Nearly 300 acres of school trust land in east Bismarck is being put up for public auction June 14 and is expected to bring about $3.7 million.

The property was granted to the state by Congress in 1889 for the benefit of the state's school system. It's managed by the Board of University and School Lands, which includes the governor, secretary of state, state treasurer and superintendent of public instruction.

Land Department Commissioner Gary Preszler said the last time the state's federal land grant property was put up for auction was in the 1970s. The portion now being put up for sale is about half of what the trust holds in an area north of Highway 10, east of Bismarck Expressway, south of Divide and west of North 52nd Street. Should the auction of the property go well, the state will likely put the remainder up for auction.

"There's some good potential for it,"Preszler said. "Clearly, the reason why it has been put up for sale is that Bismarck has grown around it, and it poses an obstacle to development to the east. Its' higher and better use is for development."

The property, which has been annexed by Bismarck, and includes the pine forest that spells out Bismarck, is zoned for agriculture and has been leased for grazing in the past. There are a number of easements running through it for above-ground electrical lines, with two power substations found adjacent to it owned by WAPA and Montana-Dakota Utilities.

"The board isn't interested in platting it and selling it lot by lot, because it doesn't want to have to put in the infrastructure," Preszler said. "There is also the risk involved in selling the property."

There have been some inquiries into the property, and this prompted the Board of University and School Lands to consider the auction.

"Until the 1970s, the board actively sold grant land, but since then it has implemented a limited land sale policy, with the exception of small, unmanageable tracts," Preszler said. "If someone calls with an interest in tracts, we'll say they're not for sale. Over the past 20 years, there have been limited land sales. But because of the unique growth potential shown here, it was decided to sell the property at a public auction."

Appraisals of the property were made, and opening minimum bids have been set at $2,384,000 for the southeast portion, consisting of about 160 acres, and $1,301,000 for the southwest portion of 121.79 acres.

"What we're telling bidders is that if we don't receive a bid at those prices this time, we'll not likely come back with lower prices," Preszler said. "We cannot sell it for less than fair market value. We don't have to sell it, we've owned it for 118 years. This is not a must-sell sale."

Proceeds from the sale will be put in the schools' permanent trust. The Board of University and School lands has more than 650,000 acres of property that it manages across the state.

If the land is sold, it will likely come back through the Bismarck Planning and Zoning Commission.

"If they want to develop the land they'll have to come in to us," said Dave Blackstead, chairman of planning and zoning. "I think the property will be popular, it's in a good location. I don't think any will be zoned industrial, but there is always a need for commercial property along high- traffic areas such as Expressway."

Development consultant Dave Patience has mixed feelings about the property.

"My first impression, as far as property goes around town: There are few pieces as encumbered as that one," Patience said. "The easements are terrible, and there are topography concerns. It's going to be a matter of trying to fit buildings in between the power lines because you can't build under them. You also have to make the transition from industrial-commercial along Expressway to residential by the time you reach the other side."

Patience also pointed to concerns about drainage, which runs right down the center of the southeast section and the fact there are a lot of alkali flats in that area.

"It wouldn't be my first choice of properties," Patience said. "It does have highway frontage to help sell industrial and commercial. But the usable property is very limited."

Preszler said that there have been concerns about the towering pine trees that spell out "Bismarck," located in an area that is part of the auction. The trees are under a 99-year easement, since their planting in the early 1970s. The purchaser of the property cannot require the city to vacate that easement.

"If there are no bidders, whether it will be offered in the future is hard to say. We're not going to lower the price, though," Preszler said.

The auction will be be held June 14 at the Kelly Inn at 10 a.m. The southeast and southwest sections will be first offered for bids separately and then as a unit. The highest combination of bids will be accepted.

(Reach reporter Gordon Weixel at 250-8255 or gordon.weixel@;bismarcktribune.com.)