U.S. GOVERNMENT PRINTING OFFICE

67–662 CC WASHINGTON : 2000

S. HRG. 106–788

S. 1938 THE CABIN-USER-FEE FAIRNESS ACT OF

1999

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE,

NUTRITION, AND FORESTRY

UNITED STATES SENATE

SUBCOMMITTEE ON FORESTRY,

CONSERVATION AND RURAL

REVITALIZATION

ONE HUNDRED SIXTH CONGRESS

SECOND SESSION

ON

S. 1938 THE CABIN-USER-FEE FAIRNESS ACT OF 1999

MARCH 22, 2000

Printed for the use of the

Committee on Agriculture, Nutrition, and Forestry

(

For sale by the U.S. Government Printing Office

Superintendent of Documents, Congressional Sales Office, Washington, DC 20402
COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

RICHARD G. LUGAR, Indiana, Chairman

JESSE HELMS, North Carolina

THAD COCHRAN, Mississippi

MITCH MCCONNELL, Kentucky

PAUL COVERDELL, Georgia

PAT ROBERTS, Kansas

PETER G. FITZGERALD, Illinois

CHARLES E. GRASSLEY, Iowa

LARRY E. CRAIG, Idaho

RICK SANTORUM, Pennsylvania

TOM HARKIN, Iowa

PATRICK J. LEAHY, Vermont

KENT CONRAD, North Dakota

THOMAS A. DASCHLE, South Dakota

MAX BAUCUS, Montana

J. ROBERT KERREY, Nebraska

TIM JOHNSON, South Dakota

BLANCHE L. LINCOLN, Arkansas

KEITH LUSE, Staff Director

DAVID L. JOHNSON, Chief Counsel

ROBERT E. STURM, Chief Clerk

MARK HALVERSON, Staff Director for the Minority

(II)
(III)

C O N T E N T S

Page

HEARING:

Wednesday, March 22, 2000, S. 1938 The Cabin-User-Fee Fairness Act of

1999 ....................................................................................................................... 1

APPENDIX:

Wednesday, March 22, 2000 ................................................................................... 31

Document(s) submitted for the record:

Wednesday, March 22, 2000 ................................................................................... 79

Wednesday, March 22, 2000

STATEMENTS PRESENTED BY SENATORS

Craig, Hon. Larry E., a U.S. Senator from Idaho, Chairman, Subcommittee

on Forestry, Conservation, and Rural Revitalization, of the Committee on

Agriculture, Nutrition, and Forestry .................................................................. 1

Baucus, Hon. Max, a U.S. Senator from Montana ................................................ 2

WITNESSES

Panel I

Brouha, Paul, Associate Deputy Chief, National Forest System, USDA Forest

Service ................................................................................................................... 4

Panel II

Allman, Paul, American Land Rights Association ................................................ 15

Betts, Richard, MAI, ASA, SRA, Betts and Associates ........................................ 17

Corlett, Joe, MAI, SRA, Mountain States Appraisal and Consulting Inc. .......... 18

Mead, David, President, Sawtooth Forest Cabin Owners’ Association, Twin

Falls, Idaho ........................................................................................................... 12

VerHoef, Mary Clarke, National Forest Homeowners .......................................... 13

APPENDIX

PREPARED STATEMENTS:

Baucus, Hon. Max ............................................................................................ 32

Allman, Paul ..................................................................................................... 61

Betts, Richard ................................................................................................... 66

Brouha, Paul ..................................................................................................... 34

Corlett, Joe ........................................................................................................ 78

Mead, David ...................................................................................................... 42

VerHoef, Mary Clarke ...................................................................................... 51

DOCUMENTS SUBMITTED FOR THE RECORD:

Position statement, submitted Hon. Daniel Akaka, a U.S. Senator from

Hawaii ............................................................................................................ 80

Position statement, submitted by Stanley N. Sherman, Germantown,

Maryland ....................................................................................................... 81
Page

IV

DOCUMENTS SUBMITTED FOR THE RECORD—CONTINUED

Position statement, submitted by Ted L. Glaub, President, American

Society of Farm Managers and Rural Appraisers ...................................... 82

Charts, displaying appraisal changes, submitted by Paul Brouha .............. 84

Revised Policy for administering recreation residence permits on the National Forests, submitted by David R. Mead .............................................. 93

Joint statement by former members of the Chief’s Committee, concerning

Congressional testimony by the U.S. Forest Service in connection with

recreation residence fee determination, submitted by Mary Clarke

VerHoef .......................................................................................................... 110

Specification for the appraisal of Recreation Residence Sites, submitted

by Richard M. Betts ...................................................................................... 128

Memorandum, Review, and response regarding re-appraisal of Pettit

Lake Recreation Residences, submitted by Joe Corlett ............................. 140

Nonconforming-Use Properties: The Concept of Positive Economic Obsolescence, submitted by Joe Corlett .............................................................. 160
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S. 1938 THE CABIN-USER-FEE FAIRNESS ACT

OF 1999

WEDNESDAY, MARCH 22, 2000

U.S. SENATE, SUBCOMMITTEE ON FORESTRY, CONSERVATION, AND RURAL

REVITALIZATION, OF THE COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY, Washington, DC.

The Subcommittee met, pursuant to notice, at 3:00 p.m., in room

SR–328A, Russell Senate Office Building, Hon. Larry E. Craig,

(Chairman of the Subcommittee), presiding.

Present or submitting a Statement: Senators Craig, and Baucus.

Chairman CRAIG. The Subcommittee is called to order. The Senate Agriculture Committee is here today to take testimony on S.

1938.

OPENING STATEMENT OF HON. LARRY E. CRAIG, A U.S. SENATOR FROM IDAHO, CHAIRMAN, SUBCOMMITTEE ON FORESTRY, CONSERVATION, AND RURAL REVITALIZATION, OF

THE COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

Chairman CRAIG. Nearly 100-years ago, Congress and the President set up a program to allow American families the opportunity

to recreate on public lands in remote cabin settings. It is a wonderful example of American people being connected to our public lands

in a responsible way, a way that fits with Gifford Pinchot’s vision

of our national forests.

Today 15,000 of these sites remain active providing recreational

opportunities to generations of families. These cabins stand in

sharp contrast in many aspects to modern outdoor recreation, yet

are an important aspect of the mix of recreation opportunities for

the American public.

While many of us enjoy fast off-road machines or watercraft or

hiking in our back country with high-tech gear, others enjoy a relaxing weekend at their cabin in the woods with their family and

their friends. The Recreational Residence Program allowed families

all across the country an opportunity to use our national forests.

This quiet, somewhat uneventful program continues to produce

close bonds and remarkable memories for hundreds of thousands of

Americans.

But in order to secure the future of the cabin program, this Congress needs to re-examine the basis on which these fees are now

being determined. This issue first came to my attention in 1997,

when the new base fee in the Sawtooth National Recreation Area
2

skyrocketed into an alarming five-digit range, an annual fee that

could be enough to purchase a lot outside the national forest, and

in some instances, to even build a cabin on it. In fact, around 140-

lots in the Sawtooth National Forest saw their annual feel catapult

up more than 500-percent. On the other hand, some areas saw

their fees go down with the new appraisal.

It is obvious now that the Forest Service was appraising and

affixing value to the lots being provided to cabin owners as if these

lands were fully developed, legally subdivided, fee simple residential lands. In other words, the Forest Service is charging for infrastructure that they have no investment in. My goal is to see that

the cabin program remains affordable to American families. Consistent with that goal, S. 1938 sets up a methodology for appraising

the cabin, which will determine the value of the use to the cabin

owner, not what the market would bear should the Forest Service

decide to sell off its assets.

Again, my goal here is to set up an appraisal system that guarantees a fair fee for the cabin owner and taxpayers, and to insure

the long-term viability of the program.

I look forward to hearing from our witnesses today, and want to

extend a very special thanks to the Appraisal Institute and the

American Society of Farm Managers and Rural Appraisers for the

time they have spent in the last few weeks to provide valuable professional input on the more technical aspects of the legislation

itself.

With that, let me turn to my colleague from Montana, Senator

Max Baucus. Max, thank you for coming today.

STATEMENT OF HON. MAX BAUCUS, A U.S. SENATOR FROM

MONTANA

Senator BAUCUS. Thank you very much, Mr. Chairman. I thank

you for this hearing.

There are a lot of people in our country who face this problem,

and I might say in my state, it is particularly acute, because we

are such an outdoors state. Everybody in Montana is an outdoors

person, everybody. I mean, either we hunt, we fish, or we are in

agriculture, or forestry, mining, tourism, recreation, we are an outdoors people. It is just the nature of our state.

And cabin sites are a part of life because we are an out of doors

people. I mean, whether it is Labor Day, weekends, whether it is

Memorial Day, 4th of July, recesses—recesses for us, 4th of July

and vacation for our people—we go to our cabins, or just go just

for the heck of it to relax and get away. And in many cases these

cabin sites are second, third, maybe fourth generation.

I might say, Mr. Chairman, I remember when I was a kid, a

friend of mine, a high school classmate of mine was—he was a real

goer. He decided he was going to build a cabin on one of these

sites. Forget it. We went out, and first of all, we laid the foundation. We mixed our own concrete, and my gosh, that is heavy stuff

when you do not have a concrete mixer and you do it in a wheelbarrow. And then we decided it was going to be a log cabin, so we

went out to get our logs. It probably was not the right thing to do,

but we found some trees. And so we cut down the trees for logs for

our cabin, and then we realized our trees were too big; we could
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not lift them up and put them on our truck. They were just too big.

So anyway, we set our sights a little lower, and had to cut down

some smaller trees, and lo and behold, finally by the end of the

summer, we had our cabin. And I must say, Mr. Chairman, it is

still there. And it has been used by other people in his family over

the years.

