BLM and the Forest Service: Federal Taxpayers Could Benefit More 
From Land Sales (10-SEP-01, GAO-01-882).			 
								 
Since 1781, the federal government has transferred or sold about 
1.1 billion acres to nonfederal entities under various		 
initiatives that promoted general economic development, developed
transportation systems, supported public schools, and encouraged 
settlement of the western frontier. Today, the Department of the 
Interior's Bureau of Land Management (BLM) and the Department of 
Agriculture's Forest Service administer about seventy percent of 
the 657 million acres that remain in federal ownership. These	 
agencies continue to transfer and sell federal land, now under	 
more limited circumstances and usually at the request of	 
nonfederal entities; for example, a community wanting to develop 
a public park, a nonprofit group wanting land for a shooting	 
range, or a neighboring homeowner wanting to obtain clear	 
property title after mistakenly building part of his residence on
federal land. During fiscal years 1991 through 2000, BLM alone	 
was authorized by law to transfer land. BLM transferred about	 
79,000 acres during this period under four key statutes and	 
received about $3 million. BLM and the Forest Service are both	 
authorized by law to sell land and are directed by law to receive
at least fair market value when they do so; BLM has broader	 
authority and has sold much more land, about 56, 000 acres under 
three key statutes, receiving about $74 million. In contrast, the
Forest Service sold only about 2,000 acres, all noncompetitively,
during this period and received about $5 million, under two key  
statutes. When BLM and Forest Service sold land, they both	 
generally received at least the appraised value. BLM generally	 
offered land for competitive sale when agency personnel believed 
there to be more than one potential buyer for the parcel. In	 
these sales, the agency used appraised values as starting	 
bids--that is, as minimum sale prices--and received prices that  
were, on average, about eighteen percent higher than the	 
appraised values. When BLM or the Forest Service sold land	 
noncompetitively, they generally set the sale price at the	 
appraised value. Some of the parcels the agencies sold		 
noncompetitively might have been more appropriately offered for  
competitive sale, and in some of the noncompetitive sales, the	 
appraised value underestimated the fair market value because it  
was not based on the land's current or planned use.		 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-01-882 					        
    ACCNO:   A01421						        
    TITLE:   BLM and the Forest Service: Federal Taxpayers Could      
             Benefit More From Land Sales                                     
     DATE:   09/10/2001 
  SUBJECT:   Fair market value					 
	     Land management					 
	     Land transfers					 

******************************************************************
** This file contains an ASCII representation of the text of a  **
** GAO Testimony.                                               **
**                                                              **
** No attempt has been made to display graphic images, although **
** figure captions are reproduced.  Tables are included, but    **
** may not resemble those in the printed version.               **
**                                                              **
** Please see the PDF (Portable Document Format) file, when     **
** available, for a complete electronic file of the printed     **
** document's contents.                                         **
**                                                              **
******************************************************************
GAO-01-882
     
Report to the Honorable George Miller, House of Representatives

United States General Accounting Office

GAO

September 2001 BLM AND THE FOREST SERVICE

Federal Taxpayers Could Benefit More From Land Sales

GAO- 01- 882

Page 1 GAO- 01- 882 Land Sales and Transfers

September 10, 2001 The Honorable George Miller House of Representatives

Dear Mr. Miller: Since 1781, the federal government has transferred or sold
1 about 1.1 billion acres to nonfederal entities- such as state and local
governments, businesses, nonprofit groups, and individual citizens- under
various initiatives that promoted general economic development, developed
transportation systems, supported public schools, and encouraged settlement
of the western frontier. Today, the Department of the Interior?s Bureau of
Land Management (BLM) and the Department of Agriculture?s Forest Service
administer about 70 percent of the 657 million acres that remain in federal
ownership. These agencies continue to transfer and sell federal land, now
under more limited circumstances and usually at the request of nonfederal
entities; for example, a community wanting to develop a public park, a
nonprofit group wanting land for a shooting range, or a neighboring
homeowner wanting to obtain clear property title after mistakenly building
part of his residence on federal land.

Interested in the authority for and the extent of such transfers and sales,
and concerned about whether they serve the federal taxpayers? interest, you
asked that we: (1) determine the key statutes authorizing BLM and the Forest
Service to transfer land and the transfers made during the past decade (i.
e., fiscal years 1991 through 2000); (2) determine the key statutes
authorizing the agencies to sell land and the sales made during this 10-
year period; and (3) assess whether the agencies received the appraised
value- which estimates fair market value- when they sold land during this
period.

In conducting our work, we obtained aggregate annual data reported by the
agencies on the transfers and sales that they completed during fiscal years
1991 through 2000, to ascertain the key statutes and the transactions

1 In this report, we consider land to be ?transferred? when the government
is authorized by law to receive less than its fair market value (or zero
value) and ?sold? when the government is directed by law to receive at least
its fair market value.

United States General Accounting Office Washington, DC 20548

Page 2 GAO- 01- 882 Land Sales and Transfers

made under them. We also reviewed all of the transfers and sales the
agencies completed in calendar year 1999 (the most recent year for which
complete data were available when we began our review) to understand how the
agencies implemented the various statutory requirements and to examine the
appraisals. Details of our scope and methodology are discussed in appendix
I.

During fiscal years 1991 through 2000, BLM alone was authorized by law to
transfer land. In total, it transferred about 79,000 acres during this
period under four key statutes and received about $3 million. The oldest of
the four statutes is the Desert Land Act, which was enacted in 1877 to
provide arid agricultural land to individuals who have made efforts to
irrigate it and meet certain other requirements; under this statute, BLM
transferred about 13,000 acres during this 10- year time frame for the price
set in law of $1.25 per acre. Most of the land transferred by BLM during
this period was transferred under the Recreation and Public Purposes Act,
which allows land to be transferred to communities for recreational and
other public purposes. Under this statute, BLM transferred about 42,000
acres for below- market prices- ranging from 90 percent of the fair market
value down to zero, depending on the purpose for which the land will be used
and type of applicant. Of the four statutes, BLM transferred the least land
under the Color- of- Title acts, which provide land to eligible individuals
who mistakenly believe they already own it; under these acts, BLM
transferred about 4,000 acres generally for a minimum price set by the
agency of $1.25 per acre. The most recent of the four transfer statutes is
the Southern Nevada Public Land Management Act, enacted in 1998 to provide
land to Clark County, Nevada, for certain public purposes; as directed by
this statute, BLM transferred about 20,000 acres at no cost to the county.

BLM and the Forest Service are both authorized by law to sell land and are
directed by law to receive at least fair market value when they do so; BLM
has broader authority and has sold much more land. In total, BLM sold about
56,000 acres during fiscal years 1991 through 2000 under three key statutes
and received about $74 million. BLM?s primary sales statute is the Federal
Land Policy and Management Act, enacted in 1976, which allows BLM to
identify land that may be sold and directs the agency to use competitive
bidding procedures unless it determines that noncompetitive sales are
necessary for reasons of equity- for example, to give preference to current
users of the land. Under this statute, BLM sold about 55,000 acres- offering
about 24,000 acres under competitive bidding procedures- for about $38
million during this 10- year period. The other Results in Brief

Page 3 GAO- 01- 882 Land Sales and Transfers

two statutes authorize BLM to sell certain land in southern Nevada under the
requirements of the Federal Land Policy and Management Act: under the
Santini- Burton Act, BLM sold about 600 acres for about $27 million, and
under the Southern Nevada Public Land Management Act, BLM sold about 100
acres for about $10 million; almost all of this land was sold competitively.
In contrast, the Forest Service sold only about 2,000 acres- all
noncompetitively- during this period and received about $5 million, under
two key statutes. Under the Townsite Act, which provides land to western
communities for community purposes, the Forest Service sold about 800 acres
and received about $3 million. Under the Small Tracts Act, which allows the
sale of small parcels that are isolated or difficult to manage, or used by
nonfederal entities who believed they had a right to do so, the Forest
Service sold about 1,200 acres and received about $2 million.

