[Senate Hearing 106-788]
[From the U.S. Government Publishing Office]
S. Hrg. 106-788
S. 1938 THE CABIN-USER-FEE FAIRNESS ACT OF 1999
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HEARING
before the
COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
UNITED STATES SENATE
SUBCOMMITTEE ON FORESTRY,
CONSERVATION AND RURAL REVITALIZATION
ONE HUNDRED SIXTH CONGRESS
SECOND SESSION
ON
S. 1938 THE CABIN-USER-FEE FAIRNESS ACT OF 1999
__________
MARCH 22, 2000
__________
Printed for the use of the
Committee on Agriculture, Nutrition, and Forestry
__________
U.S. GOVERNMENT PRINTING OFFICE
67-662 WASHINGTON : 2000
_______________________________________________________________________
For sale by the U.S. Government Printing Office
Superintendent of Documents, Congressional Sales Office, Washington, DC
20402
COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY
RICHARD G. LUGAR, Indiana, Chairman
JESSE HELMS, North Carolina TOM HARKIN, Iowa
THAD COCHRAN, Mississippi PATRICK J. LEAHY, Vermont
MITCH McCONNELL, Kentucky KENT CONRAD, North Dakota
PAUL COVERDELL, Georgia THOMAS A. DASCHLE, South Dakota
PAT ROBERTS, Kansas MAX BAUCUS, Montana
PETER G. FITZGERALD, Illinois J. ROBERT KERREY, Nebraska
CHARLES E. GRASSLEY, Iowa TIM JOHNSON, South Dakota
LARRY E. CRAIG, Idaho BLANCHE L. LINCOLN, Arkansas
RICK SANTORUM, Pennsylvania
Keith Luse, Staff Director
David L. Johnson, Chief Counsel
Robert E. Sturm, Chief Clerk
Mark Halverson, Staff Director for the Minority
(ii)
C O N T E N T S
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Page
Hearing:
Wednesday, March 22, 2000, S. 1938 The Cabin-User-Fee Fairness
Act of 1999.................................................... 1
Appendix:
Wednesday, March 22, 2000........................................ 31
Document(s) submitted for the record:
Wednesday, March 22, 2000........................................ 79
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Wednesday, March 22, 2000
STATEMENTS PRESENTED BY SENATORS
Craig, Hon. Larry E., a U.S. Senator from Idaho, Chairman,
Subcommittee on Forestry, Conservation, and Rural
Revitalization, of the Committee on Agriculture, Nutrition, and
Forestry....................................................... 1
Baucus, Hon. Max, a U.S. Senator from Montana.................... 2
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WITNESSES
Panel I
Brouha, Paul, Associate Deputy Chief, National Forest System,
USDA Forest Service............................................ 4
Panel II
Allman, Paul, American Land Rights Association................... 15
Betts, Richard, MAI, ASA, SRA, Betts and Associates.............. 17
Corlett, Joe, MAI, SRA, Mountain States Appraisal and Consulting
Inc............................................................ 18
Mead, David, President, Sawtooth Forest Cabin Owners'
Association, Twin Falls, Idaho................................. 12
VerHoef, Mary Clarke, National Forest Homeowners................. 13
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APPENDIX
Prepared Statements:
Baucus, Hon. Max............................................. 32
Allman, Paul................................................. 61
Betts, Richard............................................... 66
Brouha, Paul................................................. 34
Corlett, Joe................................................. 78
Mead, David.................................................. 42
VerHoef, Mary Clarke......................................... 51
Documents submitted for the record:
Position statement, submitted Hon. Daniel Akaka, a U.S.
Senator from Hawaii........................................ 80
Position statement, submitted by Stanley N. Sherman,
Germantown, Maryland....................................... 81
Position statement, submitted by Ted L. Glaub, President,
American Society of Farm Managers and Rural Appraisers..... 82
Charts, displaying appraisal changes, submitted by Paul
Brouha..................................................... 84
Revised Policy for administering recreation residence permits
on the National Forests, submitted by David R. Mead........ 93
Joint statement by former members of the Chief's Committee,
concerning Congressional testimony by the U.S. Forest
Service in connection with recreation residence fee
determination, submitted by Mary Clarke VerHoef............ 110
Specification for the appraisal of Recreation Residence
Sites, submitted by Richard M. Betts....................... 128
Memorandum, Review, and response regarding re-appraisal of
Pettit Lake Recreation Residences, submitted by Joe Corlett 140
Nonconforming-Use Properties: The Concept of Positive
Economic Obsolescence, submitted by Joe Corlett............ 160
S. 1938 THE CABIN-USER-FEE FAIRNESS ACT OF 1999
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WEDNESDAY, MARCH 22, 2000
U.S. Senate,
Subcommittee on Forestry, Conservation, and Rural
Revitalization, of the Committee on Agriculture, Nutrition
and Forestry,
Washington, DC.
The Subcommittee met, pursuant to notice, at 3:00 p.m., in
room SR-328A, Russell Senate Office Building, Hon. Larry E.
Craig, (Chairman of the Subcommittee), presiding.
Present or submitting a Statement: Senators Craig, and
Baucus.
Chairman Craig. The Subcommittee is called to order. The
Senate Agriculture Committee is here today to take testimony on
S. 1938.
OPENING STATEMENT OF HON. LARRY E. CRAIG, A U.S. SENATOR FROM
IDAHO, CHAIRMAN, SUBCOMMITTEE ON FORESTRY, CONSERVATION, AND
RURAL REVITALIZATION, OF THE COMMITTEE ON AGRICULTURE,
NUTRITION, AND FORESTRY
Chairman Craig. Nearly 100-years ago, Congress and the
President set up a program to allow American families the
opportunity to recreate on public lands in remote cabin
settings. It is a wonderful example of American people being
connected to our public lands in a responsible way, a way that
fits with Gifford Pinchot's vision of our national forests.
Today 15,000 of these sites remain active providing
recreational opportunities to generations of families. These
cabins stand in sharp contrast in many aspects to modern
outdoor recreation, yet are an important aspect of the mix of
recreation opportunities for the American public.
While many of us enjoy fast off-road machines or watercraft
or hiking in our back country with high-tech gear, others enjoy
a relaxing weekend at their cabin in the woods with their
family and their friends. The Recreational Residence Program
allowed families all across the country an opportunity to use
our national forests. This quiet, somewhat uneventful program
continues to produce close bonds and remarkable memories for
hundreds of thousands of Americans.
But in order to secure the future of the cabin program,
this Congress needs to re-examine the basis on which these fees
are now being determined. This issue first came to my attention
in 1997, when the new base fee in the Sawtooth National
Recreation Area skyrocketed into an alarming five-digit range,
an annual fee that could be enough to purchase a lot outside
the national forest, and in some instances, to even build a
cabin on it. In fact, around 140-lots in the Sawtooth National
Forest saw their annual feel catapult up more than 500-percent.
On the other hand, some areas saw their fees go down with the
new appraisal.
It is obvious now that the Forest Service was appraising
and affixing value to the lots being provided to cabin owners
as if these lands were fully developed, legally subdivided, fee
simple residential lands. In other words, the Forest Service is
charging for infrastructure that they have no investment in. My
goal is to see that the cabin program remains affordable to
American families. Consistent with that goal, S. 1938 sets up a
methodology for appraising the cabin, which will determine the
value of the use to the cabin owner, not what the market would
bear should the Forest Service decide to sell off its assets.
Again, my goal here is to set up an appraisal system that
guarantees a fair fee for the cabin owner and taxpayers, and to
insure the long-term viability of the program.
I look forward to hearing from our witnesses today, and
want to extend a very special thanks to the Appraisal Institute
and the American Society of Farm Managers and Rural Appraisers
for the time they have spent in the last few weeks to provide
valuable professional input on the more technical aspects of
the legislation itself.
With that, let me turn to my colleague from Montana,
Senator Max Baucus. Max, thank you for coming today.
STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM MONTANA
Senator Baucus. Thank you very much, Mr. Chairman. I thank
you for this hearing.
There are a lot of people in our country who face this
problem, and I might say in my state, it is particularly acute,
because we are such an outdoors state. Everybody in Montana is
an outdoors person, everybody. I mean, either we hunt, we fish,
or we are in agriculture, or forestry, mining, tourism,
recreation, we are an outdoors people. It is just the nature of
our state.
And cabin sites are a part of life because we are an out of
doors people. I mean, whether it is Labor Day, weekends,
whether it is Memorial Day, 4th of July, recesses--recesses for
us, 4th of July and vacation for our people--we go to our
cabins, or just go just for the heck of it to relax and get
away. And in many cases these cabin sites are second, third,
maybe fourth generation.
I might say, Mr. Chairman, I remember when I was a kid, a
friend of mine, a high school classmate of mine was--he was a
real goer. He decided he was going to build a cabin on one of
these sites. Forget it. We went out, and first of all, we laid
the foundation. We mixed our own concrete, and my gosh, that is
heavy stuff when you do not have a concrete mixer and you do it
in a wheelbarrow. And then we decided it was going to be a log
cabin, so we went out to get our logs. It probably was not the
right thing to do, but we found some trees. And so we cut down
the trees for logs for our cabin, and then we realized our
trees were too big; we could not lift them up and put them on
our truck. They were just too big. So anyway, we set our sights
a little lower, and had to cut down some smaller trees, and lo
and behold, finally by the end of the summer, we had our cabin.
And I must say, Mr. Chairman, it is still there. And it has
been used by other people in his family over the years.
In our state, all across the country it seems, folks have
sites, and they are cabin sites, and the rental fees are just
going through the roof, and clearly, we need to find a solution
that is fair and that is fair to everybody, that is fair to the
taxpayers, but particularly fair to the owners. This is their
way of life, and they love the land and take care of it. I
mean, if they are not there, the people who live in the area of
the state and take care of the land, then somebody, more likely
than not out-of-state, the Federal Government, or whoever it is
who is going to be there, it is not the same. It is not what
life is, and those people probably would not take care of it as
well as the owners do.
