[Federal Register Volume 60, Number 134 (Thursday, July 13, 1995)]
[Notices]
[Pages 36097-36104]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-17131]



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DEPARTMENT OF AGRICULTURE
Forest Service
RIN NO. 0596-AB49


Ski Area Permit Fee System

AGENCY: Forest Service, USDA.

ACTION: Notice of proposed policy; request for public comment.

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SUMMARY: The Forest Service proposes to revise existing procedures for 
determining permit fees for the use of National Forest System lands by 
ski areas. Permit fees for most ski areas operating on National Forest 
System lands are determined under the graduated rate fee system (GRFS). 
As applied to large ski areas, GRFS is complex and costly to administer 
and has been the subject of several audits, administrative appeals, and 
lawsuits. Under the proposed policy, the agency would determine permit 
fees by site-specific appraisal of the use of National Forest System 
lands by ski areas. The proposed system would produce ski area permit 
fees that are based on fair market value as required by law; would be 
simpler and less costly to administer than GRFS; would eliminate the 
need for burdensome audits of ski area assets and revenues for those 
ski areas under the new system; and would make individual fee 
determinations in a nationally consistent manner.

DATES: Comments must be received in writing by September 11, 1995.

ADDRESSES: Send written comments to the Recreation, Heritage, and 
Wilderness Resources Staff (2340), Forest Service, USDA, P.O. Box 
96090, Washington, DC 20090-6090.

FOR FURTHER INFORMATION CONTACT:
Lyle Laverty, Director, Recreation, Heritage, and Wilderness Resources 
Staff, (202) 205-1706.

SUPPLEMENTARY INFORMATION: 

Background

    Today there are 155 national forests comprising approximately 191 
million acres in 42 States, the Virgin Islands, and Puerto Rico. These 
forests, together with 20 national grasslands, land utilization 
projects, purchase units, and other lands, constitute the National 
Forest System.
    The National Forest Ski Area Permit Act of 1986 authorizes the 
Forest Service to issue permits for the use and occupancy of suitable 
lands within the National Forest System for nordic and alpine skiing 
operations and purposes (16 U.S.C. 497b). Ski area permits issued 
before the effective date of the National Forest Ski Area Permit Act 
are authorized by the Term Permit Act (16 U.S.C. 497) and the Forest 
Service's Organic Act (16 U.S.C. 551). The Forest Service issues 
special use permits to ski areas for the use and occupancy of National 
Forest System lands in accordance with 36 CFR part 251, subpart B. 
Permit fees for ski areas operating on National Forest System lands 
must be based on fair market value (16 U.S.C. 497b(b)(8); 31 U.S.C. 
9701; 36 CFR 251.57).\1\ Direction on the graduated rate fee system 
(GRFS), the current permit fee system for most ski areas operating on 
National Forest System lands, can be found in Forest Service Manual 
Chapter 2710, Special Uses Management, Section 2715, Fees.

    \1\ In this context, fair market value is the annual amount in 
cash or on terms reasonably equivalent to cash for which in all 
probability the property(ies) would be permitted to be used, sold, 
or leased by a knowledgeable owner willing but not obligated to 
permit the use or sell or lease the property(ies) to a knowledgeable 
permit holder, buyer, or lessee who desires but is not obligated to 
hold the permit or buy or lease the property(ies). In ascertaining 
that figure, consideration should be given to all matters that might 
be brought forward and reasonably be given substantial weight in 
bargaining by persons of ordinary prudence, but no consideration 
whatever should be given to matters not affecting market value (see 
Interagency Land Acquisition Conference, ``Uniform Appraisal 
Standards for Federal Land Acquisitions,'' pp. 3-4 (1992)).
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    There are 120 alpine or alpine and nordic ski areas operating on 
National Forest System lands that pay annual permit fees determined 
under GRFS. Seventeen alpine or alpine and nordic ski areas operating 
on National Forest System lands pay annual flat permit fees based 
either on GRFS principles or a percentage of land value.

Graduated Rate Fee System (GRFS)

    GRFS has been in effect for more than two decades and is complex 
and difficult to administer for ski areas.
    GRFS uses a standardized formula to obtain a percentage of the ski 
area's gross revenues Fees are calculated by applying scheduled rates 
to the ski area's sales revenue. Which rate applies is determined by 
the proportion of the ski area's sales revenue to the ski area's gross 
fixed assets (GFA): as sales revenue increases in relation to GFA, a 
higher rate is applied and the total fee increases; as sales revenue 
decreases in relation to GFA, lower rates apply and the total fee 
decreases.
    GRFS divides the ski area's sales revenue into nine business 
categories (such as revenue from lifts, tows, and ski schools; rentals 
and services; and merchandise) and applies a different profitability 
indicator or break-even point to each category. The break-even point, 
expressed as the ratio of sales revenue to GFA, is the point at which a 
business begins to show a return on investment.

[[Page 36098]]