In our state, all across the country it seems, folks have sites, and

they are cabin sites, and the rental fees are just going through the

roof, and clearly, we need to find a solution that is fair and that

is fair to everybody, that is fair to the taxpayers, but particularly

fair to the owners. This is their way of life, and they love the land

and take care of it. I mean, if they are not there, the people who

live in the area of the state and take care of the land, then somebody, more likely than not out-of-state, the Federal Government, or

whoever it is who is going to be there, it is not the same. It is not

what life is, and those people probably would not take care of it as

well as the owners do.

We had come up with a normal solution in our state in a different area with a different Federal agency, but it is another example of every situation is different, and they are all unique, but they

are all the same. They are all the same in that we need to find a

solution where as much as possible, in my view anyway, the cabin

owners can continue to have the property. If they are not paying

their rents because they go up too high, they can figure out a buyout solution. But that is not going to be true in all cases. In some

cases it is best for the Federal stewardship to prevail, but I think

the preference should be for local people, and for the lessees or for

the owners for the reasons I just indicated. I believe strongly in

this. I know how for many Montanans, and I am sure it is the

same in Idaho and some other states, this is their life. I mean,

there is not a lot else to do in some of our parts of the country,

and this is what we want to do, just to get outdoors, just go to our

cabin, and it is that important. Thank you.

Chairman CRAIG. Well, Max, thank you. And now we know why

there were clear cut spots.

[Laughter.]

Senator BAUCUS. Mr. Chairman, I must say, it was a very selective cut.

[Laughter.]

Chairman CRAIG. All right, all right. I had never thought of you

cutting something that was too big, you could not lift it.

Senator BAUCUS. Well, that was a few years ago.

Chairman CRAIG. I am sure it was. Well, thank you very much

for that testimony, and I share with you in the concern that I think

westerners and public lands states people express over these kinds

of issues. That is why we are here today with this hearing.

Senator BAUCUS. Thank you. And I wish I could stay for the

hearing, but I know you will do a terrific job. Thank you.

[The prepared statement of Senator Baucus can be found in the

appendix on page 32.]

Chairman CRAIG. Thank you very much, Max.

Now let me ask the Associate Deputy Chief of our National Forest, Paul Brouha, who is with us today, to offer his testimony on
4

behalf of the U.S. Forest Service. Thank you for joining us. We appreciate your time before the Committee, Paul.

STATEMENT OF PAUL BROUHA, ASSOCIATE DEPUTY CHIEF,

NATIONAL FOREST SYSTEM, USDA FOREST SERVICE, ACCOMPANIED BY RANDY KARSTAEDT, SPECIAL USES PROGRAM LEADER, AND PAUL TITTMAN, CHIEF APPRAISER,

USDA

Mr. BROUHA. Mr. Chairman, Senator Baucus, good afternoon.

Thank you for the opportunity to testify on Senate 1938. I am accompanied today by Randy Karstaedt, our Forest Service Special

Uses Program Manager, and by Paul Tittman, our chief appraiser.

Chairman CRAIG. Thank you both for coming.

Mr. BROUHA. Enactment of 1938 would replace the recreation

residence fee policy for National Forest System lands and direct the

Secretary of Agriculture to establish a new set of guidelines for arriving at an annual fee for the privilege to use and occupy and National Forest recreation residence lot. The proposed stipulated practices would be different from the appraisal standards that all Federal agencies are required to use in assessing fair market value.

The administration strongly opposes Senate 1938, and I will address 3 of our most significant concerns in my testimony, but let

me first give some background in addition, perhaps to what you

identified, Sir.

In 1908 we established cabin tracts and issued special use term

permits for cabin owners. And owners were charged an annual rent

representing the market value of the land at that time, and as you

noted, they took care of that land, and often served us in very good

stead in alerting us about fires and rendering emergency aid. The

permit allowed the holder to build a structure for recreational purposes, but not to occupy it on a full-time basis as a full-time resident. So the fee is really only for the site, it is not related to the

value of the structure. And as you noted, this privilege is extended

to approximately 15,000-cabin owners nationwide.

In the 1980s the Forest Service worked closely with the public

and permit holders in revising our residence policy, and in 1987

published for public review and comment, proposed revisions to appraisal and fee determination procedures and policies for recreation

residence uses. Nearly 3,200 respondents commented. 96-percent

were permit holders or associations of holders. 85-percent responded favorably. The regulations were subsequently published

and adopted in 1988.

The terms and conditions of every permit direct lots be appraised

at least every 20-years. And in 1996 we started a 5-year effort to

appraise the fee simple value of all the lots. We will complete that

within the next 2-years, using the same appraisal specifications

and the procedures today that were actually set and agreed to in

1988.

For the record, I would like to include several charts displaying

the changes, this one nationally, as well as in several states, in annual rental fees resulting from the appraisals. The national results

from 9,600 appraisals or about 63-percent of the total. More than

58-percent of our holders will experience either a decrease or a relatively moderate increase. Less than 3-percent will experience a
5

dramatic increase of over 500-percent. The balance will see significant increases averaging a tripling of their fee.

Now, we realize that a sudden rise in user fees can be a hardship. Therefore, once the appraisal is completed, we phase in fee

increases that exceed 100-percent over a three-year period. Also, increases in recreation residence fees will be implemented in fiscal

year 2000 only to the extent that they do not exceed the 1999 fees

by $2,000. In addition, no fee can be increased sooner than 1-year

after the time the Forest Service has notified the holder of the results of the appraisal.

At this time our appraisal evaluation procedures are being evaluated by the Appraisal Foundation, the governing body over all appraisal practices, and we have been given no reason to believe that

the foundation will not recognize our appraisal specifications as

professionally acceptable.

Mr. Chairman, I will now briefly discuss the specific objections

to the legislation.

First, 1938 would exempt the permit fee from fair market value

provisions in existing law and regulation. The Congress and the administration have a long-standing policy that the people of the

United States receive not just a fair fee, but fair market value for

all public lands and resources.

Based on our preliminary analysis, we estimate that the fair fee

proposed by Senate 1938 would result in a return of the Treasury

between 8 and $12 million less than fair market value. A significant percentage of our recreation residence permit holders would

be paying an annual fee that is less than the fee now being paid,

fees that are actually based on appraisals more than 20-years old.

Second, the fair fee would be different than a fair market value

rental fee. In a market economy, we rely on the market to determine what is fair. Trying to establish a rental fee without regard

to market rates for similar properties cannot lead to a fair outcome,

but rather, more likely to a subsidized result. That is not fair; certainly all the permit holders would welcome it.

Moreover, the standard for setting fees would thus be different

than the standard set by the Forest Service to assess and collect

fees for over 130 other types of special uses governing the National

Forests and Grasslands. By exempting recreation residence permit

holders from the principle of fair market value rental fees, this bill

sets a precedent for other user groups to follow, opens the door, as

it were.

Third, Senate 1938 would create a four to five-year period of disruption and inequity in the assessment and collection of fees for

recreation residence users. It would require the Secretary to contract with a professional appraisal organization to develop appraisal guidelines and promulgate new regulations, which could

take several years.

Senate 1938 would suspend all current appraisals pending the

promulgation of those new regulations. In addition, it would provide all permit holders who already have had their lots appraised,

an opportunity, within 2-years of the issuance of the new regulations, to request a new appraisal. In the interim, the bill proposes

three options for the Forest Service to assess what are characterized as transition fees, and the manner in which the bill proposes
6

to assess these fees would create fee inequities between permit

holders occupying comparably valuable lots during that four or

five-year transition period. In sum, most of the 4 million that has

been spent on appraisal since 1996 would be lost if Senate 1938 is

enacted.

In addition, we estimate it would cost 500,000 to develop new

regulations and guidelines, and after that, most of the 9,600 permit

holders with completed appraisals would likely request another appraisal, which would cost in the neighborhood of 3- to 4-million additional dollars.

Now, the use of National Forest land for private recreation residences is a privilege afforded to a relatively few number of persons.

Taxpayers should be adequately compensated for this private use

of public lands. The appraisals we have completed conform to the

value of a National Forest System land being occupied by recreation residences. We realize it has increased over the last 20-years,

and for some lots with particularly desirable amenities such as

being close to water, that value has increased significantly. While

there is sticker shock, and we recognize that, we feel we are implementing our fee policy in a manner consistent with Federal laws,

agency management direction and sound management principles

concerning fair market rental fees for the use of the public’s land.

And we believe the appropriate course would be to allow us to continue this process.

Thank you for providing me the opportunity to testify, and we

would be glad to answer any questions, and especially those of

more technical nature if you have any.

Chairman CRAIG. Well, Paul, thank you very much. I am not surprised by your testimony. We have been trying to struggle with this

issue for some time to create a sense of equity that I and I think

a good many of my colleagues, and certainly some of our resident

holders feel is inequitable.

I do have some questions, and I appreciate your response to

them. What is your ideal or definition of land in, quote, ‘‘native or

natural state’’ in chapter 6 of your handbook? How do you define

that? Do you know?

Mr. BROUHA. Mr. Chairman, the native or natural state essentially means that the property would be appraised based on its condition at the point prior to the construction of any structural improvements or ground improvements within the authorized area.

Chairman CRAIG. Would that include access or non-access?

Mr. BROUHA. You are talking about——

Chairman CRAIG. By the definition.

Mr. BROUHA. The permitted area has legal access to it. The physical access in most cases is over system roads. There are some exceptions to that where homeowners’ groups have in fact constructed

bridges or roads. Wherein the cost of a ground improvement, in or

outside of the permitted area, was borne by the permittee or the

predecessors, that is disregarded in the appraisal process. Only

those features that were paid for by the public or by a purveyor of

services like the electric company.

Chairman CRAIG. But as it relates to the definition itself, it is

the initial one, the legal—by definition, legal access?

Mr. BROUHA. Yes.
7

Chairman CRAIG. OK. Would you please explain to the Subcommittee how you instruct your appraisers to take into account

the restrictive elements of the recreational residence policy and the

special use permit when appraisals are conducted?