When BLM and the Forest Service sold land, they both generally received at
least the appraised value. BLM generally offered land for competitive sale
when agency personnel believed there to be more than one potential buyer for
the parcel; in these sales, the agency used appraised values as starting
bids- that is, as minimum sale prices- and received prices that were, on
average, about 18 percent higher than appraised values. BLM sold land
directly (noncompetitively) to applicants when the parcel for sale was in
use (whether the use was authorized or not) and agency personnel believed
that the current user was the only potential buyer. When BLM or the Forest
Service sold land noncompetitively, they generally set the sale price as the
appraised value. Some of the parcels the agencies sold noncompetitively
might have been more appropriately offered for competitive sale, and in some
of the noncompetitive sales, the appraised value underestimated the fair
market value because it was not based on the land?s current or planned use.
For example, BLM allowed a city in Arizona to use an 80- acre parcel as a
sand and gravel pit; after the pit was depleted, the city applied to buy the
parcel to use as a landfill. The parcel was appraised for use as an
industrial or recreational site and the excavated area was determined to
have no value for these uses- although the city planned to use the land
explicitly because it was excavated. BLM sometimes sold land for less than
its fair market value as estimated by its appraised value- despite having no
authority to do so- generally to resolve trespasses that posed difficult
management situations.

Under the key land- sales statutes, both BLM and the Forest Service have
opportunities to enhance federal revenues when they sell land, by increasing
their use of competitive sales and appraising parcels that are sold
noncompetitively on the basis of their current or planned use. In

Page 4 GAO- 01- 882 Land Sales and Transfers

addition, we recommend that BLM not sell land for less than its fair market
value, unless it obtains specific legislation to do so under specific
circumstances, and that it clarify certain requirements when it transfers
land. We requested comments from the Departments of the Interior and
Agriculture, but none were provided.

When BLM or the Forest Service estimates a parcel?s fair market value, they
generally obtain an appraisal that complies with federal appraisal
standards. 2 According to the standards, fair market value is defined as the
amount for which a property would be sold- for cash or its equivalent- by a
willing and knowledgeable seller with no obligation to sell, to a willing
and knowledgeable buyer with no obligation to buy. The standards require an
appraiser to first identify the property?s ?highest and best use,? which is
defined as the use that is physically possible, legally permissible,
financially feasible, and maximally profitable for the owner. The appraiser
must estimate the property?s value using at least one of three approaches:
(1) the sales comparison approach, which compares the property with other
properties that have been sold; (2) the income approach, which applies a
capitalization rate to the property?s potential net income; or (3) the cost
approach, which adds the estimated value of the land to the current cost of
replacing any improvements (such as buildings). The sales comparison
approach is generally considered to be the most reliable when sufficient
market data are available; it considers various factors- such as the
location, size and other physical characteristics, and uses of the
properties- to estimate the extent of comparability between the property
being appraised and the comparable properties. On the basis of the prices of
the properties that are judged to be the most comparable, the appraiser then
estimates the fair market value of the property being appraised.

Federal appraisal standards generally address appraisal procedures and
documentation rather than outcomes. The standards explicitly allow for the
application of professional judgment in estimating a property?s fair market
value: ?The appraiser should not hesitate to acknowledge that

2 Two sets of standards apply to appraisals of federal land: (1) the Uniform
Appraisal Standards for Federal Land Acquisitions, revised in 1992 by the
Interagency Land Acquisition Conference, a voluntary organization
established in 1968, chaired through the Department of Justice, and composed
of representatives of federal agencies that acquire land; and (2) the
Uniform Standards of Professional Appraisal Practice, developed in 1986-
1987 and annually updated by the Appraisal Standards Board of The Appraisal
Foundation, a not- for- profit educational organization established in 1987
and directed by a board of trustees. Background

Page 5 GAO- 01- 882 Land Sales and Transfers

appraising is not an exact science and that reasonable men may differ
somewhat in arriving at an estimate of the fair market value.? Before either
agency uses an appraised value, an agency appraiser must review the
appraisal report, assure it complies with federal appraisal standards, and
approve it for agency use.

Four key statutes authorize BLM to transfer land. Under these statutes, BLM
transferred about 79, 000 acres for about $3 million during fiscal years
1991 through 2000: about 13,000 acres under the Desert Land Act; about
42,000 acres under the Recreation and Public Purposes Act (R& PPA); about
4,000 acres under the Color- of- Title acts; and about 20,000 acres under
the Southern Nevada Public Land Management Act (SNPLMA). The Forest Service
did not transfer land during our study period, although it recently received
authority to do so under the Education Land Grant Act.

Enacted in 1877, the Desert Land Act authorizes BLM to transfer arid western
land to applicants who have made efforts to reclaim, irrigate, and cultivate
it, for $1.25 per acre. 3 Applicants must first identify such land- limited
to 320 acres per application- as suitable for agriculture and incapable of
producing crops without irrigation; in addition, the land generally cannot
have minerals or timber. Among other requirements, applicants must hold a
legal right to the water they plan to use for irrigation and prove that they
have expended at least $3 per acre in reclamation, irrigation, and
cultivation. According to BLM, identifying federal land that could be
acquired under this statute is now difficult for several reasons, including
the following: most of the arid western land that is suitable for
agricultural development is now privately owned, the amount of water
available for irrigation is now limited, and the costs of developing
irrigation projects are now high- roughly $250,000 for a 320- acre parcel.
In addition, the application process is time- consuming for applicants and
agency officials, sometimes taking 10 or more years to complete.

Under the Desert Land Act, BLM transferred about 13,000 acres from fiscal
year 1991 through fiscal year 2000 and received about $15,000. Figure 1

3 43 U. S. C. 321 et seq. This act applies to the 11 contiguous western
states- Arizona, California, Colorado, Idaho, Montana, Nevada, New Mexico,
Oregon, Utah, Washington, and Wyoming- plus North Dakota and South Dakota.
BLM Transferred

79,000 Acres Under Four Key Statutes

Desert Land Act

Page 6 GAO- 01- 882 Land Sales and Transfers

shows the acres transferred under the Desert Land Act, and the amount
received, annually for this 10- year period.

Figure 1: Acreage Transferred and Amount Received Under the Desert Land Act,
Fiscal Years 1991 Through 2000

The number of acres transferred annually ranged from about 300 acres in
fiscal year 1999 to about 3,100 acres in fiscal year 1996.

R& PPA authorizes BLM to transfer land to state governments, local
governments, and nonprofit organizations, if the land will be developed and
used for recreational or public purposes, upon application from any of these
entities. 4 Prices for this land are set in the act or by the agency at less
than fair market value, depending on the type of entity applying and the
purpose for which the land will be used, as shown in table 1.

4 43 U. S. C. 869 et seq. Recreation and Public

Purposes Act

Page 7 GAO- 01- 882 Land Sales and Transfers

Table 1: Pricing Requirements for Land Transferred Under R& PPA Price
Applicant Purpose

No value State or local government Historic monuments or recreation Greater
of $10 per acre or $50 in total State or local government Other government-
controlled uses that serve the general public (e. g.,

schools, firehouses, landfills) 50 percent of the appraised value State or
local government, or

nonprofit organization Public purposes that are open to the general public
(e. g., cemeteries, fairgrounds)

90 percent of the appraised value State or local government, or

nonprofit organization Other public purposes that are not open to the
general public (e. g., ?members only? shooting ranges)

Source: BLM?s Manual, revised Oct. 1994.