    Each business category has two rates: a rate base and a balance-of-
sales rate. The rate base is the percentage of sales revenue the 
average ski area pays as a fee when sales revenue is up to twice the 
break-even point. A higher balance-of-sales rate is applied to all 
sales revenue exceeding twice the break-even point.
    To account for varying levels of productivity, fees are calculated 
in three steps: (1) The fee applied to sales revenue up to the break-
even point is 50 percent of the rate base; (2) the fee applied to sales 
revenue between the break-even point and twice the break-even point is 
150 percent of the rate base; and (3) the fee applied to sales revenue 
over twice the break-even point is the balance-of-sales rate.
    If a ski area generates income from more than one business 
category, each category's break-even point, rate base, and balance-of-
sales rate are multiplied by the percentage of the ski area's total 
sales revenue that results from that category. Results for all 
categories are totaled to obtain a composite break-even point, rate 
base, and balance-of-sales rate. Composites are applied to gross sales 
revenue to determine the fee. Fee determinations for each ski area are 
periodically subject to audit by the Forest Service through the 
examination of each ski area's financial records.
    GRFS has proven to be very controversial, primarily because of 
questions concerning whether GRFS meets the legal requirement to charge 
a permit fee based on the fair market value of the use of National 
Forest System lands by ski areas. The controversy surrounding GRFS and 
assessment of the appropriate permit fee has generated appeals and 
litigation and several audits by the General Accounting Office and the 
Department of Agriculture's Office of Inspector General. These audits 
concluded that GRFS does not ensure that the Forest Service receives a 
permit fee based on fair market value from ski areas operating on 
National Forest System lands.
    Due to the historical controversy of the ski area permit fee issue 
and the need for multidisciplinary expertise in this area, a 
Departmental Working Group was formed in July 1994. This group, which 
includes representatives from the Forest Service, the Office of 
Inspector General, the Office of General Counsel, and the Office of the 
Chief Financial Officer, has met regularly to expedite development of a 
new ski area permit fee system based on fair market value.
Methods for Determining Fair Market Value

    On September 26, 1994, the Forest Service awarded a contract to 
identify methods pertinent to determining the fair market value of the 
use of National Forest System lands by ski areas and to recommend 
promising methods for testing. The contractor assembled a team of 
specialists in various fields, including real estate appraisal, land 
economics, and financial analysis, to work on the contract.
    The contractor's December 19, 1994, report analyzes 14 valuation 
techniques: Six land valuation methods (sales comparison, ground rent 
capitalization, land residual, sales allocation, extraction, and 
subdivision development); seven business valuation methods 
(capitalization of earnings, excess earnings on assets, excess earnings 
on sales, discounted cash flow, price/earnings ratio, dividend payout, 
and net worth); and one additional valuation method (competitive 
bidding). The report discusses the theoretical basis of each method, 
its advantages and disadvantages, the required frequency of updating 
for each method, and its applicability to assessing the fair market 
value of the use of National Forest System lands by ski areas. The 
report recommends testing seven valuation techniques in order of 
preference: four land valuation methods (sales comparison, ground rent 
capitalization, residual (both land and business), and allocation (in 
conjunction with land residual)) and three business valuation methods 
to be used in conjunction with the land valuation methods (capitalized 
earnings, excess earnings on assets, and excess earnings on sales).
    At the request of the Departmental Working Group, the Forest 
Service contracted for a technical written review of the contractor's 
report by two expert real estate appraisers. The two real estate 
appraisers were asked to assess (1) whether the contractor's analysis 
identifies all pertinent techniques for determining the fair market 
value of the use of National Forest System lands by ski areas and (2) 
whether the methods recommended by the contractor for testing are the 
most likely methods on which a new ski area fee system could be based.
    In their reports and during a teleconference with the Departmental 
Working Group, the two appraisers advised that the contractor's report 
covered all land valuation methods and the common business valuation 
methods. With regard to the contractor's recommendations, the 
appraisers advised that there is no need to test any of the business 
valuation methods because none of these methods gives an independent 
estimate of land value. Rather, these methods provide an estimate of 
the value of a business. Consequently, neither appraiser believed that 
any of the business valuation methods identified by the contractor 
would assist in estimating the fair market value of the use of National 
Forest System lands by ski areas.
    To determine land value, one of the appraisers advised that the 
first and most important step is to develop a database of sale and 
rental transactions involving land used for skiing or for a use 
comparable to skiing. He stated that based on his own research and 
experience, data are available for comparable sales and rentals of land 
used for skiing.
    The appraiser explained that once the database of comparable 
transactions is developed, the agency would be able to ascertain 
whether the fair market value of the use of National Forest System 
lands by ski areas can be determined. He advised that the direct 
comparison and ground rent capitalization methods would provide the 
most objective basis for making this determination.\2\ From this 
information, the agency may then be able to decide whether subjective 
methods, such as land residual, should be considered.

    \2\ The direct comparison method produces a value estimate for 
land by comparing the property being appraised to similar properties 
that have sold recently, applying appropriate units of comparison, 
and making adjustments to the sale prices of the comparables based 
on the elements of comparison (United States Department of 
Agriculture, Forest Service, ``An Analysis of Methodologies for 
Determining the Fair Market Value of the Use of National Forest 
System Land by Ski Areas'' [hereinafter Contractor's Report], p. 6 
(1994)).
    The ground rent capitalization method applies when property is 
leased for a ground rent or some other type of fee. Ground rent is 
the amount paid for the right to use and occupy land according to 
the terms of a ground lease. Market-derived capitalization rates are 
used to convert ground rent into the market value of the property. 
While a Forest Service ski area permit is not a lease and does not 
convey any interest in real property, the permit may be analogous to 
a lease for the purpose of assessing the applicability of the ground 
rent capitalization method to determine the fair market value of the 
use of National Forest System land by ski areas (Contractor's 
Report, pp. 10-11).
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    Both appraisers underscored the weaknesses and subjectivity 
inherent in applying the land residual method, particularly in 
developing an estimate of business value \3\ that is independent from 
the value of the land.\4\ Neither 

[[Page 36099]]
appraiser knew of an accepted methodology for independently estimating 
business value, since it is always the final residual. Both appraisers 
agreed that the land residual method could be applied only as a back-up 
method to information gleaned from the direct comparison and ground 
rent capitalization methods.

