid deposit that is ten percent of the amount the bidder bids; and

            (iii)  meet any other requirements as specified in the bid solicitation.

            (b)  The department will specify whether the application fee and the bid deposit may be in the form of a cashier's check, money order, or from a credit card or similar electronic funds transfer for electronic bids.

            (7)  The cabinsite will be leased to the highest qualified bidder, with the following qualifications:

            (a)  if the board determines that the bid is not in the best interests of the state and the high bid is rejected, the board will issue its reason for the rejection in writing.  The lease may then be issued, at a rental rate determined by the board, to the first bidder who is willing to pay the board-determined rental, whose name is selected through a random selection process from all bidders for the cabinsite lease; or

            (b)  if no bidder is selected, or if the highest qualified bidder declines the bid, the department may determine if and when to reopen a lease for bid, or offer the cabinsite lease to the next highest qualified bidder.

            (8)  The successful bidder shall sign and return the lease to the department within 30 days of receipt of the lease. If the lease is not signed and returned to the department within 30 days, the bidder shall forfeit the bid deposit, and the department may:

            (a)  re-advertise the lease for bid;

            (b)  offer the lease to the next highest bidder acceptable to the department;  or

            (c)  choose to offer the lease for bid at a later time.

            (9)  When a lease term begins on or between March 1 and August 31 during the first year of the lease, the lessee shall pay a rental price equal to the rental price for an entire year. When the lease term begins on or between September 1 and February 28 of the next year, the lessee shall pay a rental price equal to half of the annual rental. Prorated or partial-year payments shall be made in amounts equal to either the full annual rental or half the annual rental.

            (10)  When a lease is cancelled, abandoned, or otherwise terminated, the department shall attempt to lease the land in accordance with this rule.

            (11)  Any former lessee who has had a cabinsite lease cancelled and not reinstated by the board or department for nonpayment of rentals may bid upon that cancelled lease, or any other cabinsite lease provided that before the bid:

            (a)  the former lessee pays the unpaid rentals billed for that cancelled lease;

            (b)  if the former lessee is bidding on that cancelled lease, the former lessee must pay any unpaid taxes or similar assessments on the improvements; and

            (c)  the bid is in compliance with this rule.

            (12)  Any lessee who has had a cabinsite lease cancelled and not reinstated by the board or department for any reason other than nonpayment of rentals may be allowed to bid; however, the board or the department may reject any or all bids for a cabinsite from a lessee who has had a cabinsite lease cancelled in the past.

 

            AUTH:  77-1-202, 77-1-209, MCA

            IMP:  77-1-208, MCA

 

            NEW RULE X  TERM OF CABINSITE LEASE  (1)  A cabinsite lease will be issued for a period not to exceed 15 years unless the cabinsite lessee demonstrates a need for a longer period for loan security purposes, in which case the lease may be issued for a period up to five years longer than the terms of the loan to a maximum lease period of 35 years.

            (a)  Demonstration of need shall be in the form of a request from the lender asking for the extended lease term.

            (b)  A cabinsite lease shall expire on February 28, thirty-five years or less from the beginning date of the lease.

 

            AUTH:  77-1-202, 77-1-209, MCA

            IMP:  77-1-208, MCA

 

            NEW RULE XI  RENEWAL OF CABINSITE LEASE AND PREFERENCE RIGHT  (1)  A current cabinsite lessee shall be sent an application to renew the cabinsite lease if all rentals due are paid. The application shall be accepted under the same conditions as specified in ARM 36.25.115; however, applications for renewal will only be accepted after December 1 of the year preceding the expiration of the lease and must be postmarked on or before January 28 of the year of expiration of the lease. Failure to submit a renewal application postmarked on or before January 28 will result in an unleased tract, and the tract will be subject to the requirements for leasing an unleased tract under ARM 36.25.115.

            (2)  A cabinsite lease is not subject to bids upon renewal if the lessee continues the lease and the lessee has paid all rentals and the lease is in good standing. The lease shall be renewed at the rental according to [NEW RULE III].

 

            AUTH:  77-1-202, 77-1-209, MCA

            IMP:  77-1-208, MCA 

 

            NEW RULE XII  CABINSITE HARDSHIP RENTAL DEFERMENT

            (1)  A cabinsite lessee may request a deferment for a portion of the lease payment.  Such deferment will be a 25 percent reduction of the lease payment. An eligible lessee may obtain an annual lease deferment for a maximum of three years.