We had come up with a normal solution in our state in a
different area with a different Federal agency, but it is
another example of every situation is different, and they are
all unique, but they are all the same. They are all the same in
that we need to find a solution where as much as possible, in
my view anyway, the cabin owners can continue to have the
property. If they are not paying their rents because they go up
too high, they can figure out a buy-out solution. But that is
not going to be true in all cases. In some cases it is best for
the Federal stewardship to prevail, but I think the preference
should be for local people, and for the lessees or for the
owners for the reasons I just indicated. I believe strongly in
this. I know how for many Montanans, and I am sure it is the
same in Idaho and some other states, this is their life. I
mean, there is not a lot else to do in some of our parts of the
country, and this is what we want to do, just to get outdoors,
just go to our cabin, and it is that important. Thank you.
Chairman Craig. Well, Max, thank you. And now we know why
there were clear cut spots.
[Laughter.]
Senator Baucus. Mr. Chairman, I must say, it was a very
selective cut.
[Laughter.]
Chairman Craig. All right, all right. I had never thought
of you cutting something that was too big, you could not lift
it.
Senator Baucus. Well, that was a few years ago.
Chairman Craig. I am sure it was. Well, thank you very much
for that testimony, and I share with you in the concern that I
think westerners and public lands states people express over
these kinds of issues. That is why we are here today with this
hearing.
Senator Baucus. Thank you. And I wish I could stay for the
hearing, but I know you will do a terrific job. Thank you.
[The prepared statement of Senator Baucus can be found in
the appendix on page 32.]
Chairman Craig. Thank you very much, Max.
Now let me ask the Associate Deputy Chief of our National
Forest, Paul Brouha, who is with us today, to offer his
testimony on behalf of the U.S. Forest Service. Thank you for
joining us. We appreciate your time before the Committee, Paul.
STATEMENT OF PAUL BROUHA, ASSOCIATE DEPUTY CHIEF, NATIONAL
FOREST SYSTEM, USDA FOREST SERVICE, ACCOMPANIED BY RANDY
KARSTAEDT, SPECIAL USES PROGRAM LEADER, AND PAUL TITTMAN, CHIEF
APPRAISER, USDA
Mr. Brouha. Mr. Chairman, Senator Baucus, good afternoon.
Thank you for the opportunity to testify on Senate 1938. I am
accompanied today by Randy Karstaedt, our Forest Service
Special Uses Program Manager, and by Paul Tittman, our chief
appraiser.
Chairman Craig. Thank you both for coming.
Mr. Brouha. Enactment of 1938 would replace the recreation
residence fee policy for National Forest System lands and
direct the Secretary of Agriculture to establish a new set of
guidelines for arriving at an annual fee for the privilege to
use and occupy and National Forest recreation residence lot.
The proposed stipulated practices would be different from the
appraisal standards that all Federal agencies are required to
use in assessing fair market value. The administration strongly
opposes Senate 1938, and I will address 3 of our most
significant concerns in my testimony, but let me first give
some background in addition, perhaps to what you identified,
Sir.
In 1908 we established cabin tracts and issued special use
term permits for cabin owners. And owners were charged an
annual rent representing the market value of the land at that
time, and as you noted, they took care of that land, and often
served us in very good stead in alerting us about fires and
rendering emergency aid. The permit allowed the holder to build
a structure for recreational purposes, but not to occupy it on
a full-time basis as a full-time resident. So the fee is really
only for the site, it is not related to the value of the
structure. And as you noted, this privilege is extended to
approximately 15,000-cabin owners nationwide.
In the 1980s the Forest Service worked closely with the
public and permit holders in revising our residence policy, and
in 1987 published for public review and comment, proposed
revisions to appraisal and fee determination procedures and
policies for recreation residence uses. Nearly 3,200
respondents commented. 96-percent were permit holders or
associations of holders. 85-percent responded favorably. The
regulations were subsequently published and adopted in 1988.
The terms and conditions of every permit direct lots be
appraised at least every 20-years. And in 1996 we started a 5-
year effort to appraise the fee simple value of all the lots.
We will complete that within the next 2-years, using the same
appraisal specifications and the procedures today that were
actually set and agreed to in 1988.
For the record, I would like to include several charts
displaying the changes, this one nationally, as well as in
several states, in annual rental fees resulting from the
appraisals. The national results from 9,600 appraisals or about
63-percent of the total. More than 58-percent of our holders
will experience either a decrease or a relatively moderate
increase. Less than 3-percent will experience a dramatic
increase of over 500-percent. The balance will see significant
increases averaging a tripling of their fee.
Now, we realize that a sudden rise in user fees can be a
hardship. Therefore, once the appraisal is completed, we phase
in fee increases that exceed 100-percent over a three-year
period. Also, increases in recreation residence fees will be
implemented in fiscal year 2000 only to the extent that they do
not exceed the 1999 fees by $2,000. In addition, no fee can be
increased sooner than 1-year after the time the Forest Service
has notified the holder of the results of the appraisal.
At this time our appraisal evaluation procedures are being
evaluated by the Appraisal Foundation, the governing body over
all appraisal practices, and we have been given no reason to
believe that the foundation will not recognize our appraisal
specifications as professionally acceptable.
Mr. Chairman, I will now briefly discuss the specific
objections to the legislation.
First, 1938 would exempt the permit fee from fair market
value provisions in existing law and regulation. The Congress
and the administration have a long-standing policy that the
people of the United States receive not just a fair fee, but
fair market value for all public lands and resources.
Based on our preliminary analysis, we estimate that the
fair fee proposed by Senate 1938 would result in a return of
the Treasury between 8 and $12 million less than fair market
value. A significant percentage of our recreation residence
permit holders would be paying an annual fee that is less than
the fee now being paid, fees that are actually based on
appraisals more than 20-years old.
Second, the fair fee would be different than a fair market
value rental fee. In a market economy, we rely on the market to
determine what is fair. Trying to establish a rental fee
without regard to market rates for similar properties cannot
lead to a fair outcome, but rather, more likely to a subsidized
result. That is not fair; certainly all the permit holders
would welcome it.
Moreover, the standard for setting fees would thus be
different than the standard set by the Forest Service to assess
and collect fees for over 130 other types of special uses
governing the National Forests and Grasslands. By exempting
recreation residence permit holders from the principle of fair
market value rental fees, this bill sets a precedent for other
user groups to follow, opens the door, as it were.
Third, Senate 1938 would create a four to five-year period
of disruption and inequity in the assessment and collection of
fees for recreation residence users. It would require the
Secretary to contract with a professional appraisal
organization to develop appraisal guidelines and promulgate new
regulations, which could take several years.
Senate 1938 would suspend all current appraisals pending
the promulgation of those new regulations. In addition, it
would provide all permit holders who already have had their
lots appraised, an opportunity, within 2-years of the issuance
of the new regulations, to request a new appraisal. In the
interim, the bill proposes three options for the Forest Service
to assess what are characterized as transition fees, and the
manner in which the bill proposes to assess these fees would
create fee inequities between permit holders occupying
comparably valuable lots during that four or five-year
transition period. In sum, most of the 4 million that has been
spent on appraisal since 1996 would be lost if Senate 1938 is
enacted.
In addition, we estimate it would cost 500,000 to develop
new regulations and guidelines, and after that, most of the
9,600 permit holders with completed appraisals would likely
request another appraisal, which would cost in the neighborhood
of 3- to 4-million additional dollars.
Now, the use of National Forest land for private recreation
residences is a privilege afforded to a relatively few number
of persons. Taxpayers should be adequately compensated for this
private use of public lands. The appraisals we have completed
conform to the value of a National Forest System land being
occupied by recreation residences. We realize it has increased
over the last 20-years, and for some lots with particularly
desirable amenities such as being close to water, that value
has increased significantly. While there is sticker shock, and
we recognize that, we feel we are implementing our fee policy
in a manner consistent with Federal laws, agency management
direction and sound management principles concerning fair
market rental fees for the use of the public's land. And we
believe the appropriate course would be to allow us to continue
this process.
Thank you for providing me the opportunity to testify, and
we would be glad to answer any questions, and especially those
of more technical nature if you have any.
Chairman Craig. Well, Paul, thank you very much. I am not
surprised by your testimony. We have been trying to struggle
with this issue for some time to create a sense of equity that
I and I think a good many of my colleagues, and certainly some
of our resident holders feel is inequitable.
I do have some questions, and I appreciate your response to
them. What is your ideal or definition of land in, quote,
``native or natural state'' in chapter 6 of your handbook? How
do you define that? Do you know?
Mr. Brouha. Mr. Chairman, the native or natural state
essentially means that the property would be appraised based on
its condition at the point prior to the construction of any
structural improvements or ground improvements within the
authorized area.
Chairman Craig. Would that include access or non-access?
Mr. Brouha. You are talking about----
Chairman Craig. By the definition.
Mr. Brouha. The permitted area has legal access to it. The
physical access in most cases is over system roads. There are
some exceptions to that where homeowners' groups have in fact
constructed bridges or roads. Wherein the cost of a ground
improvement, in or outside of the permitted area, was borne by
the permittee or the predecessors, that is disregarded in the
appraisal process. Only those features that were paid for by
the public or by a purveyor of services like the electric
company.
Chairman Craig. But as it relates to the definition itself,
it is the initial one, the legal--by definition, legal access?
Mr. Brouha. Yes.
Chairman Craig. OK. Would you please explain to the
Subcommittee how you instruct your appraisers to take into
account the restrictive elements of the recreational residence
policy and the special use permit when appraisals are
conducted?
Mr. Brouha. The fee determination process, Senator, is in 2
parts. The first part deals with the value of the site as
though unimproved for the use. That does not reflect anything
other than the fair market value of that site within a
prescribed highest and best use recreation residence, summer
home, something in that ilk. The determination--or the
recognition of the terms and condition to the permit as opposed
to the terms and conditions found in typical land leases is
reflected in the 5-percent of land value fee determination.
