Moving Forward in Idaho: Self-Storage Operators Should Support Legislation Reversing the State's Purchase of a Facility
By Matthew Van Horn
Within the last year, I've written a few blogs in reference to a decision by the state of Idaho to purchase a self-storage facility and operate that facility as an entity of the state. Here's a review of the seven reasons why this is a bad idea for our industry.
- Tax-free operation : No property taxes will be paid by this state-owned facility, period.
- Experience : The state has no experience in the self-storage industry.
- Lack of accountability : The rest of us have to be accountable on an individual basis to investors or financial institutions. Who is held accountable for this facility and to whom?
- Competition: What will hold the state back from limiting competition from its new self-storage facility?
- Bail out: With the government as an investor, a bailout is always possible. No fear of the facility being disposed of through the market if it fails financially.
- Consumer backlash: How many people do you know that will not buy a GM vehicle because of government ownership?
- Innovation: The government has a horrible record when it comes to innovation.
When this story first came to light, the national Self Storage Association (SSA), along with the Idaho Self Storage Association (IDSSA), obviously had some issues with this purchase. In addition to the seven issues outlined above, George Beacon, the head of the Idaho Department of Lands, was quoted by the Associated Press as saying, “We don’t have a whole lot of commercial property ... We see that as an area to build diversity in our land portfolio."
This should send a chill down the back of every self-storage operator in the United States. So does this mean the state has identified other commercial properties for acquisition? On my next trip Idaho should I expect to stay in the Idaho State Marriot? The government has to own some land. No one expects the Pentagon to move every 10 years because it can’t negotiate a lease.
Where my understanding stops is when the entity that makes the rules starts competing with the people that have to follow the rules. There's so much room for this to be abused its insane. Governments are not perfect entities. They're managed by people that have the same fears and insecurities and make the same errors as we all do.
The problem is, in this situation, instead of making mistakes and having to pay for them, the state could just as easily adjust laws, ordinances and taxes to make up for the fact that they're not experienced operators. Honestly, how many of you would love to operate your self-storage facility without having to pay property taxes? Well, your local Idaho state-owned self-storage facility doesn’t have to pay them. Not a bad perk.
In February, House Bill 188 was introduced into the Idaho State House. The bill states,
“PUBLIC LANDS - Amends existing law relating to public lands to revise the powers and duties of the State Board of Land Commissioners to provide that, except where land is used by a public entity for a public purpose, all nonagricultural improvements shall be leased to private persons and all business operations shall be sold to private persons; to revise provisions relating to the deposit of proceeds from the sale of state endowment lands; to provide for the allocation and deposit of such proceeds and earnings thereon in specified permanent endowment funds and to remove provisions relating to authorization for the State Board of Land Commissioners to hold proceeds from the sale of land for a specified time."
Should it pass, this bill will curtail any more self-storage purchases by the State of Idaho and, hopefully, send a strong message to other states contemplating this type of endeavor.
Unfortunately HB 188 has languished in the House since February. The SSA and the IDSSA are making a push to have this legislation passed. We should all work together to help them on this issue. Please contact either of these entities to see how you can help.
You might think, “I don’t live in Idaho," but this could just as easily happen in Arizona, Florida or any state. When one state gets an idea like this and pushes forward, it encourages other states to use the same bad idea. As hard working self-storage operators and investors, we cannot allow that to happen.
Support Your State Association
One of the themes this story highlights is the importance of your state self-storage association. A majority of these types of issues happen on a state level. The national SSA is a wonderful support structure, working directly on issues that deal with the federal government and help support the state associations. But when it comes to individual state laws, your state association is the first line of defense.
State and local municipalities are typically the entities that adjust sales taxes, property taxes, lien-sale laws, occupational licenses and building codes. These are all items that affect you, the independent operator, on a regular basis. Your state must have a strong self-storage association to help in the fight against unfavorable legislation. I'm a member of the Florida Self Storage Association (FSSA). Over the past year, the FSSA has pushed for changes in Florida’s lien-law structure and helped independent operators with property tax issues.
We're all in the process of finalizing our budgets for 2012. Take a look at your projections and budget a small amount of money to join your state association. The cost is typically $200-$400 per year depending on your state. The membership fee is so small when compared to a 1 percent increase your states sales tax or unwelcome changes to your state’s lien laws. The more proactive we are as a group, the less likely unfavorable legislation will affect our industry.
Matthew Van Horn is vice president of Cutting Edge Self-Storage Management , a full-service management company specializing in management, feasibility studies, consulting and joint ventures within the self-storage industry. For more information, visit www.cuttingedgeselfstorage.com.
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