State Has Lost More Than $8 Million Due to Mismanagement of Land, Auditor Says

The state auditor reported August 23 that the State Lands Commission's failure to properly manage leases has cost the state more than $8 million.

The auditor reviewed a sample of 35 of the Lands Commission's more than 4,000 leases, and found that the commission:

  • Does not have procedures specifying steps needed for managing leases, and is ineffective or inconsistent in seeking payment from or evicting lessees whose rent is past due.

  • Has missed opportunities to generate millions of dollars in revenues for the state general fund – estimated to be as much as $8.2 million for just some of the leases reviewed by the auditor.

  • Does not always evict delinquent lessees – the auditor estimated losses totaling $1.6 million for 10 delinquent leases that were reviewed. More than 10 percent of the revenue-generating leases were past due on rent, and some of the lessees have remained on state land without paying rent for up to 22 years. (For example, Crockett Marine Services has not paid any rent since 1989, but the commission has not actively sought to remove or penalize the company since it stopped paying rent. After the auditor inquired about this lease, the commission found that Crockett is subleasing the land to another party from whom Crockett is collecting rent. The auditor estimated that the commission may have lost as much as $662,000 for this one lease alone.)

  • Does not take timely action to renew expired leases, conduct rent reviews or appraise properties. The commission lost up to an estimated $269,000 for audited leased that are currently in holdover (leases that have not been extended or renewed).

  • Lost $6.3 million in increased rent that it may have been able to receive on a sample of leases because it failed to promptly conduct rent reviews, which frequently result in increased rent amounts.

  • May be losing up to $174,000 each year for a sample of pipeline leases because it has not updated the rate – established in 1981 – in regulations, to use when calculating rent for such leases.

  • Is not appropriately tracking the status of some of its leases. Its Application Lease Information Database has inaccurate and incomplete data, and the staff does not always use it to track lease information. The auditor found that the commission apparently lost track of one of its leases, and failed to bill for 12 years while the lessee remained on state property.

  • Does not have a plan for monitoring its revenue-generating leases, in particular those leases that are potentially the most profitable because they involve the extraction of oil and gas from state properties.

  • Has not taken sufficient steps to quantify its need for additional staff.

The commission is responsible for managing the lands that the state acquired from the federal government at statehood, including the beds of navigable rivers and lakes, submerged land along the coast, and school lands granted to the state for the benefit of public education. (Source: "State Lands Commission: Because It Has Not Managed Public Lands Effectively, the State Has Lost Millions in Revenue for the General Fund," Bureau of State Audits, August 23.)

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