Current return rates based on recent market analyses reflect a
range of return rate for real estate of between 8- and 12-
percent. The 5-percent would reflective of the difference, and
that was agreed to administratively in the early 1980s as a
part of this process of negotiations with the homeowners
associations.
Chairman Craig. OK. At Pettit Lake in the Sawtooth National
Recreation Area, the Forest Service has been systematically
terminating or failing to renew cabin permits for decades, then
ordering the cabins to be removed. This creates another form of
scarcity of cabins or lots available for cabins, contributing
primarily toward the increased value of the cabins that remain
active in the cabin program. Nationwide, over recent decades,
the Agency has ordered elimination of many thousands of cabins
from the cabin system, replicating the same consequence of
driving up the value of cabins that remain in the system.
I would like to know what plans you have for the future
with respect to reducing the number of cabins that are
currently active.
Mr. Brouha. Sir, the Forest Service terminates or revokes
no more than 5 or 6 recreation permits annually, and it is done
for three primary reasons: the abandonment of the use by the
holder; the non-payment of fees; a holder's breach of terms and
conditions of the permit; and from the administration's--the
land area, sometimes if there is a determination of the need
for an alternative public use of the site, that can also lead
to a termination of the permit. But we have discontinued a very
small number of residence permits over the past 20-years.
Chairman Craig. And we could go back into the records and
document 5 or 6 a year and no more than that?
Mr. Brouha. Randy, would you?
Mr. Karstaedt. At one time in the 1960s, when the Agency
made a administrative decision not to issue any more new
permits for new recreation residence tracts, at that point in
time we peaked in terms of numbers of authorizations at around
19,000 authorizations. We are down around 15,000 right now. I
do not have records with me, but I would venture to say the
majority of that reduction has occurred over time, where we in
fact have actually conveyed out of fee title of the underlying
land to the recreation residence owners.
Now, admittedly, we have also terminated and converted some
of these sites to alternative public purposes, where we have
identified, through a planning process, that there are other
public purposes that might be served in the locale of a
particular tract or lot, like proximity to a trail head, a boat
launching area, a campground, a picnic site, that sort of
thing.
In the future--and it is in our policy right now--whenever
a decision like that is made, it is made through the Forest
Land and Resource Management Planning Procedures, public
disclosure, comment, notice, and decision making with
opportunity to appeal, and in the policy we are obligated to
give the holder a minimum of a ten-year advance notice of when
the conversion to an alternative public purpose might occur. So
to predict what might happen in the future is really dependent
on individual land and resource management planning process at
the local level.
Chairman Craig. You peaked at 19,000 when?
Mr. Karstaedt. In the mid 1960s.
Chairman Craig. So within a 40-year period or a little
less, you have dropped by 4,000.
Mr. Karstaedt. Right.
Chairman Craig. And you believe most of those were
converted to fee simple?
Mr. Karstaedt. Most of those, I believe, were--yeah, were
converted through a land exchange, most typically, where we
convey the fee title to the cabin owners.
Chairman Craig. Cabin owners in the Valley View Cabin Tract
in the Sawtooth National Forest initially faced much higher
fees as a consequence of the Forest Service's appraisal
results. The cabin owners contracted with an independent
appraiser, a man who is state-certified to conduct appraisals
in Idaho, for a second appraisal, as provided by the
recreational residence policy. The appraisal value of the
typical lot at Valley View turned out to be much lower in the
second appraisal than the Forest Service's initial appraisal,
resulting in a substantially lower fee. The Forest Service
accepted the results of the second appraisal, yet nearby, at
Pettit Lake in the Sawtooth National Forest, a second appraisal
was also conducted by another Idaho-certified appraiser, and
the Forest Service has sat on the record, the second appraisal,
for over a year without making a decision.
Let me ask a couple of questions specifically to this, if
you are knowledgeable of this situation. What do you intend to
do at Pettit Lake, and could you also tell us whether the
Forest Service appraiser or appraisers who conducted the
initial appraisal of the Valley View tract, and at the Pettit
Lake tract, were certified by the State of Idaho to be
conducting appraisals in our state?
Mr. Brouha. Mr. Chairman, all Forest Service staff
appraisers are certified in a state under OMB 9207, and because
of the scope of the jurisdiction, we are only required to be
certified in a state, meeting the intent of USAP, but every
Forest Service staff appraiser holds general certification.
Second, regarding the specifics, the second appraisal is
looked at in context with the instructions. If it is prepared
to the same standard as our Chapter 6 instructions, and it is
well documented, that report would be accepted, and that is
part of the appeal process, if you will, or a proxy for the
appeal process, and it has worked fairly well in those cases
where the second appraisal was written to the same standards.
The second appraisal at Pettit Lake had a number of issues,
and I am personally familiar with it. It was an extremely
complex process, and the review on the second appraisal will be
forthcoming. I think it probably would be inappropriate for me
to talk about whether it is accepted or rejected.
Chairman Craig. I respect that.
Mr. Brouha. But I will tell you that there were a number of
problems that were associated with that, and the review
appraiser----
Chairman Craig. When do you expect that to be out? I think
that is an appropriate question.
Mr. Brouha. I would say probably within the next week to 2-
weeks. The review appraiser has to wrestle with a lot of tough
issues and consulted with me on a whole flock of it. I did not
become the reviewer of record, but I did provide substantial
assistance in interpreting the policy and procedures. It is
very important that those second appraisals be written to
exactly the same standard as the first. Otherwise, we end up
with divergent opinions every time, and then there is no
resolution. So that was the major issue.
We have had a number of cases where the second appraisal
has been written; it was written to the appropriate standard,
and has been accepted, and resulted in a reduced fee over what
the first appraisal suggested.
Chairman Craig. No matter how good your appraisal process
is, if the result is hundreds or even thousands of cabin owners
being forced to sell, would it be your choice to go ahead with
the present process or reevaluate the process?
Mr. Brouha. Mr. Chairman, we have, on the basis of the
9,600 that we have already surveyed, in fact, we do not feel
that will be the outcome. Certainly, there are some situations
where there may be some appraisals forthcoming around highly
attractive lake tracts where we have significant development
and appreciation of value, where those value increases have not
been matched by our process to increase the fees over time. The
sticker shock is going to be pretty evident. There are some
ways of mitigating that, perhaps in the future, where we could
have a return of an appraisal on a more frequent term than
every 20-years. We could also tie the escalator of the rental
fee to a county appraisal and note the increase generally in
that particular area. There are several ways that we could
hopefully resolve that particular, but I think the appraisal
process is sound, and I think the concept of obtaining fair
market value is a valid one.
Chairman Craig. Well, obviously, I am in search of some of
the things you have suggested, although those suggestions have
not been forthcoming in policy or rule or regulation from the
Forest Service. Any time you do not appraise except every 20-
years and the circumstances of the area change and somebody
gets a 400, 500- or 600-percent increase, sticker shock is
evident. And the circumstances of the owner may not have
changed. The circumstances of the area may have changed. And to
suggest after the fact that, yeah, we could do this or we could
that, you know, thank you very much. That is long after the
person has either had to sell the cabin, get rid of it or walk
away. I do not think that, that serves our problem, and that is
probably why I am sitting here today with a bill, and you are
sitting there giving testimony on it. I have sensed a rigidity
that I thought was unacceptable on the part of US Forest
Service in certain instances. I followed it very closely. I
agree with you, the broad argument is there. In this instance,
the narrow argument is, in my opinion, unrealistic.
Is it the opinion of the Forest Service that the cabins it
administers are equivalent to other vacation cabins on private
land?
Mr. Brouha. Let me have Paul address that, because that is
an appraisal question.
Mr. Tittman. For the most part the utility that is afforded
a cabin holder is equivalent to what an individual on a
commensurate piece of private land gets, the difference being
ownership. Any time you rent something, the difference is that
you pay for it every year, and if you rent it long enough, you
will pay for it multiple times, and it makes no difference
whether it is a recreation residence or a house in the city.
That is just the nature of renting.
Fair market value, as it applies to these--and I would like
to digress a little bit if I may, Mr. Chairman?
Chairman Craig. Sure.
Mr. Tittman. If you look at the total picture, nearly all
of the dramatic increases have occurred in and around
waterfront properties, as Mr. Brouha stated. Lake effect has a
tremendous effect on value. There are not any more lakes, and
there is fewer and fewer lots available for those lakes. The
demand for that kind of thing is tremendous.
I have been monitoring on an unofficial basis what I would
refer to as leasehold sales, those situations where cabin
owners sell their cabin to another permittee and we reissue the
permit. And in a lot of cases I have been able to determine the
actual price paid for the cabin. We find that in the waterfront
areas there is a dramatic reflection of leasehold and by
definition--I know you are very aware of this--leasehold
represents the difference between contract rent and market rent
on a cumulative basis. When you see that kind of thing, it can
only tell you that the use charge under the prior regimen are
not being recognized in the market, and the market is saying
they should be substantially higher, and those leaseholds
reflect that.
The concern that we have is, is the annual indexing
process, and to supplement what Mr. Brouha said, I personally
contacted five states, your state among them, spoke to the
state departments of revenue. And what I have found is that in
the counties where we have occupancy of recreation residence,
the states in all cases can provide us a county index that
reflects appreciation for this particular class of property on
an annual basis. There are ways to utilize that to keep the
sticker shock thing from happening once we start with a level
plateau, the beginning point of fair market value. So there is
a way to mitigate that.
The history--and I have to go back to ground zero--I was
involved in the reappraisal of Priest Lake and Ponderay in the
1980s, early 1980, and I was involved in the appraisal of
Georgetown Lake in Montana in 1979. In fact, I personally did
that appraisal. The evolution of value in those areas has been
dramatic. If you were to try and buy a lot on any of those
lakes, and there are privately held lots on both lakes, the
price difference is huge, wherein we go to the Black Hills in
South Dakota, and for the most part we had values remain static
or go down, and these were not water-related properties, but
scattered tracts. We had the same thing occur in Montana on the
Helena Deer Lodge and Beaverhead Forest, where we had scattered
homes that were not water-related.