Before BLM transfers land to an applicant under R& PPA, the agency is
authorized and generally prefers to enter first into a multi- year lease
with the applicant. Such leases help the agency to assure that applicants
develop their proposed projects as planned and in a timely manner.

When BLM transfers land under R& PPA, the agency restricts the deed to
require that the parcel continue to be used for the stated purpose and not
be transferred to another owner without BLM?s consent. If these deed
restrictions are violated, BLM generally requires that the owner take
corrective action- such as returning the parcel to its stated purpose- or
transfer the parcel back to BLM. 5 In cases when the owner wants to continue
to use the parcel in a way that violates the deed restrictions, BLM often
agrees to take back the parcel and then sell it to the former owner for its
current appraised value. To assure that the deed restrictions are met, BLM?s
policy is that field offices should visually inspect each transferred parcel
at least once every 5 years. For example:

 BLM field office staff inspected a 160- acre parcel in Idaho that had been
transferred to a nonprofit group to develop and use as a trap- shooting and
rifle range. In their inspection, staff found an occupied trailer, an
abandoned car, miscellaneous garbage, and weeds growing in the area that was
to be cleared- all in violation of the deed restriction. BLM staff
subsequently directed the group to take specific actions to correct the
violations.

5 BLM may decide not to similarly restrict the deed for land that is to be
used for landfills or similar purposes, to avoid the possibility of a parcel
returning to federal ownership after it has been contaminated and may pose
environmental hazards.

Page 8 GAO- 01- 882 Land Sales and Transfers

Field office representatives told us that limited staff resources and higher
work priorities preclude them from inspecting all transferred parcels every
5 years. BLM?s automated public lands database shows that field office staff
visited only about 40 percent of the 277 parcels with restricted deeds that
were transferred in the period from fiscal years 1991 through 2000;
monitoring visits were done (or scheduled) at intervals longer than 5 years
for some parcels but were not done (or scheduled) at all for other parcels.
To address this problem, BLM offices have adopted alternative approaches:
for example, one field office hired a summer intern to inspect transferred
parcels; another requested additional funds to hire contractors to do these
inspections; yet another used a volunteer. However, BLM has not assessed the
feasibility of other less costly approaches, such as requiring owners of
transferred parcels to document their compliance with deed restrictions by
submitting periodic reports and/ or photographs of their land; field office
staff could review these documents and inspect parcels as needed- for
example, if the documents were not submitted on time or appeared to show
noncompliance.

Under R& PPA, BLM transferred about 42,000 acres during fiscal years 1991
through 2000 and received a total of about $2. 6 million: about 22,000 acres
were transferred to state or local governments for historic monument or
recreation purposes (at no cost); about 17,000 acres to state or local
governments for other government- controlled purposes that serve the general
public (for the greater of $10 per acre or $50 total); and the remaining
approximate 3,000 acres to state or local governments or nonprofit
organizations for other public purposes (for a percentage of the appraised
value). Figure 2 shows the acres transferred under R& PPA, and the amount
received, annually for fiscal years 1991 through 2000.

Page 9 GAO- 01- 882 Land Sales and Transfers

Figure 2: Acreage Transferred and Amount Received Under R& PPA, Fiscal Years
1991 Through 2000

The number of acres transferred under R& PPA ranged from about 900 in fiscal
year 1993 to about 6,500 in fiscal year 1995. The amount received from R&
PPA transfers ranged from about $9, 000 in fiscal year 1993 to almost $1.6
million in fiscal year 1999. The significant increase in that year was due
primarily to transfers of three parcels in Las Vegas, Nevada, to churches,
at 50 percent of their appraised values- one parcel yielded over $250,000
and two parcels yielded more than $500,000 each.

BLM is also authorized to transfer land under the Color- of- Title Act and
several other laws that the agency collectively refers to as the Color-
ofTitle acts. 6 Most of the land is transferred under Class I claims made
under

6 The Color- of- Title Act addresses claims involving land acquired on
January 1, 1901, or earlier (43 U. S. C. 1068( b)) and land acquired after
this date (43 U. S. C. 1068( a)). The other acts involve land that is
adjacent to Spanish or Mexican land grants (43 U. S. C. 178); land that was
erroneously surveyed along shorelines of rivers or other bodies of water
(referred to as ?erroneously meandered lands?) in Arkansas (43 U. S. C.
992), Louisiana (43 U. S. C. 993), and Wisconsin (43 U. S. C. 994 and Act of
August 24, 1954, 68 Stat. 789); and land that was not previously surveyed
(referred to as ?omitted lands?) in Idaho (76 Stat. 89) and generally (43 U.
S. C. 1721). Color- of- Title Acts

Page 10 GAO- 01- 882 Land Sales and Transfers

the Color- of- Title Act. 7 Class I claims are those made by applicants who
have valid reasons to believe that they already owned the land. Applicants
must identify the land (limited to 160 acres per applicant), show that they
(or their ancestors or the prior owners) held title to the land for more
than 20 years without knowing it was in fact federally owned, and placed
valuable improvements on the land or cultivated it. By law, the price of the
land is based on the appraised value- net of the value of improvements or
development- that is discounted to reflect an applicant?s equities; if this
calculation results in a price below $1.25 per acre, the minimum price is
set at $1.25 per acre. The Color- of- Title Act does not define ?equities.?

However, under BLM?s policy, determining an applicant?s equities may include
considering factors such as the longevity of the applicant?s claim, whether
the applicant paid fair market value for the land, the origin of the errors
that initiated the chain of title, and whether taxes on the land have been
paid.

BLM has no guidance on how to quantify these factors or use them to set
prices. In the absence of such guidance, field offices have developed
inconsistent practices that, ironically, can lead to inequities in the
prices paid by applicants. Such inconsistencies were noted by the Interior
Board of Land Appeals in a 1984 decision that criticized the department for
failing to provide or require a specific approach for estimating applicants?
equities. 8 The Board found that a BLM field office had erroneously used the
date of the application- rather than the earlier date that the applicant
became aware the land was federally owned- to determine the longevity of the
claim. The Board pointed out that using the later application date had the
effect of increasing the equities for applicants who defer filing their
claims, while punishing applicants who took immediate steps to resolve their
claims. Despite this decision, the same field office made the same error
when resolving a claim in 1999; field office representatives told us that
they were unaware of the Board?s decision on this issue.

BLM did not always use appraised value as a basis for determining the price
of land to be transferred under the Color- of- Title authority, generally
because field office representatives thought that the appraisals would have

7 43 C. F. R. 2540. 0- 5. 8 IBLA 81- 427 (1984). The Interior Board of Land
Appeals (IBLA) is part of the Office of Hearings and Appeals, an independent
and quasi- judicial office of the Secretary of the Interior that may review
decisions of BLM and the other Interior program bureaus.

Page 11 GAO- 01- 882 Land Sales and Transfers

cost more than the land was worth. In addition, BLM did not consistently
apply the Color- of- Title eligibility requirements. For example:

 BLM transferred 26 acres in Nebraska to a power company, using the
parcel?s value as assessed by the county for tax purposes, which was $164
per acre, rather than obtaining an appraisal. The field office
representative who decided to use the assessed value told us that he did not
know that the company had stated in its application that it had paid about
$1,000 per acre for the land in 1977. After deducting the applicant?s
equities from the assessed value, BLM determined that the minimum price
would apply.

