Sunday, June 06, 2010

State Trust Land: Arizona

Origins of State Trust Land:


At the onset of the nation, the federal government controlled very little of the existing land, most of the land lay within and was controlled by the thirteen original states. Therefore, virtually all State land within their borders was subject to taxation, including taxation to support public schools. When other states achieved statehood, their geographical boundaries came from existing federal territories. Any public land owned and/or reserved by the central government within a state was not subject to state taxation. (Harms, 2008: 13)


The inability of these new states to tax the vast proportions of land within their territory controlled by the federal government created significant challenges to the ability of these states to develop an adequate tax base to fund essential services, including the establishment of “common schools.” To remedy the situation, congress enacted the federal land grant status to create a binding and permanent trust that generated financial support for a state’s common schools. (Harms, 2008: 13)


Arizona Trust Land:


At statehood, Arizona was granted land by the Federal government in accordance with the New Mexico-Arizona Enabling act of 1910, these lands we transferred to the state for the express purpose of being held in trust for the benefit of fourteen beneficiaries. Section 28 of said act reads in part: “That it is hereby declared that all lands hereby granted, including those which having been heretofore granted to the said territory, are hereby expressly transferred and confirmed to the said state, shall be by the said state held in trust…and that the natural products and money proceeds of any of said lands shall be subject to the same trusts as the land producing the same.” Section 24 of the said act allots sections two and thirty-two of each township (in addition to the previously sections 16 and 36) for the ‘support of common schools”. Section 25 identifies, and apportions land to the other beneficiaries: universities, 200,000 acres, government buildings, 100,000 acres; penitentiaries, 100,000 acres; insane asylums, 100,000 acres; school for the deaf, blind and dumb, 100,000; miners’ hospital 50,000; normal schools, 200,000; state charitable, penal and reformatory institutions, 100,000; agriculture and mechanical colleges, 150,000; school of mines, 150,000; military institutes 100,000. An additional 1,000,000 acres was granted for: “The payment of the bonds and accrued interest thereon issued by Maricopa, Pima, Yavapai and Coconino counties.” Any lands remaining after the settlement of said debt would be allotted to the common schools.


In total 11 million acres of land was granted to the state of Arizona by the Federal government (McClory, 2008: 1 and Senate, 2007:1), to be held in trust for the benefit of the aforementioned beneficiaries. The State accepted this land and agreed to hold it in trust and abide by the provisions of the Enabling Act: “All lands expressly transferred and confirmed to the state by the provisions of the Enabling Act approved June 20, 1910, including all lands granted to the state and all lands heretofore granted to the Territory of Arizona…Shall be by the State accepted and held in trust…” (Arizona Constitution Article X section 1).


Section 28 of the Enabling Act also delineates the manner in which any portion of the trust lands can be disposed of and notes that disposition of said land in any manner contrary to Act’s provisions would be deemed a “breach of trust.” The act specifies that no mortgage or encumbrance shall under any circumstance be valid in favor of any person. In addition, said land would only be sold to the “highest and best bidder,” at a public auction to be held at the county seat of the county where most of the land in question lies. Furthermore, any auction would only occur after public notice has been given, and advertised for no less than ten successive weeks in a newspaper of “general circulation” published at the State capital and the nearest town to where the land is located. Said advertisement would detail the nature, time and place of the auction and provide a detailed description of the land on offer (section 28). The Section goes on to specify that all lands shall be appraised at their “true value” and no land should be sold or leased at a price lower than its appraised value. In addition, land would not be sold on credit, unless “ample security” was provided and the title would not be transferred until such time as the full price has been received.


These strict provisions (coupled with the state’s own constitutional and statutory provisions) are the reason why the literature is replete with descriptions of Arizona’s Trust land obligations being the: “most restrictive among all the Western States.” (Lincoln: 2). The specificity of the enabling act and its detailed trust obligations was meant to ensure: “That Arizona and New Mexico did not dissipate the land grant assets [as earlier admitted states had done in an indiscriminate manner without achieving lasting benefit for their school systems], at admission…Congressional intent was clear that it intended to circumscribe the State’s power to deal with State Trust Land assets. The duties imposed were that of a trustee, not that of a common manager.” (Harms, 2008: 21)


Arizona currently holds approximately 9.25 million of the trust lands bequeathed unto it by the federal government, this accounts for 12.7% of the available land in Arizona, with the remainder held by the Federal government 42.1 %, Indian Trust 27.6% and private ownership 17.6% (Sommers, 2009). Of this land 8.1 million acres is apportioned to Common Schools (ASLD, 2009: 26). The land is managed and administered by the Arizona State land Department (ASLD), and organization established by the 1915 Land Code. The Land Commissioner who is appointed and serves at the pleasure of the Governor directs the department. Arizona Revised Statutes 37-131; 37-132, lay out the powers and duties of the Land Commissioner who largely bears responsibility for the appropriate management of the State land Trust, he/she approves leases for grazing and agricultural lands, and in concert with the Board of Appeals, approves all land sales and leases for commercial purposes (Arizona Revised Statutes 37-132A7). In the administration of Urban Trust Lands, the Commissioner works with two oversight committees: Urban Planning and Conservation, both charged with ensuring that Urban Trust Lands are utilized in line with the State’s: “general and comprehensive planning scheme and open space program.” (Lincoln, 3)