Once we have established a plateau of fair market value, we
can then index annually using localized measures that will
reflect that class of real estate in that competitive arena,
and avoid one of the major traumas. And I was an advocate of
this 20-years ago, and I still am. The issue of IPD was one
selected by the homeowners. That was contrary to what the
Agency wanted. We wanted to use CPIU because it was more
commonly understood, but the IPD is one that was selected as a
more conservative index, and what happened was, is where we had
dramatic increases in property values, the IPD index that we
have been using annually to reflect changes does not----
Chairman Craig. Just a moment here. We will let these folks
complete.
[Pause.]
Chairman Craig. Please continue.
Mr. Tittman. Does not under any circumstance reflect
changes in the market, either on a subjective basis or on a
national basis. As a matter of fact, the IPD formula the
Department of Commerce uses has no component of real estate in
it. Therefore, its applicability is very questionable. So
again, from my perspective as an appraiser, to start with a
current value and then go forward with a commensurate index
that reflects changes in that class of property in that
competitive arena, including Pettit Lake in the Sawtooth or
wherever, we are going to be able to stay cyclical.
The other half of this is, is when you index anything for
much more than 10-years, you lose context with reality unless
you do a market test periodically during that extended time
frame, and that has also happened here. We did not revisit
value until 18-years had passed from the prior appraisal, and
on that premise, using an inappropriate index, you cannot help
but have all kinds of serious problems come out of the new
numbers. This was destined to happen. It was predicted 20-years
ago, and it happened.
Chairman Craig. So are you still contending that the
current method, settling cabin fees, is the same method that
you created in the 1980s?
Mr. Tittman. Yes, it is. It is exactly. The appraisal
procedure was prepared--my predecessor, Bill Wakefield, worked
with a representative of the homeowners' association, I
understand an appraiser out of Florida, or a man who had
appraisal experience out of Florida, and the handbook was
crafted based on their work. We have not changed a period or a
comma in that thing ever since. And that is another issue,
because technology changes, various and sundry things that have
happened that would have given rise to changes and a cleaner
definition of ``native'' and ``natural state'' to avoid
confusion. There is a number of things we could have done, but
because of the outstanding agreement, we did not touch that
document.
Chairman Craig. OK. Well, gentlemen, I think for the short
term, that is all the questions I have. I will leave the record
open, and I may submit some additional questions in writing for
you, but Paul and gentleman, thank you, all of you very much
for coming today to testify.
Mr. Brouha. Thank you, Mr. Chairman.
[The prepared statement of Mr. Brouha can be found in the
appendix on page 34.]
Chairman Craig. Now let me ask the second panel to come
forward if they would, please. David Mead, President of the
Sawtooth Forest Cabin Owners' Association from Twin Falls,
Idaho; March Clarke VerHoef, National Forest Homeowners,
Sacramento, California; Paul Allman, American Land Rights
Association, Berkeley; Richard Betts, Betts and Associates,
Berkeley, California; and Joe Corlett, Mountain States
Appraisal and Consulting from Boise.
Ladies and gentlemen, if you would come forward and take
your seats, please.
I would ask for sake of time that we--well, first of all,
your prepared statements will become a part of the Committee
record, so you can speak from them or abbreviate as you wish,
but I would ask that all of you try to stay within the 5-minute
limit if you can. And, David, we will start with you, David
Mead.
STATEMENT OF DAVID MEAD, PRESIDENT, SAWTOOTH FOREST CABIN
OWNERS' ASSOCIATION, TWIN FALLS, IDAHO
Mr. Mead. Thank you, Mr. Chairman. I am David Mead of Twin
Falls in south central Idaho. Our base economy is from farming,
ranching and food processing. As a country banker, retired, and
accredited rural appraiser, retired, of the American Society of
Farm Managers and Rural Appraisers, I am testifying today in
support of Senate Bill 1938, Fairness Cabin User's Fee Act of
1999.
I am here today as President, a volunteer, of Idaho's
Sawtooth Forest Cabin Owners' Association, representing
recreational resident permittees.
My special use permit allows me a cabin on half an acre of
raw, native, natural, undeveloped land on one of the tracts in
the forest. All Sawtooth Forest Cabin lots were reappraised in
1996, one of the first in the Nation. We were stunned by the
results. Fees in our tract increased 541-percent from $390 a
year, too low, to $2,500 a year, too high. Each family then was
forced to decide whether the limited seasonal use and Forest
Service heavy restrictions were worth the fee increases or not.
Some cabin owners sold immediately, could not afford what was
coming. Most of us got a second appraisal, allowed by the
Forest Service, for it was evident that the Forest Service's
first appraisal was based on cabin lot being fully developed
within legally subdivided neighborhoods as fee simple property,
not the raw, undeveloped natural lots with no improvements, as
the stated policy of the Forest Service is. My small log cabin
my family built, has no electricity, no plumbing, no phone. We
have an outhouse and carry water in a bucket up from the creek.
The bill will provide relief to some 15,000-cabin owners in
25-states and Puerto Rico who mostly, suddenly, face alarming
and increasingly high fee permits. In our high profile cabin
area, the Pettit Lake Tract, new fees are scheduled to go from
roughly $1,100 a year to $22,500, and up to $67,500 a year.
These permits contain many Forest Service restrictions on our
use of a lot, and I have attached a list of these in my written
testimony. The cabin permit is one among other documents that
must be read and understood, the values of positive and
negative, to be considered during the appraisal process.
However, the major problem is that the appraisal
methodology utilized by the Forest Service, in this round has
proven to be inconsistent and unreliable, and permittees learn
quickly that there is no inclination within the Agency to
resolve the several problems that plague the fee determination
process. The unquestionable piece of evidence that validated
the flaw in the current system is that the Forest Service
accepted the results of our second appraisal, setting aside
their own first appraisal. It appears that only further
guidance from Congress will succeed in sorting out the
conflicting Forest Services faces. On one hand Congress and the
GAO has directed resource agencies to maximize revenues from
Federal lands, and in so doing, the agencies contrived a system
that now will capture more than the fair market value from the
cabin owners. On the other hand, both Congress and the Forest
Service made commitments to the American people to provide
ample opportunities for appropriate, affordable recreation on
Federal lands, diverse recreational opportunities for average
families and individuals with average or lower incomes or
pensions, the new cabin fees make unaffordable for most one of
the oldest recreational program, the Cabin Program, authorized
by Congress in 1915. These policy objectives need not be in
conflict. The program has been providing families with
affordable recreation for decades.
The legislation preserves that program objective and
returns fair market value.
Forest Service cabin lot permit fees are very different,
and far less than private lot fee simple rights. As you can see
from the large display on the easel over there, we Forest
Service cabin owners have very few rights compared with the
private owners. One of the biggest differences is that we
cannot prevent public access on our lots except within our
cabins.
As a banker type, I leave with one fundamental professional
observation. Assuming credit worthiness, I would approve a
mortgage to the owner or prospective buyer of a fee simple
parcel, but even assuming vast riches, no banker would grant a
mortgage for the asset that is a cabin authorized on the forest
land under this program.
Please support S. 1938. Thank you, Mr. Chairman.
[The prepared statement of Mr. Mead can be found in the
appendix on page 42.]
Chairman Craig. David, thank you very much.
Now let me turn to Mary Clarke VerHoef. Please proceed.
STATEMENT OF MARY CLARKE VERHOEF, CHAIR, NATIONAL FOREST
HOMEOWNERS GOVERNMENT LIAISON COMMITTEE, SACRAMENTO, CALIFORNIA
Ms. VerHoef. Thank you. Good afternoon, Mr. Chairman. My
name is Mary Clarke VerHoef. I am the chair of the Legislative
Liaison Committee and on the Board of Directors of the National
Forest Homeowners. Thank you very much for the opportunity to
address you today.
The Forest Service recently began updating the special use
fee that we cabin owners pay every year. The first area to be
completed was the Sawtooth National Forest in Idaho. The new
fees were astronomical, some as high as $30,000 a year. The
procedure, as it continued around the country, resulted in
other unreasonable fees. Although none were quite as egregious,
they were high enough to wonder just who could or would want to
pay such a fee for this use. This program has not been the sole
province of the rich before. With such fees, we fear it will
be. We all agree that we should pay a fair fee, but many of the
resulting fees are simply not fair.
In an effort to solve this problem, we joined together with
other representatives of recreation residence users to form a
coalition. The coalition hired a consulting appraiser to help
us analyze the problem. We reviewed the process in many areas
of the country. We found errors in procedures and inconsistency
in application. The current appraisal method is not the same
method as was crafted by the 1980's regulatory revisions.
The current method of setting our annual use fee was based
on the concept that a percentage of that fair market value of
comparable underlying land in its raw state could be used to
determine the value of our use. It was based then on the belief
that appraisers for each typical lot or lots in a tract of
cabins, could identify sales of comparable privately-held
parcels in the same geographic area. Thus, the comparable
parcels must be truly comparable.
In order to implement the policy this time around, the
Forest Service prepared a new set of guidelines for appraisers.
Our review of those guidelines and our review of the resulting
appraisals led us to believe that these guidelines, as
currently written, mislead the appraiser to use market
transactions which are fundamentally not comparable. Where
there are no comparable sales, market transactions are being
used without the proper adjustments to make them reflective of
the cabin lot's value. This results in flawed appraisals, and
in some places, excessive values.
Further, the fact that this is an unusual asset, and the
unusual method by which the appraisers are to produce a
comparable sale when there are few really comparable assets,
has made the assignment even more difficult.
Finally, various governmental acts, such as the creation of
the Sawtooth National Recreation Area in Idaho and the
Government's act of buying up or limiting the use of most of
the surrounding land, added an unusual inflationary pressure on
local land which requires an adjustment to this method to
result in a fair fee for those area.