 BLM transferred 2.2 acres that abutted the backsides of 15 residential and
other lots near Ruby Ridge, Idaho, for the minimum price rather than
obtaining an appraisal. BLM transferred 1.4 of the 2.2 acres to individuals
who were ineligible: three landowners had recently bought second parcels and
were aware of the unclear titles, and four individuals had stated in their
applications that their parcels had no valuable improvements. BLM field
office representatives saw this situation as an opportunity to work
cooperatively with the community- the Color- of- Title issue had become
locally well known and contentious- and to demonstrate that a federal agency
could be a good neighbor.

Under the Color- of- Title acts, BLM transferred about 4,000 acres during
fiscal years 1991 through 2000 and received a total of about $300,000.
Figure 3 shows the acres transferred under these acts, and the amount
received, annually for fiscal years 1991 through 2000.

Page 12 GAO- 01- 882 Land Sales and Transfers

Figure 3: Acreage Transferred and Amount Received Under Color- of- Title
Acts, Fiscal Years 1991 Through 2000

Enacted in 1998, SNPLMA authorizes BLM to transfer specific parcels of
federal land around the McCarran International Airport in Clark County,
Nevada, to the county government at no cost. 9 The law also allows the
county to sell or lease this land at fair market value. If the county does
sell or lease this land, 85 percent of the gross proceeds are deposited into
the Treasury for Interior to use for such purposes as acquiring
environmentally sensitive land in Nevada; developing or improving parks,
trails, and natural areas in the county; developing a multi- species habitat
conservation plan in the county; and reimbursing BLM for any administrative
costs incurred by its local offices related to sales under this act. 10 In
addition, SNPLMA authorizes BLM to make other transfers, such

9 P. L. 105- 263, 112 Stat., 2343 (1998). 10 The law earmarks 10 percent of
any proceeds to the county to use for the airport?s development and noise
compatibility program and 5 percent to the state for general education.
Southern Nevada Public

Land Management Act

Page 13 GAO- 01- 882 Land Sales and Transfers

as land to Clark County for a youth activities facility and land to the
state or local governments for affordable housing.

Under SNPLMA, BLM transferred about 20,000 acres in fiscal years 1999 (the
first fiscal year covered by the act) and 2000, receiving zero value.
However, according to BLM officials, the agency has received about $18
million from Clark County for transferred land that the county subsequently
sold or leased.

Enacted in December 2000, the Education Land Grant Act authorizes the Forest
Service to transfer land upon application- up to 80 acres per application,
but no more than reasonably necessary- to public school districts to use for
educational purposes under certain circumstances. 11 The statute requires
the land to be transferred at a nominal cost, and Forest Service
representatives told us that they are still considering how they will
determine the cost. In addition, the law requires that transferred land
continue to be used for the stated purpose and remain in the applicant?s
ownership or else be transferred back to the Forest Service. The Forest
Service did not transfer any land under this statute during our review
period.

Both BLM and the Forest Service are authorized to sell land. BLM sold about
56,000 acres in the period extending from fiscal year 1991 through fiscal
year 2000, and received about $74 million, under three key statutes: about
55,000 acres under the Federal Land Policy and Management Act (FLPMA), about
600 acres under the Santini- Burton Act, and about 100 acres under SNPLMA.
In July 2000, the Federal Land Transaction Facilitation Act was enacted,
which authorizes BLM to use the proceeds when it sells land under FLPMA. The
Forest Service, in contrast, sold about 2,000 acres during this same 10-
year period, and received about $5 million, under two key statutes: about
800 acres under the Townsite Act and about 1,200 acres under the Small
Tracts Act. In addition, the Congress recently authorized the Forest Service
to competitively sell specific parcels in certain forests- and to use the
proceeds for specific purposes- under several statewide forest improvement
acts, but the agency did not sell land under these statutes during our
review period.

11 P. L. 106- 577, 114 Stat. 3068 (2000). Education Land Grant Act

BLM and Forest Service Sold 58, 000 Acres Under Five Key Statutes

Page 14 GAO- 01- 882 Land Sales and Transfers

FLPMA authorizes BLM to sell land that the agency has determined through its
land- use planning process to be (1) difficult and uneconomic to manage, (2)
no longer required for any federal purpose, or (3) better serving public
objectives if it were not federally owned; assuming other criteria are met
as well. 12 Buyers must meet several requirements and BLM must receive at
least fair market value of the land; under BLM?s regulations, fair market
value is estimated by appraisals that meet federal appraisal standards and
are reviewed and approved by the agency. All sale proceeds are deposited
into the Treasury. 13 Under this act, the agency must offer the land for
sale under competitive bidding procedures- public auction- unless specific
equity or public policy considerations support noncompetitive procedures.
For example, BLM could decide to give preference to the state or local
government in which the parcel is located, a parcel?s current user, an
adjoining landowner, or another person. Aside from public auctions, sales
are generally requested by potential buyers who apply to buy specific
parcels. The agency can respond to such applications by (1) using modified
competitive bidding procedures- i. e., offering the parcel for sale under
competitive bidding procedures and allowing the applicant to match the
highest bid received- or (2) selling directly (noncompetitively) to the
applicant.

Under FLPMA, BLM sold about 55,000 acres during fiscal years 1991 through
2000 and received about $38 million. Figure 4 shows the acres sold under
FLPMA, and the amount received, annually for fiscal years 1991 through 2000.

12 43 U. S. C. 1713. 13 By law, 95 percent of the proceeds from BLM land
sales in the 11 contiguous western states- plus Kansas, Nebraska, North
Dakota, Oklahoma, and South Dakota- is deposited into the federal
reclamation fund and 5 percent is set aside for states? educational and
other purposes. Federal Land Policy and

Management Act

Page 15 GAO- 01- 882 Land Sales and Transfers

Figure 4: Acreage Sold and Amount Received Under FLPMA, Fiscal Years 1991
Through 2000

Over this 10- year period, BLM sold about 24,000 acres (roughly 45 percent
of the total) in 336 competitive sales. The remaining 31,000 acres (about 55
percent of the total) were sold in 495 noncompetitive sales. Figure 5 shows
the number of competitive and noncompetitive sales BLM made under FLPMA
annually during this same 10- year period.

Page 16 GAO- 01- 882 Land Sales and Transfers

Figure 5: Number of Competitive and Noncompetitive Sales Under FLPMA, Fiscal
Years 1991 Through 2000

The Santini- Burton Act authorizes BLM to sell land- up to 700 acres per
year- that is located within a defined area of Las Vegas, Nevada, to allow
for more orderly community development. 14 When BLM sells this land, it must
follow FLPMA requirements and receive at least fair market value. 15 The law
reserves 85 percent of the sale proceeds, which are deposited into the
Treasury, to be used to repay the Forest Service for acquiring
environmentally sensitive land around Lake Tahoe. 16

14 P. L. 96- 586, 94 Stat. 3381 (1980). 15 The law provides an exception to
the requirement to follow FLPMA, to the extent necessary to expeditiously
carry out the purposes of the act. 16 The law earmarks 10 percent of the
proceeds to the county (or municipality if the land that is sold lies within
its boundaries) to acquire and develop recreational land and facilities and
5 percent to the state for general education. Santini- Burton Act

Page 17 GAO- 01- 882 Land Sales and Transfers

Under the Santini- Burton Act, BLM sold about 600 acres during fiscal years
1991 through 2000 and received about $27 million; of this acreage, all but
20 acres were sold competitively. About three- quarters of the land was sold
in fiscal year 1991 for about $16 million, and there were no reported sales
in fiscal years 1994, 1996, 1999, or 2000.