Though it has responsibility for a number of state lands and other programs (wildfire, forestry), a large majority of the Department’s resources are dedicated to the administration and management of Trust lands. The organization identifies its mission as: “To manage state Trust Lands and resources to enhance value and optimize economic return for the Trust beneficiaries, consistent with sound stewardship, conservation and business management principles supporting socioeconomic goals for citizens here today and generations to come. To manage and provide support for the well-being of the public and the State’s natural resources.” (Culp, Plant and Bird, 2007: 1). To raise the revenue necessary to: “enhance value and optimize economic return for the beneficiaries,” the department undertakes a number of activities.


Much of the States Trust Land is rural in character, though about 1 million acres is located in the vicinity of urban areas, for most of the State’s history the Trust lands were managed in concert with the dominate economic engines, agriculture and extraction of natural resources. Thus, Trust Lands were primarily dedicated to livestock grazing, agriculture and mineral production. However, as urban areas expanded and new economic engines developed, the management of trust land has shifted focus to the more urban areas with the potential for commercial development (Senate, 2 also ASLD, 4). The vast majority of Trust Land acreage is still associated with grazing (8.4 million), agriculture (166,151) (ASLD, 19). These “Surface use” lands are leased out to the “highest and best bidder” for a period of ten years or less. Commercial leases (81,00 acres) are allotted to the highest bidder, but with longer-term leases of up to 99 years (Urban Lands Act 1981). The lease rents from these activities are (as per the Enabling act) based on the fair market value of the land, with periodic adjustments for inflation (Lincoln, 8). Surface leases and use permits provided an infusion of $65,670,065.96 to common schools in FY 2009 (ASLD, 27)


A second category of lease activity is for “sub surface” uses. These leases are for base and precious metals (Leaseable minerals); “salable or mineral materials” such as gravel, sand and other construction or landscaping materiel (common variety minerals); and oil, gas and geothermal resources (energy minerals). Land mineral leases and exploration permits are awarded at public auction to the highest bidder for terms of up to twenty years. Energy mineral leases are awarded either competitively or non-competitively based on the provability of the reserves, and are for five years (proven, competitive) and for twenty years for unproven, non-competitive, with 12.5 percent royalties (Lincoln, 4). Subsurface leases accounted for $1,353,469.79 of the total monies benefiting common schools in FY 2009 (ALSD, 27).


The final and most widely known category of Land Department activity is the sale of Trust Land. As noted throughout, the Enabling act and constitution place stringent limitations on the disposition of land through sale. In addition, the fact that the lands are supposed to be held in “perpetuity,” adds an additional hurdle to the wanton sale of the lands for any purpose, the Lands Department must balance the health of the trust, as well as, best use of the land, with this in mind land sales are typically for limited acreage, averaging 5,000 acres a year (ASLD, 2010), Article X section 11 also places a limitation on the maximum acreage allowable for a single purchaser “160 acres of agricultural land or 640 acres of grazing land.” The above not withstanding, the past five years have seen tremendous sums of money flow in to the Lands department as a result of land sales. In 2009 1,381.72 acres were sold at auction, generating 71,752,000.00. This, according to the land commissioner, was the 9th largest haul in history, a history largely written in the past decade.


In 2009, the Land Departments activities (Leases and Sales contract Interest) generated $84,995,516.48 from lands allocated to the Common Schools Trust, thus, achieving in a small measure its mission to enhance and maximize the economic return to its principal beneficiary.


References:


The New Mexico – Arizona Enabling Act of June 20, 1910. Retrieved from http://www.azleg.state.az.us/const/enabling.pdf


Arizona Constitution, Article X. Retrieved from http://www.azleg.gov/Constitution.asp?Article=10


Arizona Revised Statutes Title 37 – Public Lands. Retrieved from

http://www.azleg.state.az.us/arizonarevisedstatutes.asp?title=37


Arizona State Land Department (2009) Annual Report


Arizona State Land Department (2010) “State Trust Land at a Glance” Retrieved from

www.land.state.az.us/news/ataglance.htm


Harms, Julius (2008): “A Comparison of Three State Agency Practices In the Disposition of State Trust Lands and Recommendations Considering the Same.” Unpublished Doctorate

Dissertation. Arizona State University, Tempe, AZ


Lincoln Institute: “Trust Land Management in Arizona” Retrieved from http://www.lincolninst.edu/subcenters/managing-state-trust-lands/publications/trustlands-az.pdf


Napolitano Janet (2000): “Disposition of Income fro State Trust Lands.” Retrieved from

www.azag.gov/opinions/2000/100-028.html


Sommers, Willie: “Arizona’s State Trust Land: Providing for Economic Growth and Sustainable Natural Resources.” Retrieved from http://ag.arizona.edu/backyards/articles/winter09/p8-9.pdf


5 Comments:

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