    \3\ Business value accrues from items of intangible personal 
property, such as marketing and managerial skill, an assembled work 
force, working capital, trade names, trademarks, franchises, 
patents, contracts, leases, and operating agreements (Contractor's 
Report, Glossary).
    \4\ The land residual method produces a value estimate for land 
as a component of an investment by capitalizing the net income 
allocated to land after the net income attributable to all other 
investment components has been deducted from the total net income 
(Contractor's Report, p. 11).
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Determination of Fair Market Value

    The foregoing conclusions of the two appraisers were confirmed by 
the Departmental Working Group in informal discussions with the 
Assistant Chief Appraiser for the United States Department of Justice. 
In addition, the Departmental Working Group discussed the potential 
feasibility of performing site-specific appraisals to determine the 
fair market value of the use of National Forest System lands by ski 
areas. The Assistant Chief Appraiser informally advised that if site-
specific appraisals were performed, they should be complete, self-
contained appraisals prepared in accordance with the latest editions of 
the ``Uniform Standards of Professional Appraisal Practice,'' published 
by the Appraisal Foundation, and the ``Uniform Appraisal Standards for 
Federal Land Acquisitions,'' published by the Interagency Land 
Acquisition Conference. The purpose of the appraisal would be to 
determine the fair market value of the use of National Forest System 
lands by ski areas.
    Specifically, he explained that the most defensible approach would 
be to research leases of land comparable to the subject property, i.e., 
land suitable for nordic and alpine skiing. The appraiser would analyze 
these leases to estimate the market rent for the comparable land, which 
would be the fair market value fee for the subject property.
    If there were inadequate market data to use this approach, the 
appraiser would research and analyze sales of land comparable to the 
subject property to estimate the market value of this land and compare 
it with the subject property, making whatever adjustments were 
necessary. Using the market value of the land derived from comparable 
sources, the appraiser would determine the market value of the subject 
property. Using the lease transactions and any other information 
available (e.g., the rate of return on purchased land), the appraiser 
would estimate a market-derived rate of return: the percentage to apply 
to land value to determine a fair market value fee for the use of the 
land. The appraiser would then apply the market-derived rate of return 
to the market value of the subject property to determine the fair 
market value fee for the use of the subject property.
    To confirm the soundness of using site-specific appraisals, the 
Departmental Working Group conducted additional discussions with 
appraisers from several Federal agencies and one appraiser outside the 
Federal Government. These appraisers agreed that site-specific 
appraisals are the best tool for developing a new permit fee system.
    Based on the contractor's report, the subsequent peer review of 
that report, discussions with appraisers, and internal research and 
discussions of the information gathered, the Forest Service decided 
that a permit fee system based on site-specific appraisals is the most 
technically and legally defensible way to meet the fair market value 
requirement in the National Forest Ski Area Permit Act.
    The agency believes that this approach would produce ski area 
permit fees that are based on fair market value as required by law; 
simplify the fee system; eliminate the need for burdensome audits of 
ski area assets and revenues for those ski areas under the new system; 
and make fee determinations in a nationally consistent manner. The 
site-specific appraisals would produce value determinations derived 
from the market. Rather than using a complex formula like GRFS, the new 
system would establish permit fees by site-specific appraisal. The new 
system would replace annual Forest Service calculation and verification 
of permit fees with agency monitoring to ensure that ski areas pay the 
annual permit fee determined by site-specific appraisal. Ski areas 
under the new system would not have to undergo detailed agency audits 
of their financial records for purposes of verifying fee 
determinations. Fee determinations under the new system would be 
nationally consistent because they would be determined by site-specific 
appraisals performed under a contract awarded and administered by the 
Forest Service headquarters office in Washington, D.C.

Site-Specific Appraisals

    At approximately the same time as this proposed policy is published 
in the Federal Register, the Forest Service will award a 1-year 
contract (with four consecutive options to renew) to perform site-
specific appraisals of the 137 alpine and alpine and nordic ski areas 
operating on National Forest System lands.\5\ Permit fees for each of 
these ski areas would be determined directly by site-specific 
appraisal. At this point, the agency anticipates that these appraisals 
would be updated every five years, based on the five-year cycle for 
performing site-specific appraisals. Disputes concerning fee 
determinations under the new policy would be subject to the agency's 
administrative appeal regulations at 36 CFR part 251, subpart C.

    \5\ There are a small number of nordic ski areas that are 
authorized independently from alpine ski areas under a Forest 
Service commercial special use permit. These nordic ski areas are 
covered by the National Forest Ski Area Permit Act, but would not be 
subject to the new permit fee system unless site-specific appraisals 
are performed for these areas.
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    In the first year of the contract, site-specific appraisals will be 
performed of a sample of 27 ski areas in six different strata based on 
size of operation and type of fees paid. The universe for the 
stratified simple random sampling design consists of 120 ski areas 
identified from GRFS sales revenue data for fiscal year 1991 (the 
fiscal year for which the most recent information is available), 
compiled as of January 1995, and 17 ski areas that pay annual flat 
permit fees based on GRFS principles, or a percentage of land value.
    Based on GRFS sales revenue for fiscal year 1991, the 120 ski areas 
were grouped into strata 1 to 5. The 17 ski areas that pay annual flat 
fees based on GRFS principles or a percentage of land value were placed 
in stratum 6.
    Six ski areas with zero GRFS sales revenue were placed in stratum 
1, and the largest ski area with GRFS sales revenue of over $40 million 
was placed in stratum 5. The 113 remaining ski areas were placed in 
strata 2 through 4 using the Cumulative Square Root of the Frequencies 
methodology (W. Cochran, ``Sampling Techniques,'' pp. 127-131 (3d ed. 
1977)), with respect to the GRFS sales revenue for those ski areas. 
Fifty-one ski areas with $0 to $2 million in GRFS sales revenue were 
placed in stratum 2; 33 ski areas with over $2 million and up to $7.3 
million in GRFS sales revenue were placed in stratum 3; and 29 ski 
areas with more than $7.3 and up to $40 million in GRFS sales revenue 
were placed in stratum 4.
    Within each stratum, ski areas were randomly selected for order of 
appraisal. The ski areas in stratum 1 were selected with equal 
probability, without replacement. The ski areas in strata 2 through 4 
were selected with respect to their GRFS sales revenue using 
probability proportional to size without replacement. The single ski 
area in stratum 5 was selected with probability 

[[Page 36100]]
equal to one. The ski areas in stratum 6 were selected with equal 
probability without replacement.
    The ski areas in each stratum were distributed as evenly as 
possible over a five-year period. Site-specific appraisals will be 
preformed for all 137 ski areas, with samples of 27 ski areas selected 
for years 1 through 3 and samples of 28 ski areas selected for years 4 
and 5.