SNPLMA authorizes BLM to sell additional land- about 27,000 acres- within a
defined area of Las Vegas, Nevada. When BLM sells this land, it must follow
FLPMA requirements and receive at least fair market value. The law reserves
85 percent of the sale proceeds, which are deposited into the Treasury, for
Interior to use for such purposes as acquiring environmentally sensitive
land in Nevada; developing or improving parks, trails, and natural areas in
the county; developing a multi- species habitat conservation plan in the
county; and reimbursing BLM for any administrative costs incurred by its
local offices related to sales under this act. 17

Under SNPLMA, BLM sold about 100 acres in fiscal year 2000- all in
competitive sales- and received about $10 million.

The Federal Land Transaction Facilitation Act, enacted in July 2000,
authorizes the secretaries of Agriculture and the Interior to use the
proceeds from selling certain BLM land. 18 In selling this land- which must
be located outside of the Las Vegas area of Clark County, Nevada- BLM must
follow FLPMA requirements and receive at least fair market value. Sale
proceeds are deposited into the Treasury and may be used to buy inholdings-
nonfederal land or land interests that lie within the boundary of federally
designated areas such as national parks or wildlife refuges- and other
nonfederal land that is adjacent to such areas and has exceptional
resources. 19 At least 80 percent of the proceeds must be used

17 The law earmarks 10 percent of the proceeds for water treatment and
transmission facility infrastructure in the county and 5 percent to the
state for general education. 18 P. L. 106- 248, title II, 114 Stat. 613
(2000).

19 Land to be acquired must be located in the 11 contiguous western states
or Alaska. Southern Nevada Public

Land Management Act Federal Land Transaction Facilitation Act

Page 18 GAO- 01- 882 Land Sales and Transfers

to buy inholdings, and at least 80 percent of the proceeds generated by
selling land in a state must be used within that state. 20

The Townsite Act authorizes the Forest Service to sell land in certain
western states to local governments for community purposes, upon
application. 21 The application must be for no more than 640 acres and the
land must lie adjacent to the community that has applied to buy it. The
Forest Service must determine that the sale will serve community objectives-
such as expanding existing economic enterprises, public schools, public
health facilities, and recreation areas for local citizens- and that these
local objectives outweigh public objectives that may be served by retaining
federal ownership. In addition, the agency must receive at least fair market
value; under its regulations, this value is estimated through appraisals
that meet federal appraisal standards.

Under the Townsite Act, the Forest Service sold about 800 acres- nine
parcels- during fiscal years 1991 through 2000 and received about $3
million.

The Small Tracts Act authorizes the Forest Service to sell certain small
parcels- if their value does not exceed $150, 000- to applicants, if the
sale is not practicable under any other authority. The land must also be:
(1) interspersed with or adjacent to land that was transferred out of
federal ownership under the mining laws and is no larger than 40 acres
(termed ?mineral survey fractions?); (2) encroached upon by entities who
believed in good faith that they owned the land and mistakenly improved it
and is no larger than 10 acres (termed ?encroachments?); or (3) a road
right- of- way that is substantially surrounded by nonfederal land and not
needed by the federal government. 22 When the Forest Service sells this
land, by law the agency must receive at least equal value; by regulation,
equal value is defined as the appraised value and appraisals must meet
federal appraisal standards. The Forest Service?s regulations allow the
agency to competitively sell mineral survey fractions and road rights- of

20 The law allows up to 20 percent of the proceeds to be used for
administrative and other expenses related to land sales. 21 16 U. S. C.
478a. This act applies to the 11 contiguous western states.

22 16 U. S. C. 521c- 521i. Townsi t e Act

Small Tracts Act

Page 19 GAO- 01- 882 Land Sales and Transfers

way, if an adjoining landowner has not applied to buy them. However, all
completed sales under this authority in calendar year 1999 were direct sales
to applicants.

The agency did not always follow the law?s requirements. For example:

 An individual applied to the Forest Service to buy 0. 4 acres in
California, after a new land survey revealed that he had mistakenly built a
trailer pad and shed on a national forest. The applicant then sold the land
to another individual who continued the application process, and the Forest
Service sold the land to the second individual. Furthermore, the Forest
Service did not appraise the parcel; instead, a staffmember who was not an
appraiser estimated its value at $275 on the basis of prices of recently
sold properties.

Under the Small Tracts Act, the Forest Service sold about 1,200 acres during
fiscal years 1991 through 2000 and received about $2 million. Figure 6 shows
the acres sold under the Small Tracts Act, and the amount received, annually
for fiscal years 1991 through 2000.

Figure 6: Acreage Sold and Amount Received Under the Small Tracts Act,
Fiscal Years 1991 Through 2000

Page 20 GAO- 01- 882 Land Sales and Transfers

The acres sold under the Small Tracts Act has declined since fiscal year
1992. According to Forest Service officials, the agency prefers to exchange
land under this act rather than sell it, resulting in more frequent
exchanges in recent years.

These laws authorize the Forest Service to competitively sell specifically
identified properties. 23 The identified lands may have improvements (such
as buildings) and are, according to Forest Service officials, typically
properties that the agency no longer needs. These laws generally allow the
Forest Service to accept cash, other land, existing improvements, or
improvements constructed to Forest Service specifications as consideration.
Cash proceeds are deposited into the Treasury and the Forest Service may use
them for specific purposes, which are often identified in the authorizing
act. For example, the Texas National Forest Improvement Act of 2000
authorizes the Forest Service to offer for competitive sale, nine specific
parcels totaling about 38 acres, using the sale proceeds to acquire,
construct, or improve administrative facilities for national forests in
Texas or to acquire other land or land interests in Texas. Similarly, the
Arizona National Forest Improvement Act of 2000 authorizes the Forest
Service to competitively offer several parcels totaling more than 550 acres
and to use the proceeds to acquire, construct, or improve administrative
facilities in national forests in Arizona or to acquire other land or land
interests in Arizona.

23 These laws are: (1) the Bend Pine Nursery Land Conveyance Act, P. L. 106-
526, 114 Stat. 2512 (2000); (2) the Arizona National Forest Improvement Act
of 2000, P. L. 106- 458, 114 Stat. 1983 (2000); (3) the Texas National
Forest Improvement Act of 2000, P. L. 106- 330, 114 Stat. 1299; (4) the
Mississippi National Forest Improvement Act of 1999, P. L. 106- 113, title
IV, 113 Stat. 1501A- 210; (5) an Act to authorize the Secretary of
Agriculture to convey the administrative site for the Rouge River National
Forest and for other purposes, P. L. 105- 282, 112 Stat. 2698 (1998); and
(6) an Act to authorize the Secretary of Agriculture to convey certain lands
and improvements in the State of Virginia and for other purposes, P. L. 105-
171, 112 Stat. 50 (1998). Statewide Forest

Improvement Acts

Page 21 GAO- 01- 882 Land Sales and Transfers

When BLM offered land under competitive bidding procedures, the agency often
received prices above the appraised values. The Forest Service did not offer
land for sale under competitive bidding procedures. Moreover, some land that
BLM sold directly to applicants may have been appropriate to sell
competitively. When BLM and the Forest Service sold land noncompetitively,
the agencies generally used appraised values as sale prices; however, the
appraisals sometimes underestimated the parcel?s fair market value because
they did not reflect the buyer?s current or planned use of the land. In a
few direct sales, BLM accepted less than the appraised value, although it
had no authority to accept less than fair market value.

