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Developer Gets Rent-Free Deal on Federal Land March 13, 2003 By DOUGLAS JEHL WASHINGTON, March 10 - The Army Corps of Engineers owns 456 lakes in 43 states, and under federal rules, private developers must pay fair market value to lease land from the corps along those lakes. But Ronald W. Howell, an Oklahoma lobbyist, a consultant and a prominent Republican fund-raiser, is one developer who recently found a cheaper way. Last month, Mr. Howell and his company, StateSource L.L.C., signed a 50-year rent-free lease on 280 acres of lakefront at Skiatook Lake in Oklahoma, not far from Tulsa. The deal was a sublease, between StateSource and the Skiatook Economic Development Authority, which had just leased the land free from the corps under an exemption that allows such arrangements for government agencies. The authority then handed off the property to Mr. Howell, with the corps' full approval. Mr. Howell and his lobbying and communications company plan to build a $10 million marina, golf and cabin complex and, in the process, turn a profit. The corps has granted roughly 1,300 rent-free leases to states, localities and other public agencies, and officials said they did not think the Oklahoma deal was atypical. But they make little effort to monitor such arrangements and keep no central records of them. Critics of the arrangement say that the deal violates at least the spirit of the federal rules and that the deal is notable because of what is at least a curiosity: Mr. Howell has been finance chairman for Senator James M. Inhofe, the Oklahoma Republican who, as the new chairman of the Senate Committee on Environment and Public Works, oversees the corps. In letters and other communications, Senator Inhofe urged the corps to grant swift approval to the lease, agency officials said. In interviews, officials at the corps defended Mr. Howell's arrangement as consistent with the corps' efforts to promote recreational development on public lakes. "We're not in the business of telling the states how to operate," George Tabb, who heads the corps' natural resources division, said. "If they decide that they want to put this in the hands of a private developer at no cost, to stimulate the economy, then that's not our business." A corps spokesman, David Hewitt, said the agency could provide details about rent-free leases only after soliciting information from its offices around the country, in what he said would be a time-consuming process. A spot check of several dozen rent-free leases in three states - Georgia, Mississippi and Washington - turned up no similar transactions, officials said. In a telephone interview, Mr. Howell defended the rent-free lease as appropriate and said his company's development would help meet the corps' goal of promoting recreation at Skiatook (pronounced SKY-took) Lake. He said he did not believe that the corps' approval of the project reflected special treatment because of his ties to Senator Inhofe. "All of what we're building is available for public use," Mr. Howell said. "We actually don't think that profit is a bad thing." But some federal officials involved in the project said they wondered whether the corps was in part seeking to curry favor from Mr. Inhofe. He had urged the corps to speed development on the lake, which the agency chose in 2000 as one of a handful of demonstration sites that qualified for accelerated decisions on recreation projects. "My whole impression of this since the beginning was that they were trying to railroad this thing through, trying to ram it down our throats, the corps and the Skiatook development agency and the developers behind them," said Kevin Stubbs, a biologist with the Tulsa office of the Fish and Wildlife Service. The officials did not allege any improper behavior on Senator Inhofe's part, and a spokesman for Mr. Inhofe, Danny Finnerty, said, "Neither the senator nor the senator's staff did anything for Mr. Howell over and above what they would do for any constituent." Several critics of the agency, who said they had not been aware of the arrangement until contacted by a reporter, said they regarded it as an effort to circumvent federal rules. "If we're going to do economic activity on federal lands, the federal government should be getting some return from investments," said Steve Ellis, a vice president at Taxpayers for Common Sense, an advocacy group. "In this case, they're essentially laundering land to be used for private development, and the corps seems to have been a willing accomplice." The Army Corps of Engineers owns 11.7 million acres of federal land, or about 2 percent of the total federal real estate. It attracts about 30 percent of visitors to federal land, primarily because of the popularity of recreation on corps lakes, said Mr. Hewitt, the agency spokesman. Neither the corps nor the Skiatook authority tried to determine the fair market value of the 280 acres being leased on the lake. As a matter of practice, the corps does not try to determine the market value of its property, even in the more than 500 existing deals in which corps land is directly leased to private concessionaires for a fee, said Dennis A. Hogan, chief of real estate for the corps' southwestern division, in Dallas, which oversees the Tulsa district. Those deals are awarded on the basis of competitive bidding, and as a rule, they require only that the corps receive a fair return, which usually amounts to a share of any profits or revenues, Mr. Hogan said. In the case of the 1,300 leases of corps land to state or local agencies, all are rent free, Mr. Hogan said. He and other corps officials said the corps had never tried to estimate that property's value. "We're not out to make money," Mr. Hogan said. "We're out to provide a recreational opportunity." Still, at a minimum, federal officials who spoke on condition of anonymity estimated that a 50-year lease of the 280 acres involved in the Skiatook deal would be worth hundreds of thousands of dollars, even at the kind of highly concessionary rate being paid by another tenant on federal land on the lake, the Crystal Lake Marina. "If anyone else in the world had approached the corps without the political influence, there'd be no way this would have been approved," said John Gruninger, the co-owner of that marina, who contends that the rent-free terms offered to the new project will undercut his business. The rules governing lease agreements are spelled out explicitly in the corps' real estate regulations. The rules allow rent-free leases to government agencies but say in general that "when federally owned property is leased or sold, fair market value should be obtained." In the case of the Skiatook deal, Blu Hulsey, the town manager for the community of 4,500, said it had been Mr. Howell and his associates who first approached the local development authority to propose the deal, rather than the other way around. "This was our decision as far as giving the property to them because we wanted to aid them any way possible and to make this development feasible," said Mr. Hulsey, who also serves as the principal staff member for the development agency. Mr. Howell confirmed that he had made the approach, but he and his associates said the idea of using the development agency as an intermediary to obtain a free lease had been recommended by officials at the corps' district office. "They said, `Look, the way our regulations look and the way we do business, this sort of thing works best,' " said Kevin C. 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