Public-lands improvements process bill sent to governor

Bob Mercer Farm Forum Correspondent
Farm Forum

PIERRE — State government owns hundreds of thousands of acres of rural land across South Dakota, especially in the northwest, that are leased to ranchers and farmers.

But many of the fences, watering systems and other improvements that are on the state acreages were put in place by many of those private renters.

When leases change hands, one particular question sometimes comes up: How much should the new tenant pay the previous tenant for those privately made improvements?

South Dakota right now doesn’t have an exact process in state law.

Instead, the state’s commissioners of school and public lands had relied, for at least the past century, on official opinions from state attorneys general when setting their policies.

The first opinion was written in 1919. The most recent came in 1985.

South Dakota voters elected Ryan Brunner as commissioner in 2014. Last year, he decided it was time to pull those seven opinions together and propose one new state law.

The result this session is Senate Bill 39. The state Senate Jan. 17 supported Brunner’s plan 35-0. The state House of Representatives voted for it 68-0 on Jan. 31, in what might be final legislative approval.

Now, SB 39 is on the way to Gov. Dennis Daugaard for a decision whether it becomes state law or has some problem so serious to warrant his veto.

The Legislature could choose whether to let the veto stand or override it and put Brunner’s plan into state law anyway.

Given the total absence of any lawmaker’s vote against the legislation, a veto seems unlikely.

Existing law says a board decides the value of an improvement. The board has one representative apiece for the new leaseholder and the old leaseholder. They would select the board’s third member.

That part of the law won’t change. Brunner’s proposal would require that only improvements permitted by the commissioner’s office would be eligible for compensation.

It also would add language requiring the commissioner to provide to the board an itemized list showing each improvement that was officially permitted.

The board would still decide how much each improvement is worth.

Brunner’s language specifies the appraised value would be based on the improvement’s original cost, minus the actual out-of-pocket expenses paid by the previous leaseholder.

His change also would clarify the appraised value can’t reflect any grant, subsidy or contribution that came from another source toward the expense of the improvement.

Those arrangements reflect the most-recent opinion that then-Attorney General Mark Meierhenry delivered in 1985.

Meierhenry’s opinion said the goal in the appraisal was to make the previous owner of the improvements “whole, not to grant him a windfall at the expense of the new lessee.”

His opinion also explained the previous owner could remove the improvements if the appraisal didn’t seem fair.

Likewise, the opinion said, the new lessee could refuse to make payment and consequently waive the right to the lease if the appraisal didn’t seem fair.

Brunner presented his legislation Jan. 16 to the Senate Agriculture and Natural Resources Committee.

He showed the formal application his office requires from a leaseholder before improvements are placed on the leased land.

The one-page form has boxes for building structures, shelter belts, wind breaks, pipeline, water tank, fence, well, windmill, dug-out, dam or “other” improvements.

Improvements that weren’t officially permitted aren’t eligible for reimbursement from the subsequent leaseholder, Brunner told the senators.

His office keeps the permit records.

Brunner said the intent is to try to reduce confusion by bringing together the seven official opinions from past attorneys general into a new state law.

“It’s certainly been a long-discussed issue over the 100 years,” Brunner told the senators.

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