BLM offered land for sale competitively- either through public auctions or
modified competitive sales- when agency personnel believed that there might
be more than one potential buyer. In these competitive sales, the agency
used the appraised value as the minimum acceptable bid. From fiscal years
1991 through 2000, BLM sold about 24,000 acres in competitive sales and
received $6 million- or 18 percent- more than appraised values. Similarly,
in calendar year 1999, BLM sold about 1,900 acres in 22 competitive sales
under FLPMA and received about 20 percent more than appraised values. For
example:

 BLM auctioned about 200 acres under SNPLMA in November 1999 and sold about
100 acres for a total of about $10 million- about 21 percent more than the
total appraised value. The agency did not receive bids on the remaining
acres and did not sell them at this auction. 24

 In an effort to resolve a trespass situation in California, in which a
desert mining camp established in the 1880s had evolved into a small town,
BLM sold the residential lots to the current homeowners or mining claimants
for their appraised value of about $500 per acre. BLM subsequently solicited
competitive bids on 12 lots not previously sold to homeowners and sold 5: 2
for their appraised value, an 8- acre lot for $1,000 per acre, a 1.4- acre
lot for $3,300 per acre, and a 0.5- acre lot for $4,000 per acre. BLM
received about $9,400- or 60 percent- more than the total appraised value.

 A city in Nevada applied to buy 40 acres for a highway beautification
project. BLM decided to offer the land for competitive sale and allow the

24 BLM offered additional parcels for sale in subsequent public auctions- in
June and November 2000- and received about 10 percent more than the total
appraised value of the acres sold. These sales were completed after our
review period. BLM and Forest

Service Generally Received at Least the Appraised Value When They Sold Land

BLM Usually Received Prices Higher Than Appraised Values in Competitive
Sales

Page 22 GAO- 01- 882 Land Sales and Transfers

city to match the highest bid; the agency received a high bid of $1.2
million- about 18 percent more than the appraised value- which the city then
matched.

 An adjacent landowner applied to buy 80 acres in Oregon that he had been
leasing to graze. BLM decided to offer the land for competitive sale and
allow the landowner to match the highest bid; the agency received a high bid
of $20,600- about 78 percent more than the appraised value- which the
landowner then matched.

Of the 28 parcels that BLM sold noncompetitively under FLPMA in calendar
year 1999, at least 11 parcels might have been more appropriately offered
for sale competitively. These parcels (in whole or in part) had no
continuing current authorized use or improvements, and other potential
buyers- such as adjacent landowners- may have been interested in them. BLM
could have used competitive bidding procedures and sold to the highest
bidder or used modified competitive bidding procedures to allow the
applicant to match the highest bid; if there were no other bidders, the
applicant would have paid the appraised value. BLM did not offer these
parcels for sale competitively, however, because agency representatives
assumed there were no potential buyers other than the applicants. For
example:

 A nonprofit organization applied to buy 40 vacant acres in Colorado to use
as a church camp. The parcel did not have public access, because it was
surrounded by land owned by the nonprofit organization. However, the
appraisal reported that similarly inaccessible parcels had recently been
sold and these new owners had subsequently acquired access rights.
Furthermore, the parcel was located in a recreational area- near a ski
resort, a national park, and other tourist attractions- where property
values were rapidly rising. Although BLM sold the parcel noncompetitively
for its appraised value of $126, 000, the agency planned to offer it to the
public had this sale not been completed- an indication that the parcel might
have been more appropriately offered for competitive sale.

 BLM had allowed a 1ï¿½- mile recreational railroad associated with a tourist
attraction in Arizona to be partially built on public land; however, the
field office later determined that it had improperly done so. To resolve the
situation, BLM sold the developer 40 acres- land under the track plus land
extending out to the adjacent landowners? surrounding properties and the
highway. In appraising the 40- acre parcel at an average of $3,700 per acre,
the appraiser determined the acres fronting the highway to be more valuable
because they could be commercially developed. At a minimum, BLM and Forest
Service

Might Have Had Additional Opportunities for Competitive Sales

Page 23 GAO- 01- 882 Land Sales and Transfers

these frontage acres might have been more appropriately offered for
competitive sale.

Under the Small Tracts Act, the Forest Service?s regulations allow mineral
survey fractions and road rights- of- way to be sold competitively unless an
adjacent landowner has applied to buy them. Of the 27 parcels that the
Forest Service sold under the Small Tracts Act in calendar year 1999, 10
were mineral survey fractions or road rights- of- way; 7 of these parcels
might have been more appropriately offered for sale competitively if not for
the exception to competitive sales in this regulation. These parcels (in
whole or in part) had no continuing current authorized use or improvements,
and other potential buyers- such as other adjacent landowners- may have been
interested in them. For example:

 A private landowner in Montana discovered that he had mistakenly built his
residence- a house and garage- on the forest. Although this was an
encroachment situation, the Forest Service treated it as a mineral survey
fraction because the encroached area was a small part of an 8- acre mineral
survey fraction. The landowner applied to buy all 8 acres or any reasonable
portion of the parcel. Other private parties also owned land adjacent to the
8- acre parcel and might have been potential buyers for the unoccupied
portion. Instead of selling the applicant only the encroached area, and
selling the remaining land competitively, the Forest Service sold all 8
acres to the applicant for the appraised value of $8,600.

When BLM and the Forest Service sold land directly (noncompetitively) to
applicants- usually the current user of the land or the adjacent landowner
who planned to use it for a specific purpose- the agencies generally used
the appraised value as the sale price. In several of these sales, the
appraisal underestimated the parcel?s fair market value because it did not
reflect the buyer?s current or planned use of the land.

BLM sold several parcels directly to buyers for the development of various
enterprises, including a landfill, a prison facility, and a sod and tree
farm. The appraisals for some of these parcels did not consider the planned
use in determining the parcel?s highest and best use (defined as the use
that is physically possible, legally permissible, financially feasible, and
maximally profitable) but instead determined the highest and best use to be
BLM and Forest Service

Usually Received Prices Equal to Appraised Values in Direct Sales

Page 24 GAO- 01- 882 Land Sales and Transfers

something else. 25 When the planned use of a parcel is reasonably probable,
it should be considered in determining the property?s highest and best use,
according to federal appraisal standards. In these appraisals, the buyer?s
current use of the parcel or adjacent land diminished the value of the
parcel for other uses and reduced the appraised value. In effect, the parcel
was appraised as though it could be bought by someone other than the
applicant- although BLM had already determined that no other potential
buyers existed- and would be used for a purpose other than the current or
planned use. For example:

 BLM had for years leased to a city in Arizona the rights to mine sand and
gravel on an 80- acre parcel, next to the city?s landfill. After the city
depleted the sand and gravel deposit- excavating about 70 acres to a depth
of 35 to 45 feet- it applied to buy the parcel to expand its landfill.
Despite this plan, the appraiser determined that the parcel?s highest and
best use was for recreation (e. g., a skateboard park) or light industrial
purposes (e. g., a construction yard) on the unexcavated acres. The
appraiser determined that the 70- acre pit contributed no value for these
purposes and appraised the remaining land at $7,500 per acre; the 80- acre
parcel sold for its appraised value of $75,000.

 A city in New Mexico applied to buy a 120- acre parcel to develop as a sod
and tree farm, which the city planned to irrigate with reclaimed water from
its adjacent sewage treatment plant. Despite this plan, the appraiser
determined that the parcel?s highest and best use was for cattle grazing,
finding that a bad odor from the city?s sewage treatment plant diminished
its value for any other use. The review appraiser noted the absence of
fencing and demand for such a small piece of grazing land and also noted
that the city?s planned use should have been addressed in the appraisal. The
reviewer found that the appraisal was not entirely complete by federal
appraisal standards and included additional data in his review; with the
additional data, he determined that the appraisal could be followed to a
reasonable conclusion of value, which was $50 per acre. The parcel sold for
its appraised value of $6,000.