Applicability of New Permit Fee System

    This proposed policy would automatically apply only to those ski 
areas whose permits are issued under the National Forest Ski Area 
Permit Act. Unlike permits issued under other authorities, these 
permits contain a clause that allows the Forest Service to apply any 
new permit fee system to the ski areas authorized by those permits (36 
CFR 251.57(h)). This clause currently states that GRFS--

    May be replaced in its entirety by the Chief of the Forest 
Service if a new generally applicable fee system is imposed 
affecting all holders of authorizations under Public Law 99-522 [the 
National Forest Ski Area Permit Act]. Replacement shall become 
effective on the beginning of the holder's business year following 
establishment.

Ski Area Term Special Use Permit, Clause VI.A.2.
    The new permit fee system would be applied to ski areas whose 
permits are issued under the National Forest Ski Area Permit Act and 
that are included in the first year of the appraisal contract only 
after the work performed for that year has been completed, reviewed, 
and accepted by the Forest Service. The new permit fee system would be 
applied to ski areas whose permits are issued under the National Forest 
Ski Area Permit Act and that are included in subsequent years of the 
appraisal contract only after the work performed for those years has 
been completed, reviewed, and accepted by the Forest Service. The 
agency intends to have the new permit fee system in effect for the 
1996-97 ski season for those ski areas that are included in the first 
year of the appraisal contract and whose permits are issued under the 
National Forest Ski Area Permit Act.
    Ski area whose permits are not issued under the National Forest Ski 
Area Permits Act would be placed under the new permit fee system when 
they receive a new permit or when they elect to have their existing 
permits amended. Any amendment to an existing permit would include the 
new ski area permit fee clause; preference would be given to issuing a 
new permit under the National Forest Ski Area Permit Act. New permits 
for ski areas would be issued under the National Forest Ski Area Permit 
Act and placed under the new system.
    The new fee system would not apply to any other permit holders who 
pay permit fees to the Forest Service under GRFS.

Public Meeting and Other Public Input Already Received

    On February 1, 1995, the Forest Service held a public meeting to 
obtain input on whether the agency had identified pertinent methods for 
determining the fair market value of the use of National Forest System 
lands by ski areas. The Forest Service made a compilation of the 
methods identified by the contractor available to the public as a basis 
for providing input. Notice of this meeting was published in the 
Federal Register on January 19, 1995 (60 FR 3835, Jan. 19, 1995). The 
agency also accepted written comments until February 10, 1995. No 
methods other than those identified by the contractor were suggested by 
members of the public.
    Nine comments were received, four at the meeting and five in 
writing. Two respondents commented that the Federal Government needs to 
get fair market value for the use of National Forest System lands. One 
of these respondents noted that if the public does not receive fair 
market value for the use of Federal land, the private activity that 
occurs on that land is being subsidized and the market for that type of 
land is distorted. Two other respondents stated that a new fee system 
should yield the same return as GRFS or a fair return for the use of 
National Forest System lands.
    One respondent commented that the fair market value of National 
Forest System lands used by ski areas would be very low without timber 
or the improvements made by ski areas.
    Another respondent stated that the National Forest System lands 
used have no inherent income-producing capability and that the ski 
industry's return to the Government on what would otherwise be 
unimproved land is very good, about $180 to $200 per acre per year, 
compared to $1.80 per head month for Federal land used for grazing. 
This respondent further commented that operating a ski area is like 
snow farming without a Government subsidy: the Government makes money 
even if the ski areas operating on National Forest System lands do not.
    Another respondent commented that there is a necessary partnership 
between the public and private sectors, given that the Government is a 
risk avoider and that the private sector is a risk taker. This 
respondent commented that the Government does not have experience at 
taking risks and therefore cannot assess risks as well as the private 
sector. This respondent noted that the ski industry adds value to the 
National Forest System lands used for skiing, resulting in revenue for 
the Government. This respondent stated that without this private sector 
investment, the Government would not get any revenues. This respondent 
also noted that there are three cardinal rules of real estate: 
Location, location, and location.
    Four respondents commented on GRFS. One noted that some of the 
revenue from privately owned facilities at the base of the mountain is 
counted in the GRFS calculation that would not be included if someone 
besides the permit holder owned those facilities, and that GRFS seems 
arbitrary as applied to revenue from those facilities.
    Two respondents noted that while GRFS has outlived itself, many 
studies on a new fee system have been done, more studies are 
unnecessary, and the studies and data available should be used to make 
a decision on a new system.
    One respondent commented that his ski area had flourished under 
GRFS because of GRFS's ability to adjust the marginal fee rates in 
response to poor versus good snow years; GRFS's ability to reward 
capital investment by assigning a lower average fee rate to ski areas 
with a higher GFA; and his ski area's being totally on National Forest 
System lands and not having to deal with the complexities of accounting 
for revenues generated from both National Forest System and private 
land. This respondent suggested that a new permit fee system should 
adjust for poor versus good snow years; provide incentives for capital 
investment; ease the administrative burden on small ski areas; and 
provide methods for determining fees when part of a ski area's revenues 
are derived from other than the use of National Forest System lands.
    Another respondent criticized the ski area permit fee legislation 
proposed in 1992, because it did not address the fair market value of 
the use of National Forest System lands (this respondent stated that 
the proposed bill was based on a percentage of revenue); because it did 
not provide incentives for capital improvements that give ski areas a 
break in fees during their initial start-up periods; and because it did 
not adjust permit fees for poor snow years. This respondent commented 
that GRFS is better than the legislation proposed in 1992.
    Five respondents commented that the new fee system should be 
simple. One 