The bill before us today is intended to remedy the errors
we see. It recognizes the cabin program for what it is, not as
equivalent to vacation homes on subdivided lots in resort
locations. It is aimed at producing reasonable and fair fees
for cabin use. The bill includes specific detailed requirements
for the appraiser, since it is such an unusual appraisal
assignment and its current implementation has revealed so many
problems. It is written in a language an appraiser can
understand. It calls for appraisal every 10-years instead of
20, to make sure the Forest Service is getting a fair market
value of our use in the event the annual index does not work as
expected. It chooses a new index, one more closely tied to
local land value, but not one tied to urban use.
In those circumstances where certain governmental acts
produce an unfair fee, the bill requires the comparable land
analysis to go outside the area influenced by those acts. In
those circumstances, the annual index used is a statewide index
instead of a local one. In the event there is a further
disagreement with regard to the appraisal, a mechanism is
provided for a dispute resolution. If the current appraisals
are acceptable, as some are, no new appraisal is required.
Other transition provisions are also provided.
In conclusion, the high fees resulting from improper
application of the underlying policy, if allowed to stand, will
change the face of this program, limiting its use to the rich.
This program should stay affordable by the ordinary American.
This bill is essential to that end.
[The prepared statement of Ms. VerHoef can be found in the
appendix on page 51.]
Chairman Craig. Ma'am, thank you very much.
Now let me turn to Paul Allman, American Land Rights
Association from Berkeley, California. Mr. Allman, welcome.
STATEMENT OF PAUL ALLMAN, DIRECTOR OF CABIN OWNER AFFAIRS, ON
BEHALF OF THE AMERICAN LAND RIGHTS ASSOCIATION, BERKELEY,
CALIFORNIA
Mr. Allman. Thank you, Mr. Chairman.
The American Land Rights Association thanks the Committee
for this opportunity to comment on S. 1938.
One, the current appraisal process makes no sense. It is
clearly inequitable as well as being blatantly unreasonable.
These cabin lots are not for sale. This is not a real estate
transaction. This is simply a method of determining a fair user
fee for a recreational use.
What are we really talking about? A small site on which a
cabin owner can maintain a small summer cabin under strict
guidelines at no expense to the Government. What possible sense
does it make to have the use fees for the exact same use vary
by over 150-times, 15,000-percent? This range of user fees from
under $200 to $30,000 makes clear the current Forest Service
appraisal process is blatantly flawed.
Two. We feel the Agency has made a number of errors in
policy interpretation. Through 10-years of negotiation
resulting in the National Recreation Residence Policy, the
cabin owners were assured that the language of the policy
pertaining to cabin fees would never result in permittee lots
being appraised as if they were fee simple lots, because the
many differences between permitted lots and fee simple lots
made them obviously not comparable. We were repeatedly told
that the appraisal had to begin with an estimated fee simple
value in order to arrive at some form of reasonably objective
base figures.
These differences were cited repeatedly to permittees as
reasons why the value of the land would not be comparable to
fee simple land, but would reflect the land's ``cash market
value based upon its use as a recreational residence
homesite.'' That is a direct quote from the policy statement.
But it is now the interpretation of the Agency to appraise
every permitted lot as if it is being offered directly for sale
on the fee simple market. This has resulted in an increase in
fees in some cases of over 1,000-percent. The absurdity of this
position is obvious.
If a private landowner were to offer a 20-year lease with
the restrictions demanded by the Forest Service, there is
genuine question whether anyone would be willing to lease the
land at any price.
The real answer to this problem is that the Forest Service
should properly instruct its appraisers to recognize the many
restrictions and limits included in the permit as is provided
in S. 1938.
Three. Contrary to what the Forest Service and others have
told you, cabin owners already pay their fair share and more.
Recreational residence permittees pay the highest use fees per
acre of any of the many uses of the National Forest system.
Cabin permittees, even under the old fee structure, were paying
over $2,400 per acre per year, with many paying much more.
Under the Forest Service current proposed fees, cabin owners
would be paying an average of well over $8,000 per acre per
year. Because recreation permittees, by regulation, cannot
restrict or prohibit public use of their lots, the actual
permitted area over which they have control consists only of
the footprint of their cabin. By any real world real estate
standard, they already pay more per square foot than most
commercial leases in comparable fee simple areas. This is the
single most revenue positive recreation program on the National
Forest System.
Four. The Recreation Residence Program is the most
successful provider of recreation opportunities managed by the
Forest Service. Recreational residences provide more RVDs,
recreational visitor days, per acre than any other use of the
National Forest System. Because of the nature of the recreation
provided, they also overwhelmingly provide the greatest
recreation opportunity to the retired, the elderly and the
disabled, those Americans which by law the Agency has directed
to consider in its programs. Because of the nature of the cabin
experience, these cabins are overwhelmingly also a family
experience.
Five. Given that the average lot size is roughly one-
quarter acre, all of the 15,000 recreation residences occupy
less than 4,000-acres of the 192-million acres currently in the
National Forest System, roughly 2/1,000ths of 1-percent.
You are also told by the Agency that we are private use of
public lands. We are unable to imagine a human use of the
public lands that is not private, at least for the period of
use. One retired Forest Service officer told us the only public
use of the National Forest he could think of was when the
military held maneuvers there.
Now, I would like to make an additional comment. Mr.
Karstaedt estimated 17,000. The historian in region five tells
me that there were over 15,000-cabins in California alone in
1962. There are now less than 7,000. The Forest Service told
us, in 1988 there were 15,600-cabins on the National Forest
System. They now tell us there are less than 14,500. These are
inconsistent with the information which Mr. Karstaedt has given
you, and I thought it should be pointed out. Thank you.
[The prepared statement of Mr. Allman can be found in the
appendix on page 61.]
Chairman Craig. Mr. Allman, thank you very much.
Now let me go to Richard Betts of Betts & Associates of
Berkeley, California.
STATEMENT OF RICHARD M. BETTS, CALIFORNIA STATE-CERTIFIED
GENERAL APPRAISER, BETTS & ASSOCIATES, BERKELEY, CALIFORNIA
Mr. Betts. Mr. Chairman, my name is Richard Betts, and I am
a California State-Certified General Appraiser, and the
principal in Betts & Associates, Berkeley, California. I
appreciate the opportunity to present to the Subcommittee my
analysis of the difficulties that have arisen with respect to
the calculation of fees for occupancy of cabin lots in the
National Forest System.
I was retained in 1998 by a coalition of cabin owners to
analyze the appraisal methodology and instructions employed by
the Forest Service. I am being compensated by the coalition for
my appearance here today, but the coalition has exercised no
control over my statement, nor whatever replies I might offer
in response to questions from the Subcommittee.
As a quick statement of my qualifications to be before you,
I would describe myself as a very active appraiser, an MAI, ASA
in real estate, and SRA, specializing in complex properties and
complex situations, with more than 35-years of experience in
appraisal and real estate economics consulting. I hold bachelor
of science and master of business administration degrees in
real estate and urban economics from the University of
California, Berkeley. I have taught extensively. I am the
author of a number of books and articles, including several
college textbooks. I have testified as an expert witness on
very many occasions. I have performed assignments for the US
General Accounting Office, US Department of Justice, the
National Park Service, the California Auditor General, and
numerous other clients.
I also want to give the Subcommittee the same professional
certification that was in my report, including that I have no
bias with respect to these properties or to the parties
involved. My compensation from the cabin coalition was not
contingent in any way upon my findings or the outcome. My
analyses, conclusions and opinions were developed, and my
report is prepared in conformity with the Uniform Standards of
Professional Appraisal Practice.
In conducting my analysis, I reviewed some 16-key
documents, the Forest Service Recreation Residence
Authorization Policy, sections of the handbook, memorandums,
correspondence, testimony in earlier congressional hearings,
and I also examined in detail the initial appraisal reports and
second appraisal reports from cabin tracts in Idaho, Oregon and
California.
The primary focus of my analysis was upon the appraisal
process itself, including the instructions and their
implementation. Unquestionably, major work is needed to clarify
the instructions, to remove material that is contrary to the
adopted policy, and to guide appraisers to proper practice in
this very complex and unusual setting.
The major problem area that I note is in the definition of
the property being appraised. Policy clearly states that the
Forest Service is providing raw acreage, but most appraisals
are of subdivided lots, and much of the guidance from the
Forest Service implies that the appraisal should be of a
subdivided lot.
A second major problem is with adjustments for access and
utilities, usually provided by the permittees, but incorrectly
handled in Forest Service instructions and often in appraisals.
In most cases cabin owners put in all of the effort and
management and took all of the risk of developing access and
utilities and the cabin. Forest Service language leads the
Forest Service to capture the cabin owner's investment and the
portion of value that results from the cabin owner's effort and
risk taking. In addition, the current instructions put the
burden of proof on the cabin owners to document who did what
many decades ago, which the service never required them to
document.
The third problem was with the selection of market data
upon which to base the valuation. This usually was because of
the first problem I have noted, the incorrect definition of the
property being appraised.
The fourth problem was with the adjustment of the market
data for relevant differences, and particularly using incorrect
or unsupported cost estimates and incomplete data.
Based upon my analysis, I had made recommendations to the
cabin owners' coalition for appraisal guideline language
intended to provide clear direction to appraisers and resulting
in a proper market value appraisal.
Following introduction of the bill, I have had the
opportunity to consult with representatives of the Appraisal
Institute, and the American Society of Farm Managers and Rural
Appraisers and the Appraisal Foundation, and I believe that the
bill, with minor changes, will be satisfactory, will comply
fully with appraisal standards, will meet the statutory
definition of ``market value'' and correct these appraisal
implementation problems.
[The prepared statement of Mr. Betts can be found in the
appendix on page 66.]
Chairman Craig. Mr. Betts, thank you very much.
Now let me turn to Joe Corlett, Mountain States Appraisal
and Consulting, Boise, Idaho. Joe, welcome before the
Committee.
