Both the purchasing and the commercial leasing process is initiated by an application, completed by the applicant in consultation with Department staff, and filed with the Land Department. Submission of an application does not guarantee that the land will be sold. If a determination is made at any point during the process that a sale or lease would not be in the best interest of the Trust, the application may be denied. The Trust cannot subsidize development for any purpose, no matter how commendable, at the expense of its beneficiaries.
It is the Land Department's responsibility - on behalf of the beneficiaries, public schools and other state public institutions - to enhance value and optimize economic return of state trust resources. All Trust Land transactions must be in furtherance of this mission.
The Department created a Five Year Plan as a management tool to help prioritize the disposition of lands. It takes into consideration numerous attributes of each parcel, including market feasibility, infrastructure, site constraints, entitlements, etc., to help prioritize dispositions.
Completion of an Application Addendum, as well as a conference with and sign off by Real Estate Division staff, is required prior to filing a purchase or long term lease application. Failure to schedule the conference or to provide adequate information as requested in the application may result in rejection of the application. When evaluating an application, the Department will take into consideration factors including, but not limited to, the following:
- The Department’s Five Year Plan
- The highest and best use of State Trust Lands
- The proposed long-term resource commitments and their effects on future uses of the land and adjacent Trust land
- The short term and long term benefits of the transaction to the Trust and its beneficiaries. The Trust cannot subsidize development for any purpose, no matter how commendable, at the expense of its beneficiaries
- The agency and staff work load, and existing commitments
- Other factors that may be unique to the proposed transaction
A sales and leasing administrator will coordinate evaluation of the applicant to determine if and when to proceed with disposition, as well as to define the necessary due diligence needed prior to appraisal and auction. Due diligence items may include, but are not limited to: ALTA Land and Title Survey; Archaeological Survey; Geotechnical Report; Infrastructure Analysis; Phase I Environmental Assessment Report and Appraisal Report. The applicant may be required to front these costs, which may be reimbursed, upon approval of the Land Commissioner, in the event that the applicant is not the successful bidder at an auction.
Once all the due diligence information is gathered, the parcel will be appraised. All State Trust Land transactions must be in accordance with the State’s responsibility to receive an appropriate return for the Trust beneficiaries. The Land Department will obtain an appraisal, usually from an independent appraiser, and the applicant must either prepay the cost of the appraisal or the cost will be assessed as a fee at auction. The approved appraised value establishes the minimum acceptable bid at the time of auction. For leases, the approved appraised value forms the basis for establishing a minimum rent schedule; rent is generally assessed at the greater of a percentage of the gross receipts generated by the land or the minimum scheduled rent.
All sales and leases of State Trust Land must be approved by the Board of Appeals, an independent body of 5 members, appointed by the Governor. The Land Department is authorized to pay commissions to Arizona licensed real estate brokers.
After approval by the Board of Appeals, the date of auction is set and an auction notice is published for a 10-week period, prior to the public auction. An estimated advertising fee is required from the applicant, and must be received prior to the Land Department scheduling the public auction.