            (2)  To qualify for a deferment, a lessee must:

            (a)  use the cabinsite for his/her primary residence; and

            (b)  have an annual household income at or below 80 percent of the most current Area Median Income (AMI) limit published by the Montana Department of Commerce.

            (3)  A lessee seeking the hardship rental deferment shall submit an application on a form prescribed by the department prior to October 1 annually, to qualify for the next billing cycle.

            (4)  Verification of eligibility will occur on an annual basis. If a lessee is determined eligible, the deferment may occur in the lease year the lessee was determined to be eligible, though the department will not issue any refund of payment, only credit for future payments.

            (5)  If the three-year hardship period ends, or the lessee no longer meets the eligibility criteria at the time of annual re-verification, then the deferred payments must be made in one of the following ways:

            (a)  at assignment, as a condition of assignment;

            (b)  as a balloon payment made in association with paying a regular lease payment as billed by the department during the three-year hardship period; or

            (c)  paid back over a four-year period at the end of the three-year hardship period. The amount of lease payment deferral would be tabulated, with interest thereon at the rate of return of the unified investment program administered by the board of investments pursuant to 17-6-201, MCA, then divided by four.  The resulting amount would be added to each annual payment over a four year period until the deferred rental was repaid.

 

            AUTH: 77-1-202, 77-1-209, MCA

            IMP: 77-1-208, MCA

 

REASONABLE NECESSITY:  The adoption of New Rules I through XII are reasonably necessary to provide a means for the valuation and imposition of rental rates for cabinsite leases upon state trust lands that reflect changing market values of those leases while obtaining the full market value of those leases for the affected trust beneficiaries.  The adoption of New Rules I through XII are also necessary for the proper administration of cabinsite leases upon state trust lands.

 

            NEW RULE XIII  ADMINISTRATIVE HEARINGS RELATED TO CABINSITE LEASE DISPUTES  (1)  Any cabinsite lessee may request a hearing before the department to resolve any dispute which arises from the interpretation of, the administration of, the cancellation of, or the rental due upon, a cabinsite lease.  However, the department shall not provide for any hearing upon the assessed valuations determined by the DOR for any cabinsite under 15-7-111, MCA.

 

            AUTH:  77-1-202, 77-1-209, MCA

            IMP:  77-1-208, MCA

 

REASONABLE NECESSITY:  The adoption of New Rule XIII is reasonably necessary to provide a procedure for resolving disputes related to cabinsite leases.

 

            6.  Concerned persons may submit their data, views, or arguments, either orally or in writing, at the hearing.  Written data, views, or arguments may also be submitted to Mike Sullivan, Real Estate Management Bureau, Department of Natural Resources and Conservation, 1625 Eleventh Avenue, Helena, MT; telephone (406) 444-6660; fax (406) 444-2684;  e-mail misullivan@mt.gov, and must be received no later than 5:00 p.m. on February 11, 2009.

 

            7.  Jeanne Holmgren, Real Estate Management Bureau Chief, has been designated to preside over and conduct the public hearing.

 

            8.  An electronic copy of this Notice of Public Hearing on Proposed Repeal, Amendment, and Adoption is available through the department's web site at http://www.dnrc.mt.gov.  The department strives to make the electronic copy of this Notice of Public Hearing on Proposed Repeal, Amendment, and Adoption conform to the official version of the Notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the Notice and the electronic version of the Notice, only the official printed text will be considered.

 

            9.  The department maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by this agency.  Persons who wish to have their name added to the list shall make a written request that includes the name, e-mail, and mailing address of the person to receive notices and specifies that the person wishes to receive notices regarding conservation districts and resource development, forestry, oil and gas conservation, trust land management, water resources, or a combination thereof.  Notices will be sent by e-mail unless a mailing preference is noted in the request.  Such written request may be sent or delivered to the contact person in (6) above or may be made by completing a request form at any rules hearing held by the department.

 

            10.  The bill sponsor contact requirements of 2-4-302, MCA, do not apply.

 

DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION

 

 

/s/  Mary Sexton                                                         /s/  Tommy H. Butler 

MARY SEXTON                                                        TOMMY H. BUTLER

Director                                                                      Rule Reviewer

Natural Resources and Conservation

 

 

Certified to the Secretary of State on January 4, 2010.

 

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