STATEMENT OF JOE CORLETT, CERTIFIED GENERAL REAL ESTATE
APPRAISER, MOUNTAIN STATES APPRAISAL AND CONSULTING, INC.,
BOISE, IDAHO
Mr. Corlett. Good afternoon. Thank you, Mr. Chairman. My
name is Joe Corlett. I am a resident of Boise, Idaho. I am a
certified general appraiser in both the states of Idaho and
Oregon. I am also an MAI member of the Appraisal Institute, and
I have been in the appraisal business about 26-years, and I am
a partner with Mountain States Appraisal and Consulting out of
Boise.
Today I am testifying in general support of Senate Bill
1938 for improving the consistency and fairness in the
appraisal applications of Federally permitted sites.
My specific experience IS with the cabin tracts on Pettit
Lake, Idaho, where I acted as the second appraiser, following
an original appraisal done by a government appraiser from
Ogden, Utah. He valued those sites, natural native values,
ranging between 450,000 to $600,000. I also had the opportunity
to review that report, and I could not agree with it, so I was
then engaged to conduct my own appraisal according to the
specifications set forth by the Forest Service. And based upon
my analysis, the natural and native sites had a minimum value
of $83,000 with a maximum value of $212,000.
It is my general opinion that the errors made in the
Government appraisal were really fueled by the appraiser's
analysis of leasehold sales or cabin sales that were improved.
The difficulty there is that you overlook the externalities
created by Blaine County, for example, that has a minimum site
size of 10-acres. So the externalities were overlooked in the
Government appraisal.
Also, the appraiser is instructed to appraise at the
stricter of the police powers, according to the specifications,
and these would not even be legal lots. So that is another
issue that we might have to deal with. the cabin owners
developed these sites. The government did not help. They did
not do anything with the infrastructure, to my knowledge, but
it was created by the cabin users. So all improvements on and
to the land, as per the instructions, created by the cabin
owners were deleted in my analysis. In my opinion, the
incentives due to the permittees were not deducted in the
Government appraisal, so in other words, these permittees are,
in essence, paying twice.
A recent transfer of an improved cabin sale was
substantially below the base minimum value of a vacant, native
and natural site at Pettit Lake, which I thought was
interesting. This was an 854-square foot cabin that was in very
good condition, very habitable, had a lot of deck area, and it
sold below the actual bare land value estimated by the Forest
Service.
The instructions issued to me through the Intermountain
Region of the Forest Service via a memorandum, which I have
attached, from Chief Appraiser Tittman, were contrary, in my
opinion, to the original written instructions, where I was told
to appraise the natural native land. Also, he instructed me to
use--or that I may be able to use the leasehold sales, and use
a type of--a residual analysis. This is not recommended in the
Uniform Appraisal Standards for Federal Land Acquisitions. So I
feel that this memorandum is contrary to the written
instructions, and I had difficulty with that.
And, finally, I think if you look at this bill as passing,
it would more or less cause the Forest Service not to have
different interpretations of their specification and the
valuation of these properties. In other words, it would be
consistent and much more fair for both the taxpayer and the
cabin users.
So I would welcome any questions, and thank you for the
privilege of testifying.
[The prepared statement of Mr. Corlett can be found in the
appendix on page 78.]
Chairman Craig. Well, thank all of you very much. I will
ask a series of questions now, and while I may ask it
specificly of one witness, if others feel they have something
to contribute to the direction of that question, please feel
free to do so.
Ms. VerHoef, would you describe, if you can, a typical
owner of one of these cabins, from your experience with the
associations?
Ms. VerHoef. Well, National Forest Homeowners did a survey
of its members in January of 1999. 4,600-members received
questionnaires. 48-percent of the households responded. 54.7-
percent of them are retired. The principal careers included
business owners or managers, 14.5-percent; farmers or ranchers,
4.7-percent; construction worker involved people, 5.5-percent;
engineers, 9.2-percent; and teachers, 15.6-percent. My personal
opinion is that is because they have their summers off.
Chairman Craig. Probably.
Ms. VerHoef. As far as the age is concerned, they are
primarily middle-aged to elderly with two or more generations
of the family involved in the use of the cabin.
Chairman Craig. Have you read the GAO report dated December
1996, entitled ``Fees for Recreational Special Use Permits Do
Not Reflect Fair Market Value,'' and if so, can you offer any
insight into the GAO's findings? I ask that of you, ma'am, but
any of the rest of you who might wish to comment who have read
that, go ahead, please.
Ms. VerHoef. Yes, I have read it. The report's conclusions
are incorrect, because the GAO asked the wrong question of the
county assessor. The issue is not the market value of the cabin
sites, as if they were subdivided, fully developed lots. The
cabin sites are to be valued as land in its natural state
without lot developments, utilities or access provided by the
permittees or at the permittee expense. I think the GAO
misunderstood that, and therefore, I suspect that the
appraisers misunderstood that too. Sorry, county assessors.
Chairman Craig. The Forest Service testified in earlier
hearings that the cabin owners agreed to use 5-percent of
appraisal value of the cabin lot to determine the fee. Did the
cabin owners make such an agreement to your understanding?
Ms. VerHoef. No, they did not. I attached to my----
Chairman Craig. Do you know of any cabin owner group that
might have?
Ms. VerHoef. No. I attached an exhibit to my written
testimony, which is a joint statement by the three living
members of past members of the Chiefs Committee, which was
involved with the creation of the policy. No Forest Service
members are left in the Agency from that group. It explains in
detail what actually did happen, and clearly shows that there
was no agreement. The 5-percent capitalization rate was
dictated. It was not agreed to. The IPD was--the driving force
was the Agency. The input--this report shows that the current
system is not the one to which we agreed. The agency has
significantly modified the understandings reached with
permittees. The package accepted was changed by withdrawal and
revision of the tenure provisions, and by unilateral revision
or reinterpretation of the fee provisions. The statement shows
clearly what was agreed to and what was not.
Chairman Craig. Yes, Mr. Mead.
Mr. Mead. Mr. Chairman, it was noted by the Forest Service
in their testimony that a survey sent out to all the cabin
owners back in that time, showed that the cabin owners were for
what was presented to them. And in my case and other cabin
owners' cases, we were told by our National Forest Homeowners
that what they had agree with and what the Chief's Committee
cabin owners had agreed with was all right. However, when it
actually came down and out in the Federal Register, etc., etc.,
and understood, we found out that it was not what we thought we
were voting for. So therefore those figures are askew.
Chairman Craig. Mr. Betts, how do these Forest Service
cabin sites differ from privately owned cabin sites, say in the
same area?
Mr. Betts. A typical privately-owned cabin site will have
utilities, any necessary grading, access roads, possibly a
provision for water, and in a few cases septic systems of some
sort or the testing work will have already been performed, so
that they are a completely different beast, and would sell at a
completely different price than the raw native land that we are
talking about here.
The cabin owners themselves are the ones who took on the
risk of being able to successfully develop a physical access.
They took on the risk of being able to get these lots to perk
or in some way handle the sanitary issues. Some of them, in
fact, have had to do pumps and bring a pump truck in on a
periodic basis. And the same thing with wells. If the first
well does not work, you drill a second well, or third well, or
in Mr. Mead's case, you fall back on hand carrying the water
from quite a ways. Those risks are not present in the typical
privately developed lot, simply because buyers of lots do not
want to take those risks on. Therefore, the price of that
privately-held lot has a major premium in it for both the cost
of those differences, but also the risks that have been
overcome and the effort that it took to get there. It is a big
problem for an appraiser in making that adjustment.
Mr. Mead. Mr. Chairman?
Chairman Craig. Yes.
Mr. Mead. May I bring out the property rights poster over
here on the easel, the bundle of sticks? There is a big
difference. For instance, the private one has how many--there
is 33 we have listed there, rights that they have, whereas we
only can list 6 under our right. And the appraisal of the
Forest Service was not allowed, through their instructions from
their chief appraiser, to discount any of the ones we do not
have that the private do have, the biggest one being, many of
us have said, is the fact that our lot, anybody can come out
and camp on it. We can keep them out of the cabin, per se, but
not even off the front porch, and that is not at all common on
private. Matter of fact, in Idaho, as you well know, Mr.
Chairman, you might find some buckshot if you try that, whereas
we cannot use that. Not that we want to.
Chairman Craig. In some instances in these rather bare
necessity cabins, I have understood that some people actually
don't lock the doors, put good latching systems on them,
anticipating that someone might traffic through and otherwise
use them, and instead of allowing them to be broken into, they
found over the years that to leave them open put them in a
safer condition, and that is a unique private piece of property
that allows that, but under certain circumstances I understand
that is the case.
Mr. Betts, the bill that we are discussion, 1938, is rather
detailed in its appraisal procedures. Would you believe that
that kind of detail is needed?
Mr. Betts. Mr. Chairman, from the appraisals that I
reviewed, I reached the conclusion that part of the problem was
inadequate direction from the Forest Service, or even direction
that I would have to interpret as being accidentally
misleading. But part of the problem is that this is a very,
very unusual beast for an appraiser to encounter, no matter how
experienced they are in rural property. It is also technically
very difficult to appraise, as I am sure both Mr. Mead and Mr.
Corlett, who are experienced as rural appraisers, can comment
on as well as I can.
Given that, it was my belief that it would be helpful to
give advisory guidance to appraisers to help steer them towards
what they need to do. It may be that part of this can be
handled in the definition of the appraisal process or the
property being appraised, rather, and material in the appraisal
instructions might not need to be as long, but it is very
clear, in my opinion, that this matter needs to be clarified,
or we will never get good appraisals.
Chairman Craig. Mr. Corlett, would you comment on the same
question, and also expand to the phrase you used in your
testimony called ``general support,'' meaning you give general
support to the legislation, specificity as to the procedures
and your expression of general support.
Mr. Corlett. Yes, Sir. Thank you, Mr. Chairman.