Mr. BROUHA. The fee determination process, Senator, is in 2

parts. The first part deals with the value of the site as though unimproved for the use. That does not reflect anything other than the

fair market value of that site within a prescribed highest and best

use recreation residence, summer home, something in that ilk. The

determination—or the recognition of the terms and condition to the

permit as opposed to the terms and conditions found in typical land

leases is reflected in the 5-percent of land value fee determination.

Current return rates based on recent market analyses reflect a

range of return rate for real estate of between 8- and 12-percent.

The 5-percent would reflective of the difference, and that was

agreed to administratively in the early 1980s as a part of this process of negotiations with the homeowners associations.

Chairman CRAIG. OK. At Pettit Lake in the Sawtooth National

Recreation Area, the Forest Service has been systematically terminating or failing to renew cabin permits for decades, then ordering

the cabins to be removed. This creates another form of scarcity of

cabins or lots available for cabins, contributing primarily toward

the increased value of the cabins that remain active in the cabin

program. Nationwide, over recent decades, the Agency has ordered

elimination of many thousands of cabins from the cabin system,

replicating the same consequence of driving up the value of cabins

that remain in the system.

I would like to know what plans you have for the future with respect to reducing the number of cabins that are currently active.

Mr. BROUHA. Sir, the Forest Service terminates or revokes no

more than 5 or 6 recreation permits annually, and it is done for

three primary reasons: the abandonment of the use by the holder;

the non-payment of fees; a holder’s breach of terms and conditions

of the permit; and from the administration’s—the land area, sometimes if there is a determination of the need for an alternative public use of the site, that can also lead to a termination of the permit.

But we have discontinued a very small number of residence permits over the past 20-years.

Chairman CRAIG. And we could go back into the records and document 5 or 6 a year and no more than that?

Mr. BROUHA. Randy, would you?

Mr. KARSTAEDT. At one time in the 1960s, when the Agency

made a administrative decision not to issue any more new permits

for new recreation residence tracts, at that point in time we peaked

in terms of numbers of authorizations at around 19,000 authorizations. We are down around 15,000 right now. I do not have records

with me, but I would venture to say the majority of that reduction

has occurred over time, where we in fact have actually conveyed

out of fee title of the underlying land to the recreation residence

owners.

Now, admittedly, we have also terminated and converted some of

these sites to alternative public purposes, where we have identified,

through a planning process, that there are other public purposes

that might be served in the locale of a particular tract or lot, like
8

proximity to a trail head, a boat launching area, a campground, a

picnic site, that sort of thing.

In the future—and it is in our policy right now—whenever a decision like that is made, it is made through the Forest Land and

Resource Management Planning Procedures, public disclosure, comment, notice, and decision making with opportunity to appeal, and

in the policy we are obligated to give the holder a minimum of a

ten-year advance notice of when the conversion to an alternative

public purpose might occur. So to predict what might happen in the

future is really dependent on individual land and resource management planning process at the local level.

Chairman CRAIG. You peaked at 19,000 when?

Mr. KARSTAEDT. In the mid 1960s.

Chairman CRAIG. So within a 40-year period or a little less, you

have dropped by 4,000.

Mr. KARSTAEDT. Right.

Chairman CRAIG. And you believe most of those were converted

to fee simple?

Mr. KARSTAEDT. Most of those, I believe, were—yeah, were converted through a land exchange, most typically, where we convey

the fee title to the cabin owners.

Chairman CRAIG. Cabin owners in the Valley View Cabin Tract

in the Sawtooth National Forest initially faced much higher fees as

a consequence of the Forest Service’s appraisal results. The cabin

owners contracted with an independent appraiser, a man who is

state-certified to conduct appraisals in Idaho, for a second appraisal, as provided by the recreational residence policy. The appraisal value of the typical lot at Valley View turned out to be

much lower in the second appraisal than the Forest Service’s initial

appraisal, resulting in a substantially lower fee. The Forest Service

accepted the results of the second appraisal, yet nearby, at Pettit

Lake in the Sawtooth National Forest, a second appraisal was also

conducted by another Idaho-certified appraiser, and the Forest

Service has sat on the record, the second appraisal, for over a year

without making a decision.

Let me ask a couple of questions specifically to this, if you are

knowledgeable of this situation. What do you intend to do at Pettit

Lake, and could you also tell us whether the Forest Service appraiser or appraisers who conducted the initial appraisal of the

Valley View tract, and at the Pettit Lake tract, were certified by

the State of Idaho to be conducting appraisals in our state?

Mr. BROUHA. Mr. Chairman, all Forest Service staff appraisers

are certified in a state under OMB 9207, and because of the scope

of the jurisdiction, we are only required to be certified in a state,

meeting the intent of USAP, but every Forest Service staff appraiser holds general certification.

Second, regarding the specifics, the second appraisal is looked at

in context with the instructions. If it is prepared to the same standard as our Chapter 6 instructions, and it is well documented, that

report would be accepted, and that is part of the appeal process,

if you will, or a proxy for the appeal process, and it has worked

fairly well in those cases where the second appraisal was written

to the same standards.
9

The second appraisal at Pettit Lake had a number of issues, and

I am personally familiar with it. It was an extremely complex process, and the review on the second appraisal will be forthcoming. I

think it probably would be inappropriate for me to talk about

whether it is accepted or rejected.

Chairman CRAIG. I respect that.

Mr. BROUHA. But I will tell you that there were a number of

problems that were associated with that, and the review

appraiser——

Chairman CRAIG. When do you expect that to be out? I think

that is an appropriate question.

Mr. BROUHA. I would say probably within the next week to 2-

weeks. The review appraiser has to wrestle with a lot of tough

issues and consulted with me on a whole flock of it. I did not become the reviewer of record, but I did provide substantial assistance in interpreting the policy and procedures. It is very important

that those second appraisals be written to exactly the same standard as the first. Otherwise, we end up with divergent opinions

every time, and then there is no resolution. So that was the major

issue.

We have had a number of cases where the second appraisal has

been written; it was written to the appropriate standard, and has

been accepted, and resulted in a reduced fee over what the first appraisal suggested.

Chairman CRAIG. No matter how good your appraisal process is,

if the result is hundreds or even thousands of cabin owners being

forced to sell, would it be your choice to go ahead with the present

process or reevaluate the process?

Mr. BROUHA. Mr. Chairman, we have, on the basis of the 9,600

that we have already surveyed, in fact, we do not feel that will be

the outcome. Certainly, there are some situations where there may

be some appraisals forthcoming around highly attractive lake

tracts where we have significant development and appreciation of

value, where those value increases have not been matched by our

process to increase the fees over time. The sticker shock is going

to be pretty evident. There are some ways of mitigating that, perhaps in the future, where we could have a return of an appraisal

on a more frequent term than every 20-years. We could also tie the

escalator of the rental fee to a county appraisal and note the increase generally in that particular area. There are several ways

that we could hopefully resolve that particular, but I think the appraisal process is sound, and I think the concept of obtaining fair

market value is a valid one.

Chairman CRAIG. Well, obviously, I am in search of some of the

things you have suggested, although those suggestions have not

been forthcoming in policy or rule or regulation from the Forest

Service. Any time you do not appraise except every 20-years and

the circumstances of the area change and somebody gets a 400,

500- or 600-percent increase, sticker shock is evident. And the circumstances of the owner may not have changed. The circumstances

of the area may have changed. And to suggest after the fact that,

yeah, we could do this or we could that, you know, thank you very

much. That is long after the person has either had to sell the cabin,

get rid of it or walk away. I do not think that, that serves our prob-
10

lem, and that is probably why I am sitting here today with a bill,

and you are sitting there giving testimony on it. I have sensed a

rigidity that I thought was unacceptable on the part of US Forest

Service in certain instances. I followed it very closely. I agree with

you, the broad argument is there. In this instance, the narrow argument is, in my opinion, unrealistic.

Is it the opinion of the Forest Service that the cabins it administers are equivalent to other vacation cabins on private land?

Mr. BROUHA. Let me have Paul address that, because that is an

appraisal question.

Mr. TITTMAN. For the most part the utility that is afforded a

cabin holder is equivalent to what an individual on a commensurate piece of private land gets, the difference being ownership. Any

time you rent something, the difference is that you pay for it every

year, and if you rent it long enough, you will pay for it multiple

times, and it makes no difference whether it is a recreation residence or a house in the city. That is just the nature of renting.

Fair market value, as it applies to these—and I would like to digress a little bit if I may, Mr. Chairman?

Chairman CRAIG. Sure.

Mr. TITTMAN. If you look at the total picture, nearly all of the

dramatic increases have occurred in and around waterfront properties, as Mr. Brouha stated. Lake effect has a tremendous effect

on value. There are not any more lakes, and there is fewer and

fewer lots available for those lakes. The demand for that kind of

thing is tremendous.

I have been monitoring on an unofficial basis what I would refer

to as leasehold sales, those situations where cabin owners sell their

cabin to another permittee and we reissue the permit. And in a lot

of cases I have been able to determine the actual price paid for the

cabin. We find that in the waterfront areas there is a dramatic reflection of leasehold and by definition—I know you are very aware

of this—leasehold represents the difference between contract rent

and market rent on a cumulative basis. When you see that kind of

thing, it can only tell you that the use charge under the prior regimen are not being recognized in the market, and the market is saying they should be substantially higher, and those leaseholds reflect that.

The concern that we have is, is the annual indexing process, and

to supplement what Mr. Brouha said, I personally contacted five

states, your state among them, spoke to the state departments of

revenue. And what I have found is that in the counties where we

have occupancy of recreation residence, the states in all cases can

provide us a county index that reflects appreciation for this particular class of property on an annual basis. There are ways to utilize that to keep the sticker shock thing from happening once we

start with a level plateau, the beginning point of fair market value.

So there is a way to mitigate that.