25 In a November 2000 decision involving a BLM land exchange, the Ninth
Circuit Court of Appeals found that the appraisal undervalued federal land,
and that BLM?s actions were arbitrary and capricious, because the appraisal
failed to consider the acquiring entity?s proposed use- a landfill- as a
possible highest and best use. The Court noted that the proposed use of a
parcel is certainly relevant to showing a market demand for that use, and
that a private owner would certainly consider the value of the land to the
proposed buyer in pricing the land. Desert Citizens Against Pollution v.
Bisson, 231 F. 3d 1172 (9th Cir. 2000).

Page 25 GAO- 01- 882 Land Sales and Transfers

Both BLM and the Forest Service sold several parcels directly to adjacent
homeowners who had mistakenly built part of their residences on federal
land. The appraisals for some of these parcels did not consider the actual
size of the adjacent residential lot to which the parcel would be added but
instead assumed a larger lot size. The Forest Service has a policy to make
such an assumption in appraising land to be sold under the encroachment
provision of the Small Tracts Act, assuming the average size of the parcels
used as comparable sales. BLM has no such policy but sometimes made similar
assumptions. This assumption tends to reduce the per- acre appraised value:
if other factors are equal, larger parcels tend to have lower per- acre
values than smaller parcels. For example:

 BLM sold 0.3 acres in Oregon to an adjacent homeowner who had mistakenly
built a well and pumphouse on public land. In 1998, the appraiser assumed
the parcel was part of the homeowner?s 8- acre lot and valued the land at
$12,000 per acre (or $4,000 for the parcel). After the homeowner told BLM
that he could not afford to pay this price, in 1999 BLM again appraised the
parcel. This time, the appraiser assumed the parcel was part of a larger
(40- acre) parcel and told us he did so to establish a lower appraised
value. The second appraisal valued the land at $3,000 per acre (or $1,000
for the parcel)- 75 percent less than the 1998 appraised value.

 The Forest Service sold 0.4 acres in New Mexico to an adjacent homeowner
who had mistakenly built part of her residence on the forest. The appraiser
assumed the parcel was part of a 130- acre parcel rather than the
homeowner?s 66- acre lot. The per- acre sale prices of the comparable
properties ranged from $3,100 per acre (for the smallest 20- acre parcel) to
$1,050 per acre (for the largest 270- acre parcel). The appraiser valued the
hypothetical 130- acre parcel within this range, at $2,000 per acre, and
appraised the 0.4- acre parcel at $720.

In three direct sales that were completed in calendar year 1999 under FLPMA,
BLM accepted prices that were below appraised values. Two of these sales
were made to resolve trespasses that posed difficult management situations,
such as when a trespasser?s continued use of federal land was likely to
become very costly for the agency to otherwise address. While these
decisions may have been cost- effective in the long run, FLPMA and its
implementing regulations direct BLM to receive at least fair market value-
as estimated by appraised value- when it sells land. BLM representatives
told us that the field offices probably

?stretched? their authority in resolving these trespasses but needed some
flexibility to address such situations. They further said that the agency
BLM Sometimes Received

Prices Lower Than Appraised Values in Direct Sales

Page 26 GAO- 01- 882 Land Sales and Transfers

could receive authority to sell a parcel at less than fair market value by
obtaining special legislation that applies only to the specific case. For
example:

 Several years ago an individual occupied mining claims and a millsite on
public land in the California desert and had also moved onto adjacent public
land without authority. BLM disputed the legitimacy of his occupancy but was
unsuccessful in ending the trespass. To resolve the situation, BLM sold him
40 acres- the acres he had occupied plus land that extended out to the
adjacent landowners? surrounding properties- which had been appraised at
$60,000. After he told BLM that he could only afford to pay $24,000- 60
percent less than appraised value- BLM accepted his offer.

 Many years ago BLM transferred 35 acres to an Arizona county under R& PPA
to use as a cemetery. BLM received complaints regarding the county?s
operation of the cemetery and found that bodies had been buried on 3
adjacent acres of public land without authority and that the county was
unwilling to take corrective action. To resolve the situation, BLM agreed to
take back the parcel and to sell the county 56 acres: the original 35 acres,
the 3 trespassed acres, and another 18 adjacent acres for expansion. The
appraiser determined that the 38 acres (with bodies) contributed no value
and assessed the 18 acres to be worth $17,000. The county told BLM that it
was unwilling to pay $17,000 and offered to take the 38 acres that had no
value. In response, BLM noted that all land has some value and instead
charged the county a ?minimum transaction value? of $2,000 for the 38 acres.

When BLM and the Forest Service sell land, they generally seek fair market
value, as estimated by an appraisal. When BLM sells land competitively, the
agency has the opportunity to test the reliability of such estimates in the
open market, capture additional buyers? motivations if present in that
market, and enhance federal revenues by receiving higher prices. As a
result, BLM has received about $6 million above the appraised values during
the past decade. In contrast, when BLM or the Forest Service sells land
directly (noncompetitively), they must rely on appraised values to set sale
prices; the agencies have no process to test the reliability of appraised
values or to seek higher prices if those values are understated. Of 38
direct sales we examined, about half might have been more appropriately
offered for competitive sale because there might have been potential buyers
other than the applicants, such as adjacent landowners. Furthermore, the
appraised value of parcels that are sold directly may underestimate their
fair market value- for example, the Conclusions

Page 27 GAO- 01- 882 Land Sales and Transfers

land?s current or planned use may have diminished its value to other
entities while increasing its value to the applicant- and a higher price may
be warranted if the agencies are to receive fair market value in
noncompetitive sales. In our view, federal revenues could be enhanced if
both agencies used competitive sales more frequently and sought higher
prices in their direct sales.

BLM faces additional challenges in selling and transferring land. FLPMA
requires that BLM receive at least fair market value when it sells land, but
the agency has sold land for less than its appraised value- which estimates
fair market value- in response to specific circumstances despite having no
authority to do so. BLM transferred the most land under the authority of R&
PPA- 42,000 acres- but did not inspect most of these parcels to assure that
deed restrictions were met, due to limited resources and higher priorities;
the agency has not fully evaluated less costly means of inspecting these
parcels. BLM transferred the least land under the Color- of- Title acts-
4,000 acres- but did not consistently determine applicants? eligibility or
use appraisals for these parcels and has no guidance on quantifying
applicants? equities; as a result, these acts are inconsistently applied
across the nation.

We recommend that the Chief of the Forest Service, to enhance federal
revenues, take the following actions when the agency sells land:

 change regulations implementing the Small Tracts Act to allow competitive
sales of mineral survey fractions and road rights- of- way- either through
public auctions or modified competitive bidding procedures- even if an
adjacent landowner has applied to buy the parcel;

 require that these parcels be sold competitively unless field offices
specifically demonstrate why they should be sold noncompetitively; and

 when selling land directly to applicants, require that appraisals consider
the parcel?s current or planned use in determining its highest and best use,
whether it is to be developed for an enterprise or added to an adjacent
landowner?s property.

Similarly, we recommend that the Director of BLM, to enhance federal
revenues, take the following actions when the agency sells land:

 require competitive sales unless field offices specifically demonstrate
why a parcel should be sold noncompetitively; and

 when selling land directly to applicants, require that appraisals consider
the parcel?s current or planned use in determining its highest and best use,
Recommendations for

Executive Action

Page 28 GAO- 01- 882 Land Sales and Transfers

whether it is to be developed for an enterprise or added to an adjacent
landowner?s property.