I generally support the concept of the bill. I think that
there are some language problems in the technical application
of Section 6 of that--well, that is in the House side--but it
tends to be leading the appraiser more than if--in a way that
could be in conflict with the standards, which we are told
earlier in the bill that we have to follow. So, we are going to
try and work on the language and get the bill where it is
practical for the appraisers to use. Is that appropriate?
Chairman Craig. Yes.
Mr. Corlett. The second issue is I think what the
appraisers have been missing throughout the country, and
especially with Pettit Lake coming into view, is that nobody
tells them what to appraise really. What are we appraising? The
native natural land is in the language; is it in the
instructions. Well, native natural land is not a developed
site. And my disparity with the Forest Service is dealing with
the difference. They would prefer that we appraise these sites
as if developed, with all incentives, and just deduct nominal--
virtually nominal expenses for roads, power, telephone, on-site
systems. So the real problem has been in focusing on what is
being offered by the Government. If the Government developed
these sites, then they would be entitled to the return, if they
took the risk, but they did not in this case.
Chairman Craig. In the Pettit Lake experience, you were
talking about lots from 450 to $600,000 in appraised value by
the Forest Service process. Then you had gone in on a second
appraisal. Give me the characteristics of a 400 or a $600,000
appraised lot, size, and how you found them different. My notes
say that you found them to be upwards of 50-percent less of
value than what had been appraised by Forest Service
appraisers.
Mr. Corlett. Yes, Sir, Mr. Chairman, that is correct.
Chairman Craig. Give me a little more detail for the record
in that experience if you would?
Mr. Corlett. The Forest Service appraiser, I could see him
agonizing in his report over the sales of the improved
leasehold or the cabins on sites. They were selling for much
more than they had sold for in earlier years. So he, I think,
had a hard time reconciling how to deduct those improvements
from the sales prices that these permittees had paid. So what
he did is he went to the Fisher Creek subdivision, which is in
Custer County, and allocated improvements out of sales based on
their cost or contribution and that is a compliant subdivision.
It is not a preexisting, non-conforming use type of situation
that exists at Pettit, and that preexisting, non-conforming use
is what drives the improved property values. So there is a
bonus, if you want to call it that, to the improvements. So the
improvements were not allocated correctly in my opinion.
I also deducted in my analysis the incentives due to the
risk takers. In this case the risk takers were the permittees,
so that is the basis for the disagreement.
Both of us used developed improved conforming site sales on
Payette Lake and Priest Lake, and we were aware of those; they
were fee simple transactions, and I truly believe that I
followed the letter of the instructions by going to the natural
native form of the land, what was provided by the Government.
Chairman Craig. Mr. Betts, this question may be for you,
but, Joe, you can respond to it also. The bill contains very
detailed procedures for handling the value contributed by--
well, assets like utilities. Why is that necessary?
Mr. Betts. The first reason, Mr. Chairman, is that Forest
Service instructions, and my conversations with Mr. Tittman
personally corroborate this, do not accept the concept that the
value contribution that a utility system makes to a lot is more
than the bare bones cost. I mentioned earlier that the person
who puts the system in takes on all the risk, and that may mean
very substantial overruns of cost which are now lost in the
historical record.
Chairman Craig. Sure.
Mr. Betts. How bad it was, how many alternatives; that is
all unknown now. It is just lost ancient history, so to speak.
But it is part of the cost basis that anybody buying a lot with
that utility pays versus someone who is buying a lot without.
It is not just the hard cost; it is also what appraisers call
the soft cost. There has to be his or her time for managing
this, monitoring the provision of the well or whatever, and
taking the risk on. And the Forest Service instructions appear
to disregard that, which means that they are way under
adjusting for these features when they show up on a lot sale.
Given the fact that the Forest Service----
Chairman Craig. Under adjusting meaning the situation where
value would adjusted down?
Mr. Betts. Mr. Chairman, let me put it----
Chairman Craig. The value for deduction from an overall
value expressed?
Mr. Betts. One starts with a sale price from some type of
comparable evidence, and then you must adjust that sale price
up or down to make the sold property more like the subject
property. That is the basic statement of the appraisal process.
And here, because these lots, the subject property lots are
being appraised in their native natural state with no utilities
in most cases, no physical access and so forth, most of the
sales will have those; therefore, this adjustment process is
rather critical, and it typically will be downward because the
subject properties do not have most of the features of the
properties that are in the market, unless you use larger
acreage parcels where they may not have any utilities either.
Chairman Craig. Any addition to that, Joe, that you would
like to add?
Mr. Corlett. I tend to agree with that. That is a standard
way of appraising. My analysis was deductive, where I started
with a value as if they were in fee simple title, with all the
amenities and the infrastructures in place, and then I deducted
for those factors that they (permittees) provided, including
the incentive. So I came up with a raw dirt, raw land type of
value, and that is what that 83,000 to 212,000 represents.
Chairman Craig. Can either of you express to me the
provision in the bill that deals with entrepreneurial
incentives; why should entrepreneurial incentives be part of
what appraisers consider?
Mr. Betts. That is the payment for taking on the risk.
Chairman Craig. You can establish a value to that?
Mr. Betts. Yes. It is not the most concrete piece of
evidence that appraisers have to develop in the appraisal
process. I think any appraiser would tell you that it is one of
the tougher numbers to come up with, but we have to do it all
the time in other appraisals, any subdivision, proposed
subdivision proposal has that same problem. So we are simply
saying that to be consistent with appraisal theory, that
entrepreneurial incentive must be deducted because it belongs
to the person who performed the work, which in the case that we
are talking about in the bill, are the permittee.
Chairman Craig. That is not blue sky?
Mr. Betts. No, it is not blue sky. It certainly is not the
appraiser's favorite number to come up with, and it is one we
get criticized for whenever we do, but it is part of the
regular appraisal process.
Chairman Craig. OK, all right. Thank you.
Mr. Corlett. Mr. Chairman, I can maybe add a little example
to that, and that is the case of the developer that buys a
piece of natural native land for $10,000 a unit. He then
develops that land at a cost of $10,000 per unit, putting the
infrastructure in. And would he then sell the property to
purchasers for $20,000 a unit? And emphatically, the answer is
no, unless it is really a bad market. So the incentive is what
the market will pay for that property, and if it is $30,000, he
has had a $10,000 incentive.
Chairman Craig. The entrepreneurial incentive, that is
spread then; is that right?
Mr. Corlett. Yes, Sir, that is correct.
Chairman Craig. Thank you. David, you gave us the
experience that you have had with a second appraisal, and the
willingness of the Forest Service to take that. We have heard
the Forest Service talk about second appraisals and the
frustration that they may not have been conducted as the first
appraisal was conducted. And yet, I have a sense here that
there is a dispute over definitions. There is a dispute over
what has value and what does not have value, and for the Forest
Service to suggest that they might not be able to take a second
appraisal because it was not conducted exactly like the first
appraisal, appears to me to be an inevitable conflict that
results, unless you have the first appraiser instruct the
second appraiser in great detail on how he or she accomplished
it. How were you able, in a second appraisal, and therefore to
cause an adjustment downward to that, able to do so? Would you
give us a little bit of insight into how that happened, and
also explain, if you would, the kind of assets that private
cabin lots have versus these recreational Federal lots, if you
will?
Mr. Mead. Let me answer the second question because it is
easier, first. Here again, the bundle of sticks, the property
right things, is not being taken into consideration by the
Forest Service. In our second appraisal, our appraiser took
those more into--deducted the fact that the rights on National
Forest cabins are totally different than rights on private
lands. Yes, the private lands have zoning and planning and
police powers, and other powers on them. Yes, they have
restrictions in the SNRA, because the SNRA has certain
restrictions. But here again, they have many more rights than
we do.
And this is one of the problems with the instructions that
have come out of Washington to the appraisers. The Forest
Service appraiser looks at it one way. He reads the standards
and he comes up with one set, ``OK, this is how I need to do
it.'' The second appraiser comes along. He is not hired by the
Forest Service. He interprets it different. He has a conference
with the Forest Service, yes, before he is accepted by the
Forest Service, because each second appraiser, or for that
matter, first appraiser, must be okayed by the Forest Service.
But when you get right down to it, the second appraiser, or I
know the Forest Service appraiser, would say, ``Well, gee,
there is a difference between this private lot. This other guy
has so few rights on the Forest Service, and so I will deduct a
greater amount on the Forest Service lot than I will on the
private lots.'' The Forest Service does not want the appraiser
to give credit for any rights that the National Forest cabin
owner does not have versus what the private has. And that is
one of our biggest conflicts with the Forest Service, that they
do not deduct what the rights are.
And may I refer to Mr. Betts on that, because he is the
expert on that?
Chairman Craig. Mr. Betts?
Mr. Betts. I think I was pouring water, Mr. Chairman. I am
not quite sure that----
Ms. VerHoef. How does the second appraisal come up with
something new?
Mr. Betts. I think it is a matter of trying to understand
the somewhat vague, somewhat contradictory statements that I
have seen from Forest Service. It is a matter perhaps of the
face-to-face instructions from Forest Service staff to the
appraiser, and it may be simply in the reality that different
people in the Forest Service, reviewing one of these
appraisals, may take a different take on it one time, and
another reviewer in the Forest Service may take a slightly
different take on it.
Chairman Craig. Yes, Mr. Allman.
Mr. Allman. Mr. Chairman, I would like to point out that
every financial asset reflects the amount of risk involved, and
the amount of risk in these permits where there are, contrary
to what Mr. Karstaedt said, roughly at least a hundred a year
that are no longer there, there is an element of risk. Everyone
who is in these that is not innocent has recognized this risk,
and that is really reflected in the value which is not being
taken into account, the fact that they are not compensable,
that there is a greater risk, you cannot borrow against them;
these are different critters than a fee simple.
Mr. Mead. Mr. Chairman, many buyers of cabins have not read
their permits or their perspective permits. Most buyers are
innocent. That is their fault. I am not blaming the Forest
Service for that.