The history—and I have to go back to ground zero—I was involved in the reappraisal of Priest Lake and Ponderay in the 1980s,

early 1980, and I was involved in the appraisal of Georgetown Lake

in Montana in 1979. In fact, I personally did that appraisal. The

evolution of value in those areas has been dramatic. If you were

to try and buy a lot on any of those lakes, and there are privately
11

held lots on both lakes, the price difference is huge, wherein we go

to the Black Hills in South Dakota, and for the most part we had

values remain static or go down, and these were not water-related

properties, but scattered tracts. We had the same thing occur in

Montana on the Helena Deer Lodge and Beaverhead Forest, where

we had scattered homes that were not water-related.

Once we have established a plateau of fair market value, we can

then index annually using localized measures that will reflect that

class of real estate in that competitive arena, and avoid one of the

major traumas. And I was an advocate of this 20-years ago, and I

still am. The issue of IPD was one selected by the homeowners.

That was contrary to what the Agency wanted. We wanted to use

CPIU because it was more commonly understood, but the IPD is

one that was selected as a more conservative index, and what happened was, is where we had dramatic increases in property values,

the IPD index that we have been using annually to reflect changes

does not——

Chairman CRAIG. Just a moment here. We will let these folks

complete.

[Pause.]

Chairman CRAIG. Please continue.

Mr. TITTMAN. Does not under any circumstance reflect changes

in the market, either on a subjective basis or on a national basis.

As a matter of fact, the IPD formula the Department of Commerce

uses has no component of real estate in it. Therefore, its applicability is very questionable. So again, from my perspective as an appraiser, to start with a current value and then go forward with a

commensurate index that reflects changes in that class of property

in that competitive arena, including Pettit Lake in the Sawtooth or

wherever, we are going to be able to stay cyclical.

The other half of this is, is when you index anything for much

more than 10-years, you lose context with reality unless you do a

market test periodically during that extended time frame, and that

has also happened here. We did not revisit value until 18-years had

passed from the prior appraisal, and on that premise, using an inappropriate index, you cannot help but have all kinds of serious

problems come out of the new numbers. This was destined to happen. It was predicted 20-years ago, and it happened.

Chairman CRAIG. So are you still contending that the current

method, settling cabin fees, is the same method that you created

in the 1980s?

Mr. TITTMAN. Yes, it is. It is exactly. The appraisal procedure

was prepared—my predecessor, Bill Wakefield, worked with a representative of the homeowners’ association, I understand an appraiser out of Florida, or a man who had appraisal experience out

of Florida, and the handbook was crafted based on their work. We

have not changed a period or a comma in that thing ever since.

And that is another issue, because technology changes, various and

sundry things that have happened that would have given rise to

changes and a cleaner definition of ‘‘native’’ and ‘‘natural state’’ to

avoid confusion. There is a number of things we could have done,

but because of the outstanding agreement, we did not touch that

document.
12

Chairman CRAIG. OK. Well, gentlemen, I think for the short

term, that is all the questions I have. I will leave the record open,

and I may submit some additional questions in writing for you, but

Paul and gentleman, thank you, all of you very much for coming

today to testify.

Mr. BROUHA. Thank you, Mr. Chairman.

[The prepared statement of Mr. Brouha can be found in the appendix on page 34.]

Chairman CRAIG. Now let me ask the second panel to come forward if they would, please. David Mead, President of the Sawtooth

Forest Cabin Owners’ Association from Twin Falls, Idaho; March

Clarke VerHoef, National Forest Homeowners, Sacramento, California; Paul Allman, American Land Rights Association, Berkeley;

Richard Betts, Betts and Associates, Berkeley, California; and Joe

Corlett, Mountain States Appraisal and Consulting from Boise.

Ladies and gentlemen, if you would come forward and take your

seats, please.

I would ask for sake of time that we—well, first of all, your prepared statements will become a part of the Committee record, so

you can speak from them or abbreviate as you wish, but I would

ask that all of you try to stay within the 5-minute limit if you can.

And, David, we will start with you, David Mead.

STATEMENT OF DAVID MEAD, PRESIDENT, SAWTOOTH

FOREST CABIN OWNERS’ ASSOCIATION, TWIN FALLS, IDAHO

Mr. MEAD. Thank you, Mr. Chairman. I am David Mead of Twin

Falls in south central Idaho. Our base economy is from farming,

ranching and food processing. As a country banker, retired, and accredited rural appraiser, retired, of the American Society of Farm

Managers and Rural Appraisers, I am testifying today in support

of Senate Bill 1938, Fairness Cabin User’s Fee Act of 1999.

I am here today as President, a volunteer, of Idaho’s Sawtooth

Forest Cabin Owners’ Association, representing recreational resident permittees.

My special use permit allows me a cabin on half an acre of raw,

native, natural, undeveloped land on one of the tracts in the forest.

All Sawtooth Forest Cabin lots were reappraised in 1996, one of

the first in the Nation. We were stunned by the results. Fees in

our tract increased 541-percent from $390 a year, too low, to $2,500

a year, too high. Each family then was forced to decide whether the

limited seasonal use and Forest Service heavy restrictions were

worth the fee increases or not. Some cabin owners sold immediately, could not afford what was coming. Most of us got a second

appraisal, allowed by the Forest Service, for it was evident that the

Forest Service’s first appraisal was based on cabin lot being fully

developed within legally subdivided neighborhoods as fee simple

property, not the raw, undeveloped natural lots with no improvements, as the stated policy of the Forest Service is. My small log

cabin my family built, has no electricity, no plumbing, no phone.

We have an outhouse and carry water in a bucket up from the

creek.

The bill will provide relief to some 15,000-cabin owners in 25-

states and Puerto Rico who mostly, suddenly, face alarming and increasingly high fee permits. In our high profile cabin area, the
13

Pettit Lake Tract, new fees are scheduled to go from roughly

$1,100 a year to $22,500, and up to $67,500 a year. These permits

contain many Forest Service restrictions on our use of a lot, and

I have attached a list of these in my written testimony. The cabin

permit is one among other documents that must be read and understood, the values of positive and negative, to be considered during the appraisal process.

However, the major problem is that the appraisal methodology

utilized by the Forest Service, in this round has proven to be inconsistent and unreliable, and permittees learn quickly that there is

no inclination within the Agency to resolve the several problems

that plague the fee determination process. The unquestionable

piece of evidence that validated the flaw in the current system is

that the Forest Service accepted the results of our second appraisal, setting aside their own first appraisal. It appears that only

further guidance from Congress will succeed in sorting out the conflicting Forest Services faces. On one hand Congress and the GAO

has directed resource agencies to maximize revenues from Federal

lands, and in so doing, the agencies contrived a system that now

will capture more than the fair market value from the cabin owners. On the other hand, both Congress and the Forest Service made

commitments to the American people to provide ample opportunities for appropriate, affordable recreation on Federal lands, diverse

recreational opportunities for average families and individuals with

average or lower incomes or pensions, the new cabin fees make

unaffordable for most one of the oldest recreational program, the

Cabin Program, authorized by Congress in 1915. These policy objectives need not be in conflict. The program has been providing

families with affordable recreation for decades.

The legislation preserves that program objective and returns fair

market value.

Forest Service cabin lot permit fees are very different, and far

less than private lot fee simple rights. As you can see from the

large display on the easel over there, we Forest Service cabin owners have very few rights compared with the private owners. One of

the biggest differences is that we cannot prevent public access on

our lots except within our cabins.

As a banker type, I leave with one fundamental professional observation. Assuming credit worthiness, I would approve a mortgage

to the owner or prospective buyer of a fee simple parcel, but even

assuming vast riches, no banker would grant a mortgage for the

asset that is a cabin authorized on the forest land under this program.

Please support S. 1938. Thank you, Mr. Chairman.

[The prepared statement of Mr. Mead can be found in the appendix on page 42.]

Chairman CRAIG. David, thank you very much.

Now let me turn to Mary Clarke VerHoef. Please proceed.

STATEMENT OF MARY CLARKE VERHOEF, CHAIR, NATIONAL

FOREST HOMEOWNERS GOVERNMENT LIAISON COMMITTEE,

SACRAMENTO, CALIFORNIA

Ms. VERHOEF. Thank you. Good afternoon, Mr. Chairman. My

name is Mary Clarke VerHoef. I am the chair of the Legislative Li-
14

aison Committee and on the Board of Directors of the National Forest Homeowners. Thank you very much for the opportunity to address you today.

The Forest Service recently began updating the special use fee

that we cabin owners pay every year. The first area to be completed was the Sawtooth National Forest in Idaho. The new fees

were astronomical, some as high as $30,000 a year. The procedure,

as it continued around the country, resulted in other unreasonable

fees. Although none were quite as egregious, they were high

enough to wonder just who could or would want to pay such a fee

for this use. This program has not been the sole province of the

rich before. With such fees, we fear it will be. We all agree that

we should pay a fair fee, but many of the resulting fees are simply

not fair.

In an effort to solve this problem, we joined together with other

representatives of recreation residence users to form a coalition.

The coalition hired a consulting appraiser to help us analyze the

problem. We reviewed the process in many areas of the country.

We found errors in procedures and inconsistency in application.

The current appraisal method is not the same method as was crafted by the 1980’s regulatory revisions.

The current method of setting our annual use fee was based on

the concept that a percentage of that fair market value of comparable underlying land in its raw state could be used to determine

the value of our use. It was based then on the belief that appraisers for each typical lot or lots in a tract of cabins, could identify

sales of comparable privately-held parcels in the same geographic

area. Thus, the comparable parcels must be truly comparable.

In order to implement the policy this time around, the Forest

Service prepared a new set of guidelines for appraisers. Our review

of those guidelines and our review of the resulting appraisals led

us to believe that these guidelines, as currently written, mislead

the appraiser to use market transactions which are fundamentally

not comparable. Where there are no comparable sales, market

transactions are being used without the proper adjustments to

make them reflective of the cabin lot’s value. This results in flawed

appraisals, and in some places, excessive values.

Further, the fact that this is an unusual asset, and the unusual

method by which the appraisers are to produce a comparable sale

when there are few really comparable assets, has made the assignment even more difficult.