[[Page 36101]]
respondent commented that there are a lot of expenses associated with a 
ski area, such as fixed assets and snowmaking, and that it is difficult 
to determine the value of the lands used by a ski area.
    Three respondents noted that a new permit fee system should be 
consistently applied to ski areas operating on National Forest System 
lands. One respondent noted that GRFS is subject to too many 
interpretations. Another commented that a new system should ensure that 
ski areas of different sizes and characteristics pay equitable permit 
fees. Four others stated that the new system should balance permit fees 
between small and large ski areas.
    One respondent commented that agency regulations allow for too much 
flexibility and that industry wants legislation for stability. This 
respondent noted that the stability of the fee determination should 
correspond to the stability of the 40-year ski area permit, but that 
industry would not object to scheduled updating of a legislated fee 
formula.
    One respondent stated that while use of National Forest System 
lands by private, profit-generating activities may be both beneficial 
and desirable, commercial permit holders have a responsibility to be 
conscientious stewards of the land.

Federal Advisory Committee

    A federal advisory committee was established on February 17, 1995, 
to advise the Secretary of Agriculture on development of the new ski 
area permit fee system (60 FR 9321, Feb. 17, 1995). A notice requesting 
nominations to the advisory committee was published in the Federal 
Register on February 24, 1995 (60 FR 10346, Feb. 24, 1995). The 
advisory committee will review and report on the proposed policy during 
the comment period. The advisory committee's comments will be addressed 
in the final policy.

Proposed Manual and Handbook Revision

    Detailed direction on GRFS is currently set forth in Forest Service 
Manual (FSM) Chapter 2710, Special Uses Management, Section 2715, Fees. 
Any outdated Manual direction will be revised or removed when the final 
policy on the new ski area permit fee system is issued in Forest 
Service Handbook (FSH) 2709.11, Special Uses Handbook, Chapter 30, Fee 
Determination, Section 38, Ski Area Permit Fees.
    The policy in FSM Chapter 2720, Special Uses Administration, 
Section 2721.6, Winter Recreation, would be clarified and revised to 
replace GRFS with the revised system basing ski area permit fees on 
site-specific appraisals for those ski areas whose permits are issued 
under the National Forest Ski Area Permit Act. The form number cited in 
this section for ski area permits issued under the National Forest Ski 
Area Permit Act also would be changed from Form FS-2700-24 to Form FS-
2700-5b, Ski Area Term Special Use Permit. The new permit fee clause 
would appear in FSH 2709.11, Special Uses Handbook, Chapter 50, Terms 
and Conditions, Section 53.1, Fees and Payments, Clause A-19, and in 
the revised Form FS-2700-5b. The proposed policy from FSM Chapter 2720 
and FSH 2709.11, Chapters 30 and 50, appears at the end of this notice.

Summary

    The Forest Service believes that establishing ski area permit fees 
by site-specific appraisal would produce ski area permit fees that are 
based on fair market value as required by law; would be simpler and 
less costly to administer than GRFS; would eliminate the need for 
burdensome audits of ski area assets and revenues for those ski areas 
under the new system; and would make individual fee determinations in a 
nationally consistent manner.

Regulatory Impact

    This proposed policy was reviewed under Executive Order 12866 on 
Regulatory Planning and Review. The agency has determined that the 
proposed policy is a significant action subject to Office of Management 
and Budget (OMB) review because of the strong public interest expressed 
in a new permit fee system for ski areas operating on National Forest 
System lands.
    Moreover, this proposed policy was considered in light of the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.). Permit fees for ski 
areas operating on National Forest System lands must without exception 
be based on fair market value (16 U.S.C. 497b(b)(8); 31 U.S.C. 9701; 36 
CFR 251.57). In accordance with the Regulatory Flexibility Act, the 
agency has conducted an initial Regulatory Flexibility Analysis 
regarding the impact of this proposed policy on small entities. The 
agency does not currently have all the data necessary for a 
comprehensive analysis of the effects of this proposed policy on small 
entities. Therefore, the agency is inviting comments concerning 
potential impacts. In particular, the agency is interested in 
determining the number and kind of small entities that may incur 
benefits or costs from implementation of this proposed policy.

No Takings Implications

    This proposed policy was reviewed for its impact on private 
property rights under Executive Order 12630 of March 15, 1988, as 
implemented by the United States Attorney General's Guidelines for the 
Evaluation of Risk and Avoidance of Unanticipated Takings. Executive 
Order 12630 would not apply to this proposed policy because it consists 
of administrative changes governing authorization of the use and 
occupancy of National Forest System lands. Forest Service ski area 
permits do not grant any title or interest in lands or resources held 
by the United States.

Civil Justice Reform Act

    This proposed policy was reviewed under Executive Order 12778, 
Civil Justice Reform. If this proposed policy is adopted, (1) all state 
and local laws and regulations that conflict with this proposed policy 
or that impede its full implementation would be preempted; (2) no 
retroactive effect would be given to this proposed policy; and (3) it 
would not require administrative proceedings before parties may file 
suit in court challenging its provisions.

Controlling Paperwork Burdens on the Public

    The information collection requirements that would be imposed by 
this proposed policy and the new clause for the ski area permit form 
have been approved for use by OMB through June 30, 1996, and assigned 
control number 0596-0082. The agency estimates that the public 
reporting burden for the collection of information in the proposed 
policy and the new clause for the ski area permit form would be 12 
hours per response.