Furthermore, we recommend the Director of BLM take the following additional
actions:

 when the agency faces specific circumstances it believes warrant selling a
parcel for less than its appraised value, obtain special legislation
applying to the specific case that authorizes the agency to do so;

 assess the feasibility of less costly methods of monitoring parcels
transferred under R& PPA, such as requiring entities that have acquired
these parcels to periodically self- report on their compliance with deed
restrictions; and

 develop policy and procedures for Color- of- Title applications, to
provide consistency in proving applicants? eligibility, estimating
applicants? equities, and using appraisals.

We provided copies of this report to the Departments of the Interior and
Agriculture; however, neither department provided comments.

We conducted our review from September 2000 through August 2001 in
accordance with generally accepted government auditing standards. Details of
our scope and methodology are discussed in appendix I.

We are sending copies of this report to the Secretary of the Interior, the
Director of the Bureau of Land Management, the Secretary of Agriculture, the
Chief of the Forest Service, and interested congressional committees. We
will also provide copies to others on request. Agency Comments

Page 29 GAO- 01- 882 Land Sales and Transfers

If you or your staff have any questions, please call me at (202) 512- 3841.
Key contributors to this report are listed in appendix II.

Sincerely yours, Barry T. Hill Director, Natural Resources

and Environment

Appendix I: Scope and Methodology Page 30 GAO- 01- 882 Land Sales and
Transfers

To determine the key statutes under which the BLM and the Forest Service
transferred or sold federal land during fiscal years 1991 through 2000, we
obtained data from BLM?s automated public lands database of nationwide land
statistics (referred to as LR2000), from BLM?s annual Public Lands
Statistics, and from the Forest Service?s centralized database of nationwide
land statistics. As agreed with the requester?s office, we excluded
transfers authorized to various states under the terms of their statehood,
transfers and sales authorized to resolve Native and Indian land claims, and
sales of mineral rights (if they were sold separately from land rights).
Based on the preponderance of the remaining reported transfers and sales, we
then identified the key statutes; we discussed our selection of these
statutes with officials in the agencies? Washington Offices. To describe the
transactions made under these key statutes, we obtained and analyzed data on
the acres and dollar values of land transferred and sold annually during
fiscal years 1991 through 2000.

To identify the requirements for transferring and selling land under these
key statutes, we reviewed the laws and the associated regulations, policies,
and procedures that were established by the agencies. To determine whether
the agencies were meeting these requirements, we examined all 186
transactions- 107 transfers and 79 sales- that the agencies reported
completing in calendar year 1999 under these key statutes, as summarized in
table 2.

Table 2: Transfers and Sales Completed in Calendar Year 1999 Under Key
Statutes Transfers Sales Key Statutes Number Acres Number Acres BLM

Recreation and Public Purposes Act 47 4, 310 Color- of- Title acts 27 152
Southern Nevada Public Land Management Act 33 5,145 Federal Land Policy and
Management Act 50 14,616

Forest Service

Townsite Act 2 358 Small Tracts Act 27 54

Total 107 9,607 79 15,028

For each of these transactions, we reviewed the complete case file or
obtained key documents from the case file, and discussed the documents and
our analyses with agency representatives in the cognizant field offices
Appendix I: Scope and Methodology

Appendix I: Scope and Methodology Page 31 GAO- 01- 882 Land Sales and
Transfers

in the following locations: BLM?s Arizona State Office (Phoenix, Arizona),
California State Office (Sacramento, California), Colorado State Office
(Lakewood, Colorado), Eastern States Office (Springfield, Virginia), Idaho
State Office (Boise, Idaho), Montana State Office (Billings, Montana),
Nevada State Office (Reno, Nevada), New Mexico State Office (Santa Fe, New
Mexico), Oregon State Office (Portland, Oregon), Utah State Office (Salt
Lake city, Utah), Wyoming State Office (Cheyenne, Wyoming), and various
field offices that are under the administrative jurisdiction of these state
offices; and the Forest Service?s Region 1 Office (Missoula, Montana),
Region 2 Office (Lakewood, Colorado), Region 3 Office (Albuquerque, New
Mexico), Region 5 Office (Vallejo, California), Region 6 Office (Portland,
Oregon), Region 8 Office (Atlanta, Georgia), Region 9 Office (Milwaukee,
Wisconsin), and various forest offices that are under the administrative
jurisdiction of these regional offices. We also reviewed the extent to which
BLM complied with its policy to inspect parcels that had been transferred
under the Recreation and Public Purposes Act every 5 years. Using BLM?s
public lands database, we determined whether, as of January 2000,
inspections for those parcels that had been transferred under this authority
during fiscal years 1991 through 2000 had been (1) scheduled and completed
as scheduled, (2) scheduled but not completed as scheduled, or (3) not
scheduled.

To assess whether the agencies received the appraised value when they sold
land, we reviewed federal appraisal standards and examined all 61 appraisals
that were completed for parcels that were sold in calendar year 1999: 44 for
land sold by BLM under FLPMA, and 17 for land sold by the Forest Service. To
analyze the difference in prices between competitive and noncompetitive
sales completed by BLM during fiscal years 1991 through 2000, we identified
the parcels that were sold under each procedure, and identified the
appraised value and the sale price, using available information from BLM?s
public lands database, the agency?s website, and the Federal Register. We
also contracted with Mr. Peter D. Bowes- an independent and certified
appraiser in Denver, Colorado, who has over 40 years of experience in
appraising properties and has worked with various government entities- to
provide his professional advice on our analysis. He did not reappraise the
properties discussed in this report nor review the appraisals.

We conducted our work from September 2000 through August 2001, in accordance
with generally accepted government auditing standards.

Appendix II: GAO Contacts and Staff Acknowledgments

Page 32 GAO- 01- 882 Land Sales and Transfers

Barry T. Hill (202) 512- 3841 Sue Ellen Naiberk (303) 572- 7357

In addition to those named above, Jay Cherlow, Christine Colburn, Jennifer
Duncan, Cynthia Rasmussen, and Amy Webbink made key contributions to this
report. Appendix II: GAO Contacts and Staff

Acknowledgments GAO Contacts Acknowledgments

(141490)

The first copy of each GAO report is free. Additional copies of reports are
$2 each. A check or money order should be made out to the Superintendent of
Documents. VISA and MasterCard credit cards are also accepted.

Orders for 100 or more copies to be mailed to a single address are
discounted 25 percent.

Orders by mail:

U. S. General Accounting Office P. O. Box 37050 Washington, DC 20013

Orders by visiting:

Room 1100 700 4 th St., NW (corner of 4 th and G Sts. NW) Washington, DC
20013

Orders by phone:

(202) 512- 6000 fax: (202) 512- 6061 TDD (202) 512- 2537

Each day, GAO issues a list of newly available reports and testimony. To
receive facsimile copies of the daily list or any list from the past 30
days, please call (202) 512- 6000 using a touchtone phone. A recorded menu
will provide information on how to obtain these lists.

Orders by Internet

For information on how to access GAO reports on the Internet, send an e-
mail message with ?info? in the body to:

Info@ www. gao. gov or visit GAO?s World Wide Web home page at: http:// www.
gao. gov

Contact one:

 Web site: http:// www. gao. gov/ fraudnet/ fraudnet. htm

 E- mail: fraudnet@ gao. gov

 1- 800- 424- 5454 (automated answering system) Ordering Information

To Report Fraud, Waste, and Abuse in Federal Programs
*** End of document. ***