Finally, various governmental acts, such as the creation of the

Sawtooth National Recreation Area in Idaho and the Government’s

act of buying up or limiting the use of most of the surrounding

land, added an unusual inflationary pressure on local land which

requires an adjustment to this method to result in a fair fee for

those area.

The bill before us today is intended to remedy the errors we see.

It recognizes the cabin program for what it is, not as equivalent to

vacation homes on subdivided lots in resort locations. It is aimed

at producing reasonable and fair fees for cabin use. The bill includes specific detailed requirements for the appraiser, since it is

such an unusual appraisal assignment and its current implementation has revealed so many problems. It is written in a language an
15

appraiser can understand. It calls for appraisal every 10-years instead of 20, to make sure the Forest Service is getting a fair market value of our use in the event the annual index does not work

as expected. It chooses a new index, one more closely tied to local

land value, but not one tied to urban use.

In those circumstances where certain governmental acts produce

an unfair fee, the bill requires the comparable land analysis to go

outside the area influenced by those acts. In those circumstances,

the annual index used is a statewide index instead of a local one.

In the event there is a further disagreement with regard to the appraisal, a mechanism is provided for a dispute resolution. If the

current appraisals are acceptable, as some are, no new appraisal

is required. Other transition provisions are also provided.

In conclusion, the high fees resulting from improper application

of the underlying policy, if allowed to stand, will change the face

of this program, limiting its use to the rich. This program should

stay affordable by the ordinary American. This bill is essential to

that end.

[The prepared statement of Ms. VerHoef can be found in the appendix on page 51.]

Chairman CRAIG. Ma’am, thank you very much.

Now let me turn to Paul Allman, American Land Rights Association from Berkeley, California. Mr. Allman, welcome.

STATEMENT OF PAUL ALLMAN, DIRECTOR OF CABIN OWNER

AFFAIRS, ON BEHALF OF THE AMERICAN LAND RIGHTS ASSOCIATION, BERKELEY, CALIFORNIA

Mr. ALLMAN. Thank you, Mr. Chairman.

The American Land Rights Association thanks the Committee for

this opportunity to comment on S. 1938.

One, the current appraisal process makes no sense. It is clearly

inequitable as well as being blatantly unreasonable. These cabin

lots are not for sale. This is not a real estate transaction. This is

simply a method of determining a fair user fee for a recreational

use.

What are we really talking about? A small site on which a cabin

owner can maintain a small summer cabin under strict guidelines

at no expense to the Government. What possible sense does it

make to have the use fees for the exact same use vary by over 150-

times, 15,000-percent? This range of user fees from under $200 to

$30,000 makes clear the current Forest Service appraisal process

is blatantly flawed.

Two. We feel the Agency has made a number of errors in policy

interpretation. Through 10-years of negotiation resulting in the National Recreation Residence Policy, the cabin owners were assured

that the language of the policy pertaining to cabin fees would never

result in permittee lots being appraised as if they were fee simple

lots, because the many differences between permitted lots and fee

simple lots made them obviously not comparable. We were repeatedly told that the appraisal had to begin with an estimated fee simple value in order to arrive at some form of reasonably objective

base figures.

These differences were cited repeatedly to permittees as reasons

why the value of the land would not be comparable to fee simple
16

land, but would reflect the land’s ‘‘cash market value based upon

its use as a recreational residence homesite.’’ That is a direct quote

from the policy statement.

But it is now the interpretation of the Agency to appraise every

permitted lot as if it is being offered directly for sale on the fee

simple market. This has resulted in an increase in fees in some

cases of over 1,000-percent. The absurdity of this position is obvious.

If a private landowner were to offer a 20-year lease with the restrictions demanded by the Forest Service, there is genuine question whether anyone would be willing to lease the land at any

price.

The real answer to this problem is that the Forest Service should

properly instruct its appraisers to recognize the many restrictions

and limits included in the permit as is provided in S. 1938.

Three. Contrary to what the Forest Service and others have told

you, cabin owners already pay their fair share and more. Recreational residence permittees pay the highest use fees per acre of

any of the many uses of the National Forest system. Cabin permittees, even under the old fee structure, were paying over $2,400 per

acre per year, with many paying much more. Under the Forest

Service current proposed fees, cabin owners would be paying an average of well over $8,000 per acre per year. Because recreation permittees, by regulation, cannot restrict or prohibit public use of their

lots, the actual permitted area over which they have control consists only of the footprint of their cabin. By any real world real estate standard, they already pay more per square foot than most

commercial leases in comparable fee simple areas. This is the single most revenue positive recreation program on the National Forest System.

Four. The Recreation Residence Program is the most successful

provider of recreation opportunities managed by the Forest Service.

Recreational residences provide more RVDs, recreational visitor

days, per acre than any other use of the National Forest System.

Because of the nature of the recreation provided, they also overwhelmingly provide the greatest recreation opportunity to the retired, the elderly and the disabled, those Americans which by law

the Agency has directed to consider in its programs. Because of the

nature of the cabin experience, these cabins are overwhelmingly

also a family experience.

Five. Given that the average lot size is roughly one-quarter acre,

all of the 15,000 recreation residences occupy less than 4,000-acres

of the 192-million acres currently in the National Forest System,

roughly 2/1,000ths of 1-percent.

You are also told by the Agency that we are private use of public

lands. We are unable to imagine a human use of the public lands

that is not private, at least for the period of use. One retired Forest

Service officer told us the only public use of the National Forest he

could think of was when the military held maneuvers there.

Now, I would like to make an additional comment. Mr. Karstaedt

estimated 17,000. The historian in region five tells me that there

were over 15,000-cabins in California alone in 1962. There are now

less than 7,000. The Forest Service told us, in 1988 there were

15,600-cabins on the National Forest System. They now tell us
17

there are less than 14,500. These are inconsistent with the information which Mr. Karstaedt has given you, and I thought it should

be pointed out. Thank you.

[The prepared statement of Mr. Allman can be found in the appendix on page 61.]

Chairman CRAIG. Mr. Allman, thank you very much.

Now let me go to Richard Betts of Betts & Associates of Berkeley, California.

STATEMENT OF RICHARD M. BETTS, CALIFORNIA STATE-CERTIFIED GENERAL APPRAISER, BETTS & ASSOCIATES, BERKELEY, CALIFORNIA

Mr. BETTS. Mr. Chairman, my name is Richard Betts, and I am

a California State–Certified General Appraiser, and the principal

in Betts & Associates, Berkeley, California. I appreciate the opportunity to present to the Subcommittee my analysis of the difficulties that have arisen with respect to the calculation of fees for occupancy of cabin lots in the National Forest System.

I was retained in 1998 by a coalition of cabin owners to analyze

the appraisal methodology and instructions employed by the Forest

Service. I am being compensated by the coalition for my appearance here today, but the coalition has exercised no control over my

statement, nor whatever replies I might offer in response to questions from the Subcommittee.

As a quick statement of my qualifications to be before you, I

would describe myself as a very active appraiser, an MAI, ASA in

real estate, and SRA, specializing in complex properties and complex situations, with more than 35-years of experience in appraisal

and real estate economics consulting. I hold bachelor of science and

master of business administration degrees in real estate and urban

economics from the University of California, Berkeley. I have

taught extensively. I am the author of a number of books and articles, including several college textbooks. I have testified as an expert witness on very many occasions. I have performed assignments for the US General Accounting Office, US Department of

Justice, the National Park Service, the California Auditor General,

and numerous other clients.

I also want to give the Subcommittee the same professional certification that was in my report, including that I have no bias with

respect to these properties or to the parties involved. My compensation from the cabin coalition was not contingent in any way upon

my findings or the outcome. My analyses, conclusions and opinions

were developed, and my report is prepared in conformity with the

Uniform Standards of Professional Appraisal Practice.

In conducting my analysis, I reviewed some 16-key documents,

the Forest Service Recreation Residence Authorization Policy, sections of the handbook, memorandums, correspondence, testimony

in earlier congressional hearings, and I also examined in detail the

initial appraisal reports and second appraisal reports from cabin

tracts in Idaho, Oregon and California.

The primary focus of my analysis was upon the appraisal process

itself, including the instructions and their implementation. Unquestionably, major work is needed to clarify the instructions, to

remove material that is contrary to the adopted policy, and to guide
18

appraisers to proper practice in this very complex and unusual setting.

The major problem area that I note is in the definition of the

property being appraised. Policy clearly states that the Forest Service is providing raw acreage, but most appraisals are of subdivided

lots, and much of the guidance from the Forest Service implies that

the appraisal should be of a subdivided lot.

A second major problem is with adjustments for access and utilities, usually provided by the permittees, but incorrectly handled in

Forest Service instructions and often in appraisals. In most cases

cabin owners put in all of the effort and management and took all

of the risk of developing access and utilities and the cabin. Forest

Service language leads the Forest Service to capture the cabin owner’s investment and the portion of value that results from the cabin

owner’s effort and risk taking. In addition, the current instructions

put the burden of proof on the cabin owners to document who did

what many decades ago, which the service never required them to

document.

The third problem was with the selection of market data upon

which to base the valuation. This usually was because of the first

problem I have noted, the incorrect definition of the property being

appraised.

The fourth problem was with the adjustment of the market data

for relevant differences, and particularly using incorrect or unsupported cost estimates and incomplete data.

Based upon my analysis, I had made recommendations to the

cabin owners’ coalition for appraisal guideline language intended to

provide clear direction to appraisers and resulting in a proper market value appraisal.

Following introduction of the bill, I have had the opportunity to

consult with representatives of the Appraisal Institute, and the

American Society of Farm Managers and Rural Appraisers and the

Appraisal Foundation, and I believe that the bill, with minor

changes, will be satisfactory, will comply fully with appraisal

standards, will meet the statutory definition of ‘‘market value’’ and

correct these appraisal implementation problems.

[The prepared statement of Mr. Betts can be found in the appendix on page 66.]

Chairman CRAIG. Mr. Betts, thank you very much.

Now let me turn to Joe Corlett, Mountain States Appraisal and

Consulting, Boise, Idaho. Joe, welcome before the Committee.

