R850-30-400. Lease Rates

  1. Lease rates shall be based on the market value and income producing capability of the subject property and may be determined by:

  (a) multiplying the market value of the subject property by the current agency-determined interest rate;

  (b) the evaluation and use of comparable lease data; or

  (c) using either a fixed rate per acre or a crop-share formula for agricultural leases providing that the rental rate is customary and reasonable.

  2. The agency may base lease rentals on a value other than the market value of the subject property, provided that the director determines such is in the best interest of the beneficiaries and provided that the lease contains a clause whereby the agency may terminate the lease prior to the end of the lease term.

  3. In addition to lease rental, the agency may require the payment of percentage rents.

  4. The agency, pursuant to board policy, may establish a minimum lease rental based on the costs incurred in administering the leases, and a desired minimum rate of return.

  5. Lease Review Procedures and Rental Adjustments for Special Use Leases.

  (a) Special use leases shall be reviewed by the agency as of the effective date specified in the respective lease and such review may result in an adjustment of base rental.

  (b) Adjustments in base rentals may be based upon changes in market value including appreciation of the subject properties, changes in established indices, or other methods which may be appropriate and in the best interest of the trust beneficiaries. The determination of which method to use may be based upon an analysis of the cost effectiveness of performing the review.

  (c) When using established indices, the rate of adjustment shall be based on the indices established for the years involved in the review period, unless the rate of adjustment exceeds a maximum adjustment rate, or fails to reach a minimum rate of adjustment as specified in the respective lease. If no maximum adjustment rate or minimum rate of increase is specified in the lease, then the percent change will increase or decrease according to the above described rate of adjustment.

  (d) The index used in the review may be the applicable component of the CPI-U or any other index determined by the agency to be appropriate.

  (e) The adjusted rental amount as determined pursuant to this rule shall be rounded to the nearest number evenly divisible by 10 unless:

  (i) the lease contains a fee schedule or other adjustment provisions which require a payment in an amount not evenly divisible by 10;

  (ii) the lessee requests otherwise; or

  (iii) the lease was acquired from the United States, Department of Interior, Bureau of Land Management, or other governmental agency and contains terms which do not allow rounding.

  (f) The director may suspend, defer, or waive the adjustment of base rentals in specific instances, based on a written finding that the suspension, deferral, or waiver is in the best interest of the trust beneficiaries.