DNR Letterhead

BILL ANALYSIS

BILL NUMBER:	HB 4209 (AS INTRODUCED)
TOPIC:	Provide local units of government first opportunity to purchase state park land
SPONSOR:	Representative Lisa Brown
CO-SPONSORS:	None
COMMITTEE:	Tourism, Outdoor Recreation and Natural Resources
Analysis Done:	February 27, 2009

POSITION

The Department of Natural Resources (DNR) opposes this legislation.

PROBLEM/BACKGROUND

The sale of surplus park lands has been a contentious issue in recent times. Declining state revenues and various proposals to divest of state-owned lands and property as a revenue-generating tool has generated a lot of interest in land transaction processes administered by the DNR. In 2006, legislation was created (MCL 324.74102b) to establish a lengthy approval process for selling park lands. This process involved vetting land transaction proposals via public hearings, the Citizens Committee for Michigan State Parks, and the Natural Resources Commission. Also in 2006, bills were introduced to modify MCL 324.2131 and 324.2132, which are the statutes that authorize the sale of state lands. HB 6046 and its substitute bills were never passed.

DESCRIPTION OF BILL

This bill would require the DNR to offer surplus parcels of land, not subject to MCL 324.74102b, to local units of government before offering the land to others. The bill also mandates that the fair market value be determined utilizing “parkland” as the highest and best use. A deed restriction limiting the use as “parkland” would only be 20 years in length. Additionally, the bill appears to negate the process outlined in 324.74102b by determining that the Department may not declare any properties subject to 324.74102b as surplus. The Department would be prohibited from divesting of any parcels that were 100 acres in size or represented more than 15 percent of the lands within the dedicated park boundary.

SUMMARY OF ARGUMENTS

Pro

This legislation would benefit local units of government since they would be able to purchase state lands at a lower appraised value (“parkland”) and be able to re-sell the property at a higher “best use” appraised value after a period of 20 years when the restrictions expire.

Con

This bill severely restricts the Department’s ability to divest of surplus properties for fair value in the real estate marketplace. The bill effectively nullifies the work in 2006 to establish a process for divesting of large parcels of park land that the Department deems to be surplus. Divesting of these large parcels would simply be prohibited.

Local units of governments already get the first option to purchase any surplus state land as part of the Department’s Land Consolidation Process. The bill also ensures that local units of government pay an artificially low price for surplus parcels not covered under MCL 324.74102b by mandating an appraisal based on “parkland” value. This approach is already in place as Department policy for disposal of “Class 2” parcels, those deemed valuable as parkland, but the deed restrictions on those sales mandate the use of the land for public recreation in perpetuity. This bill restricts the use for only 20 years. This process is not followed for surplus lands deemed to be “Class 3” parcels. Such parcels generally have higher appraised values because they may not be restricted as to use, thus, commanding a higher sale price.

Many state park lands have federal acquisition or development encumbrances associated with the property, and these would limit or restrict any sale. Gifts of land to the state can also carry deed restrictions. If those deed restrictions are violated, it voids the transaction.

This bill would allow for local units of government to purchase valuable lands at below market prices and then re-sell the lands at a significant profit in 20 years.

FISCAL/ECONOMIC IMPACT

Are there revenue or budgetary implications in the bill to the --

(a) Department

Budgetary:

None

Revenue:

Revenues from land sales could be drastically reduced.

Comments:

This bill puts the Department at a significant disadvantage in the real estate market.

(b) State

Budgetary:

None

Revenue:

See above

Comments:

None

(c) Local Government

Comments:

This bill could save local units of government millions of dollars in real estate costs at the expense of the state, and allow them to bank properties at bargain prices for resale later at a significant profit.

OTHER STATE DEPARTMENTS

None

ANY OTHER PERTINENT INFORMATION

MCL 324.74102b was added to statute in 2006 to provide public notification and review of the sales of state park lands. HB 6046 was introduced in 2006 to modify MCL 324.2131 and 324.2132, the relevant sections in this bill, but never passed.

ADMINISTRATIVE RULES IMPACT

Rules can be promulgated to provide for administration of the act.

_______________________________

Rebecca A. Humphries

Director

_______________________________

Date

PRD/OLAF