STATEMENT OF JOE CORLETT, CERTIFIED GENERAL REAL ESTATE APPRAISER, MOUNTAIN STATES APPRAISAL AND CONSULTING, INC., BOISE, IDAHO

Mr. CORLETT. Good afternoon. Thank you, Mr. Chairman. My

name is Joe Corlett. I am a resident of Boise, Idaho. I am a certified general appraiser in both the states of Idaho and Oregon. I

am also an MAI member of the Appraisal Institute, and I have

been in the appraisal business about 26-years, and I am a partner

with Mountain States Appraisal and Consulting out of Boise.

Today I am testifying in general support of Senate Bill 1938 for

improving the consistency and fairness in the appraisal applications of Federally permitted sites.
19

My specific experience IS with the cabin tracts on Pettit Lake,

Idaho, where I acted as the second appraiser, following an original

appraisal done by a government appraiser from Ogden, Utah. He

valued those sites, natural native values, ranging between 450,000

to $600,000. I also had the opportunity to review that report, and

I could not agree with it, so I was then engaged to conduct my own

appraisal according to the specifications set forth by the Forest

Service. And based upon my analysis, the natural and native sites

had a minimum value of $83,000 with a maximum value of

$212,000.

It is my general opinion that the errors made in the Government

appraisal were really fueled by the appraiser’s analysis of leasehold

sales or cabin sales that were improved. The difficulty there is that

you overlook the externalities created by Blaine County, for example, that has a minimum site size of 10-acres. So the externalities

were overlooked in the Government appraisal.

Also, the appraiser is instructed to appraise at the stricter of the

police powers, according to the specifications, and these would not

even be legal lots. So that is another issue that we might have to

deal with. the cabin owners developed these sites. The government

did not help. They did not do anything with the infrastructure, to

my knowledge, but it was created by the cabin users. So all improvements on and to the land, as per the instructions, created by

the cabin owners were deleted in my analysis. In my opinion, the

incentives due to the permittees were not deducted in the Government appraisal, so in other words, these permittees are, in essence,

paying twice.

A recent transfer of an improved cabin sale was substantially

below the base minimum value of a vacant, native and natural site

at Pettit Lake, which I thought was interesting. This was an 854-

square foot cabin that was in very good condition, very habitable,

had a lot of deck area, and it sold below the actual bare land value

estimated by the Forest Service.

The instructions issued to me through the Intermountain Region

of the Forest Service via a memorandum, which I have attached,

from Chief Appraiser Tittman, were contrary, in my opinion, to the

original written instructions, where I was told to appraise the natural native land. Also, he instructed me to use—or that I may be

able to use the leasehold sales, and use a type of—a residual analysis. This is not recommended in the Uniform Appraisal Standards

for Federal Land Acquisitions. So I feel that this memorandum is

contrary to the written instructions, and I had difficulty with that.

And, finally, I think if you look at this bill as passing, it would

more or less cause the Forest Service not to have different interpretations of their specification and the valuation of these properties.

In other words, it would be consistent and much more fair for both

the taxpayer and the cabin users.

So I would welcome any questions, and thank you for the privilege of testifying.

[The prepared statement of Mr. Corlett can be found in the appendix on page 78.]

Chairman CRAIG. Well, thank all of you very much. I will ask a

series of questions now, and while I may ask it specificly of one
20

witness, if others feel they have something to contribute to the direction of that question, please feel free to do so.

Ms. VerHoef, would you describe, if you can, a typical owner of

one of these cabins, from your experience with the associations?

Ms. VERHOEF. Well, National Forest Homeowners did a survey

of its members in January of 1999. 4,600-members received questionnaires. 48-percent of the households responded. 54.7-percent of

them are retired. The principal careers included business owners or

managers, 14.5-percent; farmers or ranchers, 4.7-percent; construction worker involved people, 5.5-percent; engineers, 9.2-percent;

and teachers, 15.6-percent. My personal opinion is that is because

they have their summers off.

Chairman CRAIG. Probably.

Ms. VERHOEF. As far as the age is concerned, they are primarily

middle-aged to elderly with two or more generations of the family

involved in the use of the cabin.

Chairman CRAIG. Have you read the GAO report dated December

1996, entitled ‘‘Fees for Recreational Special Use Permits Do Not

Reflect Fair Market Value,’’ and if so, can you offer any insight into

the GAO’s findings? I ask that of you, ma’am, but any of the rest

of you who might wish to comment who have read that, go ahead,

please.

Ms. VERHOEF. Yes, I have read it. The report’s conclusions are

incorrect, because the GAO asked the wrong question of the county

assessor. The issue is not the market value of the cabin sites, as

if they were subdivided, fully developed lots. The cabin sites are to

be valued as land in its natural state without lot developments,

utilities or access provided by the permittees or at the permittee

expense. I think the GAO misunderstood that, and therefore, I suspect that the appraisers misunderstood that too. Sorry, county assessors.

Chairman CRAIG. The Forest Service testified in earlier hearings

that the cabin owners agreed to use 5-percent of appraisal value of

the cabin lot to determine the fee. Did the cabin owners make such

an agreement to your understanding?

Ms. VERHOEF. No, they did not. I attached to my——

Chairman CRAIG. Do you know of any cabin owner group that

might have?

Ms. VERHOEF. No. I attached an exhibit to my written testimony,

which is a joint statement by the three living members of past

members of the Chiefs Committee, which was involved with the

creation of the policy. No Forest Service members are left in the

Agency from that group. It explains in detail what actually did

happen, and clearly shows that there was no agreement. The 5-percent capitalization rate was dictated. It was not agreed to. The IPD

was—the driving force was the Agency. The input—this report

shows that the current system is not the one to which we agreed.

The agency has significantly modified the understandings reached

with permittees. The package accepted was changed by withdrawal

and revision of the tenure provisions, and by unilateral revision or

reinterpretation of the fee provisions. The statement shows clearly

what was agreed to and what was not.

Chairman CRAIG. Yes, Mr. Mead.
21

Mr. MEAD. Mr. Chairman, it was noted by the Forest Service in

their testimony that a survey sent out to all the cabin owners back

in that time, showed that the cabin owners were for what was presented to them. And in my case and other cabin owners’ cases, we

were told by our National Forest Homeowners that what they had

agree with and what the Chief’s Committee cabin owners had

agreed with was all right. However, when it actually came down

and out in the FEDERAL REGISTER, etc., etc., and understood, we

found out that it was not what we thought we were voting for. So

therefore those figures are askew.

Chairman CRAIG. Mr. Betts, how do these Forest Service cabin

sites differ from privately owned cabin sites, say in the same area?

Mr. BETTS. A typical privately-owned cabin site will have utilities, any necessary grading, access roads, possibly a provision for

water, and in a few cases septic systems of some sort or the testing

work will have already been performed, so that they are a completely different beast, and would sell at a completely different

price than the raw native land that we are talking about here.

The cabin owners themselves are the ones who took on the risk

of being able to successfully develop a physical access. They took

on the risk of being able to get these lots to perk or in some way

handle the sanitary issues. Some of them, in fact, have had to do

pumps and bring a pump truck in on a periodic basis. And the

same thing with wells. If the first well does not work, you drill a

second well, or third well, or in Mr. Mead’s case, you fall back on

hand carrying the water from quite a ways. Those risks are not

present in the typical privately developed lot, simply because buyers of lots do not want to take those risks on. Therefore, the price

of that privately-held lot has a major premium in it for both the

cost of those differences, but also the risks that have been overcome and the effort that it took to get there. It is a big problem

for an appraiser in making that adjustment.

Mr. MEAD. Mr. Chairman?

Chairman CRAIG. Yes.

Mr. MEAD. May I bring out the property rights poster over here

on the easel, the bundle of sticks? There is a big difference. For instance, the private one has how many—there is 33 we have listed

there, rights that they have, whereas we only can list 6 under our

right. And the appraisal of the Forest Service was not allowed,

through their instructions from their chief appraiser, to discount

any of the ones we do not have that the private do have, the biggest one being, many of us have said, is the fact that our lot, anybody can come out and camp on it. We can keep them out of the

cabin, per se, but not even off the front porch, and that is not at

all common on private. Matter of fact, in Idaho, as you well know,

Mr. Chairman, you might find some buckshot if you try that,

whereas we cannot use that. Not that we want to.

Chairman CRAIG. In some instances in these rather bare necessity cabins, I have understood that some people actually don’t lock

the doors, put good latching systems on them, anticipating that

someone might traffic through and otherwise use them, and instead of allowing them to be broken into, they found over the years

that to leave them open put them in a safer condition, and that is
22

a unique private piece of property that allows that, but under certain circumstances I understand that is the case.

Mr. Betts, the bill that we are discussion, 1938, is rather detailed

in its appraisal procedures. Would you believe that that kind of detail is needed?

Mr. BETTS. Mr. Chairman, from the appraisals that I reviewed,

I reached the conclusion that part of the problem was inadequate

direction from the Forest Service, or even direction that I would

have to interpret as being accidentally misleading. But part of the

problem is that this is a very, very unusual beast for an appraiser

to encounter, no matter how experienced they are in rural property. It is also technically very difficult to appraise, as I am sure

both Mr. Mead and Mr. Corlett, who are experienced as rural appraisers, can comment on as well as I can.

Given that, it was my belief that it would be helpful to give advisory guidance to appraisers to help steer them towards what they

need to do. It may be that part of this can be handled in the definition of the appraisal process or the property being appraised, rather, and material in the appraisal instructions might not need to be

as long, but it is very clear, in my opinion, that this matter needs

to be clarified, or we will never get good appraisals.

Chairman CRAIG. Mr. Corlett, would you comment on the same

question, and also expand to the phrase you used in your testimony

called ‘‘general support,’’ meaning you give general support to the

legislation, specificity as to the procedures and your expression of

general support.

Mr. CORLETT. Yes, Sir. Thank you, Mr. Chairman.

