09/17/2021
Hello neighbors, here is some information I have found on Facebook, many of you may have already seen this, I wanted to be sure to share as much information as possible.
Island Lake Leaseholder Buyout Option
I made a very lengthy post yesterday attempting to summarize what I have learned about the leaseholder buyout option. I appreciated the comments from many--including those who questioned some of my information. I did update #7 regarding current leases as my original post should have included all lease durations.
If you would like to read the actual communications between the State and MN Power, I encourage you to go the Minnesota Public Utilities site and look at the e-dockets. The reference number is 20-675. You can read the actual documents with all the "back and forth" between MN Power and the MN PUC--including the recent clarification that 2020 EMV is the intent of MN Power. You will also be able to read where the MN PUC would like considerably more money for these lands (for example, current EMV, 25%+, each leaseholder pay EMV at time of sale, etc)--which is why I believe the 2020 EMV + 4% is a reasonable offer to the leaseholders and is a best case scenario. The platting and other issues are addressed as well.
I hope this is helpful.
MN Power Leaseholder Buyout
I have been a leaseholder on the far northeast corner of Island Lake for almost 13 years. Since receiving a letter dated June 6, 2018 from MN Power regarding the sales on Alden, Little Alden and Spring Lakes, I have had several conversations regarding the purchase of my leased land with MN Power.
I have learned a great deal about the Minnesota Public Utlitlies Commission and the role they are playing in the land sales--it's significant.
I have joined and followed the group that originated with Whiteface leaseholders and appreciate the dialogues people are having. I also feel confident in the information I have received over the years and am prepared to purchase our land when the option is made available. I support the current proposal MN Power has made to the MN PUC as I am convinced it is the best offer--if the MN PUC had their way we would be paying considerably more than the current proposal.
I know this will be lengthy, but I hope informative to some of you as to what I have learned over the last 3 years:
1) The price of my land will be my 2020 St. Louis County assessment +4%. Please note that this is NOT the most recent valuation made by SLC which resulted in a significant increase for the majority of the leaseholders.
I do know that the MN PUC would prefer that lots are appraised and the county assessment NOT used as the appraisals would result in a much higher valuation which would equal more $s in the pot.
Land valuations by SLC do NOT take into consideration LAND improvements made--it is a shoreline and acreage calculation.
The MN PUC wants MN Power to get as much money for these reservoir lands as possible as the proceeds from the land sales will be used to mitigate utility rates for customers--in theory, the more $s, the lower the utility rates for all customers.
2) The MN PUC will possibly be making the decision on the MN Power proposal on 9/30/21. If approved, lots will begin to be made available in early 2022. Availability will be determined by platting completions--however, the 2020 assessment will hold firm until the plat is completed and the leaseholder has the option to purchase. Cooperation of local townships will have a significant impact on how quickly an area can be made available.
3) The Alden, Little Alden and Spring Lakes were sold in 2019 at 90% of the assessed value. MN Power was able to make this kind of a deal because these lakes are not regulated by the MN PUC nor FERC (Federal Energy Regulatory Commission). When discussed as an option for Whiteface, Island and Fish, it was deemed to be a "non-starter" for these FERC and PUC regulated lakes. Quite frankly, to the MN PUC it is ALL about the money that can be generated to mitigate utility rates.
4) Upon sale of the land, the landowner will be granted a Riparian Easement which will grant access to the water regardless of water levels (drought year or not). This is necessary as FERC requires the 3' to the ordinary high be maintained by the utility. Certain rules will still be in place regarding the shoreline and waterfront--for example, no permanent docks, no excavating without approval etc. The landowner essentially will own 99.9% of the land--but not all of it--this the reason for the Riparian Easement at closing.
5) Compliance issues WILL come into play at the point of sale. Possible concerns will be septic compliance and placement of outhouses.
6) Road Associations will need to be configured in a particular form that is in compliance with MN Statute 515 and the association will need to be recorded with the plat. This statute refers to a common interest community, much like a condominium association. This reconfiguration is not ousting road association leadership etc, it is simply going to ensure the association follows state statute for private land ownership. Other than some pieces of paper, it is not anticipated that anything will change what is currently happening.
7) If someone opts to not buy their leased land they will be able to continue to lease the land until the end of their current lease. Current leases expire between 2023 and 2046. IF someone were to sell their property today, the new owner would be granted a lease to 2046 by MN power. This is in place to protect the current leaseholder and enable them to sell their property. IF someone decides to just continue their lease, but at expiration of the lease decide they want to buy the land, they will need to do so at the current market rate and not the 2020 rate. # note that I clarified this point from my original post.
MN PUC wanted all sales made within 3 years and those not bought by current leaseholders to go to public auction. MN Power indicated this was a non-starter.
8)If the MN PUC insists on significantly higher land prices for buyout, it is possible MN Power will just take their marbles and go home and a new leaseholder program will be put in place. It is anticipated that if this happens the new program will be structured quite differently at a higher cost--MN Power does not want to be in this business any longer as too many human resources are relegated to this task and is deemed to be less profitable than other areas.
9) Current lease payments will increase when assessed land values increase as per the current agreements--for example those payable next year and reflecting the 2021 valuations.
10) MN Power has no interest in being in the residential development business, and has no plans to develop other pieces of land in the area. It is possible, however, that they could log some of their holdings in the future as that is in their best financial interest. Regulatory commissions really want utilities to find ways to make money other than rate increases.
11) While I would like to see consideration given to prior lease payments made, I don't see this being considered as it too would reduce the $s the MN PUC sees MN Power putting into the pot. The one small consolation here is that the land values have remained fairly constant for many years (until 2021) and hopefully we will be purchasing at a value that had been in place for several years--2020. Our lease payments have also stayed constant for several years because of the formula used. Again, keeping in mind the desired end result by the MN PUC, any proposal to reduce the proposed revenue is just not likely to happen--this is all about garnering the most money possible from the sale of these lands.
I hope this is helpful. As I indicated, I have picked up the phone several times over the last few years and had many conversations with personnel at the St. Louis County Assessor's office and MN Power. I also have made it a point to keep an open dialogue with St. Louis County's Pike Lake office of forest management regarding the logging in our area which has increased greatly and potentially will continue. I have found all of these entities to be very responsive and forthcoming with information. I have copious notes!
I realize people are writing letters and appealing to the MN PUC. I was also under the impression that the public comment timeline for this docket had already expired--they may read the letters regardless. Personally, I would not be overly optimistic about any change (decrease) knowing that it is the intent of the MN PUC for MN Power to get top dollar for every property on these reservoirs. What I am most concerned about is the MN PUC telling MN Power to go back to the drawing board and up the buy out price.
Mary
