37-281.02. Leasing state lands for commercial purposes for more than ten years

A. All state lands are subject to lease as provided in this article for a term in excess of ten years, but not more than ninety-nine years, for commercial purposes to the highest and best bidder at public auction. The auction shall be conducted at the place, in the manner, and after the notice by publication provided for sales of such lands except as otherwise provided in this section. For commercial leases of state land more than three miles outside the boundaries of incorporated cities and towns having a population of ten thousand persons or less or more than five miles outside the boundaries of incorporated cities and towns having a population in excess of ten thousand persons, the department shall cooperate with the county or counties in which the land to be leased is located in considering the intended uses. The leases shall be granted in accordance with the Constitution of Arizona, state laws and the rules of the department.

B. If the department determines that leasing of the land is in the best interest of the state, the tract or tracts shall be offered for lease to the highest and best bidder.

C. Each offer for lease shall reserve the right in the department to reject any and all bids and to again offer the tract or tracts for lease if the bids received are not acceptable to the department.

D. Upon announcement of the successful bidder, the first year's annual rental shall be paid by cashier's check. The successful bidder shall also pay the cost of the publication and reasonable expenses of the sale, and such funds shall be subject to the provisions of section 37-107. If there are bids exceeding the minimum bid accepted at the auction, the successful bidder has until 5:00 p.m. of the fifth business day following the date of the auction to deposit a cashier's check with the department for the amount exceeding the minimum bid for the first year's rent. The failure to pay the first year's rent at the time of the auction or to pay the amount exceeding the minimum bid by 5:00 p.m. on the fifth business day after the auction results in forfeiture of the lease and all monies paid. In the event of forfeiture the commissioner may declare that the bid placed before the final bid accepted is the highest bid, and that bidder has five business days after notification by the department to pay by cashier's check all amounts due under this section and section 37-107.

E. Before acceptance of any bid for a lease under this section, the department shall establish to its satisfaction the responsibility of the bidder.

F. Each lease shall be for a term in excess of ten years, but not more than ninety-nine years, as determined by the department, and shall provide for an annual rental of not less than the appraised fair market rental value of the land. The department shall establish a rental adjustment formula by which the rental provided for in the lease is subject to adjustment after periods of time specified in the lease. A period of time shall not exceed five years. The department shall include a rental adjustment formula in each lease. The rental for the first five-year period and the rental adjustment formula for that lease shall be established by the department prior to the call for bids. The department shall publish in the call for bids the rental for the first period and the rental adjustment formula for that lease.

G. A lease issued under this section may include an amortization schedule to be used to determine the value of improvements when the lease is terminated.

H. All provisions of this title applicable to state lands and the lease thereof, not in conflict with the provisions of this section, shall apply to leasing and leases issued under this section.

I. The department shall require an applicant to pay a deposit before beginning to process an application to lease state trust lands if the applicant did not bid at an auction where the applicant initiated the process. The deposit shall be based on the approximate first year rental plus administrative expenses and shall be deposited in a noninterest bearing account. Monies must be deposited at the time of filing an application or at a time determined by the commissioner. If the applicant is not the successful bidder at public auction, the department shall refund the deposit to the applicant. If the applicant is the successful bidder, the department shall apply the deposit to the rental price at auction. If there are no bids at the time of the auction, the department shall transfer the deposit made by the applicant to the appropriate trust beneficiary.