16th Section homeowners vow lawsuits

Published 10:18 pm Monday, April 20, 2009

Madison school district officials say lawsuits against them have not only been threatened, but promised, should the terms of 16th section leases be altered due to an attorney general’s opinion requested by Secretary of State Delbert Hosemann earlier this year.

Attorneys with the school district and the city of Madison have met with representatives of the attorney general’s office in an attempt to clarify the opinion, which states that improvements made on 16th Section land must be taken into account when determining its fair market value.

School officials say infrastructure improvements should not be taken into account since the district does not ultimately own the infrastructure.

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Recently, the district sent out letters to 16th Section residential lessees updating them on the situation and asking them not to contact the attorney general’s office while they attempt to resolve the issue.

All 16th Section land is owned by the state, but school districts have fiduciary responsibility over the land and are charged with maximizing the revenue which is generated through leases.

Sixteenth Section land was established in the 19th century as school trust land, with rents to be paid in support of the local schools.

The 16th Section of each 36-square-mile township belongs to the schools and must be used for the benefit of public education. The leaseholders may own the buildings or houses but not the land they are on. They can lease the property and must pay property taxes.

Current Madison lessees pay 5 percent of the land’s original value, but under the new appraisal methodology if the property is sold or refinanced the lease would increase four to nine times the current rate.

With the changes homeowners fear when selling their homes they would be forced to discount the value to make up for the increased lease payment.

County Superintendent of Education Mike Kent said residents have promised lawsuits in response.

“And because their contract is with us we will receive the lawsuit, not the Secretary of State,” Kent said.

Following the meetings with the attorney general’s office, Kent said they have received a request for clarifications on some of the issues and school board attorney Holmes Adams and Madison city attorney John Hedglin are working on those.

“The district is taking the position that we never owned the infrastructure,” Kent said. “The developers installed sewer, light, roads and then dedicated it all to the city or county so the district can’t lease something it doesn’t own.”

Adams said infrastructure is at the heart of the whole issue.

He also said that when negotiating the leases the school district takes into account the location and availability of utilities when setting the price.

“The leases inside the city of Madison has an average rental rate of $1,000 per acre a year. That school district makes almost a quarter million a year off its residential leases.

“I think a lot of people remember cases from 20 years ago when people were paying $1 a year for 99 years. We’re the reverse. We’re getting top dollar,” Adams said.

Hedglin said the funds generated off the leases in Madison County far exceeds that of other districts.

“We don’t think we’re asking for anyone to give Madison County a pass on this,” Hedglin said. “We’re saying we think what the district has done is in compliance with the applicable statutes. To provide the most revenue possible for the district, and Madison County is doing that. Why should anyone look for a way to counteract that?”

Currently the Madison County School District generates more than $210,000 a year off 16th Section land, nearly a quarter of the funds generated statewide.

Kent said they currently have 450 residential leases inside the city of Madison in subdivisions like Sherboune and Madison Oaks and 180 others scattered in other locations around Madison County.

Officials in the city fear that if property values decrease for those living on 16th Section land it may hurt property values for nearby neighborhoods as well.

They say it would also hinder commercial development and could hurt the overall tax revenue.