I generally support the concept of the bill. I think that there are

some language problems in the technical application of Section 6 of

that—well, that is in the House side—but it tends to be leading the

appraiser more than if—in a way that could be in conflict with the

standards, which we are told earlier in the bill that we have to follow. So, we are going to try and work on the language and get the

bill where it is practical for the appraisers to use. Is that appropriate?

Chairman CRAIG. Yes.

Mr. CORLETT. The second issue is I think what the appraisers

have been missing throughout the country, and especially with

Pettit Lake coming into view, is that nobody tells them what to appraise really. What are we appraising? The native natural land is

in the language; is it in the instructions. Well, native natural land

is not a developed site. And my disparity with the Forest Service

is dealing with the difference. They would prefer that we appraise

these sites as if developed, with all incentives, and just deduct

nominal—virtually nominal expenses for roads, power, telephone,

on-site systems. So the real problem has been in focusing on what

is being offered by the Government. If the Government developed

these sites, then they would be entitled to the return, if they took

the risk, but they did not in this case.

Chairman CRAIG. In the Pettit Lake experience, you were talking

about lots from 450 to $600,000 in appraised value by the Forest

Service process. Then you had gone in on a second appraisal. Give

me the characteristics of a 400 or a $600,000 appraised lot, size,

and how you found them different. My notes say that you found
23

them to be upwards of 50-percent less of value than what had been

appraised by Forest Service appraisers.

Mr. CORLETT. Yes, Sir, Mr. Chairman, that is correct.

Chairman CRAIG. Give me a little more detail for the record in

that experience if you would?

Mr. CORLETT. The Forest Service appraiser, I could see him agonizing in his report over the sales of the improved leasehold or the

cabins on sites. They were selling for much more than they had

sold for in earlier years. So he, I think, had a hard time reconciling

how to deduct those improvements from the sales prices that these

permittees had paid. So what he did is he went to the Fisher Creek

subdivision, which is in Custer County, and allocated improvements out of sales based on their cost or contribution and that is

a compliant subdivision. It is not a preexisting, non-conforming use

type of situation that exists at Pettit, and that preexisting, nonconforming use is what drives the improved property values. So

there is a bonus, if you want to call it that, to the improvements.

So the improvements were not allocated correctly in my opinion.

I also deducted in my analysis the incentives due to the risk takers. In this case the risk takers were the permittees, so that is the

basis for the disagreement.

Both of us used developed improved conforming site sales on

Payette Lake and Priest Lake, and we were aware of those; they

were fee simple transactions, and I truly believe that I followed the

letter of the instructions by going to the natural native form of the

land, what was provided by the Government.

Chairman CRAIG. Mr. Betts, this question may be for you, but,

Joe, you can respond to it also. The bill contains very detailed procedures for handling the value contributed by—well, assets like

utilities. Why is that necessary?

Mr. BETTS. The first reason, Mr. Chairman, is that Forest Service instructions, and my conversations with Mr. Tittman personally

corroborate this, do not accept the concept that the value contribution that a utility system makes to a lot is more than the bare

bones cost. I mentioned earlier that the person who puts the system in takes on all the risk, and that may mean very substantial

overruns of cost which are now lost in the historical record.

Chairman CRAIG. Sure.

Mr. BETTS. How bad it was, how many alternatives; that is all

unknown now. It is just lost ancient history, so to speak. But it is

part of the cost basis that anybody buying a lot with that utility

pays versus someone who is buying a lot without. It is not just the

hard cost; it is also what appraisers call the soft cost. There has

to be his or her time for managing this, monitoring the provision

of the well or whatever, and taking the risk on. And the Forest

Service instructions appear to disregard that, which means that

they are way under adjusting for these features when they show

up on a lot sale. Given the fact that the Forest Service——

Chairman CRAIG. Under adjusting meaning the situation where

value would adjusted down?

Mr. BETTS. Mr. Chairman, let me put it——

Chairman CRAIG. The value for deduction from an overall value

expressed?
24

Mr. BETTS. One starts with a sale price from some type of comparable evidence, and then you must adjust that sale price up or

down to make the sold property more like the subject property.

That is the basic statement of the appraisal process. And here, because these lots, the subject property lots are being appraised in

their native natural state with no utilities in most cases, no physical access and so forth, most of the sales will have those; therefore,

this adjustment process is rather critical, and it typically will be

downward because the subject properties do not have most of the

features of the properties that are in the market, unless you use

larger acreage parcels where they may not have any utilities either.

Chairman CRAIG. Any addition to that, Joe, that you would like

to add?

Mr. CORLETT. I tend to agree with that. That is a standard way

of appraising. My analysis was deductive, where I started with a

value as if they were in fee simple title, with all the amenities and

the infrastructures in place, and then I deducted for those factors

that they (permittees) provided, including the incentive. So I came

up with a raw dirt, raw land type of value, and that is what that

83,000 to 212,000 represents.

Chairman CRAIG. Can either of you express to me the provision

in the bill that deals with entrepreneurial incentives; why should

entrepreneurial incentives be part of what appraisers consider?

Mr. BETTS. That is the payment for taking on the risk.

Chairman CRAIG. You can establish a value to that?

Mr. BETTS. Yes. It is not the most concrete piece of evidence that

appraisers have to develop in the appraisal process. I think any appraiser would tell you that it is one of the tougher numbers to come

up with, but we have to do it all the time in other appraisals, any

subdivision, proposed subdivision proposal has that same problem.

So we are simply saying that to be consistent with appraisal theory, that entrepreneurial incentive must be deducted because it belongs to the person who performed the work, which in the case that

we are talking about in the bill, are the permittee.

Chairman CRAIG. That is not blue sky?

Mr. BETTS. No, it is not blue sky. It certainly is not the appraiser’s favorite number to come up with, and it is one we get criticized

for whenever we do, but it is part of the regular appraisal process.

Chairman CRAIG. OK, all right. Thank you.

Mr. CORLETT. Mr. Chairman, I can maybe add a little example

to that, and that is the case of the developer that buys a piece of

natural native land for $10,000 a unit. He then develops that land

at a cost of $10,000 per unit, putting the infrastructure in. And

would he then sell the property to purchasers for $20,000 a unit?

And emphatically, the answer is no, unless it is really a bad market. So the incentive is what the market will pay for that property,

and if it is $30,000, he has had a $10,000 incentive.

Chairman CRAIG. The entrepreneurial incentive, that is spread

then; is that right?

Mr. CORLETT. Yes, Sir, that is correct.

Chairman CRAIG. Thank you. David, you gave us the experience

that you have had with a second appraisal, and the willingness of

the Forest Service to take that. We have heard the Forest Service
25

talk about second appraisals and the frustration that they may not

have been conducted as the first appraisal was conducted. And yet,

I have a sense here that there is a dispute over definitions. There

is a dispute over what has value and what does not have value,

and for the Forest Service to suggest that they might not be able

to take a second appraisal because it was not conducted exactly

like the first appraisal, appears to me to be an inevitable conflict

that results, unless you have the first appraiser instruct the second

appraiser in great detail on how he or she accomplished it. How

were you able, in a second appraisal, and therefore to cause an adjustment downward to that, able to do so? Would you give us a little bit of insight into how that happened, and also explain, if you

would, the kind of assets that private cabin lots have versus these

recreational Federal lots, if you will?

Mr. MEAD. Let me answer the second question because it is easier, first. Here again, the bundle of sticks, the property right things,

is not being taken into consideration by the Forest Service. In our

second appraisal, our appraiser took those more into—deducted the

fact that the rights on National Forest cabins are totally different

than rights on private lands. Yes, the private lands have zoning

and planning and police powers, and other powers on them. Yes,

they have restrictions in the SNRA, because the SNRA has certain

restrictions. But here again, they have many more rights than we

do.

And this is one of the problems with the instructions that have

come out of Washington to the appraisers. The Forest Service appraiser looks at it one way. He reads the standards and he comes

up with one set, ‘‘OK, this is how I need to do it.’’ The second appraiser comes along. He is not hired by the Forest Service. He interprets it different. He has a conference with the Forest Service,

yes, before he is accepted by the Forest Service, because each second appraiser, or for that matter, first appraiser, must be okayed

by the Forest Service. But when you get right down to it, the second appraiser, or I know the Forest Service appraiser, would say,

‘‘Well, gee, there is a difference between this private lot. This other

guy has so few rights on the Forest Service, and so I will deduct

a greater amount on the Forest Service lot than I will on the private lots.’’ The Forest Service does not want the appraiser to give

credit for any rights that the National Forest cabin owner does not

have versus what the private has. And that is one of our biggest

conflicts with the Forest Service, that they do not deduct what the

rights are.

And may I refer to Mr. Betts on that, because he is the expert

on that?

Chairman CRAIG. Mr. Betts?

Mr. BETTS. I think I was pouring water, Mr. Chairman. I am not

quite sure that——

Ms. VERHOEF. How does the second appraisal come up with

something new?

Mr. BETTS. I think it is a matter of trying to understand the

somewhat vague, somewhat contradictory statements that I have

seen from Forest Service. It is a matter perhaps of the face-to-face

instructions from Forest Service staff to the appraiser, and it may

be simply in the reality that different people in the Forest Service,
26

reviewing one of these appraisals, may take a different take on it

one time, and another reviewer in the Forest Service may take a

slightly different take on it.

Chairman CRAIG. Yes, Mr. Allman.

Mr. ALLMAN. Mr. Chairman, I would like to point out that every

financial asset reflects the amount of risk involved, and the amount

of risk in these permits where there are, contrary to what Mr.

Karstaedt said, roughly at least a hundred a year that are no

longer there, there is an element of risk. Everyone who is in these

that is not innocent has recognized this risk, and that is really reflected in the value which is not being taken into account, the fact

that they are not compensable, that there is a greater risk, you

cannot borrow against them; these are different critters than a fee

simple.

Mr. MEAD. Mr. Chairman, many buyers of cabins have not read

their permits or their perspective permits. Most buyers are innocent. That is their fault. I am not blaming the Forest Service for

that.

