ID Opinion 01-4 2001-12-18

Could the Idaho Land Board deposit proceeds from selling state endowment lands into the new land bank fund, and from which endowments?

Short answer: The AG concluded the Land Board may use the land bank fund for proceeds from eight endowment categories (penitentiary, public school, university, scientific school, agricultural college, normal school, mental hospital, charitable institutions) but not the capitol permanent endowment, that use is discretionary not mandatory, and reasonable sale/acquisition costs may be paid from proceeds before deposit. Section D.2 was later superseded by Opinion 02-1.

Disclaimer: This is an official Idaho Attorney General opinion. AG opinions are persuasive authority but not binding precedent. This summary is for informational purposes only and is not legal advice. Consult a licensed Idaho attorney for advice on your specific situation.

Plain-English summary

Idaho Department of Lands Director Winston Wiggins asked the AG three questions about the newly created "land bank fund" (Idaho Code § 58-133), which authorizes the State Board of Land Commissioners to hold proceeds from the sale of certain state endowment lands for later reinvestment in replacement endowment property.

Wasden's conclusions:

Which endowments are eligible. The Land Board may use the land bank fund for proceeds from sale of lands belonging to eight endowments: penitentiary, public school, university, scientific school, agricultural college, normal school, mental hospital, and charitable institutions. The capitol permanent endowment is excluded.

Discretionary, not mandatory. Section 58-133 says proceeds "may" be deposited into the land bank fund, which is permissive language. The Land Board can choose. If it does not deposit the proceeds in the land bank fund, Idaho Code § 57-716 requires deposit into the appropriate permanent endowment fund.

Sale/acquisition costs. The federal land grants creating these endowments are governed by trust principles. Reasonable costs of selling and acquiring trust property may be deducted from principal. Proceeds may be used to pay reasonable and necessary sale-incidental costs before being deposited into the land bank fund, and the land bank fund may be used to pay reasonable and necessary acquisition costs for new endowment property.

Note: superseded in part. Opinion 02-1 (June 5, 2002) supersedes Section D.2 of this opinion to the extent of conflict with three Idaho Code provisions identified in 02-1. Anyone relying on this opinion should also read 02-1.

Currency note

This opinion was issued in 2001. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The land bank fund framework (Idaho Code §§ 57-716, 58-133, 58-138) has been amended since 2001. The Idaho Land Board's exercise of trust responsibilities for endowment lands has been the subject of substantial Idaho Supreme Court litigation since this opinion was issued. Anyone advising on current land bank fund administration should consult Opinion 02-1 (which supersedes part of this opinion) and current statutes and decisions.

Common questions

Q: Was this opinion superseded?
A: Section D.2 was superseded in part by Opinion 02-1 (June 5, 2002). The other conclusions remain.

Q: What are state endowment lands?
A: Lands granted to Idaho by the federal government at statehood (and later) to support specific public purposes. The federal Admission Acts created trust obligations: the State must manage these lands for the benefit of the named beneficiary (public schools, universities, etc.), not for general state purposes.

Q: Why is the capitol endowment treated differently?
A: Because of how its enabling statutes were drafted. The capitol permanent endowment's funding mechanism does not authorize land bank fund deposits in the same way the other eight endowments' statutes do.

Q: What is the land bank fund supposed to do?
A: Hold proceeds from the sale of endowment lands temporarily, so the Land Board can then use the funds to acquire replacement endowment lands without parking the money in a permanent endowment fund (where it would be invested in financial instruments rather than lands). The land bank fund is essentially a real-estate-reinvestment vehicle.

Background and statutory framework

Idaho Const. art. IX establishes the State Board of Land Commissioners (Land Board), composed of the Governor, Secretary of State, AG, Superintendent of Public Instruction, and State Controller. The Land Board administers Idaho's federally granted endowment lands as trustee, with trust duties running to the named beneficiaries (e.g., the public schools).

Idaho Code § 58-133 created the land bank fund as a tool for managing endowment-land transactions. Idaho Code § 57-716 governs the placement of proceeds from endowment-land sales not deposited in the land bank fund.

Citations and references

Statutes: Idaho Code §§ 57-716, 58-133, 58-138.

Related opinion: Opinion 02-1 (June 5, 2002) supersedes Section D.2 of this opinion in part.

Source

Landing page: https://www.ag.idaho.gov/office-resources/opinions/
Original PDF: https://ag.idaho.gov/content/uploads/2018/04/op01-04.pdf

Original opinion text

ATTORNEY GENERAL OPINION NO. 01-4

To: Winston A. Wiggins, Director
Idaho Department of Lands
STATEHOUSE MAIL

Per Request for Attorney General's Opinion

QUESTIONS PRESENTED

You ask the following questions:

A. For which endowments may the State Board of Land Commissioners ("Land Board") utilize the land bank fund created by Idaho Code § 58-133;

B. Is use of the land bank fund mandatory; and

C. What "expenses" of property sale/acquisition, if any, can be paid for out of the proceeds from the sale of endowment lands that are invested in the land bank fund?

CONCLUSIONS

A. Pursuant to various provisions of the Idaho Code, the Land Board may deposit into the land bank fund proceeds from the sale of lands belonging to the penitentiary endowment; public school endowment; university endowment; scientific school endowment; agricultural college endowment; normal school endowment; mental hospital endowment; and charitable institutions endowment. The proceeds from the sale of lands belonging to the capitol permanent endowment, however, may not be placed into the land bank fund.

B. Based on the plain language of Idaho Code § 58-133, which states, "[t]he proceeds from the sale of state endowment land may be deposited into a fund which shall be known as the 'land bank fund'" (emphasis added), the Land Board retains discretion in deciding whether to deposit proceeds from the sale of various parcels of endowment lands into the land bank fund. In the event the Land Board chooses not to deposit the proceeds from the sale of eligible endowment lands into the land bank fund, Idaho Code § 57-716 requires those proceeds to be placed in the appropriate permanent endowment fund.

C. The trusts created by the grants of endowment lands by the federal government are governed by basic trust principles. One such principle is that reasonable costs incurred in selling and acquiring trust property may be deducted from the principal of the trust. Accordingly, prior to their deposit into the land bank fund, proceeds from the sale of endowment property may be used to pay for reasonable and necessary costs incidental to the sale. Likewise, proceeds deposited in the land bank fund may be used to pay reasonable and necessary costs incidental to the acquisition or purchase of new endowment property.

[The full opinion runs approximately 17 pages with extensive statute-by-statute analysis of each endowment's enabling Idaho Code provisions, trust-law analysis, and discussion of allowable sale-incidental and acquisition-incidental costs. See the linked PDF for the complete text.]

DATED this 18th day of December, 2001.

LAWRENCE G. WASDEN
Attorney General