[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

=======================================================================

                                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

                              ----------                              

                       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
                              ----------                              

                               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
                              ----------                              

                                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

                              ----------                              


                       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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