Chairman CRAIG. Yes, you could not for that. That is correct.

Mr. MEAD. Many cabins are even bought as we sit here, and you

ask the buyer have you read what your restrictions are, and if they

are very wealthy, they say we do not care, or if they are blue collar

or retired, no, they have not. They are taking faith that everything

is all right. Then, all of a sudden, bing, they wish they had read

it. It is like not reading a title report on your private land.

Chairman CRAIG. In the instance of your second appraisal, what

was the average difference?

Mr. MEAD. The first appraisal was $50,000.

By the way, our Valley View has one typical. There are 34 cabins

there, but there is only one typical. Pettit Lake has, I think, three

typicals. So, in our case, all the cabins came up with the same.

There would not be any average, but we went from 50,000 to

35,000. Anyway, our fee came down from a proposed 2,500 to 1,750.

That is a nice 30-percent reduction, yes, but still for many of our

cabin holders up there, they are not going to be able to afford it.

Chairman CRAIG. That was up from—what was the fee paid prior

to the new fee levied?

Mr. MEAD. Oh, yes. We started with $390, which was too low and

unfair. We realized it is not fair to ourselves as Government. The

2,500, we think is unfair.

Several cabin owners in the Valley View tract sold immediately

when the appraisal came out. They said, ‘‘I cannot afford this. I

might as well sell,’’ and they sold. When the second appraisal came

out, even though it was lower, 2,500 to 1,750, some more have gone

on the market and several have sold. They said, ‘‘We cannot even

afford that.’’

Some of those, as I say, were naive. They did not realize what

the risk was of owning one of those cabins.

Ms. VERHOEF. Mr. Chairman?

Chairman CRAIG. Yes.

Ms. VERHOEF. The coalition also looked at the first and second

appraisals in several locations. Part of the reason the second appraiser’s results will be different is the nature of appraising itself.
27

It is kind of an art, not a science, notwithstanding what these gentlemen at the end of the table feel.

They are nodding, I will note for the record.

It also has somewhat to do with those instructions from the Forest Service. They are the same, but they are inadequate. So they

are interpreted differently.

In Mr. Mead’s case, the second appraiser took some of the same

market transactions, but made different deductions, made additional deduction adjustments to make them equivalent to the native land underlying the cabin that the first appraiser did not take.

Luckily, the Forest Service agreed to those being appropriate.

None, however, were instructed. There is no provision for that.

The first appraisal was accepted by the Forest Service, ‘‘Oh.

Well, gee, you did not make those adjustments. Gosh.’’ They just

sort of were willing to accept the higher value.

Chairman CRAIG. I appreciate your expression about art or the

art of the science or the art of the knowledge, having once been a

real estate knowledge, having bought and sold ranches and private

properties and other values. I appreciate what you are saying. I

mean, there is a norm, a standard. When comparables are available, it is a little more consistent. When they are not and we are

dealing with the uniqueness of this rather hybrid animal, I can appreciate both what Mr. Corlett and Mr. Betts are saying, which

gets me back and probably to my final question.

Either, Joe, you can respond to this or, Mr. Betts, you can respond to it. I find it very interesting, and I am frustrated by this.

Public land, per se, is not for sale. There are exchanges and values

are established for those exchanged purposes, and those values are

oftentimes based on private values or the value of the asset once

it goes private as a comparable to when it was public.

But in the context of a public property that is anticipated not to

sell or at least the base land not to sell—and we understand here

the cabin itself can sell, but in those instances, other than exchanges as the Forest Service has expressed, in most instances

these properties, at least the land, does not sell.

For both of you, what is your definition? We have heard it from

the Forest Service. What is your definition of ‘‘natural’’ or ‘‘native

land’’? Because that seems to be a primary instruction that is very

confusing to most, or misleading.

Mr. CORLETT. Mr. Chairman, thank you.

The ‘‘natural native’’ is underlined in the Forest Service handbook specifications. In my mind, natural native land is untouched

real estate, untouched by man. It does not have access necessarily.

It is not ready to develop a cabin on at this time.

Chairman CRAIG. Out West, we might call that——

Mr. CORLETT. Raw dirt.

Chairman CRAIG.—raw dirt, grazing land, something that was—

if you are in the ranching business, something undeveloped.

Mr. CORLETT. That is correct.

Chairman CRAIG. OK. Mr. Betts.

Mr. BETTS. Mr. Corlett in a conversation this morning, I believe,

referred to the origins of the first cabin that was built at—I think

that was Pettit Lake, where the ranger rode over on horseback

some 5-miles and met the proposed cabin permittee, and they
28

looked at the meadow and he said, ‘‘Well, why don’t you put the

cabin there?’’ So natural raw land at one extreme is indeed a part

of, an undistinguishable part of a meadow or hillside, whatever the

topography may be.

There are cases where the Forest Service had improvements that

were in place prior to the establishment of that tract. Those might

have been roads. They might have been electric utility——

Chairman CRAIG. Roads to the tract or roads adjacent to the

tract?

Mr. BETTS. Roads adjacent——

Chairman CRAIG. That were not designed for access to the tract

originally in most instances is my understanding.

Mr. BETTS. Correct.

Chairman CRAIG. A logging road.

Mr. BETTS. A logging road.

Chairman CRAIG. A road to a campground.

Mr. BETTS. Correct, but in a number of cases, there was no physical access other than cross-country, and I recognize that there are

cabin sites today where you have to pack in, where you walk in.

There is no vehicular access, but in some of them, the tract owners,

cabin owners, have developed a physical means of access for vehicles, and the same thing is true of the utilities.

So one of the big definitional problems in my opinion is defining

who is responsible for particular site improvements at a particular

tract.

The Forest Service in its instructions has basically said that

which the cabin owner or tract owners provided, paid for obviously

gets excluded. Everything else gets included.

Unfortunately, that is a poor wording because there might be

special assessment districts. There might be a number of other

mechanisms where the cabin owners paid for it, and under the current policy, the appraisal service is picking up the value increment,

which is unfair.

There is also a problem, as I have indicated in my written report,

with the fact that these tracts date back to 1915, in that era. A lot

of these improvements were made sometime ago. Who paid for

them is, as far as the cabin owners, lost in a historical fog. There

is some ability in some cases to reach back to people from that time

period who can attest to what happened, but that is not necessarily

true in every tract.

Nor did the Forest Service ever at any point in the permit process require property owners to document and maintain documentation of what they did as opposed to what the Forest Service did.

It is only now with this appraisal cycle that the Forest Service is

basically saying, ‘‘If you can improve, you put these improvements

in here. Then we will give you a credit for it. Otherwise, we will

not.’’

One of the concerns that I developed is exactly on that point. It

is not an easy issue to handle because, as you go into the minutia

of this particular issue, it gets more and more difficult to address.

Nevertheless, the present policy is clearly biased in favor of the

Forest Service or revenue generation and against being equitable

with the cabin owners given what you have required for them in

the past. So that is part of the problem of defining ‘‘native natural.’’
29

Chairman CRAIG. Well, that is a fairly good statement to end this

hearing on, but before we do that, Mr. Allman, you have an enormous pile in front of you.

Mr. ALLMAN. This is a few of the over 3,600 questionnaires we

have returned that are addressed to the individual State Senators,

and we will be delivering them to the appropriate offices, but I

wanted the record to show that we expect to have well over 4,000

comments on this bill by the end of next week.

Chairman CRAIG. Excellent.

Does anyone else wish to make a comment before I conclude this

hearing?

Yes. I usually do not take comments from the audience, but I

will. Please stand and state your name for the record.

Mr. STONE. My name is Larry Stone, and I am from the Pettit

Lake Cabin Owners Association.

During this whole conversation, one of the things that I have

been thinking about was we have not really brought up recently

the different instruction that if we took our second appraisal on,

that they would be dead because we were instructed not to do certain things, not to go over the sentence of Chapter 6. We were told

by Chief Appraiser Tittman not to do certain things. So it seems

like this needs to be brought up for the record.

Chairman CRAIG. If you could supply that to me, the kinds of

things that you were asked not to do or do——

Mr. STONE. It is in his file, and this whole conversation does not

even mention it.

Chairman CRAIG. All right. Mr. Corlett, you seem to be reacting

to that.

Mr. CORLETT. Yes, Sir, Mr. Chairman.

The memorandum that came out from Chief Appraiser Tittman

said that I could not use a subdivision approach, and that is clearly

in opposition to the guidelines which say I have to conform to—you

ask for the standards set forth for Federal land acquisitions. It also

said I could use sales of leaseholds to determine a fee value, and

that does not work, not at Pettit Lake.

Pettit Lake is the big spike in the——

Chairman CRAIG. That is correct.

Mr. CORLETT.—system, and then I get the conflicting statements

in the memorandum which is attached to my testimony. You will

notice the reference to Marshal & Swift and the county assessor

and use this type of stuff, and then in the initial reviews set out

of San Bernandino, California, the review appraiser says you really

should not use Marshal & Swift and you should get on-site costs

and I use Marshal & Swift frequently, as do many appraisers.

So we get this kind of conflict in what is being appraised, and

it has never been an issue before as far as the entrepreneurial incentive because nothing has ever been really highly valued. These

are high-value properties. They are very valuable, but the incentive

on an $18,000 lot is a lot less than a 400 or $500,000 lot. So this

probably has never really surfaced as it has this year, but the language is in the instructions and they are interpreted totally differently.

If you look at the instructions, I think you would say raw land.

I do not think there is many——
30

Chairman CRAIG. I appreciate that being brought up, and all of

that is included in your written testimony——

Mr. CORLETT. Yes, Sir, it is.

Chairman CRAIG.—and attachments. OK.

Well, again, thank you all very much for your time and the

record you have provided the Committee as we proceed in dealing

with this legislation.

Thank you all very much, and the Subcommittee will stand adjourned.

[Whereupon, at 4:53 p.m., the Subcommittee was adjourned.]

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