Chairman Craig. Yes, you could not for that. That is
correct.
Mr. Mead. Many cabins are even bought as we sit here, and
you ask the buyer have you read what your restrictions are, and
if they are very wealthy, they say we do not care, or if they
are blue collar or retired, no, they have not. They are taking
faith that everything is all right. Then, all of a sudden,
bing, they wish they had read it. It is like not reading a
title report on your private land.
Chairman Craig. In the instance of your second appraisal,
what was the average difference?
Mr. Mead. The first appraisal was $50,000.
By the way, our Valley View has one typical. There are 34
cabins there, but there is only one typical. Pettit Lake has, I
think, three typicals. So, in our case, all the cabins came up
with the same. There would not be any average, but we went from
50,000 to 35,000. Anyway, our fee came down from a proposed
2,500 to 1,750. That is a nice 30-percent reduction, yes, but
still for many of our cabin holders up there, they are not
going to be able to afford it.
Chairman Craig. That was up from--what was the fee paid
prior to the new fee levied?
Mr. Mead. Oh, yes. We started with $390, which was too low
and unfair. We realized it is not fair to ourselves as
Government. The 2,500, we think is unfair.
Several cabin owners in the Valley View tract sold
immediately when the appraisal came out. They said, ``I cannot
afford this. I might as well sell,'' and they sold. When the
second appraisal came out, even though it was lower, 2,500 to
1,750, some more have gone on the market and several have sold.
They said, ``We cannot even afford that.''
Some of those, as I say, were naive. They did not realize
what the risk was of owning one of those cabins.
Ms. VerHoef. Mr. Chairman?
Chairman Craig. Yes.
Ms. VerHoef. The coalition also looked at the first and
second appraisals in several locations. Part of the reason the
second appraiser's results will be different is the nature of
appraising itself. It is kind of an art, not a science,
notwithstanding what these gentlemen at the end of the table
feel.
They are nodding, I will note for the record.
It also has somewhat to do with those instructions from the
Forest Service. They are the same, but they are inadequate. So
they are interpreted differently.
In Mr. Mead's case, the second appraiser took some of the
same market transactions, but made different deductions, made
additional deduction adjustments to make them equivalent to the
native land underlying the cabin that the first appraiser did
not take.
Luckily, the Forest Service agreed to those being
appropriate. None, however, were instructed. There is no
provision for that.
The first appraisal was accepted by the Forest Service,
``Oh. Well, gee, you did not make those adjustments. Gosh.''
They just sort of were willing to accept the higher value.
Chairman Craig. I appreciate your expression about art or
the art of the science or the art of the knowledge, having once
been a real estate knowledge, having bought and sold ranches
and private properties and other values. I appreciate what you
are saying. I mean, there is a norm, a standard. When
comparables are available, it is a little more consistent. When
they are not and we are dealing with the uniqueness of this
rather hybrid animal, I can appreciate both what Mr. Corlett
and Mr. Betts are saying, which gets me back and probably to my
final question.
Either, Joe, you can respond to this or, Mr. Betts, you can
respond to it. I find it very interesting, and I am frustrated
by this. Public land, per se, is not for sale. There are
exchanges and values are established for those exchanged
purposes, and those values are oftentimes based on private
values or the value of the asset once it goes private as a
comparable to when it was public.
But in the context of a public property that is anticipated
not to sell or at least the base land not to sell--and we
understand here the cabin itself can sell, but in those
instances, other than exchanges as the Forest Service has
expressed, in most instances these properties, at least the
land, does not sell.
For both of you, what is your definition? We have heard it
from the Forest Service. What is your definition of ``natural''
or ``native land''? Because that seems to be a primary
instruction that is very confusing to most, or misleading.
Mr. Corlett. Mr. Chairman, thank you.
The ``natural native'' is underlined in the Forest Service
handbook specifications. In my mind, natural native land is
untouched real estate, untouched by man. It does not have
access necessarily. It is not ready to develop a cabin on at
this time.
Chairman Craig. Out West, we might call that----
Mr. Corlett. Raw dirt.
Chairman Craig.--raw dirt, grazing land, something that
was--if you are in the ranching business, something
undeveloped.
Mr. Corlett. That is correct.
Chairman Craig. OK. Mr. Betts.
Mr. Betts. Mr. Corlett in a conversation this morning, I
believe, referred to the origins of the first cabin that was
built at--I think that was Pettit Lake, where the ranger rode
over on horseback some 5-miles and met the proposed cabin
permittee, and they looked at the meadow and he said, ``Well,
why don't you put the cabin there?'' So natural raw land at one
extreme is indeed a part of, an undistinguishable part of a
meadow or hillside, whatever the topography may be.
There are cases where the Forest Service had improvements
that were in place prior to the establishment of that tract.
Those might have been roads. They might have been electric
utility----
Chairman Craig. Roads to the tract or roads adjacent to the
tract?
Mr. Betts. Roads adjacent----
Chairman Craig. That were not designed for access to the
tract originally in most instances is my understanding.
Mr. Betts. Correct.
Chairman Craig. A logging road.
Mr. Betts. A logging road.
Chairman Craig. A road to a campground.
Mr. Betts. Correct, but in a number of cases, there was no
physical access other than cross-country, and I recognize that
there are cabin sites today where you have to pack in, where
you walk in. There is no vehicular access, but in some of them,
the tract owners, cabin owners, have developed a physical means
of access for vehicles, and the same thing is true of the
utilities.
So one of the big definitional problems in my opinion is
defining who is responsible for particular site improvements at
a particular tract.
The Forest Service in its instructions has basically said
that which the cabin owner or tract owners provided, paid for
obviously gets excluded. Everything else gets included.
Unfortunately, that is a poor wording because there might
be special assessment districts. There might be a number of
other mechanisms where the cabin owners paid for it, and under
the current policy, the appraisal service is picking up the
value increment, which is unfair.
There is also a problem, as I have indicated in my written
report, with the fact that these tracts date back to 1915, in
that era. A lot of these improvements were made sometime ago.
Who paid for them is, as far as the cabin owners, lost in a
historical fog. There is some ability in some cases to reach
back to people from that time period who can attest to what
happened, but that is not necessarily true in every tract.
Nor did the Forest Service ever at any point in the permit
process require property owners to document and maintain
documentation of what they did as opposed to what the Forest
Service did. It is only now with this appraisal cycle that the
Forest Service is basically saying, ``If you can improve, you
put these improvements in here. Then we will give you a credit
for it. Otherwise, we will not.''
One of the concerns that I developed is exactly on that
point. It is not an easy issue to handle because, as you go
into the minutia of this particular issue, it gets more and
more difficult to address. Nevertheless, the present policy is
clearly biased in favor of the Forest Service or revenue
generation and against being equitable with the cabin owners
given what you have required for them in the past. So that is
part of the problem of defining ``native natural.''
Chairman Craig. Well, that is a fairly good statement to
end this hearing on, but before we do that, Mr. Allman, you
have an enormous pile in front of you.
Mr. Allman. This is a few of the over 3,600 questionnaires
we have returned that are addressed to the individual State
Senators, and we will be delivering them to the appropriate
offices, but I wanted the record to show that we expect to have
well over 4,000 comments on this bill by the end of next week.
Chairman Craig. Excellent.
Does anyone else wish to make a comment before I conclude
this hearing?
Yes. I usually do not take comments from the audience, but
I will. Please stand and state your name for the record.
Mr. Stone. My name is Larry Stone, and I am from the Pettit
Lake Cabin Owners Association.
During this whole conversation, one of the things that I
have been thinking about was we have not really brought up
recently the different instruction that if we took our second
appraisal on, that they would be dead because we were
instructed not to do certain things, not to go over the
sentence of Chapter 6. We were told by Chief Appraiser Tittman
not to do certain things. So it seems like this needs to be
brought up for the record.
Chairman Craig. If you could supply that to me, the kinds
of things that you were asked not to do or do----
Mr. Stone. It is in his file, and this whole conversation
does not even mention it.
Chairman Craig. All right. Mr. Corlett, you seem to be
reacting to that.
Mr. Corlett. Yes, Sir, Mr. Chairman.
The memorandum that came out from Chief Appraiser Tittman
said that I could not use a subdivision approach, and that is
clearly in opposition to the guidelines which say I have to
conform to--you ask for the standards set forth for Federal
land acquisitions. It also said I could use sales of leaseholds
to determine a fee value, and that does not work, not at Pettit
Lake.
Pettit Lake is the big spike in the----
Chairman Craig. That is correct.
Mr. Corlett.--system, and then I get the conflicting
statements in the memorandum which is attached to my testimony.
You will notice the reference to Marshal & Swift and the county
assessor and use this type of stuff, and then in the initial
reviews set out of San Bernandino, California, the review
appraiser says you really should not use Marshal & Swift and
you should get on-site costs and I use Marshal & Swift
frequently, as do many appraisers.
So we get this kind of conflict in what is being appraised,
and it has never been an issue before as far as the
entrepreneurial incentive because nothing has ever been really
highly valued. These are high-value properties. They are very
valuable, but the incentive on an $18,000 lot is a lot less
than a 400 or $500,000 lot. So this probably has never really
surfaced as it has this year, but the language is in the
instructions and they are interpreted totally differently.
If you look at the instructions, I think you would say raw
land. I do not think there is many----
Chairman Craig. I appreciate that being brought up, and all
of that is included in your written testimony----
Mr. Corlett. Yes, Sir, it is.
Chairman Craig.--and attachments. OK.
Well, again, thank you all very much for your time and the
record you have provided the Committee as we proceed in dealing
with this legislation.
Thank you all very much, and the Subcommittee will stand
adjourned.
[Whereupon, at 4:53 p.m., the Subcommittee was adjourned.]
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A P P E N D I X
March 22, 2000
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DOCUMENTS SUBMITTED FOR THE RECORD
March 22, 2000
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