Categorical Exclusion

    This proposed policy would consist primarily of technical and 
administrative changes related to the authorization of occupancy and 
use of National Forest System lands. Section 31.1b of Forest Service 
Handbook 1909.15 (57 FR 43180, Sept. 18, 1992) categorically excludes 
from documentation in an environmental assessment (EA) or environmental 
impact statement (EIS) ``rules, regulations, or policies to establish 
Service-wide administrative procedures, program processes or 
instructions.'' The agency's preliminary assessment is that this 
proposed policy falls within this category of actions and that no 
extraordinary circumstances exist which would require preparation of an 
EA or 

[[Page 36102]]
an EIS. A final determination will be made upon adoption of the final 
policy.

    Dated: April 25, 1995.
Jack Ward Thomas,
Chief.
Proposed Manual and Handbook Revision

    The Forest Service organizes its directive system by alpha-numeric 
codes and subject headings. Only those sections of the Forest Service 
Manual (FSM) and Handbook (FSH) that are the subject of this notice are 
set out here. The audience for this direction is Forest Service 
employees charged with issuing and administering special use permits 
for ski areas.

Forest Service Manual

Chapter 2720--Special Uses Administration

Section 2721.6--Winter Recreation
    2721.61b--Permit Fees. See FSH 2709.11, sections 38.1 and 38.2, for 
direction on permit fee determinations for ski areas.
    2721.61e--Ski Area Permit.
    1. Use the National Forest Ski Area Permit Act (16 U.S.C. 497b) and 
Form FS-2700-5b, Ski Area Term Special Use Permit (FSH 2709.11, sec. 
38.1 and 38.2, and 53.1, Clause A-19) to issue new permits for nordic 
and alpine ski areas.
    4. Use the Land and Water Conservation Fund Act (16 U.S.C. 4601-
6a(c)) and Form FS-2700-4, Special-Use Permit (FSH 2709.11, sec. 41.) 
to issue permits for nordic skiing conducted by an outfitter or guide, 
except when this activity is associated with a ski area subject to the 
National Forest Ski Area Permit Act.
    6. Initiate conversion of existing ski areas to the new permit by 
writing to current holders, providing them with a blank copy of Form 
FS-2700-5b, Ski Area Term Special Use Permit, and inviting them to meet 
individually with the authorized officer or his or her representative 
to discuss the terms and conditions. The principal areas to be agreed 
upon are the permit boundary and length of term.

[Following are revised subparagraphs listing examples of conditions 
which could justify shorter tenure as provided by paragraph 7:]
    7d. Capital investment in the ski area is less than $1 million.
    7e. Ownership of the improvements is in transition, for example, in 
trust, in receivership, or listed for sale.
    7f. Public service required in the existing permit is not being 
provided.

Forest Service Handbook 2709.11--Special Uses Handbook

Chapter 30--Fee Determination

    38--Ski Area Permit Fees. This section establishes Forest Service 
policy for determining permit fees for the use of National Forest 
System lands by ski areas.
    38.01--Authority. (FSM 2701.1; sec. 30.1). The following 
authorities require that permit fees for ski areas operating on 
National Forest System lands be based on fair market value: National 
Forest Ski Area Permit Act (16 U.S.C. 497b), Independent Offices 
Appropriations Act (31 U.S.C. 9701), and Forest Service special use 
regulations on permit fees (36 CFR 251.57).
    38.02--Objective. Collect permit fees based on the fair market 
value of the use of National Forest System lands by ski areas.
    38.03--Policy. Determine permit fees for ski areas according to one 
of the following methods as directed by section 38.1:

1. Site-specific appraisal;
2. Graduated rate fee system (GRFS) (FSM 2715); or
3. Flat rate (FSM 2715.14).

    38.04--Responsibility.
    38.04a--Washington Office, Director, Recreation, Heritage, and 
Wilderness Resources Staff. The Washington Office Director of 
Recreation, Heritage, and Wilderness Resources has the responsibility 
to:
    1. Award and administer contracts for performing and updating site-
specific appraisals for the use of National Forest System lands by ski 
areas, in coordination with the Lands Staff and the Procurement and 
Property Staff and with review by the Office of the General Counsel.
    2. Obtain and address recommendations in reports from the 
Washington Office Director of Fiscal and Accounting Services on review 
of the objectivity and integrity of the process used to establish or 
update permit fees based on fair market value by site-specific 
appraisal.
    3. Establish and amend permit fees that are determined by site-
specific appraisal of the use of National Forest Service lands by ski 
areas.
    4. Distribute, with supporting documentation, permit fee 
determinations that are assessed by site-specific appraisal to the 
Forest Supervisors responsible for administering those fee 
determinations.
    38.04b--Washington Office, Director, Lands Staff. The Washington 
Office Director of Lands has the responsibility to:
    1. Provide technical assistance to the Washington Office Director 
of Recreation, Heritage, and Wilderness Resources to award and 
administer contracts for performing and updating site-specific 
appraisals.
    2. Provide a team of qualified appraisers to:
    a. Review site-specific appraisals; and
    b. Prepare a review appraisal report for site-specific appraisals.
    38.04c--Washington Office, Director, Fiscal and Accounting Services 
Staff. The Washington Office Director of Fiscal and Accounting Services 
has the responsibility to:
    1. Monitor and report to the Washington Office Director of 
Recreation, Heritage, and Wilderness Resources on the objectivity and 
integrity of the process used to establish or update permit fees for 
ski areas based on fair market value by site-specific appraisal. The 
process includes but is not limited to contracting for the services of 
a qualified appraiser, work performed by the contractor, review and 
acceptance of the contractor's work, and actions to establish permit 
fees for ski areas from the work performed under contract.
    2. Review adherence to Forest Service policy for ski area permit 
fees determined by site-specific appraisal to ensure that the amount 
paid by the ski areas corresponds to the amount determined by site-
specific appraisal; report any discrepancies to the Director of 
Recreation, Heritage, and Wilderness Resources.
    3. Review adherence to Forest Service policy on ski area permit 
fees determined by site-specific appraisal to ensure that site-specific 
appraisals are updated in accordance with Forest Service policy and 
permit requirements; report any discrepancies to the Director of 
Recreation, Heritage, and Wilderness Resources.
    4. Establish guidelines for auditing ski area permit fees 
determined under GRFS and review adherence to Forest Service policy on 
GRFS and permit requirements; report any discrepancies to the Director 
of Recreation, Heritage, and Wilderness Resources.
    5. Establish guidelines for auditing ski area permit fees 
determined by a flat rate and review adherence to Forest Service policy 
on flat rate fees and permit requirements; report any discrepancies to 
the Director of Recreation, Heritage, and Wilderness Resources.
    38.04d--Authorized Officer. The authorized officer has the 
responsibility to:
    1. Amend ski area permits issued under the National Forest Ski Area 


