Land Office commissioners, an “unsung hero” for education funding

Governor Kevin Stitt speaks with Auditor and State Inspector Cindy Byrd and Superintendent of Public Education Joy Hofmeister ahead of a Land Office Board of Commissioners meeting on Thursday, April 8, 2021. (Tres Savage)

Elliott Chambers grew up on the OKC subway, attended Mid-Del Public Schools, and graduated from Oklahoma State University. During his studies and early in his professional life, he had “never heard of” the land office commissioners and was unaware of his constitutionally defined role in providing funds for the public education system in London. Oklahoma.

“It’s a fascinating agency. We are managing the assets to get as much money as possible out of the school system, ”said Chambers, who has been the director of the CLO since August, after a board meeting on Thursday. “He’s an unsung hero, if you ask me, when it comes to funding education.”

During Thursday’s meeting, state leaders approved a long-term lease for a new Kay County wind farm, purchased two office buildings north of Oklahoma City, celebrated a highlight for the School Land Trust of the agency and approved a settlement agreement with twice-bankrupt oil company.

Chaparral Energy, Inc. will have to pay CLO $ 657,355.72 to resolve its oil and gas lease debts with the large but enigmatic agency, which manages state lands, owns commercial buildings, and makes payments direct to school districts from a large trust fund.

The fund has “reached a record high” of $ 2.6 billion, Chambers told the board, which has five members: Governor Kevin Stitt, Lieutenant Governor Matt Pinnell, superintendent of public education Joy Hofmeister, State Auditor and Inspector Cindy Byrd and Secretary of Agriculture Blayne Arthur. (Arthur was absent from Thursday’s meeting.)

“The trust as it exists today (…) [real estate investment trusts], many different asset types under different portfolio managers, ”Chambers said after the meeting.

He said the CLO uses 13 different fund managers with investments in 16 different funds.

“We spend a lot of time making sure we agree with their decisions, and if we don’t, we’ll reassign it from that asset class or that portfolio manager to someone else because that we don’t like what they or they do. »Re loading too much. Any income generated by these assets is distributed to schools, ”Chambers said. “If I remember correctly, off the top of my head, it was just under $ 100 million for [Fiscal Year 2020]. This $ 100 million goes to the school system.

In terms of education funding, the money paid monthly by the CLO to local school districts is “billable,” which means that every dollar distributed by the CLO translates into another dollar available for the overall aid formula. of State.

If that sounds complicated, it’s like every other aspect of the agency. In addition to leasing land to farms, the CLO expands its trust body with oil and gas royalties paid by companies that produce on land leased from the CLO.

Chambers said “the bulk” of the $ 657,000 settlement with Chaparral Energy was for interest owed by the company on “incorrect royalty payments.” The CLO filed its complaint against the company in 2016.

“Long story short, they kept raising the issue and then they went into their second bankruptcy,” he said. “It’s one of those claims that we really needed to fix, they really needed to fix it, so we ended up in the right place. “

Kay County Wind Farm Project Development

Land office commissioners
Gov. Kevin Stitt, center, and Secretary Elliot Chambers, right, sign documents after a meeting of land office commissioners on Thursday, April 8, 2021. (Tres Savage)

For commercial properties and other land leases authorized by the CLO, the agency makes payments directly to school districts and higher education institutions. On Thursday, commissioners approved a new long-term commercial lease for wind power production with Duke Energy on approximately 3,764 acres of land in Kay County.

John Fischer, CLO’s director of commercial real estate, said the 50.5-year lease marks the agency’s second collaboration with Duke Energy, which won a public auction on April 5 to lease the land. Duke Energy Renewables Wind, LLC was the sole bidder, accepting the minimum rental price of $ 15,055 for the first year. During the development phase of the project, annual rent starts at $ 4 per acre. Once the project generates electricity, CLO will receive 4% of gross revenues with a minimum royalty of $ 3,500 per megawatt per year.

“Unused areas will be released from the contract,” the meeting’s agenda said. “Agricultural use will continue on all plots for the duration of this wind lease. “

“Something that’s going to pay a lot more rent”

CLO
Land Office commissioners will purchase a pair of office buildings at 14201 and 14301 Caliber Drive in northwest Oklahoma City after the deal is approved at a meeting on Thursday, April 8, 2021. (Google Maps)

After a brief executive session Thursday, commissioners also approved CLO’s purchase of a pair of office buildings at 14201 and 14301 Caliber Drive in northwest Oklahoma City. Chambers said the buildings were about 42,000 square feet each.

“We heard it was for sale, so we went to look at it. We are looking to trade a future planned sale for other properties. This other sale is for one square mile via I-240 and Eastern (Avenue). The amount of money we expect to get out of it is just under $ 12.3 million. This purchase costs about $ 10 million, and that’s part of getting the $ 12.3 million and putting it to something else, ”Chambers said. “[The buildings are] almost fully occupied, that’s what we’re looking for. We want rent. So this rent, when it arrives, we pay it to the school system. So it was a way of taking something that wasn’t paying as much rent and transferring it into something that is going to pay a lot more rent.

With pending legislation, the CLO still decides on the custodian bank contract (s)

The CLO currently contracts with the Bank of Oklahoma to be the “custodian bank” for its extended financial interests, but state law currently requires the CLO to re-tender every five years. This happened earlier this year, and Chambers said Thursday his agency was still reviewing applications from the four financial entities that submitted bids.

” We are lucky. We have received a lot of strong proposals, ”he said. “We haven’t made a firm decision yet, but we are analyzing it.”

This selection process could be delayed until the COL has verified whether its bill, HB 2870, is passed by the state Senate and signed by Stitt. The bill would allow the agency to use more than one custodian bank at a time, and it would extend the time between required tenders from five to 10 years.

“As the trust grows, it gets more complex, just over time (…) we have different needs – more needs than in the past. So I want to be able to go to different conservationists for different things. Whether it’s what we’re doing from the point of view of the trust for the $ 2.6 billion money, or the commercial real estate portfolio, things like that. So that gives us flexibility, ”said Chambers. “Came from [five years to 10 years], we get stronger interest, stronger offers, better terms from people if they think they have a stickier relationship with us. However, we still have the option of saying “This is not working” and moving forward. “

The CLO’s current custody contract with the Bank of Oklahoma is linked below, and it describes its fee structure on page 127:

But the same page notes the distribution of income from the CLO’s securities lending program, which involves lending securities to other investors or companies. Under the CLO’s 2016 contract with BOK, the bank retains 25 percent of the net income and the CLO receives 75 percent.

Land office commissioners Page 127 of the 2016 Principal Custodian Agreement between the Land Office Commissioners and the Bank of Oklahoma lists the fee schedule. (Screenshot)

Main custodian bank contract for the commissioners of the current land office

Gregory M. Roy