[[Page 36103]]
Permit Act in conformance with direction in sections 38.11b and 38.12c.
    2. Amend ski area permits issued under authorities other than the 
National Forest Ski Area Permit Act in conformance with direction in 
sections 38.11b and 38.12c when:
    a. The holder agrees to the amendment; or
    b. The holder elects to have the permit amended for any other 
purpose.
    3. Issue new ski area permits under the National Forest Ski Area 
Permit Act in conformance with direction in section 38.2.
    4. Establish ski area permit fees that are determined under GRFS 
(sec. 38.12a).
    5. Establish ski area permit fees that are determined by a flat 
rate (sec. 38.12b).
    6. Bill holders for their use and occupancy of National Forest 
System lands.
    7. Ensure that holders are informed of their responsibility to pay 
their permit fees promptly and in full.
    38.1--Permit Fees for Existing Ski Area Permits.
    38.11--Permits Issued Under National Forest Ski Area Permit Act. 
Determine permit fees by site-specific appraisal for all ski areas 
whose permits are issued under the National Forest Ski Area Permit Act. 
These permit fees apply to all activities associated with the use and 
occupancy authorized by the corresponding ski area permits, including 
nordic and alpine skiing, outfitting and guiding, and recreation 
events. Appraisals will be reviewed and periodically updated.
    38.11a--Effective Date of Permit Fee System Based on Site-Specific 
Appraisal. If applicable, the determination of permit fees by site-
specific appraisal becomes effective on the first day of the holder's 
business year immediately following implementation of this system and 
appraisal of the holder's use of National Forest System land.
    38.11b--Amendment of Existing Ski Area Permits. Amend ski area term 
special use permits issued under the National Forest Ski Area Permit 
Act by replacing the former Clause VI in the permits with the current 
Clause VI as it appears in Form FS-2700-5b and section 53.1, Clause A-
19, of this Handbook. When amending ski area term special use permits 
that were not issued under the National Forest Ski Area Permit Act 
(sec. 38.12c), replace the current permit fee clause in the permits 
with Clause VI as it appears in Form FS-2700-5b and section 53.1, 
Clause A-19, of this Handbook.
    38.12--Ski Area Permits Not Issued Under National Forest Ski Area 
Permit Act.
    38.12a--Graduated Rate Fee System. Determine permit fees under GRFS 
(FSM 2715.11) for any ski areas whose permits are not issued under the 
National Forest Ski Area Permit Act and whose annual permit fees were 
determined under GRFS prior to [date when the system based on site-
specific appraisal was implemented], unless the holders elect to have 
their permits amended (sec. 38.12c).
    38.12b--Flat Rate. Determine permit fees by a flat rate (FSM 
2715.14) for any ski areas whose permits are not issued under the 
National Forest Ski Area Permit Act and whose annual permit fees were 
determined by a flat rate prior to [date when the system based on site-
specific appraisal was implemented], unless the holders elect to have 
their permits amended (sec. 38.12c).
    38.12c--Site-Specific Appraisal. Determine permit fees by site-
specific appraisal for ski areas whose permits are not issued under the 
National Forest Ski Area Permit Act when:
    1. Holders agree to have permit fees determined in this manner; or
    2. Holders elect to have their permits amended for any other 
purpose. The authorized officer shall give preference to issuing a new 
permit under the National Forest Ski Area Permit Act.
    These permit fees apply to all activities associated with the use 
and occupancy authorized by the corresponding ski area permits, 
including nordic and alpine skiing, outfitting and guiding, and 
recreation events. Appraisals will be reviewed and periodically 
updated.
    38.2--Permit Fees for New Ski Area Permits.
    1. Issue all new ski area permits under the National Forest Ski 
Area Permit Act.
    2. Use Form FS-2700-5b, Ski Area Term Special Use Permit, which 
requires permit fees to be determined by site-specific appraisal. 
Appraisals will be reviewed and periodically updated.
    38.3--Billing. Require holders to pay their annual permit fees on 
the first day of their business year for that year's use and occupancy 
of National Forest System lands according to the following:
    1. If the annual fee is $10,000 or less per year, payment is due in 
full on the first day of the holder's business year. Bill holders 30 
days in advance of the first day of their business year.
    2. If the annual fee exceeds $10,000, holders may pay quarterly, 
with 25 percent of the annual fee due on the first day of each quarter 
of the holder's business year. Bill holders 30 days in advance of the 
first day of each quarter.

Chapter 50--Terms and Conditions

    53.1--A--Fees and Payments.
    19. Clause for Ski Area Permit Fees Based on Site-Specific 
Appraisal. See sections 38.11b and 38.2 of this Handbook for direction 
on use of this clause.
VI. PERMIT FEES
    A. Determination of Permit Fees by Site-Specific Appraisal. The 
holder shall pay fair market value, as determined by site-specific 
appraisal performed by a Forest Service contractor, agent, employee, or 
other representative, for the use and occupancy of National Forest 
System lands authorized by this permit. These appraisals shall be 
performed in accordance with the latest editions of the ``Uniform 
Standards of Professional Appraisal Practice,'' published by the 
Appraisal Foundation, and the ``Uniform Appraisal Standards for Federal 
Land Acquisitions,'' published by the Interagency Land Acquisition 
Conference. In case of a conflict between these two standards, the 
latter shall take precedence.
    B. Access to Records.
    1. For the purpose of administering this permit, including 
performing or updating a site-specific appraisal of the use and 
occupancy authorized by this permit to determine the permit fee, the 
holder shall make all of the accounting books and supporting records 
for the business activities conducted under this permit (including any 
documentation relating to the past or future sale of the improvements 
authorized by this permit), as well as those of sublessees and 
franchises operating under the authority of this permit, available for 
analysis by contractors, agents, employees, or other representatives of 
the Forest Service or Federal agencies authorized to review Forest 
Service activities.
    2. Review of accounting books and supporting records shall be 
performed on dates convenient to the holder and reviewers.
    3. Financial information obtained under this clause shall be 
treated as confidential to the extent authorized by law.
    4. The holder shall retain and keep available for review accounting 
books and supporting records for the business activities conducted 
under this permit for 5 year after they are created, unless this 
requirement is waived by the authorized officer in writing.
    c. Corrections in Fee Determinations. Any errors in fee 
determinations shall 

[[Page 36104]]
be corrected retroactively, and a bill showing the correct permit fee 
shall be sent to the holder for the period covered by the original 
bill. Errors in fee determinations include but are not limited to those 
based on misrepresentation of amounts, arithmetic or typographical 
mistakes, or variation from generally accepted accounting principles, 
the ``Uniform Standards of Professional Appraisal Practice,'' or the 
``Uniform Appraisal Standards for Federal Land Acquisitions.'' Any 
changes in fee determinations resulting from amendment or replacement 
of the ski area permit fee system shall be made prospectively.
    D. Updating of Appraisals. As needed, the Forest Service may update 
the site-specific appraisals used to establish the permit fee under 
Clause VI. If a new permit fee is determined by an updated site-
specific appraisal, the new permit fee shall become effective on the 
first day of the holder's business year immediately following the date 
of the Forest Service review appraisal report on the updated appraisal 
report.
    E. Permit Fee Payments. Permit fee payments shall be due within 30 
days of receipt of a bill and shall be submitted to the Collection 
Officer, United States Department of Agriculture, Forest Service, at 
the address provided by the authorized officer. Checks or money orders 
shall be made payable to the United States Department of Agriculture, 
Forest Service.
    F. Interest and Penalties.
    1. Under 31 U.S.C. 3717 and 7 CFR Part 3, Subpart B, or subsequent 
changes to those authorities, interest shall be charged on any permit 
fee payment that is not received on the date it is due.
    2. Interest shall be assessed using the higher of (1) The most 
current rate prescribed by the United States Department of the Treasury 
Financial Manual (TFM-6-8025.40) or (2) the prompt payment rate 
prescribed by the United States Department of the Treasury under 
Section 12 of the Contract Disputes Act (41 U.S.C. 611). Interest shall 
accrue from the date the permit fee payment is due.
    3. Administrative charges may be assessed to cover processing and 
handling of delinquent permit fee payments.
    4. A penalty of 6 percent per year shall be assessed on any permit 
fee payment that is more than 90 days overdue and shall accrue from the 
date the fee payment is due. This penalty is in addition to any 
interest and other charges assessed under Clauses VI.F.1-3.
    5. Delinquent permit fee payments, interest, penalties, and any 
other charges assessed under Clause VI.F shall be subject to all the 
rights and remedies afforded the United States under federal law and 
implementing regulations (31 U.S.C. 3711 et seq.).

    G. Consequences of Nonpayment. The holder's failure to make timely 
payment of any permit fees, interest, penalties, or other charges 
assessed under Clause VI.F shall be grounds for revocation of this 
permit. This permit terminates when any payments owed under Clause VI 
are more than 90 days overdue.

    H. Accounting Records. The holder shall follow generally accepted 
accounting principles or other comprehensive bases of accounting 
acceptable to the Forest Service in recording financial transactions 
and in reporting results to the authorized officer. When requested by 
the authorized officer, the holder at its expense shall have its annual 
accounting reports audited or prepared by a licensed independent 
accountant acceptable to the Forest Service. When requested by the 
authorized officer, the holder at its expense shall prepare and 
maintain any special records and accounts that may be specified by the 
authorized officer. The holder shall require sublessees and franchises 
to comply with these same requirements.

    I. Financial Statements. Within 3 months of the last day of the 
holder's business year, the holder shall provide financial statements 
representing the holder's financial condition as of the last day of the 
holder's business year and the results of the holder's operation for 
that year. When requested by the authorized officer, the holder shall 
require sublessees to comply with this requirement.

    J. Replacement of Permit Fee System. The system requiring ski area 
permit fees to be determined by site-specific appraisal may be replaced 
in its entirety by the Chief of the Forest Service with a new permit 
fee system if it applies to all holders of permits issued under the 
National Forest Ski Area Permit Act. The new permit fee system shall 
become effective on the first day of the holder's business year 
immediately following implementation of the new system.

[FR Doc. 95-17131 Filed 7-12-95; 8:45 am]

BILLING CODE 3410-11-M